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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
SYMYX TECHNOLOGIES, INC.
ORION ACQUISITION CORPORATION,
INTELLICHEM, INC.
AND
PAUL VAN EIKEREN, AS REPRESENTATIVE
NOVEMBER 12, 2004
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TABLE OF CONTENTS
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Article 1
Certain
Definitions....................................................................
2
Article 2
The
Merger.............................................................................
7
2.1 Effect of
Merger on Capital
Stock......................................................
7
2.2 Company
Options........................................................................
8
2.3
Escrow.................................................................................
10
2.4 Effects of
the
Merger..................................................................
10
2.5 Further
Assurances.....................................................................
11
Article 3
Representations and Warranties of Company and principal
shareholders................... 11
3.1
Organization and Good
Standing.........................................................
11
3.2
Subsidiaries...........................................................................
11
3.3 Power,
Authorization and
Validity......................................................
11
3.4
Capitalization of
Company..............................................................
12
3.5 No
Conflict............................................................................
13
3.6
Litigation.............................................................................
13
3.7
Taxes..................................................................................
14
3.8 Financial
Statements...................................................................
15
3.9 Title to
Properties....................................................................
16
3.10
Absence of Certain
Changes.............................................................
16
3.11
Contracts and Commitments/Licenses and
Permits......................................... 18
3.12
No Default; No
Restrictions............................................................
20
3.13
Intellectual
Property..................................................................
20
3.14
Compliance with
Laws...................................................................
22
3.15
Certain Transactions and
Agreements....................................................
23
3.16
Employees, ERISA and Other Compliance; Independent
Contractors......................... 23
3.17
Corporate
Documents....................................................................
25
3.18
No
Brokers.............................................................................
25
3.19
Insurance..............................................................................
25
3.20
Environmental
Matters..................................................................
25
3.21 Board
Actions..........................................................................
26
3.22
Disclosure.............................................................................
26
Article 4
Representations and Warranties of Parent and
Sub....................................... 26
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4.1
Organization and Good
Standing.........................................................
27
4.2 Power,
Authorization and
Validity......................................................
27
4.3 No
Conflict............................................................................
28
4.4 Finders or
Brokers.....................................................................
28
4.5
Availability of
Funds..................................................................
28
Article 5 Covenants of Company
and Principal Shareholders........................................
28
5.1 Advise of
Changes......................................................................
28
5.2
Maintenance of
Business................................................................
29
5.3 Conduct of
Business....................................................................
29
5.4 Regulatory
Approvals...................................................................
31
5.5 Necessary
Consents.....................................................................
31
5.6
Litigation.............................................................................
31
5.7 No Other
Negotiations..................................................................
31
5.8 Access to
Information..................................................................
32
5.9
Satisfaction of Conditions
Precedent...................................................
32
5.10
Company Shareholder
Approval...........................................................
32
5.11
Retention of
Employees.................................................................
33
5.12
Employment
Agreements..................................................................
33
Article 6
Parent
Covenants.......................................................................
33
6.1 Advise of
Changes......................................................................
33
6.2 Regulatory
Approvals...................................................................
34
6.3
Satisfaction of Conditions
Precedent...................................................
34
6.4 Form
S-8...............................................................................
34
6.5 Employee
Matters.......................................................................
34
Article 7
Closing
Matters........................................................................
35
7.1
.......................................................................................
35
7.2
Exchange...............................................................................
35
7.3
Dissenters'
Rights.....................................................................
36
Article 8
Conditions to Obligations of
Company...................................................
36
8.1 Accuracy
of Representations and
Warranties.............................................
36
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8.2
Covenants..............................................................................
37
8.3 Compliance
with Law; No Legal
Restraints...............................................
37
8.4 Government
Consents....................................................................
37
Article 9
Conditions to Obligations of
Parent....................................................
37
9.1 Accuracy
of Representations and
Warranties.............................................
37
9.2
Covenants..............................................................................
37
9.3 No
Material Adverse
Change.............................................................
38
9.4 Compliance
with Law; No Legal Restraints; No
Litigation................................ 38
9.5 Government
Consents....................................................................
38
9.6 Opinion of
Company's
Counsel...........................................................
38
9.7
Consents...............................................................................
38
9.8 Company
Shareholder
Approvals..........................................................
38
9.9 Employment
Matters.....................................................................
38
9.10
Termination of Vested Company
Options..................................................
38
9.11
Ancillary
Agreements...................................................................
38
9.12
Resignation of Directors and
Officers..................................................
39
9.13
Consideration Allocation
Certificate...................................................
39
Article 10
Termination of
Agreement...............................................................
39
10.1
Termination by Mutual
Consent..........................................................
39
10.2
Unilateral
Termination.................................................................
39
10.3
No
Liability for
Termination...........................................................
40
Article 11
Survival of Representations, Indemnification and Remedies,
Continuing Covenants........ 40
11.1
Survival of
Representations............................................................
40
11.2
Agreements to
Indemnify................................................................
40
11.3
Limitation.............................................................................
41
11.4
Appointment of
Representative..........................................................
41
11.5
Notice of
Claim........................................................................
42
11.6
Defense of Third-Party
Claims..........................................................
42
11.7
Contents of Notice of
Claim............................................................
44
11.8
Resolution of Notice of
Claim..........................................................
44
11.9
Distribution Upon Termination of Escrow
Period......................................... 44
11.10
Access.................................................................................
45
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11.11
Indemnification of Former Directors and
Officers....................................... 45
Article 12
General
Provisions.....................................................................
45
12.1
Governing
Law..........................................................................
45
12.2
Assignment; Binding Upon Successors and
Assigns........................................ 46
12.3
Severability...........................................................................
46
12.4
Counterparts...........................................................................
46
12.5
Other
Remedies.........................................................................
46
12.6
Amendment and
Waivers..................................................................
46
12.7
Expenses...............................................................................
47
12.8
Attorneys'
Fees........................................................................
47
12.9
Notices................................................................................
47
12.10
Interpretation; Rules of
Construction..................................................
49
12.11 No
Joint
Venture.......................................................................
49
12.12
Further
Assurances.....................................................................
49
12.13
Third Party Beneficiary
Rights.........................................................
49
12.14
Public
Announcement....................................................................
50
12.15
Company Disclosure
Letter..............................................................
50
12.16
Confidentiality........................................................................
50
12.17
Entire
Agreement.......................................................................
50
12.18
Waiver Of Jury
Trial...................................................................
50
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered
into as of November 12, 2004 (the
"AGREEMENT DATE") by and among Symyx
Technologies, Inc., a Delaware corporation
("PARENT"), Orion Acquisition
Corporation, an Oregon corporation that is
a wholly-owned subsidiary of Parent
("SUB"), IntelliChem, Inc., an Oregon
corporation ("COMPANY"), and , for
purposes of Article 11 only, Paul van
Eikeren, as REPRESENTATIVE.
RECITALS
A. The
parties intend that, subject to the terms and conditions
hereinafter set forth, Sub will merge with
and into Company (the "MERGER"), with
Company to be the surviving corporation of
the Merger, all pursuant to the terms
and conditions of this Agreement and
applicable law.
B. The Boards of Directors, or a
duly authorized committee thereof, of
Parent, Sub and Company have determined
that the Merger is in the best interests
of their respective companies and
stockholders or shareholders, as applicable,
have approved and declared advisable an
Agreement and Plan of Merger
substantially in the form of this Agreement
and, accordingly, have agreed to
effect the Merger provided for herein upon
the terms and conditions of this
Agreement.
C.
Concurrently with the execution and delivery of this Agreement, and
as
a condition and inducement to Parent's
willingness to enter into this Agreement,
(i) the Principal Shareholders and certain
other shareholders of Company are
executing and delivering to Parent a Voting
and Shareholder Agreement and an
Irrevocable Proxy in which each such
Principal Shareholder or other shareholder
will agree to vote all shares of Company
capital stock owned by such Principal
Shareholder or other shareholder in favor
of the Merger and the transactions
contemplated by this Agreement; and (ii)
each of Paul van Eikeren and Josh van
Eikeren are executing and delivering to
Parent an Employment Agreement (as
defined in Section 5.12) as provided
herein.
D. Upon
the Effective Time (as defined in Section 1.36), and subject to
the terms and conditions hereof, (i) the
shares of capital stock of Company that
are outstanding immediately prior to the
Effective Time and vested options to
purchase capital stock of the Company under
the Company Plan (as defined in
Section 2.2.1) that are automatically
exercised pursuant to Section 2.2.1 will
be converted into the right to receive a
certain amount of cash from Parent,
(ii) unvested options to purchase capital
stock of Company under the Company
Plan shall be assumed or replaced with
options to purchase Common Stock of
Parent subject to and on the terms provided
herein, (iv) all other rights to
purchase capital stock of Company that are
outstanding immediately prior to the
Effective Time shall terminate, and (iii)
Sub will be merged with and into
Company, in each case, as provided in this
Agreement.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
promises,
covenants and conditions contained herein,
the parties hereby agree as follows:
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ARTICLE 1
CERTAIN DEFINITIONS
As used in
this Agreement, the following terms will have the meanings
set forth below:
1.1
"AFFIDAVIT" has the meaning given in Section 7.2.1.
1.2
"AGREEMENT" has the meaning given in the introductory
paragraph.
1.3
"AGREEMENT DATE" has the meaning given in the introductory
paragraph.
1.4
"APPLICABLE LAW" means all federal, state or local laws,
ordinances,
regulations and rules, and all orders,
writs, injunctions, awards, judgments and
decrees, applicable to a specified Person
or to such Person's assets, properties
and business.
1.5
"ARTICLES OF MERGER" means an Articles of Merger in substantially
the
form attached hereto as Exhibit A.
1.6
"BALANCE SHEET" has the meaning given in Section 3.8.
1.7
"BALANCE SHEET DATE" has the meaning given in Section 3.8.
1.8 "CASH
CONSIDERATION" means (i) Merger Consideration (as adjusted
pursuant to Section 2.1 hereof), less (ii)
the Unvested Company Option
Consideration.
1.9
"CLAIM" has the meaning given in Section 11.5.
1.10
"CLOSING" has the meaning given in Section 7.1.
1.11
"CLOSING DATE" has the meaning given in Section 7.1.
1.12
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.13
"COMMON STOCK DISTRIBUTION AMOUNT" means that portion of the
Cash
Consideration equal to an amount per share
of Common Stock of Company to be
distributed in accordance with the
provisions of Section 2 of Article III of the
Company's articles of incorporation,
including all amendments thereto, which the
parties hereto determine to be an amount
equal to $1.08174 per share (subject to
adjustment for changes to Company Stock
occurring after the date hereof and
assuming that those shares of Company
Common Stock subject to Company Options as
of the Agreement Date that will be vested
as of the Closing Date are outstanding
as of the Closing Date) prior to adjustment
pursuant to Section 2.1 hereof.
1.14 "COMPANY" has the meaning
given in the introductory paragraph.
1.15
"COMPANY ANCILLARY AGREEMENTS" has the meaning given in Section
3.3.1.
1.16
"COMPANY BUSINESS" means the business of Company as presently
conducted, and shall further include any
products of Company currently under
development.
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1.17
"COMPANY CERTIFICATES" has the meaning given in Section 7.2.1.
1.18
"COMPANY COMMON STOCK" means the common stock of Company.
1.19 "COMPANY
DISCLOSURE LETTER" has the meaning given in the introductory
paragraph of Article 3.
1.20
"COMPANY FINANCIAL STATEMENTS" has the meaning given in Section
3.8.
1.21
"COMPANY IP RIGHTS" has the meaning given in Section 3.13.1.
1.22
"COMPANY IP RIGHTS AGREEMENTS" has the meaning given in Section
3.13.2.
1.23
"COMPANY-LICENSED IP RIGHTS" has the meaning given in Section
3.13.1.
1.24
"COMPANY MATERIAL AGREEMENTS" has the meaning given in Section
3.11.
1.25
"COMPANY-OWNED IP RIGHTS" has the meaning given in Section
3.13.1.
1.26
"COMPANY OPTIONS" has the meaning given in Section 2.2.1.
1.27
"COMPANY PLAN" has the meaning given in Section 2.2.1.
1.28
"COMPANY PREFERRED STOCK" means the Series A Preferred Stock.
1.29
"COMPANY SHAREHOLDERS" means the record holders of issued and
outstanding Company Stock immediately prior
to the Effective Time.
1.30
"COMPANY SHAREHOLDERS' APPROVAL" has the meaning given in
Section
5.10.
1.31 "COMPANY STOCK"
means Company Common Stock and Company Preferred
Stock.
1.32
"CONSIDERATION ALLOCATION CERTIFICATE" has the meaning given in
Section 2.1.2.
1.33
"CONTESTED CLAIM" has the meaning given in Section 11.8.2.
1.34
"DAMAGES" has the meaning given in Section 11.2.
1.35
"DISSENTING SHARES" has the meaning given in Section 7.3.
1.36
"EFFECTIVE TIME" means the date and time on which the Merger
first
becomes legally effective under the laws of
the State of Oregon as a result of
the filing with the Oregon Secretary of
State of the Articles of Merger and any
required related certificates pursuant to,
and in conformity with, the
requirements of Section 60.494 of the
Oregon Law.
1.37
"EMPLOYEE PLANS" has the meaning given in Section 3.16.3.
1.38
"EMPLOYMENT AGREEMENT" has the meaning given in Section 5.12.
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1.39
"ENCUMBRANCE" means, with respect to any asset, any mortgage, deed
of
trust, lien, pledge, charge, security
interest, title retention device,
collateral assignment, claim, charge,
restriction or other encumbrance of any
kind in respect of such asset (including
any restriction on the voting of any
security, any restriction on the transfer
of any security or other asset, any
restriction on the receipt of any income
derived from any asset, any restriction
on the use of any asset and any restriction
on the possession, exercise or
transfer of any other attribute of
ownership of any asset), excluding Permitted
Encumbrances.
1.40
"ENVIRONMENTAL LAW" has the meaning given in Section 3.20.
1.41
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
1.42
"ESCROW AGENT" means U.S. Bank National Association.
1.43 "ESCROW
AGREEMENT" has the meaning given in Section 2.3.
1.44
"ESCROW FUND" has the meaning given in Section 2.3.
1.45
"ESCROW RELEASE DATE" has the meaning given in Section 2.3.
1.46
"EXCESS TRANSACTION EXPENSES" has the meaning given in Section
12.7.
1.47
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
1.48
"GOVERNMENTAL AUTHORITY" means any court, administrative
agency,
commission or other governmental
authority.
1.49
"GOVERNMENTAL PERMITS" has the meaning given in Section 3.14.3.
1.50
"INTELLECTUAL PROPERTY" means, collectively, all worldwide
industrial
and intellectual property rights, including
patents, patent applications, patent
rights, trademarks, trademark registrations
and applications therefor, trade
dress rights, trade names, service marks,
service mark registrations and
applications therefor, Internet domain
names, Internet and World Wide Web URLs
or addresses, copyrights, copyright
registrations and applications therefor,
mask work rights, mask work registrations
and applications therefor, franchises,
licenses, inventions, trade secrets,
know-how, customer lists, supplier lists,
proprietary processes and formulae,
software source code and object code,
algorithms, net lists, architectures,
structures, screen displays, photographs,
images, layouts, inventions, development
tools, designs, blueprints,
specifications, technical drawings (or
similar information in electronic format)
and all documentation and media
constituting, describing or relating to the
foregoing, including manuals, programmers'
notes, memoranda and records.
1.51
"IRREVOCABLE PROXY" means the Irrevocable Proxy in the form
attached
as Exhibit A to the Voting and Shareholder
Agreement.
1.52
"KNOWLEDGE," means, with respect to any fact, circumstance, event
or
other matter in question as of the
Agreement Date or as of the Effective Time,
as applicable, the actual
4
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knowledge of such fact, circumstance, event
or other matter of (a) an
individual, if used in reference to an
individual, or (b) any executive officer
of such party, if used in reference to
Company or any Person that is not an
individual. Any such individual executive
officer will be deemed to have actual
knowledge of a particular fact,
circumstance, event or other matter if such
knowledge could have been obtained through
reasonable inquiry by such Person.
1.53
"LEGAL REQUIREMENTS" means any federal, state, local,
municipal,
foreign or other law, statute,
constitution, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or
requirement issued, enacted, adopted,
promulgated, implemented or otherwise put
into effect by or under the authority
of any Governmental Authority. 1.54
"MATERIAL ADVERSE CHANGE" or "MATERIAL
ADVERSE EFFECT," when used with reference
to any entity or group of related
entities, means any event, change,
violation or effect that is or is reasonably
likely to be, individually or in the
aggregate, materially adverse to the
condition (financial or otherwise),
properties, employees, assets (including
intangible assets), operations or results
of operations of such entity and its
Subsidiaries, taken as a whole with its
Subsidiaries; provided, however, that in
no event shall (i) a change in the price of
the publicly traded stock of Parent,
or (ii) changes in general economic
conditions or changes affecting the industry
generally in which Parent or Company
operates or (iii) any adverse change or
effect resulting from compliance by Company
with the terms of this Agreement or
the announcement of the Merger, constitute,
in and of itself, a Material Adverse
Change or Material Adverse Effect in Parent
or Company, as the case may be.
1.55
"MATERIAL OF ENVIRONMENTAL CONCERN" has the meaning given in
Section
3.20.2.
1.56
"MERGER" has the meaning given in Recital A.
1.57
"MERGER CONSIDERATION" means consideration in the aggregate amount
of
$30,000,000, payable in the form of cash
and the Unvested Company Option
Consideration as herein provided.
1.58
"NOTICE OF CLAIM" has the meaning given in Section 11.5.
1.59
"OPTION EXCHANGE RATIO" has the meaning given in Section 2.2.2
1.60
"OREGON LAW" means Oregon Business Corporation Act.
1.61 "PARENT"
has the meaning given in the introductory paragraph.
1.62
"PARENT ANCILLARY AGREEMENTS" has the meaning given in Section
4.2.1.
1.63
"PARENT COMMON STOCK" has the meaning given in Section 2.2.2.
1.64
"PARENT COMMON STOCK VALUE" has the meaning given in Section
2.2.2.
1.65
"PARENT DISCLOSURE LETTER" has the meaning given in the
introductory
paragraph of Article 4.
5
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1.66
"PARENT INDEMNIFIED PERSON" has the meaning given in Section
11.2.1.
1.67
"PERSON" means any individual, corporation (including any
not-for-profit corporation), partnership,
limited liability partnership, joint
venture, estate, trust, firm, company
(including any limited liability company
or joint stock company), association,
organization, entity or Governmental
Authority.
1.68
"PERMITTED ENCUMBRANCE" shall mean (a) liens for taxes and
assessments or governmental charge or
levies not at the time due or in respect
of which the validity thereof shall
currently be contested in good faith by
appropriate proceedings; and (b) liens in
respect of pledges or deposits under
workers' compensation laws or similar
legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and
similar liens, if the obligations
secured by such liens are not then
delinquent or are being contested in good
faith by appropriate proceedings.
1.69
"PRINCIPAL SHAREHOLDERS" means Paul van Eikeren, Josh van Eikeren
and
Summit Accelerator Fund, L.P.
1.70 "PRO
RATA SHARE" means each Principal Shareholder's pro rata portion
of the Company Stock based on the total
number of shares of Company Stock held
by all Principal Shareholders.
1.71
"REGULATIONS" has the meaning given in Section 3.7.1.
1.72
"REPRESENTATIVE" has the meaning given in Section 11.4.
1.73 "SEC"
means the Securities and Exchange Commission.
1.74
"SECURITIES ACT" means the Securities Act of 1933, as amended.
1.75
"SERIES A PREFERRED" means the Company's Series A Preferred
Stock.
1.76
"SERIES A PREFERRED STOCK DISTRIBUTION AMOUNT" means that portion
of
the Cash Consideration equal to an amount
per share of Series A Preferred to be
distributed in accordance with the
provisions of Section 2 of Article III the
Company's articles of incorporation,
including all amendments thereto; which the
parties hereto determine to be amount equal
to $0.70416 per share (subject to
adjustment for changes to the Company Stock
occurring after the date hereof and
assuming that all shares of Company Common
Stock subject to Company Options as
of the Agreement date are outstanding as of
the Closing Date) prior to
adjustment pursuant to Section 2.1
hereof.
1.77 "SUB"
has the meaning given in the introductory paragraph.
1.78 "SUB
ANCILLARY AGREEMENTS" has the meaning given in Section 4.2.1.
1.79
"SUBSIDIARY" of a specified entity means any corporation,
partnership, limited liability company,
joint venture or other legal entity of
which the specified entity (either alone or
through or together with any other
subsidiary) owns, directly or indirectly,
50% or more of the
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stock or other equity or partnership
interests the holders of which are
generally entitled to vote for the election
of the Board of Directors or other
governing body of such corporation or other
legal entity.
1.80
"SURVIVING CORPORATION" has the meaning given in Section 2.4.
1.81
"TERMINATING PARTY" has the meaning given in Section 10.3.
1.82
"TERMINATION DATE" means December 6, 2004.
1.83
"THIRD-PARTY CLAIM" has the meaning given in Section 11.6.1.
1.84
"TRANSACTION EXPENSES" has the meaning given in Section 12.7.
1.85
"UNCERTIFICATED SHARES" means uncertificated shares of Company
Stock
issuable upon the exercise of any Company
Options between the Agreement Date and
the Effective Time.
1.86
"UNVESTED COMPANY OPTION" has the meaning given in Section
2.2.2.
1.87
"UNVESTED COMPANY OPTION CONSIDERATION" means an amount equal to
(i)
the product of all shares of Parent Common
Stock that will be issuable upon
exercise of the Parent Options into which
the Unvested Company Options convert
times the Parent Common Stock Value; less
(ii) the aggregate exercise price for
all Unvested Company Options.
1.88
"VOTING AND SHAREHOLDER AGREEMENT" means a voting and
shareholder
agreement in the form attached hereto as
Exhibit D.
ARTICLE 2
THE MERGER
2.1 Effect
of Merger on Capital Stock.
2.1.1 Conversion of Sub Stock. At the Effective Time, each share
of
Sub common stock that is issued and
outstanding immediately prior to the
Effective Time will be converted into one
validly issued, fully paid and
nonassessable share of common stock of the
Surviving Corporation. Each
certificate evidencing ownership of shares
of Sub common stock will evidence
ownership of such shares of common stock of
the Surviving Corporation.
2.1.2 Effect on Company Stock. Subject to the terms and
conditions
of this Agreement, at the Effective Time,
each share of Company Stock held by a
Company Shareholder that is issued and
outstanding immediately prior to the
Effective Time will, by virtue of the
Merger and without the need for any
further action on the part of the holder
thereof (except as expressly provided
herein), be converted into and represent
the right to receive such portion of
the Cash Consideration as set forth below
and as more fully set forth on a
consideration allocation certificate to be
delivered by the Company at Closing
(the "CONSIDERATION ALLOCATION
CERTIFICATE").
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(a) Each holder of Series A Preferred issued and outstanding
immediately prior to the Effective Time
shall be entitled to receive the Series
A Preferred Distribution Amount for each
share of such Series A Preferred.
(b) Each holder of Company Common Stock issued and outstanding
immediately prior to the Effective Time
shall be entitled to receive the Common
Stock Distribution Amount for each share of
such Company Common Stock; provided,
however, that with respect to each share of
Company Common Stock issued
immediately prior to the Effective Time as
a result of the automatic exercise of
a vested Company Option pursuant to Section
2.2.1, Parent shall withhold (in
addition to amounts that Parent is
otherwise authorized with respect to such
Company Option as provided in this Section
2.1.2) that portion of the Common
Stock Distribution Amount allocated to such
share of Company Common Stock in an
amount equal to the per share exercise
price (as set forth in the stock option
agreement governing the related Company
Option) of such share of Company Common
Stock, and in each case, as set forth on
the Consideration Allocation
Certificate.
The
preceding provisions of this Section 2.1.2 are subject to the
provisions of Section 2.1.3 (regarding
rights of holders of Dissenting Shares)
and Section 2.3 (regarding the withholding
of Escrow Fund). In no event shall
the amount of cash payable under this
Agreement by Parent exceed the Cash
Consideration as reduced for withholdings
pursuant to Section 2.1.2(b) as to the
unpaid exercise price for any vested
Company Options exercised pursuant to
Section 2.2.1 prior to the Closing for
which the exercise price has not been
fully paid.
The
Company, and on its behalf Parent and the Surviving Corporation,
shall
be entitled to deduct and withhold from any
consideration payable or otherwise
deliverable pursuant to this Agreement to
any holder or former holder of Company
Stock such amounts as may be required to be
deducted or withheld therefrom under
any provision of federal, state, local or
foreign tax law or under any other
applicable legal requirement at the lowest
rate permitted by law. To the extent
such amounts are properly deducted or
withheld, such amounts shall be treated
for all purposes under this Agreement as
having been paid to the person to whom
such amounts would otherwise have been
paid.
2.1.3 Dissenting Shares. As more fully set forth in Section
7.3,
holders of shares of Company Stock who have
complied with all requirements for
perfecting shareholders' dissenters'
rights, as set forth in Sections 60.551
through 60.594 of the Oregon Law, shall be
entitled to their rights under the
Oregon Law with respect to such shares.
2.2
Company Options.
2.2.1 Vested Options, Warrants and Other Rights. Other than as
explicitly provided in Section 2.2.2 below,
no options, warrants or other rights
to purchase Company Common Stock
(collectively, "COMPANY OPTIONS"), including
without limitation any vested Company
Options granted under the Company's 2003
Stock Option Plan (the "COMPANY PLAN"),
shall be assumed by Parent, and the
Company agrees to take all action necessary
to (i) enable each holder of the
Company Options to fully exercise the
Company Options on or before the Closing;
(ii) provide that all vested Company
Options outstanding immediately prior to
the Closing with a per share exercise price
that is less than the per share
Common Stock Distribution
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Amount (assuming the exercise of all then
outstanding vested Company Options)
shall be automatically exercised as of
immediately prior to the Effective Time
and all shares of Company Common Stock
subject thereto shall be immediately
issued to the holder of such Company Option
(such that at the Effective Time
such shares shall be outstanding and such
holder shall be a Company
Shareholder), provided that the Common
Stock Distribution Amount payable with
respect to such shares of Company Common
Stock shall be subject to Sections
2.1.2(b) and 2.3; (iii) effect the
termination of all then outstanding vested
Company Options at the Effective Time in
accordance with their terms, and (iv)
give any notice required under any
agreements relating to Company Options as to
such acceleration, if any, exercise and
termination.
2.2.2 Unvested Options. At the Effective Time, the unvested
portion
of each outstanding Company Option to
purchase shares of Company Common Stock
under the Company Stock Option Plan (the
"UNVESTED COMPANY OPTION") will be
assumed by Parent and converted into an
option to purchase shares of Parent
Common Stock (each a "PARENT OPTION") as
set forth in this Section 2.2.2.
Schedule 2.2.2 hereto sets forth (i) a true
and complete list as of the date
hereof of all holders of outstanding
Company Options under the Company Stock
Plan, including the number of shares of
Company Common Stock subject to each
such Company Option, the exercise or
vesting schedule, the exercise price per
share and the term of each such Company
Option; and (ii) any acceleration of the
vesting of such Company Options that shall
be effective as of the Closing Date.
Schedule 2.2.2 may be updated prior to the
Closing Date to reflect any Company
Options granted to new employees of the
Company from the date hereof to the
Closing Date as approved by Parent in
accordance with Section 5.3(m) below.
Subject to acceleration of Company Options
set forth in Schedule 2.2.2, each
Unvested Company Option assumed by Parent
under this Agreement shall retain its
respective vesting schedule under the
Company Stock Plan and its respective
stock option agreement and each such
Unvested Company Stock Option shall
continue to be subject to the terms and
conditions set forth in the Company
Option Plan, except that (i) each such
Unvested Company Option will be
exercisable for that number of whole shares
of Common Stock of Parent ("PARENT
COMMON STOCK") equal to the product of the
number of shares of Company Common
Stock that would be issuable upon exercise
of such Unvested Company Option
immediately prior to the Effective Time,
assuming that all vesting conditions
applicable to such Unvested Company Option
were then satisfied, multiplied by
the quotient obtained by dividing (A) the
price per share paid by Parent from
the Common Stock Distribution Amount; by
(B) the average closing price of Parent
Common Stock on the NASDAQ National Market
System for the ten (10) trading days
preceding (but not including) the Closing
Date, (such quotient, the "OPTION
EXCHANGE RATIO" and such average closing
price of Parent Common Stock, the
"PARENT COMMON STOCK VALUE") rounded down
to the nearest whole number of shares
of Parent Common Stock, and (ii) the per
share exercise price for the shares of
Parent Common Stock issuable upon exercise
of such assumed or replaced Unvested
Company Option will be equal to the
quotient determined by dividing the exercise
price per share of Company Common Stock at
which such Unvested Company Option
was exercisable immediately prior to the
Effective Time by the Option Exchange
Ratio, rounded up to the nearest whole
cent. Consistent with the terms of the
Company Stock Option Plan and the documents
governing the outstanding Company
Options under such plan, except as set
forth on Schedule 2.2.2, the Company
shall not accelerate the exercisability or
vesting of such Company Options or
the shares of Parent Common Stock which
will be subject to those options upon
the assumption of the Company Options in
connection with the Merger. As soon as
practicable after the Effective Time,
Parent shall deliver to each holder of an
outstanding Unvested Company
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<PAGE>
Stock Option an appropriate notice setting
forth such holder's rights pursuant
thereto and that such Company Stock Option
shall continue in effect on the same
terms and conditions (subject to the
adjustments required by this Section 2.2.2
after giving effect to the Merger).
2.3
Escrow. At the Effective Time, Parent will withhold from the
amounts
of cash to be paid to Principal
Shareholders in the Merger in respect of their
Company Stock pursuant to Section 2.1.2,
each such Principal Shareholder's Pro
Rata Share of $*** of the Cash
Consideration as set forth on Schedule 2.3 hereto
(such withheld amount of cash, the "ESCROW
FUND"). Escrow Agent will hold the
Escrow Fund as security for the
indemnification obligations of the Principal
Shareholders for Damages under Article 11
and an Escrow Agreement in
substantially the form attached hereto as
Exhibit B to be entered into among the
Company, Parent and the Representative (the
"ESCROW AGREEMENT"), until the day
***** after the Closing Date (the "ESCROW
RELEASE Date").
2.4
Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Sub will cease and Sub will be
merged
with and into Company, and Company will be
the surviving corporation of the
Merger (sometimes referred to herein as the
"SURVIVING CORPORATION") pursuant to
the terms of this Agreement and the
Articles of Merger;
(b) the Articles of Incorporation of the Surviving Corporation
will
be amended in their entirety to read as set
forth in the Articles of Merger
filed with the Oregon Secretary of
State;
(c) the Bylaws of Sub will continue unchanged and be the Bylaws
of
the Surviving Corporation immediately after
the Effective Time;
(d) each share of Company Stock that is outstanding immediately
prior to the Effective Time and each vested
Company Option that is automatically
exercised pursuant to Section 2.2.1 will be
converted into the right to receive
cash as provided in this Article 2;
(e) subject to obtaining any required consents, each Unvested
Company Option shall be assumed or replaced
by Parent and converted into a
Parent Option as provided in Section
2.2.2;
(f) each share of Sub common stock that is outstanding
immediately
prior to the Effective Time will be
converted into one validly issued, fully
paid and nonassessable share of common
stock, no par value per share, of the
Surviving Corporation as provided in
Section 2.1.1;
(g) the officers of the Surviving Corporation immediately after
the
Effective Time will be those individuals
who were the officers of Sub
immediately prior to the Effective Time,
and each such individual shall,
immediately after the Effective Time, hold
the same office or offices of the
Surviving Corporation as the office or
offices that such individual held with
Sub immediately prior to the Effective
Time;
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<PAGE>
(h) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective
Time will be the members of the
Board of Directors of Sub immediately prior
to the Effective Time; and
(i) the Merger will, from and after the Effective Time, have all
of
the effects provided by applicable law.
2.5
Further Assurances. If, at any time after the Effective Time,
any
further instruments, deeds, assignments,
assurances or other actions are
reasonably necessary or desirable to vest
the Surviving Corporation with all of
the rights and property of the Company or
to carry out the purposes and intent
of this Agreement, the officers and
directors of Company and Sub are fully
authorized on behalf of Company or Sub, as
the case may be, to execute and
deliver all such proper instruments, deeds,
assignments and assurances and do
all other things necessary or desirable to
carry out the purposes and intent of
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company
hereby represents and warrants to Parent that, except as set
forth
in the letter addressed to Parent from
Company and dated as of the Agreement
Date (including all schedules thereto)
which has been delivered by Company to
Parent concurrently herewith (the "COMPANY
DISCLOSURE LETTER"), each of the
representations, warranties and statements
contained in the following sections
of this Article 3 is true and correct as of
the Agreement Date. For all purposes
of this Agreement, the statements contained
in the Company Disclosure Letter and
its schedules shall also be deemed to be
representations and warranties made and
given by Company under Article 3 of this
Agreement.
3.1
Organization and Good Standing. Company is a corporation duly
organized and validly existing under the
laws of the State of Oregon. Company
has the corporate power and authority to
own, operate and lease its properties
and to carry on its business as now
conducted and as currently proposed to be
conducted, and is qualified or licensed to
do business and is in good standing
in each jurisdiction in which the failure
to be so qualified or licensed would
have a Material Adverse Effect on Company.
Company has delivered to Parent true
and complete copies of its currently
effective Articles of Incorporation and
Bylaws, each as amended to date. Company is
not in violation of its Articles of
Incorporation or Bylaws.
3.2
Subsidiaries. Company has no Subsidiaries or any equity or
ownership
interest, whether direct or indirect, in,
or loans to, any corporation,
partnership, limited liability company,
joint venture or other business entity.
Company is not obligated to make, nor bound
by any agreement or obligation to
make, any investment in or capital
contribution in or on behalf of any other
entity.
3.3 Power,
Authorization and Validity.
3.3.1 Power and Authority. Company has the right, power, legal
capacity and authority to enter into and
perform its obligations under this
Agreement and all agreements and documents
to which Company is or will be a
party that are required to be executed
pursuant to this Agreement (the "COMPANY
ANCILLARY AGREEMENTS"). The execution,
delivery and
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<PAGE>
performance of this Agreement and the
Company Ancillary Agreements have been
duly and validly approved and authorized by
Company.
3.3.2 No Consents. No consent, approval, permit, order or
authorization from, or registration,
declaration or filing with, any
Governmental Authority or any other Person,
governmental or otherwise, is
necessary or required to be made or
obtained by Company to enable Company to
lawfully execute and deliver, enter into,
and to perform their respective
obligations under, this Agreement, the
Company Ancillary Agreements, and for
Company to consummate the Merger, except
for the filing of the Articles of
Merger with the Oregon Secretary of
State.
3.3.3 Enforceability. This Agreement has been duly executed and
delivered by Company. This Agreement and
the Company Ancillary Agreements are,
or when executed by Company will be, valid
and binding obligations of Company
enforceable against Company in accordance
with their respective terms, subject
only to the effect now or hereafter, if
any, of (a) applicable bankruptcy,
insolvency, reorganization, moratorium and
other similar laws affecting the
rights of creditors generally and (b) rules
of law and equity governing specific
performance, injunctive relief and other
equitable remedies.
3.4
Capitalization of Company.
3.4.1 Outstanding Securities. The authorized capital stock of
Company consists entirely of: (a) Thirty
Million (30,000,000) shares of Company
Common Stock, of which, as of the Agreement
Date, a total of Fourteen Million
Sixty-Two Thousand Four Hundred Fifty-Five
(14,062,455) shares are issued and
outstanding, and (b) Six Million Five
Hundred Fifty-Seven Thousand Three Hundred
Seventy-Seven (6,557,377) shares of Company
Preferred Stock, all of which are
designated Series A Preferred and all of
which, as of the Agreement Date are
issued and outstanding. The numbers of
issued and outstanding shares of Company
Common Stock and Company Preferred Stock
held by each of the Company
Shareholders are set forth in Section 3.4.1
of the Company Disclosure Schedule.
Except as expressly set forth in Section
3.4.1 of the Company Disclosure
Schedule attached hereto, no shares of
Company Common Stock or Company Preferred
Stock are issued or outstanding. An
aggregate of Four Million (4,000,000) shares
of Company Common Stock are reserved and
authorized for issuance pursuant to the
Company Plan. True and complete copies of
the standard option agreement under
the Company Plan and each agreement for
each Company Option that does not
conform to the standard option agreement
under the Company Plan have been
delivered by Company to Parent. No Company
Options have been granted or are
outstanding except under and pursuant to
the Company Plan.
3.4.2 Valid Issuance. As of the Closing Date, there will have
been
no change in the authorized or outstanding
capital stock of Company as
represented in Section 3.4.1 above. All
issued and outstanding shares of Company
Stock have been duly authorized and validly
issued, are fully paid and
nonassessable, are not subject to any
preemptive right, right of first refusal,
right of first offer or right of
rescission, and have been offered, issued, sold
and delivered by Company in compliance with
(a) all registration or
qualification requirements (or applicable
exemptions therefrom) of all
applicable securities laws (both state and
federal) and other applicable Legal
Requirements and (b) all requirements set
forth in applicable agreements or
instruments.
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<PAGE>
3.4.3 No Other Options, Warrants or Rights. Other than as set
forth
in Sections 3.4.1 and 3.4.2 above, there
are no options, warrants, convertible
securities or other securities, calls,
commitments, conversion privileges,
preemptive rights, rights of first refusal,
rights of first offer or other
rights or agreements outstanding to
purchase or otherwise acquire (whether
directly or indirectly) any shares of
Company's authorized but unissued capital
stock or any securities convertible into or
exchangeable for any shares of
Company's capital stock or obligating
Company to grant, issue, extend or enter
into any such option, warrant, convertible
security or other security, call,
commitment, conversion privilege,
preemptive right, right of first refusal,
right of first offer or other right or
agreement to obtain any shares of
Company's capital stock, and there is no
liability for dividends accrued but
unpaid.
3.4.4 No Voting Arrangements or Registration Rights. Except as
contemplated by this Agreement, there are
no voting agreements, voting trusts or
proxies applicable to any of Company's
outstanding capital stock or any Company
Options or to the conversion of any shares
of Company's capital stock in the
Merger pursuant to any agreement or
obligation to which Company or, to Company's
knowledge, pursuant to any other agreement
or obligation. Company is not under
any obligation to register under the
Securities Act any of its presently
outstanding shares of stock or other
securities or any stock or other securities
that may be subsequently issued.
3.5 No
Conflict. Neither the execution and delivery of this Agreement
nor
any of the Company Ancillary Agreements by
Company, nor the consummation of the
Merger or any of the other transactions
contemplated hereby or thereby, will (a)
conflict with, or (with or without notice
or lapse of time, or both) result in a
termination, breach, impairment or
violation of, or constitute a default under,
(i) any provision of the Articles of
Incorporation or Bylaws of Company, as
currently in effect, or (ii) any federal,
state, local or foreign judgment,
writ, decree, order, statute, rule or
regulation applicable to Company or any of
its material assets or properties, or (iii)
any material instrument, obligation
or agreement to which Company is a party or
by which its properties or assets
are bound, or result in the creation of any
lien, charge or other encumbrance
upon any of the properties of Company under
the terms of any note, bond,
mortgage or indenture or any other material
instrument, obligation or agreement,
or (b) except as set forth in Schedule 3.5
of the Company Disclosure Letter,
require the consent, approval, assignment,
notice, release, waiver,
authorization or other certificate of any
third party to ensure that, following
the Effective Time, any Company Material
Agreement to which Company is a party
or by which Company or any of its assets or
properties are bound or affected
continues to be in full force and effect
without any breach or violation
thereof. Neither Company's entering into
this Agreement, nor the consummation of
the Merger or any other transaction
contemplated by this Agreement or any
Company Ancillary Agreement, will give rise
to, or trigger the application of,
any rights of any third party that would
come into effect upon the consummation
of the Merger.
3.6
Litigation. There is no action, suit, arbitration, mediation,
proceeding, claim or, to Company's
knowledge, investigation pending against
Company (or against any officer, director,
employee or agent of Company in their
capacity as such or relating to their
employment, services or relationship with
Company) before any court, Governmental
Authority or arbitrator, nor, to
Company's knowledge, has any such action,
suit, arbitration, mediation,
proceeding, claim or investigation been
threatened. There is no judgment,
decree, injunction,
13
<PAGE>
rule or order of any court, Governmental
Authority or arbitrator outstanding
against Company. To Company's knowledge,
there is no reasonable basis for any
Person to assert a claim against Company
based upon: (a) Company's entering into
this Agreement, any Company Ancillary
Agreement or consummating the Merger or
any of the transactions contemplated by
this Agreement or any Company Ancillary
Agreement; (b) any claim that Company has
agreed to sell or dispose of all or
any substantial portion of its assets or
business or shares of Company Stock to
any party other than Parent, whether by way
of merger, consolidation, sale or
assets or otherwise; (c) any wrongful
failure by Company to issue any of its
stock or other securities to any party; (d)
any rights under any agreement among
Company and the Company Shareholders; or
(e) a claim of ownership of, or
options, warrants or other rights to
acquire ownership of, any shares of the
capital stock of Company or any rights as a
Company Shareholder, including any
option, warrant or preemptive rights or
rights to notice or to vote.
3.7
Taxes.
3.7.1 The Company has timely filed all material federal, state,
local and foreign tax and information
returns and reports required by applicable
law to be filed by it prior to the
Effective Time, has timely paid all material
taxes required to be paid by it as shown on
such returns, except to the extent
that an accrual or reserve for such taxes
has been reflected on the Balance
Sheet, has established an adequate accrual
or reserve for the payment of all
material taxes payable in respect of the
periods subsequent to the periods
covered by its most recent applicable tax
returns (which accrual or reserve as
of the Balance Sheet Date is fully
reflected on the Balance Sheet and in any
more recent balance sheet of Company
provided by Company to Parent on or before
the Agreement Date), has made all material
required estimated tax payments and,
as of the Balance Sheet Date, has no
material liability for taxes in excess of
the amount so paid or accruals or reserves
so established. The amount of
Company's liability for unpaid material
taxes for all periods ending on or
before the Effective Time shall not, in the
aggregate, exceed the amount of the
current liability accrual or reserve for
taxes (excluding reserves for deferred
taxes), as such accrual or reserve is
reflected on the Balance Sheet, as
adjusted for operations and transactions in
the ordinary course of business
since the Balance Sheet Date in accordance
with past custom and practice. All
such returns and reports are true, correct
and complete in all material
respects, and Company has provided Parent
with true and correct copies of all
federal and state income or franchise tax
returns for the Company for all
periods since inception as well as any
other returns and reports that have been
requested by Parent. Company is not
delinquent in the payment of any material
tax or in the filing of any material tax
returns, and, to the Company's
knowledge, no deficiencies for any tax have
been threatened, claimed, proposed
or assessed against Company. Company has
not received any notification from the
Internal Revenue Service or any other
taxing authority regarding any potential
assessments that: (a) are currently pending
before the Internal Revenue Service
or any other taxing authority (including,
but not limited to, any sales or use
tax authority) regarding Company taxes, or
(b) have been raised by the Internal
Revenue Service or other taxing authority
and not yet finally resolved. No tax
return of Company is, to the Company's
knowledge, under audit by the Internal
Revenue Service or any other taxing
authority, and any such past audits (if any)
have been completed and fully resolved and
all taxes and any penalties or
interest determined by such audit to be due
from Company have been paid in full
to the applicable taxing authorities. No
tax liens are currently in effect
against any assets of Company other than
liens which arise by operation of law
for taxes not yet due and payable. There is
not in effect any waiver by Company
of any
14
<PAGE>
statute of limitations with respect to any
taxes or agreement to any extension
of time for filing any tax return which has
not been filed, and Company has not
consented to extend to a date later than
the date hereof the period in which any
tax may be assessed or collected by any
taxing authority. Company is not a
"personal holding company" within the
meaning of Section 542 of the Code.
Company has not filed any election under
Section 341(f) of the Code. Company has
withheld all material taxes, including, but
not limited to, federal and state
income taxes, FICA, Medicare, FUTA and
other taxes, required to be withheld, and
paid such withheld amounts to the
appropriate taxing authority within the time
prescribed by law. Since its inception,
Company has not been a "United States
real property holding corporation," as
defined in Section 897(c)(2) of the Code,
and in Section 1.897-2(b) of the Treasury
Regulations issued thereunder (the
"REGULATIONS"), and Company has filed with
the Internal Revenue Service all
statements, if any, with its United States
income tax returns which are required
under Section 1.897-2(h) of the
Regulations. Company neither is a party to nor
has any obligation under any tax-sharing,
tax indemnity or tax allocation
agreement or arrangement. Company has never
been involved in a distribution,
either as a distributing corporation or a
controlled corporation, in a
transaction qualifying, or intended to be
qualified, under Section 355 of the
Code. Company has never been a member of an
affiliated group filing consolidated
returns. Company has disclosed on its
federal income tax returns all positions
taken therein that could give rise to a
substantial understatement penalty
within the meaning of Section 6662 of the
Code.
3.7.2 The Company is not obligated to make any "excess
parachute
payment" (as defined in Section 280G(b)(1)
of the Code), nor will any excess
parachute payment be deemed to have
occurred as a result of or arising out of
the Merger to the extent Section 280G of
the Code is applicable to Company.
3.7.3 For the purposes of this Section 3.7, the terms "TAX" and
"TAXES" include all federal, state, local
and foreign income, alternative or
add-on minimum income, gains, franchise,
excise, property, property transfer,
sales, use, employment, license, payroll,
services, ad valorem, documentary,
stamp, withholding, occupation, recording,
value added or transfer taxes,
governmental charges, fees, customs duties,
levies or assessments (whether
payable directly or by withholding), and,
with respect to any such taxes, any
estimated tax, interest, fines and
penalties or additions to tax and interest on
such fines, penalties and additions to tax.
The term "returns" shall include all
reports, estimates, declarations of
estimated tax, information statements and
returns relating to, or required to be
filed in connection with, any taxes,
including information returns or reports
with respect to backup withholding and
other payments to third parties.
3.8
Financial Statements. The Company has delivered to Parent its
audited
financial statements (balance sheet and
statement of operations) at December 31,
2003 and for the fiscal year then ended,
and its unaudited financial statements
(balance sheet, statement of operations and
statement of cash flows) as at and
for the nine-month period ended September
30, 2004 (the "COMPANY FINANCIAL
STATEMENTS"). The Company Financial
Statements have been prepared in accordance
with generally accepted accounting
principles applied on a consistent basis,
except that the Company Financial
Statements do not include a statement of cash
flows, nor do the Company Financial
Statements contain the footnotes required by
generally accepted accounting principles.
The Company Financial Statements
fairly present the financial condition and
operating results of the Company as
of the dates, and for the periods,
indicated therein. Without
15
<PAGE>
limitation of the foregoing, the Company
Financial Statements prepared as of
September 30, 2004 ("BALANCE SHEET DATE")
have been prepared in accordance with
generally accepted accounting principles
for interim financial information, and
all adjustments (which include only normal
recurring adjustments) necessary to
present fairly the financial position of
the Company as of September 30, 2004
and the results of its operations for the
nine (9) month period then ended.
Except as set forth in the balance sheet at
the Balance Sheet Date ("BALANCE
SHEET"), the Company has no material
liabilities, contingent or otherwise, other
than (i) liabilities incurred in the
ordinary course of business subsequent to
the Balance Sheet Date and (ii) obligations
under contracts and commitments
incurred in the ordinary course of business
and not required under generally
accepted accounting principles to be
reflected on the Balance Sheet or otherwise
in the Company Financial Statements. Except
as disclosed in the Company
Financial Statements, the Company is not a
guarantor or indemnitor of any
indebtedness of any other person, firm or
corporation.
3.9 Title
to Properties. Company has good and marketable title to, or a
valid leasehold interest in, all of the
assets and properties used in Company's
business, free and clear of all
Encumbrances, other than liens for current taxes
that are not yet due and payable and except
for liens which in the aggregate do
not secure more than $25,000 in
liabilities. All machinery, vehicles, equipment
and other tangible personal property owned
or leased by Company or used in its
business are in good condition and repair,
normal wear and tear excepted, and
all leases of real or personal property to
which Company is a party are fully
effective and afford Company peaceful and
undisturbed leasehold possession of
the real or personal property that is the
subject of the lease. Company is not
in violation of any zoning, building,
safety or environmental ordinance,
regulation or requirement or other law or
regulation applicable to the operation
of its owned or leased properties, where
such violation would result in a
Material Adverse Effect on the Company, nor
has Company received any notice of
violation of law with which it has not
complied. Company does not own any real
property. Schedule 3.9 of the Company
Disclosure Letter sets forth a complete
and accurate list and a brief description
of all personal property owned or
leased by Company with an individual value
of $25,000 or greater.
3.10
Absence of Certain Changes. Since the Balance Sheet Date, Company
has
operated its business in the ordinary
course, consistent with its past practice,
and there has not been with respect to
Company any:
(a) Material Adverse Change;
(b) amendment or change in the Articles of Incorporation or
Bylaws;
(c) incurrence, creation or assumption by Company of (i) any
Encumbrance on any of the assets or
properties of Company, (ii) any obligation
or liability or any indebtedness for
borrowed money, or (iii) any contingent
liability as a guarantor or surety with
respect to the obligations of others;
(d) grant or issuance of any options, warrants or other rights
to
acquire from Company, directly or
indirectly, except as described in Sections
3.4.1 and 3.4.2, or any offer, issuance or
sale by Company of, any debt or
equity securities of Company;
16
<PAGE>
(e) acceleration or release of any vesting condition to the right
to
exercise any option, warrant or other right
to purchase or otherwise acquire any
shares of Company's capital stock, or any
acceleration or release of any right
to repurchase shares of Company's capital
stock upon any shareholder's
termination of employment or services with
Company or pursuant to any right of
first refusal;
(f) payment or discharge by Company of any liability of Company
or
Encumbrance on any asset or property of
Company in an amount in excess of
$10,000 for any liability or Encumbrance,
other than payments or discharges by
Company in the ordinary course of business,
consistent with past practices;
(g) purchase, license, sale, assignment or other disposition or
transfer, or any agreement or other
arrangement for the purchase, license, sale,
assignment or other disposition or
transfer, of any of the assets, properties or
goodwill of Company, other than purchases,
licenses, sales, assignments or other
dispositions or transfers in the ordinary
course of business, consistent with
past practices;
(h) damage, destruction or loss of any material property or
asset,
whether or not covered by insurance;
(i) declaration, setting aside or payment of any dividend on, or
the
making of any other distribution in respect
of, the capital stock of Company, or
any split, combination or recapitalization
of the capital stock of Company or
any direct or indirect redemption, purchase
or other acquisition of any capital
stock of Company or any change in any
rights, preferences, privileges or
restrictions of any outstanding security of
Company;
(j) change or increase in the compensation, including severance
compensation, payable or to become payable
to any of the officers, directors,
employees or consultants of Company or in
any bonus or pension, insurance or
other benefit payment or arrangement
(including stock awards, stock option
grants, stock appreciation rights or stock
option grants) made to or with any of
such officers, employees or agents, other
than changes or increases in the
ordinary course of business, consistent
with past practices;
(k) change with respect to the management or other key personnel
of
Company;
(l) obligation or liability incurred by Company to any of its
officers, directors or shareholders, except
for normal and customary
compensation and expense allowances payable
to Company officers in the ordinary
course of Company's business, consistent
with its past practice;
(m) making by Company of any loan, advance or capital
contribution
to, or any investment in, any officer,
director or shareholder of Company or any
firm or business enterprise in which any
such Person had a direct or indirect
material interest at the time of such loan,
advance, capital contribution or
investment;
(n) entering into, amendment of, relinquishment, termination or
non-renewal by Company of any contract,
lease, transaction, commitment or other
right or obligation other
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than in the ordinary course of business,
consistent with its past practice, or
any written or oral indication or assertion
by the other party thereto of any
material problems with Company's services
or performance under such contract,
lease, transaction, commitment or other
right or obligation or its desire to so
amend, relinquish, terminate or not renew
any such contract, lease, transaction,
commitment or other right or
obligation;
(o) assertion by any customer of Company of any material
complaint
regarding Company's services or products
that has not been addressed or is being
addressed by Company by such methods that
Company employs in the ordinary course
of business, consistent with past
practices;
(p) agreement made by Company to provide exclusive services to
any
Person or not to engage in any type of
business activity;
(q) material change in the manner in which Company extends
discounts, credits or warranties to
customers or otherwise deals with its
customers;
(r) entering into by Company of any transaction, contract or
agreement that by its terms requires or
contemplates a current and/or future
financial commitment, expense (inclusive of
overhead expense) or obligation on
the part of Company that involves in excess
of $20,000 or that is not entered
into in the ordinary course of Company's
business, consistent with its past
practice, or the conduct of any business or
operations other than in the
ordinary course of Company's business,
consistent with its past practice;
(s) license, transfer or grant of a right under any Company IP
Rights, other than non-exclusive licenses
to end-user customers in the ordinary
course of business, consistent with past
practices; or
(t) material change in accounting methods or practices
(including
any change in depreciation or amortization
policies or rates) by Company or any
material revaluation by Company of any of
its material assets.
3.11
Contracts and Commitments/Licenses and Permits. Schedule 3.11 of
the
Company Disclosure Letter sets forth a list
of each of the following written or
oral contracts, agreements, leases,
licenses, permits, assignments, mortgages,
transactions, obligations, commitments or
other instruments to which Company is
a party or to which Company or any of its
assets or properties is bound:
(a) any contract or agreement providing for payments (whether
fixed,
contingent or otherwise) by or to Company
in an aggregate amount of $50,000 or
more;
(b) any contract providing for the development of any software,
content (including textual content and
visual, photographic or graphics
content), technology or intellectual
property for (or for the benefit or use of)
Company, or providing for the purchase or
license of any software, content
(including textual content and visual,
photographic or graphics content),
technology or intellectual property to (or
for the benefit or use of) Company,
which software, content, technology or
intellectual property is in any manner
used or incorporated (or is contemplated by
Company to be used or incorporated)
in connection with any aspect or
element
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of any product, service or technology of
Company (other than software generally
available to the public at a per copy
license fee of less than $500 per copy);
(c) any joint venture or partnership contract or other
agreement
which has involved, or is reasonably
expected to involve, a sharing of profits,
expenses or losses with any other
party;
(d) any contract or commitment for or relating to the employment
of
any officer, employee or consultant of
Company or any other type of contract or
understanding with any officer, employee or
consultant of Company that is not
immediately terminable by Company without
cost or other liability;
(e) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or
other agreement or commitment for
the borrowing of money, for a line of
credit or for a leasing transaction of a
type required to be capitalized in
accordance with Statement of Financial
Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(f) any lease or other agreement under which Company is lessee of
or
holds or operates any items of tangible
personal property or real property owned
by any third party;
(g) any agreement that restricts Company from engaging in any
aspect
of its business, from participating or
competing in any line of business or
market, from freely setting prices for
Company's products, services or
technologies (including, but not limited
to, most favored customer pricing
provisions), from engaging in any business
in any market or geographic area, or
from soliciting potential employees,
consultants, contractors or other suppliers
or customers;
(h) any Company IP Rights Agreement other than object code
licenses
of commercial off-the-shelf computer
software under shrink-wrap or other
non-negotiated agreements having a cost of
less than $500 per seat;
(i) any agreement relating to the sale, issuance, grant,
exercise,
award, purchase, repurchase or redemption
of any shares of capital stock or
other securities of Company or any options,
warrants or other rights to purchase
or otherwise acquire any such shares of
capital stock, other securities or
options, warrants or other rights
therefor;
(j) any contract with or commitment to any labor union; and
(k) any Governmental Permit.
A true and
complete copy of each agreement or document required by these
subsections (a) through (k) of this Section
3.11 to be listed on Schedule 3.11
of the Company Disclosure Letter (such
agreements and documents being herein
collectively referred to as the "COMPANY
MATERIAL AGREEMENTS") and a copy of
each Governmental Permit required by
subsection (k) of this Section 3.11 to be
listed on Schedule 3.11 of the Company
Disclosure Letter has been delivered to
Parent's legal counsel.
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3.12 No
Default; No Restrictions.
3.12.1 Company is not, nor to Company's knowledge is any other
party, in material breach or default under
any Company Material Agreement. No
event has occurred, and no circumstance or
condition exists, that (with or
without notice or lapse of time, or both)
could reasonably be expected to, (i)
result in a violation or breach by Company,
or to Company's knowledge, by any
other party, of any of the provisions of
any Company Material Agreement, other
than a violation o
