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Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AKAMAI TECHNOLOGIES, INC.,
AQUARIUS ACQUISITION CORP.,
SPEEDERA NETWORKS, INC.
AND
THE REPRESENTATIVE OF THE EQUITY HOLDERS
(NAMED HEREIN)
March 16, 2005
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TABLE OF CONTENTS
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PAGE
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ARTICLE I THE
MERGER............................................................
1
1.1 The
Merger..........................................................
1
1.2 The
Closing.........................................................
1
1.3 Actions at the
Closing.............................................. 1
1.4 Additional
Action................................................... 2
1.5 Conversion of
Shares................................................ 2
1.6 Management
Shares................................................... 3
1.7 Dissenting
Shares................................................... 4
1.8 Exchange of
Shares.................................................. 4
1.9 Issuance of Management
Shares....................................... 6
1.10 Fractional
Shares................................................... 6
1.11 Options and
Warrants................................................ 6
1.12 Adjustment Before and After the
Closing............................. 9
1.13 Escrow
Arrangements.................................................
11
1.14
Representative......................................................
11
1.15 Certificate of Incorporation and
By-laws............................ 13
1.16 No Further
Rights................................................... 13
1.17 Closing of Transfer
Books........................................... 13
1.18 Withholding
Obligations............................................. 13
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY........................ 14
2.1 Organization, Qualification and Corporate
Power..................... 14
2.2
Capitalization......................................................
14
2.3
Authorization.......................................................
16
2.4
Noncontravention....................................................
16
2.5
Subsidiaries........................................................
17
2.6 Financial
Statements................................................ 17
2.7 Absence of Certain
Changes.......................................... 18
2.8 Undisclosed
Liabilities............................................. 18
2.9 Tax
Matters.........................................................
18
2.10
Assets..............................................................
20
2.11 Owned Real
Property................................................. 21
2.12 Real Property
Leases................................................ 21
2.13 Intellectual
Property............................................... 22
2.14
Inventory...........................................................
24
2.15
Contracts...........................................................
24
2.16 Accounts
Receivable................................................. 26
2.17 Powers of
Attorney.................................................. 26
2.18
Insurance...........................................................
26
2.19
Litigation..........................................................
26
2.20
Warranties..........................................................
26
2.21
Employees...........................................................
27
2.22 Employee
Benefits................................................... 29
2.23 Environmental
Matters............................................... 31
2.24 Legal
Compliance....................................................
32
2.25 Customers and
Suppliers............................................. 32
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2.26
Permits.................................................................
32
2.27 Certain Business Relationships With
Affiliates.......................... 32
2.28 Brokers'
Fees...........................................................
32
2.29 Books and
Records.......................................................
32
2.30 Prepayments, Prebilled Invoices and
Deposits............................ 32
2.31 Government
Contracts....................................................
33
2.32
Disclosure..............................................................
33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY
SUBSIDIARY.........................................................................
34
3.1 Organization and Corporate
Power........................................ 34
3.2 Authorization of
Transaction............................................ 34
3.3
Noncontravention........................................................
34
3.4 Broker's
Fees...........................................................
34
3.5 Investment
Representation...............................................
34
3.6
Litigation..............................................................
35
3.7 SEC
Filings.............................................................
35
3.8 Merger Shares and Management Shares Validly
Issued...................... 35
3.9
Disclosure..............................................................
35
3.10 Actions Consistent With Reorganization
Treatment........................ 35
ARTICLE IV
COVENANTS................................................................
36
4.1 Closing
Efforts.........................................................
36
4.2 Treatment of the Merger as a Reorganization for Tax
Purposes............ 36
4.3 Governmental and Third-Party Notices and
Consents....................... 36
4.4 Stockholder
Approval.................................................... 37
4.5 Operation of
Business................................................... 39
4.6 Stay of
Litigation......................................................
42
4.7 Access to
Information...................................................
42
4.8 Notice of
Breaches......................................................
42
4.9
Exclusivity.............................................................
43
4.10 Listing
Notifications...................................................
44
4.11
Expenses................................................................
44
4.12 Company 401(k)
Plan..................................................... 44
4.13 280G
Covenant...........................................................
44
4.14
FIRPTA..................................................................
44
4.15 Silicon Valley Bank Registration
Rights................................. 44
4.16 Option
Acceleration.....................................................
44
ARTICLE V CONDITIONS TO CONSUMMATION OF
MERGER...................................... 45
5.1 Conditions to Obligations of the Buyer and the Transitory
Subsidiary.... 45
5.2 Conditions to Obligations of the
Company................................ 47
ARTICLE VI
INDEMNIFICATION..........................................................
48
6.1 Indemnification by the Equity
Holders................................... 48
6.2 Indemnification
Claims.................................................. 49
6.3 Survival of Representations and
Warranties.............................. 51
6.4
Limitations.............................................................
51
ARTICLE VII REGISTRATION OF
SHARES.................................................. 52
7.1 California Permit; Registered
Offering.................................. 52
7.2 Lock-up
Agreements......................................................
54
ARTICLE VIII TAX
MATTERS............................................................
54
8.1 Preparation and Filing of Tax Returns; Payment of
Taxes................. 54
8.2 Tax Indemnification by the Equity
Holders............................... 55
8.3 Allocation of Certain
Taxes............................................. 55
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8.4 Termination of Tax-Sharing
Agreements............................... 55
8.5 Scope of Article
VIII............................................... 55
ARTICLE IX INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE
COMPANY............. 56
9.1 Indemnification and
Insurance....................................... 56
ARTICLE X
TERMINATION...........................................................
56
10.1 Termination of
Agreement............................................ 56
10.2 Effect of
Termination............................................... 57
ARTICLE XI
DEFINITIONS..........................................................
57
ARTICLE XII
MISCELLANEOUS.......................................................
71
12.1 Press Releases and
Announcements.................................... 71
12.2 No Third Party
Beneficiaries........................................ 71
12.3 Entire
Agreement....................................................
71
12.4 Succession and
Assignment........................................... 72
12.5 Counterparts and Facsimile
Signature................................ 72
12.6
Headings............................................................
72
12.7
Notices.............................................................
72
12.8 Governing
Law....................................................... 73
12.9 Amendments and
Waivers.............................................. 73
12.10
Severability......................................................
73
12.11 Submission to
Jurisdiction........................................ 73
12.12
Construction......................................................
74
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Exhibit A - Stockholder Agreement
Exhibit B - Management Participant Agreement
Exhibit C - Form of Notice and Transmittal
Exhibit D - Form of Indemnification Escrow Agreement
Exhibit E - Form of Contingent Settlement Agreement and Partial
Release
Exhibit F - Form of Opinion of Counsel to the Company
Exhibit G - Form of Opinion of Counsel to the India
Subsidiary
Exhibit H - Form of Opinion of Counsel to the Buyer
Schedule I - Management Participants
Schedule 12.1 - Press Releases and Announcements
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered
into as of
March 16, 2005, by and among Akamai Technologies, Inc., a
Delaware corporation
(the "Buyer"), Aquarius Acquisition Corp., a Delaware
corporation and a
wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), Speedera
Networks, Inc., a Delaware corporation (the "Company"), and,
solely for the
purposes of Section 1.14 hereof and carrying out its resulting
responsibilities
hereunder as representative of the Company Stockholders, the
Management
Participants and the holders of Options, the Representative
specified in Article
XI. The Buyer, the Transitory Subsidiary and the Company are
sometimes referred
to herein individually as a "Party" and collectively as the
"Parties".
This Agreement contemplates a merger of the Transitory
Subsidiary into the
Company. In such merger, (a) the Company Stockholders will
receive Buyer Common
Shares in exchange for their capital stock of the Company, (b)
options and
warrants to acquire common stock of the Company will become
options and warrants
to acquire Buyer Common Shares and (c) Management Participants
will receive
Buyer Common Shares in satisfaction of certain obligations of
the Company to
such Management Participants, as set forth in the Management
Participant
Agreement. The Representative will have the authority to act,
with binding
effect, on behalf of the Equity Holders according to the terms
and conditions
set forth in this Agreement. For federal income tax purposes, it
is intended
that the Merger shall qualify as a reorganization within the
meaning of Section
368(a) of the Code.
Simultaneously with the execution of this Agreement, in order to
induce
the Buyer and the Transitory Subsidiary to enter into the
transactions
contemplated by this Agreement, the Principal Stockholders have
executed the
Stockholder Agreement and the Management Participants have
executed the
Management Participant Agreement.
Now, therefore, in consideration of the representations,
warranties and
covenants herein contained, the Parties hereby agree as
follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of
this
Agreement, the Transitory Subsidiary shall merge with and into
the Company at
the Effective Time. From and after the Effective Time, the
separate corporate
existence of the Transitory Subsidiary shall cease and the
Company shall
continue as the Surviving Corporation. The Merger shall have the
effects set
forth in Section 259 of the Delaware General Corporation
Law.
1.2 The Closing. The Closing shall take place at the offices of
Wilmer
Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts
02109, commencing at 9:00 a.m. local time on the Closing
Date.
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Buyer and the
Transitory
Subsidiary the various certificates, instruments and documents
referred to in
Section 5.1;
(b) the Buyer and the Transitory Subsidiary shall deliver to
the
Company the various certificates, instruments and documents
referred to in
Section 5.2;
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(c) the Surviving Corporation shall file with the Secretary
of
State of the State of Delaware the Certificate of Merger;
(d) the Buyer or the Surviving Co the Exchange Agent to
establish
a reserve account for the distribution of certificates
representing the Initial
Merger Shares to the Company Stockholders in accordance with
Sections 1.5(d) and
1.8(a);
(e) the Buyer or the Surviving Corporation shall deliver
instructions to the Exchange Agent to distribute certificates
representing the
Initial Merger Shares to the Management Participants in
accordance with Sections
1.6(b) and 1.9; and
(f) the Buyer, the Representative and the Escrow Agent shall
execute and deliver the Indemnification Escrow Agreement, and
the Buyer shall
deliver to the Escrow Agent certificates for the Indemnification
Escrow Shares
being placed in escrow on the Closing Date pursuant to Section
1.13.
1.4 Additional Action. The Surviving Corporation may, at any
time from
and after the Effective Time, take any action, including
executing and
delivering any document, in the name and on behalf of either the
Company or the
Transitory Subsidiary, in order to consummate and give effect to
the
transactions contemplated by this Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of
the Merger
and without any action on the part of any Party or the holder of
any of the
following securities:
(a) Each Outstanding Common Share shall be converted into
and
represent the right to receive (subject to the provisions of
Section 1.13) a
fraction of a share (the "Common Conversion Ratio") of Buyer
Common Shares as is
equal to the result obtained by dividing (i) the Adjusted Merger
Consideration,
minus the Management Shares, minus the Preferred Consideration,
by (ii) the
Adjusted Total Company Shares.
(b) Each Outstanding Series A Preferred Share shall be
converted
into and represent the right to receive (subject to the
provisions of Section
1.13) a fraction of a share of Buyer Common Shares equal to the
Series A
Conversion Ratio; each Outstanding Series B Preferred Share
shall be converted
into and represent the right to receive (subject to the
provisions of Section
1.13) a fraction of a share of Buyer Common Shares equal to the
Series B
Conversion Ratio; and each Outstanding Series C Preferred Share
shall be
converted into and represent the right to receive (subject to
the provisions of
Section 1.13) a fraction of a share of Buyer Common Shares equal
to the Series C
Conversion Ratio.
(c) The Company shall take all steps necessary to ensure that
all
outstanding convertible promissory notes issued by the Company,
if any, shall be
converted into Common Shares immediately prior to the Closing,
pursuant to the
conversion terms thereof.
(d) The Buyer Common Shares into which each Company
Stockholder's
Company Shares shall be converted at the Effective Time pursuant
to Section
1.5(a) shall be delivered as follows:
(i) On the Closing Date the Buyer shall (A) deposit into
escrow pursuant to Section 1.13 the Indemnification Escrow
Percentage of the
Closing Buyer Common Shares, rounded up to the nearest whole
number, which
shares shall be designated as Indemnification Escrow Shares, and
(B) deliver to
the Exchange Agent for distribution to the Company Stockholders
in accordance
with Section 1.8 the remainder of such Closing Buyer Common
Shares, subject to
the provisions of Section 1.10, not deposited into escrow (the
"Initial Merger
Shares").
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(ii) On the date specified in Section 1.12(f) (the "Asset
Value Adjustment Date"), if the Closing Net Asset Value
Adjustment is positive,
the Buyer shall (A) deposit into escrow pursuant to Section 1.13
the
Indemnification Escrow Percentage of the Adjusted Buyer Common
Shares, rounded
up to the nearest whole number, which shares shall be designated
as
Indemnification Escrow Shares, and (B) deliver to the Exchange
Agent for
distribution to the Company Stockholders in accordance with
Section 1.8 the
remainder of such Adjusted Buyer Common Shares, subject to the
provisions of
Section 1.10, not deposited into escrow.
(iii) On the date which is 18 months after Closing Date and
is
before the payment on any claims under the Escrow Agreement, the
Buyer shall (A)
deposit into escrow pursuant to Section 1.13 the Indemnification
Escrow
Percentage of the Option Adjusted Buyer Common Shares, rounded
up to the nearest
whole number, which shares shall be designated as
Indemnification Escrow Shares,
and (B) deliver to the Exchange Agent for distribution to the
Company
Stockholders in accordance with Section 1.8 the remainder of
such Option
Adjusted Buyer Common Shares, subject to the provisions of
Section 1.10, not
deposited into escrow.
(e) Each Company Share held in the Company's treasury
immediately
prior to the Effective Time and each Company Share owned
beneficially by the
Buyer or the Transitory Subsidiary shall be cancelled and
retired without
payment of any consideration therefor.
(f) Each share of common stock, $0.01 par value per share, of
the
Transitory Subsidiary issued and outstanding immediately prior
to the Effective
Time shall be converted into and thereafter evidence one share
of common stock,
$0.01 par value per share, of the Surviving Corporation.
(g) Each Preferred Warrant outstanding and not exercised as of
the
Effective Time shall be converted into a warrant to acquire such
number of
shares of Buyer Common Shares equal to the number of shares of
Buyer Common
Shares that would be issusable pursuant to Section 1.5(b), if
the warrant were
exercised immediately before the Effective Time for Preferred
Shares. The
exercise price per Buyer Common Share shall equal the aggregate
exercise price
of such warrant divided by the number of Buyer Common Shares
subject to such
Preferred Warrants. The aggregate Option Value of the Preferred
Warrants
outstanding and not exercised as of the Effective Time (whether
vested or
exercisable) shall be added to the Preferred Consideration for
all purposes of
this Agreement.
1.6 Management Shares.
(a) Each member of the Company's management named in Schedule
I
attached hereto (each a "Management Participant" and
collectively the
"Management Participants") shall have the right to receive as of
the Effective
Time (subject to Sections 1.13 and 1.6(b)) the number of Buyer
Common Shares
which have a Market Value equal to the excess, if any, of (x)
such Management
Participant's Bonus Pool Percentage of the Bonus Pool minus, (y)
such Management
Participant's Stockholder Payment (the "Management Shares"), it
being understood
that such calculation is dependent on the Common Conversion
Ratio which is
dependent on the definition of Management Shares and is an
iterative
calculation.
(b) Of the Management Shares which each Management
Participant
shall have the right to receive as of the Effective Time
pursuant to Section
1.6(a):
(i) On the Closing Date the Buyer shall (A) deposit with the
Escrow Agent the Indemnification Escrow Percentage of such
Management Shares,
calculated using the Closing Common Conversion Ratio, rounded up
to the nearest
whole number, which shares shall be designated as
Indemnification Escrow Shares
and deposited in escrow pursuant to Section 1.13(a) and (B)
deliver the
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remainder of such Management Shares, calculated using the
Closing Common
Conversion Ratio, not deposited into escrow (the "Initial
Management Shares") to
the Exchange Agent for distribution to the Management
Participants in accordance
with 1.9.
(ii) On the Asset Value Adjustment Date, if the Closing Net
Asset Value Adjustment is positive, the Buyer shall (A) deposit
with the Escrow
Agent the Indemnification Escrow Percentage of such Management
Shares,
calculated using the Adjusted Common Conversion Ratio, rounded
up to the nearest
whole number, which shares shall be designated as
Indemnification Escrow Shares
and deposited in escrow pursuant to Section 1.13(a), and (B)
deliver the
remainder of such Management Shares not deposited into escrow to
the Exchange
Agent for distribution to the Management Participants in
accordance with 1.9; in
each case, less any Management Shares delivered to the Escrow
Agent and the
Management Participants, as the case may be, pursuant to Section
1.6(b)(i).
(iii) On the date which is 18 months after the Closing Date,
the Buyer shall (A) deposit with the Escrow Agent the
Indemnification Escrow
Percentage of any Management Shares not delivered pursuant to
Section 1.6(b)(i)
or 1.6(b)(ii), rounded up to the nearest whole number, which
shares shall be
designated as Indemnification Escrow Shares and deposited in
escrow pursuant to
Section 1.13(a), and (B) deliver the remainder of any such
Management Shares not
deposited into escrow (or delivered to the Management
Participants pursuant to
Sections 1.6(b)(i) or 1.6(b)(ii)) to the Exchange Agent for
distribution to the
Management Participants in accordance with Section 1.9;
provided, however, that
if any Management Participant has received (or has had deposited
into Escrow)
Buyer Common Shares pursuant to this Section 1.6(b) which
exceeds such
Management Participants' Management Shares, the Management
Participant shall
promptly return any such excess shares to the Buyer.
1.7 Dissenting Shares.
(a) Dissenting Shares shall not be converted into or represent
the
right to receive Buyer Common Shares, unless the Company
Stockholder holding
such Dissenting Shares shall have forfeited his, her or its
right to appraisal
under each of the Delaware General Corporation Law and the
California
Corporations Code or properly withdrawn, his, her or its demand
for appraisal.
If such Company Stockholder has so forfeited or withdrawn his,
her or its right
to appraisal of Dissenting Shares, then as of the occurrence of
such event, such
holder's Dissenting Shares shall cease to be Dissenting Shares
and shall be
converted into and represent the right to receive the Buyer
Common Shares
issuable in respect of such Company Shares pursuant to Section
1.5, which Buyer
Common Shares shall be either deposited with the Escrow Agent or
distributed to
the Company Stockholder holding Dissenting Shares as provided in
Section 1.5(d).
(b) The Company shall give the Buyer (i) prompt notice of
any
written demands for appraisal of any Company Shares, withdrawals
of such
demands, and any other instruments that relate to such demands
received by the
Company and (ii) the opportunity to direct all negotiations and
proceedings with
respect to demands for appraisal under the Delaware General
Corporation Law or
the California Corporations Code, as applicable. The Company
shall not, except
with the prior written consent of the Buyer, make any payment
with respect to
any demands for appraisal of Company Shares or offer to settle
or settle any
such demands.
1.8 Exchange of Shares.
(a) At or prior to the Effective Time, the Buyer shall appoint
the
Exchange Agent to effect the issuance of Initial Merger Shares
in exchange for
Certificates. On the Closing Date, the Buyer shall deliver
instructions to the
Exchange Agent to establish a reserve account for the
distribution of
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certificates representing the Initial Merger Shares issuable to
the Company
Stockholders, as described in Section 1.5, and cash for any
fractional shares as
described in Section 1.10 (the "Exchange Fund"). Within five (5)
business days
after the Effective Time, provided that the Company has
delivered to the Buyer
at least five (5) business days prior to the Effective Time a
list setting forth
(i) the name of each holder of a Certificate, (ii) the mailing
address of each
such holder, (iii) the number of Company Shares represented by
each Certificate
held by each holder prior to the Effective Time and (iv) the
total number of
shares of Buyer Common Stock represented by such Certificate
following the
Effective Time, the Buyer shall cause the Exchange Agent to send
to each holder
of a Certificate a notice and a transmittal in substantially the
form attached
hereto as Exhibit C advising such holder of the effectiveness of
the Merger and
the procedure for surrendering to the Exchange Agent such
Certificate in
exchange for the Initial Merger Shares issuable to such holder
pursuant to
Section 1.5. Each holder of a Certificate, upon proper surrender
thereof to the
Exchange Agent in accordance with the instructions in such
notice, shall be
entitled to receive in exchange therefor (subject to any Taxes
required to be
withheld) the Initial Merger Shares issuable pursuant to Section
1.5 plus cash
in lieu of any fractional shares, as provided in Section 1.10
below. The Buyer
shall instruct the Exchange Agent to distribute the Initial
Merger Shares and
cash in lieu of fractional shares to such holder as soon as
practicable after
receipt of such Certificate and such other documents required by
such notice.
Until properly surrendered, each such Certificate shall be
deemed for all
purposes to evidence only the right to receive a certificate for
the Initial
Merger Shares issuable pursuant to Section 1.5. Holders of
Certificates shall
not be entitled to receive certificates for the Initial Merger
Shares to which
they would otherwise be entitled until such Certificates are
properly
surrendered.
(b) If any Initial Merger Shares are to be issued in the name of
a
person other than the person in whose name the Certificate
surrendered in
exchange therefor is registered, it shall be a condition to the
issuance of such
Initial Merger Shares that (i) the Certificate so surrendered
shall be
transferable, and shall be properly assigned, endorsed or
accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be
proper and (iii)
the person requesting such transfer shall pay to the Exchange
Agent any transfer
or other Taxes payable by reason of the foregoing or establish
to the
satisfaction of the Exchange Agent that such Taxes have been
paid or are not
required to be paid. Notwithstanding the foregoing, neither the
Exchange Agent
nor any Party shall be liable to a holder of Company Shares for
any Initial
Merger Shares issuable to such holder pursuant to Section 1.5
that are delivered
to a public official pursuant to applicable abandoned property,
escheat or
similar laws.
(c) In the event any Certificate shall have been lost, stolen
or
destroyed, upon the making of an affidavit of that fact by the
person claiming
such Certificate to be lost, stolen or destroyed, the Exchange
Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the
Initial Merger
Shares issuable in exchange therefor pursuant to Section 1.5.
The Exchange Agent
may, in its discretion and as a condition precedent to the
issuance thereof,
require the owner of such lost, stolen or destroyed Certificate
to give the
Exchange Agent and the Buyer a bond in such sum as it may direct
as indemnity
against any claim that may be made against the Exchange Agent or
the Buyer with
respect to the Certificate alleged to have been lost, stolen or
destroyed.
(d) No dividends or other distributions that are payable to
the
holders of record of Buyer Common Shares as of a date on or
after the Closing
Date shall be paid to former Company Stockholders entitled by
reason of the
Merger to receive Initial Merger Shares until such holders
surrender their
Certificates for certificates representing the Merger Shares.
Upon such
surrender, the Buyer shall pay or deliver to the persons in
whose name the
certificates representing such Initial Merger Shares are issued
any dividends or
other distributions that are payable to the holders of record of
Buyer Common
Shares as of a date on or after the Closing Date and which were
paid or
delivered between the Effective Time and the time of such
surrender; provided
that no such person shall be entitled to receive any interest on
such dividends
or other distributions.
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(e) By demand, at any time after the first anniversary of
the
Effective Time, the Buyer may require that any portion of the
Exchange Fund
which remains undistributed to the Company Stockholders or
Management
Participants at such time shall be delivered to the Buyer and
any Company
Stockholder or Management Participant who has not previously
complied with this
Section 1.8 shall thereafter look only to the Buyer, as a
general unsecured
creditor, for payment of its claim for Buyer Common Shares, any
cash in lieu of
fractional Buyer Common Shares and any dividends or
distributions with respect
to Buyer Common Shares.
(f) To the extent permitted by applicable law, none of the
Buyer,
the Transitory Subsidiary, the Company, the Surviving
Corporation or the
Exchange Agent shall be liable to any Company Stockholder or any
Management
Participant, as the case may be, for any Buyer Common Shares (or
dividends or
distributions with respect thereto) delivered to a public
official pursuant to
any applicable abandoned property, escheat or similar law. If
any Certificate or
required letter of transmittal shall not have been surrendered
or delivered
prior to the third anniversary of the Effective Time (or
immediately prior to
such earlier date on which any Buyer Common Shares, and any cash
payable to any
Company Stockholder or Management Participant or any dividends
or distributions
payable to the holder of such Buyer Common Shares pursuant to
this Article I
would otherwise escheat to or become the property of any
Governmental Entity),
any such Buyer Common Shares or cash, dividends or distributions
in respect
thereof shall, to the extent permitted by applicable law, become
the property of
the Surviving Corporation, free and clear of all claims or
interest of any
person previously entitled thereto.
1.9 Issuance of Management Shares. The Buyer shall deliver
instructions
to the Exchange Agent to distribute certificates representing
the Management
Shares to the Management Participants, as described in Section
1.6(b). As soon
as practicable after the applicable date on which the Buyer is
required to
deliver the Management Shares pursuant to Section 1.6(b), the
Exchange Agent
shall deliver to the Management Participants the Management
Shares issuable
pursuant to Section 1.6(b).
1.10 Fractional Shares. No certificates or scrip representing
fractional
Merger Shares shall be issued to Company Stockholders upon the
surrender for
exchange of Certificates, and such Company Stockholders shall
not be entitled to
any voting rights, rights to receive any dividends or
distributions or other
rights as a stockholder of the Buyer with respect to any
fractional Merger
Shares that would have otherwise been issued to such Company
Stockholders. In
lieu of any fractional Merger Shares that would have otherwise
been issued, each
Company Stockholder that would have been entitled to receive a
fractional Merger
Share shall, upon proper surrender of such person's
Certificates, receive a cash
payment equal to the closing price of the Buyer Common Shares on
the NASDAQ
Stock Market on the day immediately preceding the Closing
multiplied by the
fraction of a share that such Company Stockholder would
otherwise be entitled to
receive.
1.11 Options and Warrants.
(a) As of the Effective Time, all Options, whether vested or
unvested, and the Option Plan, insofar as it relates to Options
outstanding
under such Plan as of the Closing, shall be assumed by the
Buyer. Immediately
after the Effective Time, each 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 Option at the
Effective Time,
such number of Buyer Common Shares as is equal to the number of
Common Shares
subject to the unexercised portion of such Option multiplied by
the Common
Conversion Ratio (with any fraction resulting from such
multiplication to be
rounded down to the nearest whole number) (each such Option an
"Assumed
Option"). The exercise price per share of each Assumed Option
shall be equal to
the exercise price of such Option immediately prior to the
Effective Time,
divided by the Common Conversion Ratio (rounded up to the
nearest whole cent).
The term, exercisability, vesting schedule, status as an
"incentive stock
option" under Section 422 of the
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Code, if applicable, and all of the other terms of the Options
shall otherwise
remain unchanged, except as provided in Section 1.11(f) below,
and except that
by virtue of the Merger each Option shall be amended to the
extent set forth in
Section 4 of the Indemnification Escrow Agreement with respect
to the deposit of
Indemnification Escrow Shares and the forfeiture of unexercised
portions of any
Assumed Options.
(b) Prior to the Effective Time, the Company shall use its
Reasonable Best Efforts to obtain the agreement of each holder
of a Warrant or
Preferred Warrant to exercise, no later than immediately prior
to the Effective
Time, all vested Warrants and to terminate, as of such time, all
unvested
Warrants. As of the Effective Time, all Warrants, whether vested
or unvested,
not so exercised shall be assumed by the Buyer. Immediately
after the Effective
Time, each Warrant outstanding immediately prior to the
Effective Time shall be
deemed to constitute a warrant to acquire, on the same terms and
conditions as
were applicable under such Warrant at the Effective Time, such
number of shares
of Buyer Common Shares as is equal to the number of Common
Shares subject to the
unexercised portion of such Warrant multiplied by the Common
Conversion Ratio
(with any fraction resulting from such multiplication to be
rounded down to the
nearest whole number) (each such Warrant an "Assumed Warrant").
The exercise
price per share of each such Assumed Warrant shall be equal to
the exercise
price of such Warrant immediately prior to the Effective Time,
divided by the
Common Conversion Ratio (rounded up to the nearest whole cent).
The term,
exercisability, vesting schedule, and all of the other terms of
the Warrant
shall otherwise remain unchanged, except as provided in Section
1.11(f) below,
and except that by virtue of the Merger each Warrant shall be
amended to the
extent set forth in Section 4 of the Indemnification Escrow
Agreement with
respect to the deposit of Indemnification Escrow Shares and the
forfeiture of
unexercised portions of any Assumed Warrants.
(c) As soon as practicable after the Effective Time, the Buyer
or
the Surviving Corporation shall deliver to the holders of
Options and Warrants
appropriate notices setting forth such holders' rights pursuant
to such Options
or Warrants, as applicable, as amended by this Section 1.11, and
the agreements
evidencing such Options or Warrants, as applicable, and that
such Options or
Warrants shall continue in effect on the same terms and
conditions (subject to
the amendments provided for in this Section 1.11, the
Indemnification Escrow
Agreement and such notice).
(d) The Buyer shall take all corporate action necessary to
reserve
for issuance a sufficient number of shares of Buyer Common
Shares for delivery
upon exercise of the Options and Warrants assumed in accordance
with this
Section 1.11. As promptly as practicable after the Effective
Time, but in no
event later than the date on which the Buyer has filed pursuant
to Form 8-K the
financial statements required to be filed by the Buyer in
connection with the
Merger pursuant to Regulation S-X of the Securities Act in
connection with the
Merger, the Buyer shall file a Registration Statement on Form
S-8 (or any
successor form) under the Securities Act with respect to all
shares of Buyer
Common Shares subject to the Options that may be registered on a
Form S-8, and
shall use its Reasonable Best Efforts to maintain the
effectiveness of such
Registration Statement for so long as such Options remain
outstanding. The Buyer
Common Shares subject to the Warrants will be tradeable at such
time as they
become eligible for resale pursuant to Rule 144 under the
Securities Act.
(e) The Company shall obtain, prior to the Closing, the
consent
from each holder of an Option (other than holders of Options
representing, in
the aggregate, less than 3% of the Total Company Shares) or a
Warrant to the
amendment of such Option or Warrant pursuant to the
Indemnification Escrow
Agreement and Sections 1.11 and 1.13(a) and Article VI of this
Agreement (unless
such consent is not required under the terms of the applicable
agreement,
instrument or plan).
(f) Each Assumed Option and Assumed Warrant (collectively,
the
"Assumed Convertible Securities" and individually an "Assumed
Convertible
Security") shall be subject to the following provisions:
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(i) Upon the exercise of an Assumed Convertible Security
after the Closing Date and before the date which is 18 months
after the Closing
Date, the Buyer shall (A) deliver to the Escrow Agent a
certificate representing
the Indemnification Escrow Percentage of the Buyer Common Shares
acquired in
such exercise, rounded up to the nearest whole number, which
shares shall be
designated as Indemnification Escrow Shares and deposited in
escrow pursuant to
Section 1.13(a), and (B) deliver to the holder of such Assumed
Convertible
Security a certificate representing the remainder of the Buyer
Common Shares
acquired in such exercise and not deposited into escrow, which
Buyer Common
Shares shall be considered Initial Merger Shares for all
purposes of this
Agreement.
(ii) At any time before the Asset Value Adjustment Date,
each
Assumed Convertible Security shall (x) only be exercisable for a
number of Buyer
Common Shares as is equal to the number of Common Shares subject
to the
unexercised portion of such corresponding Option or Warrant
multiplied by the
Closing Common Conversion Ratio (with any fraction resulting
from such
multiplication to be rounded down to the nearest whole number)
and (y) have an
exercise price per share equal to the exercise price of such
corresponding
Option or Warrant immediately prior to the Effective Time,
divided by the
Closing Common Conversion Ratio (rounded up to the nearest whole
cent).
(iii) On the Asset Value Adjustment Date, if the Closing Net
Asset Value Adjustment is positive, the Buyer shall with respect
to each
Exercised Share (A) deposit into escrow pursuant to Section
1.13(a) the
Indemnification Escrow Percentage of the Adjusted Buyer Common
Shares, rounded
up to the nearest whole number, which shares shall be designated
as
Indemnification Escrow Shares, and (B) deliver to the person who
exercised the
Assumed Convertible Security related to such Exercised Shares
the remainder of
such Adjusted Buyer Common Shares not deposited into escrow.
(iv) At any time after the Asset Value Adjustment Date and
before the date which is 18 months after the Closing Date, each
Assumed
Convertible Security shall (x) only be exercisable for a number
of Buyer Common
Shares as is equal to the number of Common Shares subject to the
unexercised
portion of such corresponding Option or Warrant multiplied by
the Adjusted
Common Conversion Ratio (with any fraction resulting from such
multiplication to
be rounded down to the nearest whole number) and (y) have an
exercise price per
share equal to the exercise price of such corresponding Option
or Warrant
immediately prior to the Effective Time, divided by the Adjusted
Common
Conversion Ratio (rounded up to the nearest whole cent).
(v) On the date which is 18 months after the Closing Date
and immediately before the payment of any claims under the
Escrow Agreement, the
Buyer shall with respect to each Exercised Share (A) deposit
into escrow
pursuant to Section 1.13(a) the Indemnification Escrow
Percentage of the Option
Adjusted Buyer Common Shares, rounded up to the nearest whole
number, which
shares shall be designated as Indemnification Escrow Shares, and
(B) deliver to
the person who exercised the Assumed Convertible Security
related to such
Exercised Shares the remainder of such Option Adjusted Buyer
Common Shares not
deposited into escrow.
(vi) Assumed Convertible Securities shall be amended to
reduce the number of Buyer Common Shares subject to the
unexercised portion of
any Assumed Convertible Security by such Assumed Convertible
Security's
percentage share of any Damages subject to indemnification, as
follows:
(A) Immediately prior to any distributions made
pursuant to Section 3 of the Indemnification Escrow Agreement,
each Assumed
Convertible Security shall be split into two securities, the
"Escrow Assumed
Convertible Security" and the "Free Assumed Convertible
Security". The Escrow
Assumed Convertible Security shall have an Option Merger Value
equal to 15% of
the Option Merger Value of the Assumed Convertible Security, and
the remaining
Assumed Convertible
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<PAGE>
Security shall be the Free Assumed Convertible Security, which
shall no longer
be subject to the Indemnification Escrow Agreement. If, after
any forfeiture is
made pursuant to clause (B) below of the unexercised portion of
such Escrow
Assumed Convertible Security attributable to Damages distributed
to the Buyer in
respect of any claims for indemnification by the Buyer and/or
the Surviving
Corporation pursuant to Article VI or Article VIII hereof, the
Escrow Assumed
Convertible Security has an Option Merger Value in excess of the
5% of the
Option Merger Value of the Assumed Convertible Security before
any amounts in
respect of Damages were paid, then the Escrow Assumed
Convertible Security shall
be reduced by the amount of such excess Option Merger Value and
the Free Assumed
Convertible Security shall be increased by a like amount. If an
Escrow Assumed
Convertible Security is exercised after the Initial Distribution
Date, 100% of
the Buyer Common Shares acquired upon exercise of such option
shall be deposited
into escrow and held in trust for the holder of such exercised
Escrow Assumed
Convertible Security.
(B) Upon any determination that the Buyer is entitled
to receive some or all of the Indemnification Escrow Shares
through a
distribution in respect of Damages made pursuant to Section 3 of
the
Indemnification Escrow Agreement, each holder of an Escrow
Assumed Convertible
Security shall forfeit that amount of the unexercised portion of
such Escrow
Assumed Convertible Security equal in value to such holder's
"pro rata share" of
such Damages. Such holder's pro rata share of such Damages shall
be determined
by dividing (x) the Option Merger Value of such holder's Escrow
Assumed
Convertible Security immediately before the distribution in
respect of Damages
is made by (y) the Aggregate Escrow Value immediately before
such distribution
is made. Any forfeitures hereunder shall be applied against the
Assumed
Convertible Security on a pro rata basis against the vested and
unvested portion
of the Assumed Convertible Security.
1.12 Adjustment Before and After the Closing. The Base Purchase
Price
shall be subject to adjustment as follows:
(a) Not later than three business days prior to the Closing
Date,
the Company shall prepare and deliver to the Buyer a balance
sheet of the
Company as of a date (the "Preliminary Closing Balance Sheet
Date") within five
business days of the Closing Date (the "Preliminary Closing
Balance Sheet"). The
Preliminary Closing Balance Sheet shall be prepared in
accordance with the
provisions relating to the preparation of the Closing Balance
Sheet set forth in
this Section 1.12. The Preliminary Closing Balance Sheet shall
be accompanied by
(i) all relevant backup materials and schedules, in detail
reasonably acceptable
to the Buyer, and (ii) a statement setting forth the amount, if
any, by which
the estimated Net Asset Value is greater than, or less than, the
Target Amount
(the "Preliminary Net Asset Value"). In calculating the
Preliminary Net Asset
Value, the Preliminary Closing Balance Sheet shall include (A)
as liabilities
the full amount of the transaction fees and expenses payable by
the Company in
connection with the transactions contemplated by this Agreement,
including legal
and accounting fees, to the extent such transaction fees and
expenses have not
been paid prior to the date of the Preliminary Closing Balance
Sheet; and (B)
reserves in respect of Taxes due with respect to periods ending
(or deemed to
end pursuant to Section 8.3(b) hereof) at or prior to the
Effective Time
determined in accordance with GAAP. The Preliminary Closing
Balance Sheet shall
be accompanied by a statement setting forth the calculations
showing the basis
for the determination of such sums. If the Preliminary Net Asset
Value on the
Preliminary Closing Balance Sheet is (i) greater than the Target
Amount, then
the difference shall be added to the Base Purchase Price, or
(ii) less than the
Target Amount, then the difference shall be deducted from the
Base Purchase
Price (the Base Purchase Price, as so adjusted, is referred to
as the
"Preliminary Base Purchase Price").
(b) Not later than 60 calendar days after the Closing Date,
the
Buyer shall deliver to the Representative the Closing Balance
Sheet. The Closing
Balance Sheet shall be prepared in accordance with GAAP applied
consistently
with the Company's past practices (to the extent such past
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<PAGE>
practices are consistent with GAAP), except that the Closing
Balance Sheet may
exclude all footnotes, subject to the adjustments set forth in
this Section 1.12
(which shall be in addition to and not in lieu of those required
by GAAP) and
shall be certified as such by the Buyer.
(c) The Closing Balance Sheet delivered pursuant to paragraph
(a)
above shall be accompanied by (i) all relevant backup materials
and schedules,
in detail reasonably acceptable to the Representative, and (ii)
a statement
setting forth the amount, if any, by which the Net Asset Value
(plus the amount
of Covered Costs in excess of the Cost Cap to be borne by the
Buyer pursuant to
Section 10.1(g), if applicable) is greater than, or less than,
the Preliminary
Net Asset Value. In calculating the Net Asset Value, the Closing
Balance Sheet
shall include (A) as liabilities the full amount of the
transaction fees and
expenses payable by the Company in connection with the
transactions contemplated
by this Agreement, including legal and accounting fees, to the
extent such
transaction fees and expenses were not paid prior to the
Effective Time; and (B)
reserves in respect of Taxes due with respect to periods ending
(or deemed to
end pursuant to Section 8.3(b) hereof) at or prior to the
Effective Time
determined in accordance with GAAP. The Closing Balance Sheet
shall be
accompanied by a statement setting forth the calculations
showing the basis for
the determination of such sums.
(d) In the event that the Representative disputes the
Closing
Balance Sheet or the calculation of the Closing Net Asset Value
Adjustment, the
Representative shall notify the Buyer in writing (the "Dispute
Notice") of the
amount, nature and basis of such dispute, within 30 calendar
days after delivery
of the Closing Balance Sheet. In the event of such a dispute,
the Buyer and the
Representative shall first use his, her or its diligent good
faith efforts to
resolve such dispute among themselves. If the Buyer and the
Representative are
unable to resolve the dispute within 30 calendar days after
delivery of the
Dispute Notice, then any remaining items in dispute shall be
submitted to an
independent nationally recognized accounting firm selected in
writing by the
Representative and the Buyer or, if the Representative and the
Buyer fail or
refuse to select a firm within 10 calendar days after written
request therefor
by the Representative or the Buyer, such an independent
nationally recognized
accounting firm shall be selected in accordance with the rules
of the Boston,
Massachusetts office of the AAA (the "Neutral Accountant"). All
determinations
pursuant to this paragraph (d) shall be in writing and shall be
delivered to the
Buyer and the Representative. The determination of the Neutral
Accountant as to
the resolution of any dispute shall be binding and conclusive
upon all Parties.
A judgment on the determination made by the Neutral Accountant
pursuant to this
Section 1.12 may be entered in and enforced by any court having
jurisdiction
thereover.
(e) The fees and expenses of the Neutral Accountant in
connection
with the resolution of disputes pursuant to paragraph (c) above
shall be shared
equally by the Equity Holders, on the one hand, and the Buyer,
on the other
hand; provided that if the Neutral Accountant determines that
one such party has
adopted a position or positions with respect to the Closing
Balance Sheet or the
calculation of the Closing Net Asset Value Adjustment that is
frivolous or
clearly without merit, the Neutral Accountant may, in its
discretion, assign a
greater portion of any such fees and expenses to such party. Any
such fees and
expenses that are the responsibility of the Equity Holders
pursuant to this
paragraph (e) shall be funded from the Indemnification Escrow
Shares.
(f) Immediately upon the expiration of the 30-day period for
giving the Dispute Notice, if no such notice is given, or upon
notification by
the Representative to the Buyer, that no such notice will be
given, or
immediately upon the resolution of disputes, if any, pursuant to
this Section
1.12, the Preliminary Base Purchase Price shall be adjusted as
follows (as so
adjusted, the "Adjusted Base Purchase Price"):
(i) If the Closing Net Asset Value Adjustment is negative,
such deficiency shall be deducted from the Preliminary Base
Purchase Price to
obtain the Adjusted Base Purchase Price,
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<PAGE>
and the Buyer shall be entitled to recover such deficiency
pursuant to the terms
of the Indemnification Escrow Agreement;
(ii) If the Closing Net Asset Value Adjustment is zero, the
Adjusted Base Purchase Price shall be equal to the Preliminary
Base Purchase
Price; and
(iii) If the Closing Net Asset Value Adjustment is positive,
such surplus shall be added to the Preliminary Base Purchase
Price to obtain the
Adjusted Base Purchase Price, and the Buyer shall deliver to the
Exchange Agent
Buyer Common Shares as provided in Section 1.5(d)(ii)
hereof.
1.13 Escrow Arrangements.
(a) On the Closing Date, the Buyer shall deliver to the
Escrow
Agent a certificate (issued in the name of the Escrow Agent or
its nominee)
representing the Indemnification Escrow Shares issuable pursuant
to Sections
1.5(d) and 1.6(b)(i). The Indemnification Escrow Shares will be
held in escrow
for the purpose of (i) providing security for any adjustment to
the amount of
the Preliminary Base Purchase Price pursuant to Section 1.12 and
(ii) securing
the indemnification obligations of the Equity Holders set forth
in Section 6.1.
The Indemnification Escrow Shares shall be held by the Escrow
Agent under the
Indemnification Escrow Agreement pursuant to the terms thereof.
The
Indemnification Escrow Shares 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 party, and shall be held and disbursed
solely for the
purposes and in accordance with the terms of the Indemnification
Escrow
Agreement. Equity Holders shall have the right to receive cash
dividends (in
conjunction with any general distribution of cash dividends made
by the Buyer
with respect to all Buyer Common Shares) with respect to any
issued
Indemnification Escrow Shares held on their behalf. The
Representative shall
have the right to vote any issued Indemnification Escrow Shares
by instructing
the Escrow Agent in accordance with the terms of the
Indemnification Escrow
Agreement.
(b) The execution of this Agreement by the Representative and
the
adoption of this Agreement and approval of the Merger by the
Company
Stockholders shall constitute approval of the Indemnification
Escrow Agreement
and of all of the arrangements relating thereto, including the
placement of the
Indemnification Escrow Shares in escrow.
1.14 Representative.
(a) In order to efficiently administer the transactions
contemplated hereby, including (i) the determination of the Net
Asset Value and
Adjusted Base Purchase Price and (ii) the defense and/or
settlement of any
claims for which the Equity Holders may be required to indemnify
the Buyer
and/or the Surviving Corporation pursuant to Article VI or
Article VIII hereof,
the Company Stockholders, by the approval of the Merger and
adoption of this
Agreement, the holders of Options or Warrants by executing
amendments to such
Options or Warrants, as applicable, pursuant to Section 1.11(f)
hereof, the
Principal Stockholders, by their execution of the Stockholder
Agreement, and the
Management Participants, by their execution of the Management
Participant
Agreement, shall each be deemed to have designated the
Representative as their
representative.
(b) The Company Stockholders, by the approval of the Merger
and
adoption of this Agreement, and the holders of Options or
Warrants by executing
amendments to such Options or Warrants, as applicable, pursuant
to Section
1.11(f) hereof, shall each be deemed to have authorized the
Representative (i)
to make all decisions relating to the determination of the Net
Asset Value and
the Adjusted Base Purchase Price, (ii) to take all action
necessary in
connection with the defense and/or
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<PAGE>
settlement of any claims for which the Company Stockholders may
be required to
indemnify the Buyer and/or the Surviving Corporation pursuant to
Article VI or
Article VIII hereof, (iii) after the Effective Time, to give and
receive all
notices required to be given under the Agreement, and (iv) to
take any and all
additional action as is contemplated or permitted by this
Agreement or the
Indemnification Escrow Agreement to be taken by or on behalf of
the Equity
Holders.
(c) The Buyer shall be able to rely conclusively on the
instructions
and decisions of the Representative as to the determination of
the Net Asset
Value and the Adjusted Base Purchase Price, the settlement of
any claims for
indemnification by the Buyer and/or the Surviving Corporation
pursuant to
Article VI or Article VIII hereof or any other actions required
or contemplated
or permitted to be taken by the Representative hereunder, and no
party shall
have any cause of action against the Buyer for any action taken
by the Buyer in
reliance upon the instructions or decisions of the
Representative.
(d) The Representative will have the right to act as the
representative of the Equity Holders, and to act on behalf of
the Equity Holders
and to take any and all actions required or permitted to be
taken by the
Representative under this Agreement, with respect to any claims
(including
payment thereof) made pursuant to Section 6.1 and with respect
to any actions to
be taken by the Representative pursuant to the terms of the
Escrow Agreement.
All decisions and actions by the Representative, including
without limitation
any agreement between the Representative and the Buyer relating
to the
determination of the Net Asset Value and the Adjusted Base
Purchase Price or the
defense or settlement of any claims for which the Equity Holders
may be required
to indemnify the Buyer and/or the Surviving Corporation pursuant
to Article VI
or Article VIII hereof, shall be binding upon all of the Equity
Holders, and no
Equity Holder shall have the right to object, dissent, protest
or otherwise
contest the same.
(e) The Representative (or any of the directors, officers,
agents,
employees or Affiliates thereof) shall incur no liability to the
Equity Holders
with respect to any action taken or suffered by the
Representative in reliance
upon any notice, direction, instruction, consent, statement, or
other document
believed by the Representative to be genuinely and duly
authorized, nor for any
other action or inaction with respect to distributions of the
Indemnification
Escrow Shares, any defense or settlement of any claims, and the
making of
payments with respect thereto, nor with respect to voting or
failing to vote the
Indemnification Escrow Shares, except to the extent resulting
from the
Representative's own willful misconduct or gross negligence. The
Representative
may, in all questions arising under this Agreement, rely on the
advice of
counsel, and for anything done, omitted, or suffered in good
faith by the
Representative in reliance on such advice, shall not be liable
to the Equity
Holders.
(f) In the event that the Representative dies or becomes unable
to
perform his, her or its responsibilities as the Representative
or resigns from
such position, Trinity Ventures shall appoint a new
Representative, and if
within 30 days of such death, inability to perform his, her or
its
responsibilities or resignation of the Representative, Trinity
Ventures fails to
appoint a new Representative, the Equity Holders receiving an
aggregate of
greater than 50% of the Adjusted Merger Consideration shall
select another
representative to fill such vacancy and such substituted
representative shall be
deemed to be the Representative for all purposes of this
Agreement.
(g) The Buyer and the Surviving Corporation shall be entitled
to
rely conclusively on a certificate from the Representative with
respect to any
action taken by the Representative, and no party shall have any
cause of action
against the Buyer for any action taken by the Buyer in reliance
upon such a
certificate from the Representative.
(h) The Company Stockholders, by the approval of the Merger
and
adoption of this Agreement, and the holders of Options or
Warrants by executing
amendments to such Options or Warrants, as applicable, pursuant
to Section (a)
hereof, shall
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<PAGE>
each be deemed to (i) agree and authorize the Escrow Agent to
withhold from the
Indemnification Escrow Shares, if any, otherwise payable to the
Equity Holders
under the terms of the Indemnification Escrow Agreement a number
of shares
having a value (using a price of $12.50 per share) equal to the
reasonable costs
and expenses (including reasonable professional fees) incurred
by, or reasonably
anticipated by the Representative to be incurred by, the
Representative in
connection with the representation of the Equity Holders in any
proceeding
arising out of this Agreement (including all matters concerning
claims for
indemnification under Article VI or Article VIII of this
Agreement) or the
transactions or agreements related hereto (the "Representative
Fees"); (ii)
agree and authorize the Representative to withhold Buyer Common
Shares (valued
at $12.50 per share) evidencing the Representative Fees from any
shares
otherwise issuable to the Equity Holders pursuant to Section
1.12 hereof (to the
extent such fees are not withheld from the Escrow Shares); and
(iii) agree to
reimburse the Representative for the Representative Fees.
(i) The provisions of this Section 1.14 are independent and
severable, are irrevocable and coupled with an interest and
shall be enforceable
notwithstanding any rights or remedies that any Equity Holder
may have in
connection with the transactions contemplated by this Agreement.
Remedies
available at law for any breach of the provisions of this
Section 1.14 are
inadequate; therefore, the Buyer and the Surviving Corporation
shall be entitled
to temporary and permanent injunctive relief without the
necessity of proving
damages if either the Buyer and/or the Surviving Corporation
brings an action to
enforce the provisions of this Section 1.14. The provisions of
this Section 1.14
shall be binding upon the executors, heirs, legal
representatives, personal
representatives, successors and permitted assigns of each Equity
Holder, and any
references in this Agreement to a Equity Holder or the Equity
Holders shall mean
and include the successors to the Equity Holder's rights
hereunder, whether
pursuant to testamentary disposition, the laws of descent and
distribution or
otherwise.
1.15 Certificate of Incorporation and By-laws
(a) The Certificate of Incorporation of the Surviving
Corporation
immediately following the Effective Time shall be the same as
the Certificate of
Incorporation of the Transitory Subsidiary immediately prior to
the Effective
Time, except that (i) the name of the corporation set forth
therein shall be
changed to the name of the Company and (ii) the identity of the
incorporator
shall be deleted.
(b) The By-laws of the Surviving Corporation immediately
following
the Effective Time shall be the same as the By-laws of the
Transitory Subsidiary
immediately prior to the Effective Time, except that the name of
the corporation
set forth therein shall be changed to the name of the
Company.
1.16 No Further Rights. From and after the Effective Time, no
Company
Shares shall be deemed to be outstanding, and holders of
Certificates shall
cease to have any rights with respect thereto, except as
provided herein or by
law.
1.17 Closing of Transfer Books. At the Effective Time, the stock
transfer
books of the Company shall be closed and no transfer of Company
Shares shall
thereafter be made. If, after the Effective Time, Certificates
are presented to
the Buyer, the Surviving Corporation or the Exchange Agent, they
shall be
cancelled and exchanged for Initial Merger Shares in accordance
with Section
1.5, subject to Section 1.12 and to applicable law in the case
of Dissenting
Shares.
1.18 Withholding Obligations. Each of the Buyer and the
Surviving
Corporation shall be entitled to deduct and withhold from the
consideration
otherwise payable pursuant to any provision of this Agreement to
any Equity
Holders such amounts as it reasonably determines that it is
required to deduct
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and withhold with respect to the making of such payment under
the Code, or any
other applicable U.S. or foreign law, rule or regulation. The
Buyer or the
Surviving Corporation, as the case may be, shall timely pay over
such withheld
amounts to the appropriate Governmental Entity on behalf of the
Equity Holders
from whom such amounts are withheld in accordance with the Code
or such other
applicable U.S. or foreign law, rule, or regulation. To the
extent that amounts
are so withheld by the Buyer or the Surviving Corporation, as
the case may be,
such withheld amounts shall be treated for all purposes of this
Agreement as
having been paid to the Equity Holders in respect of which such
deduction and
withholding was made by the Buyer or the Surviving Corporation,
as the case may
be. The Buyer shall also have the right to collect Forms W-8 or
W-9, or such
other forms relating to United States federal withholding
obligations as may be
applicable, from the Equity Holders. Each Equity Holder from
whom the Buyer or
the Surviving Corporation is required to withhold shall
indemnify and hold
harmless the Buyer, the Surviving Corporation and their
respective Affiliates
from and against any and all Taxes (but, for the purposes of
this Section 1.18,
the term "Taxes" shall not include any penalty or interest)
incurred or suffered
by any of them as a result of or relating to the calculation or
payment
(including without limitation any errors in the calculation or
failure to make
any payment) of any amounts required to be withheld from such
Equity Holder
and/or paid to any Governmental Entity in respect of payment of
the Merger
Consideration or Management Shares to such Equity Holder or in
respect of the
exercise of any Options or Warrants held by such Equity Holder
and the payment
of the Option/Warrant Consideration in connection with the
Merger.
ARTICLE II
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 II 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 paragraphs
corresponding to the numbered and lettered sections and
paragraphs contained in
this Article II, and the disclosures in any section or paragraph
of the
Disclosure Schedule shall qualify only (a) the corresponding
section or
paragraph in this Article II and (b) other sections or
paragraphs in this
Article II to the extent that it is reasonably clear from a
reading of the
disclosure that such disclosure also qualifies or applies to
such other section
or paragraph.
2.1 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 2.1 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 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 charter and by-laws, each as amended to date. The Company
is not in
default under or in violation of any provision of its charter or
by-laws.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i)
400,000,000 Common Shares, of which, as of the date of this
Agreement,
38,645,605 shares were issued and outstanding and 3,729,109
shares were held in
the treasury of the Company, and (ii) 222,824,205 Preferred
Shares, of which (A)
7,523,366 shares have been designated as Series A Convertible
Preferred
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Stock, of which, as of the date of this Agreement, 7,433,330
shares were issued
and outstanding, (B) 122,463,448 shares have been designated as
Series B
Convertible Preferred Stock, of which, as of the date of this
Agreement,
110,189,329 shares were issued and outstanding, and (C)
92,837,391 shares have
been designated as Series C Convertible Preferred Stock, of
which, as of the
date of this Agreement, 86,866,934 shares were issued and
outstanding.
(b) Section 2.2(b) of the Disclosure Schedule sets forth a
complete
and accurate list, as of the date of the Agreement, of the
holders of Company
Shares, showing the number of shares and the class or series of
such shares held
by each Company Stockholder and (for shares other than Common
Shares) the number
of Common Shares (if any) into which such shares are
convertible. Section 2.2(b)
of the Disclosure Schedule also indicates all outstanding
Company Shares that
constitute restricted stock or that are otherwise subject to a
repurchase or
redemption right, indicating the name of the applicable
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
Company Shares have been and on the Closing Date will be duly
authorized,
validly issued, fully paid, nonassessable and free of all
preemptive rights. All
of the issued and outstanding Company Shares have been offered,
issued and sold
by the Company in compliance with all applicable federal and
state securities
laws.
(c) Section 2.2(c) 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
Company Shares
issued to date under such Plan, the number of Company Shares
subject to
outstanding options under such Plan and the number of Company
Shares reserved
for future issuance under such Plan, (ii) all holders of
outstanding Options,
indicating with respect to each Option the Company Stock Plan
under which it was
granted, the number of Company Shares subject to such Option,
the exercise
price, the date of grant, and the vesting schedule (including
any acceleration
provisions with respect thereto), and (iii) all holders of
outstanding Warrants,
indicating with respect to each Warrant the agreement or other
document under
which it was granted, the number of shares of capital stock, and
the class or
series of such shares, subject to such Warrant, the exercise
price, the date of
issuance and the expiration date thereof. The Company has
provided to the Buyer
complete and accurate copies of all Company Stock Plans and
forms of all stock
option agreements evidencing Options and all agreements
evidencing Warrants. All
of the Company Shares subject to Options and Warrants will be,
upon issuance
pursuant to the exercise of such instruments, duly authorized,
validly issued,
fully paid, nonassessable and free of all preemptive rights.
(d) Except as set forth in Section 2.2(c) or 2.2(d) of the
Disclosure Schedule, (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 Company
Shares or any
interest therein or to pay any dividend or to make any other
distribution in
respect thereof, and (iv) there are no outstanding or authorized
stock
appreciation, phantom stock or similar rights with respect to
the Company.
(e) Except as set forth in Section 2.2(e) of the Disclosure
Schedule, there is no agreement, written or oral, between the
Company and any
holder of its securities, or, to 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.
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<PAGE>
(f) There are no claims by any stockholder or former stockholder
of
the Company, or any other person or entity (including any
officer or director of
the Company or any Subsidiary), seeking to assert, or based
upon, any rights
under the charter, by-laws or comparable organizational
documents of the
Company.
2.3 Authorization. The Company has all requisite corporate power
and
authority to execute and deliver this Agreement and to perform
its respective
obligations hereunder. The execution and delivery by the Company
of this
Agreement and the agreements provided for herein, and, subject
to obtaining the
Requisite Stockholder Approval, the performance by the Company
of this Agreement
and the consummation by the Company of the transactions
contemplated hereby and
thereby have been duly and validly authorized by all necessary
corporate and
other 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
fair and in the best interests of the Company and its
stockholders, (ii) adopted
this Agreement in accordance with the provisions of the Delaware
General
Corporation Law, and (iii) directed that this Agreement and the
Merger be
submitted to the stockholders of the Company for their adoption
and approval and
resolved to recommend that the stockholders of the Company vote
in favor of the
adoption of this Agreement and the approval of the Merger. This
Agreement and
all other agreements provided for herein have been or will be as
of the Closing
Date duly and validly executed and delivered by the Company and
constitutes or
will constitute a valid and binding obligation of the Company,
enforceable
against the Company in accordance with its terms, except as
enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization,
moratorium or other similar laws relating to or affecting the
rights of
creditors generally and by general equitable principles,
including those
limiting the availability of specific performance, injunctive
relief and other
equitable remedies and those providing for equitable
defenses.
2.4 Noncontravention. Subject to the filing of the Certificate
of Merger
as required by the Delaware General Corporation Law, to the
filing requirements
of the Hart-Scott-Rodino Act, to the regulatory approvals, if
any, required
under Indian laws, and to the filing or other regulatory
requirements of any
other applicable U.S. or foreign regulatory body, neither the
execution and
delivery by the Company of this Agreement or any other agreement
provided for
herein, nor the consummation by the Company of the transactions
contemplated
hereby or thereby, will (a) conflict with or violate any
provision of the
Certificate of Incorporation or By-laws of the Company each as
amended or
restated to date, or the Certificate of Incorporation or By-laws
(or comparable
organizational documents) of any Subsidiary each as amended or
restated to date
, (b) require on the part of the Company, any Subsidiary or any
Company
Stockholder or Management Participant any notice to or filing
with, or any
permit, authorization, consent or approval of, any Governmental
Entity, (c)
except as set forth in Section 2.4 of the Disclosure Schedule,
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 accelerate, terminate, modify
or cancel, or
require any notice, consent or waiver under, any contract,
lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or
mortgage for
borrowed money, instrument of indebtedness, Security Interest or
other
arrangement 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 the assets
of the Company
or any Subsidiary are subject, (d) result in the imposition of
any Security
Interest upon any assets of the Company or any Subsidiary or (e)
violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the
Company, any Subsidiary, any Company Stockholder or Management
Participant or
any of their respective properties or assets. Section 2.4 of the
Disclosure
Schedule sets forth a true, correct and complete list of all
consents and
approvals of third parties and Governmental Entities, and all
filings and
notices, that are required in connection with the consummation
by the Company,
the Company Stockholders and the Management Participants of the
transactions
contemplated by this Agreement.
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<PAGE>
2.5 Subsidiaries.
(a) Section 2.5 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.
(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 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) 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.
2.6 Financial Statements.
(a) The Company has provided to the Buyer the Financial
Statements
and the Current India Financial Statements. The Financial
Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the
periods covered thereby; provided, however, that the Financial
Statements
referred to in clause (b) of the definition of such term are
subject to normal
recurring year-end adjustments (which, individually and in the
aggregate, will
not be material) and do not include footnotes.
(b) Each of the Financial Statements fairly presents the
assets,
liabilities, business, financial condition, results of
operations and cash flows
of the Company as of the date thereof and for the period
referred to therein,
and is consistent with the books and records of the Company. The
accruals for
vacation expenses, severance payments and Taxes are accounted
for on the Most
Recent Balance Sheet and are adequate and properly reflect the
expenses
associated therewith in accordance with GAAP. The Current India
Financial
Statements fairly present the assets, liabilities, business,
financial
condition, results of operations and cash flows of the India
Subsidiary as of
the date thereof and for the period referred to therein, and are
consistent with
the books and records of the India Subsidiary.
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(c) The Company maintains accurate books and records reflecting
its
assets and liabilities and maintains a system of internal
accounting controls
which provide reasonable assurance that (i) transactions are
executed with
management's authorization, (ii) transactions are recorded as
necessary to
permit preparation of the financial statements of the Company
and to maintain
accountability for the Company's assets, (iii) access to assets
of the Company
is permitted only in accordance with management's authorization,
(iv) the
reporting of assets of the Company is compared with existing
assets at regular
intervals, and (v) accounts, notes and other receivables and
inventory were
recorded accurately, and proper and adequate procedures are
implemented to
effect the collection thereof on a current and timely basis.
(d) Section 2.6(d) of the Disclosure Schedule lists, and the
Company
has delivered to the Buyer copies of the documentation creating
or governing,
all securitization transactions and "off-balance sheet
arrangements" (as defined
in Item 303 (a)(4) of Regulation S-K of the Securities and
Exchange Commission)
effected by the Company since June 30, 2001. Section 2.6(d) of
the Disclosure
Schedule lists all non-audit services performed by the Company's
auditors for
the Company since June 30, 2001.
2.7 Absence of Certain Changes. Since the Most Recent Balance
Sheet Date,
(a) there has occurred no event or development which,
individually or in the
aggregate, has had, or would, based on information then known to
the Company,
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 (t) of Section 4.5.
2.8 Undisclosed Liabilities. The Company does not have any
liability
(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, a copy of which is attached to Section 2.8 of the
Disclosure
Schedule, (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 and that are not in
the aggregate
material.
2.9 Tax Matters.
(a) The Company has filed on a timely basis all Tax Returns that
it
was required to file, and all such Tax Returns were complete and
accurate.
Neither the Company nor any Subsidiary is or has ever been a
member of a group
of corporations with which it has filed (or been required to
file) consolidated,
combined, unitary or similar Tax Returns, other than a group of
which only the
Company and the Subsidiaries are or were members. Each of the
Company and the
Subsidiaries has paid on a timely basis all Taxes that were due
and payable
whether or not shown on any Tax Return. The unpaid Taxes of the
Company and the
Subsidiaries for Tax periods through the Most Recent Balance
Sheet Date do not
exceed the accruals and reserves for Taxes (excluding accruals
and reserves for
deferred Taxes established to reflect timing differences between
book and Tax
income) set forth on the Most Recent Balance Sheet. All unpaid
Taxes of the
Company or any Subsidiary attributable to periods commencing
after the Most
Recent Balance Sheet Date arose in the Ordinary Course of
Business and are
similar in nature and amount to Taxes which arose during the
comparable period
of time in the immediate preceding fiscal year. All Taxes that
the Company or
any Subsidiary is or was required by law to withhold or collect
have been duly
withheld or collected and, to the extent required, have been
paid to the proper
Governmental Entity.
(b) The Company has delivered or made available to the Buyer
complete and accurate copies of all federal income Tax Returns,
examination
reports and statements of deficiencies
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assessed against or agreed to by the Company or any Subsidiary
with respect to
all taxable periods commencing on or after June 30, 2001 (or
such earlier
taxable periods with respect to which the applicable statute of
limitations does
not preclude the assessment of additional Tax). The U.S. federal
income Tax
Returns of the Company and each Subsidiary and the Tax Returns
of the India
Subsidiary under the Indian Income Tax Act, 1961, have been
audited by the
Internal Revenue Service or comparable Indian Governmental
Entity or are closed
by the applicable statute of limitations for all taxable years
through the
taxable year specified in Section 2.9(b) of the Disclosure
Schedule. The Company
has delivered or made available to the Buyer complete and
accurate copies of all
other Tax Returns of the Company and the Subsidiaries together
with all related
examination reports and statements of deficiency for all periods
for which the
applicable period for the assessment of the Tax has not been
closed by any
applicable statute of limitations. No examination or audit of
any Tax Return of
the Company or any Subsidiary by any Governmental Entity is
currently in
progress or, to the knowledge of the Company, threatened or
contemplated.
Neither the Company nor any Subsidiary has been informed by any
jurisdiction
that the jurisdiction believes that the Company or Subsidiary
was required to
file any Tax Return that was not filed. Neither the Company nor
any Subsidiary
has waived any statute of limitations with respect to Taxes or
agreed to an
extension of time with respect to a Tax assessment or
deficiency.
(c) Neither the Company nor any Subsidiary: (i) has ever been
a
United States real property holding corporation within the
meaning of Section
897(c)(2) of the Code during the applicable period specified in
Section
897(c)(l)(A)(ii) of the Code; (ii) has made any payments, is
obligated to make
any payments, or is a party to any agreement that could obligate
it to make any
payments that may be treated as an "excess parachute payment"
under Section 280G
of the Code (determined without regard to Section 280G(b)(4) of
the Code); (iii)
has any actual or potential liability for any Taxes of any
person (other than
the Company or any Subsidiary) under Treasury Regulation Section
1.1502-6 (or
any similar provision of federal, state, local, or foreign law),
or as a
transferee or successor, by contract, or otherwise; and (iv) is
not or has never
been required to make a basis reduction pursuant to Treasury
Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company or any Subsidiary: (i)
is
"tax-exempt use property" within the meaning of Section 168(h)
of the Code; or
(ii) directly or indirectly secures any debt the interest on
which is Tax exempt
under Section 103(a) of the Code.
(e) There are no adjustments under Section 481 of the Code (or
any
similar adjustments under any provision of the Code or the
corresponding
foreign, state or local Tax laws) that are required to be taken
into account by
the Company or any Subsidiary in any period ending after the
Closing Date by
reason of a change in method of accounting in any taxable period
ending on or
before the Closing Date.
(f) Section 2.9(f) of the Disclosure Schedule sets forth the
amount
of any net operating loss, net capital loss, unused investment,
foreign Tax or
other credit, and excess charitable contribution allocable to
the Company and
each Subsidiary as of the most recent practicable date.
(g) Neither the Company nor any Subsidiary has ever participated
in
an international boycott as defined in Section 999 of the
Code.
(h) Neither the Company nor any Subsidiary has distributed to
its
stockholders or security holders stock or securities of a
controlled
corporation, nor has stock or securities of the Company been
distributed, in a
transaction to which Section 355 of the Code applies (i) in the
two years prior
to the date of this Agreement or (ii) in a distribution that
could otherwise
constitute part of a "plan" or "series of
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<PAGE>
related transactions" (within the meaning of Section 355(e) of
the Code) that
includes the transactions contemplated by this Agreement.
(i) Neither the Company nor any Subsidiary is or has been a
passive
foreign investment company within the meaning of Sections
1291-1297 of the Code.
(j) Neither the Company nor any Subsidiary has incurred (or
been
allocated) an "overall foreign loss" as defined in Section
904(f)(2) of the Code
which has not been previously recaptured in full as provided in
Sections
904(f)(1) and/or 904(f)(3) of the Code.
(k) Neither the Company nor any Subsidiary is a party to a
gain
recognition agreement under Section 367 of the Code.
(l) Section 2.9 of the Disclosure Schedule sets forth a complete
and
accurate list of any Subsidiaries for which a "check-the-box"
election under
Section 7701 has been made.
(m) To the knowledge of the Company and any Subsidiary, neither
the
Company nor any Subsidiary is or ever has been a party to a
transaction or
agreement that is in conflict with the Tax rules on transfer
pricing in any
relevant jurisdiction.
(n) Section 2.9 of the Disclosure Schedule sets forth a complete
and
accurate list of all material agreements, rulings, settlements
or other Tax
documents relating to Tax incentives between the Company or any
Subsidiary and a
Governmental Entity.
(o) Each of the Company and the Subsidiaries has delivered or
made
available to the Buyer all payroll and other compensation
records in respect of
the Management Participants, Company Stockholders and Option and
Warrant
holders, necessary for the Buyer and/or the Surviving
Corporation to fulfill
their respective withholding obligations as described in Section
1.18 of this
Agreement and, to the extent known to the Company or any
Subsidiary, such other
information as may be necessary to (i) identify any other Equity
Holder for whom
the Buyer and/or the Surviving Corporation may have a
withholding obligation
under Section 1.18 and (ii) fulfill their withholding
obligations under Section
1.18 with respect to such Equity Holders.
2.10 Assets.
(a) Except as disclosed in Section 2.10(a) of the Disclosure
Schedule, 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 necessary or desirable for the conduct of its businesses
as presently
conducted, which tangible assets are reflected in the Financial
Statements
(other than to the extent disposed of in the Ordinary Course of
Business). Each
such tangible asset is free from 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 2.10(b) of the Disclosure Schedule lists
individually
(i) all fixed assets (within the meaning of GAAP) of the Company
or the
Subsidiaries, indicating the cost, accumulated book depreciation
(if any) and
the net book value of each such fixed asset as of December 31,
2004, and (ii)
all other assets of a tangible nature (other than inventories)
of the Company or
the Subsidiaries.
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<PAGE>
(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 in its present condition at the end of the relevant
lease term or as
otherwise contemplated by the applicable lease or contract, the
obligations of
the Company or such Subsidiary to such lessor or owner will have
been discharged
in full.
2.11 Owned Real Property(a) . Neither the Company nor any
Subsidiary does
own, or has ever owned, any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure
Schedule lists
all Leases and lists the term of such Lease, any extension and
expansion
options, and the rent payable thereunder. The Company has
delivered 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 against the Company and, to the Company's knowledge,
against each
other party thereto and in full force and effect immediately
following the
Closing in accordance with the terms thereof as in effect
immediately prior to
the Closing;
(c) neither the Company, any Subsidiary nor, to the knowledge of
the
Company, any other party to the Lease 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, 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 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 assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in
the leasehold or subleasehold;
(f) the Company 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 impair the current
uses or the
occupancy by the Company or a Subsidiary of the property subject
thereto;
(g) no construction, alteration or other leasehold improvement
work
with respect to the Lease remains to be paid for or performed by
the Company or
any Subsidiary;
(h) neither the Company nor any Subsidiary is obligated to pay
any
leasing or brokerage commission relating to such Lease and will
not have any
obligation to pay any leasing or brokerage commission upon the
renewal of the
Lease; and
(i) the Financial Statements contain adequate reserves to
provide
for the restoration of the property subject to the Lease at the
end of the
respective Lease term, to the extent required by the Lease.
-21-
<PAGE>
2.13 Intellectual Property.
(a) Company Owned Intellectual Property. The Company or a
Subsidiary
is the sole and exclusive owner of all Company Owned
Intellectual Property, free
and clear of any Security Interests. No other person or business
entity has any
joint ownership interest, royalty interest, or license right to
any of the
Company Owned Intellectual Property, and, to the knowledge of
the Company, no
other person or business entity is infringing, violating or
misappropriating any
of the Company Owned Intellectual Property. Section 2.13(a) of
the Disclosure
Schedule lists each agreement, contract, assignment or other
instrument pursuant
to which the Company or any Subsidiary has at any time since the
date of its
incorporation obtained any ownership interest in or to each item
of Company
Owned Intellectual Property.
(b) Company Intellectual Property. The Company Intellectual
Property
constitutes all Intellectual Property (i) used in the operation
of the business
of the Company or any Subsidiary or necessary for the operation
of such business
as presently conducted by the Company and its Subsidiaries, (ii)
necessary to
develop, test, modify, make, use, sell, have made, used and
sold, import,
reproduce, market and distribute the Customer Deliverables in
the manner
currently done by the Company and its Subsidiaries, and (iii)
necessary to
operate and use the Internal Systems as they are currently used
by the Company
and its Subsidiaries. Each item of Company Intellectual Property
will be owned
or available for use by the Company or the applicable Subsidiary
immediately
following the Closing on substantially identical terms and
conditions as it was
immediately prior to the Closing.
(c) Customer Deliverables. Except as set forth in the
Disclosure
Schedule or as alleged in a Lawsuit, none of the Customer
Deliverables, or the
development, manufacture, importation, marketing, sale,
distribution, provision
or use thereof by the Company, any Subsidiary or any reseller,
distributor,
customer or user thereof, or the conduct by the Company or any
Subsidiary of its
business, infringes, violates or constitutes a misappropriation
of (or in the
past infringed, violated or constituted a misappropriation of)
any Intellectual
Property rights of any other person or business entity. Neither
the Company nor
any Subsidiary has received any complaint, claim or notice
alleging any such
infringement, violation or misappropriation (including any
notification that a
license under any patent is or may be required). Neither the
Company nor any
Subsidiary has agreed to indemnify any person against any
infringement,
violation or misappropriation of any Intellectual Property
rights with respect
to any Customer Deliverables, other than as required by
customers in the
Ordinary Course of Business pursuant to (i) the Company's and
each Subsidiary's
standard terms and conditions of sale, a copy of which has
previously been
delivered to the Buyer and (ii) such customers' standard terms
and conditions of
sale, where the annual amounts payable by or to the Company and
its Subsidiaries
under all such standard terms and conditions of sale does not
exceed $250,000
per contract.
(d) Intellectual Property Registrations. Section 2.13(d) of
the
Disclosure Schedule identifies each Intellectual Property
Registration that is
registered or filed in the name of the Company or any
Subsidiary, alone or
jointly with others, in each case enumerating specifically the
applicable filing
or registration number, title, subject matter, jurisdiction in
which the filing
was made or from which registration issued, date of filing or
issuance, names of
current registered owners (if other than the Company), and
status of any
required issuance, renewal, maintenance or other payments due
within one year
following the date of this Agreement. All assignments of
Intellectual Property
Registrations have been properly executed and recorded. To the
knowledge of the
Company, all Intellectual Property Registrations to the Company
are valid and
enforceable and all issuance, renewal, maintenance and other
payments that are
or have become due with respect thereto have been timely paid by
or on behalf of
the Company or any Subsidiary, as applicable.
-22-
<PAGE>
(e) Grant of Rights With Respect to Company Intellectual
Property.
Section 2.13(e) of the Disclosure Schedule identifies each
license, covenant or
other agreement pursuant to which the Company has assigned,
transferred,
licensed, distributed or otherwise granted any right or access
to any other
person or business entity, or covenanted not to assert any
right, with respect
to any Company Intellectual Property other than non-exclusive
licenses entered
into with customers of the Company or any Subsidiary in the
Ordinary Course of
Business.
(f) Company Licensed Intellectual Property. Section 2.13(f) of
the
Disclosure Schedule identifies each item of Company Licensed
Intellectual
Property that the Company or any Subsidiary currently licenses
that is owned by
a party other than the Company or such Subsidiary, and the
license agreement
pursuant to which the Company or such Subsidiary licenses such
Intellectual
Property (other than commercially available, off-the-shelf
software programs
that are part of the Internal Systems and are licensed by the
Company or such
Subsidiary pursuant to standard "shrink-wrap" licenses, with
respect to which,
although not listed in Section 2.13(f) of the Disclosure
Schedule, the
representations set forth in this Section 2.13(f) are true).
Each license
agreement referenced in this clause (f) and in Section 2.13(a)
above is legal,
valid, binding and enforceable against the Company or the
applicable Subsidiary,
and, to the knowledge of the Company, against each other party
thereto, except
as enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer,
reorganization, moratorium or other similar laws relating to or
affecting the
rights of creditors generally and by equitable principles,
including those
limiting the availability of specific performance, injunctive
relief and other
equitable remedies and those providing for equitable defenses,
and is in full
force and effect. Each such license agreement will continue to
be legal, valid,
binding and enforceable against the Company or such Subsidiary
and, to the
knowledge of the Company, each other party thereto, except as
enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization,
moratorium or other similar laws relating to or affecting the
rights of
creditors generally and by equitable principles, including those
limiting the
availability of specific performance, injunctive relief and
other equitable
remedies and those providing for equitable defenses, and will
continue to be in
full force and effect, immediately following the Closing in
accordance with the
terms thereof as in effect prior to the Closing. Neither the
Company nor any
Subsidiary nor, to the knowledge of the Company, any other party
to such license
agreement is in breach or default, and no event has occurred
which with notice
or lapse of time would constitute a breach or default or permit
termination,
modification or acceleration thereunder.
(g) Company Source Code. Neither the Company nor any Subsidiary
has
licensed, distributed or disclosed, and knows of no distribution
or disclosure
by others (including its employees and contractors) of, the
source code for any
Software ("Company Source Code") to any other person or business
entity, other
than the Company and its Subsidiaries, and the Company and the
Subsidiaries have
taken reasonable physical and electronic security measures to
prevent disclosure
of such Company Source Code. To the knowledge of the Company, no
event has
occurred, and no circumstance or condition exists, that (with or
without notice
or lapse of time, or both) will, or would reasonably be expected
to, nor will
the consummation of the transactions contemplated hereby, result
in the
disclosure or release of such Company Source Code by the
Company, any Subsidiary
or any escrow agent(s) or any other person to any third
party.
(h) Software. None of the Software includes "shareware",
"freeware"
or other code that was developed by or obtained by the Company
or any Subsidiary
from third parties. Except as set forth in Section 2.13(h) of
the Disclosure
Schedule, neither the Company nor any Subsidiary has
incorporated Open Source
Materials into, or combined Open Source Materials with, the
Software. To the
extent Open Source Materials are used in any way to provide the
Customer
Deliverables, such use has not caused any Software to become
subject to GNU
General Public License ("GPL") requirements.
-23-
<PAGE>
2.14 Inventory. Other than general office supplies, neither the
Company
nor any Subsidiary maintains any inventory.
2.15 Contracts.
(a) Section 2.15(a) of the Disclosure Schedule lists the
following
agreements to which the Company or any Subsidiary is a party as
of the date of
this Agreement (each a "Contract"):
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements):
(A) with (1) any customer of the business of the Company
and the Subsidiaries (other than agreements with any such
customer that is not
among the top 70 customers by revenue of the Company or any
Subsidiary during
the three-month period ended December 31, 2004 (the "Top
Customers"), which
agreements are not listed in Section 2.15(a) of the Disclosure
Schedule but with
respect to which the representations set forth in this Section
2.15 are true;
Section 2.15(a)(ii)(A)(1) of the Disclosure Schedule sets forth
the customer
name and corresponding redacted contract number for each Top
Customer Contract
provided by the Company to the Buyer), (2) any network service
provider that was
in effect at any time since January 1, 2004, and (3) the top 20
vendors (by
payment amount) to the Company for the twelve-month period ended
December 31,
2004, and the eight-month period ended February 28, 2005;
(B) which involves more than the sum of $50,000 over the
term of the agreement (other than customer agreements,
agreements with network
service providers and vendor agreements); or
(C) in which the Company or any Subsidiary has granted
manufacturing rights, "most favored nation" pricing provisions
or exclusive
marketing or distribution rights relating to any services,
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) any agreement concerning the establishment or
operation
of a partnership, joint venture or limited liability
company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may
create, incur,
assume or guarantee) indebtedness (including capitalized lease
obligations but
excluding trade payables to vendors incurred in the Ordinary
Course of Business)
or under which it has imposed (or may impose) a Security
Interest on any of its
assets, tangible or intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Company or any
Subsidiary (other than
sales of products and disposition of obsolete equipment in the
Ordinary Course
of Business) or any agreement 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);
(vi) any agreement concerning confidentiality,
noncompetition
or non-solicitation (other than confidentiality agreements with
customers or
employees of the Company or any Subsidiary set forth in the
Company's or the
applicable Subsidiary's standard terms and conditions of
sale
-24-
<PAGE>
or standard form of employment agreement, copies of which have
previously been
delivered to the Buyer);
(vii) any employment or consulting agreement (other than
agreements that are terminable at will without any cost, penalty
or other
obligation to the Company or any Subsidiary);
(viii) any agreement involving any current or former
officer,
director or stockholder of the Company or any Subsidiary;
(ix) any agency, distributor, sales representative,
franchise
or similar agreements to which the Company or any Subsidiary is
a party or by
which the Company or any Subsidiary is bound;
(x) any agreement which contains any provisions requiring
the
Company or any Subsidiary to indemnify any other party
(excluding indemnities
contained in agreements for the provision, purchase, sale or
license of Customer
Deliverables entered into in the Ordinary Course of Business);
and
(xi) any other agreement (or group of related agreements)
(A)
not entered into in the Ordinary Course of Business or (B) the
termination or
modification of which would have a Company Material Adverse
Effect.
(b) The Company has delivered to the Buyer a complete and
accurate
copy of each Contract (as amended to date). With respect to each
Contract: (i)
the Contract is legal, valid, binding and enforceable against
the Company or
applicable Subsidiary and, to the Company's knowledge, against
each other party
thereto, and in full force and effect, except as enforceability
may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or
other similar laws relating to or affecting the rights of
creditors generally
and by general equitable principles, including those limiting
the availability
of specific performance, injunctive relief and other equitable
remedies and
those providing for equitable defenses; (ii) the Contract will
continue to be
legal, valid, binding and enforceable against the Company or
applicable
Subsidiary and, to the Company's knowledge, against each other
party thereto
immediately following the Closing in accordance with the terms
thereof as in
effect immediately prior to the Closing, except as
enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or
other similar laws relating to or affecting the rights of
creditors generally
and by general equitable principles, including those limiting
the availability
of specific performance, injunctive relief and other equitable
remedies and
those providing for equitable defenses; and (iii) neither the
Company, any
Subsidiary nor, to the knowledge of the Company, any other
party, is in breach
or violation of, or default under, any such Contract, 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, any Subsidiary or, to the knowledge of
the Company, any
other party under such Contract.
(c) Neither the Company nor any Subsidiary is a party to any
oral
contract, agreement or other arrangement which, if reduced to
written form,
would be required to be listed in Section 2.15(a) of the
Disclosure Schedule
under the terms of Section 2.15(a). Neither the Company nor any
Subsidiary is a
party to any written or oral arrangement (i) to perform services
or sell
products which is expected to be performed at, or to result in,
a loss or (ii)
for which the customer has already been billed or paid that have
not been fully
accounted for on the Most Recent Balance Sheet. Neither the
Company nor any
Subsidiary is restricted by any Contract from carrying on
business anywhere in
the world.
-25-
<PAGE>
2.16 Accounts Receivable. All accounts receivable of the Company
and its
Subsidiaries reflected on the Most Recent Balance Sheet (other
than those paid
since such date) are valid receivables subject to no setoffs or
counterclaims
and are current and collectible (within 90 days after the date
on which it first
became due and payable), net of the applicable reserve for bad
debts on the Most
Recent Balance Sheet. A complete and accurate list of the
accounts receivable as
of December 31, 2004, showing the aging thereof, is included in
Section 2.16 of
the Disclosure Schedule. All accounts receivable of the Company
and the
Subsidiaries that have arisen since the Most Recent Balance
Sheet Date are valid
receivables subject to no setoffs or counterclaims and are
collectible (within
90 days after the date on which it first became due and
payable), net of a
reserve for bad debts in an amount proportionate to the reserve
shown on the
Most Recent Balance Sheet. Neither the Company nor any
Subsidiary has received
any written notice from an account debtor stating that any
account receivable in
an amount in excess of $5,000 is subject to any contest, claim
or setoff by such
account debtor.
2.17 Powers of Attorney. There are no outstanding powers of
attorney
executed on behalf of the Company or any Subsidiary.
2.18 Insurance. Section 2.18 of the Disclosure Schedule lists
each
insurance policy (including fire, theft, casualty, comprehensive
general
liability, workers compensation, business interruption,
environmental, product
liability and automobile insurance policies and bond and surety
arrangements) to
which the Company or any Subsidiary is a party, a named insured
or otherwise the
beneficiary of coverage, all of which are in full force and
effect. Except as
set forth in Section 2.18 of the Disclosure Schedule, there is
no claim pending
under any such policy as to which coverage has been questioned,
denied or
disputed by the underwriter of such policy. All premiums due and
payable under
all such policies have been paid, neither the Company nor any
Subsidiary will be
liable for retroactive premiums or similar payments, and the
Company and its
Subsidiaries are otherwise in compliance with the terms of such
policies.
Neither the Company nor any Subsidiary has any knowledge of any
threatened
termination of, or pending premium increase with respect to, any
such policy.
Each such policy will continue to be 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. Section 2.18 of the
Disclosure Schedule
identifies all claims asserted by the Company pursuant to any
insurance policy
since January 1, 2001 and describes the nature and status of
each such claim.
2.19 Litigation. Section 2.19 of the Disclosure Schedule
identifies and
contains a brief description of (a) any unsatisfied judgment,
order, decree,
stipulation or injunction, and (b) any claim, complaint, action,
suit,
proceeding, hearing or investigation of or in any Governmental
Entity or by a
private party or before any arbitrator, in the case of each of
clauses (a) and
(b) to which the Company or any Subsidiary is a party or, to the
knowledge of
the Company, is threatened to be made a party. None of the
complaints, actions,
suits, proceedings, hearings and investigations set forth in
Section 2.19 of the
Disclosure Schedule, individually or collectively, could have a
Company Material
Adverse Effect.
2.20 Warranties.
(a) No service or product provided, manufactured, sold,
leased,
licensed or delivered by the Company or any Subsidiary is
subject to any
guaranty, warranty, right of return, right of credit or other
indemnity other
than (i) the applicable standard terms and conditions of sale of
each Customer
Deliverable, which are set forth in Section 2.20(a) of the
Disclosure Schedule,
and (ii) manufacturers' warranties for which the Company has no
liability.
Section 2.20(a) of the Disclosure Schedule sets forth the
aggregate expenses
incurred and credits issued in fulfilling the Company's
obligations under
service-level agreements and similar guarantees with respect to
the Company's
services that were incurred or issued during the Company's most
recent fiscal
year and the interim period covered by the Financial
-26-
<PAGE>
Statements; and the Company does not know of any reason why such
expenses should
significantly increase as a percentage of sales in the
future.
(b) The reserve for warranty claims set forth on the Most
Recent
Balance Sheet and any reserves for warranty claims created by
the Company in the
Ordinary Course of Business subsequent to the Most Recent
Balance Sheet Date are
adequate and were calculated in accordance with GAAP
consistently applied.
(c) The Company has no liability to any customer in connection
with
any service provided or product manufactured, sold, leased or
delivered by the
Company to provide the customer with any other services or
products of the
Company on pre-negotiated terms, including without limitation
for upgrades to
other services or products at prices below the Company's
published price for
such services or products. The Company has no liability to any
customer in
connection with any service provided or product manufactured,
sold, leased or
delivered by the Company other than those arising in the
Ordinary Course of
Business.
2.21 Employees.
(a) Section 2.21(a) of the Disclosure Schedule contains a list
of
all employees of the Company and each Subsidiary, along with the
position, date
of hire, annual rate of compensation (or with respect to
employees compensated
on an hourly, commission, piece rate or per diem basis, the
ho
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