Exhibit 2.1
EXECUTION COPY
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AMENDED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
3M COMPANY,
STEELER MERGER CORPORATION,
STEELER MERGER LLC
AND
HIGHJUMP SOFTWARE, INC.
Dated as of January 14, 2004
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................2
1.01. Merger..........................................................2
1.02. Effective Time of the Merger....................................2
1.03. Articles of Incorporation and Bylaws of the Surviving
Corporation.....................................................2
1.04. Board of Directors and Officers of the Surviving
Corporation.....................................................2
1.05. Conversion of Shares; Merger Consideration......................3
1.06. Additional Consideration........................................5
1.07. Appraisal Rights................................................5
1.08. Stock Options...................................................6
1.09. Payment for Shares..............................................6
1.10. Distribution of Cash Flow Holdback..............................7
1.11. No Further Rights or Transfers..................................8
1.12. Tax Treatment...................................................8
ARTICLE II CLOSING............................................................9
2.01. Generally.......................................................9
2.02. Deliveries at the Closing.......................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................9
3.01. Organization, Standing, Qualification...........................9
3.02. Capitalization.................................................10
3.03. Authorization and Execution....................................10
3.04. No Conflicts...................................................11
3.05. Financial Statements...........................................11
3.06. Absence of Certain Changes or Events...........................12
3.07. Tax Matters....................................................12
3.08. Real Property..................................................14
3.09. Title to Properties............................................15
3.10. Material Contracts.............................................15
3.11. Intellectual Property..........................................16
3.12. Litigation.....................................................20
3.13. Permits, Licenses, Authorizations; Compliance with Laws........20
3.14. Retirement and Benefit Plans...................................20
3.15. Employees......................................................22
3.16. Environmental Matters..........................................24
3.17. Insurance......................................................25
3.18. Customer Relationships.........................................25
3.19. Product Warranty...............................................26
3.20. Conditions Affecting Business..................................26
3.21. No Brokers or Finders..........................................26
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3.22. Disclosure.....................................................26
3.23. Sole Representations and Warranties............................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY....27
4.01. Organization, Good Standing, Equity Ownership..................27
4.02. Authorization and Execution....................................27
4.03. No Conflicts...................................................27
4.04. Litigation.....................................................28
4.05. SEC Filings; Financial Statements..............................28
4.06. No Brokers or Finders..........................................28
4.07. Interim Operations of Merger Subsidiary........................28
4.08. Sole Representations and Warranties............................29
ARTICLE V CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME...............29
5.01. Operation of Business of the Company Until Effective Time......29
5.02. Shareholder Approval...........................................30
5.03. No Shopping....................................................30
5.04. Access to Information..........................................31
5.05. Confidentiality Agreement......................................31
5.06. Deposit of Escrowed Funds......................................31
5.07. Reasonable Efforts.............................................31
5.08. Amendment of Disclosure Schedules..............................31
5.09. Employment Agreements..........................................32
5.10. Incentive Programs.............................................32
5.11. Retention Program..............................................32
5.12. Registration and Listing of Shares.............................32
5.13. Restrictive Legend on Shares...................................32
5.14. Taxes on Transfer..............................................33
5.15. Conditions to Parent's Obligation to File Registration
Statement......................................................33
5.16. Investment Representations.....................................33
5.17. Stock Ownership Plan...........................................33
5.18. Non-Solicitation Agreements....................................34
5.19. Redemption of Shares...........................................34
5.20. Resignation of Employees.......................................34
ARTICLE VI CONDITIONS PRECEDENT..............................................34
6.01. Conditions to the Obligations of Parent and Merger Subsidiary..34
6.02. Conditions to the Obligations of the Company...................36
ARTICLE VII CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME................37
7.01. Indemnification................................................37
7.02. Directors and Officers Liability Insurance.....................37
7.03. Confidentiality................................................37
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7.04. Employment Following Effective Time............................38
7.05. Completion of Merger between New LLC and the Company...........38
ARTICLE VIII TERMINATION AND ABANDONMENT.....................................38
8.01. Generally......................................................38
8.02. Procedure and Effect of Termination and Abandonment............39
ARTICLE IX SHAREHOLDER REPRESENTATIVE........................................39
9.01. Designation....................................................39
9.02. Authority......................................................39
9.03. Resignation....................................................40
9.04. Reliance by Third Parties on the Shareholder Representative's
Authority......................................................40
9.05. Exculpation and Indemnification................................40
ARTICLE X INDEMNIFICATION....................................................41
10.01. Indemnification by the Shareholders............................41
10.02. Indemnification by Parent, Merger Subsidiary and New LLC.......41
10.03. Notice of Third-Party Claims...................................42
10.04. Defense of Third-Party Claims..................................42
10.05. Notice of Other Claims.........................................43
10.06. Access and Cooperation.........................................43
10.07. Term of Indemnities............................................43
10.08. Limitations on Liability.......................................43
10.09. Indemnification Escrow Amount and Term.........................45
10.10. Indemnity Definitions..........................................45
ARTICLE XI MISCELLANEOUS PROVISIONS..........................................47
11.01. Survival of Representations, Warranties and Covenants of the
Company, Parent and Merger Subsidiary..........................47
11.02. Amendment and Modification.....................................47
11.03. Waiver of Compliance; Consents.................................47
11.04. Expenses.......................................................47
11.05. Press Releases and Public Announcements........................47
11.06. Additional Agreements..........................................48
11.07. Notices........................................................48
11.08. Assignment.....................................................49
11.09. Interpretation.................................................49
11.10. Dispute Resolution.............................................49
11.11. Governing Law..................................................50
11.12. Counterparts...................................................50
11.13. Headings; Internal References..................................50
11.14. Number; Gender.................................................50
11.15. Entire Agreement...............................................50
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Exhibit 2.1
11.16. Enforcement....................................................50
11.17. Waiver.........................................................51
11.18. Severability...................................................51
11.19. Disclosure Schedules...........................................51
11.20. Definitions....................................................52
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Key Employee Matters
Exhibit C - Form of Incentive Program 1
Exhibit D - Form of Incentive Program 2
Exhibit E - Form of Retention Program
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EXECUTION COPY
AMENDED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered
into as of January 14, 2004, by and among 3M COMPANY, a Delaware corporation
("Parent"), STEELER MERGER CORPORATION, a Minnesota corporation and wholly owned
subsidiary of Parent ("Merger Subsidiary"), STEELER MERGER LLC, a Delaware
limited liability company and wholly owned subsidiary of Parent ("New LLC"), and
HIGHJUMP SOFTWARE, INC., a Minnesota corporation (the "Company").
RECITALS
A. Parent, Merger Subsidiary, the Company and New LLC previously
executed and delivered an Agreement and Plan of Merger dated as of December 23,
2003 (the "Original Merger Agreement") and desire to amend and restate the
Original Merger Agreement in order to make certain technical changes, the
primary purpose of which is to facilitate compliance with United States federal
securities laws.
B. The Boards of Directors of Parent, Merger Subsidiary and the Company
have determined that it is advisable and in the best interests of their
respective shareholders that the parties consummate the business combination
provided for herein in which Merger Subsidiary will merge with and into the
Company with the Company being the surviving corporation in the merger (the
"Merger").
C. Immediately following the Merger, and in any event no later than the
next business day following the Merger, Parent will cause the Company to merge
with and into New LLC.
D. Parent, as the sole shareholder of Merger Subsidiary, has approved
this Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to actions taken in accordance with the requirements of the Minnesota
Business Corporation Act (the "MBCA") and the Delaware General Corporation Law
(the "DGCL").
E. The Board of Directors of the Company has determined that the Merger
is advisable and in the best interests of the Company and its shareholders and
has directed that this Agreement be submitted to a vote of the shareholders of
the Company (the "Shareholders").
F. The Merger, immediately followed by the merger of the Company with
and into New LLC, is intended to be an integrated transaction that qualifies as
a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code")
G. Reference is made to Section 11.20 hereof, which lists the Sections
within this Agreement where each capitalized term used herein is defined.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements in this Agreement, the
parties agree as follows:
ARTICLE I
THE MERGER
1.01. MERGER. At the Effective Time (as hereinafter defined) and in
accordance with the terms and subject to the conditions set forth in this
Agreement and the MBCA, the Merger Subsidiary shall be merged with and into the
Company , the separate corporate existence of the Merger Subsidiary shall
thereupon cease, and the Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the Surviving Corporation shall thereupon and thereafter possess all the rights
and obligations of each of the constituent corporations in accordance with the
MBCA. At the Effective Time, the Merger shall have the other effects provided in
the applicable provisions of the MBCA. As set forth in Section 7.05 below, as
soon as possible thereafter, but not later than the close of business on the
first business day immediately following the Effective Time, the Surviving
Corporation, as part of a single plan to which the Merger is a part, shall be
merged with and into New LLC in accordance with the provisions of Minnesota law
and the Delaware General Corporation Law, such that, after giving effect to such
merger, New LLC shall ultimately be the surviving entity in the Merger, and,
where appropriate, the term Surviving Corporation shall refer to New LLC.
1.02. EFFECTIVE TIME OF THE MERGER. Concurrently with the Closing (as
hereinafter defined), the parties hereto shall cause the Merger to be
consummated by filing articles of merger (the "Articles of Merger"), in such
form as required by, and executed in accordance with, the applicable provisions
of the MBCA, with the Secretary of State of the State of Minnesota and shall
make all other filings or recordings required under the MBCA. The Merger shall
become effective upon the filing of the Articles of Merger with the Secretary of
State of the State of Minnesota in accordance with the MBCA or such later date
or time as the parties shall agree and specify in the Articles of Merger. The
term "Effective Time" shall mean the date and time the Merger becomes effective
in accordance with the MBCA.
1.03. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Articles of Incorporation of the Company in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, until amended in accordance with the laws of the State of
Minnesota and such Articles of Incorporation. The Bylaws of the Company in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until further amended in accordance with the laws of the
State of Minnesota, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
1.04. BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Merger Subsidiary immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, each of such directors to hold
office, subject to the applicable provisions of the Articles of Incorporation
and Bylaws of the Surviving Corporation, until the
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expiration of the term for which such director was elected and until his or her
successor is elected and has qualified or as otherwise provided in the Articles
of Incorporation or Bylaws of the Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation until their respective successors are chosen and have
qualified or as otherwise provided in the Bylaws of the Surviving Corporation.
1.05. CONVERSION OF SHARES; MERGER CONSIDERATION.
(a) Parent shall pay to the holders of convertible preferred
stock, preferred stock, common stock, warrants, stock options, and any
other securities or ownership rights in Company, an aggregate merger
consideration of $68,000,000. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary,
the Company or the holders of any of the following securities,
$68,000,000 in aggregate merger consideration shall be paid by Parent
as follows:
(i) each holder of shares of common stock of the
Company issued and outstanding immediately prior to the
Effective Time (other than with respect to any shares of
Company Common Stock with respect to which such holders
thereof have perfected appraisal rights pursuant to Section
1.07, and any shares redeemed by the Company pursuant to
Section 5.19) shall receive the consideration set forth across
from such holder's name on Schedule 1.05, as such schedule
shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise of outstanding
stock options or redemption of shares between the date of the
Original Merger Agreement and the Effective Time, in shares of
common stock of Parent ("Parent Common Stock") based upon the
Parent Share Value (as hereinafter defined) as of the day
before the Closing Date;
(ii) each holder of shares of preferred stock of the
Company issued and outstanding immediately prior to the
Effective Time (other than with respect to any shares of
preferred stock of the Company which such holders thereof have
perfected appraisal rights pursuant to Section 1.07) and
warrants to acquire shares of preferred stock of the Company
and each holder of warrants outstanding immediately prior to
the Effective Time (collectively, the "Warrants") shall
receive consideration in the amounts set forth across from
such holder's name on Schedule 1.05, as such schedule shall be
updated by the parties hereto immediately prior to the
Effective Time to reflect any exercise of outstanding stock
options or redemption of shares between the date of the
Original Merger Agreement and the Effective Time, in cash
and/or shares of Parent Common Stock based upon the Parent
Share Value (as hereinafter defined) as of the day before the
Closing Date.
(iii) each option to acquire shares of common stock
of the Company outstanding immediately prior to the Effective
Time shall be cancelled in exchange for a cash payment
described in Section 1.08 and Schedule 1.08, as such schedule
shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise, expiration or
termination of outstanding stock
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options between the date of the Original Merger Agreement and
the Effective Time.
(iv) all other securities of the Company shall be
cancelled and shall have no further force and effect, and the
holders of such securities shall have no right to receive any
portion of the consideration payable by Parent under this
Agreement; and
(v) each share of common stock, $0.01 par value per
share, of the Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(b) If, during the period between the date hereof and the
Effective Time, any change in the capital stock of Parent shall occur
by reason of reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any stock dividend
thereon with a record date during such period or any similar event, the
amounts of shares of Parent Common Stock issuable pursuant to this
Agreement shall be appropriately adjusted.
(c) Notwithstanding any other provision in this Agreement to
the contrary, the sum of (i) the total aggregate amount of cash that
will be paid in the Merger pursuant to this Section 1.05, (ii) any cash
amounts to be paid in exchange for fractional shares, (iii) any cash
amounts to be paid for Dissenting Shares pursuant to Section 1.07, (iv)
any other amounts paid by Parent or the Company to or on behalf of any
shareholder of the Company in connection with the sale or other
disposition of any shares of capital stock of the Company in connection
with the Merger for purpose of Treasury Regulation Section 1.368-1(e),
and (v) the amount of any extraordinary dividend (including any cash
distributions and payments made pursuant to Section 1.06) distributed
and paid by the Company prior to and in connection with the Merger (the
sum of these amounts, the "Aggregate Cash Amount") shall not exceed 50%
of the Aggregate Consideration (as defined in this Section). The
"Aggregate Consideration" shall equal the sum of (i) the Aggregate Cash
Amount, plus (ii) the number of shares of Parent Common Stock to be
issued in the Merger times the average of the highest and lowest quoted
trading price of Parent Common Stock on the date of the Effective Time.
If the Aggregate Cash Amount would exceed 50% of the Aggregate
Consideration, the number of shares of Parent Common Stock that would
be issued to holders of capital stock of the Company shall be increased
and the amount of cash that would be issued to the holders of capital
stock of the Company shall be decreased so that the Aggregate Cash
Amount does not exceed 50% of the Aggregate Consideration. The
foregoing adjustments shall be applied in a manner such that after such
adjustments the sum of (i) the Aggregate Cash Amount and (ii) the
product of the number of shares of Parent Common Stock to be issued in
the Merger multiplied by the Parent Share Value as of the day
immediately prior to the Closing Date, shall be equal to such sum
absent such adjustments.
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(d) For purposes of this Agreement, "Parent Share Value" means
the average of the daily closing prices of a share of Parent Common
Stock (calculated to the nearest 0.0001) on The New York Stock
Exchange, as reported in the New York Edition of the Wall Street
Journal, for the ten (10) consecutive trading days immediately
preceding and including the applicable date.
1.06. ADDITIONAL CONSIDERATION.
(a) Immediately prior to the Effective Time, those persons
whose names are listed on Schedule 1.06(a), including certain holders
of shares of capital stock of the Company, holders of Stock Options (as
hereinafter defined) and an adviser to the Company, shall be entitled
to receive a cash distribution from the Company in the amounts set
forth across from such persons' names on Schedule 1.06(a), as such
schedule shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise, expiration or termination
of outstanding stock options or redemption of shares between the date
of the Original Merger Agreement and the Effective Time. Prior to the
Closing, the Company shall prepare and deliver to Parent a balance
sheet of the Company as of December 9, 2003 (the "Closing Balance
Sheet"). The Cash balance on the Closing Balance Sheet up to
$14,000,000 (less any required tax withholding) shall be distributed as
set forth in Schedule 1.06(a) until working capital equals $500,000
(the amount payable in accordance with the foregoing being referred to
herein as "Closing Cash Consideration").
(b) If the Closing Balance Sheet shows a Cash Balance greater
than the sum of $14,000,000 and the aggregate amount of legal and
accounting fees of the Company incurred in connection with the Merger
(the "Transaction Fees"), then the Cash Balance in excess of the sum of
$14,000,000 and the Transaction Fees shall be distributed pro rata to
the holders of capital stock in the Company until working capital,
after deducting (i) the sum of the amounts distributed under Sections
1.06(a) and 1.06(b) and (ii) the Transaction Fees, equals $500,000 (the
amount payable in accordance with the foregoing being referred to
herein as "Additional Closing Cash Consideration").
1.07. APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to
the contrary, each share (if any) of capital stock of the Company issued and
outstanding immediately before the Effective Time for which the holder has
properly exercised and perfected such holder's demand for appraisal rights under
Sections 302A.471 and 302A.473 of the MBCA (each a "Dissenting Share") shall not
be converted into the right to receive its portion of the consideration
specified in Sections 1.05 and 1.06 at or after the Effective Time unless and
until the holder of such shares withdraws such holder's demand for appraisal
rights or becomes ineligible for appraisal rights. If any such holder fails to
perfect (or otherwise loses) any such appraisal rights, then each such share of
such holder shall be treated as a share that had been converted as of the
Effective Time into the right to receive its portion of the merger consideration
specified in Sections 1.05 and 1.06, without interest. The Company shall give
prompt notice to Parent of each demand received by the Company for payment of
fair value of Common Stock, and Parent shall have the right to participate in
negotiations and proceedings regarding each such demand. The Company shall not,
except with prior written consent of Parent, settle or make any payment
regarding any such demand. Each person holding of record
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or beneficially owning Dissenting Shares who becomes entitled under Sections
302A.471 and 302A.473 of the MBCA and this Section 1.07 to payment of the fair
value of such Dissenting Shares (and any other payments required by Sections
302A.471 and 302A.473 of the MBCA) shall receive payment therefor from the
Surviving Corporation.
1.08. STOCK OPTIONS. At or immediately prior to the Effective Time,
each then outstanding Stock Option (as hereinafter defined) shall be canceled by
the Company in exchange for a cash payment by the Company to the holder of such
Stock Option equal to the difference between (a) the per share amount based upon
(i) the total consideration to be paid to the holders of shares of common stock,
Stock Options and Warrants and preferred stock, on an as converted basis, of the
Company issued and outstanding as of immediately prior to the Effective Time
(the "Fully Diluted Shares"), divided by (ii) the number of Fully Diluted
Shares, and (b) the per share exercise price under the applicable option
agreement multiplied by the number of Stock Options held. The aggregate amount
payable to the holders of Stock Options under this Section 1.08 is set forth on
Schedule 1.08 (which schedule shall be updated by the parties hereto immediately
prior to the Effective Time to reflect any exercise, expiration or termination
of outstanding stock options between the date of the Original Merger Agreement
and the Effective Time) and is referred to herein as the "Option Settlement
Amount." Each such cancellation and payment shall occur pursuant to the terms
and conditions established for such cancellation in the applicable stock option
agreement and the Company's Second Amended and Restated 2000 Stock Option Plan
(the "2000 Plan"). Parent shall fund the total amount set forth in Schedule 1.08
in the column "Paid Out of Merger Consideration" at or immediately prior to the
Effective Time through a cash payment to the Company, after which the Company
shall pay to each holder of Stock Options an amount calculated in accordance
with this Section 1.08 and as set forth in Schedule 1.08 (less any applicable
withholding Taxes). Payment of the Option Settlement Amount in this manner shall
be considered part of and to satisfy in part Parent's obligation to pay the
aggregate merger consideration of $68,000,000 pursuant to Section 1.05. For
purposes of this Agreement, "Stock Options" means the options to purchase shares
of common stock of the Company outstanding immediately prior to the Effective
Time.
1.09. PAYMENT FOR SHARES.
(a) At and after the Effective Time, each holder of a
certificate or certificates representing shares of Common Stock
canceled and extinguished at the Effective Time may surrender such
certificate or certificates to the Parent, to effect the exchange of
such certificate or certificates on such holder's behalf. Until so
surrendered and exchanged, each outstanding certificate which, prior to
the Effective Time, represented shares of Common Stock shall be deemed
to represent and evidence only the right to receive the portion of the
merger consideration to be paid therefor as set forth in Sections 1.05
and 1.06 and until such surrender and exchange, no cash shall be paid
to the holder of such outstanding certificate in respect thereof.
(b) The Parent shall deliver to the Escrow Agent at the
Effective Time (i) $3,400,000 (the "Indemnification Escrow Amount") and
(ii) $500,000 (the "Cash Flow Holdback"), to be held by the Escrow
Agent subject to the terms and conditions of this Agreement and the
Escrow Agreement, and the Indemnification Escrow Amount and Cash Flow
Holdback (collectively, the "Escrowed Funds") shall be deducted from
the
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amounts otherwise payable to the holders of common stock and preferred
stock of the Company pursuant to Section 1.05, as described in Schedule
1.05.
(c) If payment is to be made to a person other than the person
in whose name the certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment that the
certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, and that the person requesting such payment
shall pay to the Company any transfer and other taxes required by
reason of such payment in any name other than that of the registered
holder of the certificate surrendered or shall have established to the
satisfaction of the Company that such tax either has been paid or is
not payable.
(d) No interest shall accrue or be payable with respect to
any, amounts which a holder of shares of capital stock of the Company,
Stock Options or Warrants shall be so entitled to receive. Parent and
the Surviving Corporation shall be authorized to pay the consideration
attributable to any certificate previously issued which has been lost
or destroyed, upon receipt of satisfactory evidence of ownership of the
shares of securities represented thereby and of appropriate
indemnification.
1.10. DISTRIBUTION OF CASH FLOW HOLDBACK.
(a) Within 210 days following the Closing Date, Parent shall
deliver to the Stockholders' Representatives a statement of cash flows
(the "PROPOSED FINAL CASH FLOW STATEMENT") reflecting Parent's
determination of the amount of cash flows generated by the Company from
continuing operations of the Company during the six-month period
immediately following the Closing Date and ending on the six-month
anniversary of the Closing Date, without taking into account any
general corporate allocations of Parent to the Company that do not
specifically relate to the business of the Company, all in accordance
with Schedule 1.10 hereto (the "PROPOSED CASH FLOW AMOUNT"), together
with the books, records, work papers and similar documentation used in
Parent's calculation of the Proposed Cash Flow Amount.
(b) After receipt of the Proposed Final Cash Flow Statement,
the Stockholders' Representatives shall have thirty (30) days to review
the Proposed Final Cash Flow Statement, together with the books,
records, workpapers and similar documentation used by Parent in its
preparation and calculation of the Proposed Cash Flow Amount, and shall
have access to the Company's books, records and personnel upon
reasonable notice and during normal business hours in conducting such
review. The Proposed Final Cash Flow Statement and the Proposed Cash
Flow Amount shall become final and binding (in their final and binding
form, after resolution of any disputes hereunder, the "FINAL CASH FLOW
STATEMENT" and the "FINAL CASH FLOW AMOUNT", respectively) on the
thirtieth day following receipt thereof by the Stockholders'
Representatives unless the Stockholders' Representatives give written
notice of their disagreement (a "NOTICE OF DISAGREEMENT") to Parent
prior to such date. Any Notice of Disagreement shall specify in
reasonable detail the nature and amount of any disagreement so
asserted. If a timely Notice of Disagreement is delivered by the
Stockholders' Representatives, then the parties shall work in good
faith to resolve such
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disagreement, and if the parties cannot resolve such disagreement
within thirty (30) days after delivery by the Stockholders'
Representatives of the Notice of Disagreement to the Proposed Final
Cash Flow Statement and Proposed Cash Flow Amount, such disagreement
shall be referred to a nationally recognized "Big Four" independent
accounting firm mutually satisfactory to Parent and the Stockholders'
Representatives (the "REVIEWING PARTY"), which shall be directed to
resolve such disagreement within thirty (30) days thereafter, and whose
decision shall be final and binding on all parties.
(c) The fees and expenses of the Reviewing Party retained
pursuant to this Section 1.10 shall be paid as follows:
(i) if the Reviewing Party determines that the Final
Cash Flow Amount is greater than the Proposed Cash Flow
Amount, all of the fees and expenses of the Reviewing Party
shall be borne by Parent; and
(ii) if the Reviewing Party determines that the Final
Cash Flow Amount is equal to or less than the Proposed Cash
Flow Amount, all of the fees and expenses of the Reviewing
Party shall be disbursed from the Indemnification Escrow
Amount.
(d) If the Final Cash Flow Amount is equal to or greater than
$1.00, Parent shall cause the Escrow Agent to distribute the Cash Flow
Holdback to the Stockholders' Representatives, for further payment pro
rata to the former holders of capital stock of the Company, within
three business days following the date on which the Final Cash Flow
Statement is determined. If the Final Cash Flow Amount is less than
zero, Parent shall cause the Escrow Agent to distribute (i) the Cash
Flow Holdback, plus (ii) the amount of the Final Cash Flow Amount, to
the Stockholders' Representatives for further payment pro rata to the
former holders of capital stock of the Company. Any remaining Cash Flow
Holdback shall be distributed to the Parent within three business days
following the date on which the Final Cash Flow Statement is
determined.
1.11. NO FURTHER RIGHTS OR TRANSFERS. At the Effective Time, all shares
of capital stock of the Company issued and outstanding immediately prior to the
Effective Time shall be canceled and cease to exist, and each holder of a
certificate or certificates that represented shares of capital stock issued and
outstanding immediately prior to the Effective Time shall cease to have any
rights as a Shareholder with respect to the shares of capital stock represented
by such certificate or certificates, except for the right to surrender such
certificate or certificates in exchange for the payment provided pursuant to
Sections 1.05 and 1.06 hereof or to preserve and perfect such holder's right to
receive payment for such holder's shares pursuant to Sections 302A.471 and
302A.473 of the MBCA and Section 1.07 hereof if such holder has validly
exercised and not withdrawn or lost such right, and no transfer of shares of
capital stock issued and outstanding immediately prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation.
1.12. TAX TREATMENT. The parties intend that the Merger, considered
together with the merger contemplated in Section 7.05 below, be treated as a
reorganization described in
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Section 368(a) of the Code. The parties to this Agreement shall not take a
position on any Tax Returns inconsistent with such treatment unless otherwise
required by law.
ARTICLE II
CLOSING
2.01. GENERALLY. Subject to the fulfillment or waiver of the conditions
precedent set forth in Article VI hereof and the termination provisions set
forth in Article VIII hereof, the closing (the "Closing") of the transactions
contemplated hereby shall occur on the last business day of the calendar month
during which the first business day following the day on which the fulfillment
or waiver of the conditions precedent set forth in Article VI occurs, or on such
other date as Parent and the Company may mutually agree (the "Closing Date").
The Closing shall be held at the offices of Dorsey & Whitney LLP, 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402, or at such other place as
Parent and the Company may mutually agree.
2.02. DELIVERIES AT THE CLOSING. Subject to the provisions of Articles
VI and VIII hereof, at the Closing:
(a) There shall be delivered to Parent, Merger Subsidiary and
the Company the certificates and other documents and instruments as
contemplated under Article V or VI hereof; and
(b) The Company and Merger Subsidiary shall cause the Articles
of Merger to be filed as provided in Section 1.02 hereof and shall take
any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary
that, except as otherwise set forth in the disclosure schedules attached hereto
(the "Disclosure Schedules" and each a "Disclosure Schedule"), the statements in
this Article III are true and correct as of the date of the Original Merger
Agreement (for purposes of this Article III, "the date of this Agreement" shall
mean the date of the Original Merger Agreement).
3.01. ORGANIZATION, STANDING, QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota and has the requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased, or the nature of its activities, makes such qualification necessary,
except such jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect upon the
business, operations, properties or financial condition of the Company
("Material Adverse Effect");
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provided, however, that wherever such term is used in this Agreement, a Material
Adverse Effect will not be deemed to have occurred if the change, circumstance,
event, effect or state of facts results primarily from (a) a change in general
economic conditions, (b) a change in general business conditions in the
Company's industry which does not disproportionately affect the Company or (c)
the disclosure to the public, or pendency, of the Merger and the transactions
contemplated thereby. The copies of the Articles of Incorporation and Bylaws of
the Company that have been made available to Parent are complete and correct as
of the date of this Agreement, and the minute book of the Company that has been
made available to Parent is complete in all material respects and accurately
reflects all material action taken prior to the date of this Agreement by the
Board of Directors of the Company and the Shareholders.
3.02. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
75,000,000 shares, of which 8,700,000 shares are designated Series A
Convertible Preferred Stock, 7,300,000 shares are designated Series B
Convertible Preferred Stock, 50,000,000 shares are designated Common
Stock and 9,000,000 shares are undesignated shares of capital stock. At
the date hereof, the issued and outstanding capital stock of the
Company consists of 8,646,999 shares of Series A Convertible Preferred
Stock, 7,185,116 shares of Series B Convertible Preferred Stock and
20,284,427 shares of Common Stock. Disclosure Schedule 3.02(a) contains
a complete and correct list of all record owners of shares of capital
stock of the Company and the number of shares owned by each such
person, in each case at the date hereof. All of the outstanding shares
of capital stock of the Company are validly issued, fully paid and
nonassessable. At the date hereof, the Company has no other issued or
outstanding shares of capital stock.
(b) Disclosure Schedule 3.02(b) contains a complete and
correct list of all outstanding and unexercised Stock Options under the
Company's 2000 Stock Option Plan, as amended (the "2000 Plan"),
specifying the name of each optionee, the date on which each Stock
Option was granted, the number of shares of Common Stock that may be
purchased pursuant to each Stock Option, the exercise price at which
such shares may be purchased, the vesting period for each Stock Option
and the expiration date of each Stock Option. Except for the Stock
Options and the Warrants and as otherwise set forth on Disclosure
Schedule 3.02(b), there are no outstanding subscriptions, options,
warrants, calls or other agreements or commitments by which the Company
is bound in respect of the capital stock of the Company, whether issued
or unissued, and no outstanding securities convertible into or
exchangeable for any such capital stock.
(c) The Company does not own, directly or indirectly, any
capital stock or other equity interest in (or any rights to acquire any
capital stock of or other equity interest in) any corporation,
partnership, joint venture or other entity.
3.03. AUTHORIZATION AND EXECUTION. The Company has the corporate power
and authority to execute and deliver this Agreement and, subject to obtaining
the Shareholder Approval, to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement have been duly and
effectively authorized by the Board of Directors of the Company, and no further
corporate action of the Company, other than the
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Shareholder Approval, is necessary to consummate the transactions contemplated
hereby. This Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a court of law or equity).
3.04. NO CONFLICTS. Subject to obtaining the Shareholder Approval and
except as set forth in Disclosure Schedule 3.04, neither the execution and
delivery of this Agreement by the Company, nor the consummation by the Company
of the transactions contemplated hereby, will (i) conflict with or result in a
breach of the Articles of Incorporation or Bylaws, as currently in effect, of
the Company, or (ii) except for the filing of the Articles of Merger as required
by the MBCA and any filing required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), require any filing with, or consent or approval of,
any governmental authority having jurisdiction over any of the business or
assets of the Company, or (iii) violate any material statute, regulation,
injunction, judgment or order to which the Company is subject, or (iv) result in
a material breach of, or constitute a material default or an event which, with
the passage of time or the giving of notice or both would constitute a material
default, give rise to a right of termination, cancellation or acceleration,
create any entitlement to any payment or benefit, require the consent of any
third party or result in the creation of any lien on the assets of the Company
under any Material Contract (as defined in Section 3.10).
3.05. FINANCIAL STATEMENTS. The Company has previously delivered to
Parent its (i) audited financial statements for the twelve months ended March
31, 2003, and (ii) unaudited financial statements for the six-month period ended
September 30, 2003. All of the foregoing financial statements are hereinafter
collectively referred to as the "Financial Statements." The audited Financial
Statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly present, in all material
respects, the financial position of the Company as at the respective dates
thereof and the results of operations and cash flows of the Company for the
periods indicated. The unaudited Financial Statements were prepared by the
Company in accordance with generally accepted accounting principles and
consistent with the past practices of the Company and fairly present, in all
material respects, the financial position of the Company as at the respective
dates thereof and the results of operations for the periods indicated, except
that all unaudited Financial Statements are subject to normal year-end
adjustments and do not contain all footnote disclosures required by generally
accepted accounting principles.
Other than as and to the extent (w) disclosed or reserved against in
the balance sheet (the "Base Balance Sheet") dated as of September 30, 2003 (the
"Base Balance Sheet Date"), (x) set forth in Disclosure Schedule 3.05, (y)
incurred under, or required or permitted to be incurred under, this Agreement,
or (z) incurred in the ordinary course of business since the Base Balance Sheet
Date, the Company has no material liabilities or obligations required to be
disclosed or reserved against on a balance sheet prepared in accordance with
generally accepted accounting principles.
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3.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Disclosure Schedule 3.06 or as permitted by Section 5.01 hereof, since the Base
Balance Sheet Date and to and including the date of this Agreement:
(a) there has not been (i) a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock of
the Company or any redemption or other acquisition by the Company of
any of the capital stock of the Company or any split, combination or
reclassification of shares of capital stock declared or made by the
Company, (iii) any change in the amount or terms of wages, salary and
other compensation paid to, or benefits provided to any current
employee or current director of the Company (other than changes that
occurred in the ordinary course of business or pursuant to plans,
programs or agreements then existing), or termination of the employment
of any employee of the Company, or (iv) any commitment or agreement to
do any of the foregoing; and
(b) there have not been (i) any extraordinary losses suffered,
(ii) any material assets mortgaged, pledged or made subject to any
lien, charge or other encumbrance, (iii) any liability or obligation
(absolute, accrued or contingent) incurred or any bad debt, contingency
or other reserve increase suffered, except, in each such case, in the
ordinary course of business and consistent with past practice, (iv) any
claims, liabilities or obligations (absolute, accrued or contingent)
paid, discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with
past practice of claims, liabilities and obligations reflected or
reserved against in the Financial Statements or incurred in the
ordinary course of business and consistent with past practice since the
Base Balance Sheet Date, (v) written off as uncollectible any notes or
accounts receivable, except write-offs in the ordinary course of
business and consistent with past practice, (vi) write down of the
value of any asset or investment on the Company's books or records,
except for depreciation and amortization taken in the ordinary course
of business and consistent with past practice, (vii) any material
change in any method of accounting or accounting practice by the
Company, except for such changes required by reason of changes in
generally accepted accounting principles, (viii) cancellation of any
debts or waiver of any claims or rights in excess of $50,000, or sale,
transfer or other disposition of any properties or assets (real,
personal or mixed, tangible or intangible) in excess of $50,000,
except, in each such case, in transactions in the ordinary course of
business and consistent with past practice, (ix) any single capital
expenditure or commitment (other than expenditures under or related to
software development contracts) in excess of $50,000 for additions to
property or equipment, or aggregate capital expenditures and
commitments in excess of $100,000 for additions to property or
equipment, (x) any transaction entered into by the Company other than
in the ordinary course of business, or (xi) any agreement to do any of
the foregoing.
3.07. TAX MATTERS.
(a) The Company has timely filed or caused to be filed all
Federal, state, local and foreign Tax Returns required to be filed by
it since January 1, 1998 with respect to Taxes and has paid all Taxes
due and owing by the Company (whether or not shown on
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any Tax Return) since such date and all assessments made against it to
the extent such have become due. None of the foregoing Tax Returns
contains any position which is or would be subject to penalties under
Code Section 6662. In addition, the Company has paid or made adequate
provision for the payment of all such Taxes which are due and payable
with respect to the periods covered by such returns pursuant to any
assessment with respect to such Taxes in such jurisdictions, whether or
not in connection with such returns or otherwise due or payable on or
before the Closing Date. The liability for Taxes reflected in the Base
Balance Sheet (i) is sufficient for the payment of all unpaid Taxes,
whether or not disputed, that are accrued or applicable for the period
ended on the Base Balance Sheet Date and for all years and periods
ended prior thereto and (ii) adjusted for the passage of time in a
manner consistent with the past practice of the Company, is sufficient
for the payment of all unpaid Taxes, whether or not disputed, that are
accrued or applicable for all years or periods ending on or prior to
the Closing Date.
(b) All Tax Returns filed by the Company for any taxable
period ending after January 1, 1998 were, as of the date filed,
complete and accurate in all material respects. Except as set forth in
Disclosure Schedule 3.07(b), no Tax Returns filed by the Company, the
due date of which (taking into account all extensions of time to file)
was on or after January 1, 1998, have been audited and no claims for
additional Taxes for any taxable period have been made by any taxing
authority that have not been resolved in full. The Company has not
received a notice of deficiency or assessment of additional Taxes,
which notice or assessment has not been resolved in full. The Company
has not received from any taxing authority (including jurisdictions
where the Company has not filed Tax Returns) any (i) notice indicating
any attempt to open an audit or other review, or (ii) request for
information relating to Tax matters. The Company has not waived any
statute of limitations in respect of Taxes or extended the period for
assessment or payment of any Tax, which period has not since expired.
(c) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with any amounts paid or
owing to any employee, former employee, independent contractor,
creditor, Shareholder or other third party.
(d) The Company has not been a member of an affiliated group
(as such term is defined in Section 1504 of the Code) filing a
consolidated federal income tax return for any tax year, or portion
thereof, since the date of incorporation of the Company.
(e) There are no liens for Taxes (other than current Taxes not
yet due and payable) upon the assets of the Company.
(f) The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations.
(g) The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
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(h) The Company is not a party to (nor will the Company, prior
to the Closing, become a party to) any Tax allocation, indemnity or
sharing agreement.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that,
individually or in the aggregate, could give rise to the payment
(taking into consideration any payment made under Section 1.08 of this
Agreement) of any amount that would not be deductible pursuant to
Section 280G of the Code.
(j) The Company has not entered into any transaction that is
considered a "reportable transaction" under Treasury Regulation Section
1.6011-4(b).
(k) The Company has not had any "ownership change" as that
phrase is defined in Code Section 382.
(l) The Company and the Shareholders have not taken (and will
not take from the date of this Agreement to the Closing date) any
action which would cause the Merger to fail to qualify for tax-free
reorganization treatment under Code Section 368(a).
(m) Disclosure Schedule 3.07(b) sets forth, as of the most
recent practicable date, (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby) the amount of any net operating loss, net capital
loss, unused investment credit or other credit.
(n) For purposes of this Agreement, the term "Tax" or "Taxes"
means all taxes, including without limitation, any income, corporation,
gross receipts, profits, gains, capital stock, capital duty, franchise,
withholding, social security, unemployment, disability, property,
wealth, welfare, stamp, excise, occupation, sales, use, value added,
alternative minimum, estimated, or other similar tax (including any
fee, assessment or other charge in the nature of or in lieu of any tax)
imposed by any governmental entity (whether Federal, state, local,
municipal, foreign or otherwise) or political subdivision thereof, and
any interest, penalties, additions to tax or additional amounts in
respect of the foregoing, and including any transferee or secondary
liability in respect of any tax (whether imposed by law, contractual
agreement or otherwise) and any liability in respect of any tax as a
result of being a member of any affiliated, consolidated, combined,
unitary or similar group. The term "Tax Return" means all returns,
declarations, reports, statements and other documents required to be
filed in respect of Taxes, and any claims for refunds of Taxes,
including any amendments or supplements to any of the foregoing.
3.08. REAL PROPERTY. The real property demised by the leases described
in Disclosure Schedule 3.08 (the "Leases") constitutes all of the real property
owned, used or occupied by the Company (the "Real Property"). The Company does
not own any Real Property. The Real Property has access, sufficient for the
conduct of the Company's business as now conducted, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business of the
Company at that location. Each of the Leases is in full force and effect.
Neither the Company
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nor, to the knowledge of the Company, any other party thereto is in material
default under or in respect of any of the Leases.
3.09. TITLE TO PROPERTIES. The Company owns or holds by valid lease or
license all of its personal property reflected in the Base Balance Sheet or
acquired after the Base Balance Sheet Date (except for any assets sold in
accordance with Section 3.06(b)(viii), and assets sold after the Base Balance
Sheet Date in the ordinary course of business and consistent with past
practice), free and clear of all mortgages, claims, liens, security interests,
charges and encumbrances, except (i) liens which may arise for current Taxes and
assessments not yet due and payable or which are being contested in good faith
and in respect of which adequate reserves have been established, (ii)
imperfections in title and liens easements, and other liens, claims and
encumbrances which were not incurred in connection with the borrowing of money
or the obtaining of advances or credit and which do not materially detract from
the value of or materially interfere with the present use of the properties
subject thereto or affected thereby, and (iii) liens which are disclosed in
Disclosure Schedule 3.09 ("Permitted Liens").
3.10. MATERIAL CONTRACTS. Except as set forth in Disclosure Schedule
3.10, the Company is not a party to or bound by any:
(a) contract with any labor union or any collective bargaining
agreement,
(b) bonus, pension, profit sharing, retirement, deferred
compensation, savings, stock purchase, stock option, hospitalization,
insurance or other plan providing similar employee benefits or
compensation;
(c) employment, agency, consulting or similar service
contract;
(d) sales representative, distributorship, or similar
agreement;
(e) lease, whether as lessor or lessee, with respect to any
real property;
(f) contract as licensor or licensee for the license of any
patent, know-how, trademark, trade name, service mark, copyright or
other intangible asset (other than non-negotiated licenses of
commercially available computer software);
(g) loan or guaranty agreement, indenture or other instrument,
contract or agreement under which any money has been borrowed or loaned
or any note, bond or other evidence of indebtedness has been issued
(other than trade accounts payable or receivable and other indebtedness
incurred in the ordinary course of business and not for money
borrowed);
(h) mortgage, security agreement, sale-leaseback agreement or
other agreement which effectively creates a lien on any assets of the
Company;
(i) contract restricting the Company in any material respect
from engaging in business or from competing with any other parties;
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(j) purchase or sale order for merchandise or supplies which
(i) was not entered into in the ordinary course of business, involves
payments of $100,000 or more, and is not terminable by the Company
without cost or penalty upon sixty (60) days' or less notice, or (ii)
is a standing or similar order with a remaining term of more than one
(1) year, that involves payments of $100,000 or more, and is not
terminable by the Company without cost or penalty upon sixty (60) days'
or less notice;
(k) plan of reorganization;
(l) contract involving the acquisition or disposition of
$50,000 or more in assets, other than contracts involving the purchase
or sale of inventory or products in the ordinary course of business;
(m) partnership, limited liability company or joint venture
agreement;
(n) contract or commitment to loan money to any person, to
guarantee indebtedness of any person, or to make an equity investment
in any person;
(o) escrow agreement for software;
(p) any other contract (excluding purchase and sale orders not
required by the terms in clause (j) above to be set forth in Disclosure
Schedule 3.10) that is not otherwise set forth in Disclosure Schedule
3.10, except such contracts as (x) involve payments of $50,000 or less
a year and (y) are terminable by the Company without cost or penalty
upon sixty (60) days' or less notice; or
(q) any contract requiring the consent of a third party upon a
change in control.
All of the foregoing are hereinafter collectively called "Material Contracts."
To the extent Material Contracts are evidenced by documents, true and correct
copies thereof have been delivered or made available to the Parent unless
otherwise noted in Disclosure Schedule 3.10. Except as set forth in Disclosure
Schedule 3.10, (i) the Material Contracts are valid and enforceable in
accordance with their respective terms with respect to the Company and, to the
knowledge of the Company, are valid and enforceable in accordance with their
respective terms with respect to any other party thereto, and (ii) there is not
under any of the Material Contracts any existing breach, default or event of
default by the Company or, to the knowledge of the Company, any other party
thereto.
3.11. INTELLECTUAL PROPERTY
(a) As used in this Section 3.11, "Intellectual Property
Rights" means patents, patent applications, inventions, trademarks
(registered and unregistered), trademark applications, service marks
(registered and unregistered), service mark applications, business
names, design rights, copyrights (registered and unregistered), domain
names and Know-How. As used in this Section 3.11, "Know-How" means any
and all technical or business information of the type generally treated
as proprietary and confidential by a business, including, but not
limited to, trade secrets, manufacturing processes, quality
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control processes, drawings, product specifications, research and
development results, customer lists and other customer information,
supplier information, regulatory information, business methods and
financial information. As used in this Section 3.11, "IP Embodiments"
means all embodiments or uses of the Intellectual Property Rights,
tangible or intangible (including, for example, but not limited to,
each item of computer software and databases.
(b) Disclosure Schedule 3.11 identifies each patent,
registered trademark, trade name and registered copyright as well as
all IP Embodiments that the Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission for operation
of the businesses of the Company as presently conducted and as
presently proposed to be conducted. The Company owns or has a valid
right to use all Intellectual Property Rights that are used by the
Company, all Intellectual Property Rights that are necessary to the
operation of the business of the Company, and all Intellectual Property
Rights that are embodied in the IP Embodiments of the Company. All
Intellectual Property Rights and all IP Embodiments owned or used by
the Company immediately prior to the Closing hereunder will be owned or
available for use by the Parent on identical terms and conditions
immediately subsequent to the Closing hereunder. The Company has taken
all action necessary to maintain and protect all Intellectual Property
Rights and all IP Embodiments related to the operation of the
businesses of the Company that the Company owns or uses.
(c) To the knowledge of the Company, the Company has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property Rights of third parties
related to the operation of the businesses of the Company. To the
knowledge of the Company, neither the past nor current use of the IP
Embodiments of the Company (i) has violated or infringed upon, or is
violating or infringing upon, the rights of any person or other party;
(ii) breaches any duty or obligation owed to any person or other party;
or (iii) violates the privacy or any law relating to the privacy of any
person or third party. The Company has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
the Company must license or refrain from using any Intellectual
Property Right or IP Embodiment of any third party). To the knowledge
of the Company, (a) no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property Rights of the Company, (b) the Intellectual Property Rights of
the Company are not invalid or unenforceable, and (c) there are no
grounds that the Intellectual Property Rights of the Company are
invalid or unenforceable.
(d) With respect to all Intellectual Property Rights and all
IP Embodiments of the Company: (i) the Company possesses all right,
title, and interest in and to the item, free and clear of any security
interest, license, or other restriction; (ii) the item is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge; (iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or ownership of
the item; (iv) at no time has the Company ever agreed to indemnify any
third party for or against any interference, infringement,
misappropriation, or other
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conflict with respect to the item; (v) there are no liens, licenses or
other encumbrances affecting any Intellectual Property Rights or IP
Embodiments other than those identified on Disclosure Schedule 3.11;
and (vi) the Company will make available to the Parent correct and
complete copies of all IP Embodiments at Closing.
(e) Disclosure Schedule 3.11(a) identifies all material
Intellectual Property Rights and IP Embodiments that any third party
owns and that the Company uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to the Parent
correct and complete copies of all such material licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to all
Intellectual Property Rights and IP Embodiments identified in
Disclosure Schedule 3.11(a): (i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and
in full force and effect; (ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation
of the transactions contemplated hereby; (iii) no party to the license,
sublicense, agreement, or permission is in material 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; (iv) no party to the license, sublicense,
agreement, or permission has repudiated any material provision thereof;
(v) with respect to each sublicense, the representations and warranties
set forth in subsections (i) through (iv) above are true and correct
with respect to the underlying license; (vi) there is no outstanding
injunction, judgment, order, decree, ruling, or charge; and (vii) no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the knowledge of the Company, is
threatened which challenges the legality, validity, or enforceability
of any Intellectual Property Right.
(f) To the knowledge of the Company, the Company will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with any Intellectual Property Right of third parties as a
result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(g) Upon Parent's reasonable request, the Company and the
employees of the Company will fully cooperate with Parent to file one
or more U.S. provisional and non-provisional patent applications and
associated PCT patent applications based on invention(s) conceived
before Closing.
(h) All IP Embodiments of the Company were, with respect to
copyright, created as works made for hire (as defined under U.S.
copyright law) or otherwise by employees of the Company. To the extent
that any author or developer of any IP Embodiment of the Company was
not an employee of the Company at the time such person contributed to
such IP Embodiments, such author or developer has irrevocably assigned
to the Company in writing all copyrights and other proprietary rights
in such person's work with respect to such IP Embodiments.
(i) With respect to the computer software listed on Disclosure
Schedule 3.11: (i) the Company maintains machine-readable
master-reproducible copies, source code
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listings, technical documentation and user manuals for the most current
releases or versions thereof and for all earlier releases or versions
thereof currently being supported by them; (ii) in each case, the
machine-readable copy substantially conforms to the corresponding
source code listing; (iii) it is written in the language set forth on
Disclosure Schedule 3.11, for use on the hardware set forth on
Disclosure Schedule 3.11 with standard operating systems; (iv) it does
not include any "open source" computer software, or any computer
software that is subject to any "GNU Public License," or any other
"free" software license containing equivalent provisions, (v) it can be
maintained and modified by reasonably competent programmers familiar
with such language, hardware and operating systems; (vi) in each case,
it operates in accordance with all contractual requirements,
specifications and documentation (including, but not limited to, any
user documentation) without material operating defects, (vii) the
Company has not received any communication that the computer software
has failed, or is failing, to perform as represented or warranted to
any licensee, (viii) the computer software shall, under normal use and
service, record, store, process, present and communicate information
and data with calendar dates falling on or after January 1, 2000 in the
manner, and with the same functionality, as the computer records,
stores, processes, presents and communicates information and data with
calendar dates on or before December 31, 1999, (ix) except with respect
to demonstration or trial copies, the computer software does not
contain, and the Company has taken reasonable precautions to prevent
the presence of, any malicious code, program, or other internal
component (e.g., computer virus, computer worm, computer time bomb, or
similar component) which could damage, destroy, or alter the computer
software or other software, firmware, or hardware used by Parent or any
customer, or which could, in any unintended manner, reveal, damage,
destroy, or alter any data or other information accessed through or
processed by the computer software.
(j) The Company has not disclosed or delivered to any escrow
agent or to any other person or party, or permitted the disclosure to
any escrow agent or to any other person or party of, the source code
(or any aspect or portion thereof) for or relating to any past,
present, or future product of any of the Company. No source code (or
any aspect or portion thereof) has been provided to any third party,
nor has any source code that Company has provided to an escrow agent
been released from escrow to a third party or been the subject of a
request for release from escrow.
(k) Any license, sublicense or other contract to which the
Company is a party that covers or relates to any Intellectual Property
Right or any IP Embodiment is, to the knowledge of the Company, legal,
valid, binding, enforceable and in full force and effect with respect
to the other party, and, upon consummation of the transactions
contemplated hereby, will continue to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those in
effect immediately prior to the consummation of the transactions
contemplated hereby. No party is in material breach of or material
default under any license, sublicense or other contract covering or
relating to any Intellectual Property Right or IP Embodiment and has
not performed any act or omitted to perform any act which, with notice
or lapse of time or both, will become or result in a material
violation, material breach or material default thereunder. No
litigation is pending or to the knowledge of the Company threatened
against the Company which challenges the
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legality, validity, enforceability or ownership of any license,
sublicense or other contract covering or relating to any Intellectual
Property Right.
(l) No Intellectual Property Right or IP Embodiment is owned
by or registered in the name of any current or former owner,
shareholder, partner, director, executive, officer, employee, salesman,
agent, customer, representative or contractor of any of the Company,
nor does any such person have any interest therein or right thereto,
including the right to royalty payments.
(m) There is no governmental prohibition or restriction on the
use of any of the Intellectual Property Rights or IP Embodiments of the
Company in any jurisdiction or on the export or import of any of the
Intellectual Property Rights or IP Embodiments of the Company from or
to any jurisdiction, in each case, as used, exported or imported by the
Company.
3.12. LITIGATION. Except as set forth in Disclosure Schedule 3.12 no
litigation, arbitration, or administrative proceeding or investigation is
pending or, to the knowledge of the Company, threatened against the Company or
any of its officers, employees or directors in connection with the business or
affairs of the Company. Disclosure Schedule 3.12 lists each litigation,
arbitration or administrative proceeding or investigation against the Company or
any of its officers, employees or directors in connection with the business and
affairs of the Company during the past five (5) years.
3.13. PERMITS, LICENSES, AUTHORIZATIONS; COMPLIANCE WITH LAWS. The
Company has all material licenses, franchises, permits and other governmental
authorizations necessary to conduct its business, and the Company is not in
material violation of any such license, franchise, permit or other governmental
authorization, or any material violation of any statute, law, ordinance, rule,
regulation, judgment, order or decree applicable to it or any of its properties.
3.14. RETIREMENT AND BENEFIT PLANS.
(a) Disclosure Schedule 3.14(a) lists each material employee
pension, retirement, profit sharing, stock bonus, stock option, stock
purchase, bonus, incentive, deferred compensation, hospitalization,
medical, dental, vision, vacation, insurance, sick pay, disability,
severance, or other employee benefit plans, funds, programs, policies,
contracts or arrangements (hereinafter referred to as the "Company
Benefit Plans"), including without limitation any Employee Benefit Plan
(as hereinafter defined), that the Company maintains or to which the
Company contributes or in which any current or former employee of the
Company has accrued any benefits which they remain entitled to receive.
Except as set forth in Disclosure Schedule 3.14(a):
(i) To the knowledge of the Company, each such
Company Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code, and other applicable laws.
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(ii) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (as hereinafter
defined) and all contributions for any period ending on or
before the Closing Date which are not yet due will have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company.
All material premiums or other payments for all periods ending
on or before the time of Closing have been paid or accrued
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan (as hereinafter defined).
(iii) Each Employee Pension Benefit Plan which is
intended to be a "qualified plan" under Section 401(a) of the
Code is so qualified.
(iv) The Company does not currently maintain, nor has
it ever maintained, an Employee Pension Benefit Plan which is
subject to Title IV of ERISA, including without limitation any
Multiemployer Plan (as hereinafter defined).
(v) The Company has delivered or otherwise made
available to Parent correct and complete copies of all plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, if any, the most recent Form 5500 Annual Report, if
any, and all related trust agreements, insurance contracts and
other funding agreements which implement each Employee Benefit
Plan.
(b) To the knowledge of the Company, there have been no
Prohibited Transactions (as defined in ERISA Section 406 or Code
Section 4975) for which the Company would be liable with respect to any
Employee Benefit Plan. The Company has no liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan. No action suit, proceeding, hearing, examination, audit or
investigation with respect to the administration or the investment of
the assets of any Company Benefit Plan (other than routine claims for
benefits) is pending or, to the knowledge of the Company, threatened.
(c) The Company does not currently contribute to any
Multiemployer Plan or have any liability (including withdrawal
liability) under any Multiemployer Plan.
(d) Except as set forth in Disclosure Schedule 3.14(d), the
Company does not maintain and has not maintained or contributed to, or
since such date been required to contribute to, any Employee Welfare
Benefit Plan providing medical, health or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses or their dependents (other than in accordance
with Code Section 4980B).
(e) For purposes of this Section 3.14:
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(i) "Employee Benefit Plan" means any plan maintained
by the Company for its employees which is (a) a nonqualified
deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan, (b) a qualified defined
contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) a qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) an
Employee Welfare Benefit Plan or material fringe benefit plan
or program.
(ii) "Employee Pension Benefit Plan" has the meaning
set forth in ERISA Sec. 3(2).
(iii) "Employee Welfare Benefit Plan" has the meaning
set forth in ERISA Sec. 3(1).
(iv) "Multiemployer Plan" has the meaning set forth
in ERISA Sec. 3(37).
(f) After the Effective Time, the Surviving Corporation will
have no obligation to issue, transfer or sell any shares of capital
stock of the Company, the Parent or the Surviving Corporation pursuant
to any Company Benefit Plan, including the 2000 Plan.
3.15. EMPLOYEES.
(a) Disclosure Schedule 3.15(a) contains a list of all current
employees of the Company as of the date of this Agreement (each a
"Company Employee"), and each such Company Employee's (i) title and/or
responsibility, (ii) compensation paid to such employee during the
current fiscal year through November 30, 2003 and (iii) current annual
compensation or hourly rates of pay, together with a statement of the
full amount and nature of any other remuneration, whether in cash or in
kind.
(b) The employment relationship between the Company and each
Company Employee is "employment at will."
(c) As of the date of this Agreement, the Company is not the
subject of any pending or, to the Company's knowledge, threatened
proceeding alleging that the Company has engaged in any unfair labor
practice under any state or federal law, statute or regulation. The
Company is not a party to any collective bargaining agreement, nor, to
Company's knowledge, is any labor union or other bargaining
representative engaged in or seeking to be engaged in collective
bargaining with respect to Company Employees. There is no pending or,
to the Company's knowledge, threatened labor strike, dispute, walk-out,
work stoppage, slow-down or lockout with respect to any Company
Employees, and no such strike, dispute, walk-out, slow-down or lockout
has occurred within the past five years.
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(d) As of the date of this Agreement, no group of Company
Employees or any current Company Employee having total annual cash
compensation of more than $50,000 has or have given notice of intent to
terminate employment with the Company.
(e) The Company is not a party to or bound by any plan,
agreement, arrangement or understanding, verbal or written, that
concerns any term or condition of employment and relates to the
employment of any Company Employee or any former employee of the
Company.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any Company Employee or former employee of the Company,
under any compensation and benefit plan, agreement, arrangement or
understanding, whether verbal or written, (ii) materially increase the
amount of benefits payable under any compensation and benefit plan,
agreement, arrangement or understanding, whether verbal or written, or
(iii) result in the acceleration of the time of payment or vesting of
any such benefits to any material extent.
(g) There are no workers' compensation claims pending against
the Company, nor, to the Company's knowledge, does any circumstance
exist that is reasonably likely to result in such a claim.
(h) No current Company Employee is on a short or long-term
disability leave, or other leave of absence.
(i) To the knowledge of the Company, the Company has complied
with all applicable local, state and federal laws and regulations
relating to employment, including but not limited to laws relating to
discrimination, hours of work, and the payment of wages or overtime
wages, and there are no complaints, lawsuits or other proceedings
pending against the Company brought by or on behalf of any applicant
for employment, any Company Employee or former employee, or any class
of the foregoing, relating to any such law or regulation, or alleging
breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship.
(j) There are no pending or, to the Company's knowledge,
threatened investigations, audits, complaints, or proceedings against
the Company by or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency, arbitration
tribunal or instrumentality, whether domestic or foreign, respecting or
involving any applicant for employment, any Company Employee or any
former employee, or any class of the foregoing, including but not
limited to:
(i) The Equal Employment Opportunity Commission or
any other state or local agency with authority to investigate
claims or charges of employment discrimination in the
workplace;
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(ii) The United States Department of Labor or any
other state or local agency with authority to investigate
claims or charges in any way relating to the Family Medical
Leave Act, the Sarbanes-Oxley Act, or hours of employment or
wages;
(iii) The Occupational Safety and Health
Administration or any other state or local agency with
authority to investigate claims or charges in any way relating
to concerning the safety and health of Employees; and
(iv) The Office of Federal Contract Compliance or any
corresponding state agency.
(k) Each employee hired after November 8, 1986, and employed
in the United States, has completed and the Company has retained an
Immigration and Naturalization Service Form I-9 in accordance with
applicable rules and regulations. No Company Employee is (a) a
non-immigrant employee whose status would terminate or otherwise be
affected by the business transaction consummated under this Agreement,
or (b) an alien who is authorized to work in the United States in
non-immigrant status.
(l) Each Company Employee has executed an "Employee Agreement
Pertaining to Confidential Information, Improvements and Inventions,
and Competitive Activities" substantially in the form attached hereto
as Schedule 3.15(l) to this Agreement.
3.16. ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(i) "Environmental Law" means any and all applicable
foreign, federal, state and local laws, rules, requirements
and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection
of human health as it relates to the environment including,
without limitation, laws and regulations relating to releases
of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Substances or relating to management of asbestos; and
(ii) "Hazardous Substance" means each of the
following: (A) any petroleum or any by-products or fractions
thereof, asbestos or asbestos-containing materials, urea
formaldehyde foam insulation, any form of natural gas,
explosives, polychlorinated biphenyls ("PCBs"), radioactive
materials, ionizing radiation, electromagnetic field radiation
or microwave transmissions; (B) any chemicals, materials or
substances, whether waste materials, raw materials or finished
products, which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
"toxic substances," "toxic pollutants," "pollutants,"
"contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or
substance, whether
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waste materials, raw materials or finished products, regulated
or forming the basis of liability under any Environmental Law.
(b) Except as set forth in Disclosure Schedule 3.15(b) and the
environmental assessments listed therein:
(i) The Company complies in all material respects
with all Environmental Laws pertaining to the generation,
storage, treatment and disposal of Hazardous Substances in the
conduct of its business. No action, suit, proceeding, hearing,
charge, complaint, claim or demand has been filed or commenced
against the Company and is now pending alleging any such
failure to comply;
(ii) The Company possesses (or has timely filed
applications pending for) all material licenses and permits
required by all Environmental Laws applicable to the ownership
of its assets and the conduct of its business;
(iii) Since January 1, 1998, there has been no
material spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any Hazardous
Substance by the Company on, under, above or into the
environment in violation of Environmental Law;
(iv) No underground storage tanks are located on the
Real Property which contain or, to the knowledge of the
Company, previously contained any Hazardous Substances; and
(v) The Company has delivered to Parent true and
complete copies of the environmental assessments listed on
Disclosure Schedule 3.15(b).
3.17. INSURANCE. The Company is insured under the insurance programs
listed in Disclosure Schedule 3.17. With respect to such insurance policies: (a)
each policy is legal, valid, binding, enforceable and in full force and effect;
(b) such policies will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (c) the Company is not in material breach or
material default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or lapse of
time, would constitute such a material breach or material default, or permit
termination, modification or acceleration, under the policy; and (d) to the
knowledge of the Company, no party to the policy has repudiated any provision
thereof. The Company has been covered during the past five years by insurance in
scope and amount customary and reasonable for the business in which it has
engaged during such period.
3.18. CUSTOMER RELATIONSHIPS. The Company has not received written
notice from any current customer that such current customer intends, and, to the
knowledge of the Company, no such customer intends, to discontinue purchases of
products and services in any material amount.
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3.19. PRODUCT WARRANTY.
(a) The Company has not, within the last five (5) years, (i)
incurred any material claims of any type in respect of or in connection
with the ownership or use of its products or (ii) incurred any material
expenses related to product warranty claims.
(b) The Company has no material liabilities for replacement or
repair of products sold, leased or delivered by the Company or for
other damages in connection with product warranty claims. No product
sold, leased or delivered by the Company is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and
conditions of sale or lease. Disclosure Schedule 3.21(b) includes
copies of the standard terms and conditions pursuant to which the
Company sells generally its products.
3.20. CONDITIONS AFFECTING BUSINESS. There is no development or
threatened development known to the Company, other than any such developments or
threatened developments that (i) affect the Company's industry generally or (ii)
relate to general economic conditions, with respect to the markets, products,
services, clients, customers, facilities, computer software, databases,
personnel, vendors, suppliers, operations, assets or financial condition of the
Company which would have a Material Adverse Effect on the business and
operations of the Company.
3.21. NO BROKERS OR FINDERS. The Company has not engaged any investment
banker, broker or finder in connection with the transactions contemplated
hereby.
3.22. DISCLOSURE. None of the representations or warranties contained
in this Article III (as qualified by the Disclosure Schedules), taken as a
whole, contains or will contain any untrue statement of a material fact, or
omits any material fact the omission of which would make the statements made
herein, in light of the circumstances in which they were made, misleading.
3.23. SOLE REPRESENTATIONS AND WARRANTIES. Neither the Company nor any
of the Shareholders shall be deemed to have made to Parent or Merger Subsidiary
any representation or warranty other than as expressly made in this Article III.
In particular, without limiting the generality of this Section 3.23, neither the
Company nor any of the Shareholders makes any representation or warranty with
respect to (a) any projections, estimates or budgets previously delivered or
made available to Parent or Merger Subsidiary concerning future revenues,
expenses, expenditures or results of operations or (b) any other information or
documents made available to Parent or Merger Subsidiary or their respective
representatives with respect to the Company, except as expressly covered in this
Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary represent and warrant to the Company as
follows (for purposes of this Article IV, "the date of this Agreement" shall
mean the date of the Original Merger Agreement):
4.01. ORGANIZATION, GOOD STANDING, EQUITY OWNERSHIP. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation. Parent owns all of
the issued and outstanding capital stock of Merger Subsidiary, and Merger
Subsidiary does not own capital stock of any corporation. Parent has delivered
to the Company a copy of the respective articles or certificate of incorporation
and bylaws of Parent and Merger Subsidiary. Each such copy is complete and
correct as of the date hereof.
4.02. AUTHORIZATION AND EXECUTION. Each of Parent and Merger Subsidiary
has the corporate power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent and Merger Subsidiary have been
duly and effectively authorized by the Boards of Directors of Parent and Merger
Subsidiary and by Parent as the sole shareholder of Merger Subsidiary, and no
further corporate action is necessary on the part of Parent or Merger Subsidiary
to consummate the transactions contemplated hereby. This Agreement constitutes a
legal, valid and binding obligation of each of Parent and Merger Subsidiary,
enforceable against each of them in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a court of law or equity).
4.03. NO CONFLICTS. Neither the execution and delivery of this
Agreement by Parent and Merger Subsidiary, nor the consummation of the
transactions contemplated hereby will (i) conflict with or result in a breach of
the articles or certificate of incorporation or bylaws, as currently in effect,
of Parent or Merger Subsidiary, or, (ii) except for the filing of the Articles
of Merger as required by the MBCA and any filing required pursuant to the HSR
Act, require any filing with, or the consent or approval of, any governmental
authority having jurisdiction over any of the business or assets of Parent or
Merger Subsidiary, or (iii) violate any statute, regulation, injunction,
judgment or order to which Parent or Merger Subsidiary is subject, or (iv)
result in a breach of, or constitute a default or an event which, with the
passage of time or the giving of notice, or both, would constitute a default,
give rise to a right of termination, cancellation or acceleration, create any
entitlement to any payment or benefit, require the consent of any third party or
result in the creation of any lien on the assets of Parent or Merger Subsidiary
under any material instrument, contract or agreement to which either of Parent
or Merger Subsidiary is a party or by which either of them is bound.
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4.04. LITIGATION. No litigation, arbitration or administrative
proceeding is pending or, to the knowledge of Parent or Merger Subsidiary,
threatened against Parent or Merger Subsidiary as of the date of this Agreement
that seeks to enjoin or otherwise challenges the consummation of the
transactions contemplated by this Agreement.
4.05. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed, and made available to the Company and
its representatives, all forms, reports and documents required to be
filed by it with the SEC since January 1, 2001 through the date of this
Agreement (collectively, the "Parent SEC Reports"). As of the
respective dates they were filed, (i) the Parent SEC Reports were
prepared, and all forms, reports and documents filed with the SEC after
the date of this Agreement and prior to the Effective Time will be
prepared, in all material respects in accordance with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as the case may be, and (ii) none of the
Parent SEC Reports contained, nor will any forms, reports and documents
filed after the date of this Agreement and prior to the Effective Time
contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading, except to the extent
superseded by a Parent SEC Report filed subsequently and prior to the
date hereof. Parent is eligible to register the resale of the Parent
Company Stock to be issued hereby to certain Shareholders under a Form
S-3 registration statement.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Reports
and in any form, report or document filed after the date of this
Agreement and prior to the Effective Time was, or will be, as the case
may be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
GAAP) and each presented or will present fairly, in all material
respects, the consolidated financial position of Parent and its
consolidated subsidiaries as at the respective dates thereof and for
the respective periods indicated therein, except as otherwise noted
therein (subject, in the case of unaudited statements, to normal
year-end adjustments that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect (as
hereinafter defined)).
4.06. NO BROKERS OR FINDERS. Neither Parent nor Merger Subsidiary has
engaged any investment banker, broker or finder in connection with the
transactions contemplated hereby.
4.07. INTERIM OPERATIONS OF MERGER SUBSIDIARY. Merger Subsidiary was
formed on December 22, 2003, solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
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4.08. SOLE REPRESENTATIONS AND WARRANTIES. Neither Parent nor Merger
Subsidiary nor any of their respective stockholders shall be deemed to have made
to the Company or the Shareholders any representation or warranty other than as
expressly made in this Article IV.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
5.01. OPERATION OF BUSINESS OF THE COMPANY UNTIL EFFECTIVE TIME.
The Company covenants and agrees that, from the date hereof to the
Effective Time, the Company will, except as required in connection with the
Merger and the other transactions contemplated by this Agreement, and except as
otherwise set forth in, or expressly permitted or contemplated by, this
Agreement, disclosed in the Exhibits or Disclosure Schedules hereto, or
consented to in writing by Parent:
(a) Carry on its businesses in the ordinary and regular
course, consistent with past practice and in substantially the same
manner previously conducted, and use its commercially reasonable good
faith efforts to preserve intact its business organization and the
goodwill of its customers, supplier and others having business
relations with the Company;
(b) Not amend its Articles of Incorporation or Bylaws;
(c) Not issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of, any of the capital stock of
the Company or rights or obligations convertible into or exchangeable
for any shares of the capital stock of the Company or make any changes
(by split-up, combination, reorganization or otherwise) in the capital
structure of the Company;
(d) Not declare, pay or set aside for payment any dividend or
other distribution in respect of the capital stock of the Company and
not redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of the Company or rights or obligations
convertible into or exchangeable for any shares of the capital stock or
other securities of the Company or obligations convertible into such,
or any options, warrants or other rights to purchase or subscribe to
any of the foregoing, except to the extent specifically contemplated by
Sections 1.06 and 5.19 of this Agreement;
(e) Not acquire or enter into an agreement to acquire, by
merger consolidation or purchase of stock or assets, any business or
entity;
(f) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $50,000 or $100,000 in the
aggregate) or create, incur or assume any short-term debt for borrowed
money (except in the ordinary course of business under existing lines
of credit), (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether
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directly, contingently or otherwise) for the obligations of any other
person, (iii) make any loans or advances to any other person, or (iv)
make any capital contributions to, or investments in, any person;
(g) Not enter into, modify or extend in any manner the terms
of any employment, severance or similar agreements with any Company
Employee or current director of the Company, nor make any change in the
amount or terms of wages, salary and other compensation paid to, or
benefits provided to any Company Employee or current director of the
Company (other than changes that occur in the ordinary course of
business or pursuant to plans, programs or agreements then existing),
including any such change pursuant to any stock option, incentive or
bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract, understanding or
commitment, whether verbal or written;
(h) Not permit a change in its methods of maintaining its
books, accounts or business records or, except as required by generally
accepted accounting principles (in which event prior notice shall be
given to Parent), change any of its accounting principles, periods or
the methods by which such principles are applied for Tax or financial
reporting purposes;
(i) Not make or change any election with respect to Taxes or
consent to any waiver or extension of time to assess or collect any
Taxes; and
(j) Prepare and file all federal, state, local and foreign Tax
Returns required to be filed by it, on a timely basis and in a manner
consistent with past practice; and pay all Taxes when due, and withhold
all Taxes when and as required, under all applicable law. Parent shall
have a reasonable opportunity to review all such Tax Returns prior to
filing.
5.02. SHAREHOLDER APPROVAL. The Company shall either (i) cause a
special meeting of the Shareholders to be duly called and held, or (ii) send to
each Shareholder a Written Consent in Lieu of Meeting, in either case as soon as
reasonably practicable after the execution of this Agreement for the purpose of
voting on the approval of this Agreement. Approval by the Shareholders in either
manner set forth above by the vote required by the MBCA and the Company's
Articles of Incorporation and Bylaws is referred to herein as the "Shareholder
Approval."
5.03. NO SHOPPING. From the date hereof until the earliest to occur of
(i) the Effective Time, (ii) the date of termination of this Agreement pursuant
to Section 8.01 hereof and (iii) February 28, 2004, the Company will not, and
will use reasonable efforts not to, permit any officer, director or other agent
or representative of the Company to, directly or indirectly, (i) take any action
to seek, initiate or solicit any offer from any person or group to acquire any
shares of capital stock of the Company, to merge or consolidate with the
Company, or to otherwise acquire, except to the extent not prohibited by Section
5.01 hereof, any significant portion of the assets of the Company, taken as a
whole (a "Third Party Acquisition Offer"), or (ii) engage in negotiations
concerning a Third Party Acquisition Offer with any person or group, or disclose
financial information relating to the Company or any confidential or proprietary
trade or business information relating to the business of the Company, or afford
access to the
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properties, books or records of the Company, to any person or group that the
Company has reason to believe may be considering a Third Party Acquisition
Offer.
5.04. ACCESS TO INFORMATION. From the date hereof until the Effective
Time, the Company will give Parent and its counsel, financial advisors, auditors
and other authorized representatives reasonable access, during normal business
hours throughout the period prior to the Effective Time, to the offices,
properties, books and records of the Company all at reasonable times and upon
reasonable notice, and will instruct the employees, counsel, financial advisors
and auditors of the Company to cooperate with Parent and each such
representative in all reasonable respects in its investigation of the business
of the Company. Parent and each such representative will conduct such
investigation in a manner as not to interfere unreasonably with the operations
of the Company and will take all necessary precautions (including obtaining the
written agreement of its respective employees or representatives involved in
such investigation) to protect the confidentiality of any information of the
Company disclosed to such persons during such investigation. Prior to the
Effective Time, Parent and its representatives shall not contact or communicate
with the customers and suppliers of the Company in connection with the
transactions contemplated by this Agreement except with the prior written
consent of the Company, which consent shall not unreasonably be withheld.
5.05. CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement between
the Company and Parent dated June 18, 2003 shall remain in full force and effect
until the Effective Time. Until the Effective Time, the Company and Parent agree
to comply with the terms of such Confidentiality Agreement.
5.06. DEPOSIT OF ESCROWED FUNDS. At the Effective Time, the Escrow
Agreement shall be executed and delivered by the parties thereto, and Parent
shall deposit with the Escrow Agent the Escrowed Funds by delivering cash by
wire transfer of same day funds. The Escrowed Funds shall remain deposited with
the Escrow Agent and shall be subject to and payable in accordance with the
terms of the Escrow Agreement and this Agreement.
5.07. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, the parties hereto shall each use their reasonable best efforts to
perform their obligations herein and to take, or cause to be taken or do, or
cause to be done, all things necessary, proper or advisable under applicable law
to obtain all regulatory approvals and satisfy all conditions to the obligations
of the parties under this Agreement and to cause the Merger and the other
transactions contemplated herein to be carried out promptly in accordance with
the terms hereof and shall cooperate fully with each other and their respective
officers, directors, employees, agents, counsel, accountants and other designees
in connection with any steps required to be taken as part of their respective
obligations under this Agreement.
5.08. AMENDMENT OF DISCLOSURE SCHEDULES. From time to time prior to the
Effective Time, the Company may supplement or amend the Disclosure Schedules in
order to make the information set forth therein timely, complete and accurate.
For purposes of determining the fulfillment of the condition set forth in
Section 6.01(a) as of the Closing, the Disclosure Schedules shall be deemed to
include only that information contained therein as of the date of the Original
Merger Agreement and shall be deemed to exclude any information contained in any
subsequent supplement or amendment thereto. For purposes of determining the
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accuracy of the representations and warranties contained in Article III and the
liability of the Company with respect thereto under Article X, the Disclosure
Schedules shall be deemed to include all information contained in any supplement
or amendment thereto made on or before the Closing.
5.09. EMPLOYMENT AGREEMENTS. The Company shall use commercially
reasonable efforts to cause up to six senior executives of the Company mutually
acceptable to Parent and the Company (collectively, the "Key Employees") to
enter into employment-related agreements in a form and according to terms and
conditions satisfactory to Parent, the material economic terms of which are
described in Exhibit B hereto. Each such agreement shall become effective at the
Closing and shall provide for the termination or amendment, effective
immediately prior to the Closing, of any other agreement between the Company and
the Key Employees affecting their employment by the Company.
5.10. INCENTIVE PROGRAMS.
(a) Prior to the Effective Time, Parent and the Company shall
have adopted and approved an incentive program substantially in the
form attached hereto as Exhibit C ("Incentive Program 1"), effective as
of the Effective Time, for eligible Company Employees as described in
Incentive Program 1.
(b) Prior to the Effective Time, Parent and the Company shall
have adopted and approved an incentive program substantially in the
form attached hereto as Exhibit D (the "Incentive Program 2"),
effective as of the Effective Time, for eligible Company Employees as
described in Incentive Program 2.
5.11. RETENTION PROGRAM. Prior to the Effective Time, Parent and the
Company shall have adopted and approved a retention program substantially in
form attached hereto as Exhibit E (the "Retention Program"), effective as of the
Effective Time, for eligible Company Employees.
5.12. REGISTRATION AND LISTING OF SHARES. Shares of Parent Common Stock
delivered to the Shareholders shall be listed with the NYSE and registered
pursuant to a Form S-3 registration statement (the "Form S-3") to be declared
effective by the SEC. Parent shall file the Form S-3 within five (5) business
days following the Closing Date. To the extent the Form S-3 is not reviewed by
the Securities and Exchange Commission (the "SEC"), Parent shall file, no later
than three (3) business days following the SEC's determination not to review the
Form S-3, an acceleration request with the SEC requesting that effectiveness of
the Form S-3 occur as soon as practicable, but in any event no later than the
expiration of such three-day period. If the SEC determines to review the Form
S-3, then Parent shall promptly respond to any comments received from the SEC,
and shall use its commercially reasonable efforts to clear SEC comments and
obtain effectiveness of the Form S-3 no later than ninety (90) days following
the date upon which the Form S-3 initially was filed with the SEC.
5.13. RESTRICTIVE LEGEND ON SHARES. Upon the Effective Time, each
certificate representing Shares of Parent Company Stock shall be endorsed with
the following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
Parent agrees that it will take all appropriate actions necessary to
remove the legend promptly after the registration statement referred to in
Section 5.12 is declared effective.
5.14. TAXES ON TRANSFER. The Shareholders shall be responsible for any
taxes resulting from any transfer of the Shares of Parent Company Stock to the
Shareholders, including any transfer, documentary, sales, use, stamp,
registration or other similar taxes and fees (including any interest due).
5.15. CONDITIONS TO PARENT'S OBLIGATION TO FILE REGISTRATION STATEMENT.
Parent's obligation to file a registration statement shall, in all cases, be
subject to the following provisions:
(a) The Shareholders shall have agreed to furnish any and all
agreements, consents and representations required of them by the SEC in
connection with the filing or which are a condition of having the
subject registration statement declared effective.
(b) Parent shall not be obligated to file any registration
statement if Parent (i) shall have delivered to the Shareholder
proposing to sell shares of Parent Common Stock delivered pursuant to
this Agreement an opinion of counsel, which counsel shall be acceptable
to such Shareholder, to the effect that the shares of Parent Common
Stock delivered pursuant to this Agreement may lawfully be sold to the
public without registration under the Securities Act and (ii) has
delivered to its transfer agent instructions to register the transfer
of any of the shares of Parent Common Stock sold in reliance on such
opinion.
(c) Parent shall have received all information reasonably
requested in writing by Parent from the Shareholders that is necessary
for the filing of the registration statement.
5.16. INVESTMENT REPRESENTATIONS. The Company shall use its
commercially reasonable efforts to cause each Shareholder receiving Parent
Shares to execute a representation letter to Parent prior to the Effective Time
in which such Stockholder represents that such Stockholder is an "accredited
investor" as defined in Regulation D under the Securities Act of 1933, as
amended, which representation letter shall be in a form reasonably acceptable to
Parent.
5.17. STOCK OWNERSHIP PLAN. Following the Closing, the Company and the
trustees of the Company's Stock Ownership Plan shall take, or cause to be taken,
all action necessary to promptly terminate the Stock Ownership Plan and dissolve
the Stock Ownership Plan trust; provided, however, that such termination and
dissolution shall not occur prior to the
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registration of the Shares of Parent Company Stock issued to the Stock Ownership
Plan pursuant to the Merger and the removal of all restrictions on the sale or
disposition of such Shares.
5.18. NON-SOLICITATION AGREEMENTS. The Company shall use commercially
reasonable efforts to cause the holders of shares of the Company's issued and
outstanding preferred stock to enter into one or more agreements with the
Surviving Corporation and/or Parent, in a form and according to terms and
conditions reasonably satisfactory to Parent, each of which shall become
effective at the Closing and which shall require the holders of shares of the
Company's issued and outstanding preferred stock, for a period of time mutually
acceptable to Parent and such preferred shareholders, to not solicit, hire or
enter into any arrangement for the services of any Company Employee who remains
an employee of the Surviving Corporation, New LLC or any affiliate thereof
immediately following the Effective Time, subject to customary exceptions and
qualifications.
5.19. REDEMPTION OF SHARES. Prior to the Effective Time, the Company
shall use its best efforts to cause the redemption for cash of all shares of the
Company's Common Stock held by each Shareholder who holds less than 2,000 shares
of the Company's Common Stock as of the date of the Original Merger Agreement;
provided, however, that additional Shareholders owning shares of the Company's
Common Stock may be asked by the Company to redeem their shares prior to the
Effective Time solely for cash if reasonably required in order to comply with
the federal securities laws. Such redemption shall be accomplished in compliance
with all applicable securities laws. Parent shall fund the amount of cash
redemption paid by the Company pursuant to this Section 5.19 as part of the
aggregate merger consideration; provided, however, that (a) in no event shall
the aggregate merger consideration paid by Parent exceed $68,000,000, and the
updated versions of Schedules 1.05, 1.06(a) and Schedule 1.08 to be agreed upon
by the parties as contemplated by Article I shall reflect the transactions and
payments contemplated by this Section 5.19, and (b) in no event shall the dollar
thresholds set forth in Section 1.06 be decreased as a result of the cash paid
by the Company pursuant to this Section 5.19.
5.20. RESIGNATION OF EMPLOYEES. Prior to the Effective Time, the
Company shall secure a written agreement, to take effect within 60 days after
the Effective Time, by each of Jeffrey L. Laurel and Gregory A. Twedt, to resign
his employment with the Company, with no further liability or obligations by the
Company or New LLC to either Laurel or Twedt, except as set forth under this
Agreement, existing Company policy, or law.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.
The obligations of Parent and Merger Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived by Parent and Merger
Subsidiary:
(a) The representations and warranties of the Company
contained in Article III of this Agreement shall be true and correct as
of the date of the Original
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Merger Agreement and there shall be no inaccuracy in any such
representation or warranty immediately prior to the Effective Time
(except with respect to representations and warranties that refer to or
speak as of a specified date, which shall only need to have been true
on and as of such date), except to the extent any such inaccuracy would
not impair the ability of the Company to consummate the transactions
contemplated hereby or have, in the aggregate, a Material Adverse
Effect; the Company shall have performed and complied in all material
respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it immediately
prior to the Effective Time; and Parent and Merger Subsidiary shall
have received a certificate signed by the Chief Executive Officer of
the Company to the effects set forth in this Section 6.01(a).
(b) The Shareholder Approval shall have been obtained, as set
forth in Section 5.02, and shall remain in full force and effect.
(c) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other
regulatory or administrative agency or commission requesting or looking
toward an injunction, writ, order, judgment or decree which, in the
reasonable judgment of Parent, is reasonably likely, if issued, to
restrain or prohibit the consummation of any of the transactions
contemplated hereby or require rescission of this Agreement or any such
transactions or result in material damages to Parent, Merger Subsidiary
or the Surviving Corporation or their respective officers or directors
if the transactions contemplated hereby are consummated, nor shall
there be in effect any injunction, writ, judgment, preliminary
restraining order or other order or decree of any nature issued by a
court or governmental agency of competent jurisdiction directing that
any of the transactions provided for herein not be consummated as so
provided.
(d) All other corporate action on the part of the Company
necessary to authorize the execution, delivery and consummation of this
Agreement or any agreement or instrument contemplated hereby to which
the Company is or is to be a party or the transactions contemplated
hereby or thereby shall have been duly and validly taken.
(e) From the date hereof until the Effective Time, there shall
not have been any damage, destruction, loss or casualty to property or
assets of the Company which has had, or could reasonably be expected to
have, a Material Adverse Effect.
(f) The consents, authorizations, orders and approvals listed
on Schedule 6.01(f), including approval under the HSR Act, shall have
been obtained or made.
(g) The Escrow Agreement shall have been executed and
delivered by the Company and the Escrow Agent.
(h) Parent shall have received the resignation of all
directors of the Company or such directors shall have otherwise been
removed in accordance with applicable law.
(i) Since the date of the Original Merger Agreement, there
shall not have been a material adverse effect upon the business,
operations, properties or financial condition of Parent (a "Parent
Material Adverse Effect"); provided, however, that a
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Parent Material Adverse Effect will not be deemed to have occurred if
the change, circumstance, event, effect or state of facts results
primarily from (a) a change in general economic conditions, (b) a
change in general business conditions in Parent's industry that does
not disproportionately affect Parent or (c) the disclosure to the
public, or pendency, of the Merger and the transactions contemplated
thereby.
(j) In the reasonable, good faith judgment of Parent, the
offering and issuance of shares of Parent Common Stock to certain
Shareholders, as contemplated under Article I of this Agreement, shall
be exempt from registration under the federal securities laws in
reliance upon Rule 506 of Regulation D under the Securities Act of
1933, as amended.
6.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions, any one or more of which may
be waived by the Company:
(a) The representations and warranties of Parent and Merger
Subsidiary contained in Article IV of this Agreement shall be true and
correct in all material respects as of the date of the Original Merger
Agreement and immediately prior to the Effective Time as if such
representations and warranties had been made on and as of the Effective
Time; each of Parent and Merger Subsidiary shall have performed and
complied in all material respects with the agreements and obligations
contained in this Agreement required to be performed and complied with
by it immediately prior to the Effective Time; and the Company shall
have received a certificate signed by a duly authorized executive
officer of each of Parent and Merger Subsidiary to the effects set
forth in this Section 6.02(a).
(b) The Shareholder Approval shall have been obtained as set
forth in Section 5.02, and shall remain in full force and effect.
(c) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other
regulatory or administrative agency or commission requesting or looking
toward an injunction, writ, order, judgment or decree which, in the
reasonable judgment of the Company, is reasonably likely, if issued, to
restrain or prohibit the consummation of any of the transactions
contemplated hereby or require rescission of this Agreement or any such
transactions or result in material damages to the Company, its officers
or directors, or the Shareholders if the transactions contemplated
hereby are consummated, nor shall there be in effect any injunction,
writ, judgment, preliminary restraining order or other order or decree
of any nature issued by a court or governmental agency of competent
jurisdiction directing that any of the transactions provided for herein
not be consummated as so provided.
(d) All corporate action on the part of Parent and Merger
Subsidiary necessary to authorize the execution, delivery and
consummation of this Agreement or any agreement or instrument
contemplated hereby to which Parent or Merger Subsidiary is or is to be
a party or the transactions contemplated hereby or thereby shall have
been duly and validly taken.
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(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or
other regulatory body (domestic or foreign) required in connection with
the execution, delivery and performance of this Agreement, including
approval under the HSR Act, shall have been obtained or made, except
for filing of the Articles of Merger and any other documents required
to be filed after the Effective Time, except where the failure to have
obtained or made any such consent, authorization, order, approval,
filing or registration would not have a Material Adverse Effect. All
consents required from third parties in order for the Company to
consummate the Merger shall have been obtained except for such
consents, the failure of which to obtain, would not have a Material
Adverse Effect.
(f) The Escrow Agreement shall have been executed and
delivered by Parent and the Escrow Agent.
(g) There shall not have been a Parent Material Adverse
Effect.
ARTICLE VII
CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME
7.01. INDEMNIFICATION. All rights to indemnification, expense
advancement and exculpation existing in favor of any present or former director,
officer or employee of the Company as provided in the Articles of Incorporation,
Bylaws or similar organizational documents of the Company or Bylaw as in effect
on the date hereof shall survive the Merger for a period of at least six (6)
years after the Effective Time (or, in the event any relevant claim is asserted
or made within such six-year period, until final disposition of such claim) with
respect to matters occurring at or prior to the Effective Time, and no action
taken during such period shall be deemed to diminish the obligations set forth
in this Section 7.01. Parent hereby guarantees, effective at the Effective Time,
all obligations of the Surviving Corporation or New LLC in respect of such
indemnification and expense advancement.
7.02. DIRECTORS AND OFFICERS LIABILITY INSURANCE. For a period of at
least six (6) years after the Effective Time, Parent shall cause the Surviving
Corporation and New LLC to maintain in effect a run-off (i.e., "tail") policy or
endorsement with respect to the current policy of directors' and officers'
liability insurance covering claims asserted within six (6) years after the
Effective Time arising from facts or events which occurred at or before the
Effective Time (including consummation of the transactions contemplated by this
Agreement); and such policies or endorsements shall name as insureds thereunder
all present and former directors and officers of the Company; provided that such
coverage and limits are readily available in the insurance market and that the
premium for such policy shall not exceed three times the current premium.
7.03. CONFIDENTIALITY. After the Closing, Shareholders shall strictly
maintain the confidentiality of all proprietary information of the Company
("Confidential Information"), except to the extent disclosure of any such
information is reasonably believed by the disclosing party to be required by law
or authorized by the other party (which, for the Shareholders, shall be the
Shareholder Representative), or otherwise made publicly available by the other
party, or reasonably occurs in connection with disputes over the terms of this
Agreement. In the event
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that Shareholders reasonably believe after consultation with counsel that they
are required by law to disclose any Confidential Information described in this
Section 7.03, the Shareholder Representative will (a) use its commercially
reasonable efforts to provide the Parent with reasonably prompt notice before
such disclosure in order that the Parent may attempt to obtain a protective
order or other assurance that confidential treatment will be accorded to
Confidential Information, and (b) cooperate with the Parent in attempting to
obtain such order or assurance. The provisions of this Section 7.03 shall not
apply to any information which is in the public domain or shall come into the
public domain, other than by reason of fault by the Shareholders or becomes
known in the industry through no wrongful act on the part of the Shareholders.
In addition, the parties hereto agree and acknowledge that nothing in this
Section 7.03 shall prohibit a Shareholder from disclosing to its officers,
directors, partners, managers or shareholders the specific terms and conditions
of the transactions to be consummated pursuant to this Agreement.
7.04. EMPLOYMENT FOLLOWING EFFECTIVE TIME. All Company Employees
employed immediately prior to the Effective Time shall remain employed by the
Surviving Corporation, New LLC or an affiliate thereof immediately following the
Effective Time (a "Surviving Employee"). The parties hereto acknowledge that the
employment of any Surviving Employee may be transferred to Parent, or to an
affiliate of any of Parent, the Surviving Corporation or New LLC. Nothing in
this Agreement, however, is intended to or shall be interpreted to require
Parent, the Surviving Corporation, New LLC or an affiliate of any of Parent, the
Surviving Corporation or New LLC to continue the employment of any Surviving
Employee for any period of time following the Effective Time.
7.05. COMPLETION OF MERGER BETWEEN NEW LLC AND THE COMPANY. As soon as
possible, but in any event no later than the close of business on the first
business day immediately following the Effective Time, the Company, as part of a
single plan of reorganization of which the Merger is a part, shall be merged
with and into New LLC in accordance with the provisions of Minnesota and
Delaware law. New LLC shall ultimately be the surviving entity in the Merger.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.01. GENERALLY. This Agreement may be terminated and abandoned at any
time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company (in
the case of the Company, as approved by its Board of Directors);
(b) by Parent or the Company (in the case of the Company, as
approved by its Board of Directors) if the transactions contemplated
hereby shall not have been consummated on or before February 28, 2004
(which date may be extended by mutual agreement of Parent and the
Company (in the case of the Company, as approved by its Board of
Directors)), provided that such failure is not due to the failure of
the party seeking to terminate this Agreement (or, in the event Parent
is seeking to terminate this Agreement, of Merger Subsidiary) to comply
with its obligations under this Agreement;
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(c) by Parent, if (i) any of the conditions set forth in
Section 6.01 hereof shall become impossible to fulfill other than for
reasons within the control of Parent or Merger Subsidiary, and such
conditions shall not have been waived pursuant to Section 11.03 hereof;
or (ii) the Shareholder Approval shall not have been obtained within 45
days after the signing of this Agreement; or
(d) by the Company (as approved by its Board of Directors), if
(i) any of the conditions set forth in Section 6.02 hereof shall become
impossible to fulfill other than for reasons within the control of the
Company, and such conditions shall not have been waived pursuant to
Section 11.03 hereof; or (ii) the Shareholder Approval shall not have
been obtained within 45 days after the signing of this Agreement.
8.02. PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT. Upon
termination of this Agreement by the Company or Parent pursuant to Section 8.01
hereof, written notice thereof shall immediately be given to the other such
party and this Agreement shall terminate and the Merger shall be abandoned
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein, this Agreement shall forthwith become void and no
party hereto shall have any liability or further obligation to any other party
to this Agreement, except to the extent the termination is a direct result of a
willful and material breach or violation by such party of a representation,
warranty or covenant contained in this Agreement and except for continuing
obligations under Section 5.05.
ARTICLE IX
SHAREHOLDER REPRESENTATIVE
9.01. DESIGNATION. Subject to the terms and conditions of this Article
IX, Michael Gorman and Jeffrey L. Laurel, and each of them acting alone, with
full power of substitution and re-substitution, is designated by the Company, on
behalf of each Shareholder, as the representative (either or both of such
persons acting individually, when acting in such capacity, being defined herein
as the "Shareholder Representative") of the Shareholders to serve, and Parent
hereby acknowledges that the Shareholder Representative shall serve, as the sole
representative of the Shareholders, from and after the Effective Time with
respect to the matters set forth in this Agreement and the Escrow Agreement,
such service to be without compensation except for the reimbursement of
out-of-pocket expenses and indemnification specifically provided herein. The
Shareholder Representative has accepted such designation as of the date hereof.
Notwithstanding anything to the contrary contained in this Agreement or the
Escrow Agreement, the Shareholder Representative shall have no duties or
responsibilities except those expressly set forth herein, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on
behalf of any Shareholder shall otherwise exist against the Shareholder
Representative.
9.02. AUTHORITY. Each of the Shareholders, by (a) voting in favor of
this Agreement and the transactions contemplated herein at the special meeting
of the Shareholders to be duly called and held, (b) approving this Agreement and
the transactions contemplated herein by signing a Written Consent in Lieu of
Meeting, or (c) accepting any portion of the consideration to be paid pursuant
to Section 1.06 will, effective as of the Effective Time,
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irrevocably appoint the Shareholder Representative as the agent, proxy and
attorney-in-fact for such Shareholder for all purposes of this Agreement,
including full power and authority on such member's behalf (i) to take all
actions which the Shareholder Representative considers necessary or desirable in
connection with the defense, pursuit or settlement of any determinations
relating to the payment of the Cash Flow Holdback Indemnification Escrow Amount
and any claims for indemnification pursuant to Article X hereof, including to
sue, defend, negotiate, settle and compromise any such claims for
indemnification made by or against, and other disputes with, Parent pursuant to
this Agreement or any of the agreements or transactions contemplated hereby,
(ii) to engage and employ agents and representatives (including accountants,
legal counsel and other professionals) and to incur such other expenses as he
shall deem necessary or prudent in connection with the administration of the
foregoing, (iii) to provide for all expenses incurred in connection with the
administration of the foregoing to be paid by directing the Escrow Agent to
reimburse the Shareholder Representative for such expenses, (iv) to disburse to
the Shareholders all indemnification payments received from Parent under Article
X hereof, (v) to accept and receive notices to the Shareholders pursuant to this
Agreement, and (vi) to take all other actions and exercise all other rights
which the Shareholder Representative (in his sole discretion) considers
necessary or appropriate in connection with this Agreement. Each of the
Shareholders, by the adoption of this Agreement either at the special meeting of
the Shareholders or by Written Consent in Lieu of Meeting referred to in Section
5.02, or by accepting any portion of the consideration to be paid pursuant to
Section 1.06, agrees that such agency and proxy are coupled with an interest,
and are therefore irrevocable without the consent of the Shareholder
Representative and shall survive the death, incapacity, bankruptcy, dissolution
or liquidation of any Shareholder. All decisions and acts by the Shareholder
Representative shall be binding upon all of the Shareholders, and no Shareholder
shall have the right to object, dissent, protest or otherwise contest the same.
9.03. RESIGNATION. In the event that both individuals authorized
hereunder as a Shareholder Representative shall die, become incapacitated,
resign or otherwise fail to act on behalf of the Shareholders for any reason,
the Shareholder Representative shall be such other person as shall be selected
by Christopher D. Heim, and such substituted representative shall be deemed to
be the Shareholder Representative for all purposes of this Agreement.
9.04. RELIANCE BY THIRD PARTIES ON THE SHAREHOLDER REPRESENTATIVE'S
AUTHORITY. The Shareholder Representative is authorized to act on behalf of the
Shareholders notwithstanding any dispute or disagreement among the Shareholders,
and the other parties hereto shall be entitled to rely on any and all action
taken by the Shareholder Representative without any liability to, or obligation
to inquire of, any Shareholder even if such party shall be aware of any actual
or potential dispute or disagreement among the Shareholders. Each of the other
parties hereto is expressly authorized to rely on the genuineness of the
signature of the Shareholder Representative and, upon receipt of any writing
which reasonably appears to have been signed by the Shareholder Representative,
the other parties hereto may act upon the same without any further duty of
inquiry as to the genuineness of the writing.
9.05. EXCULPATION AND INDEMNIFICATION. Neither the Shareholder
Representative nor any agent employed by him shall be liable to any Shareholder
relating to the performance of his duties under this Agreement for any errors in
judgment, negligence, oversight, breach of duty or otherwise except to the
extent it is finally determined in a court of
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competent jurisdiction by clear and convincing evidence that the actions taken
or not taken by the Shareholder Representative constituted fraud or were taken
or not taken in bad faith. The Shareholder Representative shall be indemnified
and held harmless by the Shareholders against all Losses (as hereinafter
defined) paid or incurred in connection with any action, suit, proceeding or
claim to which the Shareholder Representative is made a party by reason of the
fact that he was acting as the Shareholder Representative pursuant to this
Agreement; provided, however, that the Shareholder Representative shall not be
entitled to indemnification hereunder to the extent it is finally determined in
a court of competent jurisdiction by clear and convincing evidence that the
actions taken or not taken by the Shareholder Representative constituted fraud
or were taken or not taken in bad faith; and provided further, however, that the
Shareholder Representative shall have recourse only against the unpaid
Indemnification Escrow Amount (fully subordinated in right of payment and
otherwise to Parent's claims thereto, whether or not then existing or known),
with respect to such Losses as provided in the next two sentences of this
Section 9.05. Any amount owing to the Shareholder Representative from the
Shareholders pursuant to this Section 9.05 shall be reduced on a pro rata basis
from the next succeeding distribution(s) of the Indemnification Escrow Amount by
the Escrow Agent to the Shareholders, and shall be payable solely from such
source. The Shareholder Representative shall be protected in acting upon any
notice, statement or certificate believed by him to be genuine and to have been
furnished by the appropriate person and in acting or refusing to act in good
faith or any matter.
ARTICLE X
INDEMNIFICATION
10.01. INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders and each
of their successors and assigns (solely through the Indemnification Escrow
Amount as set forth in Section 10.08(c)) shall indemnify, defend, reimburse and
hold harmless Parent, Merger Subsidiary, New LLC, the Company (following the
Effective Time), and each of their respective directors, officers, employees and
agents (each a "Buyer Indemnified Party" and collectively, "Buyer Indemnified
Parties") from and against any and all Losses (as defined in Section 10.10)
resulting from or relating to (a) any breach of any representation or warranty
of the Company contained in Article III of this Agreement or (b) the breach or
failure to perform by the Company of any of its covenants or agreements set
forth in Articles V and VII of this Agreement.
10.02. INDEMNIFICATION BY PARENT, MERGER SUBSIDIARY AND NEW LLC.
Parent, Merger Subsidiary and New LLC shall indemnify, defend, reimburse and
hold harmless the Shareholders, their successors and assigns and each of their
respective directors, officers, employees and agents (each a "Shareholder
Indemnified Party" and collectively, "Shareholder Indemnified Parties") from and
against any and all Losses resulting from or relating to (a) any breach of any
representation or warranty of Parent or Merger Subsidiary contained in this
Agreement or (b) the breach or failure to perform by Parent or Merger Subsidiary
of any of Parent's or Merger Subsidiary's covenants or agreements set forth in
Article V and VII of this Agreement.
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10.03. NOTICE OF THIRD-PARTY CLAIMS. In no case shall any Indemnitor
(as defined in Section 10.10) under this Agreement be liable with respect to any
Third-Party Claim (as defined Section 10.10) against any Indemnitee (as defined
in Section 10.10) unless the Indemnitee shall have delivered to the Indemnitor a
Claim Notice (as hereinafter defined) and the following conditions are
satisfied:
(a) TIMELY DELIVERY OF CLAIM NOTICE. Except as provided in
paragraphs (b) and (c) of this Section 10.03, and subject to Section
10.07 below, no right to indemnification under this Article X shall be
available to the Indemnitee with respect to a Third-Party Claim unless
the Indemnitee shall have delivered to the Indemnitor, with a copy to
the Escrow Agent, within the Notice Period (as defined in Section
10.10) a notice ("Claim Notice") describing in reasonable detail the
facts giving rise to such Third-Party Claim and stating that the
Indemnitee intends to seek indemnification for such Third-Party Claim
from the Indemnitor pursuant to this Article X.
(b) LATE DELIVERY OF CLAIM NOTICE. If, in the case of a
Third-Party Claim, a Claim Notice is not given to the Indemnitor within
the Notice Period, the Indemnitee shall nevertheless be entitled to be
indemnified under this Article X (i) if the Indemnitee can establish
that the time elapsed between the end of the Notice Period and the
giving of the Claim Notice is reasonable in all the circumstances; or
(ii) to the extent (but only to the extent) that the Indemnitee can
establish that the Indemnitor has not been prejudiced by such time
elapsed.
(c) PAID OR SETTLED CLAIMS. If a Claim Notice is not given by
the Indemnitee prior to the payment or settlement by the Indemnitee of
a Third-Party Claim, the Indemnitee shall only be entitled to be
indemnified under this Article X to the extent (and only to the extent)
that the Indemnitee can establish that the Indemnitor has not been
prejudiced by such payment or settlement.
10.04. DEFENSE OF THIRD-PARTY CLAIMS. Upon receipt of a Claim Notice
from an Indemnitee with respect to any Third-Party Claim, the Indemnitor may
assume the defense thereof with counsel reasonably satisfactory to such
Indemnitee and the Indemnitee shall cooperate in all reasonable respects in such
defense. The Indemnitee shall have the right to employ separate counsel in any
action or claim and to participate in the defense thereof, provided that the
fees and expenses of counsel employed by the Indemnitee shall be at the expense
of the Indemnitor only if such counsel is retained pursuant to the following
sentence or if the employment of such counsel has been specifically authorized
by the Indemnitor. If the Indemnitor does not notify the Indemnitee within
thirty (30) days after receipt of the Claim Notice that the Indemnitor elects to
undertake the defense thereof, the Indemnitee shall have the right to defend at
the expense of the Indemnitor the claim with counsel of its choosing reasonably
satisfactory to the Indemnitor, subject to the right of the Indemnitor to assume
the defense of any claim at any time prior to settlement or final determination
thereof. In such event, the Indemnitee shall send a written notice to the
Indemnitor of any proposed settlement of any claim, which settlement the
Indemnitor may reject, in its reasonable judgment within thirty (30) days of
receipt of such notice. Failure to reject such notice within such thirty
(30)-day period shall be deemed an acceptance of such notice. If the Indemnitor
has assumed the defense of a claim from the Indemnitee, the Indemnitee shall
have the right to settle any such claim over
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the objection of the Indemnitor only if the Indemnitee waives any right to
indemnity therefor. So long as the Indemnitor is conducting the defense of any
Third-Party Claim in accordance with the terms hereof, the Indemnitee agrees
that Indemnitor shall have full and complete control over the conduct of such
proceeding, including any settlement thereof.
10.05. NOTICE OF OTHER CLAIMS. In the event any Indemnitee should have
a claim against any Indemnitor hereunder that does not involve a Third-Party
Claim being asserted against or sought to be collected from the Indemnitee, the
Indemnitee shall notify the Indemnitor, with a copy to the Escrow Agent, with
reasonable promptness of such claim by the Indemnitee, specifying the nature of
and specific basis for such claim and the amount or the estimated amount of such
claim. The Indemnitor shall remit (except if the Indemnitor is the Shareholder
Representative acting on behalf of the Shareholders, in which case the
Indemnitor shall instruct the Escrow Agent to remit) payment for the amount of
such claim upon receipt of an invoice therefor, or in the event of a dispute,
the Indemnitee and the Indemnitor shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations, such
dispute shall be resolved in accordance with Section 11.16 hereof.
10.06. ACCESS AND COOPERATION. After the Closing Date, Parent, the
Surviving Corporation and New LLC on the one hand, and the Shareholders, on the
other hand, shall each cooperate fully with the other as to all claims for
indemnification hereunder, shall make available to the other as reasonably
requested all information, books, records and documents that may be potentially
relevant to any and all claims and shall preserve all such information, books,
records and documents until the termination of any claim. Parent, the Surviving
Corporation and New LLC, on the one hand, and the Shareholders, on the other
hand, shall each also make available to the other, as reasonably requested, its
personnel, agents and other representatives who are responsible for preparing or
maintaining information, books, records or other documents, or who may have
particular knowledge with respect to any claim.
10.07. TERM OF INDEMNITIES. Except as hereinafter expressly provided,
the right to indemnification under Sections 10.01 and 10.02 hereof shall expire
twelve (12) months following the Closing Date; provided, however, that such
limitation shall not be applicable to an indemnification claim for which a Claim
Notice was given within the twelve-month period following the Closing Date with
respect to claims under Section 10.01, to the extent any such claim is pending
upon expiration of the applicable period. Any such pending claim shall survive
in respect of that claim until the final determination or settlement of that
claim.
10.08. LIMITATIONS ON LIABILITY.
(a) REMEDIES EXCLUSIVE. Except as specifically provided for
herein, each of the Parent, Merger Subsidiary, New LLC and the
Shareholders acknowledge and agree that, should the Closing occur, the
sole and exclusive remedy of each party hereto with respect to any and
all claims arising out of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article X; provided,
however, that this Section 10.08 shall not apply to Losses resulting
from fraud or intentional misrepresentation.
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(b) BASKET.
(i) No claim for indemnification under Sections 10.01
or 10.02 shall be made by Parent, a Buyer Indemnified Party or
a Shareholder Indemnified Party with respect to any breach
resulting in an individual item of Loss, or related items of
Losses arising out of substantially similar facts and
circumstances, unless and until the amount of such Losses
suffered by the Buyer Indemnified Parties or the Shareholder
Indemnified Parties exceeds $15,000, at which point a claim
can be made for the entire amount of such Losses, subject to
the limitations set forth in Section 10.08(b)(ii); and
(ii) Except as hereinafter expressly provided, no
claim for indemnification under Sections 10.01 or 10.02 shall
be made by a Buyer Indemnified Party or Shareholder
Indemnified Party, as the case may be, unless and until the
aggregate amount of all Losses suffered by the Buyer
Indemnified Parties or the Shareholder Indemnified Parties
exceeds $500,000 (the "Basket"), and then the aggregate amount
of all such Losses including the full amount of the Basket
shall be recoverable by the Buyer Indemnified Party or
Shareholder Indemnified Party, as the case may be; provided,
however, that claims for indemnification arising solely from
any breach of any representation or warranty of the Company
set forth in Section 3.07 ("Tax Claims") may be made by a
Buyer Indemnified Party at such time as the aggregate amount
of all Losses suffered by the Buyer Indemnified Parties
arising from Tax Claims exceeds $100,000 (the "Tax Basket"),
and then the aggregate amount of all such Losses including the
full amount of the Tax Basket shall be recoverable by the
Buyer Indemnified Party.
(c) LIABILITY LIMITED TO INDEMNIFICATION ESCROW AMOUNT. Parent
and the Surviving Corporation shall have recourse only against the
undisbursed Indemnification Escrow Amount with respect to any Losses,
in accordance with the terms of the Escrow Agreement, except in the
event of fraud or intentional misrepresentation. Neither the
Shareholders nor any of their successors and assigns shall have any
liability separate from, or in addition to, the Indemnification Escrow
Amount.
(d) EFFECT OF ADJUSTMENTS AND RESERVES. Notwithstanding any
other provision in this Agreement to the contrary, neither the
Shareholders nor their successors and assigns shall have any liability
for, and a Buyer Indemnified Party shall not bring any indemnification
claim against any Shareholder or its successors or assigns for, any of
the following: (i) a Loss, to the extent that the amount thereof was
(A) included in the calculation of the merger consideration payable
pursuant to Sections 1.05 and 1.06 or (B) the basis of an adjustment
made to the merger consideration pursuant to Sections 1.05 and 1.06; or
(ii) a Loss, to the extent that it is reflected or reserved for on the
Actual Balance Sheet and incorporated into the calculation of an
adjustment as described under Section 10.08(d)(i)(B). In addition, in
no event shall any such Loss referred to in this Section 10.08(d) be
included in the Basket.
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(e) OTHER LIMITATIONS. Notwithstanding any of the foregoing,
(i) Parent, Merger Subsidiary and the Surviving Corporation shall have
no recourse against the Company's officers, directors or agents other
than in their capacities as Shareholders otherwise entitled to receive
distributions from the Indemnification Escrow Amount under the Escrow
Agreement, and (ii) indemnification owing from any Shareholder who is
or was an officer or director of the Company shall not be deemed for
any purpose to be a claim covered by indemnification owing to such
Shareholder by the Company under any law, bylaw or agreement
whatsoever.
10.09. INDEMNIFICATION ESCROW AMOUNT AND TERM.
(a) Except as provided in Section 10.09(b) below, the Escrow
Agreement will provide that, on the date that is twelve (12)
months from the Closing Date (the "Release Date"), the Escrow
Agent shall release from escrow and deliver to the
Shareholders the remaining Indemnification Escrow Amount and
the Escrow Agreement shall terminate on such date.
(b) If there are outstanding indemnification claims on the Release
Date, and the remaining Indemnification Escrow Amount would
not cover the amount of such pending claims, then an amount
adequate to cover such pending claims shall be withheld by the
Escrow Agent from the Indemnification Escrow Amount, and the
Escrow Agreement shall continue, for as long as required to
cover such pending claims.
10.10. INDEMNITY DEFINITIONS.
"Indemnitee" means any person who may be entitled to seek
indemnification pursuant to the provisions of Sections 10.01 or 10.02 hereof (or
the Shareholder Representative in the case of indemnification owing to the
Shareholders).
"Indemnitor" means any person who may be obligated to provide
indemnification pursuant to Sections 10.01 or 10.02 hereof (or the Shareholder
Representative in the case of indemnification to be provided by the
Shareholders).
"Loss" or "Losses" means any and all demands, claims, payments,
obligations, actions or causes of action, assessments, losses, liabilities,
damages (but, except with respect to any Third-Party Claim and/or a claim
relating to fraud or intentional misrepresenation, excluding incidental,
special, consequential, exemplary, punitive and similar damages), costs and
expenses paid or incurred, including without limitation any legal or other
expenses reasonably incurred in connection with investigating or defending any
claims or actions and all amounts paid in settlement of claims or actions in
accordance with Section 10.04 hereof. The amount of any Losses for which
indemnification is provided under this Article X shall be net of any amounts
recovered or recoverable by the Indemnitee under insurance policies with respect
thereto (and thus any such amounts shall not be included in calculating the
deductible set forth in Section 10.08 (b)) and shall be (i) increased to take
account of any net tax costs actually incurred by the Indemnitee in connection
with the receipt of indemnity payments hereunder and (ii) reduced to take into
account the then present value of any net tax benefit (including as a result of
any basis adjustment) realized or to be realized by the
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Indemnitee in connection with any such Loss. In computing the amount of any such
net tax cost or net tax benefit, the Indemnitee shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any Loss.
"Notice Period" as applied to any Third-Party Claim for which an
Indemnitee seeks to be indemnified pursuant to Article X hereof, means the
period ending on the earlier of the following:
(i) Six months after the time at which the chairman, president
or any vice president or secretary (each a "Specified Officer") of the
Indemnitee (or the Indemnitee, if the Indemnitee is an individual) has
either (x) received actual notice of the facts giving rise to such
Third-Party Claim or (y) commenced an active investigation of
circumstances likely to give rise to such Third-Party Claim and, in
each case, where such Specified Officer (or Indemnitee, if an
individual) believes or should reasonably believe that such facts or
circumstances could reasonably be expected to give rise to such
Third-Party Claim for which such Indemnitee would be entitled to
Indemnification pursuant to Article X hereof; provided, however, in no
event shall the Notice Period extend past the one year anniversary of
the Closing Date;
(ii) With respect to any Third-Party Claim that has become the
subject of proceedings before any court or tribunal, such time as would
allow the Indemnitor sufficient time to contest, on the assumption that
there is an arguable defense to such Third-Party Claim, such proceeding
prior to any judgment or decision thereon; or
(iii) With respect to any Third-Party Claim that has become
the subject of settlement proceedings, such time as would provide the
Indemnitor sufficient time prior to such settlement to determine
whether to contest such claim and assume the defense pursuant to
Section 10.04 hereof.
"Third-Party Claims" means any and all Losses which arise out of or
result from (i) any claims or actions asserted against an Indemnitee by a third
party, (ii) any rights of a third party asserted against an Indemnitee, or (iii)
any liabilities of, or amounts payable by an Indemnitee to a third party arising
in respect of, claims, actions and rights referred to in the foregoing clauses
(i) or (ii).
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY, PARENT AND MERGER SUBSIDIARY.
(a) The representations, warranties and covenants of the
Company set forth in Articles III and V of this Agreement and in any
directly related closing certificate or Disclosure Schedule furnished
in connection herewith shall survive the Closing Date but shall expire
on the date which is twelve (12) months following the Closing Date.
(b) The representations, warranties and covenants of Parent
and Merger Subsidiary set forth in Articles IV and V of this Agreement
and in any directly related closing certificate furnished in connection
herewith shall survive until the date which is twelve (12) months
following the Closing Date.
11.02. AMENDMENT AND MODIFICATION. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto (in the case of the Company, as approved
by its Board of Directors) at any time prior to the Effective Time with respect
to any of the terms contained herein, except that after the Shareholder Approval
contemplated by Section 5.02 hereof, the amount of the merger consideration
shall in no event be decreased and the form of the merger consideration shall in
no event be altered without the approval of the Shareholders.
11.03. WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or Merger
Subsidiary, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein (except the conditions
in Sections 6.01(b) and 6.02(b) of this Agreement) may be waived in writing by
the Company, or by Parent and Merger Subsidiary, respectively, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.03.
11.04. EXPENSES. All expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that the legal and
accounting fees of the Company shall be payable in accordance with the
provisions set forth in Section 1.06 of this Agreement.
11.05. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party to this
Agreement shall issue any press release or make any announcement or other verbal
or written communication to employees, third parties or the public relating to
the subject matter of this Agreement without prior written approval of the other
parties; provided, however, that each of the Company and Parent may make any
public disclosure it reasonably believes in good faith (based upon written
opinion of counsel) is required by applicable law or, in the case of Parent,
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any listing or trading agreement concerning its publicly traded securities (in
which case the disclosing party will advise the other parties to this Agreement
prior to making the disclosure).
11.06. ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such necessary action.
11.07. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given (a) if delivered personally, effective when
delivered, or (b) if sent by facsimile, telecopy or other electronic
transmission device, when receipt is acknowledged; provided, however, that if
receipt is acknowledged after normal business hours of the recipient, notice
shall be deemed to have been given on the next business day, or (c) if delivered
by express delivery service, effective when delivered, or (d) if mailed by
registered or certified mail (return receipt requested), effective three
business days after mailing, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Parent or Merger Subsidiary, to it at or c/o:
3M Company
Building 220-4W-03
3M Center
St. Paul, MN 55144
Facsimile: (651) 736-5516
Attention: Division Vice President
Industrial Services and Solutions Division
with a copy to:
3M Company
Building 220-14W-07
3M Center
St. Paul, MN 55144
Facsimile: (651) 736-7859
Attention: Senior Vice President
Legal Affairs
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If to the Company, to it at:
HighJump Software, Inc.
6455 City West Parkway
Eden Prairie, MN 55344
Facsimile: (952) 947-0440
Attention: Chief Executive Officer
with a copy to:
Dorsey & Whitney LLP
50 South Sixth Street
Suite 1500
Minneapolis, MN 55402
Facsimile: (612) 340-7800
Attention: Kenneth L. Cutler
11.08. ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other parties. Except
for the provisions of Article I and Sections 7.01 and 7.02 hereof, this
Agreement is not intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
11.09. INTERPRETATION. As used in this Agreement, unless otherwise
expressly defined herein, (i) the term "including" shall mean "including without
limitation"; (ii) the term "person" shall mean and include an individual, a
partnership, a limited liability company, a joint venture, a corporation, a
trust, an incorporated organization and a government or any department or agency
thereof; (iii) the term "affiliate" shall have the meaning set forth in Rule
12b-2 of the General Rules and Regulations promulgated under the Securities
Exchange Act of 1934, as amended; (iv) the phrase "business day" shall mean any
day other than a Saturday, Sunday or a day which is a statutory holiday under
the laws of the United States or the State of Illinois; (v) all dollar amounts
are expressed in United States funds; and (vi) the phrase "to the knowledge of
the Company" or any similar phrase shall mean the knowledge of one or more of
the following officers of the Company: Chris Heim (the Company's President and
Chief Executive Officer), and Dan Mayleben (the Company's Chief Financial
Officer), including facts of which a reasonably prudent person in a similar
position should have known ,following due inquiry.
11.10. DISPUTE RESOLUTION.
(a) Any disagreement or dispute (a "Dispute") between the
parties arising out of or related to this Agreement shall be resolved
in the manner provided in this Section 11.10. In the event of a
Dispute, either party may, by written notice to the other party,
request that such Dispute be referred to the Division Vice President of
Industrial Services
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and Solutions Division of Parent and the Shareholder Representative,
who shall negotiate in good faith to attempt to resolve the Dispute. No
settlement reached under this Section 11.10 shall be binding on the
parties until reduced to a writing signed by the parties.
(b) If the procedure outlined in Section 11.10 fails to bring
about a resolution of each outstanding Dispute within 30 days following
notice thereof, then the parties shall promptly initiate a voluntary,
non-binding mediation conducted by a mutually agreed upon mediator in
Minneapolis, Minnesota. If the parties do not agree upon a mediator,
they shall request the American Arbitration Association to appoint a
capable mediator for them in accordance with the Commercial Dispute
Resolution Procedures of the American Arbitration Association in effect
as of the date of this Agreement. Parent and Shareholder Representative
shall each bear one-half of the costs and expenses of the mediation and
shall endeavor in good faith to resolve therein each outstanding
Dispute. No settlement reached under this Section 11.10 shall be
binding upon the parties until reduced to a writing signed by the
parties. In the event the parties are unable to resolve any outstanding
Dispute as provided above, then such outstanding Dispute shall be
determined by litigation conducted in accordance with this Agreement.
11.11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Minnesota without giving effect to conflict or choice of laws
principles that may be applicable.
11.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.13. HEADINGS; INTERNAL REFERENCES. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, and are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement.
11.14. NUMBER; GENDER. Whenever the context so requires, the singular
shall include the plural and the plural shall include the singular, and the
gender of any pronoun shall include the other genders.
11.15. ENTIRE AGREEMENT. This Agreement, including the Exhibits and the
Disclosure Schedules hereto and the Confidentiality Agreement described in
Section 5.05 hereof, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements and understandings among the parties with respect to such
subject matter, including but not limited to the Original Merger Agreement.
There are no restrictions, promises, representations, warranties (express or
implied), covenants or undertakings of the parties, other than those expressly
set forth or referred to in this Agreement or such Confidentiality Agreement.
11.16. ENFORCEMENT.
(a) The parties hereto agree that irreparable damage would
occur if any provision of this Agreement were not performed in
accordance with its terms or were
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otherwise breached. Each party shall be entitled to injunctive relief
to prevent any breach of this Agreement and to enforce this Agreement
specifically in any court of the State of Minnesota or any court of the
United States located in the State of Minnesota (in each case in
addition to any other remedy to which such party is entitled at law or
in equity).
(b) In addition, each party hereby:
(i) submits itself to the personal jurisdiction of
(A) the courts of the State of Minnesota; and (B) the United
States District Court for the District of Minnesota with
respect to any dispute arising out of this Agreement or any
transaction contemplated hereby to the extent such courts
would have subject matter jurisdiction with respect to such
dispute;
(ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other
request for leave from any such court; and
(iii) agrees that it will not bring any action
relating to this Agreement (or any transactions contemplated
by this Agreement) in any court other than the courts referred
to in Section 11.16(b)(i) above.
11.17. WAIVER. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH
ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ESCROW
AGREEMENT OR THE MERGER OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
11.18. SEVERABILITY. If any term, provision, covenant, agreement or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in full
force and effect and will in no way be affected, impaired or invalidated.
11.19. DISCLOSURE SCHEDULES.
(a) Matters reflected in the Disclosure Schedules are not
necessarily limited to matters required by this Agreement to be
reflected in the Disclosure Schedules. Such additional matters are set
forth for informational purposes and do not necessarily include other
matters of a similar nature.
(b) A disclosure made by the Company in any Section of this
Agreement or any Disclosure Schedule that is sufficient to reasonably
inform the Parent of information required to be disclosed in another
Section of this Agreement or another Disclosure Schedule in order to
avoid a misrepresentation thereunder shall be deemed, for all purposes
of this Agreement, to have been made with respect to such other Section
of this Agreement or such Disclosure Schedule. In no event shall the
mere listing in a Disclosure Schedule (or the mere provision by the
Company to the Parent of a copy) of a document or other item be deemed
adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the
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existence of the document or other item itself, or unless the listing
of a document or item in a Disclosure Schedule otherwise reasonably
informs the Parent of an exception to such representation or warranty).
11.20. DEFINITIONS.
Section or Place
Term Where Defined
---- ----------------
2000 Plan................................................. 1.08
Additional Closing Cash Consideration..................... 1.06(b)
affiliate................................................. 11.09
Aggregate Cash Amount .................................... 1.05(c)
Aggregate Consideration .................................. 1.05(c)
Agreement................................................. Preamble
Articles of Merger........................................ 1.02
Base Balance Sheet........................................ 3.05
Base Balance Sheet Date................................... 3.05
Basket.................................................... 10.08(b)
business day.............................................. 11.09
Buyer Indemnified Parties................................. 10.01
Cash Balance.............................................. 1.06(a)
Cash Flow Holdback........................................ 1.09(b)
Claim Notice.............................................. 10.03(a)
Closing................................................... 2.01
Closing Cash Consideration ............................... 1.06(a)
Closing Date ............................................. 2.01
Closing Balance Sheet..................................... 1.06(a)
Code...................................................... Recitals
Company................................................... Preamble
Confidential Information.................................. 7.03
DGCL...................................................... Recitals
Disclosure Schedules ..................................... Article III
Dispute................................................... 11.10(a)
Dissenting Share ......................................... 1.07
Effective Time ........................................... 1.02
Employee Benefit Plan .................................... 3.14(e)(i)
Employee Pension Benefit Plan ............................ 3.14(e)(ii)
Employee Welfare Benefit Plan ............................ 3.14(e)(iii)
Environmental Law ........................................ 3.15(a)(i)
ERISA..................................................... 3.14(a)(i)
Escrowed Funds............................................ 1.09(b)
Exchange Act.............................................. 4.05(a)
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Final Closing Cash Consideration.......................... 1.06(c)
Financial Statements ..................................... 3.05
Form S-3.................................................. 5.12
Fully Diluted Shares...................................... 1.08
Hazardous Substance....................................... 3.15(a)(ii)
HSR Act................................................... 3.04
Incentive Program 1....................................... 5.10(a)
Incentive Program 2....................................... 5.10(b)
including ................................................ 11.09
Indemnification Escrow Amount ............................ 1.09(b)
Indemnitee ............................................... 10.10
Indemnitor ............................................... 10.10
Intellectual Property Rights ............................. 3.11(a)
IP Embodiments............................................ 3.11(a)
Key Employees ............................................ 5.09
Leases ................................................... 3.08
Losses.................................................... 10.10
Management Incentive Plan................................. 5.10
Material Adverse Effect................................... 3.01
Material Contracts ....................................... 3.10
MBCA ..................................................... Recitals
Merger ................................................... Recitals
Merger Subsidiary ........................................ Preamble
Multiemployer Plan ....................................... 3.14(e)(iv)
Notice Period ............................................ 10.10
Option Settlement Amount ................................. 1.08
Original Merger Agreement................................. Recitals
Parent.................................................... Preamble
Parent Common Stock....................................... 1.05(a)(i)
Parent Material Adverse Effect............................ 6.01(i)
Parent SEC Reports........................................ 4.05(a)
Parent Share Value........................................ 1.05(d)
Permitted Liens........................................... 3.09
person.................................................... 11.09
Real Property............................................. 3.08
Release Date.............................................. 10.09(a)
Retention Program......................................... 5.11
Reviewing Party........................................... 1.10(b)
SEC....................................................... 5.12
Shareholder Indemnified Parties........................... 10.02
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Specified Officer......................................... 10.10
Shareholder Approval ..................................... 5.02
Shareholder Representative ............................... 9.01
Shareholders ............................................. Recitals
Stock Options ............................................ 1.08
Surviving Corporation .................................... 1.01
Taxes .................................................... 3.07
Tax Basket................................................ 10.08(b)(ii)
Tax Claims................................................ 10.08(b)(ii)
Tax Returns............................................... 3.07
Third Party Acquisition Offer ............................ 5.03
Third Party Claims........................................ 10.10
to the knowledge of the Company .......................... 11.09
Transaction Fees.......................................... 1.06(a)
Warrants ................................................. 1.05(a)(ii)
[Remainder of Page Intentionally Left Blank]
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SIGNATURE PAGE TO AMENDED AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the parties hereto do execute and deliver this
Agreement as of the date first above written.
COMPANY:
HIGHJUMP SOFTWARE, INC.
By /s/ Christopher D. Heim
--------------------------------
Name: Christopher D. Heim
Title: President
PARENT:
3M COMPANY
By /s/ John F. Pohl
--------------------------------
Name: John F. Pohl
Title: Division Vice President
MERGER SUBSIDIARY:
STEELER MERGER CORPORATION
By /s/ Gregg M. Larson
--------------------------------
Name: Gregg M. Larson
Title: Incorporator
NEW LLC:
STEELER MERGER LLC
By /s/ Gregg M. Larson
--------------------------------
Name: Gregg M. Larson
Title: Authorized Person
SIGNATURE PAGE TO AMENDED AGREEMENT AND PLAN OF MERGER
EXECUTION COPY
--------------------------------------------------------------------------------
AMENDED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
3M COMPANY,
STEELER MERGER CORPORATION,
STEELER MERGER LLC
AND
HIGHJUMP SOFTWARE, INC.
Dated as of January 14, 2004
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................2
1.01. Merger..........................................................2
1.02. Effective Time of the Merger....................................2
1.03. Articles of Incorporation and Bylaws of the Surviving
Corporation.....................................................2
1.04. Board of Directors and Officers of the Surviving
Corporation.....................................................2
1.05. Conversion of Shares; Merger Consideration......................3
1.06. Additional Consideration........................................5
1.07. Appraisal Rights................................................5
1.08. Stock Options...................................................6
1.09. Payment for Shares..............................................6
1.10. Distribution of Cash Flow Holdback..............................7
1.11. No Further Rights or Transfers..................................8
1.12. Tax Treatment...................................................8
ARTICLE II CLOSING............................................................9
2.01. Generally.......................................................9
2.02. Deliveries at the Closing.......................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................9
3.01. Organization, Standing, Qualification...........................9
3.02. Capitalization.................................................10
3.03. Authorization and Execution....................................10
3.04. No Conflicts...................................................11
3.05. Financial Statements...........................................11
3.06. Absence of Certain Changes or Events...........................12
3.07. Tax Matters....................................................12
3.08. Real Property..................................................14
3.09. Title to Properties............................................15
3.10. Material Contracts.............................................15
3.11. Intellectual Property..........................................16
3.12. Litigation.....................................................20
3.13. Permits, Licenses, Authorizations; Compliance with Laws........20
3.14. Retirement and Benefit Plans...................................20
3.15. Employees......................................................22
3.16. Environmental Matters..........................................24
3.17. Insurance......................................................25
3.18. Customer Relationships.........................................25
3.19. Product Warranty...............................................26
3.20. Conditions Affecting Business..................................26
3.21. No Brokers or Finders..........................................26
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3.22. Disclosure.....................................................26
3.23. Sole Representations and Warranties............................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY....27
4.01. Organization, Good Standing, Equity Ownership..................27
4.02. Authorization and Execution....................................27
4.03. No Conflicts...................................................27
4.04. Litigation.....................................................28
4.05. SEC Filings; Financial Statements..............................28
4.06. No Brokers or Finders..........................................28
4.07. Interim Operations of Merger Subsidiary........................28
4.08. Sole Representations and Warranties............................29
ARTICLE V CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME...............29
5.01. Operation of Business of the Company Until Effective Time......29
5.02. Shareholder Approval...........................................30
5.03. No Shopping....................................................30
5.04. Access to Information..........................................31
5.05. Confidentiality Agreement......................................31
5.06. Deposit of Escrowed Funds......................................31
5.07. Reasonable Efforts.............................................31
5.08. Amendment of Disclosure Schedules..............................31
5.09. Employment Agreements..........................................32
5.10. Incentive Programs.............................................32
5.11. Retention Program..............................................32
5.12. Registration and Listing of Shares.............................32
5.13. Restrictive Legend on Shares...................................32
5.14. Taxes on Transfer..............................................33
5.15. Conditions to Parent's Obligation to File Registration
Statement......................................................33
5.16. Investment Representations.....................................33
5.17. Stock Ownership Plan...........................................33
5.18. Non-Solicitation Agreements....................................34
5.19. Redemption of Shares...........................................34
5.20. Resignation of Employees.......................................34
ARTICLE VI CONDITIONS PRECEDENT..............................................34
6.01. Conditions to the Obligations of Parent and Merger Subsidiary..34
6.02. Conditions to the Obligations of the Company...................36
ARTICLE VII CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME................37
7.01. Indemnification................................................37
7.02. Directors and Officers Liability Insurance.....................37
7.03. Confidentiality................................................37
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7.04. Employment Following Effective Time............................38
7.05. Completion of Merger between New LLC and the Company...........38
ARTICLE VIII TERMINATION AND ABANDONMENT.....................................38
8.01. Generally......................................................38
8.02. Procedure and Effect of Termination and Abandonment............39
ARTICLE IX SHAREHOLDER REPRESENTATIVE........................................39
9.01. Designation....................................................39
9.02. Authority......................................................39
9.03. Resignation....................................................40
9.04. Reliance by Third Parties on the Shareholder Representative's
Authority......................................................40
9.05. Exculpation and Indemnification................................40
ARTICLE X INDEMNIFICATION....................................................41
10.01. Indemnification by the Shareholders............................41
10.02. Indemnification by Parent, Merger Subsidiary and New LLC.......41
10.03. Notice of Third-Party Claims...................................42
10.04. Defense of Third-Party Claims..................................42
10.05. Notice of Other Claims.........................................43
10.06. Access and Cooperation.........................................43
10.07. Term of Indemnities............................................43
10.08. Limitations on Liability.......................................43
10.09. Indemnification Escrow Amount and Term.........................45
10.10. Indemnity Definitions..........................................45
ARTICLE XI MISCELLANEOUS PROVISIONS..........................................47
11.01. Survival of Representations, Warranties and Covenants of the
Company, Parent and Merger Subsidiary..........................47
11.02. Amendment and Modification.....................................47
11.03. Waiver of Compliance; Consents.................................47
11.04. Expenses.......................................................47
11.05. Press Releases and Public Announcements........................47
11.06. Additional Agreements..........................................48
11.07. Notices........................................................48
11.08. Assignment.....................................................49
11.09. Interpretation.................................................49
11.10. Dispute Resolution.............................................49
11.11. Governing Law..................................................50
11.12. Counterparts...................................................50
11.13. Headings; Internal References..................................50
11.14. Number; Gender.................................................50
11.15. Entire Agreement...............................................50
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Exhibit 2.1
11.16. Enforcement....................................................50
11.17. Waiver.........................................................51
11.18. Severability...................................................51
11.19. Disclosure Schedules...........................................51
11.20. Definitions....................................................52
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Key Employee Matters
Exhibit C - Form of Incentive Program 1
Exhibit D - Form of Incentive Program 2
Exhibit E - Form of Retention Program
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EXECUTION COPY
AMENDED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered
into as of January 14, 2004, by and among 3M COMPANY, a Delaware corporation
("Parent"), STEELER MERGER CORPORATION, a Minnesota corporation and wholly owned
subsidiary of Parent ("Merger Subsidiary"), STEELER MERGER LLC, a Delaware
limited liability company and wholly owned subsidiary of Parent ("New LLC"), and
HIGHJUMP SOFTWARE, INC., a Minnesota corporation (the "Company").
RECITALS
A. Parent, Merger Subsidiary, the Company and New LLC previously
executed and delivered an Agreement and Plan of Merger dated as of December 23,
2003 (the "Original Merger Agreement") and desire to amend and restate the
Original Merger Agreement in order to make certain technical changes, the
primary purpose of which is to facilitate compliance with United States federal
securities laws.
B. The Boards of Directors of Parent, Merger Subsidiary and the Company
have determined that it is advisable and in the best interests of their
respective shareholders that the parties consummate the business combination
provided for herein in which Merger Subsidiary will merge with and into the
Company with the Company being the surviving corporation in the merger (the
"Merger").
C. Immediately following the Merger, and in any event no later than the
next business day following the Merger, Parent will cause the Company to merge
with and into New LLC.
D. Parent, as the sole shareholder of Merger Subsidiary, has approved
this Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to actions taken in accordance with the requirements of the Minnesota
Business Corporation Act (the "MBCA") and the Delaware General Corporation Law
(the "DGCL").
E. The Board of Directors of the Company has determined that the Merger
is advisable and in the best interests of the Company and its shareholders and
has directed that this Agreement be submitted to a vote of the shareholders of
the Company (the "Shareholders").
F. The Merger, immediately followed by the merger of the Company with
and into New LLC, is intended to be an integrated transaction that qualifies as
a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code")
G. Reference is made to Section 11.20 hereof, which lists the Sections
within this Agreement where each capitalized term used herein is defined.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements in this Agreement, the
parties agree as follows:
ARTICLE I
THE MERGER
1.01. MERGER. At the Effective Time (as hereinafter defined) and in
accordance with the terms and subject to the conditions set forth in this
Agreement and the MBCA, the Merger Subsidiary shall be merged with and into the
Company , the separate corporate existence of the Merger Subsidiary shall
thereupon cease, and the Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the Surviving Corporation shall thereupon and thereafter possess all the rights
and obligations of each of the constituent corporations in accordance with the
MBCA. At the Effective Time, the Merger shall have the other effects provided in
the applicable provisions of the MBCA. As set forth in Section 7.05 below, as
soon as possible thereafter, but not later than the close of business on the
first business day immediately following the Effective Time, the Surviving
Corporation, as part of a single plan to which the Merger is a part, shall be
merged with and into New LLC in accordance with the provisions of Minnesota law
and the Delaware General Corporation Law, such that, after giving effect to such
merger, New LLC shall ultimately be the surviving entity in the Merger, and,
where appropriate, the term Surviving Corporation shall refer to New LLC.
1.02. EFFECTIVE TIME OF THE MERGER. Concurrently with the Closing (as
hereinafter defined), the parties hereto shall cause the Merger to be
consummated by filing articles of merger (the "Articles of Merger"), in such
form as required by, and executed in accordance with, the applicable provisions
of the MBCA, with the Secretary of State of the State of Minnesota and shall
make all other filings or recordings required under the MBCA. The Merger shall
become effective upon the filing of the Articles of Merger with the Secretary of
State of the State of Minnesota in accordance with the MBCA or such later date
or time as the parties shall agree and specify in the Articles of Merger. The
term "Effective Time" shall mean the date and time the Merger becomes effective
in accordance with the MBCA.
1.03. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Articles of Incorporation of the Company in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, until amended in accordance with the laws of the State of
Minnesota and such Articles of Incorporation. The Bylaws of the Company in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until further amended in accordance with the laws of the
State of Minnesota, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
1.04. BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Merger Subsidiary immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, each of such directors to hold
office, subject to the applicable provisions of the Articles of Incorporation
and Bylaws of the Surviving Corporation, until the
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expiration of the term for which such director was elected and until his or her
successor is elected and has qualified or as otherwise provided in the Articles
of Incorporation or Bylaws of the Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation until their respective successors are chosen and have
qualified or as otherwise provided in the Bylaws of the Surviving Corporation.
1.05. CONVERSION OF SHARES; MERGER CONSIDERATION.
(a) Parent shall pay to the holders of convertible preferred
stock, preferred stock, common stock, warrants, stock options, and any
other securities or ownership rights in Company, an aggregate merger
consideration of $68,000,000. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary,
the Company or the holders of any of the following securities,
$68,000,000 in aggregate merger consideration shall be paid by Parent
as follows:
(i) each holder of shares of common stock of the
Company issued and outstanding immediately prior to the
Effective Time (other than with respect to any shares of
Company Common Stock with respect to which such holders
thereof have perfected appraisal rights pursuant to Section
1.07, and any shares redeemed by the Company pursuant to
Section 5.19) shall receive the consideration set forth across
from such holder's name on Schedule 1.05, as such schedule
shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise of outstanding
stock options or redemption of shares between the date of the
Original Merger Agreement and the Effective Time, in shares of
common stock of Parent ("Parent Common Stock") based upon the
Parent Share Value (as hereinafter defined) as of the day
before the Closing Date;
(ii) each holder of shares of preferred stock of the
Company issued and outstanding immediately prior to the
Effective Time (other than with respect to any shares of
preferred stock of the Company which such holders thereof have
perfected appraisal rights pursuant to Section 1.07) and
warrants to acquire shares of preferred stock of the Company
and each holder of warrants outstanding immediately prior to
the Effective Time (collectively, the "Warrants") shall
receive consideration in the amounts set forth across from
such holder's name on Schedule 1.05, as such schedule shall be
updated by the parties hereto immediately prior to the
Effective Time to reflect any exercise of outstanding stock
options or redemption of shares between the date of the
Original Merger Agreement and the Effective Time, in cash
and/or shares of Parent Common Stock based upon the Parent
Share Value (as hereinafter defined) as of the day before the
Closing Date.
(iii) each option to acquire shares of common stock
of the Company outstanding immediately prior to the Effective
Time shall be cancelled in exchange for a cash payment
described in Section 1.08 and Schedule 1.08, as such schedule
shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise, expiration or
termination of outstanding stock
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options between the date of the Original Merger Agreement and
the Effective Time.
(iv) all other securities of the Company shall be
cancelled and shall have no further force and effect, and the
holders of such securities shall have no right to receive any
portion of the consideration payable by Parent under this
Agreement; and
(v) each share of common stock, $0.01 par value per
share, of the Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(b) If, during the period between the date hereof and the
Effective Time, any change in the capital stock of Parent shall occur
by reason of reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any stock dividend
thereon with a record date during such period or any similar event, the
amounts of shares of Parent Common Stock issuable pursuant to this
Agreement shall be appropriately adjusted.
(c) Notwithstanding any other provision in this Agreement to
the contrary, the sum of (i) the total aggregate amount of cash that
will be paid in the Merger pursuant to this Section 1.05, (ii) any cash
amounts to be paid in exchange for fractional shares, (iii) any cash
amounts to be paid for Dissenting Shares pursuant to Section 1.07, (iv)
any other amounts paid by Parent or the Company to or on behalf of any
shareholder of the Company in connection with the sale or other
disposition of any shares of capital stock of the Company in connection
with the Merger for purpose of Treasury Regulation Section 1.368-1(e),
and (v) the amount of any extraordinary dividend (including any cash
distributions and payments made pursuant to Section 1.06) distributed
and paid by the Company prior to and in connection with the Merger (the
sum of these amounts, the "Aggregate Cash Amount") shall not exceed 50%
of the Aggregate Consideration (as defined in this Section). The
"Aggregate Consideration" shall equal the sum of (i) the Aggregate Cash
Amount, plus (ii) the number of shares of Parent Common Stock to be
issued in the Merger times the average of the highest and lowest quoted
trading price of Parent Common Stock on the date of the Effective Time.
If the Aggregate Cash Amount would exceed 50% of the Aggregate
Consideration, the number of shares of Parent Common Stock that would
be issued to holders of capital stock of the Company shall be increased
and the amount of cash that would be issued to the holders of capital
stock of the Company shall be decreased so that the Aggregate Cash
Amount does not exceed 50% of the Aggregate Consideration. The
foregoing adjustments shall be applied in a manner such that after such
adjustments the sum of (i) the Aggregate Cash Amount and (ii) the
product of the number of shares of Parent Common Stock to be issued in
the Merger multiplied by the Parent Share Value as of the day
immediately prior to the Closing Date, shall be equal to such sum
absent such adjustments.
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(d) For purposes of this Agreement, "Parent Share Value" means
the average of the daily closing prices of a share of Parent Common
Stock (calculated to the nearest 0.0001) on The New York Stock
Exchange, as reported in the New York Edition of the Wall Street
Journal, for the ten (10) consecutive trading days immediately
preceding and including the applicable date.
1.06. ADDITIONAL CONSIDERATION.
(a) Immediately prior to the Effective Time, those persons
whose names are listed on Schedule 1.06(a), including certain holders
of shares of capital stock of the Company, holders of Stock Options (as
hereinafter defined) and an adviser to the Company, shall be entitled
to receive a cash distribution from the Company in the amounts set
forth across from such persons' names on Schedule 1.06(a), as such
schedule shall be updated by the parties hereto immediately prior to
the Effective Time to reflect any exercise, expiration or termination
of outstanding stock options or redemption of shares between the date
of the Original Merger Agreement and the Effective Time. Prior to the
Closing, the Company shall prepare and deliver to Parent a balance
sheet of the Company as of December 9, 2003 (the "Closing Balance
Sheet"). The Cash balance on the Closing Balance Sheet up to
$14,000,000 (less any required tax withholding) shall be distributed as
set forth in Schedule 1.06(a) until working capital equals $500,000
(the amount payable in accordance with the foregoing being referred to
herein as "Closing Cash Consideration").
(b) If the Closing Balance Sheet shows a Cash Balance greater
than the sum of $14,000,000 and the aggregate amount of legal and
accounting fees of the Company incurred in connection with the Merger
(the "Transaction Fees"), then the Cash Balance in excess of the sum of
$14,000,000 and the Transaction Fees shall be distributed pro rata to
the holders of capital stock in the Company until working capital,
after deducting (i) the sum of the amounts distributed under Sections
1.06(a) and 1.06(b) and (ii) the Transaction Fees, equals $500,000 (the
amount payable in accordance with the foregoing being referred to
herein as "Additional Closing Cash Consideration").
1.07. APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to
the contrary, each share (if any) of capital stock of the Company issued and
outstanding immediately before the Effective Time for which the holder has
properly exercised and perfected such holder's demand for appraisal rights under
Sections 302A.471 and 302A.473 of the MBCA (each a "Dissenting Share") shall not
be converted into the right to receive its portion of the consideration
specified in Sections 1.05 and 1.06 at or after the Effective Time unless and
until the holder of such shares withdraws such holder's demand for appraisal
rights or becomes ineligible for appraisal rights. If any such holder fails to
perfect (or otherwise loses) any such appraisal rights, then each such share of
such holder shall be treated as a share that had been converted as of the
Effective Time into the right to receive its portion of the merger consideration
specified in Sections 1.05 and 1.06, without interest. The Company shall give
prompt notice to Parent of each demand received by the Company for payment of
fair value of Common Stock, and Parent shall have the right to participate in
negotiations and proceedings regarding each such demand. The Company shall not,
except with prior written consent of Parent, settle or make any payment
regarding any such demand. Each person holding of record
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or beneficially owning Dissenting Shares who becomes entitled under Sections
302A.471 and 302A.473 of the MBCA and this Section 1.07 to payment of the fair
value of such Dissenting Shares (and any other payments required by Sections
302A.471 and 302A.473 of the MBCA) shall receive payment therefor from the
Surviving Corporation.
1.08. STOCK OPTIONS. At or immediately prior to the Effective Time,
each then outstanding Stock Option (as hereinafter defined) shall be canceled by
the Company in exchange for a cash payment by the Company to the holder of such
Stock Option equal to the difference between (a) the per share amount based upon
(i) the total consideration to be paid to the holders of shares of common stock,
Stock Options and Warrants and preferred stock, on an as converted basis, of the
Company issued and outstanding as of immediately prior to the Effective Time
(the "Fully Diluted Shares"), divided by (ii) the number of Fully Diluted
Shares, and (b) the per share exercise price under the applicable option
agreement multiplied by the number of Stock Options held. The aggregate amount
payable to the holders of Stock Options under this Section 1.08 is set forth on
Schedule 1.08 (which schedule shall be updated by the parties hereto immediately
prior to the Effective Time to reflect any exercise, expiration or termination
of outstanding stock options between the date of the Original Merger Agreement
and the Effective Time) and is referred to herein as the "Option Settlement
Amount." Each such cancellation and payment shall occur pursuant to the terms
and conditions established for such cancellation in the applicable stock option
agreement and the Company's Second Amended and Restated 2000 Stock Option Plan
(the "2000 Plan"). Parent shall fund the total amount set forth in Schedule 1.08
in the column "Paid Out of Merger Consideration" at or immediately prior to the
Effective Time through a cash payment to the Company, after which the Company
shall pay to each holder of Stock Options an amount calculated in accordance
with this Section 1.08 and as set forth in Schedule 1.08 (less any applicable
withholding Taxes). Payment of the Option Settlement Amount in this manner shall
be considered part of and to satisfy in part Parent's obligation to pay the
aggregate merger consideration of $68,000,000 pursuant to Section 1.05. For
purposes of this Agreement, "Stock Options" means the options to purchase shares
of common stock of the Company outstanding immediately prior to the Effective
Time.
1.09. PAYMENT FOR SHARES.
(a) At and after the Effective Time, each holder of a
certificate or certificates representing shares of Common Stock
canceled and extinguished at the Effective Time may surrender such
certificate or certificates to the Parent, to effect the exchange of
such certificate or certificates on such holder's behalf. Until so
surrendered and exchanged, each outstanding certificate which, prior to
the Effective Time, represented shares of Common Stock shall be deemed
to represent and evidence only the right to receive the portion of the
merger consideration to be paid therefor as set forth in Sections 1.05
and 1.06 and until such surrender and exchange, no cash shall be paid
to the holder of such outstanding certificate in respect thereof.
(b) The Parent shall deliver to the Escrow Agent at the
Effective Time (i) $3,400,000 (the "Indemnification Escrow Amount") and
(ii) $500,000 (the "Cash Flow Holdback"), to be held by the Escrow
Agent subject to the terms and conditions of this Agreement and the
Escrow Agreement, and the Indemnification Escrow Amount and Cash Flow
Holdback (collectively, the "Escrowed Funds") shall be deducted from
the
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amounts otherwise payable to the holders of common stock and preferred
stock of the Company pursuant to Section 1.05, as described in Schedule
1.05.
(c) If payment is to be made to a person other than the person
in whose name the certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment that the
certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, and that the person requesting such payment
shall pay to the Company any transfer and other taxes required by
reason of such payment in any name other than that of the registered
holder of the certificate surrendered or shall have established to the
satisfaction of the Company that such tax either has been paid or is
not payable.
(d) No interest shall accrue or be payable with respect to
any, amounts which a holder of shares of capital stock of the Company,
Stock Options or Warrants shall be so entitled to receive. Parent and
the Surviving Corporation shall be authorized to pay the consideration
attributable to any certificate previously issued which has been lost
or destroyed, upon receipt of satisfactory evidence of ownership of the
shares of securities represented thereby and of appropriate
indemnification.
1.10. DISTRIBUTION OF CASH FLOW HOLDBACK.
(a) Within 210 days following the Closing Date, Parent shall
deliver to the Stockholders' Representatives a statement of cash flows
(the "PROPOSED FINAL CASH FLOW STATEMENT") reflecting Parent's
determination of the amount of cash flows generated by the Company from
continuing operations of the Company during the six-month period
immediately following the Closing Date and ending on the six-month
anniversary of the Closing Date, without taking into account any
general corporate allocations of Parent to the Company that do not
specifically relate to the business of the Company, all in accordance
with Schedule 1.10 hereto (the "PROPOSED CASH FLOW AMOUNT"), together
with the books, records, work papers and similar documentation used in
Parent's calculation of the Proposed Cash Flow Amount.
(b) After receipt of the Proposed Final Cash Flow Statement,
the Stockholders' Representatives shall have thirty (30) days to review
the Proposed Final Cash Flow Statement, together with the books,
records, workpapers and similar documentation used by Parent in its
preparation and calculation of the Proposed Cash Flow Amount, and shall
have access to the Company's books, records and personnel upon
reasonable notice and during normal business hours in conducting such
review. The Proposed Final Cash Flow Statement and the Proposed Cash
Flow Amount shall become final and binding (in their final and binding
form, after resolution of any disputes hereunder, the "FINAL CASH FLOW
STATEMENT" and the "FINAL CASH FLOW AMOUNT", respectively) on the
thirtieth day following receipt thereof by the Stockholders'
Representatives unless the Stockholders' Representatives give written
notice of their disagreement (a "NOTICE OF DISAGREEMENT") to Parent
prior to such date. Any Notice of Disagreement shall specify in
reasonable detail the nature and amount of any disagreement so
asserted. If a timely Notice of Disagreement is delivered by the
Stockholders' Representatives, then the parties shall work in good
faith to resolve such
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disagreement, and if the parties cannot resolve such disagreement
within thirty (30) days after delivery by the Stockholders'
Representatives of the Notice of Disagreement to the Proposed Final
Cash Flow Statement and Proposed Cash Flow Amount, such disagreement
shall be referred to a nationally recognized "Big Four" independent
accounting firm mutually satisfactory to Parent and the Stockholders'
Representatives (the "REVIEWING PARTY"), which shall be directed to
resolve such disagreement within thirty (30) days thereafter, and whose
decision shall be final and binding on all parties.
(c) The fees and expenses of the Reviewing Party retained
pursuant to this Section 1.10 shall be paid as follows:
(i) if the Reviewing Party determines that the Final
Cash Flow Amount is greater than the Proposed Cash Flow
Amount, all of the fees and expenses of the Reviewing Party
shall be borne by Parent; and
(ii) if the Reviewing Party determines that the Final
Cash Flow Amount is equal to or less than the Proposed Cash
Flow Amount, all of the fees and expenses of the Reviewing
Party shall be disbursed from the Indemnification Escrow
Amount.
(d) If the Final Cash Flow Amount is equal to or greater than
$1.00, Parent shall cause the Escrow Agent to distribute the Cash Flow
Holdback to the Stockholders' Representatives, for further payment pro
rata to the former holders of capital stock of the Company, within
three business days following the date on which the Final Cash Flow
Statement is determined. If the Final Cash Flow Amount is less than
zero, Parent shall cause the Escrow Agent to distribute (i) the Cash
Flow Holdback, plus (ii) the amount of the Final Cash Flow Amount, to
the Stockholders' Representatives for further payment pro rata to the
former holders of capital stock of the Company. Any remaining Cash Flow
Holdback shall be distributed to the Parent within three business days
following the date on which the Final Cash Flow Statement is
determined.
1.11. NO FURTHER RIGHTS OR TRANSFERS. At the Effective Time, all shares
of capital stock of the Company issued and outstanding immediately prior to the
Effective Time shall be canceled and cease to exist, and each holder of a
certificate or certificates that represented shares of capital stock issued and
outstanding immediately prior to the Effective Time shall cease to have any
rights as a Shareholder with respect to the shares of capital stock represented
by such certificate or certificates, except for the right to surrender such
certificate or certificates in exchange for the payment provided pursuant to
Sections 1.05 and 1.06 hereof or to preserve and perfect such holder's right to
receive payment for such holder's shares pursuant to Sections 302A.471 and
302A.473 of the MBCA and Section 1.07 hereof if such holder has validly
exercised and not withdrawn or lost such right, and no transfer of shares of
capital stock issued and outstanding immediately prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation.
1.12. TAX TREATMENT. The parties intend that the Merger, considered
together with the merger contemplated in Section 7.05 below, be treated as a
reorganization described in
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Section 368(a) of the Code. The parties to this Agreement shall not take a
position on any Tax Returns inconsistent with such treatment unless otherwise
required by law.
ARTICLE II
CLOSING
2.01. GENERALLY. Subject to the fulfillment or waiver of the conditions
precedent set forth in Article VI hereof and the termination provisions set
forth in Article VIII hereof, the closing (the "Closing") of the transactions
contemplated hereby shall occur on the last business day of the calendar month
during which the first business day following the day on which the fulfillment
or waiver of the conditions precedent set forth in Article VI occurs, or on such
other date as Parent and the Company may mutually agree (the "Closing Date").
The Closing shall be held at the offices of Dorsey & Whitney LLP, 50 South Sixth
Street, Suite 1500, Minneapolis, Minnesota 55402, or at such other place as
Parent and the Company may mutually agree.
2.02. DELIVERIES AT THE CLOSING. Subject to the provisions of Articles
VI and VIII hereof, at the Closing:
(a) There shall be delivered to Parent, Merger Subsidiary and
the Company the certificates and other documents and instruments as
contemplated under Article V or VI hereof; and
(b) The Company and Merger Subsidiary shall cause the Articles
of Merger to be filed as provided in Section 1.02 hereof and shall take
any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary
that, except as otherwise set forth in the disclosure schedules attached hereto
(the "Disclosure Schedules" and each a "Disclosure Schedule"), the statements in
this Article III are true and correct as of the date of the Original Merger
Agreement (for purposes of this Article III, "the date of this Agreement" shall
mean the date of the Original Merger Agreement).
3.01. ORGANIZATION, STANDING, QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota and has the requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased, or the nature of its activities, makes such qualification necessary,
except such jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect upon the
business, operations, properties or financial condition of the Company
("Material Adverse Effect");
-9-
provided, however, that wherever such term is used in this Agreement, a Material
Adverse Effect will not be deemed to have occurred if the change, circumstance,
event, effect or state of facts results primarily from (a) a change in general
economic conditions, (b) a change in general business conditions in the
Company's industry which does not disproportionately affect the Company or (c)
the disclosure to the public, or pendency, of the Merger and the transactions
contemplated thereby. The copies of the Articles of Incorporation and Bylaws of
the Company that have been made available to Parent are complete and correct as
of the date of this Agreement, and the minute book of the Company that has been
made available to Parent is complete in all material respects and accurately
reflects all material action taken prior to the date of this Agreement by the
Board of Directors of the Company and the Shareholders.
3.02. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
75,000,000 shares, of which 8,700,000 shares are designated Series A
Convertible Preferred Stock, 7,300,000 shares are designated Series B
Convertible Preferred Stock, 50,000,000 shares are designated Common
Stock and 9,000,000 shares are undesignated shares of capital stock. At
the date hereof, the issued and outstanding capital stock of the
Company consists of 8,646,999 shares of Series A Convertible Preferred
Stock, 7,185,116 shares of Series B Convertible Preferred Stock and
20,284,427 shares of Common Stock. Disclosure Schedule 3.02(a) contains
a complete and correct list of all record owners of shares of capital
stock of the Company and the number of shares owned by each such
person, in each case at the date hereof. All of the outstanding shares
of capital stock of the Company are validly issued, fully paid and
nonassessable. At the date hereof, the Company has no other issued or
outstanding shares of capital stock.
(b) Disclosure Schedule 3.02(b) contains a complete and
correct list of all outstanding and unexercised Stock Options under the
Company's 2000 Stock Option Plan, as amended (the "2000 Plan"),
specifying the name of each optionee, the date on which each Stock
Option was granted, the number of shares of Common Stock that may be
purchased pursuant to each Stock Option, the exercise price at which
such shares may be purchased, the vesting period for each Stock Option
and the expiration date of each Stock Option. Except for the Stock
Options and the Warrants and as otherwise set forth on Disclosure
Schedule 3.02(b), there are no outstanding subscriptions, options,
warrants, calls or other agreements or commitments by which the Company
is bound in respect of the capital stock of the Company, whether issued
or unissued, and no outstanding securities convertible into or
exchangeable for any such capital stock.
(c) The Company does not own, directly or indirectly, any
capital stock or other equity interest in (or any rights to acquire any
capital stock of or other equity interest in) any corporation,
partnership, joint venture or other entity.
3.03. AUTHORIZATION AND EXECUTION. The Company has the corporate power
and authority to execute and deliver this Agreement and, subject to obtaining
the Shareholder Approval, to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement have been duly and
effectively authorized by the Board of Directors of the Company, and no further
corporate action of the Company, other than the
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Shareholder Approval, is necessary to consummate the transactions contemplated
hereby. This Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a court of law or equity).
3.04. NO CONFLICTS. Subject to obtaining the Shareholder Approval and
except as set forth in Disclosure Schedule 3.04, neither the execution and
delivery of this Agreement by the Company, nor the consummation by the Company
of the transactions contemplated hereby, will (i) conflict with or result in a
breach of the Articles of Incorporation or Bylaws, as currently in effect, of
the Company, or (ii) except for the filing of the Articles of Merger as required
by the MBCA and any filing required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), require any filing with, or consent or approval of,
any governmental authority having jurisdiction over any of the business or
assets of the Company, or (iii) violate any material statute, regulation,
injunction, judgment or order to which the Company is subject, or (iv) result in
a material breach of, or constitute a material default or an event which, with
the passage of time or the giving of notice or both would constitute a material
default, give rise to a right of termination, cancellation or acceleration,
create any entitlement to any payment or benefit, require the consent of any
third party or result in the creation of any lien on the assets of the Company
under any Material Contract (as defined in Section 3.10).
3.05. FINANCIAL STATEMENTS. The Company has previously delivered to
Parent its (i) audited financial statements for the twelve months ended March
31, 2003, and (ii) unaudited financial statements for the six-month period ended
September 30, 2003. All of the foregoing financial statements are hereinafter
collectively referred to as the "Financial Statements." The audited Financial
Statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly present, in all material
respects, the financial position of the Company as at the respective dates
thereof and the results of operations and cash flows of the Company for the
periods indicated. The unaudited Financial Statements were prepared by the
Company in accordance with generally accepted accounting principles and
consistent with the past practices of the Company and fairly present, in all
material respects, the financial position of the Company as at the respective
dates thereof and the results of operations for the periods indicated, except
that all unaudited Financial Statements are subject to normal year-end
adjustments and do not contain all footnote disclosures required by generally
accepted accounting principles.
Other than as and to the extent (w) disclosed or reserved against in
the balance sheet (the "Base Balance Sheet") dated as of September 30, 2003 (the
"Base Balance Sheet Date"), (x) set forth in Disclosure Schedule 3.05, (y)
incurred under, or required or permitted to be incurred under, this Agreement,
or (z) incurred in the ordinary course of business since the Base Balance Sheet
Date, the Company has no material liabilities or obligations required to be
disclosed or reserved against on a balance sheet prepared in accordance with
generally accepted accounting principles.
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3.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Disclosure Schedule 3.06 or as permitted by Section 5.01 hereof, since the Base
Balance Sheet Date and to and including the date of this Agreement:
(a) there has not been (i) a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock of
the Company or any redemption or other acquisition by the Company of
any of the capital stock of the Company or any split, combination or
reclassification of shares of capital stock declared or made by the
Company, (iii) any change in the amount or terms of wages, salary and
other compensation paid to, or benefits provided to any current
employee or current director of the Company (other than changes that
occurred in the ordinary course of business or pursuant to plans,
programs or agreements then existing), or termination of the employment
of any employee of the Company, or (iv) any commitment or agreement to
do any of the foregoing; and
(b) there have not been (i) any extraordinary losses suffered,
(ii) any material assets mortgaged, pledged or made subject to any
lien, charge or other encumbrance, (iii) any liability or obligation
(absolute, accrued or contingent) incurred or any bad debt, contingency
or other reserve increase suffered, except, in each such case, in the
ordinary course of business and consistent with past practice, (iv) any
claims, liabilities or obligations (absolute, accrued or contingent)
paid, discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with
past practice of claims, liabilities and obligations reflected or
reserved against in the Financial Statements or incurred in the
ordinary course of business and consistent with past practice since the
Base Balance Sheet Date, (v) written off as uncollectible any notes or
accounts receivable, except write-offs in the ordinary course of
business and consistent with past practice, (vi) write down of the
value of any asset or investment on the Company's books or records,
except for depreciation and amortization taken in the ordinary course
of business and consistent with past practice, (vii) any material
change in any method of accounting or accounting practice by the
Company, except for such changes required by reason of changes in
generally accepted accounting principles, (viii) cancellation of any
debts or waiver of any claims or rights in excess of $50,000, or sale,
transfer or other disposition of any properties or assets (real,
personal or mixed, tangible or intangible) in excess of $50,000,
except, in each such case, in transactions in the ordinary course of
business and consistent with past practice, (ix) any single capital
expenditure or commitment (other than expenditures under or related to
software development contracts) in excess of $50,000 for additions to
property or equipment, or aggregate capital expenditures and
commitments in excess of $100,000 for additions to property or
equipment, (x) any transaction entered into by the Company other than
in the ordinary course of business, or (xi) any agreement to do any of
the foregoing.
3.07. TAX MATTERS.
(a) The Company has timely filed or caused to be filed all
Federal, state, local and foreign Tax Returns required to be filed by
it since January 1, 1998 with respect to Taxes and has paid all Taxes
due and owing by the Company (whether or not shown on
-12-
any Tax Return) since such date and all assessments made against it to
the extent such have become due. None of the foregoing Tax Returns
contains any position which is or would be subject to penalties under
Code Section 6662. In addition, the Company has paid or made adequate
provision for the payment of all such Taxes which are due and payable
with respect to the periods covered by such returns pursuant to any
assessment with respect to such Taxes in such jurisdictions, whether or
not in connection with such returns or otherwise due or payable on or
before the Closing Date. The liability for Taxes reflected in the Base
Balance Sheet (i) is sufficient for the payment of all unpaid Taxes,
whether or not disputed, that are accrued or applicable for the period
ended on the Base Balance Sheet Date and for all years and periods
ended prior thereto and (ii) adjusted for the passage of time in a
manner consistent with the past practice of the Company, is sufficient
for the payment of all unpaid Taxes, whether or not disputed, that are
accrued or applicable for all years or periods ending on or prior to
the Closing Date.
(b) All Tax Returns filed by the Company for any taxable
period ending after January 1, 1998 were, as of the date filed,
complete and accurate in all material respects. Except as set forth in
Disclosure Schedule 3.07(b), no Tax Returns filed by the Company, the
due date of which (taking into account all extensions of time to file)
was on or after January 1, 1998, have been audited and no claims for
additional Taxes for any taxable period have been made by any taxing
authority that have not been resolved in full. The Company has not
received a notice of deficiency or assessment of additional Taxes,
which notice or assessment has not been resolved in full. The Company
has not received from any taxing authority (including jurisdictions
where the Company has not filed Tax Returns) any (i) notice indicating
any attempt to open an audit or other review, or (ii) request for
information relating to Tax matters. The Company has not waived any
statute of limitations in respect of Taxes or extended the period for
assessment or payment of any Tax, which period has not since expired.
(c) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with any amounts paid or
owing to any employee, former employee, independent contractor,
creditor, Shareholder or other third party.
(d) The Company has not been a member of an affiliated group
(as such term is defined in Section 1504 of the Code) filing a
consolidated federal income tax return for any tax year, or portion
thereof, since the date of incorporation of the Company.
(e) There are no liens for Taxes (other than current Taxes not
yet due and payable) upon the assets of the Company.
(f) The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations.
(g) The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
-13-
(h) The Company is not a party to (nor will the Company, prior
to the Closing, become a party to) any Tax allocation, indemnity or
sharing agreement.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that,
individually or in the aggregate, could give rise to the payment
(taking into consideration any payment made under Section 1.08 of this
Agreement) of any amount that would not be deductible pursuant to
Section 280G of the Code.
(j) The Company has not entered into any transaction that is
considered a "reportable transaction" under Treasury Regulation Section
1.6011-4(b).
(k) The Company has not had any "ownership change" as that
phrase is defined in Code Section 382.
(l) The Company and the Shareholders have not taken (and will
not take from the date of this Agreement to the Closing date) any
action which would cause the Merger to fail to qualify for tax-free
reorganization treatment under Code Section 368(a).
(m) Disclosure Schedule 3.07(b) sets forth, as of the most
recent practicable date, (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby) the amount of any net operating loss, net capital
loss, unused investment credit or other credit.
(n) For purposes of this Agreement, the term "Tax" or "Taxes"
means all taxes, including without limitation, any income, corporation,
gross receipts, profits, gains, capital stock, capital duty, franchise,
withholding, social security, unemployment, disability, property,
wealth, welfare, stamp, excise, occupation, sales, use, value added,
alternative minimum, estimated, or other similar tax (including any
fee, assessment or other charge in the nature of or in lieu of any tax)
imposed by any governmental entity (whether Federal, state, local,
municipal, foreign or otherwise) or political subdivision thereof, and
any interest, penalties, additions to tax or additional amounts in
respect of the foregoing, and including any transferee or secondary
liability in respect of any tax (whether imposed by law, contractual
agreement or otherwise) and any liability in respect of any tax as a
result of being a member of any affiliated, consolidated, combined,
unitary or similar group. The term "Tax Return" means all returns,
declarations, reports, statements and other documents required to be
filed in respect of Taxes, and any claims for refunds of Taxes,
including any amendments or supplements to any of the foregoing.
3.08. REAL PROPERTY. The real property demised by the leases described
in Disclosure Schedule 3.08 (the "Leases") constitutes all of the real property
owned, used or occupied by the Company (the "Real Property"). The Company does
not own any Real Property. The Real Property has access, sufficient for the
conduct of the Company's business as now conducted, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business of the
Company at that location. Each of the Leases is in full force and effect.
Neither the Company
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nor, to the knowledge of the Company, any other party thereto is in material
default under or in respect of any of the Leases.
3.09. TITLE TO PROPERTIES. The Company owns or holds by valid lease or
license all of its personal property reflected in the Base Balance Sheet or
acquired after the Base Balance Sheet Date (except for any assets sold in
accordance with Section 3.06(b)(viii), and assets sold after the Base Balance
Sheet Date in the ordinary course of business and consistent with past
practice), free and clear of all mortgages, claims, liens, security interests,
charges and encumbrances, except (i) liens which may arise for current Taxes and
assessments not yet due and payable or which are being contested in good faith
and in respect of which adequate reserves have been established, (ii)
imperfections in title and liens easements, and other liens, claims and
encumbrances which were not incurred in connection with the borrowing of money
or the obtaining of advances or credit and which do not materially detract from
the value of or materially interfere with the present use of the properties
subject thereto or affected thereby, and (iii) liens which are disclosed in
Disclosure Schedule 3.09 ("Permitted Liens").
3.10. MATERIAL CONTRACTS. Except as set forth in Disclosure Schedule
3.10, the Company is not a party to or bound by any:
(a) contract with any labor union or any collective bargaining
agreement,
(b) bonus, pension, profit sharing, retirement, deferred
compensation, savings, stock purchase, stock option, hospitalization,
insurance or other plan providing similar employee benefits or
compensation;
(c) employment, agency, consulting or similar service
contract;
(d) sales representative, distributorship, or similar
agreement;
(e) lease, whether as lessor or lessee, with respect to any
real property;
(f) contract as licensor or licensee for the license of any
patent, know-how, trademark, trade name, service mark, copyright or
other intangible asset (other than non-negotiated licenses of
commercially available computer software);
(g) loan or guaranty agreement, indenture or other instrument,
contract or agreement under which any money has been borrowed or loaned
or any note, bond or other evidence of indebtedness has been issued
(other than trade accounts payable or receivable and other indebtedness
incurred in the ordinary course of business and not for money
borrowed);
(h) mortgage, security agreement, sale-leaseback agreement or
other agreement which effectively creates a lien on any assets of the
Company;
(i) contract restricting the Company in any material respect
from engaging in business or from competing with any other parties;
-15-
(j) purchase or sale order for merchandise or supplies which
(i) was not entered into in the ordinary course of business, involves
payments of $100,000 or more, and is not terminable by the Company
without cost or penalty upon sixty (60) days' or less notice, or (ii)
is a standing or similar order with a remaining term of more than one
(1) year, that involves payments of $100,000 or more, and is not
terminable by the Company without cost or penalty upon sixty (60) days'
or less notice;
(k) plan of reorganization;
(l) contract involving the acquisition or disposition of
$50,000 or more in assets, other than contracts involving the purchase
or sale of inventory or products in the ordinary course of business;
(m) partnership, limited liability company or joint venture
agreement;
(n) contract or commitment to loan money to any person, to
guarantee indebtedness of any person, or to make an equity investment
in any person;
(o) escrow agreement for software;
(p) any other contract (excluding purchase and sale orders not
required by the terms in clause (j) above to be set forth in Disclosure
Schedule 3.10) that is not otherwise set forth in Disclosure Schedule
3.10, except such contracts as (x) involve payments of $50,000 or less
a year and (y) are terminable by the Company without cost or penalty
upon sixty (60) days' or less notice; or
(q) any contract requiring the consent of a third party upon a
change in control.
All of the foregoing are hereinafter collectively called "Material Contracts."
To the extent Material Contracts are evidenced by documents, true and correct
copies thereof have been delivered or made available to the Parent unless
otherwise noted in Disclosure Schedule 3.10. Except as set forth in Disclosure
Schedule 3.10, (i) the Material Contracts are valid and enforceable in
accordance with their respective terms with respect to the Company and, to the
knowledge of the Company, are valid and enforceable in accordance with their
respective terms with respect to any other party thereto, and (ii) there is not
under any of the Material Contracts any existing breach, default or event of
default by the Company or, to the knowledge of the Company, any other party
thereto.
3.11. INTELLECTUAL PROPERTY
(a) As used in this Section 3.11, "Intellectual Property
Rights" means patents, patent applications, inventions, trademarks
(registered and unregistered), trademark applications, service marks
(registered and unregistered), service mark applications, business
names, design rights, copyrights (registered and unregistered), domain
names and Know-How. As used in this Section 3.11, "Know-How" means any
and all technical or business information of the type generally treated
as proprietary and confidential by a business, including, but not
limited to, trade secrets, manufacturing processes, quality
-16-
control processes, drawings, product specifications, research and
development results, customer lists and other customer information,
supplier information, regulatory information, business methods and
financial information. As used in this Section 3.11, "IP Embodiments"
means all embodiments or uses of the Intellectual Property Rights,
tangible or intangible (including, for example, but not limited to,
each item of computer software and databases.
(b) Disclosure Schedule 3.11 identifies each patent,
registered trademark, trade name and registered copyright as well as
all IP Embodiments that the Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission for operation
of the businesses of the Company as presently conducted and as
presently proposed to be conducted. The Company owns or has a valid
right to use all Intellectual Property Rights that are used by the
Company, all Intellectual Property Rights that are necessary to the
operation of the business of the Company, and all Intellectual Property
Rights that are embodied in the IP Embodiments of the Company. All
Intellectual Property Rights and all IP Embodiments owned or used by
the Company immediately prior to the Closing hereunder will be owned or
available for use by the Parent on identical terms and conditions
immediately subsequent to the Closing hereunder. The Company has taken
all action necessary to maintain and protect all Intellectual Property
Rights and all IP Embodiments related to the operation of the
businesses of the Company that the Company owns or uses.
(c) To the knowledge of the Company, the Company has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property Rights of third parties
related to the operation of the businesses of the Company. To the
knowledge of the Company, neither the past nor current use of the IP
Embodiments of the Company (i) has violated or infringed upon, or is
violating or infringing upon, the rights of any person or other party;
(ii) breaches any duty or obligation owed to any person or other party;
or (iii) violates the privacy or any law relating to the privacy of any
person or third party. The Company has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
the Company must license or refrain from using any Intellectual
Property Right or IP Embodiment of any third party). To the knowledge
of the Company, (a) no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property Rights of the Company, (b) the Intellectual Property Rights of
the Company are not invalid or unenforceable, and (c) there are no
grounds that the Intellectual Property Rights of the Company are
invalid or unenforceable.
(d) With respect to all Intellectual Property Rights and all
IP Embodiments of the Company: (i) the Company possesses all right,
title, and interest in and to the item, free and clear of any security
interest, license, or other restriction; (ii) the item is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge; (iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or ownership of
the item; (iv) at no time has the Company ever agreed to indemnify any
third party for or against any interference, infringement,
misappropriation, or other
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conflict with respect to the item; (v) there are no liens, licenses or
other encumbrances affecting any Intellectual Property Rights or IP
Embodiments other than those identified on Disclosure Schedule 3.11;
and (vi) the Company will make available to the Parent correct and
complete copies of all IP Embodiments at Closing.
(e) Disclosure Schedule 3.11(a) identifies all material
Intellectual Property Rights and IP Embodiments that any third party
owns and that the Company uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to the Parent
correct and complete copies of all such material licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to all
Intellectual Property Rights and IP Embodiments identified in
Disclosure Schedule 3.11(a): (i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and
in full force and effect; (ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation
of the transactions contemplated hereby; (iii) no party to the license,
sublicense, agreement, or permission is in material 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; (iv) no party to the license, sublicense,
agreement, or permission has repudiated any material provision thereof;
(v) with respect to each sublicense, the representations and warranties
set forth in subsections (i) through (iv) above are true and correct
with respect to the underlying license; (vi) there is no outstanding
injunction, judgment, order, decree, ruling, or charge; and (vii) no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the knowledge of the Company, is
threatened which challenges the legality, validity, or enforceability
of any Intellectual Property Right.
(f) To the knowledge of the Company, the Company will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with any Intellectual Property Right of third parties as a
result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(g) Upon Parent's reasonable request, the Company and the
employees of the Company will fully cooperate with Parent to file one
or more U.S. provisional and non-provisional patent applications and
associated PCT patent applications based on invention(s) conceived
before Closing.
(h) All IP Embodiments of the Company were, with respect to
copyright, created as works made for hire (as defined under U.S.
copyright law) or otherwise by employees of the Company. To the extent
that any author or developer of any IP Embodiment of the Company was
not an employee of the Company at the time such person contributed to
such IP Embodiments, such author or developer has irrevocably assigned
to the Company in writing all copyrights and other proprietary rights
in such person's work with respect to such IP Embodiments.
(i) With respect to the computer software listed on Disclosure
Schedule 3.11: (i) the Company maintains machine-readable
master-reproducible copies, source code
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listings, technical documentation and user manuals for the most current
releases or versions thereof and for all earlier releases or versions
thereof currently being supported by them; (ii) in each case, the
machine-readable copy substantially conforms to the corresponding
source code listing; (iii) it is written in the language set forth on
Disclosure Schedule 3.11, for use on the hardware set forth on
Disclosure Schedule 3.11 with standard operating systems; (iv) it does
not include any "open source" computer software, or any computer
software that is subject to any "GNU Public License," or any other
"free" software license containing equivalent provisions, (v) it can be
maintained and modified by reasonably competent programmers familiar
with such language, hardware and operating systems; (vi) in each case,
it operates in accordance with all contractual requirements,
specifications and documentation (including, but not limited to, any
user documentation) without material operating defects, (vii) the
Company has not received any communication that the computer software
has failed, or is failing, to perform as represented or warranted to
any licensee, (viii) the computer software shall, under normal use and
service, record, store, process, present and communicate information
and data with calendar dates falling on or after January 1, 2000 in the
manner, and with the same functionality, as the computer records,
stores, processes, presents and communicates information and data with
calendar dates on or before December 31, 1999, (ix) except with respect
to demonstration or trial copies, the computer software does not
contain, and the Company has taken reasonable precautions to prevent
the presence of, any malicious code, program, or other internal
component (e.g., computer virus, computer worm, computer time bomb, or
similar component) which could damage, destroy, or alter the computer
software or other software, firmware, or hardware used by Parent or any
customer, or which could, in any unintended manner, reveal, damage,
destroy, or alter any data or other information accessed through or
processed by the computer software.
(j) The Company has not disclosed or delivered to any escrow
agent or to any other person or party, or permitted the disclosure to
any escrow agent or to any other person or party of, the source code
(or any aspect or portion thereof) for or relating to any past,
present, or future product of any of the Company. No source code (or
any aspect or portion thereof) has been provided to any third party,
nor has any source code that Company has provided to an escrow agent
been released from escrow to a third party or been the subject of a
request for release from escrow.
(k) Any license, sublicense or other contract to which the
Company is a party that covers or relates to any Intellectual Property
Right or any IP Embodiment is, to the knowledge of the Company, legal,
valid, binding, enforceable and in full force and effect with respect
to the other party, and, upon consummation of the transactions
contemplated hereby, will continue to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those in
effect immediately prior to the consummation of the transactions
contemplated hereby. No party is in material breach of or material
default under any license, sublicense or other contract covering or
relating to any Intellectual Property Right or IP Embodiment and has
not performed any act or omitted to perform any act which, with notice
or lapse of time or both, will become or result in a material
violation, material breach or material default thereunder. No
litigation is pending or to the knowledge of the Company threatened
against the Company which challenges the
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legality, validity, enforceability or ownership of any license,
sublicense or other contract covering or relating to any Intellectual
Property Right.
(l) No Intellectual Property Right or IP Embodiment is owned
by or registered in the name of any current or former owner,
shareholder, partner, director, executive, officer, employee, salesman,
agent, customer, representative or contractor of any of the Company,
nor does any such person have any interest therein or right thereto,
including the right to royalty payments.
(m) There is no governmental prohibition or restriction on the
use of any of the Intellectual Property Rights or IP Embodiments of the
Company in any jurisdiction or on the export or import of any of the
Intellectual Property Rights or IP Embodiments of the Company from or
to any jurisdiction, in each case, as used, exported or imported by the
Company.
3.12. LITIGATION. Except as set forth in Disclosure Schedule 3.12 no
litigation, arbitration, or administrative proceeding or investigation is
pending or, to the knowledge of the Company, threatened against the Company or
any of its officers, employees or directors in connection with the business or
affairs of the Company. Disclosure Schedule 3.12 lists each litigation,
arbitration or administrative proceeding or investigation against the Company or
any of its officers, employees or directors in connection with the business and
affairs of the Company during the past five (5) years.
3.13. PERMITS, LICENSES, AUTHORIZATIONS; COMPLIANCE WITH LAWS. The
Company has all material licenses, franchises, permits and other governmental
authorizations necessary to conduct its business, and the Company is not in
material violation of any such license, franchise, permit or other governmental
authorization, or any material violation of any statute, law, ordinance, rule,
regulation, judgment, order or decree applicable to it or any of its properties.
3.14. RETIREMENT AND BENEFIT PLANS.
(a) Disclosure Schedule 3.14(a) lists each material employee
pension, retirement, profit sharing, stock bonus, stock option, stock
purchase, bonus, incentive, deferred compensation, hospitalization,
medical, dental, vision, vacation, insurance, sick pay, disability,
severance, or other employee benefit plans, funds, programs, policies,
contracts or arrangements (hereinafter referred to as the "Company
Benefit Plans"), including without limitation any Employee Benefit Plan
(as hereinafter defined), that the Company maintains or to which the
Company contributes or in which any current or former employee of the
Company has accrued any benefits which they remain entitled to receive.
Except as set forth in Disclosure Schedule 3.14(a):
(i) To the knowledge of the Company, each such
Company Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code, and other applicable laws.
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(ii) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (as hereinafter
defined) and all contributions for any period ending on or
before the Closing Date which are not yet due will have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company.
All material premiums or other payments for all periods ending
on or before the time of Closing have been paid or accrued
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan (as hereinafter defined).
(iii) Each Employee Pension Benefit Plan which is
intended to be a "qualified plan" under Section 401(a) of the
Code is so qualified.
(iv) The Company does not currently maintain, nor has
it ever maintained, an Employee Pension Benefit Plan which is
subject to Title IV of ERISA, including without limitation any
Multiemployer Plan (as hereinafter defined).
(v) The Company has delivered or otherwise made
available to Parent correct and complete copies of all plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, if any, the most recent Form 5500 Annual Report, if
any, and all related trust agreements, insurance contracts and
other funding agreements which implement each Employee Benefit
Plan.
(b) To the knowledge of the Company, there have been no
Prohibited Transactions (as defined in ERISA Section 406 or Code
Section 4975) for which the Company would be liable with respect to any
Employee Benefit Plan. The Company has no liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan. No action suit, proceeding, hearing, examination, audit or
investigation with respect to the administration or the investment of
the assets of any Company Benefit Plan (other than routine claims for
benefits) is pending or, to the knowledge of the Company, threatened.
(c) The Company does not currently contribute to any
Multiemployer Plan or have any liability (including withdrawal
liability) under any Multiemployer Plan.
(d) Except as set forth in Disclosure Schedule 3.14(d), the
Company does not maintain and has not maintained or contributed to, or
since such date been required to contribute to, any Employee Welfare
Benefit Plan providing medical, health or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses or their dependents (other than in accordance
with Code Section 4980B).
(e) For purposes of this Section 3.14:
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(i) "Employee Benefit Plan" means any plan maintained
by the Company for its employees which is (a) a nonqualified
deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan, (b) a qualified defined
contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) a qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) an
Employee Welfare Benefit Plan or material fringe benefit plan
or program.
(ii) "Employee Pension Benefit Plan" has the meaning
set forth in ERISA Sec. 3(2).
(iii) "Employee Welfare Benefit Plan" has the meaning
set forth in ERISA Sec. 3(1).
(iv) "Multiemployer Plan" has the meaning set forth
in ERISA Sec. 3(37).
(f) After the Effective Time, the Surviving Corporation will
have no obligation to issue, transfer or sell any shares of capital
stock of the Company, the Parent or the Surviving Corporation pursuant
to any Company Benefit Plan, including the 2000 Plan.
3.15. EMPLOYEES.
(a) Disclosure Schedule 3.15(a) contains a list of all current
employees of the Company as of the date of this Agreement (each a
"Company Employee"), and each such Company Employee's (i) title and/or
responsibility, (ii) compensation paid to such employee during the
current fiscal year through November 30, 2003 and (iii) current annual
compensation or hourly rates of pay, together with a statement of the
full amount and nature of any other remuneration, whether in cash or in
kind.
(b) The employment relationship between the Company and each
Company Employee is "employment at will."
(c) As of the date of this Agreement, the Company is not the
subject of any pending or, to the Company's knowledge, threatened
proceeding alleging that the Company has engaged in any unfair labor
practice under any state or federal law, statute or regulation. The
Company is not a party to any collective bargaining agreement, nor, to
Company's knowledge, is any labor union or other bargaining
representative engaged in or seeking to be engaged in collective
bargaining with respect to Company Employees. There is no pending or,
to the Company's knowledge, threatened labor strike, dispute, walk-out,
work stoppage, slow-down or lockout with respect to any Company
Employees, and no such strike, dispute, walk-out, slow-down or lockout
has occurred within the past five years.
-22-
(d) As of the date of this Agreement, no group of Company
Employees or any current Company Employee having total annual cash
compensation of more than $50,000 has or have given notice of intent to
terminate employment with the Company.
(e) The Company is not a party to or bound by any plan,
agreement, arrangement or understanding, verbal or written, that
concerns any term or condition of employment and relates to the
employment of any Company Employee or any former employee of the
Company.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any Company Employee or former employee of the Company,
under any compensation and benefit plan, agreement, arrangement or
understanding, whether verbal or written, (ii) materially increase the
amount of benefits payable under any compensation and benefit plan,
agreement, arrangement or understanding, whether verbal or written, or
(iii) result in the acceleration of the time of payment or vesting of
any such benefits to any material extent.
(g) There are no workers' compensation claims pending against
the Company, nor, to the Company's knowledge, does any circumstance
exist that is reasonably likely to result in such a claim.
(h) No current Company Employee is on a short or long-term
disability leave, or other leave of absence.
(i) To the knowledge of the Company, the Company has complied
with all applicable local, state and federal laws and regulations
relating to employment, including but not limited to laws relating to
discrimination, hours of work, and the payment of wages or overtime
wages, and there are no complaints, lawsuits or other proceedings
pending against the Company brought by or on behalf of any applicant
for employment, any Company Employee or former employee, or any class
of the foregoing, relating to any such law or regulation, or alleging
breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship.
(j) There are no pending or, to the Company's knowledge,
threatened investigations, audits, complaints, or proceedings against
the Company by or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency, arbitration
tribunal or instrumentality, whether domestic or foreign, respecting or
involving any applicant for employment, any Company Employee or any
former employee, or any class of the foregoing, including but not
limited to:
(i) The Equal Employment Opportunity Commission or
any other state or local agency with authority to investigate
claims or charges of employment discrimination in the
workplace;
-23-
(ii) The United States Department of Labor or any
other state or local agency with authority to investigate
claims or charges in any way relating to the Family Medical
Leave Act, the Sarbanes-Oxley Act, or hours of employment or
wages;
(iii) The Occupational Safety and Health
Administration or any other state or local agency with
authority to investigate claims or charges in any way relating
to concerning the safety and health of Employees; and
(iv) The Office of Federal Contract Compliance or any
corresponding state agency.
(k) Each employee hired after November 8, 1986, and employed
in the United States, has completed and the Company has retained an
Immigration and Naturalization Service Form I-9 in accordance with
applicable rules and regulations. No Company Employee is (a) a
non-immigrant employee whose status would terminate or otherwise be
affected by the business transaction consummated under this Agreement,
or (b) an alien who is authorized to work in the United States in
non-immigrant status.
(l) Each Company Employee has executed an "Employee Agreement
Pertaining to Confidential Information, Improvements and Inventions,
and Competitive Activities" substantially in the form attached hereto
as Schedule 3.15(l) to this Agreement.
3.16. ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(i) "Environmental Law" means any and all applicable
foreign, federal, state and local laws, rules, requirements
and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection
of human health as it relates to the environment including,
without limitation, laws and regulations relating to releases
of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Substances or relating to management of asbestos; and
(ii) "Hazardous Substance" means each of the
following: (A) any petroleum or any by-products or fractions
thereof, asbestos or asbestos-containing materials, urea
formaldehyde foam insulation, any form of natural gas,
explosives, polychlorinated biphenyls ("PCBs"), radioactive
materials, ionizing radiation, electromagnetic field radiation
or microwave transmissions; (B) any chemicals, materials or
substances, whether waste materials, raw materials or finished
products, which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
"toxic substances," "toxic pollutants," "pollutants,"
"contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or
substance, whether
-24-
waste materials, raw materials or finished products, regulated
or forming the basis of liability under any Environmental Law.
(b) Except as set forth in Disclosure Schedule 3.15(b) and the
environmental assessments listed therein:
(i) The Company complies in all material respects
with all Environmental Laws pertaining to the generation,
storage, treatment and disposal of Hazardous Substances in the
conduct of its business. No action, suit, proceeding, hearing,
charge, complaint, claim or demand has been filed or commenced
against the Company and is now pending alleging any such
failure to comply;
(ii) The Company possesses (or has timely filed
applications pending for) all material licenses and permits
required by all Environmental Laws applicable to the ownership
of its assets and the conduct of its business;
(iii) Since January 1, 1998, there has been no
material spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any Hazardous
Substance by the Company on, under, above or into the
environment in violation of Environmental Law;
(iv) No underground storage tanks are located on the
Real Property which contain or, to the knowledge of the
Company, previously contained any Hazardous Substances; and
(v) The Company has delivered to Parent true and
complete copies of the environmental assessments listed on
Disclosure Schedule 3.15(b).
3.17. INSURANCE. The Company is insured under the insurance programs
listed in Disclosure Schedule 3.17. With respect to such insurance policies: (a)
each policy is legal, valid, binding, enforceable and in full force and effect;
(b) such policies will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (c) the Company is not in material breach or
material default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or lapse of
time, would constitute such a material breach or material default, or permit
termination, modification or acceleration, under the policy; and (d) to the
knowledge of the Company, no party to the policy has repudiated any provision
thereof. The Company has been covered during the past five years by insurance in
scope and amount customary and reasonable for the business in which it has
engaged during such period.
3.18. CUSTOMER RELATIONSHIPS. The Company has not received written
notice from any current customer that such current customer intends, and, to the
knowledge of the Company, no such customer intends, to discontinue purchases of
products and services in any material amount.
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3.19. PRODUCT WARRANTY.
(a) The Company has not, within the last five (5) years, (i)
incurred any material claims of any type in respect of or in connection
with the ownership or use of its products or (ii) incurred any material
expenses related to product warranty claims.
(b) The Company has no material liabilities for replacement or
repair of products sold, leased or delivered by the Company or for
other damages in connection with product warranty claims. No product
sold, leased or delivered by the Company is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and
conditions of sale or lease. Disclosure Schedule 3.21(b) includes
copies of the standard terms and conditions pursuant to which the
Company sells generally its products.
3.20. CONDITIONS AFFECTING BUSINESS. There is no development or
threatened development known to the Company, other than any such developments or
threatened developments that (i) affect the Company's industry generally or (ii)
relate to general economic conditions, with respect to the markets, products,
services, clients, customers, facilities, computer software, databases,
personnel, vendors, suppliers, operations, assets or financial condition of the
Company which would have a Material Adverse Effect on the business and
operations of the Company.
3.21. NO BROKERS OR FINDERS. The Company has not engaged any investment
banker, broker or finder in connection with the transactions contemplated
hereby.
3.22. DISCLOSURE. None of the representations or warranties contained
in this Article III (as qualified by the Disclosure Schedules), taken as a
whole, contains or will contain any untrue statement of a material fact, or
omits any material fact the omission of which would make the statements made
herein, in light of the circumstances in which they were made, misleading.
3.23. SOLE REPRESENTATIONS AND WARRANTIES. Neither the Company nor any
of the Shareholders shall be deemed to have made to Parent or Merger Subsidiary
any representation or warranty other than as expressly made in this Article III.
In particular, without limiting the generality of this Section 3.23, neither the
Company nor any of the Shareholders makes any representation or warranty with
respect to (a) any projections, estimates or budgets previously delivered or
made available to Parent or Merger Subsidiary concerning future revenues,
expenses, expenditures or results of operations or (b) any other information or
documents made available to Parent or Merger Subsidiary or their respective
representatives with respect to the Company, except as expressly covered in this
Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary represent and warrant to the Company as
follows (for purposes of this Article IV, "the date of this Agreement" shall
mean the date of the Original Merger Agreement):
4.01. ORGANIZATION, GOOD STANDING, EQUITY OWNERSHIP. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation. Parent owns all of
the issued and outstanding capital stock of Merger Subsidiary, and Merger
Subsidiary does not own capital stock of any corporation. Parent has delivered
to the Company a copy of the respective articles or certificate of incorporation
and bylaws of Parent and Merger Subsidiary. Each such copy is complete and
correct as of the date hereof.
4.02. AUTHORIZATION AND EXECUTION. Each of Parent and Merger Subsidiary
has the corporate power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent and Merger Subsidiary have been
duly and effectively authorized by the Boards of Directors of Parent and Merger
Subsidiary and by Parent as the sole shareholder of Merger Subsidiary, and no
further corporate action is necessary on the part of Parent or Merger Subsidiary
to consummate the transactions contemplated hereby. This Agreement constitutes a
legal, valid and binding obligation of each of Parent and Merger Subsidiary,
enforceable against each of them in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a court of law or equity).
4.03. NO CONFLICTS. Neither the execution and delivery of this
Agreement by Parent and Merger Subsidiary, nor the consummation of the
transactions contemplated hereby will (i) conflict with or result in a breach of
the articles or certificate of incorporation or bylaws, as currently in effect,
of Parent or Merger Subsidiary, or, (ii) except for the filing of the Articles
of Merger as required by the MBCA and any filing required pursuant to the HSR
Act, require any filing with, or the consent or approval of, any governmental
authority having jurisdiction over any of the business or assets of Parent or
Merger Subsidiary, or (iii) violate any statute, regulation, injunction,
judgment or order to which Parent or Merger Subsidiary is subject, or (iv)
result in a breach of, or constitute a default or an event which, with the
passage of time or the giving of notice, or both, would constitute a default,
give rise to a right of termination, cancellation or acceleration, create any
entitlement to any payment or benefit, require the consent of any third party or
result in the creation of any lien on the assets of Parent or Merger Subsidiary
under any material instrument, contract or agreement to which either of Parent
or Merger Subsidiary is a party or by which either of them is bound.
-27-
4.04. LITIGATION. No litigation, arbitration or administrative
proceeding is pending or, to the knowledge of Parent or Merger Subsidiary,
threatened against Parent or Merger Subsidiary as of the date of this Agreement
that seeks to enjoin or otherwise challenges the consummation of the
transactions contemplated by this Agreement.
4.05. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed, and made available to the Company and
its representatives, all forms, reports and documents required to be
filed by it with the SEC since January 1, 2001 through the date of this
Agreement (collectively, the "Parent SEC Reports"). As of the
respective dates they were filed, (i) the Parent SEC Reports were
prepared, and all forms, reports and documents filed with the SEC after
the date of this Agreement and prior to the Effective Time will be
prepared, in all material respects in accordance with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as the case may be, and (ii) none of the
Parent SEC Reports contained, nor will any forms, reports and documents
filed after the date of this Agreement and prior to the Effective Time
contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading, except to the extent
superseded by a Parent SEC Report filed subsequently and prior to the
date hereof. Parent is eligible to register the resale of the Parent
Company Stock to be issued hereby to certain Shareholders under a Form
S-3 registration statement.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Reports
and in any form, report or document filed after the date of this
Agreement and prior to the Effective Time was, or will be, as the case
may be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
GAAP) and each presented or will present fairly, in all material
respects, the consolidated financial position of Parent and its
consolidated subsidiaries as at the respective dates thereof and for
the respective periods indicated therein, except as otherwise noted
therein (subject, in the case of unaudited statements, to normal
year-end adjustments that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect (as
hereinafter defined)).
4.06. NO BROKERS OR FINDERS. Neither Parent nor Merger Subsidiary has
engaged any investment banker, broker or finder in connection with the
transactions contemplated hereby.
4.07. INTERIM OPERATIONS OF MERGER SUBSIDIARY. Merger Subsidiary was
formed on December 22, 2003, solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
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4.08. SOLE REPRESENTATIONS AND WARRANTIES. Neither Parent nor Merger
Subsidiary nor any of their respective stockholders shall be deemed to have made
to the Company or the Shareholders any representation or warranty other than as
expressly made in this Article IV.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
5.01. OPERATION OF BUSINESS OF THE COMPANY UNTIL EFFECTIVE TIME.
The Company covenants and agrees that, from the date hereof to the
Effective Time, the Company will, except as required in connection with the
Merger and the other transactions contemplated by this Agreement, and except as
otherwise set forth in, or expressly permitted or contemplated by, this
Agreement, disclosed in the Exhibits or Disclosure Schedules hereto, or
consented to in writing by Parent:
(a) Carry on its businesses in the ordinary and regular
course, consistent with past practice and in substantially the same
manner previously conducted, and use its commercially reasonable good
faith efforts to preserve intact its business organization and the
goodwill of its customers, supplier and others having business
relations with the Company;
(b) Not amend its Articles of Incorporation or Bylaws;
(c) Not issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of, any of the capital stock of
the Company or rights or obligations convertible into or exchangeable
for any shares of the capital stock of the Company or make any changes
(by split-up, combination, reorganization or otherwise) in the capital
structure of the Company;
(d) Not declare, pay or set aside for payment any dividend or
other distribution in respect of the capital stock of the Company and
not redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of the Company or rights or obligations
convertible into or exchangeable for any shares of the capital stock or
other securities of the Company or obligations convertible into such,
or any options, warrants or other rights to purchase or subscribe to
any of the foregoing, except to the extent specifically contemplated by
Sections 1.06 and 5.19 of this Agreement;
(e) Not acquire or enter into an agreement to acquire, by
merger consolidation or purchase of stock or assets, any business or
entity;
(f) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $50,000 or $100,000 in the
aggregate) or create, incur or assume any short-term debt for borrowed
money (except in the ordinary course of business under existing lines
of credit), (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether
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directly, contingently or otherwise) for the obligations of any other
person, (iii) make any loans or advances to any other person, or (iv)
make any capital contributions to, or investments in, any person;
(g) Not enter into, modify or extend in any manner the terms
of any employment, severance or similar agreements with any Company
Employee or current director of the Company, nor make any change in the
amount or terms of wages, salary and other compensation paid to, or
benefits provided to any Company Employee or current director of the
Company (other than changes that occur in the ordinary course of
business or pursuant to plans, programs or agreements then existing),
including any such change pursuant to any stock option, incentive or
bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract, understanding or
commitment, whether verbal or written;
(h) Not permit a change in its methods of maintaining its
books, accounts or business records or, except as required by generally
accepted accounting principles (in which event prior notice shall be
given to Parent), change any of its accounting principles, periods or
the methods by which such principles are applied for Tax or financial
reporting purposes;
(i) Not make or change any election with respect to Taxes or
consent to any waiver or extension of time to assess or collect any
Taxes; and
(j) Prepare and file all federal, state, local and foreign Tax
Returns required to be filed by it, on a timely basis and in a manner
consistent with past practice; and pay all Taxes when due, and withhold
all Taxes when and as required, under all applicable law. Parent shall
have a reasonable opportunity to review all such Tax Returns prior to
filing.
5.02. SHAREHOLDER APPROVAL. The Company shall either (i) cause a
special meeting of the Shareholders to be duly called and held, or (ii) send to
each Shareholder a Written Consent in Lieu of Meeting, in either case as soon as
reasonably practicable after the execution of this Agreement for the purpose of
voting on the approval of this Agreement. Approval by the Shareholders in either
manner set forth above by the vote required by the MBCA and the Company's
Articles of Incorporation and Bylaws is referred to herein as the "Shareholder
Approval."
5.03. NO SHOPPING. From the date hereof until the earliest to occur of
(i) the Effective Time, (ii) the date of termination of this Agreement pursuant
to Section 8.01 hereof and (iii) February 28, 2004, the Company will not, and
will use reasonable efforts not to, permit any officer, director or other agent
or representative of the Company to, directly or indirectly, (i) take any action
to seek, initiate or solicit any offer from any person or group to acquire any
shares of capital stock of the Company, to merge or consolidate with the
Company, or to otherwise acquire, except to the extent not prohibited by Section
5.01 hereof, any significant portion of the assets of the Company, taken as a
whole (a "Third Party Acquisition Offer"), or (ii) engage in negotiations
concerning a Third Party Acquisition Offer with any person or group, or disclose
financial information relating to the Company or any confidential or proprietary
trade or business information relating to the business of the Company, or afford
access to the
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properties, books or records of the Company, to any person or group that the
Company has reason to believe may be considering a Third Party Acquisition
Offer.
5.04. ACCESS TO INFORMATION. From the date hereof until the Effective
Time, the Company will give Parent and its counsel, financial advisors, auditors
and other authorized representatives reasonable access, during normal business
hours throughout the period prior to the Effective Time, to the offices,
properties, books and records of the Company all at reasonable times and upon
reasonable notice, and will instruct the employees, counsel, financial advisors
and auditors of the Company to cooperate with Parent and each such
representative in all reasonable respects in its investigation of the business
of the Company. Parent and each such representative will conduct such
investigation in a manner as not to interfere unreasonably with the operations
of the Company and will take all necessary precautions (including obtaining the
written agreement of its respective employees or representatives involved in
such investigation) to protect the confidentiality of any information of the
Company disclosed to such persons during such investigation. Prior to the
Effective Time, Parent and its representatives shall not contact or communicate
with the customers and suppliers of the Company in connection with the
transactions contemplated by this Agreement except with the prior written
consent of the Company, which consent shall not unreasonably be withheld.
5.05. CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement between
the Company and Parent dated June 18, 2003 shall remain in full force and effect
until the Effective Time. Until the Effective Time, the Company and Parent agree
to comply with the terms of such Confidentiality Agreement.
5.06. DEPOSIT OF ESCROWED FUNDS. At the Effective Time, the Escrow
Agreement shall be executed and delivered by the parties thereto, and Parent
shall deposit with the Escrow Agent the Escrowed Funds by delivering cash by
wire transfer of same day funds. The Escrowed Funds shall remain deposited with
the Escrow Agent and shall be subject to and payable in accordance with the
terms of the Escrow Agreement and this Agreement.
5.07. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, the parties hereto shall each use their reasonable best efforts to
perform their obligations herein and to take, or cause to be taken or do, or
cause to be done, all things necessary, proper or advisable under applicable law
to obtain all regulatory approvals and satisfy all conditions to the obligations
of the parties under this Agreement and to cause the Merger and the other
transactions contemplated herein to be carried out promptly in accordance with
the terms hereof and shall cooperate fully with each other and their respective
officers, directors, employees, agents, counsel, accountants and other designees
in connection with any steps required to be taken as part of their respective
obligations under this Agreement.
5.08. AMENDMENT OF DISCLOSURE SCHEDULES. From time to time prior to the
Effective Time, the Company may supplement or amend the Disclosure Schedules in
order to make the information set forth therein timely, complete and accurate.
For purposes of determining the fulfillment of the condition set forth in
Section 6.01(a) as of the Closing, the Disclosure Schedules shall be deemed to
include only that information contained therein as of the date of the Original
Merger Agreement and shall be deemed to exclude any information contained in any
subsequent supplement or amendment thereto. For purposes of determining the
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accuracy of the representations and warranties contained in Article III and the
liability of the Company with respect thereto under Article X, the Disclosure
Schedules shall be deemed to include all information contained in any supplement
or amendment thereto made on or before the Closing.
5.09. EMPLOYMENT AGREEMENTS. The Company shall use commercially
reasonable efforts to cause up to six senior executives of the Company mutually
acceptable to Parent and the Company (collectively, the "Key Employees") to
enter into employment-related agreements in a form and according to terms and
conditions satisfactory to Parent, the material economic terms of which are
described in Exhibit B hereto. Each such agreement shall become effective at the
Closing and shall provide for the termination or amendment, effective
immediately prior to the Closing, of any other agreement between the Company and
the Key Employees affecting their employment by the Company.
5.10. INCENTIVE PROGRAMS.
(a) Prior to the Effective Time, Parent and the Company shall
have adopted and approved an incentive program substantially in the
form attached hereto as Exhibit C ("Incentive Program 1"), effective as
of the Effective Time, for eligible Company Employees as described in
Incentive Program 1.
(b) Prior to the Effective Time, Parent and the Company shall
have adopted and approved an incentive program substantially in the
form attached hereto as Exhibit D (the "Incentive Program 2"),
effective as of the Effective Time, for eligible Company Employees as
described in Incentive Program 2.
5.11. RETENTION PROGRAM. Prior to the Effective Time, Parent and the
Company shall have adopted and approved a retention program substantially in
form attached hereto as Exhibit E (the "Retention Program"), effective as of the
Effective Time, for eligible Company Employees.
5.12. REGISTRATION AND LISTING OF SHARES. Shares of Parent Common Stock
delivered to the Shareholders shall be listed with the NYSE and registered
pursuant to a Form S-3 registration statement (the "Form S-3") to be declared
effective by the SEC. Parent shall file the Form S-3 within five (5) business
days following the Closing Date. To the extent the Form S-3 is not reviewed by
the Securities and Exchange Commission (the "SEC"), Parent shall file, no later
than three (3) business days following the SEC's determination not to review the
Form S-3, an acceleration request with the SEC requesting that effectiveness of
the Form S-3 occur as soon as practicable, but in any event no later than the
expiration of such three-day period. If the SEC determines to review the Form
S-3, then Parent shall promptly respond to any comments received from the SEC,
and shall use its commercially reasonable efforts to clear SEC comments and
obtain effectiveness of the Form S-3 no later than ninety (90) days following
the date upon which the Form S-3 initially was filed with the SEC.
5.13. RESTRICTIVE LEGEND ON SHARES. Upon the Effective Time, each
certificate representing Shares of Parent Company Stock shall be endorsed with
the following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
Parent agrees that it will take all appropriate actions necessary to
remove the legend promptly after the registration statement referred to in
Section 5.12 is declared effective.
5.14. TAXES ON TRANSFER. The Shareholders shall be responsible for any
taxes resulting from any transfer of the Shares of Parent Company Stock to the
Shareholders, including any transfer, documentary, sales, use, stamp,
registration or other similar taxes and fees (including any interest due).
5.15. CONDITIONS TO PARENT'S OBLIGATION TO FILE REGISTRATION STATEMENT.
Parent's obligation to file a registration statement shall, in all cases, be
subject to the following provisions:
(a) The Shareholders shall have agreed to furnish any and all
agreements, consents and representations required of them by the SEC in
connection with the filing or which are a condition of having the
subject registration statement declared effective.
(b) Parent shall not be obligated to file any registration
statement if Parent (i) shall have delivered to the Shareholder
proposing to sell shares of Parent Common Stock delivered pursuant to
this Agreement an opinion of counsel, which counsel shall be acceptable
to such Shareholder, to the effect that the shares of Parent Common
Stock delivered pursuant to this Agreement may lawfully be sold to the
public without registration under the Securities Act and (ii) has
delivered to its transfer agent instructions to register the transfer
of any of the shares of Parent Common Stock sold in reliance on such
opinion.
(c) Parent shall have received all information reasonably
requested in writing by Parent from the Shareholders that is necessary
for the filing of the registration statement.
5.16. INVESTMENT REPRESENTATIONS. The Company shall use its
commercially reasonable efforts to cause each Shareholder receiving Parent
Shares to execute a representation letter to Parent prior to the Effective Time
in which such Stockholder represents that such Stockholder is an "accredited
investor" as defined in Regulation D under the Securities Act of 1933, as
amended, which representation letter shall be in a form reasonably acceptable to
Parent.
5.17. STOCK OWNERSHIP PLAN. Following the Closing, the Company and the
trustees of the Company's Stock Ownership Plan shall take, or cause to be taken,
all action necessary to promptly terminate the Stock Ownership Plan and dissolve
the Stock Ownership Plan trust; provided, however, that such termination and
dissolution shall not occur prior to the
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registration of the Shares of Parent Company Stock issued to the Stock Ownership
Plan pursuant to the Merger and the removal of all restrictions on the sale or
disposition of such Shares.
5.18. NON-SOLICITATION AGREEMENTS. The Company shall use commercially
reasonable efforts to cause the holders of shares of the Company's issued and
outstanding preferred stock to enter into one or more agreements with the
Surviving Corporation and/or Parent, in a form and according to terms and
conditions reasonably satisfactory to Parent, each of which shall become
effective at the Closing and which shall require the holders of shares of the
Company's issued and outstanding preferred stock, for a period of time mutually
acceptable to Parent and such preferred shareholders, to not solicit, hire or
enter into any arrangement for the services of any Company Employee who remains
an employee of the Surviving Corporation, New LLC or any affiliate thereof
immediately following the Effective Time, subject to customary exceptions and
qualifications.
5.19. REDEMPTION OF SHARES. Prior to the Effective Time, the Company
shall use its best efforts to cause the redemption for cash of all shares of the
Company's Common Stock held by each Shareholder who holds less than 2,000 shares
of the Company's Common Stock as of the date of the Original Merger Agreement;
provided, however, that additional Shareholders owning shares of the Company's
Common Stock may be asked by the Company to redeem their shares prior to the
Effective Time solely for cash if reasonably required in order to comply with
the federal securities laws. Such redemption shall be accomplished in compliance
with all applicable securities laws. Parent shall fund the amount of cash
redemption paid by the Company pursuant to this Section 5.19 as part of the
aggregate merger consideration; provided, however, that (a) in no event shall
the aggregate merger consideration paid by Parent exceed $68,000,000, and the
updated versions of Schedules 1.05, 1.06(a) and Schedule 1.08 to be agreed upon
by the parties as contemplated by Article I shall reflect the transactions and
payments contemplated by this Section 5.19, and (b) in no event shall the dollar
thresholds set forth in Section 1.06 be decreased as a result of the cash paid
by the Company pursuant to this Section 5.19.
5.20. RESIGNATION OF EMPLOYEES. Prior to the Effective Time, the
Company shall secure a written agreement, to take effect within 60 days after
the Effective Time, by each of Jeffrey L. Laurel and Gregory A. Twedt, to resign
his employment with the Company, with no further liability or obligations by the
Company or New LLC to either Laurel or Twedt, except as set forth under this
Agreement, existing Company policy, or law.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.
The obligations of Parent and Merger Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived by Parent and Merger
Subsidiary:
(a) The representations and warranties of the Company
contained in Article III of this Agreement shall be true and correct as
of the date of the Original
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Merger Agreement and there shall be no inaccuracy in any such
representation or warranty immediately prior to the Effective Time
(except with respect to representations and warranties that refer to or
speak as of a specified date, which shall only need to have been true
on and as of such date), except to the extent any such inaccuracy would
not impair the ability of the Company to consummate the transactions
contemplated hereby or have, in the aggregate, a Material Adverse
Effect; the Company shall have performed and complied in all material
respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it immediately
prior to the Effective Time; and Parent and Merger Subsidiary shall
have received a certificate signed by the Chief Executive Officer of
the Company to the effects set forth in this Section 6.01(a).
(b) The Shareholder Approval shall have been obtained, as set
forth in Section 5.02, and shall remain in full force and effect.
(c) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other
regulatory or administrative agency or commission requesting or looking
toward an injunction, writ, order, judgment or decree which, in the
reasonable judgment of Parent, is reasonably likely, if issued, to
restrain or prohibit the consummation of any of the transactions
contemplated hereby or require rescission of this Agreement or any such
transactions or result in material damages to Parent, Merger Subsidiary
or the Surviving Corporation or their respective officers or directors
if the transactions contemplated hereby are consummated, nor shall
there be in effect any injunction, writ, judgment, preliminary
restraining order or other order or decree of any nature issued by a
court or governmental agency of competent jurisdiction directing that
any of the transactions provided for herein not be consummated as so
provided.
(d) All other corporate action on the part of the Company
necessary to authorize the execution, delivery and consummation of this
Agreement or any agreement or instrument contemplated hereby to which
the Company is or is to be a party or the transactions contemplated
hereby or thereby shall have been duly and validly taken.
(e) From the date hereof until the Effective Time, there shall
not have been any damage, destruction, loss or casualty to property or
assets of the Company which has had, or could reasonably be expected to
have, a Material Adverse Effect.
(f) The consents, authorizations, orders and approvals listed
on Schedule 6.01(f), including approval under the HSR Act, shall have
been obtained or made.
(g) The Escrow Agreement shall have been executed and
delivered by the Company and the Escrow Agent.
(h) Parent shall have received the resignation of all
directors of the Company or such directors shall have otherwise been
removed in accordance with applicable law.
(i) Since the date of the Original Merger Agreement, there
shall not have been a material adverse effect upon the business,
operations, properties or financial condition of Parent (a "Parent
Material Adverse Effect"); provided, however, that a
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Parent Material Adverse Effect will not be deemed to have occurred if
the change, circumstance, event, effect or state of facts results
primarily from (a) a change in general economic conditions, (b) a
change in general business conditions in Parent's industry that does
not disproportionately affect Parent or (c) the disclosure to the
public, or pendency, of the Merger and the transactions contemplated
thereby.
(j) In the reasonable, good faith judgment of Parent, the
offering and issuance of shares of Parent Common Stock to certain
Shareholders, as contemplated under Article I of this Agreement, shall
be exempt from registration under the federal securities laws in
reliance upon Rule 506 of Regulation D under the Securities Act of
1933, as amended.
6.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions, any one or more of which may
be waived by the Company:
(a) The representations and warranties of Parent and Merger
Subsidiary contained in Article IV of this Agreement shall be true and
correct in all material respects as of the date of the Original Merger
Agreement and immediately prior to the Effective Time as if such
representations and warranties had been made on and as of the Effective
Time; each of Parent and Merger Subsidiary shall have performed and
complied in all material respects with the agreements and obligations
contained in this Agreement required to be performed and complied with
by it immediately prior to the Effective Time; and the Company shall
have received a certificate signed by a duly authorized executive
officer of each of Parent and Merger Subsidiary to the effects set
forth in this Section 6.02(a).
(b) The Shareholder Approval shall have been obtained as set
forth in Section 5.02, and shall remain in full force and effect.
(c) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other
regulatory or administrative agency or commission requesting or looking
toward an injunction, writ, order, judgment or decree which, in the
reasonable judgment of the Company, is reasonably likely, if issued, to
restrain or prohibit the consummation of any of the transactions
contemplated hereby or require rescission of this Agreement or any such
transactions or result in material damages to the Company, its officers
or directors, or the Shareholders if the transactions contemplated
hereby are consummated, nor shall there be in effect any injunction,
writ, judgment, preliminary restraining order or other order or decree
of any nature issued by a court or governmental agency of competent
jurisdiction directing that any of the transactions provided for herein
not be consummated as so provided.
(d) All corporate action on the part of Parent and Merger
Subsidiary necessary to authorize the execution, delivery and
consummation of this Agreement or any agreement or instrument
contemplated hereby to which Parent or Merger Subsidiary is or is to be
a party or the transactions contemplated hereby or thereby shall have
been duly and validly taken.
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(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or
other regulatory body (domestic or foreign) required in connection with
the execution, delivery and performance of this Agreement, including
approval under the HSR Act, shall have been obtained or made, except
for filing of the Articles of Merger and any other documents required
to be filed after the Effective Time, except where the failure to have
obtained or made any such consent, authorization, order, approval,
filing or registration would not have a Material Adverse Effect. All
consents required from third parties in order for the Company to
consummate the Merger shall have been obtained except for such
consents, the failure of which to obtain, would not have a Material
Adverse Effect.
(f) The Escrow Agreement shall have been executed and
delivered by Parent and the Escrow Agent.
(g) There shall not have been a Parent Material Adverse
Effect.
ARTICLE VII
CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME
7.01. INDEMNIFICATION. All rights to indemnification, expense
advancement and exculpation existing in favor of any present or former director,
officer or employee of the Company as provided in the Articles of Incorporation,
Bylaws or similar organizational documents of the Company or Bylaw as in effect
on the date hereof shall survive the Merger for a period of at least six (6)
years after the Effective Time (or, in the event any relevant claim is asserted
or made within such six-year period, until final disposition of such claim) with
respect to matters occurring at or prior to the Effective Time, and no action
taken during such period shall be deemed to diminish the obligations set forth
in this Section 7.01. Parent hereby guarantees, effective at the Effective Time,
all obligations of the Surviving Corporation or New LLC in respect of such
indemnification and expense advancement.
7.02. DIRECTORS AND OFFICERS LIABILITY INSURANCE. For a period of at
least six (6) years after the Effective Time, Parent shall cause the Surviving
Corporation and New LLC to maintain in effect a run-off (i.e., "tail") policy or
endorsement with respect to the current policy of directors' and officers'
liability insurance covering claims asserted within six (6) years after the
Effective Time arising from facts or events which occurred at or before the
Effective Time (including consummation of the transactions contemplated by this
Agreement); and such policies or endorsements shall name as insureds thereunder
all present and former directors and officers of the Company; provided that such
coverage and limits are readily available in the insurance market and that the
premium for such policy shall not exceed three times the current premium.
7.03. CONFIDENTIALITY. After the Closing, Shareholders shall strictly
maintain the confidentiality of all proprietary information of the Company
("Confidential Information"), except to the extent disclosure of any such
information is reasonably believed by the disclosing party to be required by law
or authorized by the other party (which, for the Shareholders, shall be the
Shareholder Representative), or otherwise made publicly available by the other
party, or reasonably occurs in connection with disputes over the terms of this
Agreement. In the event
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that Shareholders reasonably believe after consultation with counsel that they
are required by law to disclose any Confidential Information described in this
Section 7.03, the Shareholder Representative will (a) use its commercially
reasonable efforts to provide the Parent with reasonably prompt notice before
such disclosure in order that the Parent may attempt to obtain a protective
order or other assurance that confidential treatment will be accorded to
Confidential Information, and (b) cooperate with the Parent in attempting to
obtain such order or assurance. The provisions of this Section 7.03 shall not
apply to any information which is in the public domain or shall come into the
public domain, other than by reason of fault by the Shareholders or becomes
known in the industry through no wrongful act on the part of the Shareholders.
In addition, the parties hereto agree and acknowledge that nothing in this
Section 7.03 shall prohibit a Shareholder from disclosing to its officers,
directors, partners, managers or shareholders the specific terms and conditions
of the transactions to be consummated pursuant to this Agreement.
7.04. EMPLOYMENT FOLLOWING EFFECTIVE TIME. All Company Employees
employed immediately prior to the Effective Time shall remain employed by the
Surviving Corporation, New LLC or an affiliate thereof immediately following the
Effective Time (a "Surviving Employee"). The parties hereto acknowledge that the
employment of any Surviving Employee may be transferred to Parent, or to an
affiliate of any of Parent, the Surviving Corporation or New LLC. Nothing in
this Agreement, however, is intended to or shall be interpreted to require
Parent, the Surviving Corporation, New LLC or an affiliate of any of Parent, the
Surviving Corporation or New LLC to continue the employment of any Surviving
Employee for any period of time following the Effective Time.
7.05. COMPLETION OF MERGER BETWEEN NEW LLC AND THE COMPANY. As soon as
possible, but in any event no later than the close of business on the first
business day immediately following the Effective Time, the Company, as part of a
single plan of reorganization of which the Merger is a part, shall be merged
with and into New LLC in accordance with the provisions of Minnesota and
Delaware law. New LLC shall ultimately be the surviving entity in the Merger.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.01. GENERALLY. This Agreement may be terminated and abandoned at any
time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company (in
the case of the Company, as approved by its Board of Directors);
(b) by Parent or the Company (in the case of the Company, as
approved by its Board of Directors) if the transactions contemplated
hereby shall not have been consummated on or before February 28, 2004
(which date may be extended by mutual agreement of Parent and the
Company (in the case of the Company, as approved by its Board of
Directors)), provided that such failure is not due to the failure of
the party seeking to terminate this Agreement (or, in the event Parent
is seeking to terminate this Agreement, of Merger Subsidiary) to comply
with its obligations under this Agreement;
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(c) by Parent, if (i) any of the conditions set forth in
Section 6.01 hereof shall become impossible to fulfill other than for
reasons within the control of Parent or Merger Subsidiary, and such
conditions shall not have been waived pursuant to Section 11.03 hereof;
or (ii) the Shareholder Approval shall not have been obtained within 45
days after the signing of this Agreement; or
(d) by the Company (as approved by its Board of Directors), if
(i) any of the conditions set forth in Section 6.02 hereof shall become
impossible to fulfill other than for reasons within the control of the
Company, and such conditions shall not have been waived pursuant to
Section 11.03 hereof; or (ii) the Shareholder Approval shall not have
been obtained within 45 days after the signing of this Agreement.
8.02. PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT. Upon
termination of this Agreement by the Company or Parent pursuant to Section 8.01
hereof, written notice thereof shall immediately be given to the other such
party and this Agreement shall terminate and the Merger shall be abandoned
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein, this Agreement shall forthwith become void and no
party hereto shall have any liability or further obligation to any other party
to this Agreement, except to the extent the termination is a direct result of a
willful and material breach or violation by such party of a representation,
warranty or covenant contained in this Agreement and except for continuing
obligations under Section 5.05.
ARTICLE IX
SHAREHOLDER REPRESENTATIVE
9.01. DESIGNATION. Subject to the terms and conditions of this Article
IX, Michael Gorman and Jeffrey L. Laurel, and each of them acting alone, with
full power of substitution and re-substitution, is designated by the Company, on
behalf of each Shareholder, as the representative (either or both of such
persons acting individually, when acting in such capacity, being defined herein
as the "Shareholder Representative") of the Shareholders to serve, and Parent
hereby acknowledges that the Shareholder Representative shall serve, as the sole
representative of the Shareholders, from and after the Effective Time with
respect to the matters set forth in this Agreement and the Escrow Agreement,
such service to be without compensation except for the reimbursement of
out-of-pocket expenses and indemnification specifically provided herein. The
Shareholder Representative has accepted such designation as of the date hereof.
Notwithstanding anything to the contrary contained in this Agreement or the
Escrow Agreement, the Shareholder Representative shall have no duties or
responsibilities except those expressly set forth herein, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on
behalf of any Shareholder shall otherwise exist against the Shareholder
Representative.
9.02. AUTHORITY. Each of the Shareholders, by (a) voting in favor of
this Agreement and the transactions contemplated herein at the special meeting
of the Shareholders to be duly called and held, (b) approving this Agreement and
the transactions contemplated herein by signing a Written Consent in Lieu of
Meeting, or (c) accepting any portion of the consideration to be paid pursuant
to Section 1.06 will, effective as of the Effective Time,
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irrevocably appoint the Shareholder Representative as the agent, proxy and
attorney-in-fact for such Shareholder for all purposes of this Agreement,
including full power and authority on such member's behalf (i) to take all
actions which the Shareholder Representative considers necessary or desirable in
connection with the defense, pursuit or settlement of any determinations
relating to the payment of the Cash Flow Holdback Indemnification Escrow Amount
and any claims for indemnification pursuant to Article X hereof, including to
sue, defend, negotiate, settle and compromise any such claims for
indemnification made by or against, and other disputes with, Parent pursuant to
this Agreement or any of the agreements or transactions contemplated hereby,
(ii) to engage and employ agents and representatives (including accountants,
legal counsel and other professionals) and to incur such other expenses as he
shall deem necessary or prudent in connection with the administration of the
foregoing, (iii) to provide for all expenses incurred in connection with the
administration of the foregoing to be paid by directing the Escrow Agent to
reimburse the Shareholder Representative for such expenses, (iv) to disburse to
the Shareholders all indemnification payments received from Parent under Article
X hereof, (v) to accept and receive notices to the Shareholders pursuant to this
Agreement, and (vi) to take all other actions and exercise all other rights
which the Shareholder Representative (in his sole discretion) considers
necessary or appropriate in connection with this Agreement. Each of the
Shareholders, by the adoption of this Agreement either at the special meeting of
the Shareholders or by Written Consent in Lieu of Meeting referred to in Section
5.02, or by accepting any portion of the consideration to be paid pursuant to
Section 1.06, agrees that such agency and proxy are coupled with an interest,
and are therefore irrevocable without the consent of the Shareholder
Representative and shall survive the death, incapacity, bankruptcy, dissolution
or liquidation of any Shareholder. All decisions and acts by the Shareholder
Representative shall be binding upon all of the Shareholders, and no Shareholder
shall have the right to object, dissent, protest or otherwise contest the same.
9.03. RESIGNATION. In the event that both individuals authorized
hereunder as a Shareholder Representative shall die, become incapacitated,
resign or otherwise fail to act on behalf of the Shareholders for any reason,
the Shareholder Representative shall be such other person as shall be selected
by Christopher D. Heim, and such substituted representative shall be deemed to
be the Shareholder Representative for all purposes of this Agreement.
9.04. RELIANCE BY THIRD PARTIES ON THE SHAREHOLDER REPRESENTATIVE'S
AUTHORITY. The Shareholder Representative is authorized to act on behalf of the
Shareholders notwithstanding any dispute or disagreement among the Shareholders,
and the other parties hereto shall be entitled to rely on any and all action
taken by the Shareholder Representative without any liability to, or obligation
to inquire of, any Shareholder even if such party shall be aware of any actual
or potential dispute or disagreement among the Shareholders. Each of the other
parties hereto is expressly authorized to rely on the genuineness of the
signature of the Shareholder Representative and, upon receipt of any writing
which reasonably appears to have been signed by the Shareholder Representative,
the other parties hereto may act upon the same without any further duty of
inquiry as to the genuineness of the writing.
9.05. EXCULPATION AND INDEMNIFICATION. Neither the Shareholder
Representative nor any agent employed by him shall be liable to any Shareholder
relating to the performance of his duties under this Agreement for any errors in
judgment, negligence, oversight, breach of duty or otherwise except to the
extent it is finally determined in a court of
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competent jurisdiction by clear and convincing evidence that the actions taken
or not taken by the Shareholder Representative constituted fraud or were taken
or not taken in bad faith. The Shareholder Representative shall be indemnified
and held harmless by the Shareholders against all Losses (as hereinafter
defined) paid or incurred in connection with any action, suit, proceeding or
claim to which the Shareholder Representative is made a party by reason of the
fact that he was acting as the Shareholder Representative pursuant to this
Agreement; provided, however, that the Shareholder Representative shall not be
entitled to indemnification hereunder to the extent it is finally determined in
a court of competent jurisdiction by clear and convincing evidence that the
actions taken or not taken by the Shareholder Representative constituted fraud
or were taken or not taken in bad faith; and provided further, however, that the
Shareholder Representative shall have recourse only against the unpaid
Indemnification Escrow Amount (fully subordinated in right of payment and
otherwise to Parent's claims thereto, whether or not then existing or known),
with respect to such Losses as provided in the next two sentences of this
Section 9.05. Any amount owing to the Shareholder Representative from the
Shareholders pursuant to this Section 9.05 shall be reduced on a pro rata basis
from the next succeeding distribution(s) of the Indemnification Escrow Amount by
the Escrow Agent to the Shareholders, and shall be payable solely from such
source. The Shareholder Representative shall be protected in acting upon any
notice, statement or certificate believed by him to be genuine and to have been
furnished by the appropriate person and in acting or refusing to act in good
faith or any matter.
ARTICLE X
INDEMNIFICATION
10.01. INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders and each
of their successors and assigns (solely through the Indemnification Escrow
Amount as set forth in Section 10.08(c)) shall indemnify, defend, reimburse and
hold harmless Parent, Merger Subsidiary, New LLC, the Company (following the
Effective Time), and each of their respective directors, officers, employees and
agents (each a "Buyer Indemnified Party" and collectively, "Buyer Indemnified
Parties") from and against any and all Losses (as defined in Section 10.10)
resulting from or relating to (a) any breach of any representation or warranty
of the Company contained in Article III of this Agreement or (b) the breach or
failure to perform by the Company of any of its covenants or agreements set
forth in Articles V and VII of this Agreement.
10.02. INDEMNIFICATION BY PARENT, MERGER SUBSIDIARY AND NEW LLC.
Parent, Merger Subsidiary and New LLC shall indemnify, defend, reimburse and
hold harmless the Shareholders, their successors and assigns and each of their
respective directors, officers, employees and agents (each a "Shareholder
Indemnified Party" and collectively, "Shareholder Indemnified Parties") from and
against any and all Losses resulting from or relating to (a) any breach of any
representation or warranty of Parent or Merger Subsidiary contained in this
Agreement or (b) the breach or failure to perform by Parent or Merger Subsidiary
of any of Parent's or Merger Subsidiary's covenants or agreements set forth in
Article V and VII of this Agreement.
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10.03. NOTICE OF THIRD-PARTY CLAIMS. In no case shall any Indemnitor
(as defined in Section 10.10) under this Agreement be liable with respect to any
Third-Party Claim (as defined Section 10.10) against any Indemnitee (as defined
in Section 10.10) unless the Indemnitee shall have delivered to the Indemnitor a
Claim Notice (as hereinafter defined) and the following conditions are
satisfied:
(a) TIMELY DELIVERY OF CLAIM NOTICE. Except as provided in
paragraphs (b) and (c) of this Section 10.03, and subject to Section
10.07 below, no right to indemnification under this Article X shall be
available to the Indemnitee with respect to a Third-Party Claim unless
the Indemnitee shall have delivered to the Indemnitor, with a copy to
the Escrow Agent, within the Notice Period (as defined in Section
10.10) a notice ("Claim Notice") describing in reasonable detail the
facts giving rise to such Third-Party Claim and stating that the
Indemnitee intends to seek indemnification for such Third-Party Claim
from the Indemnitor pursuant to this Article X.
(b) LATE DELIVERY OF CLAIM NOTICE. If, in the case of a
Third-Party Claim, a Claim Notice is not given to the Indemnitor within
the Notice Period, the Indemnitee shall nevertheless be entitled to be
indemnified under this Article X (i) if the Indemnitee can establish
that the time elapsed between the end of the Notice Period and the
giving of the Claim Notice is reasonable in all the circumstances; or
(ii) to the extent (but only to the extent) that the Indemnitee can
establish that the Indemnitor has not been prejudiced by such time
elapsed.
(c) PAID OR SETTLED CLAIMS. If a Claim Notice is not given by
the Indemnitee prior to the payment or settlement by the Indemnitee of
a Third-Party Claim, the Indemnitee shall only be entitled to be
indemnified under this Article X to the extent (and only to the extent)
that the Indemnitee can establish that the Indemnitor has not been
prejudiced by such payment or settlement.
10.04. DEFENSE OF THIRD-PARTY CLAIMS. Upon receipt of a Claim Notice
from an Indemnitee with respect to any Third-Party Claim, the Indemnitor may
assume the defense thereof with counsel reasonably satisfactory to such
Indemnitee and the Indemnitee shall cooperate in all reasonable respects in such
defense. The Indemnitee shall have the right to employ separate counsel in any
action or claim and to participate in the defense thereof, provided that the
fees and expenses of counsel employed by the Indemnitee shall be at the expense
of the Indemnitor only if such counsel is retained pursuant to the following
sentence or if the employment of such counsel has been specifically authorized
by the Indemnitor. If the Indemnitor does not notify the Indemnitee within
thirty (30) days after receipt of the Claim Notice that the Indemnitor elects to
undertake the defense thereof, the Indemnitee shall have the right to defend at
the expense of the Indemnitor the claim with counsel of its choosing reasonably
satisfactory to the Indemnitor, subject to the right of the Indemnitor to assume
the defense of any claim at any time prior to settlement or final determination
thereof. In such event, the Indemnitee shall send a written notice to the
Indemnitor of any proposed settlement of any claim, which settlement the
Indemnitor may reject, in its reasonable judgment within thirty (30) days of
receipt of such notice. Failure to reject such notice within such thirty
(30)-day period shall be deemed an acceptance of such notice. If the Indemnitor
has assumed the defense of a claim from the Indemnitee, the Indemnitee shall
have the right to settle any such claim over
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the objection of the Indemnitor only if the Indemnitee waives any right to
indemnity therefor. So long as the Indemnitor is conducting the defense of any
Third-Party Claim in accordance with the terms hereof, the Indemnitee agrees
that Indemnitor shall have full and complete control over the conduct of such
proceeding, including any settlement thereof.
10.05. NOTICE OF OTHER CLAIMS. In the event any Indemnitee should have
a claim against any Indemnitor hereunder that does not involve a Third-Party
Claim being asserted against or sought to be collected from the Indemnitee, the
Indemnitee shall notify the Indemnitor, with a copy to the Escrow Agent, with
reasonable promptness of such claim by the Indemnitee, specifying the nature of
and specific basis for such claim and the amount or the estimated amount of such
claim. The Indemnitor shall remit (except if the Indemnitor is the Shareholder
Representative acting on behalf of the Shareholders, in which case the
Indemnitor shall instruct the Escrow Agent to remit) payment for the amount of
such claim upon receipt of an invoice therefor, or in the event of a dispute,
the Indemnitee and the Indemnitor shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations, such
dispute shall be resolved in accordance with Section 11.16 hereof.
10.06. ACCESS AND COOPERATION. After the Closing Date, Parent, the
Surviving Corporation and New LLC on the one hand, and the Shareholders, on the
other hand, shall each cooperate fully with the other as to all claims for
indemnification hereunder, shall make available to the other as reasonably
requested all information, books, records and documents that may be potentially
relevant to any and all claims and shall preserve all such information, books,
records and documents until the termination of any claim. Parent, the Surviving
Corporation and New LLC, on the one hand, and the Shareholders, on the other
hand, shall each also make available to the other, as reasonably requested, its
personnel, agents and other representatives who are responsible for preparing or
maintaining information, books, records or other documents, or who may have
particular knowledge with respect to any claim.
10.07. TERM OF INDEMNITIES. Except as hereinafter expressly provided,
the right to indemnification under Sections 10.01 and 10.02 hereof shall expire
twelve (12) months following the Closing Date; provided, however, that such
limitation shall not be applicable to an indemnification claim for which a Claim
Notice was given within the twelve-month period following the Closing Date with
respect to claims under Section 10.01, to the extent any such claim is pending
upon expiration of the applicable period. Any such pending claim shall survive
in respect of that claim until the final determination or settlement of that
claim.
10.08. LIMITATIONS ON LIABILITY.
(a) REMEDIES EXCLUSIVE. Except as specifically provided for
herein, each of the Parent, Merger Subsidiary, New LLC and the
Shareholders acknowledge and agree that, should the Closing occur, the
sole and exclusive remedy of each party hereto with respect to any and
all claims arising out of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article X; provided,
however, that this Section 10.08 shall not apply to Losses resulting
from fraud or intentional misrepresentation.
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(b) BASKET.
(i) No claim for indemnification under Sections 10.01
or 10.02 shall be made by Parent, a Buyer Indemnified Party or
a Shareholder Indemnified Party with respect to any breach
resulting in an individual item of Loss, or related items of
Losses arising out of substantially similar facts and
circumstances, unless and until the amount of such Losses
suffered by the Buyer Indemnified Parties or the Shareholder
Indemnified Parties exceeds $15,000, at which point a claim
can be made for the entire amount of such Losses, subject to
the limitations set forth in Section 10.08(b)(ii); and
(ii) Except as hereinafter expressly provided, no
claim for indemnification under Sections 10.01 or 10.02 shall
be made by a Buyer Indemnified Party or Shareholder
Indemnified Party, as the case may be, unless and until the
aggregate amount of all Losses suffered by the Buyer
Indemnified Parties or the Shareholder Indemnified Parties
exceeds $500,000 (the "Basket"), and then the aggregate amount
of all such Losses including the full amount of the Basket
shall be recoverable by the Buyer Indemnified Party or
Shareholder Indemnified Party, as the case may be; provided,
however, that claims for indemnification arising solely from
any breach of any representation or warranty of the Company
set forth in Section 3.07 ("Tax Claims") may be made by a
Buyer Indemnified Party at such time as the aggregate amount
of all Losses suffered by the Buyer Indemnified Parties
arising from Tax Claims exceeds $100,000 (the "Tax Basket"),
and then the aggregate amount of all such Losses including the
full amount of the Tax Basket shall be recoverable by the
Buyer Indemnified Party.
(c) LIABILITY LIMITED TO INDEMNIFICATION ESCROW AMOUNT. Parent
and the Surviving Corporation shall have recourse only against the
undisbursed Indemnification Escrow Amount with respect to any Losses,
in accordance with the terms of the Escrow Agreement, except in the
event of fraud or intentional misrepresentation. Neither the
Shareholders nor any of their successors and assigns shall have any
liability separate from, or in addition to, the Indemnification Escrow
Amount.
(d) EFFECT OF ADJUSTMENTS AND RESERVES. Notwithstanding any
other provision in this Agreement to the contrary, neither the
Shareholders nor their successors and assigns shall have any liability
for, and a Buyer Indemnified Party shall not bring any indemnification
claim against any Shareholder or its successors or assigns for, any of
the following: (i) a Loss, to the extent that the amount thereof was
(A) included in the calculation of the merger consideration payable
pursuant to Sections 1.05 and 1.06 or (B) the basis of an adjustment
made to the merger consideration pursuant to Sections 1.05 and 1.06; or
(ii) a Loss, to the extent that it is reflected or reserved for on the
Actual Balance Sheet and incorporated into the calculation of an
adjustment as described under Section 10.08(d)(i)(B). In addition, in
no event shall any such Loss referred to in this Section 10.08(d) be
included in the Basket.
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(e) OTHER LIMITATIONS. Notwithstanding any of the foregoing,
(i) Parent, Merger Subsidiary and the Surviving Corporation shall have
no recourse against the Company's officers, directors or agents other
than in their capacities as Shareholders otherwise entitled to receive
distributions from the Indemnification Escrow Amount under the Escrow
Agreement, and (ii) indemnification owing from any Shareholder who is
or was an officer or director of the Company shall not be deemed for
any purpose to be a claim covered by indemnification owing to such
Shareholder by the Company under any law, bylaw or agreement
whatsoever.
10.09. INDEMNIFICATION ESCROW AMOUNT AND TERM.
(a) Except as provided in Section 10.09(b) below, the Escrow
Agreement will provide that, on the date that is twelve (12)
months from the Closing Date (the "Release Date"), the Escrow
Agent shall release from escrow and deliver to the
Shareholders the remaining Indemnification Escrow Amount and
the Escrow Agreement shall terminate on such date.
(b) If there are outstanding indemnification claims on the Release
Date, and the remaining Indemnification Escrow Amount would
not cover the amount of such pending claims, then an amount
adequate to cover such pending claims shall be withheld by the
Escrow Agent from the Indemnification Escrow Amount, and the
Escrow Agreement shall continue, for as long as required to
cover such pending claims.
10.10. INDEMNITY DEFINITIONS.
"Indemnitee" means any person who may be entitled to seek
indemnification pursuant to the provisions of Sections 10.01 or 10.02 hereof (or
the Shareholder Representative in the case of indemnification owing to the
Shareholders).
"Indemnitor" means any person who may be obligated to provide
indemnification pursuant to Sections 10.01 or 10.02 hereof (or the Shareholder
Representative in the case of indemnification to be provided by the
Shareholders).
"Loss" or "Losses" means any and all demands, claims, payments,
obligations, actions or causes of action, assessments, losses, liabilities,
damages (but, except with respect to any Third-Party Claim and/or a claim
relating to fraud or intentional misrepresenation, excluding incidental,
special, consequential, exemplary, punitive and similar damages), costs and
expenses paid or incurred, including without limitation any legal or other
expenses reasonably incurred in connection with investigating or defending any
claims or actions and all amounts paid in settlement of claims or actions in
accordance with Section 10.04 hereof. The amount of any Losses for which
indemnification is provided under this Article X shall be net of any amounts
recovered or recoverable by the Indemnitee under insurance policies with respect
thereto (and thus any such amounts shall not be included in calculating the
deductible set forth in Section 10.08 (b)) and shall be (i) increased to take
account of any net tax costs actually incurred by the Indemnitee in connection
with the receipt of indemnity payments hereunder and (ii) reduced to take into
account the then present value of any net tax benefit (including as a result of
any basis adjustment) realized or to be realized by the
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Indemnitee in connection with any such Loss. In computing the amount of any such
net tax cost or net tax benefit, the Indemnitee shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any Loss.
"Notice Period" as applied to any Third-Party Claim for which an
Indemnitee seeks to be indemnified pursuant to Article X hereof, means the
period ending on the earlier of the following:
(i) Six months after the time at which the chairman, president
or any vice president or secretary (each a "Specified Officer") of the
Indemnitee (or the Indemnitee, if the Indemnitee is an individual) has
either (x) received actual notice of the facts giving rise to such
Third-Party Claim or (y) commenced an active investigation of
circumstances likely to give rise to such Third-Party Claim and, in
each case, where such Specified Officer (or Indemnitee, if an
individual) believes or should reasonably believe that such facts or
circumstances could reasonably be expected to give rise to such
Third-Party Claim for which such Indemnitee would be entitled to
Indemnification pursuant to Article X hereof; provided, however, in no
event shall the Notice Period extend past the one year anniversary of
the Closing Date;
(ii) With respect to any Third-Party Claim that has become the
subject of proceedings before any court or tribunal, such time as would
allow the Indemnitor sufficient time to contest, on the assumption that
there is an arguable defense to such Third-Party Claim, such proceeding
prior to any judgment or decision thereon; or
(iii) With respect to any Third-Party Claim that has become
the subject of settlement proceedings, such time as would provide the
Indemnitor sufficient time prior to such settlement to determine
whether to contest such claim and assume the defense pursuant to
Section 10.04 hereof.
"Third-Party Claims" means any and all Losses which arise out of or
result from (i) any claims or actions asserted against an Indemnitee by a third
party, (ii) any rights of a third party asserted against an Indemnitee, or (iii)
any liabilities of, or amounts payable by an Indemnitee to a third party arising
in respect of, claims, actions and rights referred to in the foregoing clauses
(i) or (ii).
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY, PARENT AND MERGER SUBSIDIARY.
(a) The representations, warranties and covenants of the
Company set forth in Articles III and V of this Agreement and in any
directly related closing certificate or Disclosure Schedule furnished
in connection herewith shall survive the Closing Date but shall expire
on the date which is twelve (12) months following the Closing Date.
(b) The representations, warranties and covenants of Parent
and Merger Subsidiary set forth in Articles IV and V of this Agreement
and in any directly related closing certificate furnished in connection
herewith shall survive until the date which is twelve (12) months
following the Closing Date.
11.02. AMENDMENT AND MODIFICATION. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto (in the case of the Company, as approved
by its Board of Directors) at any time prior to the Effective Time with respect
to any of the terms contained herein, except that after the Shareholder Approval
contemplated by Section 5.02 hereof, the amount of the merger consideration
shall in no event be decreased and the form of the merger consideration shall in
no event be altered without the approval of the Shareholders.
11.03. WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or Merger
Subsidiary, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein (except the conditions
in Sections 6.01(b) and 6.02(b) of this Agreement) may be waived in writing by
the Company, or by Parent and Merger Subsidiary, respectively, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.03.
11.04. EXPENSES. All expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that the legal and
accounting fees of the Company shall be payable in accordance with the
provisions set forth in Section 1.06 of this Agreement.
11.05. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party to this
Agreement shall issue any press release or make any announcement or other verbal
or written communication to employees, third parties or the public relating to
the subject matter of this Agreement without prior written approval of the other
parties; provided, however, that each of the Company and Parent may make any
public disclosure it reasonably believes in good faith (based upon written
opinion of counsel) is required by applicable law or, in the case of Parent,
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any listing or trading agreement concerning its publicly traded securities (in
which case the disclosing party will advise the other parties to this Agreement
prior to making the disclosure).
11.06. ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such necessary action.
11.07. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given (a) if delivered personally, effective when
delivered, or (b) if sent by facsimile, telecopy or other electronic
transmission device, when receipt is acknowledged; provided, however, that if
receipt is acknowledged after normal business hours of the recipient, notice
shall be deemed to have been given on the next business day, or (c) if delivered
by express delivery service, effective when delivered, or (d) if mailed by
registered or certified mail (return receipt requested), effective three
business days after mailing, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Parent or Merger Subsidiary, to it at or c/o:
3M Company
Building 220-4W-03
3M Center
St. Paul, MN 55144
Facsimile: (651) 736-5516
Attention: Division Vice President
Industrial Services and Solutions Division
with a copy to:
3M Company
Building 220-14W-07
3M Center
St. Paul, MN 55144
Facsimile: (651) 736-7859
Attention: Senior Vice President
Legal Affairs
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If to the Company, to it at:
HighJump Software, Inc.
6455 City West Parkway
Eden Prairie, MN 55344
Facsimile: (952) 947-0440
Attention: Chief Executive Officer
with a copy to:
Dorsey & Whitney LLP
50 South Sixth Street
Suite 1500
Minneapolis, MN 55402
Facsimile: (612) 340-7800
Attention: Kenneth L. Cutler
11.08. ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other parties. Except
for the provisions of Article I and Sections 7.01 and 7.02 hereof, this
Agreement is not intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
11.09. INTERPRETATION. As used in this Agreement, unless otherwise
expressly defined herein, (i) the term "including" shall mean "including without
limitation"; (ii) the term "person" shall mean and include an individual, a
partnership, a limited liability company, a joint venture, a corporation, a
trust, an incorporated organization and a government or any department or agency
thereof; (iii) the term "affiliate" shall have the meaning set forth in Rule
12b-2 of the General Rules and Regulations promulgated under the Securities
Exchange Act of 1934, as amended; (iv) the phrase "business day" shall mean any
day other than a Saturday, Sunday or a day which is a statutory holiday under
the laws of the United States or the State of Illinois; (v) all dollar amounts
are expressed in United States funds; and (vi) the phrase "to the knowledge of
the Company" or any similar phrase shall mean the knowledge of one or more of
the following officers of the Company: Chris Heim (the Company's President and
Chief Executive Officer), and Dan Mayleben (the Company's Chief Financial
Officer), including facts of which a reasonably prudent person in a similar
position should have known ,following due inquiry.
11.10. DISPUTE RESOLUTION.
(a) Any disagreement or dispute (a "Dispute") between the
parties arising out of or related to this Agreement shall be resolved
in the manner provided in this Section 11.10. In the event of a
Dispute, either party may, by written notice to the other party,
request that such Dispute be referred to the Division Vice President of
Industrial Services
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and Solutions Division of Parent and the Shareholder Representative,
who shall negotiate in good faith to attempt to resolve the Dispute. No
settlement reached under this Section 11.10 shall be binding on the
parties until reduced to a writing signed by the parties.
(b) If the procedure outlined in Section 11.10 fails to bring
about a resolution of each outstanding Dispute within 30 days following
notice thereof, then the parties shall promptly initiate a voluntary,
non-binding mediation conducted by a mutually agreed upon mediator in
Minneapolis, Minnesota. If the parties do not agree upon a mediator,
they shall request the American Arbitration Association to appoint a
capable mediator for them in accordance with the Commercial Dispute
Resolution Procedures of the American Arbitration Association in effect
as of the date of this Agreement. Parent and Shareholder Representative
shall each bear one-half of the costs and expenses of the mediation and
shall endeavor in good faith to resolve therein each outstanding
Dispute. No settlement reached under this Section 11.10 shall be
binding upon the parties until reduced to a writing signed by the
parties. In the event the parties are unable to resolve any outstanding
Dispute as provided above, then such outstanding Dispute shall be
determined by litigation conducted in accordance with this Agreement.
11.11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Minnesota without giving effect to conflict or choice of laws
principles that may be applicable.
11.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.13. HEADINGS; INTERNAL REFERENCES. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, and are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement.
11.14. NUMBER; GENDER. Whenever the context so requires, the singular
shall include the plural and the plural shall include the singular, and the
gender of any pronoun shall include the other genders.
11.15. ENTIRE AGREEMENT. This Agreement, including the Exhibits and the
Disclosure Schedules hereto and the Confidentiality Agreement described in
Section 5.05 hereof, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements and understandings among the parties with respect to such
subject matter, including but not limited to the Original Merger Agreement.
There are no restrictions, promises, representations, warranties (express or
implied), covenants or undertakings of the parties, other than those expressly
set forth or referred to in this Agreement or such Confidentiality Agreement.
11.16. ENFORCEMENT.
(a) The parties hereto agree that irreparable damage would
occur if any provision of this Agreement were not performed in
accordance with its terms or were
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otherwise breached. Each party shall be entitled to injunctive relief
to prevent any breach of this Agreement and to enforce this Agreement
specifically in any court of the State of Minnesota or any court of the
United States located in the State of Minnesota (in each case in
addition to any other remedy to which such party is entitled at law or
in equity).
(b) In addition, each party hereby:
(i) submits itself to the personal jurisdiction of
(A) the courts of the State of Minnesota; and (B) the United
States District Court for the District of Minnesota with
respect to any dispute arising out of this Agreement or any
transaction contemplated hereby to the extent such courts
would have subject matter jurisdiction with respect to such
dispute;
(ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other
request for leave from any such court; and
(iii) agrees that it will not bring any action
relating to this Agreement (or any transactions contemplated
by this Agreement) in any court other than the courts referred
to in Section 11.16(b)(i) above.
11.17. WAIVER. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH
ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ESCROW
AGREEMENT OR THE MERGER OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
11.18. SEVERABILITY. If any term, provision, covenant, agreement or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in full
force and effect and will in no way be affected, impaired or invalidated.
11.19. DISCLOSURE SCHEDULES.
(a) Matters reflected in the Disclosure Schedules are not
necessarily limited to matters required by this Agreement to be
reflected in the Disclosure Schedules. Such additional matters are set
forth for informational purposes and do not necessarily include other
matters of a similar nature.
(b) A disclosure made by the Company in any Section of this
Agreement or any Disclosure Schedule that is sufficient to reasonably
inform the Parent of information required to be disclosed in another
Section of this Agreement or another Disclosure Schedule in order to
avoid a misrepresentation thereunder shall be deemed, for all purposes
of this Agreement, to have been made with respect to such other Section
of this Agreement or such Disclosure Schedule. In no event shall the
mere listing in a Disclosure Schedule (or the mere provision by the
Company to the Parent of a copy) of a document or other item be deemed
adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the
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existence of the document or other item itself, or unless the listing
of a document or item in a Disclosure Schedule otherwise reasonably
informs the Parent of an exception to such representation or warranty).
11.20. DEFINITIONS.
Section or Place
Term Where Defined
---- ----------------
2000 Plan................................................. 1.08
Additional Closing Cash Consideration..................... 1.06(b)
affiliate................................................. 11.09
Aggregate Cash Amount .................................... 1.05(c)
Aggregate Consideration .................................. 1.05(c)
Agreement................................................. Preamble
Articles of Merger........................................ 1.02
Base Balance Sheet........................................ 3.05
Base Balance Sheet Date................................... 3.05
Basket.................................................... 10.08(b)
business day.............................................. 11.09
Buyer Indemnified Parties................................. 10.01
Cash Balance.............................................. 1.06(a)
Cash Flow Holdback........................................ 1.09(b)
Claim Notice.............................................. 10.03(a)
Closing................................................... 2.01
Closing Cash Consideration ............................... 1.06(a)
Closing Date ............................................. 2.01
Closing Balance Sheet..................................... 1.06(a)
Code...................................................... Recitals
Company................................................... Preamble
Confidential Information.................................. 7.03
DGCL...................................................... Recitals
Disclosure Schedules ..................................... Article III
Dispute................................................... 11.10(a)
Dissenting Share ......................................... 1.07
Effective Time ........................................... 1.02
Employee Benefit Plan .................................... 3.14(e)(i)
Employee Pension Benefit Plan ............................ 3.14(e)(ii)
Employee Welfare Benefit Plan ............................ 3.14(e)(iii)
Environmental Law ........................................ 3.15(a)(i)
ERISA..................................................... 3.14(a)(i)
Escrowed Funds............................................ 1.09(b)
Exchange Act.............................................. 4.05(a)
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Final Closing Cash Consideration.......................... 1.06(c)
Financial Statements ..................................... 3.05
Form S-3.................................................. 5.12
Fully Diluted Shares...................................... 1.08
Hazardous Substance....................................... 3.15(a)(ii)
HSR Act................................................... 3.04
Incentive Program 1....................................... 5.10(a)
Incentive Program 2....................................... 5.10(b)
including ................................................ 11.09
Indemnification Escrow Amount ............................ 1.09(b)
Indemnitee ............................................... 10.10
Indemnitor ............................................... 10.10
Intellectual Property Rights ............................. 3.11(a)
IP Embodiments............................................ 3.11(a)
Key Employees ............................................ 5.09
Leases ................................................... 3.08
Losses.................................................... 10.10
Management Incentive Plan................................. 5.10
Material Adverse Effect................................... 3.01
Material Contracts ....................................... 3.10
MBCA ..................................................... Recitals
Merger ................................................... Recitals
Merger Subsidiary ........................................ Preamble
Multiemployer Plan ....................................... 3.14(e)(iv)
Notice Period ............................................ 10.10
Option Settlement Amount ................................. 1.08
Original Merger Agreement................................. Recitals
Parent.................................................... Preamble
Parent Common Stock....................................... 1.05(a)(i)
Parent Material Adverse Effect............................ 6.01(i)
Parent SEC Reports........................................ 4.05(a)
Parent Share Value........................................ 1.05(d)
Permitted Liens........................................... 3.09
person.................................................... 11.09
Real Property............................................. 3.08
Release Date.............................................. 10.09(a)
Retention Program......................................... 5.11
Reviewing Party........................................... 1.10(b)
SEC....................................................... 5.12
Shareholder Indemnified Parties........................... 10.02
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Specified Officer......................................... 10.10
Shareholder Approval ..................................... 5.02
Shareholder Representative ............................... 9.01
Shareholders ............................................. Recitals
Stock Options ............................................ 1.08
Surviving Corporation .................................... 1.01
Taxes .................................................... 3.07
Tax Basket................................................ 10.08(b)(ii)
Tax Claims................................................ 10.08(b)(ii)
Tax Returns............................................... 3.07
Third Party Acquisition Offer ............................ 5.03
Third Party Claims........................................ 10.10
to the knowledge of the Company .......................... 11.09
Transaction Fees.......................................... 1.06(a)
Warrants ................................................. 1.05(a)(ii)
[Remainder of Page Intentionally Left Blank]
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SIGNATURE PAGE TO AMENDED AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the parties hereto do execute and deliver this
Agreement as of the date first above written.
COMPANY:
HIGHJUMP SOFTWARE, INC.
By /s/ Christopher D. Heim
--------------------------------
Name: Christopher D. Heim
Title: President
PARENT:
3M COMPANY
By /s/ John F. Pohl
--------------------------------
Name: John F. Pohl
Title: Division Vice President
MERGER SUBSIDIARY:
STEELER MERGER CORPORATION
By /s/ Gregg M. Larson
--------------------------------
Name: Gregg M. Larson
Title: Incorporator
NEW LLC:
STEELER MERGER LLC
By /s/ Gregg M. Larson
--------------------------------
Name: Gregg M. Larson
Title: Authorized Person
SIGNATURE PAGE TO AMENDED AGREEMENT AND PLAN OF MERGER