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EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NUANCE COMMUNICATIONS, INC.
VICKSBURG ACQUISITION CORPORATION
VOICE SIGNAL TECHNOLOGIES, INC.
U.S. BANK NATIONAL ASSOCIATION, AS ESCROW AGENT
AND
STATA VENTURE PARTNERS, LLC, AS STOCKHOLDER REPRESENTATIVE
DATED AS OF MAY 14, 2007
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TABLE OF CONTENTS
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PAGE
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ARTICLE I THE
MERGER.................................................................................................
2
1.1 The
Merger.........................................................................................
2
1.2 Effective
Time.....................................................................................
2
1.3 Effects of the
Merger..............................................................................
2
1.4 Organizational
Documents...........................................................................
2
1.5
Directors/Officers.................................................................................
3
1.6
Definitions........................................................................................
3
1.7 Effect of the Merger on the Capital Stock of the Constituent
Corporations.......................... 6
1.8 Dissenting
Shares..................................................................................
11
1.9 Surrender of
Certificates..........................................................................
12
1.10 No Further Ownership Rights in Company Capital
Stock............................................... 15
1.11 Lost, Stolen or Destroyed
Certificates.............................................................
15
1.12 Taking of Necessary Action; Further
Action.........................................................
15
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.............................................................
15
2.1 Organization of the
Company........................................................................
16
2.2 Company Capital
Structure..........................................................................
16
2.3
Subsidiaries.......................................................................................
17
2.4
Authority..........................................................................................
18
2.5 No
Conflict........................................................................................
18
2.6
Consents...........................................................................................
18
2.7 Company Financial
Statements.......................................................................
18
2.8 No Undisclosed
Liabilities.........................................................................
19
2.9 Internal
Controls..................................................................................
19
2.10 No
Changes.........................................................................................
20
2.11 Tax
Matters........................................................................................
22
2.12 Restrictions on Business
Activities................................................................
24
2.13 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment..................... 24
2.14 Intellectual
Property..............................................................................
25
2.15 Agreements, Contracts and
Commitments..............................................................
30
2.16 Interested Party
Transactions......................................................................
32
2.17 Governmental
Authorization.........................................................................
32
2.18
Litigation.........................................................................................
32
2.19 Minute
Books.......................................................................................
33
2.20 Environmental
Matters..............................................................................
33
2.21 Brokers' and Finders' Fees; Third Party
Expenses................................................... 33
2.22 Employee Benefit Plans and
Compensation............................................................
33
2.23
Insurance..........................................................................................
38
2.24 Compliance with
Laws...............................................................................
38
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TABLE OF CONTENTS
(CONTINUED)
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2.25 Bank Accounts, Letters of Credit and Powers of
Attorney............................................ 38
2.26 Information
Supplied...............................................................................
38
2.27 Disclaimer of Certain Representations and
Warranties............................................... 39
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB......................................................... 39
3.1 Organization, Standing and
Power...................................................................
39
3.2
Authority..........................................................................................
39
3.3 Parent Capital
Structure...........................................................................
40
3.4 No
Conflict........................................................................................
41
3.5
Consents...........................................................................................
41
3.6 Capital Resources;
Solvency........................................................................
41
3.7 Parent Common
Stock................................................................................
41
3.8 SEC
Documents......................................................................................
42
3.9 Parent Financial
Statements........................................................................
42
3.10 No Undisclosed
Liabilities.........................................................................
42
3.11 Absence of Certain Changes or
Events...............................................................
43
3.12 Interim Operations of
Sub..........................................................................
43
3.13 Information
Supplied...............................................................................
43
3.14
Litigation.........................................................................................
43
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE
TIME.......................................................................
44
4.1 Conduct of Business of the
Company.................................................................
44
4.2 No
Solicitation....................................................................................
48
4.3 Procedures for Requesting Parent
Consent...........................................................
49
ARTICLE V ADDITIONAL
AGREEMENTS......................................................................................
49
5.1 Registration Statement, Information Statement; Stockholder
Approval................................ 49
5.2 Access to
Information..............................................................................
51
5.3
Confidentiality....................................................................................
51
5.4
Expenses...........................................................................................
51
5.5 Public
Disclosure..................................................................................
52
5.6
Consents...........................................................................................
52
5.7 FIRPTA
Compliance..................................................................................
52
5.8 Reasonable Efforts; Regulatory
Filings.............................................................
52
5.9 Parent Notification of Certain
Matters.............................................................
53
5.10 Additional Documents and Further
Assurances........................................................
53
5.11 New Employment
Arrangements........................................................................
53
5.12 Termination of 401(k)
Plan.........................................................................
53
5.13
Financials.........................................................................................
54
5.14 Indemnification and
Insurance......................................................................
54
5.15 Disclosure
Supplements.............................................................................
55
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TABLE OF CONTENTS
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5.16
Non-Disparagement..................................................................................
56
5.17 Stockholder
Arrangements...........................................................................
56
ARTICLE VI CONDITIONS TO THE
MERGER..................................................................................
57
6.1 Conditions to Obligations of Each Party to Effect the
Merger....................................... 57
6.2 Conditions to the Obligations of Parent and
Sub.................................................... 58
6.3 Conditions to Obligations of the
Company...........................................................
59
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND
WARRANTIES...............................................................
59
7.1 Survival of Representations, Warranties and
Covenants.............................................. 59
7.2 Stockholder Obligations for
Indemnification........................................................
60
7.3 Parent Obligations for
Indemnification.............................................................
60
7.4 Escrow
Arrangements................................................................................
60
7.5 Indemnification
Claims.............................................................................
62
7.6 Stockholder
Representative.........................................................................
69
7.7 Limitations on
Liability...........................................................................
70
7.8 Adjustments to Merger
Consideration................................................................
71
7.9 No Indemnification without
Closing.................................................................
71
ARTICLE VIII TERMINATION, AMENDMENT AND
WAIVER.......................................................................
71
8.1
Termination........................................................................................
71
8.2 Effect of
Termination..............................................................................
72
8.3 Reimbursement of Company
Expenses..................................................................
72
8.4
Amendment..........................................................................................
72
8.5 Extension;
Waiver..................................................................................
72
ARTICLE IX GENERAL
PROVISIONS........................................................................................
73
9.1
Notices............................................................................................
73
9.2
Interpretation.....................................................................................
75
9.3
Counterparts.......................................................................................
75
9.4 Entire Agreement;
Assignment.......................................................................
75
9.5 Outside
Information................................................................................
75
9.6
Severability.......................................................................................
75
9.7 Other Remedies; Specific
Performance...............................................................
76
9.8 Governing
Law......................................................................................
76
9.9 Rules of
Construction..............................................................................
76
9.10 Role of Bingham McCutchen
LLP......................................................................
76
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INDEX OF EXHIBITS
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EXHIBIT DESCRIPTION
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Exhibit A Form of Voting Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Form of Proprietary Information Agreement
Exhibit D List of Persons whose knowledge constitutes
"Knowledge"
Exhibit E Merger Consideration Distribution
Exhibit F Form of Release Agreement
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SCHEDULES
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THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and
entered
into as of May 14, 2007 by and among Nuance Communications,
Inc., a Delaware
corporation ("PARENT"), Vicksburg Acquisition Corporation, a
Delaware
corporation and a wholly owned subsidiary of Parent ("SUB "),
Voice Signal
Technologies, Inc., a Delaware corporation (the "COMPANY"), U.S.
Bank National
Association, to act as escrow agent hereunder, and as a party to
this Agreement
solely with respect to ARTICLE VII herein (the "ESCROW AGENT")
and Stata Venture
Partners, LLC, who will serve as the representative of the
Company's
stockholders, and is referred to herein from time to time as the
"STOCKHOLDER
REPRESENTATIVE."
RECITALS
A. The Boards of Directors of each of Parent, Sub and the
Company believe
it is in the best interests of each company and its respective
stockholders that
Parent acquire the Company through the statutory merger of Sub
with and into the
Company (the "MERGER") and, in furtherance thereof, have
approved the Merger.
B. Pursuant to the Merger, among other things, and subject to
the terms
and conditions of this Agreement, all of the issued and
outstanding capital
stock of the Company shall be converted into the right to
receive the
consideration set forth herein.
C. A portion of the consideration payable in connection with the
Merger
shall be placed in escrow as security for the indemnification
obligations set
forth in this Agreement.
D. The Company, on the one hand, and Parent and Sub, on the
other hand,
desire to make certain representations, warranties, covenants
and other
agreements in connection with the Merger.
E. Concurrent with the execution and delivery of this Agreement,
as a
material inducement to Parent and Sub to enter into this
Agreement, all officers
and directors of the Company, and certain other affiliated
stockholders of the
Company are entering into Voting Agreements, in substantially
the form attached
hereto as EXHIBIT A (the "VOTING AGREEMENTS"), with Parent,
pursuant to which
such stockholders have irrevocably agreed to vote in favor of
the Merger and the
transactions contemplated thereby and to other matters set forth
therein.
F. Concurrent with the execution and delivery of this Agreement,
as a
material inducement to the Company and the Stockholders to enter
into this
Agreement, Parent and certain individuals are entering into
Release Agreements
substantially in the form attached hereto as EXHIBIT F (the
"RELEASE
AGREEMENTS"), pursuant to which Parent and such individuals are
releasing each
other from claims related to the Parent/Company Litigation (as
defined below).
NOW, THEREFORE, in consideration of the mutual agreements,
covenants and
other promises set forth herein, the mutual benefits to be
gained by the
performance thereof, and for other
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good and valuable consideration, the receipt and sufficiency of
which are hereby
acknowledged and accepted, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in SECTION 1.2
hereof)
and subject to and upon the terms and conditions of this
Agreement and the
applicable provisions of the General Corporation Law of the
State of Delaware
("DELAWARE LAW"), Sub shall be merged with and into the Company,
the separate
corporate existence of Sub shall cease, and the Company shall
continue as the
surviving corporation and as a wholly owned subsidiary of
Parent. The surviving
corporation after the Merger is hereinafter referred to as the
"SURVIVING
CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant
to Section 8.1 hereof, the closing of the Merger (the "CLOSING")
will take place
as promptly as practicable after the execution and delivery
hereof by the
parties hereto, and following satisfaction or waiver of the
conditions set forth
in Article VI hereof, at the offices of Wilson Sonsini Goodrich
& Rosati,
Professional Corporation, 1700 K Street NW, Fifth Floor,
Washington, D.C.,
unless another time or place is mutually agreed upon in writing
by Parent and
the Company. The date upon which the Closing actually occurs
shall be referred
to herein as the "CLOSING DATE." On the Closing Date, the
parties hereto shall
cause the Merger to be consummated by filing a Certificate of
Merger in
substantially the form attached hereto as EXHIBIT B, with the
Secretary of State
of the State of Delaware (the "CERTIFICATE OF MERGER"), in
accordance with the
applicable provisions of Delaware Law (the time of the
acceptance of such filing
by the Secretary of State of the State of Delaware such filing
shall be referred
to herein as the "EFFECTIVE TIME").
1.3 EFFECTS OF THE MERGER. At the Effective Time, the effect of
the Merger
shall be as provided in the applicable provisions of Delaware
Law. Without
limiting the generality of the foregoing, and subject thereto,
at the Effective
Time, except as otherwise agreed to pursuant to the terms of
this Agreement, all
of the property, rights, privileges, powers and franchises of
the Company shall
vest in the Surviving Corporation, and all debts, liabilities
and duties of the
Company shall become the debts, liabilities and duties of the
Surviving
Corporation.
1.4 ORGANIZATIONAL DOCUMENTS. Unless otherwise determined by
Parent prior
to the Effective Time, the certificate of incorporation of the
Surviving
Corporation shall be amended and restated as of the Effective
Time to be
identical to the certificate of incorporation of Sub as in
effect immediately
prior to the Effective Time, until thereafter amended in
accordance with
Delaware Law; provided, however, that at the Effective Time,
Article I of the
certificate of incorporation of the Surviving Corporation shall
be amended and
restated in its entirety to read as follows: "The name of the
corporation is
Voice Signal Technologies, Inc."
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(a) Unless otherwise determined by Parent prior to the
Effective
Time, the bylaws of Sub, as in effect immediately prior to the
Effective Time,
shall be the bylaws of the Surviving Corporation at the
Effective Time until
thereafter amended in accordance with Delaware Law.
1.5 DIRECTORS/OFFICERS.
(a) DIRECTORS OF THE COMPANY. Unless otherwise determined by
Parent
prior to the Effective Time, the directors of Sub immediately
prior to the
Effective Time shall be the directors of the Surviving
Corporation immediately
after the Effective Time, each to hold office until their
successors are duly
elected and qualified.
(b) OFFICERS OF THE COMPANY. Unless otherwise determined by
Parent
prior to the Effective Time, the officers of Sub immediately
prior to the
Effective Time shall be the officers of the Surviving
Corporation immediately
after the Effective Time, each to hold office in accordance with
the provisions
of the bylaws of the Surviving Corporation.
1.6 DEFINITIONS. For all purposes of this Agreement, the
following terms
shall have the following respective meanings:
(a) "BUSINESS DAY(S)" shall mean each day that is not a
Saturday,
Sunday or holiday on which banking institutions located in New
York, New York
are authorized or obligated by Law or executive order to
close.
(b) "CASH CONSIDERATION" shall mean $210,000,000, plus the
aggregate
amount of cash proceeds received by the Company at any time
after the date of
this Agreement in connection with the exercise of any Company
Option, and less
the amount of Third Party Expenses set forth on the Statement of
Expenses.
(c) "COMPANY CAPITAL STOCK" shall mean the Company Common Stock,
the
Company Preferred Stock and any other shares of capital stock,
if any, of the
Company, taken together.
(d) "COMPANY COMMON STOCK" shall mean shares of common stock,
$0.001
par value per share, of the Company.
(e) "COMPANY MATERIAL ADVERSE EFFECT" shall mean any change,
event
or effect that is materially adverse to the business, assets
(whether tangible
or intangible), financial condition, operations or
capitalization of the Company
and any subsidiaries, taken as a whole; provided, however, that,
in no event
shall any of the following be taken into account in determining
whether there
has been or will be a Company Material Adverse Effect: (A) any
effect resulting
from changes or effects in general worldwide or United States
economic, capital
market or political conditions (which changes or effects do
not
disproportionately affect the Company), (B) any effect resulting
from changes or
effects generally affecting the industries or markets in which
the Company
operates
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(which changes or effects do not disproportionately affect the
Company), (C) any
effect resulting from any act of war or terrorism (or, in each
case, any
escalation thereof) (which changes or effects do not
disproportionately affect
the Company), (D) any changes in applicable Laws or GAAP, (E)
any effect
resulting directly from the announcement or pendency of the
Merger, or (F) any
change, event or effect resulting from or arising out of any
action on the part
of Parent or any of its affiliates, including, without
limitation, actions taken
in the ordinary course of business.
(f) "COMPANY OPTIONS" shall mean all issued and outstanding
options
(including commitments to grant options to purchase or otherwise
acquire Company
Common Stock (whether or not vested) held by any person, each of
whom are listed
on SECTION 2.2(B) of the Disclosure Schedule.
(g) "COMPANY PREFERRED STOCK" shall mean shares of Company
Series A
Convertible Preferred Stock, Company Series B Convertible
Preferred Stock,
Company Series C Convertible Preferred Stock and Company Series
D Convertible
Preferred Stock, taken together.
(h) "COMPANY SERIES A CONVERTIBLE PREFERRED STOCK" shall mean
shares
of Series A Preferred Stock, par value $0.001 per share, of the
Company.
(i) "COMPANY SERIES B CONVERTIBLE PREFERRED STOCK" shall mean
shares
of Series B Preferred Stock, par value $0.001 per share, of the
Company.
(j) "COMPANY SERIES C CONVERTIBLE PREFERRED STOCK" shall mean
shares
of Series C Preferred Stock, par value $0.001 per share, of the
Company.
(k) "COMPANY SERIES D CONVERTIBLE PREFERRED STOCK" shall mean
shares
of Series D Preferred Stock, par value $0.001 per share, of the
Company.
(l) "CONTRACT" shall mean any written or oral agreement,
contract,
subcontract, lease, binding understanding, instrument, note,
bond, mortgage,
indenture, option, warranty, purchase order, license,
sublicense, benefit plan,
obligation, commitment or undertaking of any nature.
(m) "ESCROW AMOUNT" shall mean $30,000,000 of the Cash
Consideration.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934,
as amended.
(o) "GAAP" shall mean United States generally accepted
accounting
principles consistently applied.
(p) "KNOWLEDGE" or "KNOWN" shall mean, with respect to the
Company,
the knowledge of the persons set forth on EXHIBIT D after
reasonable inquiry of
those employees of the Company whom such persons reasonably
believe would have
actual knowledge of the matters represented.
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(q) "LAWS" shall mean any national, federal, state, local or
foreign
law, rule, regulation, statute, ordinance, order, judgment,
decree, permit,
franchise, license or other governmental restriction or
requirement of any kind
(r) "LIEN" shall mean any lien, pledge, charge, claim,
mortgage,
security interest or other encumbrance of any sort.
(s) "MERGER CONSIDERATION" shall mean the Cash Consideration and
the
Stock Consideration.
(t) "NEW NDA" shall mean the Non-Disclosure and F.R.E. 408
Agreement
between Parent and the Company, entered into April 30, 2007.
(u) "PARENT COMMON STOCK" shall mean the common stock, par
value
$0.001 per share, of Parent.
(v) "PARENT/COMPANY LITIGATION" shall mean any current or
future
litigation between Parent or any of its affiliates, on the one
hand, and the
Company or any of its affiliates on the other hand (other than
to the extent
that such litigation arises out of or relates to this Agreement
and the
transactions contemplated hereby).
(w) "PARENT MATERIAL ADVERSE EFFECT" shall mean any change,
event or
effect that (i) is materially adverse to the business, assets
(whether tangible
or intangible), financial condition, or results of operations of
Parent and its
subsidiaries, taken as a whole or (ii) will or is reasonably
likely to
materially impede the ability of Parent to timely consummate the
transactions
contemplated by this Agreement in accordance with the terms
hereof; provided,
however, that, for purposes of clause (i) above, in no event
shall any of the
following be taken into account in determining whether there has
been or will be
a Parent Material Adverse Effect: (A) any effect resulting from
changes or
effects in general worldwide or United States economic, capital
market or
political conditions (which changes or effects do not
disproportionately affect
Parent), (B) any effect resulting from changes or effects
generally affecting
the industries or markets in which Parent operates (which
changes or effects do
not disproportionately affect Parent), (C) any effect resulting
from any act of
war or terrorism (or, in each case, any escalation thereof)
(which changes or
effects do not disproportionately affect Parent), (D) any
changes in applicable
Laws or GAAP (E) any effect resulting directly from the
announcement or pendency
of the Merger, (F) any change in and of itself in Parent's Stock
price or
trading volume, or (G) any change, event or effect resulting
from or arising out
of any action on the part of the Company or any of its
affiliates, including,
without limitation, actions taken in the ordinary course of
business.
(x) "PLANS" shall mean the Company's Amended and Restated 1998
Stock
Option Plan.
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(y) "PRO RATA PORTION" shall mean, with respect to each
Stockholder
entitled to receive a portion of the Cash Consideration, the
quotient obtained
by dividing (A) the portion of the Cash Consideration that such
Stockholder is
entitled to receive at the Effective Time pursuant to SECTION
Y1.7(A) (including
the portion thereof to be contributed to the Escrow Fund
pursuant to Section
1.7(b)) by (B) the Cash Consideration.
(z) "RELATED AGREEMENTS" shall mean the Certificate of Merger,
the
Voting Agreements, the Release Agreements, the Mutual
Non-Disclosure and F.R.E.
Agreement executed by the Company on October 30, 2006 and
executed by Parent on
November 2, 2006, as amended and in effect from time to time
(the "CONFIDENTIAL
DISCLOSURE AGREEMENT" and the New NDA.
(aa) "SAS-100" shall mean Statement of Auditing Standards No.
100.
(bb) "SEC" shall mean the United States Securities and
Exchange
Commission.
(cc) "SECURITIES ACT" shall mean the Securities Act of 1933,
as
amended.
(dd) "SIGNING PRICE" shall mean $15.42 (reflecting the average
of
the reported closing price of the Parent Common Stock for the
ten (10) trading
days immediately preceding the date of this Agreement),
proportionally adjusted
for any stock split, stock dividend, reverse stock split, or
similar subdivision
or combination of the outstanding shares of Parent Common Stock
occurring after
the date of this Agreement.
(ee) "STATEMENT OF EXPENSES" shall have the meaning set forth
in
SECTION 5.4.
(ff) "STOCK CONSIDERATION" shall mean the number of shares of
Parent
Common Stock equal to $90,000,000 divided by the Signing Price
and rounded down
to the nearest whole share.
(gg) "STOCKHOLDER" shall mean any holder of any Company
Capital
Stock and/or Company Vested Options immediately prior to the
Effective Time.
(hh) "STOCKHOLDER ARRANGEMENTS" shall have the meaning set forth
in
SECTION 5.17.
(ii) "THIRD PARTY EXPENSES" shall have the meaning set forth
in
SECTION 5.4.
(jj) "WELL-KNOWN SEASONED ISSUER" shall have the meaning set
forth
in Rule 405 promulgated by the SEC under the Securities Act.
1.7 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT
CORPORATIONS.
(a) EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the
Merger and without any action on the part of Sub, the Company or
the holders of
shares of Company Capital Stock, each outstanding share of
Company Capital Stock
issued and outstanding immediately prior
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to the Effective Time (other than Dissenting Shares (as defined
in SECTION
1.8(a) hereof)), upon the terms and subject to conditions set
forth in this
SECTION 1.7 and throughout this Agreement, including, without
limitation, the
escrow provisions set forth in ARTICLE VII hereof, will be
cancelled and
extinguished and be converted automatically into the right to
receive, upon
surrender of the certificate representing such shares of Company
Capital Stock
in the manner provided in SECTION 1.9 hereof, the portions of
the Cash
Consideration and the Stock Consideration to be determined in
accordance with
the provisions set forth in EXHIBIT E attached hereto. Both on
the fifth (5th)
day prior to the Closing and at the Closing, the Vice President
of Finance of
the Company shall deliver to Parent a calculation setting forth
the portions of
the Cash Consideration and the Stock Consideration to which each
holder of
shares of Company Capital Stock or of vested Company Options, in
each case to
the extent outstanding on the date such calculation is delivered
by the Vice
President of Finance of the Company, would be entitled at the
Effective Time if
such holder were to hold all of such shares of Company Capital
Stock or vested
Company Options, as the case may be, immediately prior to the
Effective Time.
Such calculations by the Vice President of Finance of the
Company shall be made
by implementing the provisions of EXHIBIT E attached hereto.
(b) REDUCTION FOR ESCROW AMOUNT. Each distribution of the
Cash
Consideration made to a Stockholder pursuant to this SECTION 1.7
shall be
reduced by such Stockholder's Pro Rata Portion of the Escrow
Amount, if any, in
accordance with SECTION 7.4 hereof.
(c) NO FRACTIONAL SHARES. No fraction of a share of Parent
Common
Stock will be issued pursuant to the Merger, but in lieu
thereof, each
Stockholder who would otherwise be entitled to a fraction of a
share of Parent
Common Stock (after aggregating all fractional shares of Parent
Common Stock to
be received by such Stockholder) shall receive from Parent an
amount of cash
(rounded to the nearest whole cent) equal to the product of (i)
such fraction
multiplied by (ii) the Signing Price.
(d) Notwithstanding anything in this SECTION 1.7 to the
contrary, in
no event shall Parent be obligated to distribute in the
aggregate (i) cash in
excess of the Cash Consideration or (ii) shares of Parent Common
Stock in excess
of the Stock Consideration.
(e) TREATMENT OF COMPANY OPTIONS.
(i) No Company Vested Option shall be assumed or otherwise
replaced by Parent. Each Company Vested Option shall terminate
and cease to be
outstanding as of the Effective Time.
(ii) The Company shall give to each holder of a Company
Vested
Option the opportunity (of not more than 30 days) to decline to
accept a
modification of such Company Vested Option such that,
immediately prior to the
Effective Time, and conditioned on the consummation of the
Merger, such holder
shall automatically (without any further action required of such
holder) be
deemed to have exercised such Company Vested Option pursuant to
a net exercise
program whereby such holder will be deemed to have paid the
aggregate exercise
price for such
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Company Vested Option by relinquishing that number of shares of
Company Common
Stock underlying such option in an amount necessary to pay the
applicable
aggregate exercise price and any applicable withholding taxes
associated with
such net exercise of such Company Vested Option. The number of
shares of Company
Common Stock deemed delivered to the holder of each Company
Vested Option
pursuant to this net exercise program shall be determined by
subtracting the Net
Exercise Consideration (as defined below) applicable to such
Company Vested
Option from the number of shares of Company Common Stock subject
to such Company
Vested Option. The holder of each such Company Vested Option
shall from and
after the Effective Time (A) participate in the transactions
contemplated by
this Agreement in the same manner, and to the same extent, as if
at the
Effective Time such holder owned that number of shares of
Company Common Stock
delivered after the automatic deemed net exercise pursuant to
this Section
1.7(ii) and (B) receive, if applicable, the Fractional Share
Payment (as defined
below). As soon as practicable following the filing of the
Registration
Statement and in compliance with applicable securities laws, the
Company shall
provide to each holder of any Company Option an informational
notice and consent
describing the treatment of Company Vested Options pursuant to
this Section 1.7.
(iii) Parent shall, at its sole discretion and pursuant to a
written election of Parent made prior to the Closing, either (A)
assume every
Company Unvested Option in accordance with the terms set forth
below in this
Section 1.7(iii) or (B) cause all such Company Unvested Options
to vest and
terminate (each referred to herein as a "CASHED OUT OPTION") and
make a cash
payment to the holder of each such Cashed Out Option in an
amount equal to (x)
the number of shares of Company Common Stock underlying all
Company Unvested
Options held by such holder immediately prior to the Effective
Time multiplied
by (y) the Per Share Amount and minus (z) the aggregate amount
necessary to
exercise all of the Company Unvested Options held by such
holder. If Parent
elects to vest and terminate all Company Unvested Options in
accordance with the
foregoing provisions of this Section 1.7(iii), Parent shall make
the cash
payment required pursuant to the foregoing provisions of this
Section 1.7(iii)
to each holder of Company Unvested Options no later than the
second Business Day
after the Closing. If Parent elects to assume all Company
Unvested Options in
accordance with the foregoing provisions of this Section
1.7(iii), (i) each such
assumed Company Unvested Option shall thereby be converted into
an option (an
"ASSUMED OPTION") to purchase the number of shares of Parent
Common Stock equal
to the product of the number of shares of Company Common Stock
that were
issuable upon exercise of such Company Unvested Option
immediately prior to the
Effective Time multiplied by the Company Option Exchange Ratio
(as defined
below), rounded down to the nearest whole number of shares of
Parent Common
Stock, and (ii) the per share exercise price for the shares of
Parent Common
Stock issuable upon exercise of such Assumed Option shall be
equal to the
quotient obtained by dividing the per share exercise price of
the Company
Unvested Option immediately prior to the Effective Time by the
Company Option
Exchange Ratio, rounded up to the nearest whole cent. Each
Assumed Option shall
continue to be subject to the same vesting schedule following
the Effective Time
as to which it was subject prior to the Effective Time and shall
also have the
same terms and conditions set forth in the applicable Company
Unvested Option
(including any applicable award agreement or other documents
evidencing such
security). Notwithstanding the provisions of the immediately
preceding
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<PAGE>
sentence, in the event that, at any time after the Effective
Time, Parent or the
Surviving Corporation shall terminate for any reason or no
reason (other than
for Cause) the employment, consultancy or other association of
any holder of an
Assumed Option, or the holder of any Assumed Option shall
terminate for Good
Reason his or her employment, consultancy or other association
with Parent or
the Surviving Corporation, and that at the time of such
termination such Assumed
Option is not exercisable for all of the shares of Parent Common
Stock subject
to such Assumed Option, then, immediately upon such termination,
such Assumed
Option shall automatically (without any further action required
by such holder,
Parent or the Surviving Corporation) become exercisable for all
of the shares of
Parent Common Stock subject to such Assumed Option.
(iv) For the purposes of this Section 1.7:
(1) "CAUSE" shall mean a determination by the Board of
Directors of Parent that the holder of an Assumed Option has (a)
engaged in
willful misconduct or unlawful or dishonest conduct in
connection with the
performance of such holder's duties and responsibilities as an
employee or
consultant of Parent or the Surviving Corporation, as the case
may be; (b)
materially breached any of such holder's obligations under any
agreement between
such holder and Parent or the Surviving Corporation, as the case
may be, that
pertains to such holder's employment or consulting relationship
with Parent or
the Surviving Corporation, as the case may be; (c) been
convicted of a felony;
or (d) refused to obey or follow a lawful and reasonable
directive issued by
such holder's direct supervisor.
(2) "CLOSING PRICE" shall mean the average of the
reported closing price per share of the Parent Common Stock for
the ten (10)
Business Days prior to the Closing Date.
(3) "COMPANY OPTION EXCHANGE RATIO" shall mean the
quotient obtained by dividing (A) the Per Share Amount by (B)
the Closing Price.
(4) "COMPANY UNVESTED OPTION" shall mean each Company
Option which is not a Company Vested Option.
(5) "COMPANY VESTED OPTION" shall mean each Company
Option that is vested and outstanding by its terms immediately
prior to the
Effective Time (including those that are or become vested by
their terms at the
Effective Time as a result of the passage of time or
transactions contemplated
by this Agreement). Company Vested Option shall not include in
any event any
Company Option vesting solely pursuant to the Parent's election
described in
Section 1.7(iii) above.
(6) "FRACTIONAL SHARE PAYMENT" shall mean a payment in
cash determined by multiplying (A) the fractional share of
Company Common Stock
which was not required to be paid but was nevertheless forfeited
as required by
the rounding convention in the definition of "Net Exercise
Consideration" by (B)
the Per Share Amount.
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<PAGE>
(7) "GOOD REASON" shall mean, with respect to any holder
of an Assumed Option, (a) a material change in such holder's
position and
responsibilities as an employee or consultant of Parent or the
Surviving
Corporation, as the case may be, except in connection with the
termination of
such holder's employment with Parent or the Surviving
Corporation, as the case
may be, (b) a reduction in such holder's base salary or
consulting fees not
agreed to by such holder, or (c) a material breach by Parent or
the Surviving
Corporation, as the case may be, of its obligations under any
agreement between
Parent or the Surviving Corporation, as the case may be, and
such holder.
(8) "NET EXERCISE CONSIDERATION" shall mean that number
of shares of Company Common Stock determined by dividing (A) the
sum of the
total aggregate exercise price of the applicable Company Vested
Option and the
amount of the appropriate tax withholdings in connection with
the automatic
deemed exercise of such Company Vested Option pursuant to
Section 1.7(ii) by (B)
the Per Share Amount and then rounding that quotient up to the
next whole share.
(9) "PER SHARE AMOUNT" means an amount determined by
dividing (A) the sum of $90,000,000 plus the Cash Consideration
by the sum of
(B)(i) the total number of shares of Company Common Stock
outstanding
immediately prior to the Effective Time (without duplication of
any of the
shares of Company Common Stock referred to in clause (iii)
below), (ii) the
total number of shares of Company Common Stock issuable
immediately prior to the
Effective Time upon conversion of all shares of Company
Preferred Stock
outstanding immediately prior to the Effective Time and (iii)
the total number
of shares of Company Common Stock issued pursuant to the
automatic deemed
exercise of Company Vested Options pursuant to Section 1.7(ii)
above.
(v) The Company shall use commercially reasonable efforts,
prior to the Effective Time, (i) provide any notices to and
obtain consents from
holders of Company Options and (ii) to amend the terms of its
equity incentive
plans or arrangements, to give effect to the provisions of this
Section 1.7. It
is intended that the assumption of the Company Unvested Options
by Parent shall
comply with Section 424 of the Code. The Company shall take no
action, other
than those actions contemplated by this Agreement or by any
agreement disclosed
in the Company Disclosure Statement, which will cause or result
in the
accelerated vesting of the Company Unvested Options. As soon as
practicable
after the Effective Time, Parent shall deliver to the holder of
each Company
Option appropriate notices setting forth the number of shares of
Parent Common
Stock underlying such Assumed Option then held by each such
holder and the
exercise price under each such Assumed Option.
(vi) Parent shall take such actions as are necessary for the
assumption of the Company Options pursuant to this Section 1.7,
including the
reservation, issuance and listing of Parent Common Stock as is
necessary to
effectuate the transactions contemplated by this Section 1.7.
Parent shall
prepare and file with the SEC a registration statement on Form
S-8 with respect
to the shares of Parent Common Stock subject to the Company as
promptly as
practicable and in no event
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<PAGE>
later than ten (10) Business Days after the Effective Time and
use commercially
reasonable efforts to maintain the effectiveness of such
registration statement
covering such Company Options for so long as such Company
Options remain
outstanding.
(f) WITHHOLDING TAXES. Notwithstanding any other provision in
this
Agreement, Parent, the Company, Sub, the Exchange and Paying
Agent and Escrow
Agent (as defined in SECTION 1.9) shall have the right to deduct
and withhold
Taxes (as defined in SECTION 2.11) from any payments to be made
hereunder if
such withholding is required by Law, and to request any
necessary Tax forms,
including Form W-9 or the appropriate series of Form W-8, as
applicable, or any
similar information, from the Stockholders and any other
recipients of payments
hereunder. To the extent that amounts are so withheld, such
withheld amounts
shall be treated for all purposes of this Agreement as having
been delivered and
paid to the Stockholder or other recipient of payments in
respect of which such
deduction and withholding was made.
(g) CAPITAL STOCK OF SUB. Each share of common stock of Sub
issued
and outstanding immediately prior to the Effective Time shall be
converted into
and exchanged for one validly issued, fully paid and
nonassessable share of
common stock of the Surviving Corporation. Each stock
certificate of Sub
evidencing ownership of any such shares shall continue to
evidence ownership of
such shares of capital stock of the Surviving Corporation.
(h) STOCKHOLDER REPRESENTATIVE FUND. The Company and the
Stockholder
Representative hereby, direct Parent that on the Closing Date
$200,000 of the
Cash Consideration otherwise payable to the Stockholders upon
the Closing shall
instead be withheld and paid directly by Parent to an account
selected by the
Stockholder Representative (which prior to the Closing Date
shall advise Parent
in writing of the details of the account selected), as a fund
for the fees and
expenses (including legal fees and expenses) of the Stockholder
Representative
incurred in connection with this Agreement (the "STOCKHOLDER
REPRESENTATIVE
FUND"), with any balance of the Stockholder Representative Fund
not incurred for
such purposes to be returned to the Stockholders when the
Stockholder
Representative shall deem it appropriate to do so. In the event
that the
Stockholder Representative Fund shall be insufficient to satisfy
the expenses of
the Stockholder Representative, and in the event there are any
remaining funds
in the Escrow Fund to be distributed to the Stockholders
immediately prior to
the final distribution from the Escrow Fund to the Stockholders
pursuant to the
Escrow Agreement, the Stockholder Representative shall be
entitled to recover
any such expenses from the Escrow Fund to the extent of such
funds prior to the
distribution of funds to the Stockholders. The Stockholders
agree that all
interest or other income earned from the investment of the
Stockholder
Representative Fund shall be reported as allocated to the
Stockholders in
proportion to their interests in the Stockholder Representative
Fund. Each
Stockholder shall deliver to the Stockholder Representative a
properly executed
IRS Form W-9 or appropriate IRS Form W-8.
1.8 DISSENTING SHARES.
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<PAGE>
(a) RIGHT TO DISSENT. Notwithstanding any other provisions of
this
Agreement to the contrary, any shares of Company Capital Stock
held by a holder
who has not voted for the Merger, or who has not effectively
withdrawn or lost
such holder's appraisal rights under Delaware Law (collectively,
the "DISSENTING
SHARES") shall not be converted into or represent a right to
receive the
applicable consideration for Company Capital Stock set forth in
SECTION 1.7
hereof, but the holder thereof shall only be entitled to such
rights as are
provided by Delaware Law.
(b) WITHDRAWAL OF APPRAISAL RIGHTS. Notwithstanding the
provisions
of SECTION 1.8(a) hereof, if any holder of Dissenting Shares
shall effectively
withdraw or lose (through failure to perfect or otherwise) such
holder's
appraisal rights under Delaware Law, then, as of the later of
the Effective Time
and the occurrence of such event, such holder's shares shall
automatically be
converted into and represent only the right to receive the
consideration for
Company Capital Stock, as applicable, set forth in SECTION 1.7
hereof, without
interest thereon, upon surrender of the certificate representing
such shares.
(c) DISSENTING SHARE PAYMENTS. The Company shall give Parent and
the
Stockholder Representative prompt notice of any written demand
for appraisal
received by the Company pursuant to the applicable provisions of
Delaware Law.
Parent shall have the opportunity to participate in (but not
control) all
negotiations and proceedings with respect to such demands. All
such negotiations
and proceedings and all decisions related thereto shall be
controlled by the
Stockholder Representative. None of Parent, the Company or the
Surviving
Corporation shall, except with the prior written consent of the
Stockholder
Representative not to be unreasonably withheld, make any payment
with respect to
any such demands or offer to settle or settle any such demands.
To the extent
that Parent, the Company or the Surviving Corporation (i) makes
any payment or
payments in respect of any Dissenting Shares in excess of the
consideration that
otherwise would have been payable in respect of such shares in
accordance with
this Agreement or (ii) incurs any other costs or expenses,
(including
specifically, but without limitation, attorneys' fees, costs and
expenses in
connection with any action or proceeding or in connection with
any
investigation) in respect of any Dissenting Shares (excluding
payments for such
shares) (together "DISSENTING SHARE PAYMENTS"), Parent shall be
entitled to
recover under the terms of SECTION 7.2 hereof the amount of such
Dissenting
Share Payments without regard to the Deductible or the Basket
(as such terms are
defined in SECTION 7.5(a) hereof).
1.9 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AND PAYING AGENT. Parent, or an institution
selected by
Parent, shall serve as the exchange and paying agent (Parent in
such capacity,
or such institution, the "EXCHANGE AND PAYING AGENT") for the
Merger to receive
the consideration to which the Stockholders are or may be
entitled to pursuant
to this Agreement.
(b) PARENT TO PROVIDE CASH AND PARENT COMMON STOCK. Subject to
the
provisions of SECTION 7.4 relating to escrow arrangements,
promptly after the
Effective Time, Parent shall make available to the Exchange and
Paying Agent for
exchange in accordance with this ARTICLE I the
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<PAGE>
shares of Parent Common Stock issuable and the cash payable at
the Effective
Time pursuant to SECTION 1.7 hereof in exchange for outstanding
shares of
Company Capital Stock; provided, however, that Parent shall
deposit into the
Escrow Fund the Escrow Amount out of the Cash Consideration
otherwise
deliverable to the Stockholders pursuant to SECTION 1.7 hereof.
The Pro Rata
Portion of the Escrow Amount shall be deemed to be contributed
with respect to
each Stockholder entitled to receive a portion of the Stock
Consideration.
(c) EXCHANGE PROCEDURES. Approximately ten (10) days prior to
the
date the parties expect to be the Closing Date, Parent or the
Exchange and
Paying Agent shall mail a letter of transmittal to each
Stockholder at the
address set forth opposite each such Stockholder's name on
SECTION 2.2(a) of the
Disclosure Schedule. If requested by the Stockholder
Representative, Parent or
the Exchange and Paying Agent, as the case may be, will include
with the letter
of transmittal a copy of an agreement between the Stockholder
Representative and
the Stockholders in the form provided by the Stockholder
Representative, with
the request that each Stockholder sign and return such agreement
with the letter
of transmittal; Parent or the Exchange and Paying Agent, as the
case may be,
will promptly deliver to the Stockholder Representative any such
agreements
which are returned to Parent or the Exchange and Paying Agent by
the
Stockholders. At or as soon as practicable following the
Closing, the
Stockholders will surrender the certificates representing their
shares of
Company Capital Stock (the "COMPANY STOCK CERTIFICATES") to the
Exchange and
Paying Agent for cancellation together with a duly completed and
validly
executed letter of transmittal. Upon surrender of a Company
Stock Certificate
for cancellation to the Exchange and Paying Agent, together with
such letter of
transmittal, duly completed and validly executed in accordance
with the
instructions thereto, subject to the terms of SECTION 1.9(f)
hereof, the holder
of such Company Stock Certificate shall be entitled to receive
from the Exchange
and Paying Agent in exchange therefor, the applicable portion of
the Merger
Consideration pursuant to SECTION 1.7 hereof (less the Escrow
Amount to be
deposited into the Escrow Fund with respect to such Stockholder,
if any), and
the Company Stock Certificate so surrendered shall be cancelled.
Parent shall
use commercially reasonable efforts to ensure that, if the Vice
President of
Finance has delivered to Parent the calculation contemplated
under SECTION
1.7(a) hereof at least five (5) days prior to the Closing Date,
the Merger
Consideration shall be delivered to Stockholders on the Closing
Date who have
surrendered certificates representing their shares of Company
Capital Stock in
accordance with the provisions of this SECTION 1.9(c). In the
event that,
despite using commercially reasonable efforts, Parent is unable
to cause the
Merger Consideration to delivered to such Stockholders on the
Closing Date,
Parent shall nevertheless ensure that the Merger Consideration
is delivered to
such Stockholders within three Business Days after the Closing
Date.
(d) Until so surrendered, each Company Stock Certificate
outstanding
after the Effective Time will be deemed, for all corporate
purposes thereafter,
to evidence only the right to receive the cash amounts payable
and/or Parent
Common Stock issuable in exchange for shares of Company Capital
Stock (without
interest) into which such shares of Company Capital Stock shall
have been so
converted. No portion of the Merger Consideration will be paid
to the holder of
any unsurrendered Company Stock Certificate with respect to
shares of Company
Capital Stock formerly
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<PAGE>
represented thereby until the holder of record of such Company
Stock Certificate
shall surrender such Company Stock Certificate pursuant
hereto.
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends
or other distributions declared or made after the Effective Time
with respect to
Parent Common Stock with a record date after the Effective Time
will be paid to
the holder of any unsurrendered Company Stock Certificate with
respect to the
shares of Parent Common Stock represented thereby until the
holder of record of
such Company Stock Certificate shall surrender such Company
Stock Certificate.
Subject to applicable Laws, following surrender of any such
Company Stock
Certificate, there shall be paid to the record holder of the
certificates
representing whole shares of Parent Common Stock issued in
exchange therefor,
without interest, at the time of such surrender, the amount of
dividends or
other distributions with a record date after the Effective Time
theretofore paid
with respect to such whole shares of Parent Common Stock. No
interest shall be
payable on any cash deliverable upon the exchange of any Company
Capital Stock.
(f) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent
Common Stock is to be issued in a name other than that in which
the Company
Stock Certificate surrendered in exchange therefor is
registered, or if any cash
amounts are to be disbursed pursuant to SECTION 1.7 hereof to
person other than
the person whose name is reflected on the Company Stock
Certificate surrendered
in exchange therefor, it will be a condition of the issuance or
delivery thereof
that the certificate so surrendered will be properly endorsed
and otherwise in
proper form for transfer and that the person requesting such
exchange will have
paid to Parent or any agent designated by it any transfer or
other Taxes (as
defined in SECTION 2.11) required by reason of the issuance of a
certificate for
shares of Parent Common Stock in any name other than that of the
registered
holder of the certificate surrendered, or established to the
satisfaction of
Parent or any agent designated by it that such Tax has been paid
or is not
payable.
(g) EXCHANGE AND PAYING AGENT TO RETURN CASH CONSIDERATION. At
any
time following the last day of the sixth (6th) month following
the Effective
Time, Parent shall be entitled to require the Exchange and
Paying Agent to
deliver to Parent or its designated successor or assign all cash
amounts and
shares of Parent Common Stock that have been deposited with the
Exchange and
Paying Agent pursuant to SECTION 1.9(b) hereof, and any and all
interest thereon
or other income or proceeds thereof, not disbursed to the
holders of Company
Stock Certificates pursuant to SECTION 1.9(b) hereof, and
thereafter the holders
of Company Stock Certificates shall be entitled to look only to
Parent (subject
to the terms of SECTION 1.9(h) hereof) only as general creditors
thereof with
respect to any and all amounts that may be payable to such
holders of Company
Stock Certificates pursuant to SECTION 1.7 hereof upon the due
surrender of such
Company Stock Certificates in the manner set forth in SECTION
1.9(b) hereof.
(h) NO LIABILITY. Notwithstanding anything to the contrary in
this
SECTION 1.9, neither the Exchange and Paying Agent, the
Surviving Corporation,
nor any party hereto shall be
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<PAGE>
liable to a holder of shares of Company Capital Stock for any
amount properly
paid to a public official as required by any applicable
abandoned property,
escheat or similar Law.
1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. The
cash
amounts paid and Parent Common Stock issued in respect of the
surrender for
exchange of shares of Company Capital Stock in accordance with
the terms hereof
shall be deemed to be full satisfaction of all rights pertaining
to such shares
of Company Capital Stock, and there shall be no further
registration of
transfers on the records of the Surviving Corporation of shares
of Company
Capital Stock that were outstanding immediately prior to the
Effective Time. If,
after the Effective Time, Company Stock Certificates are
presented to the
Surviving Corporation for any reason, they shall be canceled and
exchanged as
provided in this ARTICLE I.
1.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Company
Stock Certificates shall have been lost, stolen or destroyed,
the Exchange and
Paying Agent shall issue in exchange for such lost, stolen or
destroyed
certificates, upon the making of an affidavit of that fact by
the holder
thereof, such amount, if any, as may be required pursuant to
SECTION 1.7 hereof;
provided, however, that Parent may, in its discretion and as a
condition
precedent to the issuance thereof, require the Stockholder who
is the owner of
such lost, stolen or destroyed certificates to either (i)
deliver a bond in such
amount as it may reasonably direct or (ii) provide an unsecured
indemnification
agreement in a form and substance reasonably acceptable to
Parent, against any
claim that may be made against Parent or the Exchange and Paying
Agent with
respect to the certificates alleged to have been lost, stolen or
destroyed.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time
after the
Effective Time, any further action is necessary or desirable to
carry out the
purposes of this Agreement and to vest the Surviving Corporation
with full
right, title and possession to all assets, property, rights,
privileges, powers
and franchises of the Company, Parent, Sub, and the officers and
directors of
the Company, Parent and Sub are fully authorized in the name of
their respective
corporations or otherwise to take, and will take, all such
lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub,
subject to
such exceptions as are disclosed in the disclosure schedule
supplied by the
Company to Parent (as supplemented pursuant to SECTION 5.15
hereof, the
"DISCLOSURE SCHEDULE") and dated as of the date hereof, on the
date hereof and
as of the Effective Time, as though made at the Effective Time,
as follows:
The Disclosure Schedule is numbered and captioned to correspond
to the
Sections in this Article II. Each disclosure in the Disclosure
Schedule
qualifies the representations and warranties in the
corresponding Section of
this Article II and any other Section(s) of this Article II to
which such
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<PAGE>
disclosure is cross-referenced or with respect to which the
relevance of such
disclosure is reasonably apparent on its face.
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation
duly
organized, validly existing and in good standing under the Laws
of the State of
Delaware. The Company has the corporate power to own its
properties and to carry
on its business as currently conducted. The Company is duly
qualified or
licensed to do business and in good standing as a foreign
corporation in each
jurisdiction in which the failure to be so qualified or licensed
would have a
Company Material Adverse Effect. The Company has delivered a
true and correct
copy of its certificate of incorporation and bylaws, each as
amended to date and
in full force and effect on the date hereof (collectively, the
"CHARTER
DOCUMENTS"), to Parent. SECTION 2.1 of the Disclosure Schedule
lists the
directors and officers of the Company as of the date hereof.
SECTION 2.1 of the
Disclosure Schedule also lists (i) each jurisdiction in which
the Company is
qualified or licensed to do business and (ii) every state or
foreign
jurisdiction in which the Company has Employees or facilities or
otherwise
carries on business.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
128,000,000 shares of Common Stock, of which 17,363,169 shares
are issued and
outstanding and 80,084,844 shares of Preferred Stock, of which
5,600,000 shares
have been designated Series A Convertible Preferred Stock, all
of which are
issued and outstanding, 1,820,000 shares have been designated
Series B
Convertible Preferred Stock, all of which are issued and
outstanding, 6,383,294
shares have been designated Series C Convertible Preferred
Stock, all of which
are issued and outstanding and 66,281,550 shares have been
designated Series D
Convertible Preferred Stock, all of which are issued and
outstanding. The
Company Capital Stock is held by the persons with the domicile
addresses and in
the amounts set forth in SECTION 2.2(a) of the Disclosure
Schedule. All
outstanding shares of Company Capital Stock are duly authorized,
validly issued,
fully paid and non-assessable and not subject to preemptive
rights created by
statute, the Charter Documents, or any Contract to which the
Company is a party
or by which it is bound, and have been issued in compliance in
all material
respects with federal and state securities Laws. All outstanding
shares of
Company Capital Stock and Company Options have been issued or
repurchased (in
the case of shares that were outstanding and repurchased by the
Company or any
stockholder of the Company) in compliance in all material
respects with all
applicable Laws, including federal and state securities Laws.
The Company has
not, and will not have, suffered or incurred any Liability (as
defined in
SECTION 2.8), contingent or otherwise, or claim, loss, damage,
deficiency, cost
or expense relating to or arising out of the issuance or
repurchase of any
Company Capital Stock or Company Options, or out of any
Contracts relating
thereto (including any amendment of the terms of any such
arrangement or
arrangements). There are no declared or accrued but unpaid
dividends with
respect to any shares of Company Capital Stock. The Company has
no capital stock
other than the Company Common Stock and the Company Preferred
Stock authorized,
issued or outstanding. The Company has no Company Capital Stock
that is
unvested.
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<PAGE>
(b) Except for the Plans, the Company has never adopted,
sponsored
or maintained any stock option plan or any other plan or
agreement providing for
equity compensation to any person. The Company has reserved
24,727,315 shares of
Company Common Stock for issuance to employees and directors of,
and consultants
to, the Company upon the issuance of stock or the exercise of
Company Options
granted under the Plans or any other plan, Contract or
arrangement (whether
written or oral, formal or informal), of which (i) 20,110,890
shares are
issuable, as of the date hereof, upon the exercise of
outstanding, unexercised
Company Options, and (ii) 1,903,169 shares have been issued upon
the exercise of
Company Options previously granted as of the date hereof. Except
for the Company
Options set forth in SECTION 2.2(b) of the Disclosure Schedule
(such schedule to
contain, for each holder of Company Options, the name and
address of such
holder, the number of Company Options held by such holder, the
vesting schedule
and exercise price of such Company Options, the dates on which
such Company
Options were granted and will expire, the number of shares
vested under such
Company Options and whether any Company Options are intended to
be incentive
stock options under the Code), there are no options, warrants,
calls, rights,
convertible securities, commitments or Contracts of any
character to which the
Company is a party or by which the Company is bound obligating
the Company to
issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered,
sold, repurchased or redeemed, any shares of the Company Capital
Stock or
obligating the Company to grant, extend, accelerate the vesting
of, change the
price of, otherwise amend or enter into any such option,
warrant, call, right,
commitment or agreement. There are no outstanding or authorized
stock
appreciation, phantom stock, profit participation, or other
similar rights with
respect to the Company. Except as contemplated hereby, there are
no voting
trusts, proxies, or other Contracts or understandings with
respect to the voting
stock of the Company. There are no Contracts to which the
Company is a party
relating to the registration, sale or transfer (including
agreements relating to
rights of first refusal, co-sale rights or "drag-along" rights)
of any Company
Capital Stock. As a result of the Merger, Parent will be the
sole record and
beneficial holder of all issued and outstanding Company Capital
Stock and all
rights to acquire or receive any shares of Company Capital
Stock, whether or not
such shares of Company Capital Stock are outstanding. SECTION
2.2(b) of the
Disclosure Schedule lists any Company Options, the vesting of
which will
accelerate as of the Effective Time as result of the Merger or
which may be
subject to acceleration following the Effective Time (whether or
not such
acceleration is conditioned upon the occurrence of a subsequent
event).
2.3 SUBSIDIARIES. The Company does not have and has never had
any
subsidiaries or affiliated companies and does not otherwise own
and has never
otherwise owned any shares of capital stock or any interest in,
or control,
directly or indirectly, any other corporation, limited liability
company,
partnership, association, joint venture or other business
entity. The Company
has not agreed, is not obligated to make, or is not bound by any
Contract under
which it may become obligated to make any future investment in,
or capital
contribution to, any other entity. The Company does not directly
or indirectly
own any equity or similar interest in or any interest
convertible, exchangeable
or exercisable for any equity or similar interest in, any
person.
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<PAGE>
2.4 AUTHORITY. The Company has all requisite power and authority
to enter
into this Agreement and any Related Agreements to which it is a
party and
(subject to the Sufficient Stockholder Vote) to consummate the
transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement
and any Related Agreements to which the Company is a party and
(subject to the
Sufficient Stockholder Vote) the consummation of the
transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action
on the part of the Company and no further action (other than the
Sufficient
Stockholder Vote) is required on the part of the Company to
authorize the
Agreement and any Related Agreements to which it is a party and
the transactions
contemplated hereby and thereby. The vote required under
Delaware Law and the
Charter Documents to approve this Agreement by the Stockholders
is set forth in
SECTION 2.4 of the Disclosure Schedule ("SUFFICIENT STOCKHOLDER
VOTE"). This
Agreement and the Merger have been unanimously approved by the
Board of
Directors of the Company. This Agreement has been duly executed
and delivered by
the Company and assuming the due authorization, execution and
delivery by the
other parties hereto, this Agreement constitutes, and each of
the Related
Agreements to which the Company is contemplated to be a party,
if and when duly
executed and delivered by the Company will constitute, the valid
and binding
obligations of the Company enforceable against it in accordance
with their
respective terms, except as such enforceability may be subject
to the laws of
general application relating to bankruptcy, insolvency, and the
relief of
debtors and rules of law governing specific performance,
injunctive relief, or
other equitable remedies.
2.5 NO CONFLICT. The execution and delivery by the Company of
this
Agreement and any Related Agreement to which the Company is a
party, and
(subject to the Sufficient Stockholder Vote) the consummation of
the
transactions contemplated hereby and thereby, will not conflict
with or result
in any violation of or default under (with or without notice or
lapse of time,
or both) or give rise to a right of termination, cancellation,
modification or
acceleration of any obligation or loss of any benefit under (i)
any provision of
the Charter Documents, (ii) any Material Contract (as defined in
SECTION 2.15),
or (iii) any Law applicable to the Company or any of its
properties (whether
tangible or intangible) or assets, except in the case of clause
(iii) for such
violations or failures to comply as have not had or are not
reasonably likely to
have a Company Material Adverse Effect.
2.6 CONSENTS. No consent, notice, waiver, approval, order or
authorization
of, or registration, declaration or filing with any court,
administrative agency
or commission or other federal, state, county, local or other
foreign
governmental or regulatory authority, instrumentality, agency or
commission
(each, a "GOVERNMENTAL ENTITY"), is required by the Company in
connection with
the execution and delivery of this Agreement and any Related
Agreements to which
the Company is a party or the consummation of the transactions
contemplated
hereby and thereby, except for compliance with the pre-merger
notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as
amended (the "HSR ACT"), and under the comparable non-U.S.
competition Laws the
parties reasonably determine apply.
2.7 COMPANY FINANCIAL STATEMENTS.
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<PAGE>
(a) SECTION 2.7 of the Disclosure Schedule sets forth the
Company's
(i) unaudited consolidated balance sheet as of December 31, 2006
(the "BALANCE
SHEET DATE"), and audited consolidated balance sheets as of
December 31, 2005
and December 31, 2004, and the related consolidated statements
of income, cash
flow and stockholders' equity for each of the twelve (12) month
periods then
ended (the "YEAR-END FINANCIALS"), and (ii) unaudited
consolidated balance sheet
as of March 31, 2007, and the related unaudited consolidated
statements of
income, cash flow and stockholders' equity for the three (3)
month period then
ended (the "INTERIM FINANCIALS"). The Year-End Financials and
the Interim
Financials (collectively referred to as the "FINANCIALS") have
been prepared in
accordance with GAAP consistently applied on a consistent basis
throughout the
periods indicated and consistent with each other (except that
unaudited
Financials do not contain footnotes and other presentation items
that may be
required by GAAP). The Financials present fairly the Company's
financial
condition, operating results and cash flows as of the dates and
during the
periods indicated therein, subject in the case of the Interim
Financials, to
normal year-end adjustments that are not material in amount or
significance in
any individual case or in the aggregate. The Company's unaudited
consolidated
balance sheet as of the Balance Sheet Date is referred to
hereinafter as the
"CURRENT BALANCE SHEET."
(b) Any financial statements provided by the Company pursuant
to
SECTION 5.13 hereof, when delivered, will (i) have been derived
from the books
and records of the Company, (ii) fairly present, in all material
respects, the
consolidated financial position, results of operations and cash
flows of the
Company at the dates and for the periods indicated in accordance
with GAAP and
Regulation S-X promulgated under the Exchange Act ("REGULATION
S-X").
2.8 NO UNDISCLOSED LIABILITIES. The Company has no
liability,
indebtedness, obligation, expense, claim, deficiency, guaranty
or endorsement of
any type, whether accrued, absolute, contingent, matured,
unmatured or other
("LIABILITIES"), other than (i) Liabilities reflected in the
Current Balance
Sheet, or incurred in the ordinary course of business,
consistent with past
practice, and not required by GAAP to be set forth in a balance
sheet, (ii)
Liabilities arising in the ordinary course of business
consistent with past
practices since the Balance Sheet Date, (iii) Liabilities for
fees and expenses
incurred in connection with the transactions contemplated by
this Agreement, and
(iv) Liabilities that, in the aggregate, are immaterial to the
financial
condition or operating results of the Company and its
subsidiaries, taken as a
whole.
2.9 INTERNAL CONTROLS. The Company maintains books and records
reflecting
its assets and Liabilities and maintains internal accounting
controls that the
Company reasonably believes provide reasonable assurance that
(i) transactions
are executed with management's authorization; (ii) transactions
are recorded as
necessary to permit preparation of the consolidated financial
statements of the
Company in accordance with GAAP and to maintain accountability
for the Company's
consolidated assets; (iii) access to the Company's assets is
permitted only in
accordance with management's authorization; (iv) the
identification of the
Company's assets is compared with existing assets as necessary
to permit
preparation of the consolidated financial statements of the
Company in
accordance with GAAP and to maintain accountability for the
Company's
consolidated
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<PAGE>
assets; (v) accounts, notes and other receivables and inventory
are recorded
accurately, and adequate procedures are implemented to effect
the collection
thereof on a timely basis; and (vi) there are adequate
procedures in place
regarding prevention or timely detection of unauthorized
acquisition, use or
disposition of the Company's assets. As of the date of this
Agreement, to the
Company's Knowledge, (x) there are no significant deficiencies
in the design or
operation of the Company's internal controls over financial
reporting that could
reasonably be expected to adversely affect in any material
respect the Company's
ability to record, process, summarize and report financial data
or material
weaknesses in internal controls over financial reporting and (y)
there has been
no fraud, whether or not material, that involved management or
other employees
of the Company who have a significant role in the Company's
internal controls
over financial reporting.
2.10 NO CHANGES. From the Balance Sheet Date through the date of
this
Agreement, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course
of
business as conducted on that date and consistent with past
practices;
(b) capital expenditure or commitment by the Company
exceeding
$100,000 individually or $250,000 in the aggregate;
(c) payment, discharge or satisfaction, in any amount in excess
of
$50,000 in any one case, or $100,000 in the aggregate, of any
Liabilities, other
than payments, discharges or satisfactions in the ordinary
course of business,
consistent with past practices, of Liabilities reflected or
reserved against in
the Current Balance Sheet;
(d) destruction of, damage to, or loss of any material
assets
(whether tangible or intangible), material business or material
customer of the
Company (whether or not covered by insurance);
(e) change in accounting methods or practices (including any
change
in depreciation or amortization policies or rates) by the
Company other than as
required by GAAP;
(f) adoption of or change in any material Tax (as defined
below)
election, adoption of or change in any Tax accounting method,
entry into any
closing agreement, settlement or compromise of any Tax claim or
assessment, or
extension or waiver of the limitation period applicable to any
Tax claim or
assessment;
(g) material revaluation by the Company of any of its assets
(whether tangible or intangible), including without limitation,
writing down the
value of inventory or writing off notes or accounts
receivable;
(h) increase in the salary or other compensation payable or
to
become payable by the Company to any of its respective officers,
directors,
Employees or advisors, which increase
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<PAGE>
(individually or in the aggregate) is material to the Company,
or the
declaration, payment or commitment or obligation of any kind for
the payment
(whether in cash or equity) by the Company of a severance
payment, termination
payment, bonus or other additional salary or compensation to any
such person;
(i) incurring by the Company of any indebtedness for borrowed
money,
amendment of the terms of any outstanding loan agreement,
guaranteeing by the
Company of any material indebtedness, issuance or sale of any
debt securities,
purchase of a material amount of debt securities or guaranteeing
of any debt
securities of others, except for advances to employees for
travel and business
expenses in the ordinary course of business, consistent with
past practices;
(j) waiver or release of any rights or claims of the
Company,
including any write-offs or other compromise of any account
receivable of the
Company, with a value in excess of $25,000 individually or
$50,000 in the
aggregate;
(k) commencement or settlement of any lawsuit by the Company,
the
commencement, settlement, notice or, to the Knowledge of the
Company, threat of
any lawsuit or proceeding or other investigation against the
Company (other than
on the part of Parent or any of its affiliates, as to which this
representation
is not made);
(l) receipt by the Company of written notice of any claim or
potential claim of ownership, interest or right by any person
other than the
Company of the Company Intellectual Property (as defined in
SECTION 2.14 hereof)
or of infringement by the Company of any other person's
Intellectual Property
(as defined in SECTION 2.14 hereof);
(m) (i) except standard end user licenses/hosting agreements
entered
into in the ordinary course of business, consistent with past
practice, sale or
license of any Company Intellectual Property or execution,
modification or
amendment of any agreement with respect to the Company
Intellectual Property
with any person or with respect to the Intellectual Property of
any person, or
(ii) except in the ordinary course of business, consistent with
past practice,
purchase or license of any Intellectual Property or execution,
modification or
amendment of any agreement with respect to the Intellectual
Property of any
person, (iii) agreement or modification or amendment of an
existing agreement
with respect to the development of any Intellectual Property
with a third party,
or (iv) material change in pricing or royalties set or charged
by the Company to
its customers or licensees or in pricing or royalties set or
charged by persons
who have licensed Intellectual Property to the Company;
(n) event or condition of any character that has had or is
reasonably likely to have a Company Material Adverse Effect;
or
(o) agreement by the Company, or any officer or employees on
behalf
of the Company, to do any of the things described in the
preceding clauses (a)
through (m) of this
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<PAGE>
SECTION 2.10 (other than negotiations with Parent and its
representatives
regarding the transactions contemplated by this Agreement and
the Related
Agreements).
2.11 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
the
term "TAX" or, collectively, "TAXES" shall mean any and all U.S.
federal, state,
local and non-U.S. taxes, assessments, duties, impositions and
other
governmental charges, including taxes based upon or measured by
gross receipts,
income, profits, sales, use and occupation, and value added, ad
valorem,
transfer, franchise, withholding, payroll, recapture,
employment, excise and
property taxes as well as public imposts, fees and social
security charges
(including but not limited to health, unemployment and pension
insurance),
together with all interest, penalties and additions imposed with
respect to such
amounts.
(b) TAX RETURNS AND AUDITS.
(i) The Company has (a) prepared and timely filed all
material
U.S. federal, state, local and non-U.S. returns, estimates,
information
statements and reports ("RETURNS") relating to any and all Taxes
of the Company
and such Returns are true and correct in all material respects
and have been
completed in accordance with applicable Laws and (b) timely paid
all Taxes it is
required to pay (whether or not shown to be due on any
Return).
(ii) The Company has paid or withheld with respect to its
Employees (as defined in SECTION 2.22) and other third parties,
all U.S.
federal, state and non-U.S. income taxes and social security
charges and similar
fees, Federal Insurance Contribution Act amounts, Federal
Unemployment Tax Act
amounts and other Taxes it was required to withhold, and has
timely paid over
any such withheld Taxes to the appropriate authorities.
(iii) There is no Tax deficiency outstanding, assessed or
proposed against the Company, nor has the Company executed any
outstanding
waiver of any statute of limitations on or extending the period
for the
assessment or collection of any Tax.
(iv) To the Company's Knowledge, no audit or other
examination
of any Return of the Company is presently in progress, nor has
the Company been
notified of any request for such an audit or other examination.
No adjustment
relating to any Return filed by the Company has been proposed by
any Tax
authority to the Company or any representative thereof. No claim
has ever been
made to the Company in writing by an authority in a jurisdiction
where the
Company does not file Returns that it is or may be subject to
taxation by that
jurisdiction.
(v) The Company has not incurred any Liability for Taxes
since
the Balance Sheet Date other than in the ordinary course of
business.
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<PAGE>
(vi) The Company has made available to Parent or its legal
counsel, copies of all Returns for the Company filed for the
past six (6) years.
(vii) There are (and immediately following the Effective
Time
there will be) no Liens on the assets of the Company relating to
or attributable
to Taxes, other than Liens for Taxes not yet due and
payable.
(viii) None of the Company's assets is treated as
"tax-exempt
use property," within the meaning of Section 168(h) of the
Code.
(ix) The Company has (a) never been a member of an
affiliated
group (within the meaning of Code Section 1504(a)) filing a
consolidated federal
income tax Return, (b) never been a party to any Tax sharing,
indemnification,
allocation or similar agreement, (c) no liability for the Taxes
of any person
under Treasury Regulation Section 1.1502-6 (or any similar
provision of state,
local or foreign Law (including any arrangement for group or
consortium relief
or similar arrangement)), as a transferee or successor, or by
Contract (other
than Contracts entered into with customers, vendors or real
property lessors,
the principal purpose of which is not to address Tax matters)
and (d) never been
a party to any joint venture, partnership or other arrangement
that could be
treated as a partnership for Tax purposes.
(x) The Company has not been, at any time, a "United States
Real Property Holding Corporation" within the meaning of Section
897(c)(2) of
the Code.
(xi) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of
stock intended
to qualify for tax-free treatment under Section 355 of the
Code.
(xii) The Company has not engaged in a reportable
transaction
under Treas. Reg. Section 1.6011-4(b), including a transaction
that is the same
as or substantially similar to one of the types of transactions
that the
Internal Revenue Service has determined to be a tax avoidance
transaction and
identified by notice, regulation, or other form of published
guidance as a
listed transaction, as set forth in Treas. Reg. Section
1.6011-4(b)(2).
(xiii) The Company will not be required to include any
income
or gain or exclude any deduction or loss from Taxable income in
any Tax Period
ending after the Effective Time as a result of any (a) change in
method of
accounting under Section 481 of the Code, (b) closing agreement
under Section
7121 of the Code, (or in the case of each of (a) and (b), under
any similar
provision of applicable Laws), or (c) prepaid amount.
(xiv) The Company is not subject to Tax in any jurisdiction
outside of the United States by virtue of having a permanent
establishment or
other place of business or by virtue of having a source of
income in that
country.
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<PAGE>
(xv) The Company is in full compliance with all terms and
conditions of any currently effective Tax exemption, Tax holiday
or other Tax
reduction agreement or order applicable to it ("TAX INCENTIVE")
and the
consummation of the transactions contemplated by this Agreement
will not have
any adverse effect on the continued validity and effectiveness
of any such Tax
Incentive.
(c) EXECUTIVE COMPENSATION TAX. There is no Contract to which
the
Company is a party, including, without limitation, the
provisions of this
Agreement, covering any Employee of the Company, that,
individually or
collectively, could give rise to the payment of any amount that
would not be
deductible pursuant to Sections 280G or 404 of the Code or that
would give rise
to a penalty under Section 409A of the Code.
(d) 409A. The Company is not party to any Contract that is a
"nonqualified deferred compensation plan" subject to Section
409A of the Code.
Each such nonqualified deferred compensation plan has been
operated since
January 1, 2005 in good faith compliance with Section 409A of
the Code and IRS
Notice 2005-1. No nonqualified deferred compensation plan has
been "materially
modified" (within the meaning of IRS Notice 2005-1) at any time
after October 3,
2004. No Company Option, Company Warrant or other right to
acquire Company
Common Stock or other equity of the Company (i) has an exercise
price that has
been or may be less than the fair market value of the underlying
equity as of
the date such Company Option, Company Warrant or other right was
granted, (ii)
has any feature for the deferral of compensation other than the
deferral of
recognition of income until the later of exercise or disposition
of such Company
Option, Company Warrant or rights, or (iii) has been granted
after December 31,
2004, with respect to any Company Capital Stock that is not
"service recipient
stock" (within the meaning of applicable regulations under
Section 409A).
2.12 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
Contract,
commitment, judgment, injunction, order or decree to which the
Company is a
party or otherwise binding upon the Company that has or may
reasonably be
expected to have the effect of prohibiting or impairing any
business practices
of the Company, any acquisition of property (tangible or
intangible) by the
Company, the conduct of business by the Company, or otherwise
limiting the
freedom of the Company to engage in any line of business or to
compete with any
person. Without limiting the generality of the foregoing, the
Company has not
entered into any Contract under which the Company is restricted
from selling,
licensing, manufacturing or otherwise distributing any of its
technology or
products or from providing services to customers or potential
customers, in any
geographic area, during any period of time, or in any segment of
the market.
2.13 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF
EQUIPMENT.
(a) The Company does not own any real property, nor has the
Company
ever owned any real property. SECTION 2.13(a) of the Disclosure
Schedule sets
forth a list of all real property currently leased, subleased or
licensed by or
from the Company or otherwise used or occupied by the
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<PAGE>
Company for the operation of its business (the "LEASED REAL
PROPERTY"), the name
of the lessor, licensor, sublessor, master lessor and/or lessee,
the date and
term of the lease, license, sublease or other occupancy right
and each amendment
thereto (the "LEASE AGREEMENTS") and, with respect to any
current lease,
license, sublease or other occupancy right, the aggregate annual
rent payable
thereunder. All such Lease Agreements are valid and effective in
accordance with
their respective terms, and there is not, under any of such
leases, any existing
default, past due rent, or event of default (or event which with
notice or lapse
of time, or both, would constitute a default on) on the part of
the Company, or
to the Company's Knowledge, on the part of any other party
thereto. The Company
has not received any notice of a default, alleged failure to
perform, or any
offset or counterclaim with respect to any such Lease Agreement,
that has not
been fully remedied and withdrawn.
(b) To the Company's Knowledge, the Leased Real Property is in
good
operating condition and repair, free from structural, physical
and mechanical
defects and is structurally sufficient and otherwise suitable
for the conduct of
the business as presently conducted. Neither the operation of
the Company on the
Leased Real Property nor, to the Company's Knowledge, such
Leased Real Property,
including the improvements thereon, violate in any material
respect any
applicable building code, zoning requirement or Law relating to
such property or
operations thereon, and any such non-violation is not dependent
on so-called
non-conforming use exceptions.
(c) The Company has good and valid title to, or, in the case
of
leased properties and assets, valid leasehold interests in, all
of its tangible
properties and assets, real, personal and mixed, used or held
for use in its
business, free and clear of any Liens, except (i) as reflected
in the Current
Balance Sheet, (ii) Liens for Taxes not yet due and payable, and
(iii) such
imperfections of title and encumbrances, if any, which do not
detract from the
value or interfere with the present use of the property subject
thereto or
affected thereby.
(d) All facilities, equipment and other properties owned, leased
or
used by the Company are (i) adequate for the conduct of the
business of the
Company as currently conducted and as currently contemplated to
be conducted
(such contemplation evidenced by a resolution of the Company's
board of
directors) and (ii) to the Company's Knowledge, in good
operating condition,
regularly and properly maintained, subject to normal wear and
tear.
2.14 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For all purposes of this Agreement, the
following
terms shall have the following respective meanings:
"INTELLECTUAL PROPERTY" shall mean any or all of the
following
(i) works of authorship including, without limitation, computer
programs, source
code, and executable code, whether embodied in software,
firmware or otherwise,
architecture, documentation, designs, files, records, databases,
and data, (ii)
inventions (whether or not patentable), discoveries,
improvements, and
technology, (iii) proprietary and confidential information,
trade secrets and
know how,
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<PAGE>
(iv) databases, data compilations and collections and technical
data, (v) domain
names, web addresses and sites, (vi) tools, methods and
processes, and (vii) any
and all instantiations or embodiments of the foregoing in any
form and embodied
in any media.
"INTELLECTUAL PROPERTY RIGHTS" shall mean worldwide common
law
and statutory rights associated with (i) patents and patent
applications of any
kind, (ii) copyrights, copyright registrations and copyright
applications,
"moral" rights and mask work rights, (iii) the protection of
trade and
industrial secrets and confidential information, (iv) other
proprietary rights
relating to intangible Intellectual Property, (v) logos,
trademarks, trade names
and service marks, (vi) analogous rights to those set forth
above, and (vii)
divisions, continuations, renewals, reissuances and extensions
of the foregoing
(as applicable).
"COMPANY INTELLECTUAL PROPERTY" shall mean any and all
Intellectual Property and Intellectual Property Rights that are
owned by or
exclusively licensed to the Company.
"REGISTERED INTELLECTUAL PROPERTY" shall mean Intellectual
Property and Intellectual Property Rights that have been
registered, applied
for, filed, certified or otherwise perfected, issued, or
recorded with or by any
state, government or other public or quasi-public legal
authority.
(b) SECTION 2.14(b) of the Disclosure Schedule (i) lists all
Registered Intellectual Property owned by, or filed in the name
of, the Company
(the "COMPANY REGISTERED INTELLECTUAL PROPERTY") and (ii) lists
any material
proceedings or actions before any court, tribunal (including the
United States
Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the
world) related to any of the Company Registered Intellectual
Property or Company
Intellectual Property.
(c) Each item of Company Registered Intellectual Property is
valid
and subsisting, and all necessary registration, maintenance and
renewal fees
have been paid and all necessary documents and certificates
required to be filed
in connection with such Company Registered Intellectual Property
have been filed
with the relevant patent, copyright, trademark or other
authorities in the
United States or foreign jurisdictions, as the case may be, for
the purposes of
maintaining such Registered Intellectual Property. In each case
in which the
Company has acquired title to any Intellectual Property or
Intellectual Property
Rights from any person, the Company has obtained an assignment
in form
sufficient to irrevocably transfer all rights in such
Intellectual Property and
the associated Intellectual Property Rights.
(d) All Company Intellectual Property will be fully transferable
and
licensable by the Surviving Corporation and/or Parent without
restriction and
without payment of any kind to any third party.
(e) Each item of Company Intellectual Property is free and clear
of
any Liens.
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<PAGE>
(f) The Company has not (i) transferred ownership of, or granted
any
exclusive license of or exclusive right to use, or authorized
the retention of
any exclusive rights to use or joint ownership of, any
Intellectual Property or
Intellectual Property Rights that is or was Company Intellectual
Property, to
any other person or (ii) permitted the Company's rights in any
Company
Intellectual Property to enter into the public domain.
(g) The Company Intellectual Property constitutes all of the
Intellectual Property and Intellectual Property Rights used in,
necessary to or
otherwise would be infringed by the conduct of the business of
the Company as it
currently is conducted, including, without limitation, the
design, development,
marketing, manufacture, use, import and sale of any product,
technology or
service currently being produced and sold by the Company. The
Surviving
Corporation will own or possess sufficient rights to all
Intellectual Property
and Intellectual Property Rights immediately following the
Closing Date that are
necessary to the operation of the business of the Company as it
currently is
conducted and without infringing on the Intellectual Property
Rights of any
person. For avoidance of doubt, "currently" as it is used in
this SECTION
2.14(g), when measured as of the Closing Date, shall mean both
"at the Effective
Time" and "immediately following the Effective Time".
(h) No third party that has licensed Intellectual Property
or
Intellectual Property Rights to the Company has ownership rights
or license
rights to improvements or derivative works made by the Company
in such
Intellectual Property that has been licensed to the Company.
(i) SECTION 2.14(i) of the Disclosure Schedule lists all
Contracts
between the Company and any other person wherein or whereby the
Company has
agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse,
hold harmless, guaranty or otherwise assume or incur any
obligation or Liability
or provide a right of rescission with respect to the
infringement or
misappropriation by the Company, or such other person of the
Intellectual
Property Rights of any person other than the Company, but
excluding (i)
Shrink-Wrap Code and (ii) non-disclosure agreements entered into
in the ordinary
course of business.
(j) The operation of the business of the Company as it has
been
conducted and is currently conducted by the Company, including
but not limited
to the design, development, use, import, branding, advertising,
promotion,
marketing, distribution, manufacture and sale of any product,
technology or
service that has been or is being produced and sold by the
Company has not
infringed or misappropriated, does not infringe or
misappropriate, and will not
infringe or misappropriate when conducted by Parent and/or the
Surviving
Corporation following the Closing in the manner currently
conducted, any
Intellectual Property Rights of any person, violate any privacy,
publicity, or
similar right or constitute unfair competition or trade
practices under the Laws
of any jurisdiction. Except for such notices both (a) for which
Company has
provided complete copies to Parent's legal counsel (along with
all related
information Known to Company and reasonably requested by
Parent's legal counsel)
and (b) that include claims of infringement or misappropriation
that would not,
individually or in the aggregate, result in liability to the
Company of more
than one million dollars ($1,000,000) or result (either directly
or indirectly
as a result of an injunction or other
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<PAGE>
order (whether temporary, preliminary or permanent)) in a loss
of more than one
percent (1%) of the Company's annual revenues, the Company has
not received
notice from any person claiming that such operation or any act,
any product,
technology or service (including products, technology or
services currently
under development) or Intellectual Property of the Company
infringes or
misappropriates any Intellectual Property Rights of any person
or constitutes
unfair competition or trade practices under the Laws of any
applicable
jurisdiction (nor does the Company have Knowledge of any basis
therefor). For
avoidance of doubt, "currently" as it is used in this SECTION
2.14(j), when
measured as of the Closing Date, shall mean both "at the
Effective Time" and
"immediately following the Effective Time".
(k) Neither this Agreement nor the transactions contemplated by
this
Agreement, including the assignment (or deemed assignment) to
Parent and/or the
Surviving Corporation by operation of law or otherwise of any
Contracts to which
the Company is a party, will result in (other than by reason of
agreements
entered into by Parent or any of its subsidiaries or other
actions taken by any
of them): (i) Parent or any of its subsidiaries granting to any
third party any
right to or with respect to any Intellectual Property Rights
owned by, or
licensed to Parent or any of its subsidiaries, (ii) Parent or
any of its
subsidiaries, being bound by or subject to, any exclusivity
obligations,
non-compete or other restriction on the operation or scope of
their respective
businesses, or (iii) Parent or the Surviving Corporation being
obligated to pay
any royalties or other material amounts to any third party in
excess of those
payable by any of them, respectively, in the absence of this
Agreement or the
transactions contemplated hereby.
(l) To the Knowledge of the Company, no person has infringed
or
misappropriated or is infringing or misappropriating any Company
Intellectual
Property.
(m) The Company has, and enforces, a policy requiring each
Employee
and contractor to execute proprietary information,
confidentiality and
assignment agreements substantially in the Company's standard
forms (in the
forms set forth in EXHIBIT C), and all current and former
Employees and
contractors of the Company have executed such an agreement in
substantially the
Company's standard form. To the extent that any Intellectual
Property has been
developed or created independently or jointly by any person
other than the
Company for which the Company has, directly or indirectly,
provided
consideration for such development or creation, the Company has
a written
Contract with such person with respect thereto pursuant to the
terms of which
such person agrees that the Company thereby has obtained
ownership of all rights
(or where not assignable, a waiver of all nonassignable rights)
of such person
with respect to all such Intellectual Property therein and
associated
Intellectual Property Rights.
(n) No Company Intellectual Property, Intellectual Property
Rights,
product, technology, or service of the Company is subject to any
pending
proceeding (other than the Parent/Company Litigation, as to
which no
representation is made) or outstanding decree, order, judgment
or settlement
agreement or stipulation that restricts in any manner the use,
transfer or
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<PAGE>
licensing thereof by the Company or may affect the validity, use
or
enforceability of such Company Intellectual Property.
(o) No government funding, facilities or resources of a
university,
college, other educational institution or research center or
funding from third
parties was used in the development of the Company Intellectual
Property and no
Governmental Entity, university, college, other educational
institution or
research center has any claim or right in or to the Company
Intellectual
Property. To the Company's Knowledge, no current or former
Employee or
independent contractor of the Company who was involved in, or
who contributed
to, the creation or development of any Company Intellectual
Property, has
performed services for the government, a university, college or
other
educational institution, or a research center, during a period
of time during
which such Employee or indepe
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