Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
By and Among
VOLT DELTA RESOURCES LLC,
as Parent,
LSSI RESOURCES CORP.,
as Merger Sub,
And
LSSi CORP.,
as the Company,
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.,
GRANITE VENTURES, LLC,
H&Q LSSI INVESTORS, L.P.,
and GEORGICA ADVISORS, LLC,
as the Principal Stockholders
Dated as of
June 18, 2007
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINED TERMS AND
INTERPRETATION.....................................2
1.1
Certain
Definitions...............................................2
1.2
Terms Defined
Elsewhere..........................................11
1.3
Interpretation...................................................14
ARTICLE II THE
MERGER.........................................................14
2.1 The
Merger.......................................................14
2.2
Closing..........................................................15
2.3
Effective
Time...................................................15
2.4
Effect of the
Merger.............................................15
2.5
Certificate of Incorporation and By-laws of the Surviving
Corporation.....................................................15
2.6
Directors and Officers of the Surviving
Corporation..............15
2.7
Company
Actions..................................................16
2.8
Additional
Actions...............................................16
ARTICLE III CONVERSION OF COMPANY STOCK; COMPANY OPTIONS, COMPANY
WARRANTS
AND INCENTIVE PLAN; DELIVERY AND PAYMENT OF MERGER
CONSIDERATION....................................................16
3.1 The
Merger.......................................................16
3.2
Delivery of the Merger
Consideration.............................18
3.3
Allocation and Payment of Merger
Consideration...................23
3.4
Dissenters'
Rights...............................................26
3.5
Stock Transfer
Books.............................................27
3.6
Equityholder
Representative......................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPAL
STOCKHOLDERS......................................................28
4.1
Organization and Qualification;
Subsidiaries.....................28
4.2
Charter Documents; Corporate
Books...............................29
4.3
Capitalization;
Subsidiaries.....................................29
4.4
Authority........................................................31
4.5 No
Conflict; Required Filings and
Consents.......................31
4.6
Compliance with Licenses; Applicable
Laws........................32
4.7
Financial Statements; No Undisclosed
Liabilities.................33
4.8
Conduct of the
Business..........................................34
4.9
Absence of Certain Changes or
Events.............................35
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4.10
Labor and Employee
Matters.......................................35
4.11
Company
Contracts................................................37
4.12
Litigation.......................................................41
4.13
Environmental
Matters............................................41
4.14
Intellectual
Property............................................43
4.15
Relationships with Customers and
Suppliers.......................48
4.16
Tangible
Assets..................................................48
4.17
Tax
Matters......................................................48
4.18
Insurance........................................................50
4.19
Internal Controls; Accounts
Receivable...........................51
4.20
Real
Estate......................................................51
4.21
Employee Benefit
Matters.........................................53
4.22
Opinion of Financial
Advisors....................................55
4.23
Brokers..........................................................56
4.24
Indebtedness.....................................................56
4.25
Change of Control and
Severance..................................56
4.26
Related Party
Transactions.......................................56
4.27
Commercial
Bribery...............................................57
4.28
Money
Laundering.................................................57
4.29
Foreign Corrupt Practices
Act....................................57
4.30
Material
Facts...................................................57
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB.............58
5.1
Organization and
Qualification...................................58
5.2
Authority........................................................58
5.3 No
Conflict......................................................58
5.4
Consents and
Approvals...........................................59
5.5
Ownership of Merger Sub; No Prior
Activities.....................59
5.6
Absence of
Litigation............................................59
5.7
Brokers..........................................................60
5.8 Vote
Required....................................................60
5.9
Availability of
Funds............................................60
5.10
No Knowledge of Company
Breach...................................60
ARTICLE VI COVENANTS 60
6.1
Conduct of Business by the Company Pending the Effective
Time....60
6.2
Stockholders'
Approval...........................................63
6.3 No
Control.......................................................63
6.4
Irrevocable
Consent..............................................63
6.5
Access...........................................................63
6.6 No
Shop..........................................................64
6.7
Cooperation; Reasonable Best
Efforts.............................65
6.8 HSR
Act..........................................................66
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6.9
Certain
Notices..................................................66
6.10
Public
Announcements.............................................67
6.11
Termination of Company
Contracts.................................68
6.12
Insurance
Policies...............................................68
6.13
State Takeover
Statutes..........................................69
6.14
Cooperation in Securing
Financing................................70
6.15
Further
Assurances...............................................70
6.16
Disbursement of
Cash.............................................70
6.17
Certain Actions in Respect of Company Stockholders and MIP
Participants....................................................70
6.18
Disclosure.......................................................73
6.19
Duty to Assume, Defend and
Indemnify.............................73
6.20
MIP Tax
Benefit..................................................74
6.21
Contract
Buy-Out.................................................75
6.22
Bring-Down
Letters...............................................75
6.23
Revenue..........................................................75
6.24
Consent..........................................................76
6.25
Qualification....................................................76
6.26
Customers........................................................76
6.27
Exchange of
Advice...............................................76
ARTICLE VII CLOSING
CONDITIONS................................................76
7.1
Conditions to Obligations of Each Party Under This
Agreement.....76
7.2
Additional Conditions to Obligations of Parent and Merger
Sub....77
7.3
Additional Conditions to Obligations of the Company and the
Principal
Stockholders..........................................79
ARTICLE VIII TERMINATION, AMENDMENT AND
WAIVER................................80
8.1
Termination......................................................80
8.2
Effect of
Termination............................................81
8.3 Fees
and Expenses................................................82
8.4
Extension;
Waiver................................................82
8.5
Amendment........................................................82
ARTICLE IX SURVIVAL;
INDEMNIFICATION..........................................82
9.1
Survival.........................................................82
9.2
Indemnification by the Company
Stockholders......................82
9.3
Indemnification Escrow
Amount....................................83
9.4
Indemnification by Parent and the Surviving
Corporation..........83
9.5
Limits on
Indemnification........................................83
9.6
Notice and Payment of Claims other than Related to
Taxes.........85
9.7
Mitigation of Damages; No Double
Recovery........................86
9.8
Exclusive
Remedy.................................................86
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ARTICLE X TAX
MATTERS.........................................................87
10.1
Tax
Matters......................................................87
10.2
Cooperation on Tax
Matters.......................................88
10.3
Tax Sharing
Agreements...........................................89
10.4
Certain
Taxes....................................................89
10.5
Contest
Provision................................................89
10.6
Disclosure Requirements of Company
Stockholders..................90
ARTICLE XI GENERAL
PROVISIONS.................................................91
11.1
Notices..........................................................91
11.2
Headings.........................................................91
11.3
Severability.....................................................91
11.4
Entire
Agreement.................................................91
11.5
Assignment.......................................................92
11.6
Mutual
Drafting..................................................92
11.7
Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury..92
11.8
Counterparts.....................................................93
11.9
Specific
Performance.............................................93
11.10
Representations and Warranties and Company Disclosure
Schedule...93
11.11
No
Fiduciary
Duty................................................93
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EXHIBITS
--------
Exhibit A
Form of Certificate of Merger
Exhibit B
Certificate of Incorporation and By-laws of Merger Sub
Exhibit C
Initial Directors and Officers of the Surviving Corporation
Exhibit D
Form of Escrow Agreement
Exhibit E
Form of Irrevocable Consent
Exhibit F
Form of Opinion of Troutman Sanders LLP
Exhibit G
Licenses and other Government Approvals
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 18, 2007, by
and
among VOLT DELTA RESOURCES LLC, a Nevada limited liability company
("Parent"),
LSSI RESOURCES CORP., a Delaware corporation and a wholly-owned
Subsidiary of
Parent ("Merger Sub"), LSSi CORP., a Delaware corporation (the
"Company"),
WARBURG PINCUS PRIVATE EQUITY VIII, L.P. ("Warburg Pincus"),
GRANITE VENTURES,
LLC ("Granite"), H&Q LSSI INVESTORS, L.P. ("H&Q LSSI") and
GEORGICA ADVISORS,
LLC ("Georgica" and together with Warburg Pincus, Granite and
H&Q LSSI, the
"Principal Stockholders"). Parent, Merger Sub, the Company and the
Principal
Stockholders are referred to collectively herein as, the "Parties"
and each
individually, as a "Party."
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and
the Company have approved and declared advisable the merger of
Merger Sub with
and into the Company (the "Merger") upon the terms and subject to
the conditions
of this Agreement and Plan of Merger, including the exhibits and
disclosure
schedules attached hereto (the "Agreement") and in accordance with
the General
Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, the respective Boards of Directors of Parent and the
Company
have determined that the Merger is in furtherance of, and
consistent with, their
respective business strategies and is in the best interest of their
respective
stockholders, and Parent has approved this Agreement and the Merger
as the sole
stockholder of Merger Sub; and
WHEREAS, the Company shall use its best efforts to cause each of
the
Principal Stockholders to execute and deliver to the Company,
Parent and Merger
Sub the Irrevocable Consent immediately following the execution and
delivery of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective
representations, warranties, covenants and agreements set forth in
this
Agreement, and other good and valuable consideration, the receipt
and
sufficiency of which is hereby acknowledged, and intending to be
legally bound
hereby, the Parties agree as follows:
<PAGE>
ARTICLE I
DEFINED TERMS AND INTERPRETATION
1.1 Certain
Definitions. For purposes of this Agreement, the term:
"Action" shall mean any complaint, claim, controversy, dispute,
disagreement, charge, lawsuit, action, suit, arbitration,
mediation, inquiry,
audit, proceeding or investigation or other proceeding by or before
any
Governmental Authority, court, or judicial or arbitration
tribunal.
"Affiliate" shall mean a Person that directly or indirectly,
through
one or more intermediaries, controls, is controlled by, or is under
common
control with, the first-mentioned Person, where "control" shall
mean the
possession, directly or indirectly or as trustee or executor, of
the power to
direct or cause the direction of the management or policies of a
Person, whether
through the ownership of stock or as trustee or executor, by
contract or
otherwise; provided, that in no event shall any of the Principal
Stockholders or
any of their Affiliates (other than Subsidiaries of the Company) be
deemed to be
an Affiliate of the Company for purposes of this Agreement.
"Applicable Law" shall mean, with respect to any Person, any U.S.
or
foreign, federal, state, provincial or local law, statute,
ordinance,
regulation, rule, code, order, common law, other requirement or
rule of law or
stock exchange rule applicable to such Person or any of its
respective
properties, assets, officers, directors, employees, independent
contractors,
consultants or agents.
"Business" shall mean the business currently conducted by the
Company
and the Company Subsidiaries consisting of obtaining, compiling and
furnishing,
supplying and delivering under license (or similar contractual
arrangements),
and licensing Data, access to Databases and systems (hardware and
software), as
well as support, maintenance and associated services, and
specifically including
the Products, the Product Components and the businesses described
in
www.lssi.net on the date of this Agreement, attached to Section
1.1(a) of the
Company Disclosure Schedule.
"Business Day" shall mean any day other than a Saturday, Sunday and
any
day which is a legal holiday under the laws of the State of New
York or is a day
on which banking institutions located in the State of New York are
authorized or
required by Applicable Law or other governmental action to
close.
"Code" shall mean the United States Internal Revenue Code of 1986,
as
amended.
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"Company Convertible Note" shall mean Indebtedness of the Company
which
is convertible into Company Stock in accordance with its terms.
"Company Employees" shall mean employees of the Company and all
Company
Subsidiaries, all of whom, domestic and foreign, are listed in
Section 4.10.2 of
the Company Disclosure Schedule.
"Company Option" means each outstanding unexercised Option to
purchase
Company Stock, whether or not then vested, conditioned or fully
exercisable,
granted on or prior to the date hereof to any current or former
employee or
director of the Company or any Company Subsidiary or any other
Person.
"Company Warrant" shall mean a warrant to purchase shares of
Company
Stock.
"Confidential Information" shall mean any business, marketing,
technical, scientific or other information disclosed by any Party
which, at the
time of disclosure, is designated as confidential (or like
designation), is
disclosed in circumstances of confidence, or would be understood by
a Party,
exercising reasonable business judgment, to be confidential. It is
understood
that Confidential Information includes design documentation,
implementation
details, Trade Secrets, pricing and sales information, business
plans, marketing
plans, research plans, financial data, forecasts, computer
programs, code,
algorithms, inventions, know-how, recording techniques, budgets and
projections,
business processes and systems and Customer, Supplier and personnel
information.
"Contract" shall mean any note, bond, mortgage, indenture,
lease,
license, occupancy agreement (either written or oral), management
agreement,
permit, concession, franchise, contract, agreement or other
instrument or
obligation.
"Customers" shall mean clients, prospective customers and
clients,
distributors and resellers.
"Data" shall mean information of all kinds that is owned or
licensed by
the Company or any Company Subsidiary including names, addresses,
zip codes,
telephone numbers, driving directions, e-mail addresses, domain
names, telephone
company listings, business category headings, yellow page listings,
white page
listings, restaurant reviews, driver licenses, social security
numbers, any
other information that is assembled, compiled or otherwise
developed for the
purpose of providing directory assistance services or any other
information
service of any kind by any means including human assisted,
automated, or via the
Internet or any other communications medium.
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"Database" shall mean the stored Data in any medium including
electronic or paper form.
"Deferred Intercompany Transaction" has the meaning set forth in
Reg.
ss.1.1502 13.
"Environmental Laws" shall mean any Applicable Law relating to
the
protection of the environment or to occupational health and
safety.
"Environmental Permit" shall mean any identification number or
License
required under or issued pursuant to any Environmental Law.
"Equityholder Representative" shall mean, Warburg Pincus, or
its
designees.
"Equity Interest" shall mean any share, capital stock,
partnership,
member or similar interest in any entity and any option, warrant,
note, right or
other security convertible, exchangeable or exercisable
therefor.
"Escrow Agent" shall mean the escrow agent named in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement to be entered
into
by and among Parent, Merger Sub, the Equityholder Representative
and the Escrow
Agent, substantially in the form of Exhibit D attached hereto.
"European Indebtedness" shall mean the Indebtedness of the
Company
under (i) the lease agreement with IBM Global Financing and (ii)
payments due to
infoContact S.p.A. under the LSSi S.p.A. Share Purchase
Agreement.
"Exchange Act" shall mean the United States Securities Exchange Act
of
1934, as amended, and the rules and regulations promulgated
thereunder.
"Facility" shall mean real property, computer servers, network
equipment, and any other systems wherever located, including
hosting
environments wherever located, a partitioned (or unpartitioned)
piece of
another's server or system or computer wherever located, or any
other place
where Data may be stored.
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<PAGE>
"GAAP" shall mean generally accepted accounting principles as
applied
in the United States, consistently applied.
"Governmental Authority" shall mean any U.S. or foreign,
federal,
state, provincial or local governmental, regulatory or
administrative authority,
agency or commission or any court, tribunal or judicial or arbitral
body.
"Governmental Order" shall mean any order, writ, judgment,
injunction,
decree, stipulation, determination, award or finding entered by or
with any
Governmental Authority.
"Hazardous Materials" shall mean any natural or artificial
substance
(whether in the form of solid, gas, vapor or liquid alone or in
combination with
any other substance), which is dangerous or harmful in any way to
any form of
life, toxic, unsafe, risky, treacherous, perilous, annoying,
harmful, noxious,
tending to cause disease or impair health, whether known or
unknown, or
suspected to do so, and includes anything regulated in any way by
Environmental
Laws or any Governmental Authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act
of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indebtedness" shall mean, with respect to any Person at a
particular
time and, in each case, except between or among the Company and any
Company
Subsidiary, (i) any obligation for borrowed money or issued in
substitution for,
or exchange of indebtedness for, borrowed money, (ii) any
obligation evidenced
by any note, bond, debenture or other debt security, (iii) any
obligation for
the deferred purchase price of property or services with respect to
which such
Person is liable, contingently or otherwise, as obligor or
otherwise (other
than, with respect to the Company and any Company Subsidiary, trade
payables and
other current Liabilities incurred in the Ordinary Course of
Business), (iv) any
commitment by which such Person assures a creditor against loss
(including,
without limitation, contingent reimbursement obligations with
respect to letters
of credit), (v) any obligation for borrowed money guaranteed in any
manner by
such Person (including, without limitation, guarantees in the form
of an
agreement to repurchase or reimburse), (vi) any obligations under
capitalized or
synthetic leases with respect to which such Person is liable,
contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to
which
obligations such Person assures a creditor against loss, (vii) any
obligation
secured by a Lien on such Person's assets, (viii) any Liability
under any
deferred compensation plans, severance plans, bonus plans,
employment
agreements, or any other plan, agreement or arrangement with any
such Person,
which Liability is payable or becomes due as a result of the
Merger, and (ix)
any fees, penalties, premiums or accrued and unpaid interest with
respect to the
foregoing (in the case of prepayments or otherwise).
5
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"Independent Accounting Firm" shall mean JH Cohn LLP, Weiser LLP
or
such other internationally recognized accounting firm as Parent and
Equityholder
Representative shall in good faith agree upon.
"Institutional Lender" shall mean any bank, investment bank or
other
financial institution providing loans or other financing in
connection with the
Merger.
"Insured Persons" means all insureds and/or protected Persons
currently
covered under the Westchester Policy, the U.S. Specialty Policy or
the
CyberTech+ Policy, as applicable.
"Intellectual Property" shall mean all proprietary and
intellectual
property rights, in any jurisdiction, whether owned or held for use
under valid
License by the Company or a Company Subsidiary and used in the
Business,
including such rights in and to: (i) trademarks, service marks,
brand names,
trade dress, trade names, business names, internet domain names and
other
similar indications of origin and the goodwill associated
therewith
("Trademarks"); (ii) patents and pending patent applications
(including all
provisionals, divisionals, continuations, continuations-in-part,
re-examination
and reissue patents), utility models, inventors' certificates and
invention
disclosures ("Patents"); (iii) copyrights and copyrightable
material subject
matter, including copyrights in writings and other works of
authorship, product
documentation, marketing materials, brochures, and training
materials, and moral
rights related to each of the foregoing ("Copyrights"); (iv) mask
works or
integrated circuit topographies ("Mask Works"); (v) industrial
designs
("Industrial Designs"); (vi) computer programs, including all
object code,
source code, algorithms, subroutines, technical specifications,
data contained
in or supporting the computer programs and associated documentation
and all
translations, compilations, arrangements, adaptations and
derivative works
thereof, in each case whether patentable, copyrightable or not, and
all
embodiments thereof in all forms of media ("Software"); (vii) trade
secrets and
other confidential proprietary business or technical information,
including
proprietary and confidential Data, Databases, ideas, formulas,
compositions,
compilations, discoveries and improvements, know-how, show-how,
manufacturing
and production methods, processes and techniques, research and
development
information, drawings, designs, specifications, plans, proposals
and technical
and systems data, analytical models, investment and lending
strategies and
records, financial and other products, financial, marketing and
business data,
pricing and cost information, business and marketing plans and
Customer and
supplier lists and information, and confidential and proprietary
Software, Mask
Works, and Industrial Designs, in each case whether patentable,
copyrightable or
not, including proprietary and confidential information ("Trade
Secrets") and
together with Trademarks, Patents, Copyrights, Mask Works,
Industrial Designs
and Software, the "Intellectual Property Rights".
"Inventory" shall mean raw materials, work-in-process and
finished
goods, supplies, parts, spare parts, hardware, equipment and other
inventory
(including in transit, or consignment or in the possession of a
third Person) to
the extent dedicated to, embodied in or constituting products used
in the
Business and owned by the Company or any Company Subsidiary.
6
<PAGE>
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge of the Company" or "the Company's Knowledge" shall mean
the
actual knowledge, after reasonable due inquiry, of the event or
circumstance in
question, of those individuals identified in Section 1.1(b) of the
Company
Disclosure Schedule.
"Knowledge of the Parent" or "to the Parent's Knowledge" shall mean
the
actual knowledge, after reasonable due inquiry, of the event or
circumstance in
question, of those individuals identified in Section 1.1(a) of the
Parent
Disclosure Schedule.
"Liabilities" or "Liability" shall mean any and all debts,
liabilities,
Indebtedness and obligations, whether accrued or fixed, absolute or
contingent,
matured or unmatured, including those arising under any Applicable
Law, Action
or Governmental Order and those arising under any Contract.
"License" shall mean any license, permit, certification,
qualification,
franchise, approval, registrations, qualifications, rights,
variances,
permissive uses, accreditations, certificates, certifications,
consents,
contracts, interim licenses, interim permits and other
authorizations of every
nature whatsoever required by, or issued under, any Applicable Laws
required or
issued by any Governmental Authority.
"Lien" shall mean any lien, encumbrance, pledge, mortgage, deed
of
trust, security interest, UCC-1 financing statement, claim, lease,
sublease,
charge, claim, levy, option, right of first refusal, warrant,
tenancy,
restriction, easement, servitude, proxy, voting trust or agreement,
transfer
restriction under any shareholder or similar agreement or
encumbrance.
"Material Adverse Effect" shall mean, with respect to the Business,
the
Company or any Company Subsidiary, as applicable, any effect that
is, or would
reasonably be expected to be, material and adverse to the
properties, assets and
liabilities, business, results of operations or financial condition
of, the
Company and the Company Subsidiaries taken as a whole, but shall
not include any
effect relating to (i) changes after the date hereof in GAAP or in
Applicable
Laws by any applicable Governmental Authorities that affect in
general the
Business or the businesses in which the Company and the Company
Subsidiaries are
engaged, as applicable, (ii) this Agreement and the transactions,
or any
announcement of the transactions, contemplated hereby and thereby,
(iii) actions
or omissions of a Party to this Agreement required to be taken by
this Agreement
or taken with the prior express written consent of the other
Parties to this
Agreement, (iv) changes in general economic conditions, or the
occurrence of
other events or developments affecting generally the industries in
which the
Business is conducted or the Company and the Company Subsidiaries
conduct the
Businesses and (v) war, act of terrorism, civil unrest or similar
event. For the
avoidance of doubt, occurrence of the events in Section 6.27 of the
Company
Disclosure Schedule shall constitute a Material Adverse Effect.
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"MIP" shall mean the LSSi Corp. Management Incentive Plan, dated as
of
December 27, 2005.
"MIP Participant" shall mean a Person who is a participant in the
MIP.
"Option" with respect to any Person, shall mean any security,
right
(including any preemptive right, conversion right, stock
appreciation right,
exercise right, redemption right or repurchase right),
subscription, warrant,
option, "phantom" stock right or other Contract that directly or
indirectly
gives or provides for the right to (i) purchase or otherwise
receive or be
issued any shares of capital stock (or other equity securities or
beneficial or
other interests) of such Person or any security of any kind
convertible into or
exchangeable or exercisable for any shares of capital stock (or
other equity
securities or beneficial or other interests) of such Person or (ii)
receive any
benefits or rights similar to any rights enjoyed by or accruing to
the holder of
shares of capital stock (or other equity securities or beneficial
or other
interests) of such Person, including any rights to participate in
the equity,
income or election of directors or officers (or persons of a
similar capacity)
of such Person.
"Option Holder" shall mean a holder of a Company Option.
"Ordinary Course of Business" shall mean for the Company and each
of
the Company Subsidiaries, the operation of the Business in the
ordinary and
usual course consistent with past custom and practice, including
both day-to-day
and seasonal operations and including, in particular, without any
changes in its
accounting practices.
"Permitted Encumbrance" shall mean any restrictions, limitations
or
conditions contained in (a) the Company Contracts or (b) Contracts
granting
rights to any licensee to use any Intellectual Property (it being
understood
that, in each case, such encumbrances are not security
interests).
"Person" shall mean an individual, corporation, limited
liability
company, partnership, association, trust, unincorporated
organization or other
entity.
8
<PAGE>
"Product Component" shall mean a component of a Product sold by or
on
behalf of the Company or any Company Subsidiary, which component
(a) is used or
is necessary in any way for the design, development, marketing,
manufacture,
distribution, furnishing, providing, sale, licensing, or use of any
products or
services by or on behalf of the Company or any Company Subsidiary
after the
Effective Time, (b) is similar or comparable to a component used
within a
Product sold or distributed by the Company or any Company
Subsidiary prior to
the Effective Time, or (c) is used after the Effective Time within
the Product
sold by or on behalf of Parent or a Subsidiary of Parent in a
manner similar to
the manner in which such component was used within the Product by
the Company or
any Company Subsidiary prior to the Effective Time.
"Products" shall mean the products and services of the
Business,
derived through the amalgamation, integration and normalization of
the Data,
including but not limited to Data, Databases, Database Management,
EDA Services,
File Install, FollowMe 411, Global Gateways, Identity Verification,
National
Listing Databases, National CNAM File, New Movers, Online
Directory, Phone
Append, Prospect Database, Vintage Data and all United States and
foreign Data
and Databases, and the master database, and other information
owned, created,
compiled, possessed, derived, used or maintained by the Company or
any Company
Subsidiary or, licensed, sold or supplied by the Company or any
Company
Subsidiary to Third Parties, and including all versions, releases,
modules and
embodiments thereof, in existence or made available at any Facility
or installed
or made available by any means at any of the Business' Customers'
Facilities
and, including those listed and generally described in Section
1.1(c) of the
Company Disclosure Schedule, and including all versions, releases
and modules
thereof in existence or available at a Facility or installed at any
of the
Facilities of the Business' Customers' and for purposes of this
Agreement
includes future, current and historical or past Products, whether
completed or
marketed or not, at all developmental stages, including works in
progress and
abandoned projects, and for purposes of this Agreement after the
date hereof
includes all products developed by the Company in any way similar
to the
Products and the Product Components.
"Representatives" shall mean, with respect to a Party, such
Party's
directors, officers, employees, agents, advisors or Affiliates,
or
representatives of its agents, advisors or Affiliates.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the United States Securities Act of
1933,
as amended, and the rules and regulations promulgated
thereunder.
"Stockholders' Agreement" shall mean that certain "LSSi Corp.
Stockholders Agreement," dated as of August 22, 2003, among the
Company and
Investors listed therein.
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"Subsidiary" of any Person shall mean any corporation,
partnership,
joint venture, limited liability company, trust or estate of which
(or in which)
more than fifty percent (50%) of (a) the issued and outstanding
capital stock
having ordinary voting power to elect a majority of the board of
directors of
such entity, or (b) the interest in the capital or profits of such
entity is at
the time directly or indirectly owned or controlled by such Person,
by such
Person and one or more of its other Subsidiaries or by one or more
of such
Person's other Subsidiaries.
"Suppliers" includes vendors, licensors and others who furnish
or
supply Intellectual Property, Products, Data, Databases or
components of any of
the foregoing, material and/or services to the Company or any
Company Subsidiary
by any means and for any purpose under a Contract.
"Takeover Proposal" shall mean any inquiry, proposal or offer
relating
to (i) the acquisition of more than twenty percent (20%) of the
outstanding
shares of capital stock or any other voting securities of the
Company by any
Third Party, (ii) a merger, consolidation, business combination,
reorganization,
share exchange, sale of assets, recapitalization, liquidation,
dissolution or
similar transaction, or a series of any such transactions, which
would result in
any Third Party acquiring the assets of the Company and the Company
Subsidiaries
(including capital stock or other Equity Interests of Company
Subsidiaries)
representing twenty percent (20%) or more of the consolidated
assets, revenues
or earnings of the Company and the Company Subsidiaries,
immediately prior to
such transaction (whether by purchase of assets, acquisition of
stock or other
Equity Interests of a Company Subsidiary or otherwise) (iii) any
other
transaction which would result in a Third Party acquiring the
assets of the
Company and the Company Subsidiaries (including capital stock or
other Equity
Interests of Company Subsidiaries) representing twenty percent
(20%) or more of
the consolidated assets, revenues or earnings of the Company and
the Company
Subsidiaries, immediately prior to such transaction (whether by
purchase of
assets, acquisition of stock or other Equity Interests of a Company
Subsidiary
or otherwise) or (iv) any combination of the foregoing.
"Tax Returns" shall mean any return, declaration, report, claim
for
refund, or information return or statement relating to Taxes,
required to be
filed with any Governmental Authority, including any schedule or
attachment
thereto, and including any amendment thereof.
"Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs,
imposts and other similar charges (together with any and all
interest,
penalties, additions to tax and additional amounts imposed with
respect thereto)
imposed by any Governmental Authority, including those on or
measured by or
referred to as income, franchise, windfall or other profits, gross
receipts,
property, sales, use, net worth, capital stock, payroll,
employment, social
security, workers' compensation, unemployment compensation, excise,
withholding,
ad valorem, stamp, transfer, value-added and provider taxes.
10
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"Third Party" shall mean any Person other than the Company, any
Company
Subsidiary, Parent or Merger Sub.
"Third Party Licenses" shall mean those licenses set forth in
Section
1.1(d) of the Company Disclosure Schedule.
"Warrant Holder" shall mean a holder of a Company Warrant.
1.2 Terms
Defined Elsewhere. The following terms are defined elsewhere in
this Agreement, as indicated below:
"401(k) Plan"
Section
7.2(f)(iv)
"Acceptable Confidentiality Agreement"
Section 6.6(b)
"Additional Agreement" or "Additional
Section 3.6.1
Agreements"
"Additional Consent"
Section 6.17.1
"Agreement"
Recitals
"Allocation Spreadsheet"
Section 3.1.1(b)
"Applicable Policies"
Section 6.12.2
"Arbitration Firm"
Section 3.2.4(b)
"Audit Adjustment"
Section 6.20(b)
"Audited Financial Statements"
Section 4.7.1
"Balance Sheet"
Section 4.7.1
"Cash Consideration"
Section 3.2.1
"Certificate of Merger"
Section 2.3
"Certificates"
Section 3.3.2(b)
"Certification of Non-Foreign Status"
Section 10.6(a)(ii)
"CLEC"
Section 4.5.2
"Closing"
Section 2.2
"Closing Date"
Section 2.2
"Closing Date Adjustment"
Section 3.2.2
"Closing Working Capital Statement"
Section 3.2.4(b)
"Company"
Preamble
"Company Benefit Plans"
Section 4.21.1
"Company Common Stock"
Section 4.3.1
"Company Contract"
Section 4.11.1
"Company Disclosure Schedule"
Article IV
"Company Financial Advisors"
Section 4.22
"Company Leased Properties"
Section 4.20.2
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"Company Preferred Stock"
Section 4.3.1
"Company Recommendation"
Section 2.7
"Company Stock"
Section 4.3.1
"Company Stockholder"
Section 2.7
"Company Subsidiary" and "Company
Section 4.1.1
Subsidiaries"
"Confidentiality Agreement"
Section
11.4
"Contract Termination Escrow Amount"
Section 3.2.1(a)
"Contract Termination Excess"
Section 3.2.1(a)
"Contributor"
Section 6.19(e)
"Customer Complaints"
Section 4.12.3
"CyberTech+ Policy"
Section 6.12.1(c)
"Damages"
Section 9.2
"Defaulting Stockholder"
Section 10.6(b)
"DGCL"
Recitals
"Dispute Notice"
Section 3.2.4(b)
"Dissenting Shares"
Section 3.1.1(a)
"Dissenting Stockholders"
Section 3.1.1(a)
"Effective Time"
Section 2.3
"Equityholder Reserve"
Section 3.2.1(d)
"ERISA"
Section 4.21.1
"ERISA Affiliate"
Section 4.21.1
"Estimated Working Capital"
Section 3.2.2(c)
"Estimated Working Capital Statement"
Section 3.2.4(a)
"FCPA"
Section 4.29
"Final Cash Consideration Decrease"
Section 3.2.4(e)
"Final Cash Consideration Increase"
Section 3.2.4(d)
"Final Working Capital"
Section 3.2.2(e)
"Financial Statements"
Section 4.7.1
"Georgica"
Preamble
"Granite"
Preamble
"Grant Damages"
Section 9.2(c)
"H&Q LSSI"
Preamble
"Indemnification Escrow Amount"
Section 3.2.1(b)
"Indemnification Escrow Excess"
Section 3.2.1(b)
"Irrevocable Consent"
Section 6.4
"Joinder Agreement"
Section 6.17.2
"Lease" and
"Leases"
Section 4.20.2
"Leave Employee"
Section 4.10.2
"Letter of Intent"
Section 11.4
"Letter of Transmittal"
Section 3.3.2(b)
"Long-Form Joinder Agreement"
Section 6.17.3
"Merger"
Recitals
"Merger Consideration"
Section 3.1.1(a)
12
<PAGE>
"Merger Sub"
Preamble
"MIP Payment"
Section 3.1.3
"MIP-Related Taxes"
Section 3.1.3
"Money Laundering Laws"
Section 4.28
"Net Cash Consideration"
Section 3.2.1(f)
"Non-Performing Party"
Section 11.9
"OFCCP"
Section 4.10.9
"Parent"
Preamble
"Parent Disclosure Schedule"
Article V
"Parent Indemnitees"
Section 9.2
"Party" or "Parties"
Preamble
"Paying Agent"
Section 3.3.2(a)
"Payment Fund"
Section 3.3.2(a)
"Pension Plan"
Section 4.21.1
"Performing Party"
Section 11.9
"Post-Closing Payment Holders"
Section 3.3.1(c)
"Potential Acquiror"
Section 6.6(b)
"Pre-Closing Certificate"
Section 3.2.4(a)
"Pre-Closing Tax"
Section 10.1.2
"Pre-Closing Tax Returns"
Section 10.1.1
"Press Release"
Section 6.10
"Principal Stockholders"
Preamble
"Pro Rata"
Section 3.2.1(a)
"Released Claims"
Section 6.17.3
"Releasor"
Section 6.17.3
"Realized Tax Benefit"
Section 6.20(b)
"Reserve Excess"
Section 3.2.1(d)
"Short-Form Joinder Agreement"
Section 6.17.4
"Stockholder Approval"
Section 4.4.1
"Stockholder Claim"
Section 6.19(a)
"Stockholder Claim Damages"
Section 9.5.1
"Stockholder Released Claims"
Section 6.17.4
"Stockholder Releasor"
Section 6.17.4
"Straddle Period Returns"
Section 10.1.2
"Surviving Corporation"
Section 2.1
"Target Amount"
Section 3.2.2(a)
"Tax Audit"
Section 10.5.1
"Tax Benefit Payment"
Section 6.20(b)
"Termination Date"
Section 8.1(b)(i)
"TIN Certification"
Section 10.6.(a)(i)
"Twenty Day Period"
Section 6.6(b)
"Unaudited Interim Financial Statements"
Section 4.7.1
"U.S. Specialty Policy"
Section 6.12.1(b)
"Warburg Pincus"
Preamble
13
<PAGE>
"Westchester Policy"
Section 6.12.1(a)
"Working Capital"
Section 3.2.2(d)
"Working Capital Decrease"
Section 3.2.2(b)
"Working Capital Increase"
Section 3.2.2(a)
1.3
Interpretation. In this Agreement, unless otherwise specified,
the
following rules of interpretation apply:
(a) references to Sections, Subsections, Schedules, Annexes,
Exhibits,
Clauses and Parties are references to sections or sub-sections,
schedules,
annexes, exhibits and clauses of, and Parties to, this
Agreement;
(b) references to any Person include references to such
Person's
predecessors, successors and permitted assigns;
(c) words importing the singular include the plural and vice
versa;
(d) words importing one gender include the other gender;
(e)
references to the word "including" do not imply any limitation;
(f) references to months are to calendar months;
(g) the words "hereof", "herein" and "hereunder" and words of
similar
import, when used in this Agreement, refer to this Agreement as a
whole and not
to any particular provision of this Agreement;
(h) references to "$" or "Dollars" refer to U.S. dollars;
(i) to the extent this Agreement refers to information or
documents
having been made available (or delivered or provided) to Parent or
Merger Sub,
the Company shall be deemed to have satisfied such obligation if
the Company or
any Company Representatives have made such information or document
available (or
delivered or provided such information or document) to any of
Parent, Merger
Sub, or any Representative thereof; and
(j) a defined term has its defined meaning throughout this
Agreement
and in each Exhibit and Schedule to this Agreement, regardless of
whether it
appears before or after the place where it is defined.
ARTICLE II
THE MERGER
2.1 The
Merger. Upon the terms and subject to satisfaction or written
waiver of the conditions set forth in this Agreement, and in
accordance with the
DGCL, at the Effective Time, Merger Sub shall be merged with and
into the
Company. As a result of the Merger, the separate corporate
existence of Merger
Sub shall cease and the Company shall continue as the surviving
corporation of
the Merger (the "Surviving Corporation").
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2.2 Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place on a day
that is a
Business Day (i) at the offices of Troutman Sanders LLP, 405
Lexington Avenue,
New York, New York 10174 at 10:00 a.m., New York City time, no
later than the
second (2nd) Business Day following the satisfaction of the
conditions set forth
in Article VII (other than (a) those conditions that are waived in
writing in
accordance with the terms of this Agreement by the Party or Parties
for whose
benefit such conditions exist and (b) any such conditions which, by
their terms,
are to be satisfied at the Closing) or (ii) at such other place,
time and/or
date as the Parties may otherwise agree. The date upon which the
Closing shall
occur is referred to herein as the "Closing Date".
2.3 Effective
Time. If all of the conditions to the Merger set forth in
Article VII have been fulfilled or waived and this Agreement shall
not have been
terminated as provided in Article VIII, the Parties shall cause a
certificate of
merger substantially in the form of Exhibit A attached hereto (the
"Certificate
of Merger") to be properly executed and filed in accordance with
the DGCL and
the terms of this Agreement on the Closing Date. The Merger shall
become
effective at such time as the Certificate of Merger is duly filed
with the
Secretary of State of the State of Delaware or at such other time
as is
specified by the Parties as the Effective Time in the Certificate
of Merger (the
"Effective Time").
2.4 Effect of
the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL.
Without limiting
the generality of the foregoing, at the Effective Time, except as
otherwise
provided herein, all the property, rights, privileges, powers and
franchises of
the Company and Merger Sub shall vest in the Surviving Corporation,
and all
debts, Liabilities and duties of the Company and Merger Sub shall
become the
debts, Liabilities and duties of the Surviving Corporation.
2.5
Certificate of Incorporation and By-laws of the Surviving
Corporation.
At the Effective Time, the certificate of incorporation and by-laws
of the
Surviving Corporation shall be amended in their entirety to contain
the
provisions set forth in the certificate of incorporation and
by-laws of Merger
Sub attached as Exhibit B hereto, except that the name of the
Surviving
Corporation shall at the Effective Time be changed to the name of
the Company.
2.6 Directors
and Officers of the Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time (and identified
as the
initial directors of the Surviving Corporation in Exhibit C hereto)
shall be the
initial directors of the Surviving Corporation, and shall each hold
office in
accordance with the certificate of incorporation and by-laws of the
Surviving
Corporation. The persons identified in Exhibit C hereto as the
initial officers
of the Surviving Corporation shall be the initial officers of the
Surviving
Corporation, and shall each hold office in accordance with the
certificate of
incorporation and by-laws of the Surviving Corporation.
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<PAGE>
2.7 Company
Actions. The Company represents that the board of directors of
the Company has, at a meeting duly called and held, unanimously (a)
approved
this Agreement and the transactions contemplated herein, including
the Merger,
(b) recommended that the holders of Company Stock (each, a
"Company
Stockholder") approve and adopt this Agreement (the "Company
Recommendation"),
(c) determined that this Agreement and the transactions
contemplated herein,
including the Merger, are fair to and in the best interests of the
Company
Stockholders, (d) determined that the Merger Consideration to be
paid for
Company Stock in the Merger is fair to all of the Company
Stockholders and (e)
declared that this Agreement is advisable.
2.8 Additional
Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds,
bills of
sale, assignments or assurances in law or any other acts are
necessary or
desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving
Corporation its right, title or interest in, to or under any of the
rights,
properties or assets of the Company or any Company Subsidiary, the
Company and
each Company Subsidiary and each of their officers and directors
shall be deemed
to have granted to the Surviving Corporation an irrevocable power
of attorney to
execute and deliver all such deeds, assignments and assurances in
law and to
take all acts necessary, proper or desirable to vest, perfect or
confirm title
to and possession of such rights, properties or assets in the
Surviving
Corporation, and the officers of the Surviving Corporation are
authorized in the
name of the Company and each Company Subsidiary to take any and all
such action.
ARTICLE III
CONVERSION OF COMPANY STOCK; COMPANY OPTIONS, COMPANY WARRANTS
AND
INCENTIVE PLAN; DELIVERY AND PAYMENT OF MERGER CONSIDERATION
3.1 The
Merger.
3.1.1
Conversion
of Company Stock; Cancellation of Options. At the
Effective Time, by virtue of the Merger and without any action on
the part of
Merger Sub, the Company or the Company Stockholders, the following
shall occur:
(a) Each share of Company Stock issued and outstanding
immediately
prior to the Effective Time (other than any shares of Company Stock
to be
cancelled pursuant to Section 3.1.1(d) and any shares of Company
Stock which are
held by Company Stockholders who have not voted in favor of this
Agreement or
consented thereto in writing and who have complied with the
requirements of
Section 262 of the DGCL ("Dissenting Stockholders")), shall be
converted,
subject to Section 3.3.5, into the right to receive the Net Cash
Consideration
applicable to such Company Stock as set forth on the Allocation
Spreadsheet, and
any amounts that become payable to the Company Stockholders, Option
Holders and
the MIP Participants as Contract Termination Excess,
Indemnification Escrow
Excess, Reserve Excess and Final Cash Consideration Increase
pursuant to Section
3.2, plus interest earned thereon in accordance with the terms of
the Escrow
Agreement (collectively, the "Merger Consideration"). At the
Effective Time, all
such shares of Company Stock (other than shares of Company Stock
held by
16
<PAGE>
Dissenting Stockholders ("Dissenting Shares") which will be treated
in
accordance with Section 3.4) shall no longer be outstanding and
shall
automatically be cancelled and retired and shall cease to exist,
and each
Certificate which immediately prior to the Effective Time
represented shares of
Company Stock shall thereafter represent the right to receive the
Merger
Consideration therefor. Dissenting Shares will represent the right,
if any, to
receive payment (as provided in Section 6.19) of the "fair value"
of such shares
of Company Stock as determined in accordance with Section 262 of
the DGCL.
Certificates previously representing shares of Company Stock (other
than
Dissenting Shares) shall be exchanged for the Merger Consideration,
without
interest, upon the surrender of such Certificates in accordance
with the
provisions of Section 3.3.
(b) Section 3.1.1(b) of the Company Disclosure Schedule is a
preliminary schedule (the "Allocation Spreadsheet") showing (i) the
name,
address and contact information for each holder of Company Stock,
each Option
Holder and each Warrant Holder (which names include all Persons who
have claimed
or, to the Knowledge of the Company or the knowledge of any
Principal
Stockholder, could claim, any such status), regardless of whether
or not such
holder will receive any consideration pursuant to the transaction
contemplated
by this Agreement, and each MIP Participant, (ii) the amount to be
received in
cash by each holder of Company Stock, Option Holder and MIP
Participant at the
Effective Time as provided for in this Article III, based on the
formulas and
assumptions set forth therein, and (iii) a true, complete and
correct list of
(y) the aggregate number of shares of each class of Company Stock
held by each
Company Stockholder and (z) the allocation of the amounts payable
to each MIP
Participant under the MIP. The Parties hereby acknowledge and agree
that between
the date of this Agreement and the Effective Time, the Allocation
Spreadsheet
shall be updated as necessary by the Equityholder Representative to
reflect (1)
changes in the Merger Consideration pursuant to Section 3.2, (2)
changes to the
equity structure of the Company arising prior to the Closing,
including as a
result of the exercise, if any, of Company Options or Company
Warrants and the
conversion of the Company Convertible Notes, and (3) the granting
of interests
under the MIP (but only as permitted pursuant to this Agreement),
in each case,
in a manner in which the Equityholder Representative shall deem
appropriate.
(c) Each Company Option and Company Warrant issued and
outstanding
immediately prior to the Closing (whether or not vested) shall, by
virtue of the
Merger, become without any exercise thereof, solely the right to
receive such
portion of the Merger Consideration to which such holder would have
been
entitled had such holder exercised such Company Option or Company
Warrant
immediately prior to the Effective Time and paid the exercise price
therefor.
The Company represents and warrants to Parent that immediately
prior to the
Effective Time, the portion of the Merger Consideration to which
each Warrant
Holder would be entitled in the event of such exercise and payment
is less than
the exercise price for such or Company Warrant.
(d) Each share of Company Stock held by Parent, Merger Sub, any
Subsidiary of Parent or Merger Sub, or in the treasury of the
Company or by any
Company Subsidiary immediately prior to the Effective Time shall be
cancelled
and extinguished without any conversion thereof and no payment
shall be made
with respect thereto.
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(e) Each share of common stock, no par value, of Merger Sub issued
and
outstanding immediately prior to the Effective Time shall be
converted into and
be exchanged for one (1) newly and validly issued, fully paid and
nonassessable
share of common stock of the Surviving Corporation. Following the
Effective
Time, each certificate evidencing ownership of shares of Merger Sub
common stock
shall evidence ownership of such shares of the Surviving
Corporation.
3.1.2
Change in
Shares. If between the date of this Agreement and the
Effective Time the outstanding shares of Company Stock shall have
been changed
into a different number of shares or a different class, by reason
of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or
exchange of shares, the Allocation Spreadsheet shall be
correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification,
recapitalization,
split, combination or exchange of shares.
3.1.3
MIP
Payments. Prior to the calendar day on which the Effective Time
occurs, upon the receipt from each MIP Participant of an Additional
Consent and
a Joinder Agreement as provided in Sections 6.17.2 and 6.17.3
hereof, the
Company shall pay an amount equal to ten percent (10%) of the Net
Cash
Consideration payable pursuant Section 3.2, subject to applicable
withholding
Taxes, to the participants in the MIP as set forth on the
Allocation Spreadsheet
(collectively, the "MIP Payment") and the Company shall remit or
accrue the
liability for the payment of all applicable withholding Taxes and
employer Taxes
with respect thereto ("MIP-Related Taxes").
3.2 Delivery
of the Merger Consideration.
3.2.1
Delivery
of Merger Consideration. At the Closing, upon the terms
and subject to the conditions contained herein, Parent shall
deliver an amount
equal to the difference between (i) Seventy Million Dollars
($70,000,000) and
(ii) the principal outstanding as of the Closing Date of the
European
Indebtedness (the difference between (i) and (ii), the "Cash
Consideration"),
subject to the Closing Date Adjustment pursuant to Section 3.2.2,
in the manner
set forth below:
(a) $1,300,000 (the "Contract Termination Escrow Amount") for
the
purpose of paying actual Contract termination and cancellation
charges in
accordance with the provisions of Section 6.11 shall be paid by
Parent directly
to the Escrow Agent in immediately available funds to the account
or accounts
designated by the Escrow Agent not less than two (2) Business Days
prior to the
Closing Date, which amount shall be distributed pursuant to the
Escrow
Agreement; provided that any excess over such actual termination
and
cancellation charges (the "Contract Termination Excess"), shall be
paid in
accordance with Section 6.11 to the Company Stockholders, Option
Holders and MIP
Participants Pro Rata. For purposes of this Agreement, "Pro Rata"
means pro rata
in proportion to the aggregate amounts payable to such Persons
pursuant to the
Allocation Spreadsheet; provided, that each such Person has
previously received
Net Cash Consideration pursuant to Section 3.3.1 or Section 3.3.2
(and if any
such Person shall have received Net Cash Consideration pursuant to
Section
3.3.2, the amount to be paid to such Person shall be delivered to
the Paying
Agent for distribution in connection with Section 3.3.2);
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<PAGE>
(b) Seven Million Dollars ($7,000,000) (the "Indemnification
Escrow
Amount") for the purpose of paying any indemnification claims to
any Parent
Indemnitee under and pursuant to the provisions of Article IX and
any Final Cash
Consideration Decrease due Parent shall be paid by Parent directly
to the Escrow
Agent in immediately available funds to the account or accounts
designated not
less than two (2) Business Days prior to the Closing Date by the
Escrow Agent,
which amount shall be distributed pursuant to the Escrow Agreement;
provided
that, subject to the terms of the Escrow Agreement, any portion of
the
Indemnification Escrow Amount remaining after payments to (i) any
Parent
Indemnitee pursuant to Article IX of this Agreement and (ii) Parent
with respect
to the payment, if any, of the Final Cash Consideration Decrease
pursuant to
Section 3.2.4(e) (the "Indemnification Escrow Excess"), shall, on
February 1,
2009, be paid to the Company Stockholders, Option Holders and MIP
Participants
Pro Rata in accordance with Section 3.2.5 hereof;
(c) An amount of cash sufficient to fully repay all of the
Indebtedness
of the Company and its Subsidiaries, including (i) all
Indebtedness, if any,
associated with the MIP Payment and any MIP-Related Taxes which
have not been
fully paid and (ii) any Indebtedness of the Company or its
Subsidiaries that is
not shown on the balance sheets of such entities or that is not
otherwise
reflected in the books and records thereof), except the European
Indebtedness
and the Indebtedness set forth in Section 3.2.1(c) of the Company
Disclosure
Schedule, shall be paid by the Parent on behalf of the Company and
the Company
Subsidiaries at the Closing directly to the holders of such
Indebtedness against
receipt by the Company and Parent of duly executed payoff letters
in customary
form, which shall be reasonably acceptable to Parent, and
documentation
reasonably acceptable to the Parent releasing any Liens securing
such
Indebtedness;
(d) An amount equal to Three Hundred Fifty Thousand Dollars
($350,000)
(which amount represents: (X) One Hundred Thousand Dollars
($100,000) for the
reasonable and demonstrable costs and expenses payable by the
Company and the
Company Stockholders in connection with the consummation of the
Merger as
estimated and set forth in Section 3.2.1(d) of the Company
Disclosure Schedule
and (Y) Two Hundred Fifty Thousand Dollars ($250,000) which may be
applied to
any expenses and liabilities of the Principal Stockholders, at
their sole
discretion (the "Equityholder Reserve")) shall be paid by Parent in
immediately
available funds to an account designated by the Equityholder
Representative not
less than two (2) Business Days prior to the Closing Date; provided
that any
excess over such expenses and liabilities (the "Reserve Excess"),
shall, within
ninety (90) days after the Closing Date or such other date as the
Equityholder
Representative shall determine, be thereafter paid to the Company
Stockholders,
Option Holders and MIP Participants Pro Rata;
(e) An amount equal to the Taxes required to be withheld pursuant
to
Sections 10.4 and 10.6 of this Agreement and any other Taxes
required to be
withheld pursuant to any provision of the Code and the regulations
promulgated
thereunder and any corresponding or like provision of state, or
foreign law,
shall be deducted from the amount payable and paid over by Parent
to the
appropriate Governmental Authority; and
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(f) the remainder (the "Net Cash Consideration"), shall be paid
by
Parent in accordance with the provisions of Section 3.3.
3.2.2
Closing
Cash Consideration Adjustment. The Cash Consideration to be
paid at the Closing pursuant to Section 3.2.1 shall be increased
(if applicable)
by an amount equal to any Working Capital Increase, or decreased
(if applicable)
by an amount equal to any Working Capital Decrease. The net amount
by which the
Cash Consideration is adjusted at the Closing in accordance with
the preceding
sentence is referred to as the "Closing Date Adjustment." As used
herein:
(a) "Working Capital Increase" means the amount, if any, by which
the
Estimated Working Capital (according to the Pre-Closing
Certificate) exceeds
$2,226,000 (the "Target Amount").
(b)
"Working Capital Decrease" means the amount, if any, by which
the
Target Amount exceeds the Estimated Working Capital (according to
the
Pre-Closing Certificate).
(c) "Estimated Working Capital" means the Company's estimate of
Working
Capital as of the second Business Day immediately prior to the
Closing Date
(after giving effect to the transactions contemplated hereby but
before giving
effect to any other transactions) set forth on the Estimated
Working Capital
Statement;
(d) "Working Capital" as of any date shall mean, with respect to
the
Company, all consolidated current assets less all consolidated
current
Liabilities; provided, that current assets and current Liabilities
shall exclude
any assets and Liabilities relating to: (i) Indebtedness repaid as
of the
Closing, including any Indebtedness related to the MIP Payment and
any
Indebtedness related to the MIP-Related Taxes, (ii) accruals for
expenses of the
Company relating to the transactions contemplated by this Agreement
be paid as
of the Closing, (iii) accruals for expenses associated with the
2006 Employee
Bonus and Incentive Plan and the 2007 Employee Bonus and Incentive
Plan and (iv)
accruals for Taxes for the fiscal year ended December 31, 2006, (v)
$1,300,000
which represents an amount equal to the termination costs
associated with
terminating the Contracts listed in Section 6.11 of the Company
Disclosure
Schedule; (vi) any amounts relating to the matter referred to in
Sections 9.2(c)
and 9.2(d) of this Agreement; and (vii) the cost of the Run-Off
Periods and
Endorsements for the Applicable Policies as provided in Section
6.12.2; provided
further that current assets and Liabilities shall include Seven
Hundred Thousand
Dollars ($700,000) which represents the Parties' good faith
estimate of one-half
(1/2) of the total severance costs associated with the termination
of employees
and independent contractors as a result of the Merger, and no Party
shall be
liable to any other Party to the extent that the actual severance
costs incurred
in connection with the consummation of the Merger (in connection
with the
termination of employees and independent contractors or otherwise)
are greater
than or less than such amount.
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(e) "Final Working Capital" means the final determination of
Working
Capital as of the Closing Date (after giving effect to the
transactions
contemplated hereby but before giving effect to any other
transactions)
determined in accordance with Section 3.2.4(b); and
3.2.3
Final Cash
Consideration Adjustment. Upon the determination of the
Final Working Capital in accordance with Section 3.2.4(b), either
(a) the Parent
shall pay to the Company Stockholders, Option Holders and the MIP
Participants
Pro Rata the amount of the Final Cash Consideration Increase in
accordance with
Section 3.2.4(d) or, alternatively, (b) the Company Stockholders
shall pay to
the Parent the amount of the Final Cash Consideration Decrease in
accordance
with Section 3.2.4(e).
3.2.4
Working
Capital Adjustment.
(a) At least two (2) Business Days prior to the Closing Date,
the
Company shall cause to be prepared and delivered to Parent (i) a
statement of
Estimated Working Capital prepared using the same accounting
methods,
principles, practices, procedures and estimation methodologies as
those utilized
in preparing the Balance Sheet, subject to the adjustments
described in the
definition of Working Capital as of the Closing Date (the
"Estimated Working
Capital Statement") and (ii) a certificate (the "Pre-Closing
Certificate"), in a
form reasonably satisfactory to Parent, signed by the Company's
Chief Financial
Officer and its President stating the amount of the Working Capital
in the
Estimated Working Capital Statement and certifying that such amount
is the best
estimate thereof by the Company and the reasonable, good faith
belief of and
forecast by the Company, after due consideration and consultation
with the
outside accountants of the Company, of Working Capital at such
time. The
Estimated Working Capital Statement shall be using the same
accounting methods,
principles, practices, procedures and estimation methodologies as
those utilized
in preparing the Balance Sheet, subject to the adjustments
described in the
definition of Working Capital.
(b) As promptly as practicable, but no later than ninety (90)
days
after the Closing Date, Parent shall deliver to the Equityholder
Representative
a statement of Working Capital as of the Closing Date (the "Closing
Working
Capital Statement"). The Closing Working Capital Statement shall be
prepared
using the same accounting methods, principles, practices,
procedures and
estimation methodologies as those utilized in preparing the Balance
Sheet,
subject to the adjustments described in the definition of Working
Capital. The
Equityholder Representative may dispute the preparation or amount
of Working
Capital as set forth in the Closing Working Capital Statement by
delivering to
Parent within thirty (30) days after delivery of the Closing
Working Capital
Statement a written notice (a "Dispute Notice") which Dispute
Notice shall set
forth with specificity the basis for such dispute and the
Equityholder
Representative's computation of Working Capital as of two (2)
Business Days
immediately prior to the Closing Date. In the event that the
Equityholder
Representative does not give Parent a Dispute Notice within such
thirty (30)-day
period, the Closing Working Capital Statement will be final,
conclusive and
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binding on the Parties and the Working Capital set forth thereon
shall become
the Final Working Capital. In the event the Equityholder
Representative shall
give Parent a Dispute Notice, the Equityholder Representative and
Parent shall
negotiate in good faith to resolve such dispute. If the
Equityholder
Representative and Parent, notwithstanding such good faith effort,
fail to
resolve such dispute within thirty (30) days after Parent gives the
Equityholder
Representative the Dispute Notice, then the Equityholder
Representative and
Parent jointly shall engage the Independent Accounting Firm (the
"Arbitration
Firm") to resolve such dispute and to determine the Final Working
Capital. The
Arbitration Firm shall only be authorized to choose between the
Working Capital
set forth in the Closing Working Capital Statement and the
Equityholder
Representative's computation of Working Capital set forth in the
Dispute Notice.
All determinations made by the Arbitration Firm shall be final,
conclusive and
binding on the Parties. The costs and expenses of the Arbitration
Firm, along
with the costs and expenses of the Party whose position is selected
by the
Arbitration Firm, shall be paid by the Party whose position is not
selected by
the Arbitration Firm.
(c) For purposes of complying with the terms set forth in this
Section
3.2.4, each Party shall cooperate with and make reasonably
available to the
other Parties and their respective Representatives all information,
records,
data and working papers, and will permit reasonable access to its
facilities and
personnel, as may be reasonably required in connection with the
preparation and
analysis of the Estimated Working Capital Statement and the Closing
Working
Capital Statement.
(d) If the Final Working Capital is greater than the Estimated
Working
Capital, then, subject to Section 3.3.8, the Cash Consideration
shall be
increased by the amount of such difference (the "Final Cash
Consideration
Increase") and Parent shall, within five (5) days after the date
upon which such
determination is made, pay to the Company Stockholders, Option
Holders and the
MIP Participants, in the manner directed by the Equityholder
Representative,
their Pro Rata share of any Final Cash Consideration Increase.
(e) If the
Final Working Capital is less than the Estimated Working
Capital, then the Cash Consideration shall be decreased by the
amount of such
difference (the "Final Cash Consideration Decrease") and the
Equityholder
Representative shall direct the Escrow Agent to pay such amount to
Parent out of
the Escrow Amount pursuant to the Escrow Agreement within five (5)
days after
the date upon which such determination is made.
(f) All actions taken by Equityholder Representative hereunder
shall be
binding upon each Company Stockholder and Option Holder. Without
limiting the
generality of the foregoing, the Equityholder Representative shall
have full
power and authority, on behalf of each Company Stockholder and
Option Holder to
interpret the terms and provisions of this Agreement, to dispute or
fail to
dispute the composition or amount of Working Capital or any item on
the Closing
Working Capital Statement, to negotiate and compromise any dispute
which may
arise under this Section 3.2.4, and to sign any releases or other
documents with
respect to any such dispute.
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3.2.5
Distribution of Escrow Amount. Upon release of the
Indemnification
Escrow Excess pursuant to the terms of the Escrow Agreement and
Section 3.2.1(b)
hereof, such amount shall be paid in the following sequence: (i)
first, up to
the first Three Million Dollars ($3,000,000) of such amount, less
any amounts
allocable to Dissenting Shareholders, shall be paid to the Company
Stockholders,
Option Holders and MIP Participants Pro Rata, and (ii) next, up to
the next
Three Million Five Hundred Thousand Dollars ($3,500,000) of such
amount, less
any amounts allocable to Dissenting Shareholders, shall be paid to
the Persons
that were holders of the Company's Series E Redeemable Convertible
Preferred
stock immediately prior to the Effective Time until such Persons
shall have been
paid the full amount of the preference payable to such Persons
under the terms
of such Series E Redeemable Convertible Preferred stock and (iii)
the balance,
less any amounts allocable to Dissenting Shareholders, to the
Company
Stockholders, Option Holders and MIP Participants Pro Rata.
3.3 Allocation
and Payment of Merger Consideration.
3.3.1
Closing
Payments. Parent shall make payment of the Net Cash
Consideration as follows:
(a) for each Company Stockholder entitled pursuant to Section 3.1.1
to
receive Net Cash Consideration of at least Five Hundred Thousand
Dollars
($500,000), by wire transfer at the Closing of immediately
available funds to
the account or accounts designated not less than two (2) Business
Days prior to
the Closing Date by such Company Stockholder; provided, that such
Person deliver
to Parent prior to the Closing, a duly executed Letter of
Transmittal and the
Certificates representing such Person's shares of Company
Stock;
(b) for each other Company Stockholder who delivers to Parent prior
to
the Closing a duly executed Letter of Transmittal and the
Certificates
representing such Person's shares of Company Stock, Parent shall
deliver at the
Closing a certified bank check or, in Parent's discretion, a wire
transfer at
the Closing of immediately available funds to the account or
accounts designated
not less than two (2) Business Days prior to the Closing Date by
such Company
Stockholder; and
(c) for each Company Stockholder and Option Holder other than
those
paid at the Closing pursuant to Sections 3.3.1(a) and 3.3.1(b)
(the
"Post-Closing Payment Holders"), Parent shall make payment pursuant
to Section
3.3.2.
3.3.2
Payment
Procedures Regarding Company Stock.
(a) At the Effective Time, Parent shall deposit, or shall cause to
be
deposited, with any Person designated by Parent and reasonably
satisfactory to
the Equityholder Representative (the "Paying Agent"), for the
benefit of the
Post-Closing Payment Holders, for exchange in accordance with this
Article III,
through the Paying Agent, cash in U.S. dollars in an amount
sufficient to pay
the Net Cash Consideration payable to such Post-Closing Payment
Holder (such
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<PAGE>
cash, together with any other Merger Consideration to be paid to
Post-Closing
Payment Holders, hereinafter referred to as the "Payment Fund")
payable pursuant
to Section 3.1 in exchange for outstanding shares of Company Stock.
Parent shall
cause the Paying Agent, pursuant to irrevocable instructions, to
promptly
deliver the Merger Consideration contemplated to be paid pursuant
to Section 3.1
out of the Payment Fund. The Payment Fund shall be invested by the
Paying Agent
as directed by Parent; provided, however, that: (i) no such
investment or losses
thereon shall affect the Merger Consideration payable to the
holders of Company
Stock and following any losses Parent shall promptly provide
additional funds to
the Paying Agent for the benefit of the holders of the shares of
the Company
Stock in the amount of any such losses; and (ii) such investments
shall be in
obligations of or guaranteed by the United States of America or any
agency or
instrumentality thereof and backed by the full faith and credit of
the United
States of America, in commercial paper obligations rated A-1 or P-1
or better by
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or
banker's
acceptances of commercial banks with capital exceeding $1 billion
(based on the
most recent financial statements of such bank that are then
publicly available).
Any net profit resulting from, or interest or income produced by,
such
investments shall be payable to the Surviving Corporation or
Parent, as Parent
directs. The Payment Fund shall not be used for any other
purpose.
(b) Promptly following the Effective Time (but in no event later
than
five (5) Business Days following the Effective Time), the Paying
Agent shall
mail to each Post-Closing Payment Holder that is a holder of record
of a
certificate or certificates which immediately prior to the
Effective Time
represented outstanding shares of Company Stock (the
"Certificates") (i) a
letter of transmittal in customary form (which shall specify that
delivery shall
be effected, and risk of loss and title to the Certificates shall
pass, only
upon proper delivery of the Certificates to the Paying Agent (the
"Letter of
Transmittal") 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 Paying Agent together with, if
applicable,
such Letter of Transmittal, properly completed and duly executed,
and such other
documents as may be required pursuant to such instructions, the
holder of such
Certificate shall be entitled to receive in exchange therefor the
Merger
Consideration which such holder has the right to receive hereunder,
and the
Certificate so surrendered shall forthwith be cancelled. No
interest will be
paid or accrued on any Merger Consideration payable to such
holders. In the
event of a transfer of ownership of shares of Company Stock which
is not
registered in the transfer records of the Company, the Merger
Consideration may
be issued to a transferee if the Certificate representing such
shares of Company
Stock is presented to the Paying Agent, accompanied by all
documents required to
evidence and effect such transfer and by evidence that any
applicable stock
transfer taxes have been paid. Until surrendered as contemplated by
this Section
3.3.2(b), each Certificate shall be deemed at any time after the
Effective Time
to represent only the right to receive upon such surrender the
Merger
Consideration or the right to demand to be paid the "fair value" of
the shares
represented thereby as contemplated by Section 3.4.
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<PAGE>
(c) Payment of the aggregate Merger Consideration hereunder by
Parent
to the Paying Agent shall for all purposes be deemed to be full,
complete, due
and proper payment thereof by Parent to the Post-Closing Payment
Holders, and
Parent shall have no further responsibility, liability or
obligation of any kind
with respect to such payment to any Post-Closing Payment Holders or
the
Equityholder Representative, or any other Person, regardless of any
negligence,
fraud, defalcation or mishandling of funds or otherwise by or on
behalf of the
Paying Agent.
3.3.3
Release of
Option Holders, Warrant Holders and Company
Stockholders. Each Principal Stockholder shall deliver to Parent at
the Closing,
and the Company shall use its good faith efforts to obtain from (a)
each other
Option Holder, (b) each other Warrant Holder and (c) each other
Company
Stockholder, a written acknowledgment that effective as of the
Effective Time,
all Company Options held by such Option Holder, and all Company
Warrants held by
such Warrant Holder, and all Company Stock held by such Company
Stockholder, as
applicable, shall, in each case, without any action on the part of
the Company,
such Option Holder, Warrant Holder or Company Stockholder, be
deemed terminated,
cancelled, void and of no further force and effect as between the
Company, the
Surviving Corporation and the Option Holder, Warrant Holder and
Company
Stockholder, as applicable, and a release whereby each such
Person
unconditionally, irrevocably and completely releases any such
Person's rights,
claims or interest in, to or under such Company Option, Company
Warrant or
Company Stock, as applicable, against the Company, Parent and the
Surviving
Corporation, in a form reasonably acceptable to Parent. The
provisions of this
Section 3.3.3 shall survive the consummation of the Merger.
3.3.4
Further
Rights in Company Stock. All Merger Consideration paid in
accordance with the terms hereof shall be deemed to have been
issued in full
satisfaction of all rights pertaining to such shares of Company
Stock and
Company Options.
3.3.5
Termination of Payment Fund. Any portion of the Payment Fund
which
remains undistributed to the Company Stockholders and Option
Holders for one (1)
year after the Effective Time shall be delivered to the Surviving
Corporation
upon demand, and any Company Stockholders or Option Holders who
have not
theretofore complied with this Article III shall thereafter look
only to the
Surviving Corporation only as general unsecured creditors thereof
for payment of
any Merger Consideration, without any interest or dividends
thereon.
3.3.6
No
Liability. None of Parent, the Company or the Surviving
Corporation shall be liable to any Company Stockholders or Option
Holders for
any cash from the Payment Fund delivered to a public official
pursuant to any
abandoned property, escheat or similar Applicable Law. If any
Certificates shall
not have been surrendered upon the second (2nd) anniversary of the
Closing Date
(or immediately prior to such earlier date on which any Merger
Consideration,
dividends (whether in cash, stock or property) or other
distributions with
respect to Company Stock in respect of such Certificate would
otherwise escheat
to or become the property of any Governmental Authority), any such
shares, cash,
dividends or distributions in respect of such Certificate shall, to
the extent
permitted by Applicable Law, become the property of the Surviving
Corporation,
free and clear of all claims or interests of any Person previously
entitled
thereto.
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3.3.7
Lost
Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
Person
claiming such Certificate to be lost, stolen or destroyed and, if
required by
Parent, the posting by such Person of a bond, in such reasonable
and customary
amount as Parent may direct, as indemnity against any claim that
may be made
against it with respect to such lost, stolen or destroyed
Certificate, the
Paying Agent or Parent, as applicable, will pay in exchange for
such lost,
stolen or destroyed Certificate the Merger Consideration without
any interest
thereon.
3.3.8
Withholding. Each of Parent, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the
consideration
otherwise payable pursuant to this Agreement to any Company
Stockholders, Option
Holders or MIP Participant such amounts as may be required to be
deducted and
withheld under the Code or any other Applicable Law with respect to
the making
of such payment. To the extent that amounts are so deducted or
withheld, such
deducted or withheld amounts shall be treated for all purposes of
this Agreement
as having been paid to the Company Stockholders, Option Holders or
MIP
Participant, as applicable, in respect of whom such deduction and
withholding
was made.
3.4
Dissenters' Rights. Notwithstanding anything in this Agreement to
the
contrary, if any Dissenting Stockholder shall demand to be paid the
"fair value"
of such Dissenting Stockholder's shares of Company Stock, as
provided in Section
262 of the DGCL, such shares of Company Stock shall not be
converted into or
exchangeable for the right to receive the Merger Consideration
otherwise
allocable to such Dissenting Stockholder at the Effective Time
(except as
provided in this Section 3.4) and shall entitle such Dissenting
Stockholder only
to payment of the fair value of such shares of Company Stock, in
accordance with
Section 262 of the DGCL, unless and until such Dissenting
Stockholder fails to
perfect or withdraws (in accordance with Section 262(k) of the
DGCL) or
effectively loses the right to dissent. The Company shall give the
Parent prompt
written notice of any demands for appraisal, withdrawals of demands
for
appraisal and any other instruments served pursuant to Section 262
(or any
successor or replacement) of the DGCL which are received by the
Company. The
Company will not voluntarily make a payment with respect to any
demands for
appraisal and will not, except with the prior written consent of
the Parent,
settle or offer to settle any such demands. The Company shall not,
except with
the prior written consent of Parent, voluntarily make any payment
with respect
to, or settle or offer to settle, any such demand for payment of
fair value of a
Dissenting Stockholder's shares of Company Stock prior to the
Effective Time.
The Company shall give Parent notice thereof prior to the Effective
Time and
Parent shall have the right to participate at its own expense in
all
negotiations and proceedings with respect to any such demands. If
any Dissenting
Stockholder shall have effectively failed to perfect or withdrawn
(in accordance
with Section 262(k) of the DGCL) or lost the right to dissent, then
as of the
later of the Effective Time or the occurrence of such event, the
shares of
Company Stock held by such Dissenting Stockholder shall be
cancelled and
converted into and represent the right to receive the Merger
Consideration.
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3.5 Stock
Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed (after giving effect to the payment
for
Certificates described in Section 3.3) and thereafter, there shall
be no further
registration of transfers of shares of Company Stock theretofore
outstanding on
the records of the Company. From and after the Effective Time, the
holders of
Certificates shall cease to have any rights with respect to such
shares of
Company Stock except as otherwise provided herein or by Applicable
Law. On or
after the Effective Time, any Certificates presented to the Paying
Agent or
Parent for any reason shall be converted into the Merger
Consideration.
3.6
Equityholder Representative.
3.6.1
Appointment. The Equityholder Representative is hereby
irrevocably
appointed and authorized to act as the representative for the
Company
Stockholders party to this Agreement, including the Principal
Stockholders, and
the MIP Participants party to this Agreement with respect to any
matter
requiring action or decision by the Equityholder Representative
pursuant to this
Agreement and all post-Closing matters requiring any action or
decision by the
Company Stockholders, Option Holders or the MIP Participants,
including without
limitation to (i) execute and deliver all documents necessary or
desirable to
carry out the intent of this Agreement, the Escrow Agreement, and
any other
documents, instruments and/or agreements contemplated thereby (the
"Additional
Agreements," and each, an "Additional Agreement"), (ii) to give and
receive on
behalf of the Company Stockholders party to this Agreement or MIP
Participants
party to this Agreement any and all notices from or to any Company
Stockholder,
Option Holder and the MIP Participants under this Agreement and any
Additional
Agreement, (iii) grant any consent or approval on behalf of the
Company
Stockholders, Option Holders and the MIP Participants under this
Agreement and
any Additional Agreement and make all other elections or decisions
contemplated
by this Agreement and any Additional Agreement, and to amend,
modify or
supplement any of the foregoing in each such Company Stockholder's,
Option
Holder's and MIP Participant's name, place and stead, as if such
Company
Stockholder, Option Holder and MIP Participant had personally done
such act, and
the Equityholder Representative hereby accepts such appointment.
The death,
incapacity, dissolution, liquidation, insolvency or bankruptcy of
any Company
Stockholder, Option Holder or MIP Participant shall not terminate
such
appointment or the authority and agency of the Equityholder
Representative. The
power-of-attorney granted in this section is coupled with an
interest and is
irrevocable. The Company Stockholders, Option Holders and MIP
Participants shall
agree to indemnify, defend and hold harmless the Equityholder
Representative
from and against any and all loss, damage, liability and expense
that may be
incurred by the Equityholder Representative arising out of or in
connection with
his acceptance or appointment as the Equityholder Representative
under this
Agreement (except such as may result from the Equityholder
Representative's bad
faith or gross negligence), including the legal costs and expenses
of defending
itself against any claim or liability in connection with its
performance under
this Agreement and any Additional Agreements executed and delivered
by the
Equityholder Representative in connection with this Agreement or
any Additional
Agreement.
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3.6.2
Reliance.
Each party hereto shall be entitled to rely exclusively
upon any communication given or other action taken by the
Equityholder
Representative on behalf of the Company Stockholders, Option
Holders and the MIP
Participants pursuant to this Agreement, and shall not be liable
for any action
taken or not taken in good faith reliance on a communication or
other
instruction from the Equityholder Representative on behalf of the
Company
Stockholders, Option Holders and the MIP Participants.
3.6.3
Limitation
on Liability. The Equityholder Representative, solely in
its capacity as such, shall have no liability to Parent, Merger Sub
or the
Surviving Corporation under this Agreement or any Additional
Agreement, and
shall have no liability whatsoever to the Company Stockholders, the
Option
Holders, the MIP Participants or any Person claiming by, through or
under them,
for or in respect of any of its acts or omissions, except only for
its bad
faith.
3.6.4 Additional Limitation.
Notwithstanding the foregoing, the
Equityholder Representative, each Company Stockholder, each MIP
Participant, the
Company, Parent and Merger Sub expressly acknowledge that the
Equityholder
Representative shall have no authority or responsibility to act on
behalf of any
Company Stockholder or any MIP Participant in connection with any
claim, action
or proceeding initiated against such Company Stockholder or MIP
Participant
alleging a breach by such Company Stockholder or MIP Participant of
such Company
Stockholder's or MIP Participant's, as applicable, individual
representations,
warranties or covenants made in this Agreement or any letter of
transmittal.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS
Subject to such exceptions as are disclosed in the disclosure
schedule
(the "Company Disclosure Schedule") delivered by the Company to
Parent
concurrently with the execution and delivery of this Agreement, (i)
the Company
represents and warrants to Parent and Merger Sub the items
contained in this
Article IV to the extent applicable to the Company and its
Subsidiaries, and
(ii) subject to Article IX of this Agreement, each Principal
Stockholder
severally and not jointly represents and warrants to Parent and
Merger Sub the
items contained in Section 4.23 and Section 4.26, to the extent
applicable to
such Principal Stockholder, each of which is true and correct as of
the date
hereof and as of the Closing Date (except for such representations
and
warranties made as of another date, which shall, in each case, be
true and
correct as of such other date):
4.1
Organization and Qualification; Subsidiaries.
4.1.1
The
Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Section
4.1.1 of the
Company Disclosure Schedule contains a complete list of all of the
Subsidiaries
of the Company (each, a "Company Subsidiary" and collectively, the
"Company
Subsidiaries"), including (a) its respective jurisdiction of
incorporation or
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organization, as the case may be (b) its authorized capital stock,
(c) the
number of shares of its capital stock issued and outstanding and
(d) the
Company's direct and indirect Equity Interests therein. Except for
Equity
Interests in the Company's Subsidiaries, the Company does not own,
directly or
indirectly, any capital stock or other ownership interest in any
Person. No
Company Subsidiary owns, directly or indirectly, any capital stock
or other
ownership interest in any Person, except for the capital stock
and/or other
ownership interest in another wholly-owned Subsidiary of the
Company. Each
Company Subsidiary is directly or indirectly wholly owned by the
Company.
4.1.2
Each
Company Subsidiary has been duly organized, and is validly
existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization, as the case may be. The Company and
each Company
Subsidiary has the requisite power and authority necessary to own,
lease and
operate its properties and to carry on its business as it is now
being
conducted. The Company and each Company Subsidiary is duly
qualified or licensed
and in good standing under the laws of each such jurisdiction in
which the
conduct of the Business or the ownership or lease of its properties
or assets
requires such qualification, licensing or authorization. Section
4.1.2 of the
Company Disclosure Schedule sets forth each such jurisdiction with
respect to
the Company and each Company Subsidiary.
4.2 Charter
Documents; Corporate Books. The Company has heretofore made
available to Parent a complete and correct copy of the certificate
of
incorporation and the bylaws of the Company and each Company
Subsidiary in full
force and effect. Neither the Company nor any Company Subsidiary is
in violation
of any of the provisions of its certificate of incorporation or
bylaws or other
organizational documents, as applicable. Copies of all minute books
of the
Company and all Company Subsidiaries have been made available by
the Company to
Parent and, to the Company's Knowledge, all of the minutes of
meetings of the
boards of directors and stockholders of the Company and its
Subsidiaries are
contained in such minute books.
4.3
Capitalization; Subsidiaries.
4.3.1
The
authorized capital stock of the Company consists of 335,000,000
shares of common stock, par value $0.002 per share (the "Company
Common Stock");
22,000,000 shares of Series A Convertible Preferred stock, par
value $0.001 per
share; 22,000,000 shares of Series A1 Convertible Preferred stock,
par value
$0.001 per share; 6,666,667 shares of Series B Convertible
Preferred Stock, par
value $0.001 per share; 6,666,667 shares of Series B1 Convertible
Preferred
stock, par value $0.001 per share; 30,914,354 shares of Series C
Convertible
Preferred stock, par value $0.001 per share; 30,914,354 shares of
Series C1
Convertible Preferred stock, par value $0.001 per share; and
183,230,315 shares
of Series E Redeemable Convertible Preferred stock, par value
$0.001 per share
(collectively, the "Company Preferred Stock," and together with the
Company
Common Stock, the "Company Stock"). Except for Company Stock issued
after the
date of this Agreement upon exercise of Company Options, Company
Warrants or
Company Convertible Notes outstanding as of the date of this
Agreement, as of
the date of this Agreement, there are (a) 18,689,481 shares of
Company Common
Stock (other than treasury shares) issued and outstanding, (b) 0
shares of
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Company Common Stock held in the treasury of the Company, (c)
22,000,000 shares
of Series A Convertible Preferred stock, par value $0.001 per share
issued and
outstanding; (d) 0 shares of Series A1 Convertible Preferred stock,
par value
$0.001 per share issued and outstanding; (e) 6,666,667 shares of
Series B
Convertible Preferred stock, par value $0.001 per share were issued
and
outstanding; (f) 0 shares of Series B1 Convertible Preferred stock,
par value
$0.001 per share were issued and outstanding; (g) 30,914,354 shares
of Series C
Convertible Preferred stock, par value $0.001 per share were issued
and
outstanding; (h) 0 shares of Series C1 Convertible Preferred stock,
par value
$0.001 per share were issued and outstanding; and (i) 151,849,306
shares of
Series E Redeemable Convertible Preferred stock, par value $0.001
per share were
issued and outstanding. As of the date of this Agreement (i)
41,700,837 of
Company Common Stock are issuable upon exercise of outstanding
Company Options,
(ii) 3,200,000 shares of Company Common Stock are issuable upon
exercise of
outstanding Company Warrants and (iii) 29,977,083 shares of Company
Common Stock
are issuable upon exercise of Company Convertible Notes issued and
outstanding.
Section 4.3.1 of the Company Disclosure Schedule sets forth the
name of (A) each
Option Holder and each Warrant Holder, together with the grant
date, exercise
price, number of shares of Company Stock issuable upon exercise of
each such
Company Option or Company Warrant, as applicable, vesting schedule
of each such
Company Option or Company Warrant, as applicable, the number of
vested and
unvested Company Options of each Option Holder and Company Warrants
of each
Warrant Holder, and, with respect to Company Options, the specific
Company stock
plan pursuant to which such Company Option was issued, and (B) each
Company
Stockholder and any other holder of an Equity Interest in the
Company, together
with, as of June 1, 2007, the number of shares of Company Stock or
other Equity
Interest held by each Company Stockholder and each other holder of
an Equity
Interest in the Company.
4.3.2
All of the
issued and outstanding shares of Company Stock have been
duly authorized and validly issued and are fully paid and
nonassessable. Except
for the shares of Company Stock issuable upon the conversion of
outstanding
Company Options, Company Warrants and Company Convertible Notes,
there are no
Options of any character to which the Company or any Company
Subsidiary is a
party or by which the Company or any Company Subsidiary is bound
relating to the
issued or unissued Equity Interests of the Company, or securities
convertible
into or exchangeable for such Equity Interests, or obligating the
Company to
issue or sell any shares of its capital stock or other Equity
Interests, or
securities convertible into or exchangeable for such capital stock
of, or other
Equity Interests in, the Company. Except as set forth in Section
4.3.1, there
are no outstanding contractual obligations of the Company or any
Company
Subsidiary affecting the voting rights of or requiring the
repurchase,
redemption or disposition of, any Equity Interests in the Company.
Except as set
forth in Section 4.3.1, as otherwise would be permitted by this
Agreement or
upon exercise or conversion of Company Options, Company Warrants or
Company
Convertible Notes outstanding as of the date hereof, since December
31, 2006,
the Company has not issued any shares of its capital stock, or
securities
convertible into or exchangeable for such capital stock or any
other Equity
Interests in the Company.
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<PAGE>
4.3.3
Each
issued and outstanding share of capital stock or other Equity
Interest of each Company Subsidiary is duly authorized, validly
issued, fully
paid, nonassessable and is held, directly or indirectly, by the
Company or
another Company Subsidiary, free and clear of all Liens. Except as
set forth in
Section 4.3.1, there are no Options or other commitments,
understandings,
restrictions or arrangements relating to the issuance or sale with
respect to
any shares of capital stock or other Equity Interests of any
Company Subsidiary,
including any right of conversion or exchange under any outstanding
security,
instrument or agreement.
4.4
Authority.
4.4.1
The
Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of
this Agreement by the Company and the consummation by the Company
of the
transactions contemplated hereby have been duly and validly
authorized by all
necessary corporate action and no other corporate proceedings on
the part of the
Company or the Principal Stockholders and no stockholder votes are
necessary to
authorize this Agreement or to consummate the transactions provided
for herein
other than, with respect to the Merger, the affirmative vote of (i)
the holders
of a majority of the voting power of the Company Stockholders and
(ii) the
holders of a majority of the voting power of the Series E
Redeemable Convertible
Preferred Stock, to adopt this Agreement and approve the
transactions provided
for herein (the "Stockholder Approval"). This Agreement has been
duly authorized
and validly executed and delivered by the Company and, assuming
this Agreement
is a valid and binding obligation of Parent and Merger Sub, this
Agreement
constitutes a legal, valid and binding obligation of the Company,
enforceable
against the Company in accordance with its terms, except to the
extent that its
enforceability may be limited by applicable bankruptcy,
insolvency,
reorganization, moratorium or other laws affecting the enforcement
of creditors'
rights generally or by general equitable principles.
4.4.2
Upon
consummation of the Merger, (a) Parent will own all of the
outstanding capital stock of the Surviving Corporation and (b) all
the holders
of Company Options and Company Warrants shall be entitled only to
receive their
Pro Rata portion of the Merger Consideration, if any, upon payment
of the
exercise price therefor.
4.5 No
Conflict; Required Filings and Consents.
4.5.1 The execution,
delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated
hereby do not
and will not (i) assuming that Stockholder Approval is obtained,
conflict with
or violate any provision of the certificate of incorporation or the
by-laws of
the Company or any equivalent organizational documents of any
Company
Subsidiary, (ii) assuming that all consents, approvals and
authorizations
described in Section 4.5.2 will have been obtained prior to the
Effective Time,
and all filings and notifications described in Section 4.5.2 will
have been
made, and any waiting periods thereunder will have terminated or
expired prior
to the Effective Time, materially conflict with or violate any
Applicable Laws
or (iii) except as set forth in Section 4.5.1 of the Company
Disclosure
Schedule, require any consent or approval under, result in any
breach of or any
loss of any benefit under, or constitute a default (or an event
which with
notice or lapse of time or both would become a default) under, or
give to any
Person any right of termination, purchase, vesting, amendment,
acceleration or
cancellation of, or result in the creation of a Lien on any
property or asset of
the Company or any Company Subsidiary pursuant to, any Contract to
which the
Company or any Company Subsidiary is a party or by which any of
their respective
properties or assets are bound.
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<PAGE>
4.5.2
The
execution, delivery and performance of this Agreement by the
Company do not and the consummation of the transactions
contemplated hereby will
not, require any consent, approval, authorization or other action
by, or filing
with or notification to, any Governmental Authority, except (i)
under the rules
and regulations of the HSR Act or any other antitrust, competition,
trade or
other Applicable Laws, (ii) the filing and recordation of the
Certificate of
Merger as required by the DGCL or (iii) under the rules and
regulations of any
Governmental Authority with respect to the continuation of the
competitive local
exchange carrier ("CLEC") Licenses (or their equivalent).
4.6 Compliance
with Licenses; Applicable Laws.
4.6.1
A list of
all Licenses held by or granted to the Company and any
Company Subsidiary as of the date hereof is set forth in Section
4.6.1 of the
Company Disclosure Schedule, which includes all Licenses which are
used in or
required for the operation of the Business as presently conducted.
The Company
and each Company Subsidiary holds all Licenses necessary for the
operation of
the Business as currently operated, and neither the Company nor any
Company
Subsidiary has (i) received any written notice from any
Governmental Authority
or (ii) received, as of the date hereof, any written notice from
any Person
other than a Governmental Authority, that it (a) fails to hold, or
(b) is in
violation of, or (c) is, or any of its Customers are, acting beyond
the scope of
any such Licenses. All such Licenses are valid and in full force
and effect, and
neither the Company nor any Company Subsidiary is in default or
violation (and
no event has occurred which, with notice or the lapse of time or
both, would
constitute a default or violation) of any term, condition or
provision of, or
has received any notice threatening to revoke, any License to which
it is a
party.
4.6.2
As of the
date hereof, neither the Company nor any Company
Subsidiary has received any written notice that it is, and neither
the Company
nor any Company Subsidiary is, in violation of any Applicable Law
or
Governmental Order applicable to the Business or any of their
assets or
properties of the Company or any Company Subsidiary.
4.6.3
Except for
events or circumstances set forth in Sections 4.10,
4.13, 4.14, 4.17, 4.20, 4.21, 4.27, 4.28 and 4.29 with respect to
which the
Company, is making the representations and warranties set forth in
such
sections, no event has occurred or circumstance exists that (with
or without
notice or lapse of time or both) would reasonably be expected to
constitute or
result in a material violation by the Company or any Company
Subsidiary of, or a
failure on the part of the Company or any Company Subsidiary to be
in material
compliance with, any Applicable Law or Governmental Order.
32
<PAGE>
4.7 Financial
Statements; No Undisclosed Liabilities.
4.7.1
Section
4.7.1 of the Company Disclosure Schedule sets forth (a) the
audited consolidated financial statements of the Company and the
Company
Subsidiaries including the balance sheets, related statements of
income and cash
flows and changes in stockholder equity for the periods ended
December 31, 2006,
December 31, 2005 and December 31, 2004, together with all
accompanying notes
thereto (the "Audited Financial Statements") and (b) the
consolidated unaudited
balance sheet of the Company and the Company Subsidiaries, as of
April 30, 2007
and the related unaudited consolidated statements of income and
cash flows and
changes in stockholder equity for the four (4) month period then
ended including
the notes prepared in connection therewith (the "Unaudited Interim
Financial
Statements" and together with the Audited Financial Statements, the
"Financial
Statements"). Except as shown or provided for in the Financial
Statements or as
otherwise described in Section 4.7.1 of the Company Disclosure
Schedule, such
Financial Statements (i) have been prepared in accordance with the
accounting
principles and books and records of the Company; (ii) have been
prepared in
accordance with GAAP; (iii) reflect and provide adequate reserves
in respect of,
all known Liabilities of the Company and the Company Subsidiaries
in accordance
with GAAP, including all known contingent Liabilities as of their
respective
dates, and (iv) present fairly in all material respects the
consolidated
financial position, results of operations and cash flows of the
Company and its
consolidated Company Subsidiaries as of the dates or for the period
indicated.
For purposes of this Agreement, the "Balance Sheet" shall mean the
consolidated
balance sheet of the Company for the year ended December 31, 2006
contained in
the Audited Financial Statements.
4.7.2
Except as
set forth in Section 4.7.2 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has any
Liabilities of
any character whatsoever, whether or not accrued and whether or not
fixed or
contingent, other than (i) Liabilities reflected in the Audited
Financial
Statements, (ii) Liabilities incurred in the Ordinary Course of
Business
subsequent to December 31, 2006, (iii) Liabilities of a nature not
required to
be disclosed on a balance sheet or in the notes to financial
statements prepared
in accordance with GAAP and (iv) Liabilities incurred in connection
with
performance of this Agreement. Neither the Company nor any of the
Company
Subsidiaries have any equity, financial or creditor interest,
direct or
indirectly, in any special purpose entity.
4.7.3
Section
4.7.3 of the Company Disclosure Schedule contains a list of
all Liabilities of the Company and each Company Subsidiary (i)
which have been
expressly identified in letters from counsel of the Company to the
Company's
auditors or (ii) in letters from management of the Company to its
auditors in
connection with the audit of its 2006 Audited Financial Statements,
or (iii)
about which (A) the Company has Knowledge, (B) are in excess of
Twenty-Five
Thousand Dollars ($25,000) individually and (C) are not otherwise
identified in
(i) or (ii) above, in each case, which are not reflected in the
Company's 2006
Audited Financial Statements because they are of a nature not
required to be
disclosed on a balance sheet or in the notes to financial
statements prepared in
accordance with GAAP.
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<PAGE>
4.8 Conduct of
the Business. Except as set forth in Section 4.8 of the
Company Disclosure Schedule, from December 31, 2006 to the date
hereof, the
Business has been conducted in the Ordinary Course of Business and
the assets
and properties of Company and each Company Subsidiary have been
maintained in
substantially the same manner as maintained prior to the date of
the Balance
Sheet and in at least such order and condition as is necessary to
continue to
conduct the Business in the Ordinary Course of Business, and,
without limiting
the foregoing, neither the Company nor any Company Subsidiary
has:
(a) incurred any obligation or Liability or entered into any
transaction which could reasonably be expected to result in
monetary obligations
to the Company in excess of Twenty-Five Thousand Dollars ($25,000),
except in
the Ordinary Course of Business or in connection with the
performance of this
Agreement;
(b) increased or established any reserve for Taxes or other
Liability
on its books or otherwise provided therefor, except as may have
been required in
accordance with GAAP due to the operations or income of the Company
or the
Company Subsidiaries since the date of the Balance Sheet;
(c) subjected any of the assets, properties or business of the
Company
or the Company Subsidiaries to any Lien; sold, assigned or
transferred any
asset, property or business or cancelled any debt or claim, or
waived any right,
except in the Ordinary Course of Business;
(d) except in
the Ordinary Course of Business, sold, assigned,
transferred, encumbered (other than Permitted Encumbrances) or
permitted to
lapse any rights with respect to any Intellectual Property Rights
or other
material intangible asset owned by the Company or a Company
Subsidiary;
(e) granted any general or uniform increase in the rates of pay
of
employees of the Company or the Company Subsidiaries or any
increase in salary
payable or to become payable to any officer, employee, consultant
or agent of
the Company or the Company Subsidiaries, or increased the
compensation
(including perquisites) payable to any officer, employee,
consultant or agent of
the Company or the Company Subsidiaries for any period before or
after the date
of the balance sheet included in the Unaudited Interim Financial
Statements, or
by means of any bonus or pension plan, Contract or other commitment
increased
the compensation of any officer, employee, consultant or agent of
the Company or
the Company Subsidiaries;
(f) made
or authorized any capital expenditures for additions to plant
and equipment accounts of the Company or the Company Subsidiaries
in excess of
Twenty-Five Thousand Dollars ($25,000) in the aggregate;
(g) made any loan or payment to, or entered into any Contract with,
any
Company Stockholders or any Affiliate (but excluding any Company
Subsidiary), or
agreed to take any such action;
34
<PAGE>
(h) issued, sold or transferred, or agreed to issue, sell or
transfer,
any stock, note, bond, debenture or other corporate debt or Equity
Interest of
the Company or the Company Subsidiaries, whether newly issued or
held in
treasury;
(i) except for this Agreement, entered into any transaction other
than
in the Ordinary Course of Business;
(j) experienced any damage, destruction or loss (whether or not
covered
by insurance) adversely affecting its properties, assets or
business, or
experienced any other adverse change in its assets, liabilities, or
financial
condition from that disclosed on the Balance Sheet;
(k) delayed or postponed the payment of accounts payable and
other
Liabilities outside the Ordinary Course of Business;
(l) except in the Ordinary Course of Business, granted any license
or
sublicense of any rights under or with respect to any Intellectual
Property;
(m) made any loan or payment to, or entered into any other
Contract
with, any of its directors, officers, and employees other than
compensation paid
and advances and reimbursements for expenses made in the Ordinary
Course of
Business;
(n) entered into any employment Contract or collective
bargaining
agreement, written or oral, or modified the terms of any existing
such Contract
or agreement;
(o) terminated any Company Contract or made any material amendment
or
modification of any Company Contract on terms less beneficial in
all material
respects to the Company or any Company Subsidiary than, the terms
of such
Company Contract prior to the making of such amendment or
modification, except
for Contracts that terminated pursuant to their terms;
(p) taken any action which would have the effect of terminating,
or
giving any Governmental Authority the right to terminate, any
License;
(q) except as required by GAAP, made any material change in any
method
of accounting or accounting practice by the Company or any Company
Subsidiary or
any material write-up or write-down in the value of their
respective inventory
or accounts receivable or a reversal of any material accruals or
deviations from
past policies and practice with respect to product sales,
markdowns, discounts
or promotions; or
(r) entered into or made any Contract to do any of the
foregoing.
4.9 Absence of
Certain Changes or Events. Since December 31, 2006, there
has not been any Material Adverse Effect.
4.10
Labor and Employee Matters.
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4.10.1
(a) Neither the
Company nor any Company Subsidiary is a party to or
bound by any collective bargaining agreement or similar agreement
with any labor
organization, or work rules or practices agreed to with any labor
organization
or employee association applicable to any Company Employees, (b) no
Company
Employees are represented by any labor organization and there are
no
organizational campaigns, demands or proceedings pending or, to the
Knowledge of
the Company, threatened by any labor organization or group of
employees seeking
recognition or certification as collective bargaining
representative of any
group of Company Employees, (c) there are no unfair labor practice
charges or
complaints pending against the Company or any Company Subsidiary,
or, to the
Knowledge of the Company, threatened before the National Labor
Relations Board
or any analogous foreign, state or local agency, (d) there are no
grievance or
arbitration proceedings arising under any collective bargaining
agreement or
policy of the Company or any Company Subsidiary pending or, to the
Knowledge of
the Company, threatened against the Company or any Company
Subsidiary, and (e)
there are no strikes, controversies, slowdowns, work stoppages,
lockouts or
labor disputes pending or, to the Knowledge of the Company,
threatened against
or affecting the Company or any Company Subsidiary, and there has
not been any
such action during the past three (3) years.
4.10.2
Section 4.10.2
of the Company Disclosure Schedule sets forth with
respect to each Company Employee and each consultant or independent
contractor
engaged by the Company or any Company Subsidiary as of the date
hereof, and each
such employee's, consultant's or independent contractor's (as
applicable) (a)
name, (b) position, (c) date of hire, (d) base wage rate, (e)
vacation accrual
rate, (f) accrued unused vacation days and the base salary
equivalent for such
accrued unused vacation days, (g) sick leave accrual rate, (h)
entitlement to
other compensation, including any bonus to which such Company
Employee may be
entitled as of the Effective Time pursuant to any incentive plan or
other bonus
policy or practice maintained by the Company or any Company
Subsidiary, (i) work
location, (j) telecommuting status and (k) home address. Also set
forth in
Section 4.10.2 of the Company Disclosure Schedule is (i) the name
of each
Company Employee who, on the date hereof, is on a leave of absence
approved by
the Company or any Company Subsidiary or recognized by Applicable
Law, including
but not limited to family and medical leave, workers compensation
leave,
military leave or leave related to short or long-term disability (a
"Leave
Employee"), and, with respect to each such Leave Employee, to the
extent
permitted by Applicable Law, the reason for such leave and such
Leave Employee's
expected return date and (ii) the name of each Company Employee who
has any
License or clearance issued by any Governmental Authority which is
used in the
operation of the Business.
4.10.3
The Company and
each Company Subsidiary is, and has at all times
during at least the last three (3) years been in material
compliance with all
Applicable Laws respecting labor relations, immigration, employment
and
employment practices, and the terms and conditions of employment,
including
employment standards, equal employment opportunity, family and
medical leave,
wages, wage and hour laws, hours of work and occupational health
and safety and,
with respect to Company Employees working outside of the United
States,
comparable laws of the country in which such Company Employees
work.
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4.10.4
As of the date
hereof, the Company and each Company Subsidiary have
not received written notice of any Actions related to the Company
or any Company
Subsidiary pending or threatened, in or before any Governmental
Authority
responsible for the enforcement of any Applicable Law regarding
breach or
violation of any express or implied collective bargaining agreement
or contract
of employment, any Applicable Law governing labor relations,
employment or the
termination thereof or other illegal, discriminatory, wrongful or
tortious
conduct in connection with the employment relationship, the terms
and conditions
of employment, or applications for employment with the Company or
any Company
Subsidiary.
4.10.5
As of the date
hereof, the Company and each Company Subsidiary have
not received written notice of the intent of any Governmental
Authority
responsible for the enforcement of Applicable Laws related to
immigration,
labor, equal employment opportunity, family and medical leave,
wages, wage and
hour laws, hours of work, occupational health and safety or any
other Applicable
Law governing the employment relationship to conduct an
investigation with
respect to or relating to the Company or any Company Subsidiary,
and no such
investigation is in progress.
4.10.6
[Reserved.]
4.10.7
Set forth in
Section 4.10.7 of the Company Disclosure Schedule is
name of each employee that either the Company or any Company
Subsidiary has laid
off within the past six (6) months. The Company and each Company
Subsidiary is,
and during the ninety (90)-day period prior to the date of this
Agreement, has
been in compliance in all material respects with the Worker
Adjustment and
Retraining Notification Act of 1988, as amended, and any similar
state or local
law that requires notice to employees in the event of a plant
closing or mass
layoff.
4.10.8
The Company and
each Company Subsidiary has materially complied
with all employment verification procedures, including proper
completion of Form
I-9, as such procedures relate to all Company Employees. As of the
date hereof
there are no current foreign national employees of the Company or
any of the
Company Subsidiaries on whose behalf the Company or any of the
Company
Subsidiaries has submitted applications and petitions to the U.S.
Department of
Labor, U.S. Immigration and Naturalization Service, and U.S.
Department of State
for immigration employment and visa benefits.
4.10.9
There are no
businesses or assets of the Company involving federal
Contracts giving rise to any reporting or filing obligations with
the Office of
Federal Contract Compliance Programs ("OFCCP") and, to the extent
applicable,
the Company and each Company Subsidiary has complied in all
material respects
with all hiring and employment obligations applicable under OFCCP
rules and
regulations.
4.11
Company Contracts.
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4.11.1
The Company has
delivered to Parent true and complete copies of (a)
the types of contracts described in Section 4.11.2 of the this
Agreement and (b)
all Customer and Data Contracts which are, in the case of both (a)
and (b), now
in effect, or which although terminated, contain surviving
obligations,
liabilities or responsibilities to which the Company or a Company
Subsidiary is
a party or by which they or their property are bound, (collectively
"Company
Contracts" and each a "Company Contract").
4.11.2
Except as set
forth in Section 4.11.2 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is a party
to, or is
liable under (either directly or indirectly, contingently or
absolutely) any
written or oral:
(a) Contract not made in the Ordinary Course of Business, other
than
this Agreement;
(b) Employment, worker, contractor or consulting Contract which is
not
terminable without cost or other liability to either the Company or
any Company
Subsidiary, or any successor thereof, upon notice of thirty (30)
days or less;
(c) Contract or collective bargaining agreement with any labor
union or
any other program or contractual commitment involving employees,
workers,
contractors or consultants;
(d) Contract with any Company Employee containing any
non-competition
or non-solicitation clauses;
(e) bonus, pension, profit-sharing, retirement, stock purchase,
stock
option, incentive compensation, hospitalization, insurance or
similar plan,
Contract or understanding providing for employees, workers,
contractors or
consultants benefits of any kind;
(f) Lease with respect to any property, real or personal, whether
as
lessor or lessee;
(g) Contract for the purchase of real property, equipment or
fixed
assets;
(h) Contract for
the future purchase of materials, supplies or
inventory which may not be terminated without cost upon notice of
thirty (30)
days or less;
(i) Contract for the sale or purchase of goods, services,
Products,
Product Components or other assets calling for annual payments in
excess of
Twenty-Five Thousand Dollars ($25,000);
(j) Contract for the performance of services of any kind for or by
the
Company or any Company Subsidiary calling for annual payments in
excess of
Twenty-Five Thousand Dollars ($25,000);
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(k) insurance Contract other than those listed in Section 4.18 of
the
Company Disclosure Schedule or those contemplated by Section
6.12;
(l) Contract which cannot be terminated by the Company or any
Company
Subsidiary without cost or liability to the Company or such Company
Subsidiary
(or any successor thereof) upon thirty (30) days notice or
less;
(m) manufacturers' representative, sales agency, dealer or
advertising
Contract;
(n) agreement or indenture for the borrowing or lending of
money;
(o) agreement or indenture for the mortgaging or pledging of,
or
otherwise placing a Lien or security interest on, any assets or
properties of
the Company or any Company Subsidiary;
(p) Option or other Contract for the issuance of any debt or
equity
security, or the conversion of any obligation, instrument or
security, into debt
or equity securities of the Company or any Company Subsidiary,
other than
Company Options, Company Warrants and Company Convertible
Notes;
(q) guaranty of any obligation for borrowed money or otherwise,
excluding endorsements made for collection;
(r) settlement agreement of any administrative or judicial
proceedings;
(s) agreement under which the Company or any Company Subsidiary
has
advanced or agreed to advance moneys;
(t) commercial agency agreement and other commission Contracts
specifying a commercial agency territory and containing
exclusiveness
provisions;
(u) agreement with professional advisers or consultants;
(v) confidentiality agreement (other than those contained in
Contracts
delivered to Parent and other than those called for by any other
Section of this
Agreement);
(w) Contract with Third Parties to provide or joint venture in
the
provision of research or development;
(x) Contract for joint ventures, strategic alliances,
partnerships,
licensing arrangements or sharing of profits or proprietary
information;
(y) Contract which, as a consequence of Merger, require any consent
or
approval, result in any breach of or any loss of any benefit, or
constitute a
default (or an event which with notice or lapse of time or both
would become a
default) thereunder, or give to any Person any right of
termination, purchase,
vesting, amendment, acceleration or cancellation thereof, or result
in the
creation of a Lien (other than Permitted Liens) on any property or
asset of the
Company or any Company Subsidiary; and
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(z) any other agreement (or group of related agreements),
regardless of
the amount of consideration, pursuant to which the consequences of
a default or
termination could reasonably be expected to result in a Material
Adverse Effect.
4.11.3
As of the date
hereof, except as set forth in Section 4.11.3 of the
Company Disclosure Schedule, neither the Company nor any Company
Subsidiary has
made any offer or proposal to a Third Party which, upon acceptance
by such Third
Party, would become a Contract.
4.11.4
Each Company
Contract is a legal, valid and binding obligation of
the Company or a Company Subsidiary, as applicable, is in full
force and effect
and, assuming it is a legal, valid and binding obligation of the
counterparty
thereto, enforceable against the Company or such Company
Subsidiary, as
applicable, in accordance with its terms, except to the extent that
its
enforceability may be limited by applicable bankruptcy,
insolvency,
reorganization, moratorium or other laws affecting the enforcement
of creditors'
rights generally or by general equitable principles. Neither the
Company nor any
Company Subsidiary has received written notice, nor has Knowledge
of a reason
why any Company Contract is not a legal, valid and binding
obligation of the
counterparty thereto or is not in full force and effect and
enforceable against
such counterparty in accordance with its terms. Neither the Company
nor any
Company Subsidiary is in breach of, or default under, any Company
Contract. To
the Company's Knowledge, as of the date hereof, no counterparty to
a Company
Contract, is in breach or violation of, or default under, any
Company Contract.
Neither the Company nor any Company Subsidiary has received any
claim of
default, alleged default, anticipatory breach or delay, or failure
in performing
under any Company Contract, and there are no agreements of any of
the parties
relating to such Company Contracts which have not been disclosed to
Parent in
the Company Disclosure Schedule. To the Company's Knowledge, no
event has
occurred which would result in a breach or violation of, or a
default under, any
Company Contract (in each case, with or without notice or lapse of
time or
both), in each case by the Company or any Company Subsidiary. The
contract with
the Customer identified in Section 4.11.4 of the Company Disclosure
Schedule has
the meaning set forth therein.
4.11.5
Neither the
Company nor any Company Subsidiary is a party to a
Contract (a) receiving grants or applying for subsidies, investment
bonuses and
other official grants including Contracts that are connected with
subsidies,
bonuses or grants nor (b) providing for existing and imminent
obligations,
either now or upon Closing, to reimburse granted subsidies,
investment bonuses
and other official grants.
4.11.6
Three are no
agreements or understandings, other than those set
forth in Section 6.11 of the Company Disclosure Schedule, which
would impact the
termination or cancellation amounts owed under any Contract set
forth in Section
6.11 of the Company Disclosure Schedule.
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4.12
Litigation.
4.12.1
Except as set
forth in Section 4.12.1 of the Company Disclosure
Schedule (a) as of the date hereof (i) there is no Action pending
or, to the
Knowledge of the Company, threatened against the Company or any
Company
Subsidiary or any of their assets or properties at law or in
equity, or before
or by any Governmental Authority (including inquiries as to the
qualification of
the Company or any Company Subsidiary to hold or receive any
Licenses) and (ii)
neither the Company nor any Company Subsidiary or any officer of
the Company or
any Company Subsidiary has Knowledge of any basis for any of the
foregoing and
(b) none of the Company or any of the Company Subsidiaries is
subject to any
outstanding Governmental Order. Section 4.12.1 of the Company
Disclosure
Schedule sets forth all lawsuits, arbitrations and proceedings
involving the
Company or any of its Subsidiaries before Governmental Authority
during the six
(6) years preceding the date hereof.
4.12.2
Neither the
Company nor any Company Subsidiary are in default with
respect to any Governmental Order known to or served upon the
Company or any
Company Subsidiary. There is no pending Action brought by the
Company or any
Company Subsidiaries against others.
4.12.3
To the Knowledge
of the Company, Section 4.12.3 of the Company
Disclosure Schedule contains a true and complete list of every
written complaint
or claim of defect, default or breach in the five (5) years
preceding the date
hereof by any Customer concerning, regarding or in connection with
any Product
sold, offered, or offered for sale by the Company or any Company
Subsidiary,
separately by product line (the "Customer Complaints"), none of
which
constitutes a breach or default under the Contract with such
Customer. The
Company is capable of resolving any and all Customer Complaints
which are
existing and not resolved as of the date of this Agreement within
90 days from
the date hereof in the Ordinary Course of Business.
4.12.4
The Company has
provided to Parent copies of the letters received
by the Company's auditors from counsel to the Company in connection
with the
audit of its Audited Financial Statements since 2004, and in
connection with any
investigation conducted by or at the direction of its counsel at
the request of
the Company or its board of directors.
4.13
Environmental Matters.
4.13.1
Neither the
Company nor any Company Subsidiary has as of the date
hereof, received any written notice that it is not, and each of the
Company and
each Company Subsidiary (a) is in compliance with all applicable
Environmental
Laws relating to the Business or the assets or properties of the
Company and
each Company Subsidiary, and (b) has obtained and is in compliance
with all
Environmental Permits which are required to conduct the Business or
for the
ownership and use of the properties or assets of the Company and
each Company
Subsidiary.
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4.13.2
There are no
Actions pursuant to any Environmental Law pending or
threatened relating to the Business or the properties or assets of
the Company
or any Company Subsidiary, or which may give rise to any obligation
on the part
of the Company or any Company Subsidiary to undertake, or to bear
all or any
portion of the cost of, any remedial action of any nature under
any
Environmental Law.
4.13.3
The operations,
practices, policies and procedures of the Company,
each Company Subsidiary and each of their employees have been
conducted and,
prior to the Closing will be conducted, in material compliance
with, and have
not and will not, prior to the Closing, give rise to any loss,
Liability,
damage, costs, expenses or other adverse effect under, all
Applicable Laws,
Governmental Orders, regulations, directives and restrictions
concerning
protection of the environment, the disposal of Hazardous Materials
and health
and safety, and all Governmental Orders, rules, regulations,
directives and
restrictions issued thereunder or promulgated in connection
therewith.
4.13.4
There are under
Applicable Laws, Governmental Orders, regulations,
directives and restrictions concerning protection of the
environment and health
and safety, no outstanding notices of violations or consent orders
to which the
Company, its properties, any of the Company Subsidiaries or any of
their
properties are subject or may become subject. As of the date of the
Balance
Sheet, the Company had set aside adequate capital reserves to fund
all pending
and threatened notices of violations, all as reflected on the
Balance Sheet.
4.13.5
The Company has
delivered to Parent copies of all reports or other
documents furnished by the Company or any Company Subsidiary during
the past
five (5) years to any Governmental Authority and copies or complete
and accurate
summaries of all notices, orders or other documents or
correspondence, written
or oral, notifying or indicating to the Company or any Company
Subsidiary that
any of the Company's or such Company Subsidiary's buildings or
improvements, or
the operation or maintenance thereof, as now maintained and
operated, contravene
any zoning or building Applicable Law or ordinance or other
administrative
regulation or violate any restrictive covenant or any provision of
federal,
state or local Applicable Law.
4.13.6
To the Knowledge
of the Company, there are no ground or water
contamination or objects located on the any Company Properties or
underground
which lead, or could reasonably be expected to lead to a Liability
of the
Company or any Company Subsidiary for pollution or contamination,
such as tanks,
containers, pipe lines, or existing conflicts/disputes concerning
planning and
building Applicable Laws and regulations or concerning Applicable
Laws on the
effect of noise, smells or chemicals on adjoining property.
4.13.7
Neither the
Company, nor any Company Subsidiary has been engaged in
any business which in any way manufactured, distributed, sold,
handled,
processed, purchased or stored any Hazardous Materials (other than
Hazardous
Materials of the type which can be purchased without any License
and which were
not utilized in the conduct of the Business in any significant
way).
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4.14
Intellectual Property.
4.14.1
Section 4.14.1
of the Company Disclosure Schedule sets forth a
complete and accurate list of the (i) issued patents and patent
applications,
(ii) trademark registrations and applications, (iii) copyright
registrations and
applications, and (iv) domain names in any jurisdiction, owned by
the Company or
any Company Subsidiary as of the date hereof.
4.14.2 The Company or a Company
Subsidiary is the owner of all right,
title and interest in, or has a valid right or license to use
without further
payment to a third party (except as disclosed in Section 4.14.5 of
the Company
Disclosure Schedule), free and clear of any and all Liens (other
than Permitted
Encumbrances), all of the Intellectual Property Rights which are
used or are
necessary (i) for the design, development, marketing, distribution,
sale,
licensing, furnishing, supply, delivery, creation of derivatives,
development,
manufacture or use of Products, (ii) for the design, development,
marketing,
distribution, sale, licensing, creation of derivatives, manufacture
or use of
the Products, and (iii) to conduct the Business, in each of the
foregoing (i),
(ii), and (iii), as currently conducted by the Company or a Company
Subsidiary.
4.14.3
As of the date
hereof, no written claims of infringement relating
to any of the Intellectual Property have been received by the
Company or any
Company Subsidiary from any Third Party and no such claims of
infringement have
been settled in the last five (5) years. To the Knowledge of the
Company, there
is no valid basis for any such claim of infringement relating to
any of the
Intellectual Property Rights which are used or necessary in the
Business by the
Company or the Company's Subsidiaries.
4.14.4
The
specifications and documentation relating to the Intellectual
Property Rights owned or licensed by the Company or any Company
Subsidiary which
are necessary to conduct the Business (A) are kept (1) in
accordance with
industry standards and (2) are current, complete, accurate, and
sufficient in
detail and content to allow its full and appropriate use by the
Company or any
Company Subsidiary without reliance on the knowledge or memory of
any
individual; and (B) will be delivered to Parent at the Effective
Time.
4.14.5
Section 4.14.5
of the Company Disclosure Schedule sets forth a
complete and accurate list, as of the date hereof, of each Contract
(including
royalties or other future obligations of any kind or co-ownership
agreement)
with a third party pursuant to which the Company or any Company
Subsidiary
obtains any Intellectual Property used in, or necessary to conduct
the Business,
that is owned by a party other than the Company or a Company
Subsidiary. As of
the date hereof, neither the Company nor any Company Subsidiary is
obligated to
pay any royalties or other compensation to any third party in
respect of its
ownership, use or license of any Intellectual Property, except as
listed in
Section 4.14.5 of the Company Disclosure Schedule. As of the date
hereof,
neither the Company nor any Company Subsidiary has received written
notice of
any actual or threatened Actions with respect to any Third Party
Licenses or any
Intellectual Property Rights or Intellectual Property.
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4.14.6
To the Knowledge
of the Company, no Person is engaging in any
activity that infringes in any respect upon the Intellectual
Property Rights
owned by the Company or any Company Subsidiary that are used or
necessary (i)
for the design, development, marketing, distribution, sale,
licensing,
furnishing, supply, delivery, manufacture or use of Products, (ii)
for the
design, development, marketing, distribution, sale, licensing,
furnishing,
supply, delivery, manufacture or use of the Products of the Company
or any
Company Subsidiary; or (iii) to conduct the Business.
4.14.7
With respect to
all of the Intellectual Property owned by the
Company or any Company Subsidiary that has been developed by or on
behalf of the
Company or a Company Subsidiary, the Company has a policy requiring
its (x)
former and current employees to execute written agreements
assigning to the
Company or a Company Subsidiary all rights to such Intellectual
Property Rights,
and (y) independent contractors hired to write source code on
behalf of the
Company or any Company Subsidiary, whom the Company or a Company
Subsidiary
directly or indirectly paid for such development or creations, to
execute
written agreements whereby such independent contractors assign to
the Company or
a Company Subsidiary, all right, title and interest in the
Intellectual Property
in such code, and, to the Knowledge of the Company, there has been
no violation
of such policy. To the Knowledge of the Company, no former or
current Company
Employee has entered into any written agreement with a third party
that
restricts or limits in any way the scope or type of work in which
either the
Company or any Company Employee may be engaged, or which requires
the Company or
any Company Employee to transfer or assign any Intellectual
Property Rights, or
disclose information concerning his or her work to anyone other
than the Company
or any Company Subsidiary.
4.14.8
Patents. Except
as set forth in Section 4.14.1 of the Company
Disclosure Schedule, neither the Company nor any of its
Subsidiaries own any
other patents or patent applications.
4.14.9
Trademarks.
Except as set forth in Section 4.14.1 of the Company
Disclosure Schedule (and with the exception of common law rights),
neither the
Company nor any of its Subsidiaries own any other trademarks or
trademark
applications.
4.14.10
Copyrights. Except as
set forth in Section 4.14.1 of the Company
Disclosure Schedule (and with the exception of common law rights),
neither the
Company nor any of its Subsidiaries own any other copyrights.
4.14.11
Trade Secrets.
(a) Reasonable precautions have been taken by the Company and
each
Company Subsidiary to protect the secrecy, confidentiality, and
value of the
Trade Secrets owned by the Company or any Company Subsidiary. The
Trade Secrets
owned by the Company or any Company Subsidiary are not part of the
public
knowledge or literature and, to the Knowledge of the Company, have
not been
copied, published, used, divulged, appropriated, released or
distributed by any
Person or removed from the premises of the Company or a Company
Subsidiary,
except by employees, independent contractors, and other Persons who
are subject
to a written confidentiality and non-disclosure agreement.
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(b) All Company Employees have executed written agreements
prohibiting
the use of any Trade Secrets owned by the Company or a Company
Subsidiary after
their employment by the Company or such Company Subsidiary has
ceased, and, to
the Knowledge of the Company, there has been no violation of such
policy.
(c) Any tangible or electronically accessible copies of the
Trade
Secrets owned by the Company or any Company Subsidiary have been
marked with
proper confidentiality notices.
(d) Reasonable precautions have been taken by the Company and
each
Company Subsidiary to protect the secrecy, confidentiality, and
value of all
Trade Secrets, and to the Knowledge of the Company, no Trade
Secrets or source
code has been copied, published, used, divulged, disclosed,
appropriated,
released or distributed by any Person, except by employees,
independent
contractors, and other Persons who are subject to a written
confidentiality and
non-disclosure agreement, and no such source code is subject to
disclosure or
release to any Person as a result of the Merger.
4.14.12
D
