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