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Search Agreement and Plan of Merger by:
Exhibit 2.1
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AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
AMONG
BLUE COAT SYSTEMS, INC.,
PIVOT
ACQUISITION CORP.,
PERMEO
TECHNOLOGIES, INC.
AND
CHRIS
PACITTI, as
STOCKHOLDERS' REPRESENTATIVE
Dated as of
December 30, 2005
----------
<PAGE>
TABLE OF
CONTENTS
-----------------
Page
----
ARTICLE I THE
MERGER..........................................................2
SECTION 1.01 The
Merger...............................................2
SECTION 1.02 Effective Time;
Closing..................................3
SECTION 1.03 Effect of the
Merger.....................................3
SECTION 1.04 Certificate of Incorporation and Bylaws of
the
Surviving
Corporation................................................3
SECTION 1.05 Directors and
Officers...................................3
ARTICLE II MERGER CONSIDERATION;
EXCHANGE OF CERTIFICATES.....................4
SECTION 2.01 Merger
Consideration.....................................4
SECTION 2.02 Exchange of
Certificates................................14
SECTION 2.03 Stock Transfer Books....................................17
SECTION 2.04 Company Stock Options;
Warrants.........................17
SECTION 2.05
Reserved................................................18
SECTION 2.06 Dissenting
Shares.......................................18
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE COMPANY....................18
SECTION 3.01 Organization and
Qualification..........................19
SECTION 3.02 Certificate of Incorporation and
Bylaws.................19
SECTION 3.03 No
Subsidiaries.........................................20
SECTION 3.04
Capitalization..........................................20
SECTION 3.05 Authority Relative to This
Agreement....................22
SECTION 3.06 No Conflict; Required Filings and
Consents..............23
SECTION 3.07 Permits;
Compliance.....................................23
SECTION 3.08 Financial
Statements....................................24
SECTION 3.09 Absence of Certain Changes or
Events....................25
SECTION 3.10 Absence of
Litigation...................................25
SECTION 3.11 Employee Benefit Plans; Labor
Matters...................26
SECTION 3.12 Contracts...............................................29
SECTION 3.13 Environmental
Matters...................................31
SECTION 3.14 Intellectual
Property...................................32
SECTION 3.15 Taxes...................................................35
SECTION 3.16 Vote
Required...........................................38
SECTION 3.17 Assets; Absence of Liens and
Encumbrances...............38
SECTION 3.18 Owned Real
Property.....................................38
SECTION 3.19 Certain
Interests.......................................38
SECTION 3.20 Insurance
Policies......................................39
SECTION 3.21 Restrictions on Business
Activities.....................39
SECTION 3.22
Brokers.................................................39
SECTION 3.23 State Takeover
Statutes.................................40
SECTION 3.24 Customers and
Suppliers.................................40
SECTION 3.25
Inventory...............................................40
SECTION 3.26 Accounts Receivable; Bank
Accounts......................40
i
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SECTION 3.27 Powers of Attorney......................................40
SECTION 3.28
Offers..................................................40
SECTION 3.29
Warranties..............................................41
SECTION 3.30 Books and
Records.......................................41
SECTION 3.31 Tax
Matters.............................................41
SECTION 3.32 No Illegal
Payments.....................................41
SECTION 3.33
Reserved................................................41
SECTION 3.34
No Misstatements........................................41
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB...........42
SECTION 4.01 Organization and
Qualification..........................42
SECTION 4.02 Authority Relative to This
Agreement....................43
SECTION 4.03 Capital
Structure.......................................43
SECTION 4.04 No Conflict; Required Filings and
Consents..............44
SECTION 4.05 SEC Filings; Financial
Statements.......................44
SECTION 4.06 Interim Operations of Merger
Sub........................45
SECTION 4.07 Valid Issuance of Parent
Shares.........................45
SECTION 4.08 Brokers.................................................45
SECTION 4.09 Tax
Matters.............................................45
SECTION 4.10
Litigation..............................................45
SECTION 4.11 Intellectual Property...................................45
SECTION 4.12 NASDAQ
Requirements.....................................46
SECTION 4.13 Absence of Parent Material Adverse
Effect...............46
SECTION 4.14 No
Misstatements........................................46
ARTICLE V CONDUCT OF BUSINESSES PENDING
THE MERGER...........................46
SECTION 5.01 Conduct of Business by the Company Pending
the Merger...46
SECTION 5.02
Litigation..............................................49
SECTION 5.03 Notification of
Certain Matters.........................50
ARTICLE VI ADDITIONAL
AGREEMENTS.............................................50
SECTION 6.01 California Permit; Company Stockholder
Approval.........50
SECTION 6.02 Access to Information;
Confidentiality..................52
SECTION 6.03 No Solicitation of
Transactions.........................52
SECTION 6.04 Employee Benefits
Matters...............................53
SECTION 6.05 Further Action; Consents;
Filings.......................54
SECTION 6.06 Plan of
Reorganization..................................55
SECTION 6.07 No Public
Announcement..................................55
SECTION 6.08 Expenses................................................55
SECTION 6.09 Affiliate
Agreements....................................55
SECTION 6.10
Reserved................................................55
SECTION 6.11 Indemnification of Officers and
Directors...............55
SECTION 6.12 Nasdaq National Market
Listing..........................56
SECTION 6.13 Section 16
Relief.......................................56
SECTION 6.14 Certificate Amendment...................................56
SECTION 6.15 Conversion
Schedule.....................................57
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SECTION 6.16 Liquidation Bonus
Plan..................................57
ARTICLE VII CONDITIONS TO THE
MERGER.........................................58
SECTION 7.01 Conditions to the Obligations of Each
Party.............58
SECTION 7.02 Conditions to the Obligations of Parent and
Merger Sub..58
SECTION 7.03 Conditions to the Obligations of the
Company............61
ARTICLE VIII TERMINATION, AMENDMENT AND
WAIVER...............................62
SECTION 8.01
Termination.............................................62
SECTION 8.02 Effect of Termination...................................63
SECTION 8.03
Amendment...............................................63
SECTION 8.04
Waiver..................................................63
ARTICLE IX
INDEMNIFICATION...................................................63
SECTION 9.01 Survival of Representations and
Warranties..............63
SECTION 9.02 Indemnification by the Company
Stockholders.............64
SECTION 9.03
Reserved................................................66
SECTION 9.04 Indemnification
Procedures..............................66
SECTION 9.05 Stockholders'
Representative............................68
ARTICLE X GENERAL
PROVISIONS.................................................69
SECTION 10.01
Notices.................................................69
SECTION 10.02 Certain
Definitions.....................................70
SECTION 10.03
Severability............................................71
SECTION 10.04 Assignment; Binding
Effect; Benefit.....................71
SECTION 10.05 Incorporation of
Exhibits...............................71
SECTION 10.06 Specific
Performance....................................72
SECTION 10.07 Governing Law;
Forum....................................72
SECTION 10.08 Time of the
Essence.....................................72
SECTION 10.09
Reserved................................................72
SECTION 10.10 Construction and
Interpretation.........................72
SECTION 10.11 Further
Assurances......................................73
SECTION 10.12
Headings................................................73
SECTION 10.13
Counterparts............................................73
SECTION 10.14 Entire
Agreement........................................73
SECTION 10.15
Schedules...............................................73
Exhibit A Form of Voting
Agreement
Exhibit B Form of Escrow
Agreement
Exhibit C Form of Company
Affiliate Agreement
Exhibit D Form of Company Counsel
Legal Opinion
Exhibit E Form of FIRPTA
Notification Letter
Exhibit F Form of FIRPTA Notice
to IRS
Schedule 2.01(b) Schedule of Merger
Consideration
Schedule 6.09 Affiliates
iii
<PAGE>
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION, dated as of December
30, 2005 (this "Agreement"), among BLUE COAT SYSTEMS, INC., a
Delaware
corporation ("Parent"), PIVOT ACQUISITION CORP., a Delaware
corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), PERMEO
TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), and Chris Pacitti, as
Stockholders'
Representative (as defined in Section 9.05 hereof).
W I T N E
S S E T H
WHEREAS, upon the terms and
subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law (the
"DGCL"), Parent
and the Company will enter into a business combination transaction pursuant to
which Merger Sub will merge with and into the Company (the "Merger");
WHEREAS, the Board of Directors
of the Company has (i) determined that
the Merger is fair to, and in the best interests of, the Company and its
stockholders, (ii) unanimously approved and adopted this Agreement, the Merger,
and the other transactions contemplated by this Agreement, and (iii) determined
to unanimously recommend that the stockholders of the Company approve and adopt
this Agreement and the Merger;
WHEREAS, the Boards of Directors
of each of Parent and Merger Sub have
(i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests
of,
Parent, Merger Sub and their respective stockholders and (ii) approved and
adopted this Agreement, the Merger, and the other transactions contemplated by
this Agreement;
WHEREAS, Parent, as the sole
stockholder of Merger Sub, has approved and
adopted this Agreement, the Merger, and the other transactions contemplated by
this Agreement;
WHEREAS, for Federal income tax
purposes, the Merger is intended to
qualify as a reorganization under the provisions of Section 368(a) of the
United
States Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, each person listed on
Schedule 6.09 hereto owns such number of
shares of common stock, $0.001 par value, of the Company (the "Company
Common
Stock"), such number of shares of Series A Convertible Preferred Stock,
par
value $0.001 per share, of the Company (the "Company Series A Preferred
Stock"),
such number of shares of Series B Convertible Preferred Stock, par value $0.001
per share, of the Company (the "Company Series B Preferred Stock"),
such number
of shares of Series C Convertible Preferred Stock, par value $0.001 per share,
of the Company (the "Company Series C Preferred Stock"), and such number
of
shares of Series C-1 Convertible Preferred Stock, par value $0.001 per share,
of
the Company (the "Company Series C-1 Preferred Stock" and, together
with the
Company Series A Preferred Stock, Company Series B Preferred Stock and Company
Series C Preferred Stock, the "Company Preferred Stock," and, the
Company Common
Stock together with the Company Preferred Stock, the "Company Stock")
as is set
forth opposite such stockholder's name in Section 3.04 of the Company
Disclosure
Schedule (as defined in Article III) (such stockholders being referred to
herein
as the "Principal Stockholders");
<PAGE>
WHEREAS, pursuant to the Merger,
each outstanding share of Company Stock
shall be converted into the right to receive shares of Parent's authorized
common stock, par value $0.0001 per share ("Parent Common Stock"),
and cash, at
the rates determined in this Agreement;
WHEREAS, as a condition and
inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, each of the
Principal Stockholders is entering into a voting agreement with Parent
(a "Voting Agreement"), dated the date hereof and substantially in
the form
attached hereto as Exhibit A;
WHEREAS, a portion of the Parent
Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in this Agreement and the Escrow Agreement (as defined in
Section 2.02(b)); and
WHEREAS, certain capitalized
terms used in this Agreement are defined in
Section 10.02 of this Agreement.
NOW, THEREFORE, in consideration
of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub, the Company and the Stockholders' Representative
hereby agree as follows:
ARTICLE I
THE MERGER
----------
SECTION 1.01 The Merger. Upon the
terms of this Agreement and
----------
subject to the conditions set forth in this Agreement, and in accordance with
the DGCL, at the Effective Time (as defined in Section 1.02), Merger Sub shall
be merged with and into the Company (the "Reverse Merger"). As a
result of the
Reverse Merger, the separate corporate existence of Merger Sub shall cease, and
the Company shall continue as the surviving corporation of the Reverse Merger
(the "Surviving Corporation"). As soon as reasonably practicable
following the
consummation of the Reverse Merger, but in any event within sixty (60) days
thereafter, the Company shall be merged (the "Second-Step Merger")
with and into
Parent or a wholly-owned, first-tier subsidiary of Parent; provided, however,
that such Second-Step Merger shall not be required if Parent and the
Stockholders' Representative determine in good faith in writing after
consultation with their respective counsel that the consummation of the Reverse
Merger, by itself, is sufficient to cause the Merger to satisfy the requirement
of Code Section 368(a)(2)(E)(ii). Following the Second-Step Merger, if it
occurs, the separate corporate existence of the Company shall cease and Parent
or its wholly-owned subsidiary, as the case may be, shall continue as the
Surviving Corporation. The Reverse Merger is referred to herein as the
"Merger."
For purposes of Section 3.31, Section 4.09 and Section 6.06, if the Second-Step
Merger is consummated, then "Merger" shall refer to the Reverse
Merger and the
Second-Step Merger, collectively or seriatim, as appropriate.
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<PAGE>
SECTION 1.02 Effective Time;
Closing. As promptly as practicable
-----------------------
following the satisfaction or waiver of the conditions set forth in Article VII
(or such other date as may be agreed by Parent and the Company), the parties
hereto shall cause the Merger to be consummated by (i) filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of
the State of
Delaware in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL and (ii) making all other filings and
recordings
required under the DGCL. The term "Effective Time" means the date and
time of
the filing of the Certificate of Merger (or such later time as may be agreed by
each of the parties hereto and specified in the Certificate of Merger).
Immediately prior to the filing of the Certificate of Merger, a closing (the
"Closing") will be held at the offices of Gunderson Dettmer Stough
Villeneuve
Franklin & Hachigian, LLP ("Gunderson Dettmer"), 155 Constitution
Drive, Menlo
Park, California (or such other place as the parties may agree). The date on
which the Closing shall occur is referred to herein as the "Closing
Date."
SECTION 1.03 Effect of the
Merger. At and after the Effective Time,
--------------------
the Merger shall have the effects as set forth in the applicable provisions of
the DGCL. Without limiting the generality of the foregoing, and subject
thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of each of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
disabilities
and duties of each of the Company and Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the
Surviving
Corporation.
SECTION 1.04 Certificate of
Incorporation and Bylaws of the Surviving
--------------------------------------------------------
Corporation.
-----------
(a) At the Effective Time, the Certificate of
Incorporation
of the Company as the Surviving Corporation shall be amended and restated to
read the same as the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time, except that Section 1 of the amended
and restated Certificate of Incorporation of the Surviving Corporation, instead
of reading the same as Section 1 of the Certificate of Incorporation of Merger
Sub, shall read as follows: "The name of this corporation is Permeo
Technologies, Inc."
(b) At the Effective Time, the Bylaws of the
Company as the
Surviving Corporation shall be amended to read the same as the Bylaws of Merger
Sub as in effect immediately prior to the Effective Time, except that all
references to Merger Sub in the Bylaws of the Surviving Corporation shall be
changed to refer to Permeo Technologies, Inc.
SECTION 1.05 Directors and
Officers. The directors of Merger Sub
----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial
officers
of the Surviving Corporation, in each case until their respective successors
are
duly elected or appointed and qualified.
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<PAGE>
ARTICLE II
MERGER CONSIDERATION;
EXCHANGE OF CERTIFICATES
----------------------------------------------
SECTION 2.01 Merger
Consideration. The consideration in the Merger
--------------------
consists of (i) shares of Parent Common Stock, (ii) cash and (iii) a payment
under the Company's Liquidation Bonus Plan. If the Average Closing Price (as
defined below) is $45.00, the Aggregate Merger Consideration (as defined below)
will be $59,999,980.00 (assuming that the Bridge Amount (as defined below) is
not greater than $1,000,000). The Aggregate Merger Consideration will fluctuate
as described in this Section 2, based on changes in the Average Closing Price.
The Parent Common Stock issued in the Merger, or Parent Shares (as defined
below), consists of 1,104,444 shares of Parent Common Stock, less an amount
necessary to compensate for the Bonus Amount (as defined below); provided,
however, that the Parent Shares will be subject to adjustment if the Average
Closing Price is below $36.00 or above $54.00 (as described below). The cash
paid in the Merger will be $10,300,000.00, reduced by certain bridge loan and
litigation amounts. The Parent Cash is also subject to adjustment if the
Average
Closing Price is below $36.00 or above $54.00 (as described below). The payment
under the Company's Liquidation Bonus Plan, or Bonus Amount, will be twelve
percent (12%) of the Aggregate Merger Consideration. The foregoing description
is a general summary, and is subject to the more detailed description set forth
herein.
The Company has four different
series of Preferred Stock outstanding
(and since the Company Series B Preferred Stock has cumulative dividends and
was
issued on three different issue dates, this Section 2 treats the Company Series
B Preferred Stock as three different series of Preferred Stock). The Company
Preferred Stock is entitled to certain liquidation preferences over the Company
Common Stock. After the payment of the aggregate liquidation preferences of the
Company Preferred Stock, the Company Preferred Stock will share or participate
with the Company Common Stock in any remaining proceeds. Since the holder's of
Company Stock receive cash and stock in the Merger, this Section 2 describes
cash and stock exchange ratios for each series of the Company Preferred Stock
and for the Company Common Stock.
Schedule 2.01 of this Agreement
is a spreadsheet that calculates each of
the exchange ratios in the Merger, assuming that the Average Closing Price is
$45.00 and based on the capitalization of the Company included in the Company's
representation as to capitalization contained in Section 3.04 of this
Agreement.
(a) At the Effective Time, by virtue of the
Merger and
without any action on the part of Parent, Merger Sub, the Company or the
holders
of any of the following securities:
(i)
(1) each share of Company Series C-1
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Series C-1 Preferred Stock to be canceled
pursuant to Section 2.01(a)(ii) and any Dissenting Shares (as defined in
Section
2.06)) shall be converted into the right to receive (a) such number of shares
of
Parent Common Stock equal to the sum of (i) the Series C-1 Stock Exchange Ratio
and (ii) the product obtained by multiplying the Participating Stock Exchange
Ratio by the then effective Conversion Rate of the Company Series C-1 Preferred
Stock, and (b) an amount of cash equal to the sum of (i) the Series C-1 Cash
Exchange Ratio and (ii) the product obtained by multiplying the Participating
Cash Exchange Ratio by the then effective Conversion Rate of the Company Series
C-1 Preferred Stock (each such term as defined in Section 2.01(b));
4
<PAGE>
(2) each share of Company Series C Preferred
Stock issued and outstanding immediately prior to the Effective Time (other
than
any shares of Company Series C Preferred Stock to be canceled pursuant to
Section 2.01(a)(ii) and any Dissenting Shares (as defined in Section 2.06))
shall be converted into the right to receive (a) such number of shares of Parent
Common Stock equal to the sum of (i) the Series C Stock Exchange Ratio and (ii)
the product obtained by multiplying the Participating Stock Exchange Ratio by
the then effective Conversion Rate of the Company Series C Preferred Stock, and
(b) an amount of cash equal to the sum of (i) the Series C Cash Exchange Ratio
and (ii) the product obtained by multiplying the Participating Cash Exchange
Ratio by the then effective Conversion Rate of the Company Series C Preferred
Stock (each such term as defined in Section 2.01(b));
(3) each share of Company Series B Preferred
Stock originally issued as of April 30, 2002 ("Company Series B April 2002
Preferred Stock") and issued and outstanding immediately prior to the
Effective
Time (other than any shares of Company Series B Preferred Stock to be canceled
pursuant to Section 2.01(a)(ii) and any Dissenting Shares (as defined in
Section
2.06)) shall be converted into the right to receive (a) such number of shares
of
Parent Common Stock equal to the sum of (i) the Series B April 2002 Stock
Exchange Ratio and (ii) the product obtained by multiplying the Participating
Stock Exchange Ratio by the then effective Conversion Rate of the Company
Series
B Preferred Stock, and (b) an amount of cash equal to the sum of (i) the Series
B April 2002 Cash Exchange Ratio and (ii) the product obtained by multiplying
the Participating Cash Exchange Ratio by the then effective Conversion Rate of
the Company Series B Preferred Stock (each such term as defined in Section
2.01(b));
(4) each share of Company Series B Preferred
Stock originally issued as of September 18, 2002 ("Company Series B
September
2002 Preferred Stock") and issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Series B Preferred Stock to be
canceled pursuant to Section 2.01(a)(ii) and any Dissenting Shares (as defined
in Section 2.06)) shall be converted into the right to receive (a) such number
of shares of Parent Common Stock equal to the sum of (i) the Series B September
2002 Stock Exchange Ratio and (ii) the product obtained by multiplying the
Participating Stock Exchange Ratio by the then effective Conversion Rate of the
Company Series B Preferred Stock, and (b) an amount of cash equal to the sum of
(i) the Series B September 2002 Cash Exchange Ratio and (ii) the product
obtained by multiplying the Participating Cash Exchange Ratio by the then
effective Conversion Rate of the Company Series B Preferred Stock (each such
term as defined in Section 2.01(b));
5
<PAGE>
(5) each share of Company Series B Preferred
Stock originally issued as of May 20, 2003 ("Company Series B May 2003 Preferred
Stock") and issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Series B Preferred Stock to be canceled
pursuant to Section 2.01(a)(ii) and any Dissenting Shares (as defined in
Section
2.06)) shall be converted into the right to receive (a) such number of shares
of
Parent Common Stock equal to the sum of (i) the Series B May 2003 Stock
Exchange
Ratio and (ii) the product obtained by multiplying the Participating Stock
Exchange Ratio by the then effective Conversion Rate of the Company Series B
Preferred Stock, and (b) an amount of cash equal to the sum of (i) the Series B
May 2003 Cash Exchange Ratio and (ii) the product obtained by multiplying the
Participating Cash Exchange Ratio by the then effective Conversion Rate of the
Company Series B Preferred Stock (each such term as defined in Section
2.01(b));
(6) each share of Company Series A Preferred
Stock issued and outstanding immediately prior to the Effective Time (other
than
any shares of Company Series A Preferred Stock to be canceled pursuant to
Section 2.01(a)(ii) and any Dissenting Shares (as defined in Section 2.06))
shall be converted into the right to receive (a) such number of shares of
Parent
Common Stock equal to the sum of (i) the Series A Stock Exchange Ratio and (ii)
the product obtained by multiplying the Participating Stock Exchange Ratio by
the then effective Conversion Rate of the Company Series A Preferred Stock, and
(b) an amount of cash equal to the sum of (i) the Series A Cash Exchange Ratio
and (ii) the product obtained by multiplying the Participating Cash Exchange
Ratio by the then effective Conversion Rate of the Company Series A Preferred
Stock (each such term as defined in Section 2.01(b)); and
(7) each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.01(a)(ii)
and any Dissenting Shares (as defined in Section 2.06)) shall be converted into
the right to receive (a) such number of shares of Parent Common Stock equal to
the Participating Stock Exchange Ratio and (b) an amount of cash equal to the
Participating Cash Exchange Ratio (each as defined in Section 2.01(b));
(ii) each share of Company Stock held in the
treasury
of the Company and each share of Company Stock owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or of the Company immediately prior
to the Effective Time shall be cancelled and extinguished without any
conversion
thereof and no payment or distribution shall be made with respect thereto; and
(iii) each share of common stock, par value $.0001
per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $$.0001 per share, of the
Surviving Corporation. The stock certificate evidencing shares of common stock
of Merger Sub shall then evidence ownership of the outstanding shares of common
stock of the Surviving Corporation.
6
<PAGE>
(b) As used in this Agreement, the following
terms have the
following meanings:
(i) "Aggregate Merger Consideration"
means the sum
------------------------------
of (x) the product obtained by multiplying the Parent Shares by the Average
Closing Price, (y) the Parent Cash and (z) the Bonus Amount.
(ii) "Average Closing Price" means the
average
---------------------
closing price per share of Parent Common Stock on The Nasdaq National Market
over the ten (10) trading day period ending on and including the trading day
that is the third trading day prior to the Closing Date.
(iii) "Bonus Amount" means an amount
equal to twelve
------------
percent (12%) of the Aggregate Merger Consideration.
(iv) "Bridge Amount" means, solely
with respect to
-------------
the Bridge Notes that remain outstanding at the Effective Time (such Bridge
Notes, the "Closing Bridge Notes"), the aggregate amount in excess of
$1,000,000
that, immediately after the Effective Time, would be required to be paid to the
holders of the Closing Bridge Notes in order to fully pay all obligations owing
under the Closing Bridge Notes. For avoidance of doubt, such amount shall
include (x) the aggregate amount of principal and accrued interest that remains
outstanding under the Closing Bridge Notes at the Effective Time plus (y) the
aggregate of any additional payments that, immediately after the Effective
Time,
will be required to be paid under the Closing Bridge Notes as a result of the
consummation of the Merger (or a combination of the Merger and the occurrence
of
another event or events).
(v) "Bridge Note" shall mean any
promissory note,
-----------
simple or convertible, that is issued by the Company to any party, including
Parent, on or after the date of this Agreement and prior to the Effective Time.
(vi) "Company Preferred Stock Liquidation
Preference
----------------------------------------------
Parent Cash" means the sum of (a) the product obtained by multiplying the
Series
-----------
A Cash Exchange Ratio by the number of shares of Company Series A Preferred
Stock outstanding immediately prior to the Effective Time, (b) the product
obtained by multiplying the Series B April 2002 Cash Exchange Ratio by the
number of shares of Company Series B April 2002 Preferred Stock outstanding
immediately prior to the Effective Time, (c) the product obtained by
multiplying
the Series B September 2002 Cash Exchange Ratio by the number of shares of
Company Series B September 2002 Preferred Stock outstanding immediately prior
to
the Effective Time, (d) the product obtained by multiplying the Series B May
2003 Cash Exchange Ratio by the number of shares of Company Series B May 2003
Preferred Stock outstanding immediately prior to the Effective Time, (e) the
product obtained by multiplying the Series C Cash Exchange Ratio by the number
of shares of Company Series C Preferred Stock outstanding immediately prior to
the Effective Time, and (f) the product obtained by multiplying the Series C-1
Cash Exchange Ratio by the number of shares of Company Series C-1 Preferred
Stock outstanding immediately prior to the Effective Time.
7
<PAGE>
(vii) "Company Preferred Stock Liquidation
Preference
----------------------------------------------
Parent Shares" means the sum of (a) the product obtained by multiplying
the
-------------
Series A Stock Exchange Ratio by the number of shares of Company Series A
Preferred Stock outstanding immediately prior to the Effective Time, (b) the
product obtained by multiplying the Series B April 2002 Stock Exchange Ratio by
the number of shares of Company Series B April 2002 Preferred Stock outstanding
immediately prior to the Effective Time, (c) the product obtained by
multiplying
the Series B September 2002 Stock Exchange Ratio by the number of shares of
Company Series B September 2002 Preferred Stock outstanding immediately prior
to
the Effective Time, (d) the product obtained by multiplying the Series B May
2003 Stock Exchange Ratio by the number of shares of Company Series B May 2003
Preferred Stock outstanding immediately prior to the Effective Time, (e) the
product obtained by multiplying the Series C Stock Exchange Ratio by the number
of shares of Company Series C Preferred Stock outstanding immediately prior to
the Effective Time, and (f) the product obtained by multiplying the Series C-1
Stock Exchange Ratio by the number of shares of Company Series C-1 Preferred
Stock outstanding immediately prior to the Effective Time.
(viii) "Conversion Rate" of a series of
Company
---------------
Preferred Stock means the rate at which one share of such series of Company
Preferred Stock converts into Company Common Stock.
(ix) "Escrow Shares" means a number of
shares of
-------------
Parent Common Stock equal to fifteen percent (15%) of the sum the (A) Parent
Shares and (B) the quotient obtained by dividing the Bonus Amount by the
Average
Closing Price.
(x) "Fully Diluted Common Shares
Amount" means a
----------------------------------
number of shares of Company Common Stock equal to the sum of (x) the number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time and (y) the number of shares of Company Common Stock issuable
upon exercise, conversion and/or exchange of all securities issued and
outstanding immediately prior to the Effective Time that are exercisable,
convertible and/or exchangeable for shares of Company Common Stock (or other
capital stock of the Company), including, without limitation, (i) the Company
Preferred Stock, and (ii) all vested Company Options (as defined in Section
2.04
below), whether or not exercisable. Notwithstanding the foregoing, "Fully
Diluted Common Shares Amount" shall not include unvested Company Options
issued
and outstanding immediately prior to the Effective Time.
(xi) "Litigation Amounts" means any
amounts paid by
------------------
the Company on or after the date of this Agreement and on or before the
Effective Time in connection with the matter described in Item #1 of Section
3.10 of the Company Disclosure Schedule.
(xii) "Parent Cash" means $10,300,000
less (i) the
-----------
Bridge Amount and (ii) the Litigation Amounts; provided, however, that
(1) if the Average Closing Price is between
$31.50 and $36.00, then Parent Cash shall be increased by that amount of cash
calculated using the following formula: 0.20 * ( ($39,700,000 - (1,104,444 *
Average Closing Price) ) * 0.75);
8
<PAGE>
(2) if the Average Closing Price is equal to
or below $31.50, then Parent Cash shall be increased by that amount of cash
calculated using the following formula: $750,000.00 + (0.20 * ( ($34,700,000 -
(1,104,444 * Average Closing Price) ) * 0.50) );
(3) if the Average Closing Price is between
$54.00 and $58.50, then Parent Cash shall be reduced by that amount of cash
calculated using the following formula: 0.143 * ( ( (1,104,444 * Average
Closing
Price) - $59,700,000) * 0.75); and
(4) if the Average Closing Price is equal to
or above $58.50, then Parent Cash shall be reduced by that that amount of cash
calculated using the following formula: $536,250.00 + (0.143 * ( ( (1,104,444 *
Average Closing Price) - $64,700,000) * 0.50) ).
(xiii) By way of examples, (A) if the Average
Closing
Price is $34.00, the amount of Parent Cash shall be increased by $322,335.60
pursuant to (1) above; (B) if the Average Closing Price is $29.00, the amount
of
Parent Cash shall be increased by $1,017,112.40 pursuant to (2) above; (C) if
the Average Closing Price is $56.00, the amount of Parent Cash shall be reduced
by $230,465.66 pursuant to (3) above; and (D) if the Average Closing Price is
$61.00, the amount of Parent Cash shall be reduced by $727,232.51 shares
pursuant to (4) above.
(xiv) "Parent Cash Percentage" means the
quotient
----------------------
obtained by dividing (x) the Parent Cash, by (y) the sum of (i) the Parent Cash
and (ii) the product obtained by multiplying the Parent Shares by the Average
Closing Price.
(xv) "Parent Shares" means 1,104,444
shares of Parent
-------------
Common Stock, less the quotient obtained by dividing the Bonus Amount by the
Average Closing Price; provided, however, that
(1) if the Average Closing Price is between
$31.50 and $36.00, then Parent Shares shall be increased by that number of
shares calculated using the following formula: 0.80 * ( ( ($39,700,000 -
(1,104,444 * Average Closing Price) ) * 0.75) / Average Closing Price), rounded
to the nearest whole share;
(2) if the Average Closing Price is equal to
or below $31.50, then Parent Shares shall be increased by that number of shares
calculated using the following formula: ($3,000,000 / Average Closing Price) +
(0.80 * ( ( ($34,700,000 - (1,104,444 * Average Closing Price) ) * 0.50 ) /
Average Closing Price) ), rounded to the nearest whole share;
(3) if the Average Closing Price is between
$54.00 and $58.50, then Parent Shares shall be reduced by that number of shares
calculated using the following formula: 0.857 * ( ( ( (1,104,444 * Average
Closing Price) - $59,700,000) * 0.75 ) / Average Closing Price), rounded to the
nearest whole share; and
9
<PAGE>
(4) if the Average Closing Price is equal to
or above $58.50, then Parent Shares shall be reduced by that number of shares
calculated using the following formula: ($3,213,750.00 / Average Closing Price)
+ (0.857 * ( ( ( (1,104,444 * Average Closing Price) - $64,700,000) * 0.50) /
Average Closing Price) ), rounded to the nearest whole share.
By way of examples, (A) if the Average Closing Price is $34.00, the number of
Parent Shares shall be increased by 37,922 shares pursuant to (1) above; (B) if
the Average Closing Price is $29.00, the number of Parent Shares shall be
increased by 140,291 shares pursuant to (2) above; (C) if the Average Closing
Price is $56.00, the number of Parent Shares shall be reduced by 24,664 shares
pursuant to (3) above; and (D) if the Average Closing Price is $61.00, the
number of Parent Shares shall be reduced by 71,448 shares pursuant to (4)
above.
Notwithstanding any of the foregoing, in no event will the number of Parent
Shares be greater than 1,900,000 shares.
(xvi) "Parent Shares Percentage" means
the quotient
------------------------
obtained by dividing (x) the product obtained by multiplying the Parent Shares
by the Average Closing Price, by (y) the sum of (i) the Parent Cash and (ii)
the
product obtained by multiplying the Parent Shares by the Average Closing Price.
(xvii) "Participating Cash Exchange Ratio"
means the
---------------------------------
quotient obtained by dividing (x) the Parent Cash less the Company Preferred
Stock Liquidation Preference Parent Cash, by (y) the Fully Diluted Common
Shares
Amount.
(xviii)
"Participating Stock Exchange Ratio" means the
----------------------------------
quotient obtained by dividing (x) the Parent Shares less the Company Preferred
Stock Liquidation Preference Parent Shares, by (y) the Fully Diluted Common
Shares Amount.
(xix) "Series A Cash Exchange Ratio"
means the product
----------------------------
obtained by multiplying the Series A Liquidation Preference by the Parent Cash
Percentage.
(xx) "Series B April 2002 Cash Exchange
Ratio" means
---------------------------------------
the product obtained by multiplying the Series B April 2002 Liquidation
Preference by the Parent Cash Percentage.
(xxi) "Series B May 2003 Cash Exchange
Ratio" means
-------------------------------------
the product obtained by multiplying the Series B May 2003 Liquidation
Preference
by the Parent Cash Percentage.
(xxii) "Series B September 2002 Cash Exchange
Ratio"
-------------------------------------------
means the product obtained by multiplying the Series B September 2002
Liquidation Preference by the Parent Cash Percentage.
(xxiii)
"Series C Cash Exchange Ratio" means the product
-----------------------------------------------
obtained by multiplying the Series C Liquidation Preference by the Parent Cash
Percentage.
(xxiv) "Series C-1 Cash Exchange Ratio"
means the
------------------------------
product obtained by multiplying the Series C-1 Liquidation Preference by the
Parent Cash Percentage.
10
<PAGE>
(xxv) "Series A Liquidation Preference"
means $5.1894
-------------------------------
(as adjusted for any stock splits, stock dividends, combinations, subdivisions,
recapitalizations or the like with respect to the Company Series A Preferred
Stock occurring after the date of this Agreement and prior to the Effective
Time).
(xxvi) "Series B April 2002 Liquidation
Preference"
------------------------------------------
means the sum of $1.00 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series B April 2002 Preferred Stock occurring after the date of this
Agreement and prior to the Effective Time) and the Series B April 2002 Dividend
Amount.
(xxvii)
"Series B September 2002 Liquidation Preference"
----------------------------------------------
means the sum of $1.00 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series B September 2002 Preferred Stock occurring after the date of
this
Agreement and prior to the Effective Time) and the Series B September 2002
Dividend Amount.
(xxviii)
"Series B May 2003 Liquidation Preference"
----------------------------------------
means the sum of $1.00 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series B May 2003 Preferred Stock occurring after the date of this
Agreement and prior to the Effective Time) and the Series B May 2003 Dividend
Amount.
(xxix) "Series C Liquidation Preference"
means the sum
-------------------------------
of $1.28570951 (as adjusted for any stock splits, stock dividends,
combinations,
subdivisions, recapitalizations or the like with respect to the Company Series
C
Preferred Stock occurring after the date of this Agreement and prior to the
Effective Time) and the Series C Dividend Amount.
(xxx) "Series C-1 Liquidation
Preference" means the
---------------------------------
sum of $0.76636 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series C-1 Preferred Stock occurring after the date of this Agreement
and prior to the Effective Time) and the Series C-1 Dividend Amount.
(xxxi) "Series B April 2002 Dividend
Amount" means that
-----------------------------------
dollar amount of dividends that have accrued but have not been paid in respect
of a share of Company Series B April 2002 Preferred Stock, which dollar amount
is equal to 8% of $1.00 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series B Preferred Stock occurring after the date of this Agreement and
prior to the Effective Time) per annum (compounded annually on the anniversary
of the original issuance date) for each share of Company Series B April 2002
Preferred Stock, calculated from the date of original issuance by the Company
of
shares of Company Series B April 2002 Preferred Stock through and including the
Closing Date. For avoidance of doubt, "Series B April 2002 Dividend
Amount"
shall not include that dollar amount of dividends that have otherwise been paid
by the Company, or will be paid by the Company at or prior to the Effective
Time, in respect of a share of Company Series B April 2002 Preferred Stock.
11
<PAGE>
(xxxii)
"Series B September 2002 Dividend Amount" means
---------------------------------------
that dollar amount of dividends that have accrued but have not been paid in
respect of a share of Company Series B September 2002 Preferred Stock, which
dollar amount is equal to 8% of $1.00 (as adjusted for any stock splits, stock
dividends, combinations, subdivisions, recapitalizations or the like with
respect to the Company Series B Preferred Stock occurring after the date of
this
Agreement and prior to the Effective Time) per annum (compounded annually on
the
anniversary of the original issuance date) for each share of Company Series B
September 2002 Preferred Stock, calculated from the date of original issuance
by
the Company of shares of Company Series B September 2002 Preferred Stock
through
and including the Closing Date. For avoidance of doubt, "Series B
September 2002
Dividend Amount" shall not include that dollar amount of dividends that
have
otherwise been paid by the Company, or will be paid by the Company at or prior
to the Effective Time, in respect of a share of Company Series B September 2002
Preferred Stock.
(xxxiii)"Series B May 2003 Dividend Amount" means that
---------------------------------
dollar amount of dividends that have accrued but have not been paid in respect
of a share of Company Series B May 2003 Preferred Stock, which dollar amount is
equal to 8% of $1.00 (as adjusted for any stock splits, stock dividends,
combinations, subdivisions, recapitalizations or the like with respect to the
Company Series B Preferred Stock occurring after the date of this Agreement and
prior to the Effective Time) per annum (compounded annually on the anniversary
of the original issuance date) for each share of Company Series B May 2003
Preferred Stock, calculated from the date of original issuance by the Company
of
shares of Company Series B May 2003 Preferred Stock through and including the
Closing Date. For avoidance of doubt, "Series B May 2003 Dividend
Amount" shall
not include that dollar amount of dividends that have otherwise been paid by
the
Company, or will be paid by the Company at or prior to the Effective Time, in
respect of a share of Company Series B May 2003 Preferred Stock.
(xxxiv)
"Series C Dividend Amount" means that dollar
------------------------
amount of dividends that have accrued but have not been paid in respect of a
share of Company Series C Preferred Stock, which dollar amount is equal to 8%
of
$1.28570951 (as adjusted for any stock splits, stock dividends, combinations,
subdivisions, recapitalizations or the like with respect to the Company Series
C
Preferred Stock occurring after the date of this Agreement and prior to the
Effective Time) per annum (compounded annually on the anniversary of the
original issuance date) for each share of Company Series C Preferred Stock,
calculated from the date of first issuance by the Company of shares of Company
Series C Preferred Stock through and including the Closing Date. For avoidance
of doubt, "Series C Dividend Amount" shall not include that dollar
amount of
dividends that have otherwise been paid by the Company, or will be paid by the
Company at or prior to the Effective Time, in respect of a share of Company
Series C Preferred Stock.
(xxxv) "Series C-1 Dividend Amount" means
that dollar
--------------------------
amount of dividends that have accrued but have not been paid in respect of a
share of Company Series C-1 Preferred Stock, which dollar amount is equal to 8%
of $0.76636 (as adjusted for any stock splits, stock dividends, combinations,
subdivisions, recapitalizations or the like with respect to the Company Series
C-1 Preferred Stock occurring after the date of this Agreement and prior to the
Effective Time) per annum (compounded annually on the anniversary of the
original issuance date) for each share of Company Series C-1 Preferred Stock,
calculated from the date of first issuance by the Company of shares of Company
Series C-1 Preferred Stock through and including the Closing Date. For
avoidance
of doubt, "Series C-1 Dividend Amount" shall not include that dollar
amount of
dividends that have otherwise been paid by the Company, or will be paid by the
Company at or prior to the Effective Time, in respect of a share of Company
Series C-1 Preferred Stock.
12
<PAGE>
(xxxvi)
"Series A Stock Exchange Ratio" means the
-----------------------------
product obtained by multiplying (i) the quotient obtained by dividing the
Series
A Liquidation Preference by the Average Closing Price, by (ii) the Parent
Shares
Percentage.
(xxxvii)
"Series B April 2002 Stock Exchange Ratio"
----------------------------------------
means the product obtained by multiplying (i) the quotient obtained by dividing
the Series B April 2002 Liquidation Preference by the Average Closing Price, by
(ii) the Parent Shares Percentage.
(xxxviii)
"Series B September 2002 Stock Exchange Ratio"
--------------------------------------------
means the product obtained by multiplying (i) the quotient obtained by dividing
the Series B September 2002 Liquidation Preference by the Average Closing
Price,
by (ii) the Parent Shares Percentage.
(xxxix)
"Series B May 2003 Stock Exchange Ratio" means
--------------------------------------
the product obtained by multiplying (i) the quotient obtained by dividing the
Series B May 2003 Liquidation Preference by the Average Closing Price, by (ii)
the Parent Shares Percentage.
(xl) "Series C Stock Exchange Ratio"
means the
-----------------------------
product obtained by multiplying (i) the quotient obtained by dividing the
Series
C Liquidation Preference by the Average Closing Price, by (ii) the Parent
Shares
Percentage.
(xli) "Series C-1 Stock Exchange Ratio"
means the
-------------------------------
product obtained by multiplying (i) the quotient obtained by dividing the
Series
C-1 Liquidation Preference by the Average Closing Price, by (ii) the Parent
Shares Percentage.
(c) If, during the period between the date
hereof and the
Effective Time, any change in the capital stock of Parent shall occur by reason
of reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period or any similar event, the definitions set forth in Section 2.01(b)
shall be adjusted, to the extent appropriate, to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange
or
readjustment of shares.
(d) If any shares of Company Common Stock
outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement, stock option exercise agreement or other
agreement with the Company, then the Parent Shares issued in exchange for such
shares of Company Common Stock will also be unvested and/or subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such Parent Shares may accordingly be marked with appropriate
legends. Notwithstanding the foregoing the Parent Shares issued in exchange for
any shares of Company Common Stock outstanding immediately prior to the
Effective Time that fully vest automatically at the Effective Time shall be
fully vested Parent Shares and shall be issued free of legends other than
legends required by the Affiliate Agreement entered into by the recipient
thereof.
13
<PAGE>
SECTION 2.02 Exchange of
Certificates.
------------------------
(a) Exchange Procedures. From and after the
Effective Time,
-------------------
a bank or trust company to be designated by Parent, and reasonably approved by
the Company (it being agreed by the parties that [Equiserve] is an acceptable
exchange agent), shall act as exchange agent (the "Exchange Agent")
in effecting
the exchange of the applicable Parent Shares and Parent Cash for certificates
which immediately prior to the Effective Time represented outstanding shares of
Company Stock ("Company Share Certificates") and which were converted
into the
right to receive the applicable Parent Shares and Parent Cash pursuant to
Section 2.01. At least one day prior to the fairness hearing pursuant to
Section
6.01(a), Parent shall deliver to the Company (i) a letter of transmittal (the
"Letter of Transmittal") in a form approved by Parent and the
Company, (ii) the
instructions for use in surrendering such Company Share Certificates and
receiving the applicable Parent Shares and Parent Cash pursuant to Section
2.01,
(iii) a Form W-8 and Form W-9 and (iv) such other documents as may reasonably
be
required by the Exchange Agent. The Company shall distribute such Letter of
Transmittal in connection with the notice of the meeting or the solicitation of
written consents contemplated by Section 6.01(b). To the extent a completed
Letter of Transmittal has not been tendered to Parent by or on behalf of a
record holder of Company Share Certificates at Closing, the Parent and the
Exchange Agent shall mail to such record holder the Letter of Transmittal and
the instructions for use. Promptly after the Effective Time, but in no event
later than five (5) business days following the Effective Time, Parent shall
cause to be deposited in trust with the Exchange Agent the Parent Shares and
Parent Cash less the Escrow Shares.
Within 15 days following the
surrender of each Company Share Certificate
for cancellation to the Exchange Agent (or to Parent with respect to those
delivered to Parent at Closing), together with a properly completed Letter of
Transmittal and such other documents as may reasonably be required by the
Exchange Agent (including any applicable Form W-8 or Form W-9):
(i) Parent shall cause to be issued to the
holder of
such Company Share Certificate in exchange therefor (A) a separate stock
certificate representing the Parent Shares to which such holder is entitled
pursuant to Section 2.01 (less the Escrow Shares attributable to the pro rata
interest of such holder in the Escrow Fund pursuant to Section 2.02(b)) and (B)
that portion of the Parent Cash to which such holder is entitled pursuant to
Section 2.01; and
(ii) the Company Share Certificates so
surrendered
shall forthwith be cancelled.
In the event of a transfer of
ownership of shares of Company Stock that
is not registered in the transfer records of the Company, the applicable Parent
Shares and Parent Cash may be issued to a person other than the person in whose
name the Company Share Certificate so surrendered is registered if the Company
Share Certificate representing such shares of Company Stock is presented to
Parent, accompanied by all documents required to evidence and effect such
transfer and evidence that (i) the shares are transferable and (ii) any
applicable stock transfer taxes have been paid.
14
<PAGE>
Until surrendered as contemplated
by this Article II, each Company Share
Certificate shall, subject to appraisal rights under the DGCL and Section 2.06,
be deemed at any time after the Effective Time to represent only the right to
receive upon surrender the applicable Parent Shares and Parent Cash with
respect
to the shares of Company Stock formerly represented thereby to which such
holder
is entitled pursuant to Section 2.01.
(b) Escrow Fund. Prior to or simultaneously
with the
-----------
Closing, the Stockholders' Representative and Parent shall enter into an escrow
agreement (the "Escrow Agreement") with an escrow agent selected by
Parent and
reasonably acceptable to the Stockholders' Representative (the "Escrow
Agent"),
substantially in the form of Exhibit B hereto. Pursuant to the terms of the
Escrow Agreement, Parent shall deposit one or more certificates in the name of
the Escrow Agent representing the Escrow Shares into an escrow account, which
account is to be managed by the Escrow Agent (the "Escrow Account").
Any Escrow
Shares in the Escrow Account are referred to herein as the "Escrow
Fund". In
connection with such deposit of the Escrow Shares with the Escrow Agent and as
of the Effective Time, each holder of Company Stock will be deemed to have
received and deposited with the Escrow Agent each such holder's pro rata
interest in the Escrow Fund as determined as of the Closing by reference to the
number of Parent Shares distributed in exchange for shares of Company Stock to
such holder at the Closing (including, in the case of Michael Bennett or his
assignees, any shares of Parent Common Stock issued to Mr. Bennett or his
assignees pursuant to Section 6.16, but excluding any shares of Parent Common
Stock issued to persons other than Michael Bennett or his assignees pursuant to
Section 6.16), relative to the number of Parent Shares distributed in exchange
for Company Stock to all stockholders of the Company (the "Company
Stockholders") at the Closing (including any shares of Parent Common Stock
issued to Mr. Bennett or his assignees pursuant to Section 6.16, but excluding
any shares of Parent Common Stock issued to persons other than Michael Bennett
or his assignees pursuant to Section 6.16), without any act of the Company
Stockholders. Distributions of any Escrow Shares from the Escrow Account shall
be governed by the terms and conditions of the Escrow Agreement. The adoption
of
this Agreement and the approval of the Merger by the Company Stockholders shall
constitute approval of the Escrow Agreement and of all the arrangements
relating
thereto, including, without limitation, the placement of the Escrow Shares in
escrow and the appointment of the Stockholders' Representative. No portion of
the Escrow Fund shall be contributed in respect of any Company Option or any
warrant or other security exercisable or convertible into Company Stock. No
Parent Shares contributed to the Escrow Fund shall be unvested or subject to any
right of repurchase, risk of forfeiture or other condition in favor of the
Surviving Corporation.
(c) Distributions with Respect to Unexchanged
Parent Shares.
-------------------------------------------------------
No dividends or other distributions declared or made after the Effective Time
with respect to Parent Shares comprising part of the Aggregate Merger
Consideration with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Company Share Certificate with respect to the
Parent
Shares represented thereby until the holder of such Company Share Certificate
shall surrender such Company Share Certificate in accordance with this Section
2.02 (at which time such holder shall be entitled to all such dividends or
other
distributions).
15
<PAGE>
(d) No Further Rights in Company Stock. The
Parent Shares
----------------------------------
and Parent Cash issued upon the conversion of shares of Company Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Stock.
(e) No Fractional Shares. Notwithstanding any
other
--------------------
provision of this Agreement, no fractional shares of Parent Common Stock shall
be issued upon the conversion and exchange of Company Share Certificates, and
no
holder of Company Share Certificates shall be entitled to receive a fractional
share of Parent Common Stock. In the event that any holder of Company Stock
would otherwise be entitled to receive a fractional share of Parent Common
Stock
(after aggregating all shares and fractional shares of Parent Common Stock
issuable to such holder), then such holder will receive an aggregate number of
shares of Parent Common Stock rounded up or down to the nearest whole share
(with 0.5 being rounded up).
(f) No Liability. Neither Parent nor the
Surviving
------------
Corporation shall be liable to any holder of shares of Company Stock for any
such shares of Parent Common Stock (or dividends or distributions with respect
thereto) or cash properly and legally delivered to a public official pursuant
to
any abandoned property, escheat or similar Law (as defined in Section 3.06(a)).
(g) Withholding Rights. Each of the Exchange
Agent, the
------------------
Surviving Corporation and Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign Tax (as defined in Section 3.15(c)) Law. To the extent
that amounts are so withheld by the Exchange Agent, the Surviving Corporation
or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Stock in respect of which such deduction and withholding were made by
the Exchange Agent, the Surviving Corporation or Parent, as the case may be.
(h) Affiliates. Notwithstanding anything to
the contrary
----------
contained in this Agreement, no Parent Shares (or certificates therefor) or
Parent Cash shall be issued in exchange for any Company Stock Certificates to
any person who, prior to the Effective Time, may be an "affiliate"
(as that term
is used in Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of the Company (each such person, an
"Affiliate") until such
person shall have delivered to Parent and the Company a duly executed Affiliate
Agreement as contemplated by Section 6.09.
(i) Lost Certificates. If any Company Share
Certificate
-----------------
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Company Share Certificate to be lost,
stolen or destroyed, Parent shall issue in exchange for such lost, stolen or
destroyed Company Share Certificate, the applicable Parent Shares (and
dividends
or other distributions pursuant to Section 2.02(c)) and Parent Cash to which
such person is entitled pursuant to the provisions of this Article II;
provided,
however, that such affidavit shall contain the agreement of the person claiming
such Company Share Certificate to be lost, stolen or destroyed to indemnify
Parent for any losses incurred by Parent as a result of any action taken or
omitted to have been taken by such person with respect to such lost, stolen or
destroyed Company Share Certificate .
16
<PAGE>
(j) Return of Parent Shares. Promptly
following the end of
-----------------------
the sixth full calendar month after the Effective Time, the Exchange Agent
shall
return to Parent all of the remaining Parent Shares and Parent Cash in the
Exchange Agent's possession and the Exchange Agent's duties shall terminate.
Thereafter, upon the surrender of a Company Share Certificate to Parent,
together with a properly executed Letter of Transmittal and forms of stock
power
and such other documents as may reasonably be required by Parent, and subject
to
applicable abandoned property, escheat and similar Laws, the holder of such
Company Share Certificate shall be entitled to receive in exchange therefor the
applicable Parent Shares (and dividends or other distributions pursuant to
Section 2.02(c)) and Parent Cash without any interest thereon.
SECTION 2.03 Stock Transfer
Books. At the Effective Time, the stock
--------------------
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Stock thereafter on the records
of the Company. From and after the Effective Time, the holders of certificates
representing shares of Company Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Stock, except as otherwise provided in this Agreement or by Law.
SECTION 2.04 Company Stock
Options. At the Effective Time, Parent shall
---------------------
assume all options to purchase Common Stock issued by the Company pursuant to
the Stock Plan (as defined in Section 3.04(b)), whether vested or unvested and
whether exercisable or unexercisable (each a "Company Option"). The
Company's
repurchase right with respect to any unvested shares acquired by the exercise
of
Company Options shall be assigned to Parent by virtue of the Merger and without
any further action on the part of the Company or the holder of such unvested
shares. Immediately after the Effective Time, each Company Option outstanding
immediately prior to the Effective Time shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Company Option at the Effective Time, such number of shares of Parent Common
Stock (rounded down to the nearest whole number) that is equal to the product
obtained by multiplying the number of shares of Company Common Stock subject to
the unexercised portion of such Company Option by the Option Exchange Ratio.
The
per share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option shall be equal to the quotient obtained
by dividing the exercise price per share of such Company Option in effect
immediately prior to the Effective Time by the Option Exchange Ratio (rounded
up
to the nearest whole cent). The term, vesting schedule, and all of the other
terms of the Company Options shall otherwise remain unchanged. It is the
intention of the parties that the assumption by Parent of the Company Options
hereunder satisfies the requirements of Treasury Regulation Section 1.424-1 (as
if all such options were incentive stock options) and of Proposed Treasury
Regulation Section 1.409A-1(b)(5)(v)(D) and the provisions of this Section 2.04
shall be interpreted and applied consistent with such intention. Within 15 days
after the Effective Time, Parent will issue to each person who, immediately
prior to the Effective Time, was a holder of a Company Option a document
evidencing the foregoing assumption of such option by Parent. Within 15 days
after the Effective Time, Parent shall file a registration statement on Form
S-8
(or any successor or other appropriate forms) that will register the shares of
Parent Common Stock subject to assumed Company Options to the extent permitted
by Federal securities laws and shall use its commercially reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding. The term
"Option Exchange Ratio" means the quotient obtained by dividing (a)
the sum of
(i) the Participating Cash Exchange Ratio and (ii) the product obtained by
multiplying the Participating Stock Exchange Ratio and the Average Closing
Price, by (b) the Average Closing Price.
17
<PAGE>
SECTION 2.05 Reserved.
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SECTION 2.06 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this
Agreement to the
contrary, shares of Company Stock that are outstanding immediately prior to the
Effective Time and which are held by stockholders who have exercised and
perfected appraisal rights for such shares of Company Stock in accordance with
the DGCL (collectively, the "Dissenting Shares") shall not be
converted into or
represent the right to receive the applicable Parent Shares and Parent Cash.
Such stockholders shall be entitled to receive payment of the appraised value
of
such shares of Company Stock held by them in accordance with the DGCL, unless
and until such stockholders fail to perfect or effectively withdraw or
otherwise
lose their appraisal rights under the DGCL. All Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their right to appraisal of such shares of Company Stock
under
the DGCL shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
applicable Parent Shares and Parent Cash (and dividends or other distributions
pursuant to Section 2.02(c), if any), without any interest thereon, upon the
surrender, in the manner provided in Section 2.02 (including the provision for
the Escrow Shares pursuant to Section 2.02(b)), of the corresponding Company
Share Certificate.
(b) The Company shall give Parent (i) prompt
notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other related instruments served pursuant to the DGCL and received by the
Company and (ii) after the Effective Time, the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisal or offer to settle
or
settle any such demands.
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and
warrants to Parent and Merger Sub that
the statements contained in this Article III are true and correct as of the
date
of this Agreement and as of the Effective Time (except for any such
representation and warranty that expressly is made as of a specific date, which
such representation and warranty shall be true and correct as of such date),
subject to such qualifications as set forth in the disclosure schedule
delivered
by the Company to Parent and Merger Sub concurrently with the execution of this
Agreement (the "Company Disclosure Schedule"). The Company Disclosure
Schedule
shall be arranged according to specific sections in this Article III and shall
provide exceptions to, or otherwise qualify in reasonable detail, only the
corresponding section in this Article III and any other section hereof where it
is reasonably apparent, upon a reading of such disclosure, that the disclosure
would also qualify or apply to such other section.
18
<PAGE>
SECTION 3.01 Organization and
Qualification. The Company is a
------------------------------
corporation duly organized, validly existing and in good standing under the
laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and otherwise hold and operate its properties and other assets and
to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such corporate power
and authority has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect (as defined
below). The Company is duly qualified or licensed as a foreign corporation to
do
business, and is in good standing, in