|
Exhibit
10.21
EXECUTION COPY
AGREEMENT AND PLAN OF
MERGER
by and among
COGNIZANT TECHNOLOGY
SOLUTIONS CORPORATION,
COGNIZANT TECHNOLOGY
CORPORATION,
and
MARKETRX, INC.,
and
Jaswinder S. Chadha as the
Stockholder Representative
Dated as of October 18,
2007
TABLE OF CONTENTS
|
|
|
|
|
| |
|
|
|
Page |
|
ARTICLE
I THE
MERGER
|
|
2 |
|
1.1
|
|
The Merger
|
|
2 |
|
1.2
|
|
Closing; Effective Time
|
|
2 |
|
1.3
|
|
Effects of the Merger
|
|
2 |
|
1.4
|
|
Further Assurances
|
|
3 |
|
|
|
ARTICLE
II MERGER
CONSIDERATION AND CONVERSION OF SECURITIES
|
|
3 |
|
2.1
|
|
Merger Consideration
|
|
3 |
|
2.2
|
|
Effect on Company Capital
Stock
|
|
5 |
|
2.3
|
|
Effect on Company Options and Series C
Preferred Warrants
|
|
6 |
|
2.4
|
|
Closing Payments
|
|
7 |
|
2.5
|
|
Exchange Procedures and Payment of
Merger Consideration
|
|
9 |
|
2.6
|
|
Schedule of Merger
Consideration
|
|
11 |
|
2.7
|
|
Conversion of Buyer Subsidiary Capital
Stock, Treasury Stock and Stock Owned by Buyer
|
|
11 |
|
2.8
|
|
Dissenting Shares
|
|
12 |
|
2.9
|
|
No Further Ownership Rights
|
|
12 |
|
2.10
|
|
Lost Certificates
|
|
12 |
|
2.11
|
|
No Further Transfer of Shares
|
|
12 |
|
|
|
ARTICLE
III REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
13 |
|
3.1
|
|
Organization, Qualification and
Corporate Power
|
|
13 |
|
3.2
|
|
Capitalization
|
|
13 |
|
3.3
|
|
Authorization of Transaction
|
|
15 |
|
3.4
|
|
Noncontravention
|
|
16 |
|
3.5
|
|
Subsidiaries
|
|
16 |
|
3.6
|
|
Financial Statements
|
|
17 |
|
3.7
|
|
Absence of Certain Changes
|
|
18 |
|
3.8
|
|
Undisclosed Liabilities
|
|
18 |
|
3.9
|
|
Tax Matters
|
|
18 |
|
3.10
|
|
Assets
|
|
21 |
|
3.11
|
|
Owned Real Property
|
|
21 |
- i -
|
|
|
|
|
|
3.12
|
|
Real Property Leases
|
|
21 |
|
3.13
|
|
Intellectual Property
|
|
23 |
|
3.14
|
|
Contracts
|
|
26 |
|
3.15
|
|
Accounts Receivable and Unbilled
Receivables
|
|
29 |
|
3.16
|
|
Powers of Attorney
|
|
30 |
|
3.17
|
|
Insurance
|
|
30 |
|
3.18
|
|
Litigation
|
|
30 |
|
3.19
|
|
Warranties
|
|
30 |
|
3.20
|
|
Employees
|
|
31 |
|
3.21
|
|
Employee Benefits
|
|
33 |
|
3.22
|
|
Environmental Matters
|
|
35 |
|
3.23
|
|
Legal Compliance
|
|
36 |
|
3.24
|
|
Customers and Suppliers
|
|
36 |
|
3.25
|
|
Permits
|
|
36 |
|
3.26
|
|
Certain Business Relationships With
Affiliates
|
|
37 |
|
3.27
|
|
Brokers’ Fees
|
|
37 |
|
3.28
|
|
Books and Records
|
|
37 |
|
3.29
|
|
Disclosure
|
|
37 |
|
3.30
|
|
Backlog
|
|
38 |
|
3.31
|
|
Absence of Certain Changes or
Events
|
|
38 |
|
3.32
|
|
Related Party Transactions
|
|
40 |
|
3.33
|
|
No Illegal Payments
|
|
40 |
|
3.34
|
|
Government Contracts
|
|
40 |
|
3.35
|
|
Conditions Affecting the Company and the
Subsidiaries
|
|
40 |
|
3.36
|
|
Stockholder Approval
|
|
40 |
|
|
|
ARTICLE
IV REPRESENTATIONS
AND WARRANTIES OF THE BUYER AND THE BUYER SUBSIDIARY
|
|
41 |
|
4.1
|
|
Organization and Corporate
Power
|
|
41 |
|
4.2
|
|
Authorization of Transaction
|
|
41 |
|
4.3
|
|
Noncontravention
|
|
41 |
|
4.4
|
|
Brokers’ Fees
|
|
42 |
|
4.5
|
|
Litigation
|
|
42 |
|
4.6
|
|
Payment of Merger
Consideration
|
|
42 |
- ii -
|
|
|
|
|
|
4.7
|
|
Buyer Subsidiary
|
|
42 |
|
4.8
|
|
Disclosure
|
|
42 |
|
|
| ARTICLE
V COVENANTS |
|
42 |
|
5.1
|
|
Closing Efforts
|
|
42 |
|
5.2
|
|
Governmental and Third-Party Notices and
Consents
|
|
43 |
|
5.3
|
|
Stockholder Approval
|
|
44 |
|
5.4
|
|
Operation of Business
|
|
44 |
|
5.5
|
|
Negative Covenants
|
|
45 |
|
5.6
|
|
Access to Information
|
|
47 |
|
5.7
|
|
Notification of Certain
Matters
|
|
47 |
|
5.8
|
|
Exclusivity
|
|
48 |
|
5.9
|
|
Expenses
|
|
48 |
|
5.10
|
|
Employees
|
|
48 |
|
5.11
|
|
Tax Matters
|
|
48 |
|
5.12
|
|
Company Plans
|
|
50 |
|
5.13
|
|
Employee Matters
|
|
51 |
|
5.14
|
|
Severance, Other Arrangements and Prior
Service
|
|
51 |
|
|
|
ARTICLE
VI CONDITIONS TO
CONSUMMATION OF MERGER
|
|
52 |
|
6.1
|
|
Conditions to Each Party’s
Obligations
|
|
52 |
|
6.2
|
|
Conditions to Obligations of the Buyer
and the Buyer Subsidiary
|
|
52 |
|
6.3
|
|
Conditions to Obligations of the
Company
|
|
56 |
|
|
|
ARTICLE
VII INDEMNIFICATION
|
|
57 |
|
7.1
|
|
Indemnification by the Indemnifying
Stockholders
|
|
57 |
|
7.2
|
|
Indemnification by the Buyer
|
|
57 |
|
7.3
|
|
Indemnification Claims
|
|
57 |
|
7.4
|
|
Survival of Representations and
Warranties
|
|
59 |
|
7.5
|
|
Limitations
|
|
60 |
|
7.6
|
|
Stockholder Representative and Adoption
of Provisions
|
|
61 |
|
7.7
|
|
Tax Indemnification
|
|
62 |
|
7.8
|
|
Procedures Relating to Indemnification
of Tax Claims
|
|
62 |
|
7.9
|
|
Tax Treatment of Indemnification
Payments
|
|
63 |
|
|
|
ARTICLE
VIII TERMINATION
|
|
64 |
|
8.1
|
|
Termination of Agreement
|
|
64 |
- iii -
|
|
|
|
|
|
8.2
|
|
Effect of Termination
|
|
64 |
|
8.3
|
|
Remedies
|
|
65 |
|
|
| ARTICLE
IX DEFINITIONS |
|
65 |
|
9.1
|
|
Definitions
|
|
65 |
|
9.2
|
|
Other Defined Terms
|
|
75 |
|
|
| ARTICLE
X MISCELLANEOUS |
|
76 |
|
10.1
|
|
Press Releases and
Announcements
|
|
76 |
|
10.2
|
|
No Third Party Beneficiaries
|
|
76 |
|
10.3
|
|
Entire Agreement
|
|
76 |
|
10.4
|
|
Succession and Assignment
|
|
77 |
|
10.5
|
|
Counterparts and Facsimile
Signature
|
|
77 |
|
10.6
|
|
Headings
|
|
77 |
|
10.7
|
|
Notices
|
|
77 |
|
10.8
|
|
Governing Law
|
|
78 |
|
10.9
|
|
Amendments and Waivers
|
|
78 |
|
10.10
|
|
Severability
|
|
79 |
|
10.11
|
|
Submission to Jurisdiction
|
|
79 |
|
10.12
|
|
Construction
|
|
79 |
|
| Schedule A - Merger Consideration |
|
| Schedule B - Indebtedness |
|
| Exhibit A-1 - Certificate of Assistant Secretary of the
Company |
|
| Exhibit A-2 Opinion of Counsel |
|
| Exhibit B - Form of Net Assets Statement |
|
| Exhibit C - Escrow Agreement |
|
| Exhibit D - Exchange Agreement |
|
| Exhibit E - Transmittal Letter |
|
| Exhibit F - Cancellation Acknowledgement |
|
| Exhibit G - Standard Proprietary Information
Agreement |
|
| Exhibit H - Noncompetition Agreement |
- iv -
AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND PLAN OF
MERGER (“ Agreement ”), dated as of
October 18, 2007, is made by and among Cognizant Technology
Solutions Corporation, a Delaware corporation (the “
Buyer ”), Cognizant Technology Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Buyer (the “
Buyer Subsidiary ”), marketRx, Inc., a Delaware
corporation (the “ Company ”), and Jaswinder S.
Chadha, solely in his capacity as representative of the Company
Stockholders pursuant to the terms of this Agreement (the “
Stockholder Representative ”). Capitalized terms used
in this Agreement are defined in ARTICLE IX or in the applicable
Section of this Agreement to which reference is made in
ARTICLE IX.
RECITALS :
WHEREAS, this Agreement
contemplates a merger of the Buyer Subsidiary into the Company and
in such merger, the Company Stockholders will receive cash in
exchange for their capital stock of the Company;
WHEREAS, the respective
Boards of Directors of the Buyer, the Buyer Subsidiary, the Company
and the Subsidiaries deem it advisable and in the best interests of
their respective stockholders to consummate the business
combination provided for herein;
WHEREAS, the Board of
Directors of the Company has recommended to the Company
Stockholders the adoption of this Agreement;
WHEREAS, each of the Board of
Directors of the Subsidiaries has recommended the adoption of this
Agreement to the Company;
WHEREAS, the Buyer, as the
sole stockholder of the Buyer Subsidiary, has adopted this
Agreement; and
WHEREAS, immediately
following the execution and delivery of this Agreement, certain of
Company Stockholders, including WestBridge Ventures I, LLC,
WestBridge Ventures II, LLC, WestBridge Ventures Co-Investment I,
LLC, CBD Holdings, Richard S. Braddock, Incept LLC and the Key
Management Stockholders, and each of their respective Affiliates
(collectively, the “ Major Investors ”) are
executing and adopting a stockholder consent approving this
Agreement and the transactions set forth herein, including the
Merger (the “ Stockholder Consent ”) and the
Stockholder Consent shall constitute the Requisite Stockholder
Approval; and
WHEREAS, immediately
following the execution and delivery of this Agreement, the Buyer,
as the sole stockholder of the Buyer Subsidiary, will execute and
deliver to the Buyer Subsidiary an Action by Written Consent of
Sole Stockholder, pursuant to which the Buyer will adopt this
Agreement pursuant to and in accordance with the applicable
provisions of Delaware Law and the Buyer Subsidiary’s
Certificate of Incorporation and By-laws.
NOW, THEREFORE, in
consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, the Buyer, the
Buyer Subsidiary, the Stockholder Representative, the Company and
each of the Subsidiaries agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger .
Subject to the terms and conditions of this Agreement and the
Certificate of Merger in such form as is required by the relevant
provisions of the Delaware General Corporation Law (the “
DGCL ”), at the Effective Time, the Buyer Subsidiary
shall be merged with and into the Company and the separate
corporate existence of the Buyer Subsidiary shall thereupon cease
(the “ Merger ”). As a result of the Merger, the
outstanding shares of capital stock of the Buyer Subsidiary and the
Company shall be converted or canceled in the manner provided in
ARTICLE II of this Agreement, the separate corporate existence of
the Buyer Subsidiary shall cease and the Company shall be the
surviving corporation following the Merger. The Company, as the
surviving corporation following the Merger, is sometimes referred
to herein as the “ Surviving Corporation
”.
1.2 Closing; Effective
Time . The closing of the Merger (the “ Closing
”) shall take place at the offices of Morgan,
Lewis & Bockius LLP, Princeton, New Jersey, at 10:00 a.m.
on a date to be specified by the Parties, which shall be no later
than two (2) Business Days after satisfaction (or waiver as
provided herein) of the conditions set forth in ARTICLE IV (other
than those conditions that by their nature will be satisfied at the
Closing), unless another time, date and/or place is agreed to in
writing by the Parties. The date upon which the Closing occurs is
herein referred to as the “ Closing Date ”.
Simultaneously with the Closing, the Company as the surviving
corporation shall file the Certificate of Merger with the Secretary
of State of the State of Delaware as is required by, and executed
in accordance with, the relevant provisions of the DGCL. The Merger
shall become effective, pursuant to the Certificate of Merger, at
such time as the Certificate of Merger is so filed, which time is
hereinafter referred to as the “ Effective Time
”.
1.3 Effects of the
Merger .
(a) At and after the
Effective Time, the Merger shall have the effects specified in the
DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all of the property, rights,
privileges, powers, immunities, purposes and franchises of each of
the Company, the Subsidiaries and the Buyer Subsidiary shall vest
in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the
Company, the Subsidiaries and the Buyer Subsidiary shall become the
debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation, all without act or
deed.
(b) At the Effective Time,
the Certificate of Incorporation of the Company shall be amended
and restated in its entirety to be identical to the Certificate of
Incorporation of the Buyer Subsidiary as in effect immediately
prior to the Effective Time, except that Article I of the
Certificate of Incorporation shall read: “The name of this
corporation is marketRx, Inc.”. The Buyer may elect, in its
sole discretion, to use a different name for the Surviving
Corporation. As so amended and restated, the Certificate of
Incorporation of the Company shall be the Certificate of
Incorporation of the Surviving Corporation, until amended
thereafter in accordance with applicable Law.
- 2 -
(c) At the Effective Time,
the by-laws of the Buyer Subsidiary as in effect immediately prior
to the Effective Time shall be the by-laws of the Surviving
Corporation until amended thereafter in accordance with applicable
Law.
(d) At the Effective Time,
each of the directors and officers of the Buyer Subsidiary
immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, each to hold office until
their respective death, permanent disability, resignation or
removal or until his or her respective successor is duly elected
and qualified, all in accordance with the Certificate of
Incorporation and by-laws of the Surviving Corporation and
applicable Law.
1.4 Further Assurances
. If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of
sale, assignments or similar instruments are necessary or proper to
vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties, assets,
liabilities or other obligations of either of the Buyer Subsidiary,
the Company, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either the Buyer Subsidiary
or the Company, all such deeds, bills of sale, assignments and
other similar instruments as may be necessary, desirable or proper
to vest, perfect or confirm the Surviving Corporation’s
right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties, assets, liabilities or
other obligations of either the Buyer Subsidiary or the
Company.
ARTICLE II
MERGER CONSIDERATION AND
CONVERSION OF SECURITIES
2.1 Merger
Consideration .
(a) Estimated Net
Assets . On or before the third Business Day prior to the
Closing Date, the Company shall deliver to the Buyer a statement
setting forth the Company’s good faith estimate of the Net
Assets (“ Estimated Net Assets ”). The amount,
if any, by which $5,778,000 exceeds the Estimated Net Assets is
referred to herein as the “ Initial Deficiency
”, and the amount, if any, by which the Estimated Net Assets
exceeds $5,778,000 is referred to herein as the “ Initial
Surplus ”. On the Closing Date, if there is an Initial
Deficiency, the Merger Consideration shall be reduced by the amount
of the Initial Deficiency pursuant to Section 2.1(b). On the
Closing Date, if there is an Initial Surplus, then such amount
shall be subject to the final settlement of the Final Net Assets
pursuant to Section 2.1(c).
(b) Genera l. Subject
to the post closing adjustment set forth in Section 2.1(c)
hereof, the aggregate amount to be paid by the Buyer on the Closing
Date with respect to all of the outstanding shares of capital stock
of the Company and any options or other rights to acquire any
securities of the Company (including Common Stock, Preferred Stock
and Vested Company Options) shall equal (such amount, the “
Merger Consideration ”) $135,000,000; provided
, however , the amount actually payable to each Holder on
the Closing Date is subject to reduction pursuant to
(i) Section 2.1(a) with respect to an Initial Deficiency,
(ii) Section 2.4(a)(i) with respect to the Indemnity
Escrow Amount, (iii) Section 2.4(a)(ii) with respect to
the Stockholder
- 3 -
Representative Escrow Amount,
(iv) the satisfaction of all outstanding Indebtedness as
described in 2.4(b) below and as set forth on
Schedule B ; (v) Section 2.5(g) with respect
to the Merger Compensation Payments, (vi) Section 5.9
with respect to the Company’s costs and expenses (including
legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, and
(vii) the terms of this Agreement. Pursuant to
Section 2.6, the Merger Consideration shall be paid to each
Company Stockholder as set forth on Schedule A , which
Schedule A , the Parties acknowledge will be updated
not more than two (2) Business Days prior to the Closing Date
(hereafter, as so updated, “ Schedule A
”).
(c) Net Assets
Adjustment . The Merger Consideration shall be subject to
adjustment on a dollar for dollar basis as set forth in this
Section 2.1(c).
(i) Net Assets Statement;
Buyer’s Review . No later than seventy five
(75) days following the Closing Date, the Buyer shall prepare
and deliver to the Stockholder Representative (or its designee) the
Net Assets Statement setting forth its calculation of the actual
amount of the Net Assets as of the Closing Date calculated in
accordance with GAAP consistently applied. The Stockholder
Representative shall have a period of thirty (30) days from
the receipt of the Net Assets Statement (the “ Review
Period ”) to review the Net Assets Statement, during
which Review Period the Buyer shall, upon reasonable request and
during normal business hours, make available to the Stockholder
Representative all relevant books and records in the Buyer’s
possession or control and all personnel with knowledge of
information relevant to the determination of the Net Assets as of
the Closing Date. If as a result of such review, the Stockholder
Representative disagrees with the Net Assets Statement, the
Stockholder Representative shall deliver to the Buyer a written
notice of disagreement (a “ Net Assets Dispute Notice
”) prior to the expiration of the Review Period. Any Net
Assets Dispute Notice shall (i) specify in reasonable detail
the nature and amount of any disagreement so asserted and
(ii) include a calculation by the Stockholder Representative
of the Net Assets as of the Closing Date.
(ii) Acceptance; Failure
to Respond . If the Stockholder Representative does not
disagree with the Net Assets Statement, the Stockholder
Representative shall deliver a written statement to the Buyer
within the Review Period accepting the Net Assets Statement (an
“ Acceptance Notice ”), in which case the
Buyer’s determination of the Net Assets as of the Closing
Date as shown on the Net Assets Statement shall be final and
binding on the parties, effective as of the date on which the Buyer
receives the Acceptance Notice. If the Stockholder Representative
does not deliver a Net Assets Dispute Notice or an Acceptance
Notice within the Review Period, then the Buyer’s
determination of the Net Assets as of the Closing Date as shown on
the Net Assets Statement shall be final and binding on the parties,
effective as of the first Business Day after the expiration of the
Review Period.
(iii) Resolution of Net
Assets Disputes . If the Stockholder Representative delivers a
Net Assets Dispute Notice to the Buyer in a timely manner, then the
Buyer and the Stockholder Representative shall attempt in good
faith to resolve such dispute by negotiation between
representatives who have authority to settle the dispute within
thirty (30) days after delivery of the Net Assets Dispute
Notice. If the Buyer and the Stockholder Representative cannot
reach agreement within such thirty (30) day period (or such
longer period as they may mutually agree), then the Buyer and the
Stockholder Representative shall promptly
- 4 -
refer the dispute to either
Ernst & Young LLP or KPMG LLP (whichever shall be
reasonably acceptable to both the Buyer and the Stockholder
Representative) (the “ CPA Firm ”). The CPA Firm
shall work to resolve such dispute promptly, based solely on
written submissions by the Buyer and the Stockholder
Representative, and, to the extent practicable, within thirty
(30) days from the date the dispute is submitted to the CPA
Firm. Any item not specifically referred to the CPA Firm for
evaluation shall be deemed final and binding on the parties. The
CPA Firm shall determine the Net Assets in accordance with GAAP
consistently applied by selecting with respect to each item in
dispute an amount between the Buyer’s position, as set forth
in the Net Assets Statement, and the Stockholder
Representative’s position, as set forth in the Net Assets
Dispute Notice, or equal to the Buyer’s position or the
Stockholder Representative’s position. The CPA Firm shall
deliver to both the Buyer and the Stockholder Representative a
written opinion setting forth the CPA Firm’s final
determination of the Net Assets calculated in accordance with the
provisions of this Agreement. The determination of the CPA Firm
shall be final and binding on the Buyer and the Stockholder
Representative, effective as of the date the CPA Firm’s
written opinion is received by the Buyer and the Stockholder
Representative. The fees, costs and expenses of the CPA Firm shall
be borne equally by the Buyer and the Stockholder Representative.
The final determination of the Net Assets, either pursuant to
Section 2.1(c)(ii) or this Section 2.1(c)(iii) shall be
referred to as the “ Final Net Assets
.”
(iv) Final Settlement
. Within ten (10) days of the determination of the Final Net
Assets, (i) if the Final Net Assets is less than the Estimated
Net Assets and also less than $5,778,000, then, from the Indemnity
Escrow Fund, without giving effect to any limitations set forth in
Section 7.5(a) of this Agreement, Stockholder Representative
shall make an adjustment payment to the Buyer equal to the
difference between the Final Net Assets and the lesser of
$5,778,000 or the Estimated Net Assets, (ii) if the Final Net
Assets is less than $5,778,000, but greater than the Estimated Net
Assets, then the Buyer shall make an adjustment payment to Company
Stockholders through the Exchange Agent equal to the difference
between the Final Net Assets and the Estimated Net Assets, and
(iii) if the Final Net Assets is greater than $5,778,000, then
the Buyer shall make an adjustment payment to Company Stockholders
through the Exchange Agent equal to the difference between the
Final Net Assets and the lesser of Estimated Net Assets or
$5,778,000. Any such payments shall include interest at the
applicable Federal Funds Rate.
(v) Calculation of Net
Assets, Estimated Net Assets and Final Net Assets . Net Assets,
Estimated Net Assets and Final Net Assets shall all be calculated,
prepared or determined as of immediately prior to the Merger, in
accordance with the definition of Net Assets set forth in ARTICLE
IX.
2.2 Effect on Company
Capital Stock .
(a) Each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Common Stock of the Company (including all rights attendant
thereto) issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares) shall, by virtue of the Merger
and without any action on the part of the Buyer, the Company or the
Holder thereof, be automatically converted into the right to
receive an amount of cash equal to the amount set forth next to
such Holder’s name on Schedule A , all as has
been calculated in accordance with the Company’s Charter
Documents.
- 5 -
2.3 Effect on Company
Options and Series C Preferred Warrants .
(a) After the date of this
Agreement and prior to the Effective Time, the Board of Directors
of the Company shall cause each outstanding Company Option that is
listed on Section 2.3 of the Disclosure Schedule to become
vested and exercisable to the extent set forth on such schedule.
Upon the effectiveness of such action by the Board of Directors of
the Company, the vested portion of each such Company Options that
is listed on Section 2.3 of the Disclosure Schedule shall be a
“ Vested Company Option .”
(b) At the Effective Time,
each Vested Company Option that is outstanding immediately prior to
the Effective Time, without any payment therefor except as
otherwise provided in this Section 2.3, shall be automatically
cancelled in accordance with its terms, and, prior to the Effective
Time, the Board of Directors of the Company shall adopt appropriate
resolutions and take all other actions necessary to terminate the
portion of the Company Stock Plans and individual option agreements
outside of the Company Stock Plans attributable to the Vested
Company Options, as of the Effective Time. Each Vested Company
Option, to the extent unexercised as of the Effective Time, shall
thereafter no longer be exercisable but shall entitle each Holder
of a Vested Company Option, in cancellation and settlement
therefor, to a payment in cash, at the Effective Time, equal to the
product of (i) the excess, if any, of the Merger Consideration
per share of Common Stock underlying such Vested Company Option
over the exercise price per share of Common Stock of such Vested
Company Option, multiplied by (ii) the total number of vested
shares of Common Stock as of the Effective Time subject to such
Vested Company Option immediately prior to its cancellation (such
payment to be net or withholding Taxes and without interest). Such
payment shall be made at the same time as Company Stockholders
receive the Merger Consideration, and if any Holder of a Vested
Company Option is entitled to any portion of the Merger
Consideration, such Holder shall deliver to the Company, prior to
the Effective Time as a condition to any payment under this
Section 2.3, documents evidencing the surrender of such Vested
Company Options and release of claims related thereto in form and
substance reasonably satisfactory to the Company and the
Buyer.
(c) At the Effective Time,
the portion of each Company Option that is not vested in accordance
with Section 2.3(a) above, and any portion of each Company
Option that becomes vested and exercisable after the Effective Time
(the applicable portion of each such Company Option is referred to
as an “Unvested Company Option”) and the portion of
each Company Stock Plan and the individual option agreements
outside of the Company Stock Plans attributable to the Unvested
Company Options, if any, shall be assumed by the Buyer in a
transaction described in Sections 409A or 424(a), as
applicable, of the Code. Each Unvested Company Option so assumed by
the Buyer under this Agreement will continue to have, and be
subject to, the same terms and conditions of such Unvested Company
Option immediately prior to the Effective Time, except that
(i) each Unvested Company Option will be exchanged and
converted into an option to purchase shares of common stock of the
Buyer (“ Buyer Common Stock ”) in accordance
with the applicable requirements of Sections 409A and 424 of
the Code and the regulations promulgated thereunder. As soon as
practicable after the Effective Time, the Buyer shall, or shall
cause the Surviving Corporation to, deliver to the holders of
Unvested Company Options, notices describing the conversion of such
Unvested Company Options, and the agreements evidencing the
Unvested Company Options shall continue in effect on the
same
- 6 -
terms and conditions. The Buyer shall
comply with the terms of all such Unvested Company Options. Prior
to the Effective Time, the Buyer shall reserve for issuance the
number of shares of Buyer Common Stock necessary to satisfy the
Buyer’s obligations under this Section 2.3. As soon as
practicable after the Effective Time, provided, however no later
than fifteen (15) days after the Effective Time, the Buyer
shall file a registration statement or statements on Form S-8
(or any successor form) with respect to the shares of Buyer Common
Stock subject to Unvested Company Options assumed by the Buyer
pursuant to this Agreement in the event such shares are not already
covered by an effective registration statement.
(d) Each Series C Preferred
Warrant that is outstanding immediately prior to the Effective
Time, shall, by virtue of the Merger and without any action on the
part of the Buyer, the Company or the Holder thereof, be cancelled
and converted into the right to receive a cash payment from the
Merger Consideration equal to (i) the amount of cash to be
paid to each Holder for each share of Series C Preferred Stock
pursuant to Section 2.2(a) of this Agreement multiplied by
(ii) the number of shares of Series C Preferred Stock issuable
upon the net exercise of such Series C Preferred Warrant. Prior to
the Effective Time, the Company shall take all actions that are
reasonably necessary and appropriate to provide for such
cancellation and conversion (or exercise) as of the Effective Time.
In addition, each holder of Series C Preferred Warrant, for
purposes of the applicable exchange procedures, shall be treated as
a Participating Preferred Holder in accordance with
Section 2.5(b) of this Agreement.
(e) Prior to the Effective
Time, the Buyer and the Company shall take all such steps as may be
required to cause any acquisitions of Buyer equity securities
(including derivative securities with respect to any Buyer equity
securities) and dispositions of Company equity securities
(including derivative securities with respect to any Company equity
securities) resulting from the transactions contemplated by this
Agreement by each individual who is anticipated to be subject to
the reporting requirements of Section 16(a) of the Exchange
Act, with respect to the Buyer, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
2.4 Closing Payments .
At the Closing, the Buyer shall pay or cause to be paid the
following amounts by wire transfers of immediately available
funds:
(a) Escrow Amounts
.
(i) Indemnity Escrow
Amounts . At the Closing, a portion of the Merger Consideration
in an amount equal to the Indemnity Escrow Amount shall be
deposited by the Buyer with the escrow agent (the “ Escrow
Agent ”) designated in the Escrow Agreement,
substantially in the form of Exhibit C hereto, to be
entered into at the Closing by the Buyer, the Company, the
Stockholder Representative and the Escrow Agent. At any time, the
amount of cash held by the Escrow Agent related to the Indemnity
Escrow Amount, together with any proceeds thereon (which shall be
apportioned pursuant to the terms of the Escrow Agreement), shall
at such time constitute the “ Indemnity Escrow Fund
” and shall be used to satisfy Damages of an Indemnified
Party pursuant to ARTICLE VII and to satisfy any payment to the
Buyer pursuant to Section 2.1(c)(iv)(i). The Escrow Agreement
sets forth the terms upon which disbursements shall be made by the
Escrow Agent. Except as described below with respect to the portion
of the Indemnity Escrow attributable to the Merger Compensation
Payments, the Indemnity Escrow Fund shall be held in a separate
trust fund and shall not be subject to any lien,
- 7 -
attachment, trustee process or any other
judicial process of any creditor of any Person. The Buyer shall
cause the portion of the Indemnity Escrow Fund attributable to the
Merger Compensation Payments (and any interest with respect
thereto) to be structured in a manner so that under applicable tax
law, such amount is not subject to income tax with respect to the
Company Stockholders until distribution is made in accordance with
the applicable terms of the Escrow Agreement. The Buyer shall cause
such structure to be reflected in the terms of the Escrow
Agreement. In addition, any amount to be paid from the Indemnity
Escrow Fund attributable to the Merger Compensation Payments (and
any interest with respect thereto) shall be administered and
interpreted in accordance with Section 409A of the Code, and
if required to avoid adverse consequences under Section 409A
of the Code, all amounts then held in the Indemnity Escrow Fund
attributable to the Merger Compensation Payments (and any interest
with respect thereto) shall be distributed not later than five
years following the Closing Date.
(ii) Stockholder
Representative Escrow Amounts . At the Closing, a portion of
the Merger Consideration in an amount equal to the Stockholder
Representative Escrow Amount shall be deposited by the Buyer for a
period of two (2) years with the Escrow Agent pursuant to the
Escrow Agreement. At any time, such amount of cash held by the
Escrow Agent, together with any proceeds thereon (which shall be
apportioned pursuant to the terms of the Escrow Agreement), shall
at all times constitute the “ Stockholder Representative
Escrow Funds ” and shall be used to satisfy all costs and
expenses of the Stockholder Representative pursuant to
Section 7.5. Except as described below with respect to the
portion of the Stockholder Representative Escrow Funds attributable
to the Merger Compensation Payments, the Stockholder Representative
Escrow Funds shall be held in a separate trust fund and shall not
be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any Person. The Buyer shall
cause the portion of the Stockholder Representative Escrow Funds
attributable to the Merger Compensation Payments (and any interest
with respect thereto) to be structured in a manner so that under
applicable tax law, such amount is not subject to income tax with
respect to the Company Stockholders until distribution is made in
accordance with the applicable terms of the Transmittal Letter. The
Company shall cause such structure to be reflected in the terms of
the Transmittal Letter. In addition, any amount to be paid from the
Stockholder Representative Escrow Funds attributable to the Merger
Compensation Payments (and any interest with respect thereto) shall
be administered and interpreted in accordance with
Section 409A of the Code, and if required to avoid adverse
consequences under Section 409A of the Code, all amounts then
held in the Stockholder Representative Escrow Funds attributable to
the Merger Compensation Payments (and any interest with respect
thereto) shall be distributed not later than five years following
the Closing Date.
(b) Payoff of
Indebtedness . Prior to the Closing, the Company shall pay the
full amounts due in satisfaction of all outstanding Indebtedness,
as set forth on Schedule B .
(c) Remaining Merger
Consideration . At the Closing, the Buyer shall deposit, or
shall cause to be deposited, with American Stock
Transfer & Trust Company or such other bank or trust
company as may be designated by the Buyer and reasonably acceptable
to the Company (the “ Exchange Agent ”) for the
benefit of the Holders, the aggregate amount of the Merger
Consideration (such Merger Consideration, together with any
interest with respect thereto, being hereinafter referred to as the
“ Exchange Fund ”) less the Indemnity Escrow
Amount deposited with the Escrow Agent pursuant to
Section 2.4(a)(i), less the Stockholder
- 8 -
Representative Escrow Amount deposited
with the Escrow Agent pursuant to Section 2.4(a)(a)(ii) and
any other adjustments to the Merger Consideration required under
this Agreement. The Exchange Agent shall, pursuant to irrevocable
instructions set forth in the Exchange Agent Agreement (the “
Exchange Agreement ”) substantially in the form of
Exhibit D hereto, deliver the cash out of the Exchange
Fund in exchange for the outstanding Company Securities. The
Exchange Fund shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any Person. Except as
contemplated by this Section 2.4(c), the Exchange Fund shall
not be used for any other purpose.
2.5 Exchange Procedures
and Payment of Merger Consideration . The Merger Consideration
shall be payable as follows:
(a) Exchange
Procedures . As promptly as practicable after the Effective
Time, the Buyer shall cause the Exchange Agent to mail to each
Holder of stock certificates, options or other securities which,
immediately prior to the Effective Time represented outstanding
Company Securities (collectively, the “ Certificates
”) (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent), substantially in the form
attached hereto as Exhibit E (the “
Transmittal Letter ”), (ii) counterpart signature
pages to the Escrow Agreement, (iii) in the case of a Holder
of a Vested Company Option, a duly executed cancellation
acknowledgement (a “ Cancellation Acknowledgement
”), substantially in the form attached hereto as
Exhibit F and (iv) in the case of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Common Stock instructions for use in effecting the surrender of
the Certificates in exchange for cash, in each case to the extent
the Company has not previously received such documents duly
executed by the applicable Holder. Upon surrender to the Exchange
Agent of a Certificate for cancellation, together with such
Transmittal Letter, Escrow Agreement and the Cancellation
Acknowledgement, to the extent applicable (in each case to the
extent the Company has not previously received such documents duly
executed by the applicable Holder), each duly executed, and such
other documents as may be reasonably required pursuant to such
instructions (collectively, the “ Holder Documents
”), the Holder of such Certificate shall be entitled to
receive in exchange therefor an amount of cash which such Holder
has the right to receive in respect of the Company Securities
formerly represented by such Certificates, and the Certificates so
surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of a Company Security which is not registered
in the transfer records of the Company, the proper amount of cash
may be paid to a transferee if the Certificate representing such
Company Security is presented to the Exchange Agent, accompanied by
such documents reasonably required to evidence and effect such
transfer and by reasonable evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by
this Section 2.5(a), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash to which such Holder
is entitled pursuant to the terms of this Agreement.
(b) Exchange of Preferred
Stock . Regarding Holders of Preferred Stock issued and
outstanding as of the Effective Time (each, a “
Participating Preferred Holder ”), as soon as
practicable after receipt by Exchange Agent of a Participating
Preferred Holder’s Certificates and applicable Holder
Documents executed and delivered in accordance with this Agreement,
Exchange Agent shall deliver to that Participating Preferred Holder
the amount of
- 9 -
cash due to such Participating Preferred
Holder for each share of Preferred Stock held by such Participating
Preferred Holder as of the Effective Time as determined in
accordance with the applicable provisions of Section 2.2 (less
such Participating Preferred Holder’s portion of the
Indemnity Escrow Fund and Stockholder Representative Escrow
Funds).
(c) Exchange of Common
Stock . Regarding Holders of Common Stock issued and
outstanding as of the Effective Time (each, a “
Participating Common Holder ”), as soon as practicable
after receipt by Exchange Agent of a Participating Common
Holder’s Certificates and applicable Holder Documents
executed and delivered in accordance with this Agreement, Exchange
Agent shall deliver to that Participating Common Holder the amount
of cash due to such Participating Common Holder for each share of
Common Stock held by such Participating Common Holder as of the
Effective Time as determined in accordance with the applicable
provisions of Section 2.2 (less such Participating Common
Holder’s portion of the Indemnity Escrow Fund and Stockholder
Representative Escrow Funds).
(d) Exchange of Vested
Company Options . Regarding Holders of Vested Company Options
as of immediately prior to the Effective Time (each, a “
Participating Common Convertible Holder ”), as soon as
practicable after receipt by Exchange Agent of a Participating
Common Convertible Holder’s Vested Company Options, as
applicable, and applicable Holder Documents executed and delivered
in accordance with this Agreement, Exchange Agent shall deliver to
that Participating Common Convertible Holder, an amount of cash due
to such Participating Common Convertible Holder for each Vested
Company Option held by such Participating Common Convertible Holder
as of the Effective Time as determined in accordance with the
applicable provision of Section 2.3 (less such Participating
Common Convertible Holder’s portion of the Indemnity Escrow
Fund and Stockholder Representative Escrow Funds), subject, in all
cases, to the provisions of Section 2.5(g).
(e) Full Satisfaction
. Except as provided herein, all cash paid upon exchange of the
Company Securities (including amounts deposited into escrow
pursuant to the Escrow Agreement) in accordance with the terms of
this Agreement shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Company
Securities.
(f) Undistributed Portions
of Exchange Fund . Any portion of the Exchange Fund which
remains undistributed to the Holders of Company Securities for one
(1) year after the Effective Time, and all certificates or
other documents in possession of the Exchange Agent relating to the
transactions contemplated hereby, shall be promptly delivered to
the Buyer, and the Exchange Agent’s duties shall terminate.
Thereafter, each Holder of a Certificate representing Company
Securities (other than certificates representing Dissenting Shares)
may surrender such certificate to the Surviving Corporation and
(subject to any applicable abandoned property, escheat or similar
Law) receive in consideration therefor, the Merger Consideration
relating thereto, without any interest thereon (except as otherwise
set forth in the Escrow Agreement), calculated in accordance with
this Section 2.5. Any portion of the Exchange Fund remaining
unclaimed by Holders of Company Securities as of a date which is
immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Entity shall, to
the extent permitted by applicable Law, become the property of the
Buyer free and clear of any claims or interest of any Person
previously entitled thereto. None of the Buyer, the Company, the
Surviving Corporation or the Exchange Agent shall be liable to any
Holder for any cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.
- 10 -
(g) Payment of Merger
Compensation Payments; Withholding Taxes . Notwithstanding any
other provision of this Agreement, the Exchange Agent shall not
directly pay Merger Compensation Payments to the former holders of
Vested Company Options and Restricted Company Stock for which
election under Section 83(b) of the Code was not timely made
and which remain unvested as of the Closing Date as contemplated by
Section 2.3, but shall instead transfer Merger Compensation
Payments to the Surviving Corporation for immediate payment to such
recipients through the Surviving Corporation’s payroll
systems. The Surviving Corporation shall be entitled to deduct and
withhold from Merger Compensation Payments and any other
consideration otherwise payable pursuant to this Agreement to any
person such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any other
applicable state, local or foreign Taxes Law. To the extent that
amounts are so withheld by the Company, as the case may be, such
withheld amounts (i) shall be remitted by the Company to the
applicable Governmental Entity, and (ii) shall be treated for
all purposes of this Agreement as having been paid to the Holder in
respect of which such deduction and withholding was made by the
Company, as the case may be.
(h) Adoption of
Agreement . The adoption of this Agreement and the Requisite
Stockholder Approval constitutes approval of the Exchange
Agreement, the Escrow Agreement and of all of the arrangements
relating thereto, including the placement of the Indemnity Escrow
Fund and the Stockholder Representative Escrow Funds in escrow and
the appointment of the Stockholder Representative.
2.6 Schedule of
Merger Consideration . Schedule A sets forth, as of
the date hereof, (i) the amount due in satisfaction of all
outstanding Indebtedness pursuant to Section 2.4(b),
(ii) the estimated amount of the Merger Consideration
calculated pursuant to the formula set forth in Section 2.1,
(iii) the estimated amount of Merger Consideration to be
received at the Closing by each Holder (assuming no deductions
related to Indemnity Escrow Fund or Stockholder Representative
Escrow Funds), (iv) the estimated amount of the Indemnity
Escrow Amount and Stockholder Representative Escrow Amount
allocated to each Holder, and (v) the estimated net Merger
Consideration payable to each Holder as of the Effective Time. At
the Closing, the Company shall deliver to the Buyer an updated
Schedule A as of the Closing Date which shall fully
comply with the terms of the Charter Documents of the Company and
with the terms of the Vested Company Options.
2.7 Conversion of Buyer
Subsidiary Capital Stock, Treasury Stock and Stock Owned by
Buyer . Notwithstanding anything to the contrary contained
herein, the following shall apply:
(a) Stock of Buyer
Subsidiary . Each share of capital stock of the Buyer
Subsidiary issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any
action on the part of the Buyer or the Company, be converted into
one (1) share of common stock of the Surviving
Corporation.
- 11 -
(b) Treasury Shares and
Stock owned by Buyer or Buyer Subsidiary . Each (i) share
of Company Stock held in the Company’s treasury immediately
prior to the Effective Time and (ii) Company Security owned
beneficially by the Buyer or the Buyer Subsidiary immediately prior
to the Effective Time, shall not represent the right to receive any
Merger Consideration, and each such security shall, as of the
Effective Time, be cancelled and retired and shall cease to exist,
and no cash, securities or other property shall be payable in
respect thereof, in each case without any conversion thereof
pursuant to Sections 2.2 and 2.3.
2.8 Dissenting Shares
. Notwithstanding anything in this Agreement to the contrary, the
shares of Company Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by the Company
Stockholders who did not vote in favor of the Merger and who comply
with all of the relevant provisions of Section 262 of the DGCL
(the “ Dissenting Shares ”) shall not be
converted into or represent the right to receive the Merger
Consideration and the Buyer shall retain the Merger Consideration
applicable to such Dissenting Shares, unless and until such Holders
shall have failed to perfect or shall have effectively withdrawn or
lost their rights to appraisal under the DGCL; and any such Holder
shall have only such rights in respect of the Dissenting Shares
owned by them as are provided by Section 262 of the DGCL. If
any such Holder shall have failed to perfect or shall have
effectively withdrawn or lost such right, such Holder’s
Dissenting Shares shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for
the right to receive the applicable Merger Consideration without
any interest thereon, pursuant to the terms of this ARTICLE II.
Prior to the Effective Time, the Company will not, except with the
prior written consent of the Buyer, voluntarily make any payment
with respect to, or settle or offer to settle, any claim made by
the Company Stockholders with respect to the Dissenting Shares.
Dissenting Shares, if any, after payments of fair value in respect
thereto have been made to the Holders thereof pursuant to
applicable Law, shall be canceled.
2.9 No Further Ownership
Rights . Except as otherwise provided in this Agreement or in
the Escrow Agreement, no interest will be paid or accrued on the
amounts payable upon the surrender of the Certificates. Until
surrendered in accordance with the provisions of Section 2.5,
each Certificate shall represent for all purposes, only the right
to receive the consideration pursuant to the terms of this ARTICLE
II and the Escrow Agreement.
2.10 Lost Certificates
. In the event any Certificates representing shares of Company
Securities or exercisable for Company Securities (as of immediately
prior to the Effective Time) shall have been lost, stolen or
destroyed, Exchange Agent or the Buyer, as applicable, shall make
such payment in accordance with Section 2.5 in exchange for
such lost, stolen or destroyed Certificates upon the making of an
affidavit of that fact by the Holder thereof in a form reasonably
acceptable to the Buyer.
2.11 No Further Transfer
of Shares . After the Effective Time, there shall be no
transfers of shares of Company Stock that were outstanding
immediately prior to the Effective Time on the stock transfer books
of the Surviving Corporation. If, after the Effective Time,
Certificates for Company Stock are presented to the Surviving
Corporation for transfer, they shall be canceled and exchanged for
cash as provided in this ARTICLE II. At the close of business on
the day of the Effective Time, the stock ledger of the Company
shall be closed.
- 12 -
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company represents and
warrants to the Buyer that, except as set forth in the Disclosure
Schedule, the statements contained in this ARTICLE III are true and
correct as of the date of this Agreement and will be true and
correct as of the Closing as though made as of the Closing, except
to the extent such representations and warranties are specifically
made as of a particular date (in which case such representations
and warranties will be true and correct as of such date). The
Disclosure Schedule shall be arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections
contained in this ARTICLE III. The disclosures in any section or
subsection of the Disclosure Schedule shall qualify only the
corresponding section or subsection in this ARTICLE III. For
purposes of this ARTICLE III, the phrase “to the knowledge of
the Company or each of the Subsidiaries” or any phrase of
similar import shall be deemed to refer to the actual knowledge of
the executive officers of the Company and each of the Subsidiaries,
as well as any other knowledge which such executive officers would
have possessed had they made reasonable inquiry of appropriate
employees and agents of the Company and each of the Subsidiaries
with respect to the matter in question.
3.1 Organization,
Qualification and Corporate Power . The Company is a
corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the State of Delaware. The
Company is duly qualified to conduct business and is in corporate
and tax good standing under the laws of each jurisdiction listed in
Section 3.1 of the Disclosure Schedule, which jurisdictions
constitute the only jurisdictions in which the nature of the
Company’s businesses or the ownership or leasing of its
properties requires such qualification. The Company has all
requisite corporate power and authority to carry on the businesses
in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and
accurate copies of its Certificate of Incorporation and By-laws.
The Company is not in default under or in violation of any
provision of its Certificate of Incorporation or
By-laws.
3.2 Capitalization
.
(a) The authorized capital
stock of the Company consists of (i) 20,000,000 shares of
Common Stock, of which, as of the date of this Agreement, 5,443,587
shares were issued and outstanding and 102,667 shares were held in
the treasury of the Company, and (ii) 8,430,000 shares of
Preferred Stock, of which (A) 1,400,000 shares have been
designated as Series A Preferred Stock, of which, as of the
date of this Agreement, 1,293,333 shares were issued and
outstanding, (B) 3,000,000 shares have been designated as
Series B Preferred Stock, of which, as of the date of this
Agreement, 1,603,865 shares were issued and outstanding and
(C) 4,030,000 shares have been designated as Series C
Preferred Stock, of which, as of the date of this Agreement,
3,763,853 shares were issued and outstanding.
(b) Section 3.2 of the
Disclosure Schedule sets forth a complete and accurate list, as of
the date of the Agreement, of the Holders of capital stock of the
Company, showing the number of shares of capital stock, and the
class or series of such shares, held by each Company Stockholder
and (for shares other than Common Stock) the number of shares of
Common Stock (if any) into which such shares are convertible.
Section 3.2 of the Disclosure Schedule also
- 13 -
indicates all outstanding shares of
Common Stock that constitute restricted stock or that are otherwise
subject to a repurchase or redemption right, indicating the name of
the applicable Company Stockholder, the vesting
schedule (including any acceleration provisions with respect
thereto), and the repurchase price payable by the Company. All of
the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. All of the issued and outstanding shares of capital
stock of the Company have been offered, issued and sold by the
Company in compliance with all applicable federal and state
securities laws.
(c) Section 3.2 of the
Disclosure Schedule sets forth a complete and accurate list, as of
the date of this Agreement of: (i) all Company Stock Plans,
indicating for each Company Stock Plan the number of shares of
Common Stock issued to date under such Plan, the number of shares
of Common Stock subject to outstanding options under such Plan and
the number of shares of Common Stock reserved for future issuance
under such Plan; and (ii) all Holders of outstanding Company
Options, indicating with respect to each Company Option the Company
Stock Plan under which it was granted, the number of shares of
Common Stock subject to such Company Option, the exercise price,
the date of grant, and the vesting schedule (including any
acceleration provisions with respect thereto). The Company has
provided to the Buyer complete and accurate copies of all Company
Stock Plans, forms of all stock option agreements evidencing
Company Options. All of the shares of capital stock of the Company
subject to Company Options will be, upon issuance pursuant to the
exercise of such instruments, duly authorized, validly issued,
fully paid and nonassessable. All Company Options have been granted
with an exercise price that was not less then the fair market value
of a share of Common Stock as of the date the Company Option was
granted.
(d) Except as set forth in
this Section 3.2 or in Section 3.2 of the Disclosure
Schedule and other than the warrants to purchase 11,673 shares of
Series C Preferred Stock (originally issued as Series B-1
Convertible Preferred Stock) held by Silicon Valley Bank,
(i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible
security or other such right, or to issue or distribute to Holders
of any shares of its capital stock any evidences of Indebtedness or
assets of the Company, (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay
any dividend or to make any other distribution in respect thereof,
except as set forth in Section 6.2(t) of this Agreement; and
(iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the
Company.
(e) No Company Option will by
its terms require an adjustment in connection with the Merger,
except as contemplated by this Agreement. Except as contemplated by
this Agreement, neither the consummation of the transactions
contemplated by this Agreement, nor any action taken or to be taken
by the Company in connection with such transactions, will result in
(i) any acceleration of exercisability or vesting (including,
without limiting the foregoing, any right to acceleration of
vesting that is contingent upon the occurrence of a subsequent
event) in favor of any Holder of any Company Option, (ii) any
additional benefits for any Holder of any Company Option, or
(iii) the inability of the Buyer after the Effective Time to
exercise any right
- 14 -
or benefit held by the Company prior to
the Effective Time with respect to any Company Option assumed by
the Buyer. The assumption by the Buyer of the Company Stock Plans
and the Unvested Company Options will not give rise to any event
described in clauses (i) through (iii) of the immediately
preceding sentence. Each Holder of a Company Option has been or
will be given, or shall have properly waived, any required notice
of the Merger prior thereto, and all such rights of notice will
terminate at or prior to the Effective Time.
(f) Except as set forth in
Section 3.2 of the Disclosure Schedule, there is no agreement,
written or oral, between the Company and any Holder of its
securities, or, to the best of the Company’s knowledge, among
any Holders of its securities, relating to the sale or transfer
(including agreements relating to rights of first refusal, co-sale
rights or “drag-along” rights), registration under the
Securities Act, or voting, of the capital stock of the
Company.
(g) The conversion, exercise
and/or exchange of Preferred Stock and Company Options prior to the
Effective Time will be in compliance with the terms of the
agreement pursuant to which such securities were issued and in
compliance with all federal and state securities laws, and the
issuance of shares of Common Stock upon conversion, exercise and/or
exchange of such securities shall have been duly authorized by all
requisite corporate action on the part of the Company. Any such
issuance of Common Stock upon conversion, exercise and/or exchange
of such securities shall be in accordance with the Company’s
Charter Documents and shall not violate the rights of any Company
Stockholder.
(h) Except as set forth in
Section 3.2 of the Disclosure Schedule and except for the
repurchase at cost of shares of Common Stock from employees of the
Company and its Subsidiaries in connection with the termination of
their employment, the Company has not repurchased or otherwise
reacquired any of the Company Securities. The repurchase of any
such securities was duly approved and authorized by the Board of
Directors and complied in all respects with applicable law, and the
Company has no liability, contingent or otherwise, to make any
payments with respect to any such repurchased securities. There are
no obligations, contingent or otherwise, of the Company to
repurchase, redeem or otherwise acquire any of the Company
Securities. There are no declared or accrued unpaid dividends with
respect to any of the Company Securities.
(i) Except as set forth in
Section 3.2 of the Disclosure Schedule, the Company does not
have outstanding any bonds, debentures, notes or other obligations
or debt securities the holders of which have the right to vote (or
convertible into, or exercisable or exchangeable for, securities
having the right to vote) on any matter.
3.3 Authorization of
Transaction . The Company has all requisite power and authority
to execute and deliver this Agreement and the other Transaction
Documents to which the Company is a party and to perform its
obligations hereunder. The execution and delivery by the Company of
this Agreement and the other Transaction Documents to which the
Company is a party and, subject to obtaining the Requisite
Stockholder Approval, the consummation by the Company of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the
Company. Without limiting the generality of the foregoing, the
Board of Directors of the Company, at a meeting duly called and
held, by the unanimous vote of all directors (i) determined
that the Merger is in the best interests of the
- 15 -
Company and the Company Stockholders,
(ii) adopted this Agreement in accordance with the provisions
of the DGCL, and (iii) directed that this Agreement and the
Merger be submitted to the Company Stockholders for their adoption
and approval and resolved to recommend that the Company
Stockholders vote in favor of the adoption of this Agreement and
the approval of the Merger. This Agreement has been (and the other
Transaction Documents to which the Company is a party when executed
and delivered at the Closing will be) duly and validly executed and
delivered by the Company and constitutes (and with respect to such
other Transaction Documents will constitute at the Closing) a valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
3.4 Noncontravention
.
(a) Except as set forth in
Section 3.4 of the Disclosure Schedule, and subject to the
filing of the Certificate of Merger as required by the DGCL,
neither the execution and delivery by the Company of this Agreement
(and the other Transaction Documents to which it is a party), nor
the consummation by the Company of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the
Certificate of Incorporation or By-laws of the Company or the
charter, by-laws or other organizational document of any
Subsidiary, (b) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under,
create in any party the right to terminate, modify or cancel, or
require any notice, consent or waiver under, any contract or
instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of
their respective assets is subject, (c) result in the
imposition of any Security Interest upon any assets of the Company
or any Subsidiary or (d) assuming compliance by the Company
with the matters referred to Section 3.4(a), require on the
part of the Company or any Subsidiary any notice to or filing with,
or any permit, authorization, consent or approval of, any
Governmental Entity, other than any notice, filing, permit,
authorization, consent or approval which if not obtained would not
have a Company Material Adverse Effect or violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Company or any Subsidiary or any of their respective properties or
assets, other than such violations which would not have a Company
Material Adverse Effect.
(b) No Authorization or Order
of, registration, declaration or filing with, or notice to any
Governmental Entity is required by the Company or any Subsidiary in
connection with the execution and delivery of this Agreement (and
the other Transaction Documents to which the Company or any
Subsidiary is a party) and the consummation of the Merger, except
for such Authorizations, Orders, declarations, filings and notices
as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the “ Hart-Scott-Rodino Act
”) and the Other Antitrust Laws and the filing of the
Certificate of Merger as may be required by the DGCL.
3.5 Subsidiaries
.
(a) Section 3.5 of the
Disclosure Schedule sets forth: (i) the name of each
Subsidiary; (ii) the number and type of outstanding equity
securities of each Subsidiary and a list of the Holders thereof;
(iii) the jurisdiction of organization of each Subsidiary;
(iv) the names of the officers and directors of each
Subsidiary; and (v) the jurisdictions in which each Subsidiary
is qualified or holds licenses to do business as a foreign
corporation or other entity.
- 16 -
(b) Each Subsidiary is a
corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct
business and is in corporate and tax good standing under the laws
of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification.
Each Subsidiary has all requisite power and authority to carry on
the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company has delivered or made
available to the Buyer complete and accurate copies of the charter,
by-laws or other organizational documents of each Subsidiary. No
Subsidiary is in default under or in violation of any provision of
its charter, by-laws or other organizational documents. All of the
issued and outstanding shares of capital stock of each Subsidiary
are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All shares of each Subsidiary that are
held of record or owned beneficially by either the Company or any
Subsidiary are held or owned free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and
state securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and
demands. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company or any
Subsidiary is a party or which are binding on any of them providing
for the issuance, disposition or acquisition of any capital stock
of any Subsidiary. There are no outstanding stock appreciation,
phantom stock or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of
any Subsidiary.
(c) No Subsidiary of the
Company has outstanding any bonds, debentures, notes or other
obligations or debt securities the holders of which have the right
to vote (or convertible into, or exercisable or exchangeable for,
securities having the right to vote) on any Company
matter.
(d) The Company does not
control directly or indirectly or have any direct or indirect
equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or
other business association or entity which is not a
Subsidiary.
3.6 Financial
Statements .
(a) The Company has provided
to the Buyer the audited financial statements set forth in
paragraph (a) of the definition of Financial Statements set
forth in this Agreement. Section 3.6 of the Disclosure
Schedule includes the unaudited financial statements set forth in
paragraph (b) of the definition of Financial Statements set
forth in this Agreement. The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, fairly present the
consolidated financial condition, results of operations and cash
flows of the Company and the Subsidiaries as of the respective
dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the
Subsidiaries; provided, however, that the Financial Statements
referred to in clause (b) of the definition of such term do
not include footnotes.
- 17 -
(b) The Company and its
Subsidiaries have in place systems and processes that are:
(i) designed to provide reasonable assurances regarding the
reliability of the Financial Statements; and (ii) to the
Company’s knowledge, adequate for a company at the same stage
of development as the Company. There have been no instances of
fraud, whether or not material, which occurred during any period
covered by the Financial Statements.
3.7 Absence of Certain
Changes . Except as set forth in Section 3.7 of the
Disclosure Schedule, since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which,
individually or in the aggregate, has had, or could reasonably be
expected to have in the future, a Company Material Adverse Effect,
and (b) neither the Company nor any Subsidiary has taken any
of the actions set forth in paragraphs (a) through (r) of
Section 5.5.
3.8 Undisclosed
Liabilities . Except as set forth in Section 3.8 of the
Disclosure Schedule, none of the Company and its Subsidiaries has
any liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or
to become due), except for (a) liabilities shown on the Most
Recent Balance Sheet, (b) liabilities which have arisen since
the Most Recent Balance Sheet Date in the Ordinary Course of
Business and (c) contractual and other liabilities incurred in
the Ordinary Course of Business which are not required by GAAP to
be reflected on a balance sheet.
3.9 Tax Matters
.
(a) All Tax Returns required
to have been filed by or with respect to the Company and each of
its Subsidiaries have been duly and timely filed, and each such Tax
Return correctly and completely reflects liability for Taxes and
all other information required to be reported thereon. All Taxes
owed by the Company and each of its Subsidiaries (whether or not
shown on any Tax Return) have been timely paid. The Company and
each of its Subsidiaries has adequately provided for, in its books
of account and related records, liability for all unpaid Taxes,
being current Taxes not yet due and payable.
(b) There is no action or
audit currently proposed, threatened or pending against, or with
respect to, the Company or any of its Subsidiaries in respect of
any Taxes. Neither the Company nor any of its Subsidiaries is the
beneficiary of any extension of time within which to file any Tax
Return, nor has the Company or any of its Subsidiaries made any
request for such an extension. No claim has ever been made by an
authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or any of
its Subsidiaries is or may be subject to taxation by that
jurisdiction or that the Company or any of its Subsidiaries must
file Tax Returns. There are no Security Interests on any of the
stock or assets of the Company or any of its Subsidiaries with
respect to Taxes, other than Security Interests for Taxes not yet
due and payable.
(c) The Company and each of
its Subsidiaries has withheld and timely paid all Taxes required to
have been withheld with respect to amounts paid or owed to any
Person and has complied with all information reporting and
withholding requirements, including maintenance of required records
with respect thereto.
- 18 -
(d) There is no dispute or
claim concerning any liability for Taxes with respect to the
Company or any of its Subsidiaries for which notice from a
Governmental Entity has been received, or which is asserted or
threatened, or which is otherwise known to the Company Stockholders
or the Company. No issues have been raised in any Taxes examination
with respect to the Company or any of its Subsidiaries which, by
application of similar principles, could be expected to result in
liability for Taxes for any period not so examined.
Section 3.9 of the Disclosure Schedule (i) lists all U.S.
federal, state, local, and foreign income Tax Returns filed with
respect to the Company and each of its Subsidiaries for taxable
periods ended on or after 2000, (ii) indicates those Tax
Returns that have been audited, and (iii) indicates those Tax
Returns that currently are the subject of audit. The Stockholder
Representative has delivered or made available to the Buyer correct
and complete copies of all U.S. federal income Tax Returns filed,
examination reports, and statements of deficiencies assessed
against or agreed to by the Company since 2000. Neither the Company
nor any of its Subsidiaries has waived (or is subject to a waiver
of) any statute of limitations in respect of Taxes or has agreed to
(or is subject to) any extension of time with respect to a Tax
assessment or deficiency.
(e) Neither the Company nor
any of its Subsidiaries has filed (or is subject to) a consent
pursuant to the collapsible corporation provisions of the former
Section 341(f) of the Code (or any corresponding provisions of
state, local or foreign income Tax Law). None of the assets or
properties of the Company or any of its Subsidiaries constitutes
tax-exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code. Neither the Company
nor any of its Subsidiaries is a party to any “safe harbor
lease” within the meaning of Section 168(f)(8) of the
Code, as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982, or to any “long-term
contract” within the meaning of Section 460 of the Code.
Neither the Company nor any of its Subsidiaries has ever been a
United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code. Neither the Company nor any
of its Subsidiaries has ever made any payments, nor is obligated to
make any payments, nor is a party to any agreement that as a result
of the Merger and any other event could obligate it to make
payments that would result in a nondeductible expense under
Section 280G of the Code or an excise Tax to the recipient of
such payments pursuant to Section 4999 of the Code. Neither
the Company nor any of its Subsidiaries has participated in or
cooperated with an international boycott as defined in
Section 999 of the Code.
(f) Neither the Company nor
any of its Subsidiaries has agreed to make and is not required to
make, by reason of a change in accounting method, a proposed or
threatened change in accounting method or otherwise, any adjustment
under Section 481(a) of the Code. Neither the Company nor any
of its Subsidiaries has been the “distributing
corporation” (within the meaning of Section 355(c)(2) of
the Code) with respect to a transaction described in
Section 355 of the Code within the five-year period ending as
of the date of this Agreement. Neither the Company nor any of its
Subsidiaries has received (nor is it subject to) any ruling from
any Taxing Authority, nor has it entered into (nor is it subject
to) any agreement with a Taxing Authority. The Company has
disclosed on its U.S. federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement
of U.S. federal income Tax within the meaning of Section 6662
of the Code.
(g) Except with respect to
the affiliated group of corporation of which the Company is the
common parent (as defined in Section 1504 of the Code),
neither the Company
- 19 -
or any of its Subsidiaries has ever been
a member of an affiliated group of corporations (as that term is
used by Section 1504 of the Code) or any comparable provision
of state, local or foreign law. Except as set forth in
Section 3.9 of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries is a party to any Tax allocation or
sharing agreement. Except with respect to the affiliated group of
corporations of which the Company is the common parent (as defined
in Section 1504 of the Code), neither the Company nor any of
its Subsidiaries has any liability for the Taxes of any Person,
(i) as a transferee or successor, (ii) by contract,
(iii) under Section 1.1502-6 of the Regulations (or any
similar provision of state, local or foreign Law), or
(iv) otherwise. Neither the Company nor any of its
Subsidiaries is a party to any joint venture, partnership or other
arrangement that is treated as a partnership for U.S. federal
income tax purposes.
(h) Neither the Company nor
any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income
for any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (i) intercompany transactions
or excess loss accounts described in Treasury regulations under
Section 1502 of the Code (or any similar provision of state,
local, or foreign Tax Law), (ii) installment sale or open
transaction disposition made on or prior to the Closing Date or
(iii) prepaid amount received on or prior to the Closing
Date.
(i) Section 3.9 of the
Disclosure Schedule sets forth the following information with
respect to the Company and the Subsidiaries as of August 31,
2007: (i) the basis of the Company and each of its
Subsidiaries in its assets, (ii) the current and accumulated
earnings and profits of the Company and each of its Subsidiaries,
(iii) the basis of the stock of the Company and each of its
Subsidiaries (or the amount of any excess loss account),
(iv) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax credit, or
excess charitable contribution allocable to the Company or any of
the Subsidiaries, (v) the amount of any deferred gain or loss
allocable to the Company arising out of any intercompany
transaction as described in the Treasury regulations under
Section 1502 of the Code, and (vi) tax elections
affecting the Company or any of its Subsidiaries.
(j) Neither the Company nor
any of its Subsidiaries has operating losses or other tax
attributes presently subject to limitation under Sections 279, 382,
383, or 384 of the Code, or the federal consolidated return
regulations.
(k) Neither the Company nor
any of its Subsidiaries has at any time been subject to
(i) the dual consolidated loss provisions of
Section 1503(d) of the Code, (ii) the overall foreign
loss provisions of Section 904(f) of the Code or
(iii) the recharacterization provisions of
Section 952(c)(2) of the Code. Neither the Company nor any of
its Subsidiaries has any “non-recaptured net
Section 1231 losses” within the meaning of
Section 1231(c)(2) of the Code.
(l) Neither the Company nor
any of its Subsidiaries has entered into any transaction that is
either a “listed transaction” or that the Company or
its Stockholders believe in good faith is a “reportable
transaction” or a “transaction of interest” (all
as defined in Treas. Reg. § 1.6011-4).
- 20 -
(m) No Subsidiary of the
Company that is incorporated in a non-U.S. jurisdiction has, or at
any time has had, an investment in “United States
property” within the meaning of Section 956(c) of the
Code. No Subsidiary of the Company is, or at any time has been, a
passive foreign investment company within the meaning of
Section 1297 of the Code and neither the Company nor any of
its Subsidiaries is a shareholder, directly or indirectly, in a
passive foreign investment company. No Subsidiary of the Company
that is incorporated in a non-U.S. jurisdiction is, or at any time
has been, engaged in the conduct of a trade or business within the
United States, or treated as or considered to be so engaged and
neither the Company nor any of its Subsidiaries has a permanent
establishment in any country outside of its country of
incorporation.
(n) All material related
party transactions involving the Company, and any of its
Subsidiaries or Affiliates, have been supported by an arm’s
length study in compliance with Section 482 of the Code and
the Treasury Regulations promulgated thereunder, and to the extent
applicable, any comparable provisions of state, local, or foreign
Law.
(o) The operations conducted
by marketRx India, prior to the Closing Date, properly qualify for
exemption from Taxes under Section 10A of the Income Tax Act
of 1961.
3.10 Assets
.
(a) The Company or the
applicable Subsidiary is the true and lawful owner, and has good
title to, all of the assets (tangible or intangible) purported to
be owned by the Company or the Subsidiaries, free and clear of all
Security Interests. Each of the Company and the Subsidiaries owns
or leases all tangible assets sufficient for the conduct of its
businesses as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from material defects,
has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and
tear) and is suitable for the purposes for which it presently is
used.
(b) Section 3.10(b) of
the Disclosure Schedule lists individually (i) all fixed
assets (within the meaning of GAAP) of the Company or the
Subsidiaries having a book value greater than $10,000, indicating
the cost, accumulated book depreciation (if any) and the net book
value of each such fixed asset as of the Most Recent Balance Sheet
Date, and (ii) all other assets of a tangible nature (other
than inventories) of the Company or the Subsidiaries whose book
value exceeds $10,000.
(c) Each item of equipment,
motor vehicle and other asset that the Company or a Subsidiary has
possession of pursuant to a lease agreement or other contractual
arrangement is in such condition that, upon its return to its
lessor or owner under the applicable lease or contract, the
obligations of the Company or such Subsidiary to such lessor or
owner will have been discharged in full.
3.11 Owned Real
Property . The Company does not own any Owned Real
Property.
3.12 Real Property
Leases . Section 3.12 of the Disclosure Schedule is an
accurate and complete list of all Leases and lists all documents
comprising such Leases, the term
- 21 -
of such Leases, any extension and
expansion options, the rent payable thereunder, the type of use
(e.g., office, warehouse), and the location. The Company has
delivered or made available to the Buyer complete and accurate
copies of the Leases. With respect to each Lease:
(a) such Lease is legal,
valid, binding, enforceable and in full force and
effect;
(b) such Lease will continue
to be legal, valid, binding, enforceable and in full force and
effect immediately following the Closing in accordance with the
terms thereof as in effect immediately prior to the Closing and no
consent of the landlord, sublandlord or any other party is required
under the such Lease in connection with the transactions
contemplated hereby;
(c) neither the Company nor
any Subsidiary nor, to the knowledge of the Company or any
Subsidiary, any other party, is in breach or violation of, or
default under, any such Lease, and no event has occurred, is
pending or, to the knowledge of the Company or any Subsidiary, is
threatened, which, after the giving of notice, with lapse of time,
or otherwise, would constitute a breach or default by the Company
or any Subsidiary or, to the knowledge of the Company or any
Subsidiary, any other party under such Lease;
(d) there are no disputes,
oral agreements or forbearance programs in effect as to such
Lease;
(e) neither the Company nor
any Subsidiary has licensed, assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the
leasehold or subleasehold;
(f) to the knowledge of the
Company or any Subsidiary, all facilities leased or subleased
thereunder are supplied with utilities and other services adequate
for the operation of said facilities;
(g) the Company or any
Subsidiary is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property
subject to such lease which would reasonably be expected to
materially impair the current uses or the occupancy by the Company
or a Subsidiary of the property subject thereto;
(h) the Company or a
Subsidiary enjoys peaceful and quiet possession of the leased
property;
(i) to the knowledge of the
Company or any Subsidiary, such Lease and the use and operation
thereof comply with all applicable Laws and conditions affecting
the leased property and no written notice or other information has
been received by the Company or any Subsidiary calling attention to
the need for any material work, repairs or environmental
remediation;
(j) there is no damage to the
leased property from fire or other casualty that has not been
repaired and, to the knowledge of the Company or any Subsidiary, no
condemnation or similar proceedings are pending or threatened with
regard to the leased property; and
- 22 -
(k) no work has been
performed and there is no work in progress at the leased property
for which a mechanic’s or materialmen’s lien may be
filed.
3.13 Intellectual
Property .
(a) Section 3.13 of the
Disclosure Schedule sets forth an accurate and complete list and
description of all Company Intangibles, and, in the case of Company
Software, a product description, the language in which it is
written, and the type of hardware platform(s) on which it runs.
Except as set forth on Section 3.13 of the Disclosure
Schedule, no other Intangibles are used to operate or held in
connection with the Company.
(b) Except as set forth on
Section 3.13 of the Disclosure Schedule, the Company has good,
marketable, and indefeasible title to, and has the full right to
use, all of Company Intangibles, free and clear of any Security
Interest. Except as set forth on Section 3.13 of the
Disclosure Schedule, no rights of any third party are necessary to
market, sell, distribute, support, maintain, license or grant any
rights in or to, sell, modify, update, or create derivative works
based upon any or all of the Company Intangibles. Neither the
Company nor any Subsidiary has granted or assigned to any other
person or entity any right to manufacture, have manufactured,
assemble or sell the products or proposed products or to provide
the services or proposed services of the Company or any
Subsidiary.
(c) Except as set forth on
Section 3.13 of the Disclosure Schedule, all of the
copyrights, websites, logos, symbols, Software, written works,
visual works, audio works, multimedia works, and databases and
other works eligible for copyright protection of any kind or
fashion included in the Company Intangibles were created as works
made for hire (as defined under U.S. copyright law) by regular
full-time employees of the Company. To the extent that (i) any
author, contributor, creator, or developer of any Company
Intangible (A) was not a regular full-time employee of the
Company at the time such person contributed to, authored, created,
or developed any Company Intangible, or (B) was a regular
full-time employee of the Company at the time such person
contributed to, authored, created, or developed any Company
Intangible, but such authoring, creation, contribution, or
development was not in the scope of such person’s employment
with the Company, or (ii) such person authored, contributed,
created, developed, designed, conceived, or reduced to practice any
Intangible that is not a work made for hire, such author,
contributor, creator, or developer has irrevocably assigned to the
Company in writing all Intellectual Property Rights in such
Person’s work with respect to such Company Intangibles. All
authors, creators, contributors, and developers of Company
Intangibles have waived any and all paternity, integrity, moral and
other similar rights that they may have now or in the future in the
Company Intangibles. None of the employees, contractors, or
consultants of the Company (y) is subject to any contractual
or legal restrictions that might interfere with the use of his or
her best efforts to promote the interests of the Company, or (z)(A)
has used any other Person’s trade secrets or other
confidential information in the course of his or her work or
(B) is, or is reasonably expected to be, in default under any
term of any Contract or restrictive covenant relating to the
Company Intangibles or any other Contract or restrictive covenant.
No employee of the Company has entered into any Contract that
restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer,
assign, convey, or disclose information concerning any Company
Intangible to anyone other than the Company.
- 23 -
(d) With respect to the
Company Software included in the Company Intangibles, (i) the
Company maintains machine-readable master-reproducible copies,
source code listings, technical documentation and user manuals for
the most current releases or versions thereof and for all earlier
releases or versions thereof currently being supported or
maintained by or on behalf of the Company; (ii) in each case,
the machine-readable copy substantially conforms to the
corresponding source code listing; (iii) it is written in the
language set forth on Section 3.13 of the Disclosure Schedule
for use on the hardware set forth on Section 3.13 of the
Disclosure Schedule or with standard operating systems;
(iv) it can be maintained and modified by reasonably competent
programmers familiar with such language, hardware and operating
systems; (v) in each case, it operates in accordance with the
user manual therefor without material operating defects; and,
(vi) none of the Company Intangibles contains, uses, includes,
is based upon, is integrated or bundled with, is derived from, or
incorporates (A) any version of any Software that contains, or
is derived in any manner (in whole or in part) from, any Software
that is distributed as free software, open source software (for
example, among others, Linux), public software, or via similar
licensing or distribution models (including GNU’s General
Public License or Lesser/Library GPL, the Artistic/PERL License,
the Mozilla Public License, the Netscape Public License, the Sun
Community Source License, or the Sun Industry Standards License),
(B) any version of any Software that requires as a condition
of use, modification or distribution that other Software
distributed with such Software (I) be disclosed or distributed
in source code form, (II) be licensed for the purpose of making
derivative works, or (III) be redistributable at no charge, or
(C) any version of any Software the design or development of
which was funded in whole or in part by any Governmental Entity.
Except as disclosed on Section 3.13 of the Disclosure
Schedule, all modifications, fixes, work-arounds, circumventions,
improvements, enhancements, versions, new releases, updates, and
upgrades of the Company Software, to the extent the foregoing are
in development or design by or on behalf of the Company (whether in
alpha test mode, beta test mode, production, or otherwise) are
either (i) fully backwards compatible with any and all
releases, versions, and other forms of the Company Software in use
on the date of this Agreement without further development or the
expenditure of additional time or money, or (ii) can be
promptly made fully backwards compatible without any further
material development effort or the expenditure of a material amount
of time or money.
(e) None of the Company
Intangibles or their respective past or current uses, including the
preparation, distribution, marketing or licensing thereof, has
violated or infringed upon or has interfered with, or is violating
or infringing upon or interfering with, any Intellectual Property
Right of any Person. None of the Company Intangibles is subject to
any Judgment. No Legal Proceeding is pending or, to the
Company’s knowledge, is threatened, nor has any claim or
demand been made, which challenges or challenged the legality,
validity, enforceability, use or exclusive ownership by the Company
of any of the Company Intangibles. No Person is violating or
infringing upon or interfering with, or has violated or infringed
upon or interfered with at any time, any of the Company
Intangibles. Except as listed on Schedule 3.13, there are no
registered copyrights, copyright applications, patents or patent
applications (including divisions, continuations,
continuations-in-part, substitutes, renewals, reissues and
extensions of the foregoing (as and to the extent applicable))
covering any of the Company Intellectual Property.
(f) The Company has
adequately maintained all Intellectual Property Rights with respect
to the Company Intangibles. Except as set forth on
Schedule 3.13, the Company has
- 24 -
not disclosed or delivered to any escrow
agent or to any other Person, or permitted the disclosure to any
escrow agent or to any other Person of, the source code (or any
aspect or portion thereof) for or relating to any Company Software
or any past, present or future product of the Company. The trade
secrets included in the Company Intellectual Property are not part
of the public knowledge or literature, and, have not been used,
divulged, or appropriated either for the benefit of any Person
(other than the Company) or to the detriment of the Company. All
necessary registration, maintenance and renewal fees currently due
in connection with the Company Intangibles have been made, all
formal legal requirements (including the timely post-registration
applications) have been met, and all necessary documents,
recordations and certificates in connection with such Company
Intangibles have been filed with the relevant patent, trademark or
other authorities in the U.S. or foreign jurisdictions, as the case
may be, for the purposes of perfecting and maintaining such Company
Intangibles.
(g) All licenses, sublicenses
and other Contracts covering or relating to the Company Intangibles
are legal, valid, binding, enforceable and in full force and
effect, and upon consummation of the transactions contemplated
hereby, will continue to be legal, valid, binding, enforceable and
in full force and effect on terms identical to those in effect
immediately prior to the consummation of the transactions
contemplated hereby. The Company is not in breach of or default
under any license, sublicense or other Contract covering or
relating to any Company Intangible and has not performed any act or
omitted to perform any act which gives any Person any right to be
indemnified, defended, released, or held harmless by the Company
under any license, sublicense or other Contract covering or
relating to any Company Intangible. No Legal Proceeding is pending
or, to the Company’s knowledge, threatened which challenges
the legality, validity, enforceability or ownership of any license,
sublicense or other Contract covering or relating to any Company
Intangible.
(h) None of the Company
Software or other Company Intangibles is owned by or registered in
the name of any current or former owner, shareholder, partner,
director, executive, officer, employee, salesman, agent, customer,
representative or contractor of the Company or any Affiliate nor
does any such Person have any interest therein or right thereto,
including the right to royalty payments.
(i) No portion of any Company
Software or other Company Intangible contains any “back
door,” “time bomb,” “Trojan horse,”
“worm,” “drop dead device,”
“virus” or other Software routines, coding, or
programming or hardware components that damage, interfere with,
intercept, permit access to, or disable or erase software,
hardware, any computer or other system, information, or data
without the consent of the user, or that are intended to do so or
that facilitate or enable the doing of such.
(j) There is no governmental
prohibition or restriction on the use of any of the Company
Intangibles in any jurisdiction or on the export or import of any
of the Company Intangibles from or to any jurisdiction.
(k) The Company maintains, in
connection with the Company and the Company Intangibles, access
detection controls and filters, authorization and authentication
policies, intrusion and misuse controls, virus detection and
eradication Software, information security vulnerability and risk
management controls and policies, and similar
information
- 25 -
security controls, devices, and
policies, and the foregoing (i) ensure the integrity and
confidentiality of the Company Intangibles and the data and
information processed in connection therewith, and (ii) are at
least as stringent and efficacious as the highest information
security controls, devices, and policies used in the data
processing, information technology, and software
industries.
(l) To the best of the
Company’s knowledge, no third party has claimed or has reason
to claim, or has threatened, that any person employed by or
affiliated with the Company, in connection with his or her
employment by or affiliation with the Company, (i) has
violated or is violating any of the terms or conditions of his
employment, non-competition or non-disclosure agreement with such
third party, (ii) has disclosed or is disclosing or has
utilized or is utilizing any trade secret or proprietary
information or documentation of such third party or (iii) has
interfered or is interfering in the employment relationship between
such third party and any of its present or former employees. To the
best of the Company’s knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any
trade secret or any information or documentation proprietary to any
former employer, and to the best of the Company’s knowledge,
no person employed by or affiliated with the Company has violated
any confidential relationship which such person may have had with
any third party, in connection with the development, manufacture or
sale or any product or proposed product or the development or sale
of any service or proposed service of the Company, and the Company
has no reason to believe there will be any such employment or
violation. To the best of the Company’s knowledge, none of
the execution or delivery of this Agreement, or the carrying on of
business of the Company as officers, employees or agents by any
officer, director or key employee of the Company, or the conduct or
proposed conduct of the business of the Company, will conflict with
or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument
under which any such person is obligated.
3.14 Contracts
.
(a) Section 3.14 of the
Disclosure Schedule contains a complete and accurate list of each
Contract or series of related Contracts to which the Company or any
Subsidiary is a party or is subject, or by which any of their
respective assets are bound, to as of the date of this
Agreement:
(i) for the purchase of
materials, products, supplies, goods, services, equipment or other
assets or for the furnishing or receipt of services (A) which
calls for performance over a period of more than one (1) year,
(B) which involves annual payments by the Company or any of
the Subsidiaries of $50,000 or more, (C) ) which involves
aggregate payments by the Company or any of the Subsidiaries of
$50,000 or more or (D) in which the Company or any Subsidiary
has granted “most favored nation” pricing provisions or
marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively
from a certain party;
(ii) for the sale by the
Company or any of the Subsidiaries of materials, products,
supplies, goods, services, equipment or other assets or for the
furnishing or receipt of services (A) which calls for
performance over a period of more than one (1) year,
(B) which
- 26 -
involves a specified annual minimum
dollar sales amount by the Company or any of the Subsidiaries of
$50,000 or more, (C) pursuant to which the Company or any of
its Subsidiaries received payments of more than $50,000 in the year
ended 2006 or expects to receive payments of more than $50,000 in
the year ended 2007, or (D) in which the Company or any
Subsidiary has granted “most favored nation” pricing
provisions or marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity
of goods or services or has agreed to purchase goods or services
exclusively from a certain party;
(iii) that requires the
Company or any of the Subsidiaries to purchase its total
requirements of any product or service from a third party or that
contains “take or pay” provisions;
(iv) pursuant to which
(A) the Company or any of the Subsidiaries purchases
components for inclusion into its products other than components
purchased solely on a purchase order basis or (B) pursuant to
which a third party manufactures or assembles products on behalf of
the Company or any of the Subsidiaries;
(v) that continues over a
period of more than six (6) months from the date hereof and
involves payments to or by the Company or any of its Subsidiaries
exceeding $50,000, other than arrangements disclosed pursuant to
the preceding subparagraphs (i) and (ii);
(vi) that is a Software
license, Software support, Software maintenance, managed services
or statement of work Contract under which the Company is the
licensor, marketer, developer, designer, distributor or provider of
services;
(vii) that is a Contract for
the purchase, lease and/or maintenance of computer equipment and
other equipment under which the Company is the purchaser, licensee,
lessee or user;
(viii) that is a Contract
under which any rights in and/or ownership of any Company Software
or other Company Intangible, or any prior version thereof, or any
part of the customer base were obtained or acquired;
(ix) that is a (A) Lease
or (B) Contract for the lease of personal property from or to
third parties, in either case providing for payments to or by the
Company or any of the Subsidiaries in any one case in excess of
$50,000 per annum, $50,000 or more over the term of the lease or
having a remaining term longer than six (6) months;
(x) that is a partnership,
joint venture, limited liability company or similar
Contract;
(xi) that is a distribution,
dealer, representative or sales agency Contract;
(xii) with any Governmental
Entity;
(xiii) that under which it
has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) Indebtedness (including capitalized lease
obligations) involving more than $50,000 or under which it has
imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
- 27 -
(xiv) that is a note,
debenture, bond, equipment trust, letter of credit, loan or other
Contract for Indebtedness or lending of money (other than to
employees for travel expenses in the Ordinary Course of Business)
or Contract for a line of credit or guarantee, pledge or
undertaking of the Indebtedness of any other Person;
(xv) for a charitable or
political contribution in any one case in excess of $10,000 or any
such Contracts in the aggregate greater than $25,000;
(xvi) for any capital
expenditure or leasehold improvement in any one case in excess of
$25,000 or any such Contracts in the aggregate greater than
$50,000;
(xvii) that restricts or
purports to restrict the right of the Company or any of its
Subsidiaries to engage in any line of business, acquire any
property, develop or distribute any product or provide any service
(including geographic restrictions) or to compete with any Person
or granting any exclusive distribution rights, in any market, field
or territory;
(xviii) for the disposition
of any significant portion of the assets or business of the Company
or any Subsidiary (other than sales of products in the Ordinary
Course of Business) or for the acquisition of the assets or
business of any other entity (other than purchases of inventory or
components in the Ordinary Course of Business);
(xix) that concerns
confidentiality or noncompetition;
(xx) that is an employment,
consulting, employee benefit, pension, bonus, profit-sharing, stock
option, stock purchase or similar plan or arrangement, distributor
or sales representative, termination or severance Contract, other
than any such Contract that is terminable at-will by the Company or
any of its Subsidiaries without material liability to the Company
or such Subsidiary;
(xxi) that involves any
current or former officer, director or stockholder of the Company
or an Affiliate or “associate” (as such term is defined
in the rules and regulations promulgated under the Securities Act)
thereof, including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of
real or personal property from, or otherwise requiring payments to,
any such person or entity;
(xxii) that under which the
consequences of a default or termination would reasonably be
expected to have a Company Material Adverse Effect;
(xxiii) that contains any
provisions requiring the Company or any Subsidiary to indemnify any
other party (excluding indemnities contained in agreements for the
purchase, sale or license of products entered into in the Ordinary
Course of Business);
(xxiv) that either involves
more than $50,000 or is not entered into in the Ordinary Course of
Business; and
- 28 -
(xxv) that is otherwise
material to the Company and its Subsidiaries as a whole and not
previously disclosed pursuant to this Section 3.14.
(b) Except as set forth in
Section 3.14 of the Disclosure Schedule, each of the customers
of the Company has signed and is bound by a written contract
(including click wrap Contracts) that is similar to one of the form
agreements in all material respects that is referred to on
Section 3.14 of the Disclosure Schedule, and, to the knowledge
of the Company, the provisions of each such customer Contract,
including provisions regarding proprietary protection and
limitations on liability, are binding on the customer. Except as
set forth in Section 3.14 of the Disclosure Schedule, all
customers have accepted the Software, products and/or services
described in their respective customer Contracts. Except as set
forth in Section 3.14 of the Disclosure Schedule, within the
last three (3) years, the Company (i) has not failed to
achieve a service level commitment set forth in any Contract,
(ii) has no outstanding claims for service level commitments,
or (iii) has not breached any “most favored
customer” pricing provisions contained in any agreement
listed in Section 3.13 or Section 3.14 of the Disclosure
Schedule.
(c) The Company has delivered
or made available to the Buyer a complete and accurate copy of each
agreement listed in Section 3.13 or Section 3.14 of the
Disclosure Schedule. With respect to each agreement so listed:
(i) the agreement is legal, valid, binding and enforceable and
in full force and effect; (ii) the agreement will continue to
be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the
terms thereof as in effect immediately prior to the Closing; and
(iii) neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any other party, is in breach or
violation of, or default under, any such agreement, and no event
has occurred, is pending or, to the knowledge of the Company, is
threatened, which, after the giving of notice, with lapse of time,
or otherwise, would constitute a breach or default by the Company
or any Subsidiary or, to the knowledge of the Company, any other
party under such agreement.
(d) Except as set forth on
Section 3.14 of the Disclosure Schedule, no Person is
renegotiating, or has the right to renegotiate, any amount paid or
payable to the Company under any Material Contract or another other
term or provision of any Material Contract.
(e) The Material Contracts
are all the Contracts necessary and sufficient to operate the
Company’s business as currently operated.
3.15 Accounts Receivable
and Unbilled Receivables .
(a) Accounts
Receivable . All accounts receiva
|