UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§ 240.14a-12
VERTICALNET, INC.
(Name of Registrant as Specified in
Its Charter)
N/A
(Name of Person(s) Filing Proxy
Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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400 CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
December 14, 2007
To our Shareholders:
You are cordially invited to attend a special meeting of the
shareholders of Verticalnet, Inc., a Pennsylvania corporation,
which we refer to as Verticalnet or the
Company, to be held at the offices of Morgan,
Lewis & Bockius LLP located at 1701 Market Street,
Philadelphia, Pennsylvania 19103 on Tuesday, January 15, 2008,
beginning at 10:00 a.m. local time. Our Board of Directors
has fixed the close of business on December 10, 2007, as the
record date for the purpose of determining shareholders entitled
to receive notice of and vote at the special meeting or any
adjournment or postponement of the special meeting. Notice of
the special meeting and the related proxy statement are enclosed.
At the special meeting, you will be asked to consider and vote
upon a proposal to adopt the Agreement and Plan of Merger (the
Merger Agreement), dated as of October 25,
2007, among the Company, BravoSolution S.p.A., a corporation
organized under the laws of Italy (Parent), and
BravoSolution U.S.A., Inc., a Pennsylvania corporation and
wholly-owned subsidiary of Parent (Merger Sub) and
the related Plan of Merger, and to approve the merger
contemplated thereby.
The Merger Agreement and the related Plan of Merger provide for,
among other things, the merger of Merger Sub with and into the
Company, with the Company as the surviving corporation (the
Merger). As a result of the Merger, the Company will
become a wholly-owned subsidiary of Parent. If the Merger is
completed, you will be entitled to receive: (i) $2.56 in
cash, without interest and less any required withholding tax,
for each share of our common stock you own; and
(ii) $0.38750 or $0.26875 in cash, without interest and
less any required withholding tax, for each share of our
Series B Preferred Stock you own (determined in accordance
with the terms of the Merger Agreement and the related Plan of
Merger). Merger Sub is the sole owner of our Series C
Preferred Stock and, if the Merger is completed, each such share
of Series C Preferred Stock shall be cancelled and retired
and shall not be entitled to receive any consideration.
If the Merger is completed, Verticalnet will continue its
operations as a privately-held company owned by BravoSolution
S.p.A. As a result of the Merger, Verticalnet shares will no
longer be quoted on NASDAQ.
Our Board of Directors has unanimously approved and adopted the
Merger Agreement, the related Plan of Merger, and the
transactions contemplated thereby and has determined that the
Merger, the Merger Agreement, the related Plan of Merger, and
the transactions contemplated by the Merger Agreement are fair
to, and in the best interests of, the Company.
Accordingly,
our Board of Directors recommends that you vote FOR
the adoption of the Merger Agreement and the related Plan of
Merger, and the approval of the Merger, and FOR the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
The proxy statement attached to this letter provides you with
information about the proposed merger and the special meeting.
We encourage you to read the entire proxy statement carefully
because it explains the Merger and related matters, including
the conditions to the completion of the Merger. You may also
obtain more information about the Company from documents we have
filed with the Securities and Exchange Commission.
Regardless of the number of shares you own, your vote is very
important.
The Merger cannot be completed unless the
Merger Agreement and the related Plan of Merger are adopted and
the Merger is approved by the affirmative vote of a majority of
the votes cast by the holders of the outstanding shares of our
capital stock that are entitled to vote at the special meeting
(assuming a quorum is present), and the affirmative vote of a
majority of the votes cast by the holders of outstanding shares
of Series B Preferred Stock that are entitled to vote at
the special meeting, voting as a separate class (assuming a
quorum is present).
Whether or not you plan to attend the special meeting, it is
important that your shares be represented. Accordingly, we urge
you to vote, by completing, signing, dating and promptly
returning the enclosed proxy card in the envelope provided,
which requires no postage if mailed in the United States.
Alternatively, you may vote through the Internet or by telephone
as directed on the enclosed proxy card. If you receive more than
one proxy card because you own shares that are registered
differently, please vote all of your shares shown on all of your
proxy cards.
Voting by proxy will not prevent you from voting your shares in
person if you subsequently choose to attend the special meeting.
If you have any questions or need assistance voting your shares,
please call Georgeson, Inc., which is assisting us, toll free at
888-605-7614.
We look forward to seeing you at the special meeting.
Sincerely,
Nathanael V. Lentz
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved of the
Merger, passed upon the fairness or merits of the Merger or the
Merger Agreement or passed upon the adequacy or accuracy of the
information contained in the accompanying proxy statement. Any
representation to the contrary is a criminal offense.
THIS PROXY STATEMENT IS DATED DECEMBER 14, 2007, AND IS
BEING FIRST MAILED TO SHAREHOLDERS ON OR ABOUT DECEMBER 14,
2007.
400
CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held January 15, 2008
DEAR SHAREHOLDER:
We will hold a special meeting of shareholders of Verticalnet,
Inc., a Pennsylvania corporation, which we refer to as
Verticalnet or the Company, on Tuesday,
January 15, 2008 at 10:00 a.m. at the offices of
Morgan, Lewis & Bockius LLP located at
1701 Market Street, Philadelphia, Pennsylvania 19103 for
the following purposes:
1. To consider and vote upon a proposal to adopt the Merger
Agreement (the Merger Agreement), dated as of
October 25, 2007, among the Company, BravoSolution S.p.A.,
a corporation organized under the laws of Italy
(Parent), and BravoSolution U.S.A., Inc., a
Pennsylvania corporation and wholly-owned subsidiary of Parent
(Merger Sub), and the related Plan of Merger, and to
approve the merger of Merger Sub with and into the Company (the
Merger). Copies of the Merger Agreement and the
related Plan of Merger are attached as
Annex A
and
Annex A-1
,
respectively, to the accompanying proxy statement.
2. To approve any motion to adjourn the special meeting to
a later date, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes at the time of the
special meeting to approve the foregoing proposal.
3. To transact such other business as may properly come
before the special meeting.
Only holders of record of shares of our common and preferred
stock at the close of business on December 10, 2007, the
record date for the special meeting, are entitled to notice of
and to vote at the special meeting and at any adjournment or
postponement of the special meeting. A list of shareholders will
be available for inspection at the special meeting. All
shareholders of record are cordially invited to attend the
special meeting in person.
Our Board of Directors has unanimously approved and adopted the
Merger Agreement, the related Plan of Merger, and the
transactions contemplated thereby, and has determined that the
Merger, the Merger Agreement, the related Plan of Merger, and
the transactions contemplated by the Merger Agreement are fair
to, and in the best interests of, the Company.
Accordingly,
our Board of Directors recommends that you vote FOR
the adoption of the Merger Agreement and the related Plan of
Merger, and the approval of the Merger, and FOR the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
Regardless of the number of shares you own, your vote is very
important.
The approval and adoption of the
Merger Agreement, the related Plan of Merger, and the Merger
require the affirmative vote of a majority of the votes cast by
the holders of the outstanding shares of our common stock that
are entitled to vote at the special meeting (assuming a quorum
is present), and by a majority of the votes cast by the holders
of the outstanding shares of our Series B Preferred Stock
that are entitled to vote at the special meeting (assuming a
quorum is present), voting as a separate class.
We hope you will be able to attend the special meeting, but
whether or not you plan to attend, please vote your
shares by:
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signing and returning the enclosed proxy card as soon as
possible,
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calling the toll-free number listed on the proxy card, or
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accessing the Internet as instructed on the proxy card.
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Voting by proxy will not prevent you from voting your shares in
person in the manner described in the attached proxy statement
if you subsequently choose to attend the special meeting. If you
attend the special meeting, you may revoke your proxy and vote
in person by ballot if you wish, even if you have previously
returned your proxy card. If you hold your shares through a
bank, broker or other custodian, you must obtain a legal proxy
from such custodian in order to vote in person at the special
meeting. Properly executed proxy cards with no instructions
indicated on the proxy card will be voted FOR the
adoption the Merger Agreement and the related Plan of Merger,
and the approval of the Merger, and FOR the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS COMPLETED, YOU WILL BE SENT
INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
By Order of the Board of Directors
of the Company
Christopher G. Kuhn
Vice President and General Counsel
Dated: December 14, 2007
TABLE OF
CONTENTS
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Page No.
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Page No.
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Agreement and Plan of Merger, dated as of
October 25, 2007, by and among Verticalnet, Inc.,
BravoSolution S.p.A. and BravoSolution U.S.A., Inc.
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A-1
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Plan of Merger of BravoSolution U.S.A., Inc. with
and into Verticalnet, Inc.
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A-1-1
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Amended and Restated Voting Agreement, dated as
of November 20, 2007, by and among BravoSolution S.p.A.,
Verticalnet, Inc. and the other parties thereto
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B-1
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Employment Agreement, dated October 25,
2007, among Nathanael Lentz, Verticalnet, Inc. and BravoSolution
S.p.A.
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C-1
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Release of Claims, dated October 25, 2007,
between Nathanael Lentz and Verticalnet, Inc.
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D-1
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ii
The following summary, together with the Questions and
Answers about the Special Meeting and the Merger,
highlights selected information from this proxy statement and
may not contain all of the information that is important to you.
Accordingly, we encourage you to read carefully this entire
proxy statement (including its annexes), and the other documents
we file with the Securities and Exchange Commission that are
available to the public free of charge, before voting. See
Where You Can Find Additional Information beginning
on page 55. Each item in this summary includes a page
reference directing you to a more complete description of that
item in this document.
Unless we otherwise indicate or unless the context requires
otherwise: all references in this document to
Company, Verticalnet, we,
our, and us refer to Verticalnet, Inc.
and its subsidiaries; all references to Parent refer
to BravoSolution S.p.A.; all references to Merger
Sub refer to BravoSolution, U.S.A., Inc.; all references
to Merger Agreement refer to the Agreement and Plan
of Merger, dated as of October 25, 2007, among the Company,
Parent and Merger Sub, as it may be amended from time to time, a
copy of which is attached as Annex A to this document; all
references to Plan of Merger refer to the Plan of
Merger among the Company, Parent and Merger Sub, as it may be
amended from time to time, a copy of which is attached as
Annex A-1
to this document; all references to the Merger refer
to the merger contemplated by the Merger Agreement; all
references to Merger Consideration refer to the per
share merger consideration of (i) $2.56 in cash without
interest and less any required withholding tax, to be received
by the holders of our common stock in accordance with the terms
of the Merger Agreement; and (ii) $0.38750 or $0.26875 in
cash without interest and less any required withholding tax, to
be received by the holders of our Series B Preferred Stock
in accordance with the terms of the Merger Agreement.
Parties
to the Merger (page 14)
Verticalnet, Inc.
, is a provider of On-Demand Supply
Management solutions to companies ranging in size from
mid-market to Global 2000. We provide a full scope of Supply
Management software, services, and domain expertise in areas
that include: Program Management, Spend Analysis, eSourcing,
Contract Management, and Supplier Performance Management. Our
solutions help our customers save money on the goods and
services they buy. In addition to traditional software
installation and application service provider hosting, we offer
the majority of our software products in an
on-demand delivery model. On-demand delivery enables
our customers to pay a single annual fee that includes software
license, maintenance, application hosting, customer/community
support, and training. We believe that our on-demand delivery
model mitigates the software implementation costs for our
customers, and reduces the obstacles to a successful supply
management initiative. In addition to implementation services,
we also provide customers with supply management business
process consulting, primarily in the areas of Spend Analysis and
Advanced Sourcing, and offer custom software development for
customers that desire to build additional supply management
capabilities.
BravoSolution S.p.A.
, or Parent, is a leading
international provider of eSourcing solutions. Its mission is to
generate value by supporting its clients in the improvement of
procurement processes through innovative web-based technologies
and services. Founded in Italy in June 2000 by the Italcementi
Group, BravoSolution S.p.A combines professional expertise and
technological excellence in the area of sourcing in order to
deliver valuable results to its numerous customers worldwide.
BravoSolution S.p.A has offices in London, Madrid, Milan, Paris,
Rome and Shanghai. In the United Kingdom, BravoSolution S.p.A is
the sole approved provider of eSourcing Services under the
Framework Agreement managed by an Executive Agency of the UK
Treasury (OGC). BravoSolution S.p.A has a team of more than 250
professionals and has now managed over 70,000 online
negotiations, totaling over $50 billion of spend.
BravoSolution U.S.A., Inc.
, which we refer to as Merger
Sub, is a Pennsylvania corporation formed for the sole purpose
of completing the Merger with the Company. Merger Sub is a
wholly-owned subsidiary of Parent. Merger Sub has not conducted
any activities to date other than activities incidental to its
formation and activities undertaken in connection with the
transactions contemplated by the Merger Agreement. Upon
consummation of the proposed Merger, Merger Sub will merge with
and into Verticalnet and will cease to exist, with the Company
continuing as the surviving corporation.
1
On October 25, 2007, the Company entered into the Merger
Agreement. Upon the terms and subject to the conditions of the
Merger Agreement and the related Plan of Merger, Merger Sub will
merge with and into the Company, with the Company as the
surviving corporation. We will become a wholly-owned subsidiary
of Parent. You will have no equity interest in the Company or
Parent after the effective time of the Merger and will not
participate in any future earnings or growth of the Company.
At the effective time of the Merger:
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each outstanding share of our common stock, par value $0.01 per
share (the Common Stock), other than those held by
the Company, Parent or Merger Sub, will be cancelled and
converted automatically into the right to receive $2.56 in cash,
without interest and less any required withholding tax;
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each outstanding share of our Series B Preferred Stock, par
value $0.01 per share (the Series B Preferred
Stock) will be cancelled and converted automatically into
the right to receive $0.38750 or $0.26875 in cash, without
interest and less any required withholding tax, in accordance
with the Merger Agreement. See The Merger
Certain Effects of the Merger beginning on page 30;
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each outstanding share of our Series C Preferred Stock, par
value $0.01 per share (the Series C Preferred
Stock) will be cancelled and no payment will be made with
respect to the Series C Preferred Stock. As of the date of
this proxy statement, all shares of Series C Preferred
Stock are owned by Merger Sub; and
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each outstanding option, warrant or restricted stock unit to
purchase our Common Stock outstanding immediately prior to the
effective time of the Merger will be cancelled (other than
certain specified securities), and each holder of such option,
warrant or restricted stock unit will be entitled to receive, in
full settlement of such security, a cash payment equal to the
product of the number of shares subject to such option, warrant
or restricted stock unit, multiplied by the excess, if any, of
(a) $2.56 per share less (b) the exercise or
conversion price of such security, without interest and less any
required withholding tax.
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The
Special Meeting (page 15)
The special meeting will be held on Tuesday, January 15, 2008
starting at 10:00 a.m. local time at the offices of Morgan,
Lewis & Bockius LLP located at 1701 Market Street,
Philadelphia, Pennsylvania 19103.
Record
Date, Voting Power and Quorum (page 15)
You are entitled to vote at the special meeting if you owned
shares of the Companys common stock, Series B
Preferred Stock or Series C Preferred Stock at the close of
business on December 10, 2007, the record date for the
special meeting. As of the record date, there were
2,542,309 shares of the Companys capital stock
outstanding and entitled to vote, consisting of
1,610,845 shares of Common Stock, 623,875 shares of
Series B Preferred Stock entitled to vote subject to a
voting cap as set forth in the Series B Statement of
Designation, and 307,589 shares of Series C Preferred
Stock entitled to vote subject to a voting cap as set forth in
the Series C Statement of Designation. The presence at the
meeting, in person or by proxy, of the holders of a majority of
our outstanding capital stock (including Common Stock,
Series B Preferred Stock and Series C Preferred
Stock), and a majority of the outstanding shares of
Series B Preferred Stock, entitled to vote at the special
meeting will constitute a quorum.
Vote
Required for Approval (page 16)
The adoption of the Merger Agreement and the related Plan of
Merger and the approval of the Merger requires the affirmative
vote of a majority of the votes cast by the holders of the
outstanding shares of our capital stock, including shares of
Series B Preferred Stock and Series C Preferred Stock
(together, the Preferred Stock) and shares of Common
Stock, that are entitled to vote at the special meeting
(assuming a quorum is present) and by a majority of the votes
cast by the holders of the outstanding shares of our
Series B Preferred Stock entitled to vote at the special
meeting, voting as a separate class (assuming a quorum is
present).
Holders of all outstanding shares of Series B Preferred
Stock have entered into a Voting Agreement with Parent and the
Company, as amended (the Voting Agreement), pursuant
to which holders of our Series B Preferred Stock
2
that as of the record date represent 17.27% of the voting power
of the outstanding shares of our capital stock entitled to vote
at the special meeting have agreed to vote all of their Common
Stock and Series B Preferred Stock FOR the
adoption of the Merger Agreement and the related Plan of Merger
and the approval of the Merger, and FOR the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies, and holders of our Series B
Preferred Stock that as of the record date represent 7.62% of
the voting power of the outstanding shares of our capital stock
entitled to vote at the special meeting have agreed to grant an
irrevocable proxy to the Company to vote their Common Stock and
Series B Preferred Stock, in connection with the Merger and
any other extraordinary corporate transaction, in a manner that
the Company, acting through our Board of Directors, determines
in its sole discretion. The Voting Agreement will terminate on
the earliest to occur of (i) the termination of the Merger
Agreement in accordance with its terms, (ii) the mutual
written consent of Parent, the Company and each of the
shareholders party to the Voting Agreement, and (iii) by
each such shareholder upon the execution or granting of any
amendment, modification, change or waiver with respect to the
Merger Agreement or the Plan of Merger that results in a
decrease in the merger consideration. The Voting Agreement
assures that the separate class vote of our Series B
Preferred Stock required for the adoption of the Merger
Agreement and the related Plan of Merger and the approval of the
Merger, will be obtained at the special meeting. The full text
of the Voting Agreement is attached to this proxy statement as
Annex B
. We encourage you to read the full text of
the Voting Agreement in its entirety.
Also, as of the date of this proxy statement, all shares of
Series C Preferred Stock are owned by Merger Sub and it is
anticipated that Merger Sub will vote in favor of the adoption
of the Merger Agreement and the approval of the Merger.
If the proposal to adjourn our special meeting for the purpose
of soliciting additional proxies is submitted to our
shareholders for approval, such approval requires the
affirmative vote of the holders of a majority of the shares of
our capital stock present or represented by proxy and entitled
to vote on the matter.
Share
Ownership of Directors and Executive Officers
(page 53)
As of the record date, the directors and executive officers of
Verticalnet held and were entitled to vote, in the aggregate,
shares of our capital stock representing approximately 6.4% of
the outstanding shares entitled to vote at the special meeting.
As of the record date, Nathanael V. Lentz, Michael J. Hagan and
Mark L. Walsh beneficially own shares of Series B Preferred
Stock subject to the Voting Agreement which represent 5.56% of
the Companys outstanding voting stock. Subject to the
Voting Agreement, each of the directors and executive officers
either agreed to vote, or has advised us that he plans to vote,
all of his shares in favor of the adoption of the Merger
Agreement.
Voting
and Proxies (page 17)
Any Verticalnet shareholder of record entitled to vote may
submit a proxy by telephone, the Internet or returning the
enclosed proxy card by mail, or may vote by ballot by appearing
at the special meeting. If your shares are held in street
name by your broker, you should instruct your broker on
how to vote your shares using the instructions provided by your
broker. If you do not provide your broker with instructions,
your shares will not be voted.
Revocability
of Proxy (page 17)
Any Verticalnet shareholder of record who executes and returns a
proxy card (or submits a proxy via telephone or the Internet)
may revoke the proxy at any time before it is voted in any one
of the following ways:
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filing with the Companys corporate secretary, at or before
the special meeting, a written notice of revocation that is
dated a later date than the proxy;
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sending a later-dated proxy relating to the same shares to the
Companys corporate secretary, at or before the special
meeting;
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submitting a later-dated proxy by the Internet or by telephone,
at or before the special meeting; or
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attending the special meeting and voting in person by ballot.
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3
Simply attending the special meeting will not constitute
revocation of a proxy.
If you have instructed your broker to
vote your shares, the above-described options for revoking your
proxy do not apply and instead you must follow the directions
provided by your broker to change these instructions.
Recommendation
of Our Board of Directors (page 28)
Our Board of Directors has unanimously:
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approved, adopted and declared advisable the Merger Agreement,
the related Plan of Merger and the Merger,
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determined that the Merger Agreement, the related Plan of
Merger, the Merger and the transactions contemplated thereby are
fair to, and in the best interests of, the Company, and
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recommended that our shareholders vote FOR the
adoption of the Merger Agreement and the related Plan of Merger,
and the approval of the Merger, and FOR the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
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For a discussion of the material factors considered by the Board
of Directors in reaching their conclusions, see The
Merger Reasons for the Merger; Recommendation of Our
Board of Directors beginning on page 28.
Restrictions
on Solicitation of Other Offers (page 42)
The Merger Agreement provides that beginning at 11:59 p.m.
(Eastern Time) on November 19, 2007, which we refer to as
the No-Shop Period Start Date, we will not, and we
will ensure that our representatives do not:
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initiate, solicit or knowingly facilitate or encourage any
alternate acquisition proposal;
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participate in any negotiations regarding, or furnish any
material nonpublic information to any person with respect to an
acquisition proposal;
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engage in discussions with any person with respect to an
acquisition proposal;
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approve or recommend any acquisition proposal; or
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enter into any letter of intent or similar document, or any
agreement or commitment providing for any acquisition proposal.
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Notwithstanding these restrictions, under circumstances
specified in the Merger Agreement, if required in order to
comply with its fiduciary duties under applicable law, our Board
of Directors may respond to certain unsolicited competing
proposals. Also, under certain circumstances specified in the
Merger Agreement, our Board of Directors may withdraw its
recommendation in favor of the adoption of the Merger Agreement,
and the Company may terminate the Merger Agreement and enter
into an agreement with respect to a superior acquisition
proposal. The Merger Agreement provides that through the No-Shop
Period Start Date, the Company was permitted to initiate,
solicit and encourage (or go shop) an alternative
acquisition proposal for the Company (including by way of
providing information pursuant to a confidentiality agreement),
and enter into and maintain discussions or negotiations
concerning an alternative acquisition proposal for the Company.
During this period, the Company engaged a financial advisor to
facilitate the go shop process. This financial
advisor and the Company contacted 16 parties, including
financial and strategic buyers. However, these actions did not
result in the Company receiving a superior proposal, see
The Merger Background of the Merger
beginning on page 19.
Completion
of the Merger (page 45)
We are working to complete the Merger as soon as possible. We
anticipate completing the Merger during the first quarter of
2008. However, we cannot predict the exact timing of the Merger
or whether the Merger will be completed. In order to complete
the Merger, our shareholders must adopt the Merger Agreement and
the other closing conditions under the Merger Agreement must be
satisfied or waived.
Before we can complete the Merger, a number of conditions must
be satisfied. These include:
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the receipt of the required Company shareholder approval;
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the absence of any order suspending the use of the proxy
statement or any proceeding initiated by the SEC for that
purpose;
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the absence of laws, executive orders, decrees, rulings,
injunctions, writs, judgments or orders that prohibit, restrain
or enjoin the consummation of the transactions;
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the accuracy of each of the parties representations and
warranties, except to the extent the failure of such
representations and warranties to be true and correct would not
constitute a material adverse effect (in the case of the
Company) or materially delay the ability of Parent or Merger Sub
to perform their respective obligations under the Merger
Agreement; and
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the performance and compliance by each of the parties of its
covenants and obligations under the Merger Agreement in all
material respects.
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Other than the conditions pertaining to the Company shareholder
approval and the absence of legal prohibitions, either the
Company, on the one hand, or Parent and Merger Sub, on the other
hand, may elect to waive conditions to their respective
performance and complete the Merger.
Termination
of the Merger Agreement (page 46)
The Company, Parent and Merger Sub may agree in writing to
terminate the Merger Agreement at any time without completing
the Merger, even after the shareholders of Verticalnet have
adopted the Merger Agreement. In addition, the Merger Agreement
may also be terminated at any time prior to the effective time
of the Merger:
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by either the Company or Parent by written notice to the other
if:
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the Company shareholders do not adopt the Merger Agreement at
the special meeting;
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a final, non-appealable governmental order prohibits or makes
illegal the completion of the Merger; or
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the closing has not occurred on or before April 15, 2008,
provided that the party seeking to terminate the Merger
Agreement shall not have prevented the closing from occurring by
that time;
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by written notice from the Company to Parent if:
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Parent or Merger Sub breaches or fails to perform any of its
representations, warranties or covenants in the Merger Agreement
such that the conditions to the Companys obligations to
close would not be satisfied and such condition is incapable of
being satisfied by April 15, 2008 or such breach has not
been cured by Parent or Merger Sub within 30 days following
the receipt of a written notice from the Company; or
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prior to the special meeting, if the Company receives a superior
proposal and changes its recommendation to its shareholders, but
only after the Company has provided Parent with a five business
day period to revise the terms and conditions of the Merger
Agreement in such a manner that the superior proposal is no
longer determined to constitute a superior proposal, and only if
the Company pays the termination fee described below;
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by written notice from Parent to the Company if:
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the Company breaches or fails to perform any of its
representations, warranties or covenants in the Merger Agreement
such that the conditions to Parents and Merger Subs
obligations to close would not be satisfied and such condition
is incapable of being satisfied by April 15, 2008 or such
breach has not been cured by Parent or Merger Sub within
30 days following the receipt of a written notice from
Parent;
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the Companys board of directors, among other things,
withdraws, adversely modifies or fails to reconfirm its
recommendation or approval of the Merger Agreement or recommends
or approves another acquisition proposal; or
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if any person or group (other than Parent, Merger Sub or any of
their respective affiliates) shall have become the beneficial
owner of at least a majority of the outstanding voting
securities of the Company.
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5
Termination
Fee (page 47)
If the Merger Agreement is terminated under certain
circumstances, the Company may be required to pay a termination
fee to Parent in cash equal to the sum of:
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5.99% of the Companys Enterprise Value, which we define as
the sum of (i) the aggregate merger consideration offered
for each outstanding share of common stock and each outstanding
share of Series B Preferred Stock, and
(ii) $5,310,396, the principal amount outstanding at
maturity of the Radcliffe Note; and
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all documented, reasonable out-of-pocket costs and expenses,
including the reasonable fees and expenses of lawyers,
accountants, financial advisors, consultants and other advisors,
incurred by Parent and Merger Sub in connection with the Merger
and the transactions contemplated by the Merger Agreement.
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We encourage you to read the full text of the Merger Agreement
in its entirety.
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders (page 35)
Generally, the Merger will be taxable to our shareholders who
are U.S. holders for U.S. federal income tax purposes.
A U.S. holder of Common Stock and Series B Preferred
Stock receiving cash in the Merger generally will recognize gain
or loss for U.S. federal income tax purposes in an amount
equal to the difference between the amount of cash received and
the holders adjusted tax basis in our Common Stock or
Series B Preferred Stock surrendered. You should consult
your own tax advisor for a full understanding of how the Merger
will affect your particular tax circumstances.
Interests
of Verticalnets Directors and Officers in the Merger
(page 31)
In considering the recommendation of our Board of Directors with
respect to the Merger, you should be aware that certain of our
directors and executive officers may be considered to have
interests in the Merger that are different from, or in addition
to, your interests as a shareholder and that may present actual
or potential conflicts of interest. Our Board of Directors was
aware of these interests and considered that the interests may
be different from or in addition to the interests of our
shareholders generally, among other matters, in approving the
Merger Agreement, the related Plan of Merger and the
transactions contemplated thereby, including the Merger, and in
determining to recommend that our shareholders vote for the
adoption of the Merger Agreement and the related Plan of Merger
and the approval of the Merger, and for the adjournment of the
special meeting, if necessary or appropriate, to solicit
additional proxies.
Procedure
for Receiving Merger Consideration (page 48)
As soon as reasonably practicable after the effective time of
the Merger, the exchange agent will mail a letter of transmittal
and instructions to all Company shareholders. The letter of
transmittal and instructions will tell you how to surrender your
stock certificates or book-entry shares in exchange for the
merger consideration.
You should not return any share
certificates you hold with the enclosed proxy card, and you
should not forward your share certificates to the exchange agent
without a letter of transmittal.
Market
Price of Verticalnet Common Stock (page 52)
Our Common Stock is listed on The NASDAQ Capital Market under
the trading symbol VERT. The closing sale price of
Common Stock on October 25, 2007, which was the last
trading day before the announcement of the execution of the
Merger Agreement, was $5.61 per share. On December 10, 2007, the
record date, the closing sale price of our Common Stock was
$2.42 per share.
6
Dissenters
Rights of Appraisal (page 53)
Under the Pennsylvania Business Corporation Law of 1988, as
amended (PBCL), holders of Common Stock and
Series B Preferred Stock are not entitled to dissenters
rights in connection with the proposed Merger. Under the PBCL,
holders of shares of Series C Preferred Stock are entitled
to dissenters rights in connection with the proposed Merger. As
of the date of this proxy statement, all shares of Series C
Preferred Stock are owned by Merger Sub and it is anticipated
that Merger Sub will vote in favor of the Merger Agreement and
the Merger.
Delisting
and Deregistration of Common Stock (page 31)
If the Merger is completed, our Common Stock will be delisted
from NASDAQ and deregistered under the Exchange Act and we will
no longer file periodic reports with the SEC on account of our
Common Stock.
7
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly
address some commonly asked questions regarding the Merger, the
Merger Agreement and the special meeting. These questions and
answers may not address all questions that may be important to
you as a Verticalnet shareholder. Please refer to the
Summary and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the other documents we file with the SEC that are
available free of charge, which you should read carefully. See
Where You Can Find Additional Information beginning
on page 55.
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Q:
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What is the proposed transaction?
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A:
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The proposed transaction is the acquisition of the Company by
Parent pursuant to the Merger Agreement and the related Plan of
Merger. Once the Merger Agreement has been adopted by the
requisite vote of our shareholders and other closing conditions
under the Merger Agreement have been satisfied or waived, Merger
Sub, a wholly-owned subsidiary of Parent, will merge with and
into the Company. The Company will be the surviving corporation
and become a wholly-owned subsidiary of Parent and we will no
longer be a publicly-held corporation, and our common stock, par
value $0.01 per share (Common Stock) will be
delisted from NASDAQ.
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Q:
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What will a Verticalnet holder of Common Stock receive in the
Merger?
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A:
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If the Merger is completed, holders of the Common Stock will
receive $2.56 in cash, without interest and less any required
withholding taxes, for each share of our Common Stock that you
own in accordance with the Merger Agreement and the related Plan
of Merger. We refer to this amount as the common stock merger
consideration. You will not own any shares of the surviving
corporation.
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Q:
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What will a Verticalnet holder of Series B Preferred
Stock receive in the Merger?
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A:
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If the Merger is completed, each share of our Series B
Preferred Stock will be cancelled and converted automatically
into the right to receive $0.38750 or $0.26875 in cash, without
interest and less any required withholding taxes, in accordance
with the Merger Agreement and the related Plan of Merger. We
refer to this amount as the Series B merger consideration. We
refer to the common stock merger consideration and the Series B
merger consideration, collectively as the merger consideration.
You will not own any shares of the surviving corporation.
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Q:
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What will a Verticalnet holder of Series C Preferred
Stock receive in the Merger?
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A:
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As of the date of this proxy statement, Merged Sub is the sole
holder of our Series C Preferred Stock. If the Merger is
completed, each share of our Series C Preferred Stock will
be cancelled and no consideration shall be paid in respect of
such shares.
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Q:
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What effects will the Merger have on Verticalnet?
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A:
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If the Merger is approved, Verticalnet will cease to be a
publicly-traded company and will become a subsidiary of Parent.
Common stock of Verticalnet will no longer be listed on any
stock exchange or quotation system, including NASDAQ.
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Q:
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When and where is the special meeting?
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A:
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The special meeting of the Companys shareholders will be
held at 10:00 a.m. local time, on
Tuesday, January 15, 2008, at the offices of Morgan,
Lewis & Bockius LLP located at 1701 Market Street,
Philadelphia, Pennsylvania 19103.
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Q:
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Who is entitled to vote at the special meeting?
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A:
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The record date for the special meeting is December 10,
2007. Only the holders of Verticalnet common stock and preferred
stock at the close of business on the record date are entitled
to notice of, and to vote at, the special meeting or any
postponement thereof.
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Q:
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What matters will be voted on at the special meeting?
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A:
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You will be asked to consider and vote on the following
proposals:
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to adopt the Merger Agreement and the related Plan
of Merger, and to approve the Merger;
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to approve any motion to adjourn the special meeting
to a later date, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to adopt the Merger Agreement and the
related Plan of Merger, and approve the Merger; and
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to transact such other business as may properly come
before the special meeting.
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Q:
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How does the Companys Board of Directors recommend that
I vote on the proposals?
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A:
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Our Board of Directors unanimously recommends that you vote:
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FOR the proposal to adopt the Merger
Agreement and the related Plan of Merger, and to approve the
Merger; and
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FOR the adjournment proposal.
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You should read The Merger Reasons for the
Merger; Recommendation of Our Board of Directors beginning
on page 28 for a discussion of the factors that our Board
of Directors considered in deciding to recommend the adoption of
the Merger Agreement and the related Plan of Merger, and the
approval of the Merger. See also The Merger
Interests of Verticalnets Directors and Executive Officers
in the Merger beginning on page 31.
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Q:
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What constitutes a quorum for the special meeting?
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A:
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The presence, in person or by proxy, of shareholders
representing a majority of the shares of our capital stock
(including Common Stock, Series B Preferred Stock and
Series C Preferred Stock) outstanding and entitled to vote
on the record date will constitute a quorum for the special
meeting.
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The presence, in person or by proxy, of shareholders
representing a majority of the shares of Series B Preferred
Stock outstanding and entitled to vote on the record date will
constitute a quorum for the class vote of the holders of
outstanding shares of Series B Preferred Stock. Certain of
our directors, officers and shareholders, who beneficially own
approximately 70% of our outstanding shares of Series B
Preferred Stock entitled to vote at the special meeting, have
agreed to vote all of their shares in favor of the approval and
adoption of the Merger, the Merger Agreement and the related
Plan of Merger, which assures that the quorum for the class vote
of the holders of Series B Preferred Stock will be obtained
at the special meeting.
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Q:
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What vote of shareholders is required to approve the Merger
Agreement?
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A:
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The approval and adoption of the Merger Agreement, the related
Plan of Merger and the Merger requires, assuming a quorum is
present, the affirmative vote of a majority of the votes cast by
the holders of the outstanding shares of our capital stock
(including Common Stock, Series B Preferred Stock and
Series C Preferred Stock) that are entitled to vote at the
special meeting, and the affirmative vote of a majority of the
votes cast by the holders of outstanding shares of Series B
Preferred Stock that are entitled to vote at the special meeting
(voting as a separate class).
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Certain of our directors, officers and shareholders, who
beneficially own 17.27% of the outstanding capital stock and
approximately 70% of our outstanding shares of Series B
Preferred Stock entitled to vote at the special meeting, have
agreed to vote all of their shares in favor of the approval and
adoption of the Merger, the Merger Agreement and the related
Plan of Merger, which assures that the class vote of the holders
of Series B Preferred Stock required for the adoption of
the Merger Agreement and the related Plan of Merger, and the
approval of the Merger, will be obtained at the special meeting.
Furthermore, as of the date of this proxy statement, all shares
of Series C Preferred Stock are owned by Merger Sub and it
is anticipated that Merger Sub will vote in favor of the
adoption of the Merger Agreement and the approval of the Merger.
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Q:
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How do the directors and executive officers of Verticalnet
intend to vote?
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A:
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We believe our directors and current executive officers intend
to vote all of their shares of our capital stock FOR the
adoption of the Merger Agreement and the related Plan of Merger,
and the approval of the Merger, and FOR the adjournment of the
special meeting, if necessary or appropriate, to solicit
additional proxies. As of December 10, 2007, the record
date, the directors and executive officers of Verticalnet held
and were entitled to vote, in the aggregate, shares of our
capital stock representing approximately 6.4% of the outstanding
shares entitled to vote at the special meeting.
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Q:
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What does it mean if I get more than one proxy card?
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A:
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If you have shares of our Common Stock, Series B Preferred
Stock or Series C Preferred Stock that are registered
differently and are in more than one account, you will receive
more than one proxy card. Please follow the directions for
voting on each of the proxy cards you receive to ensure that all
of your shares are voted.
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Q:
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What do I need to do now?
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A:
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Please vote as soon as possible. We urge you to read this proxy
statement carefully, including its annexes, and to consider how
the transaction affects you as a shareholder. You also may want
to review the other documents we file with the SEC that are
available to the public free of charge. See Where You Can
Find Additional Information, beginning on page 55.
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Q:
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How do I vote without attending the special meeting?
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A:
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If you are a registered shareholder (that is, if you hold shares
of our Common Stock, Series B Preferred Stock or
Series C Preferred Stock in certificated form), you may
submit your proxy and vote your shares by returning the enclosed
proxy card, marked, signed and dated, in the postage-paid
envelope provided, or by telephone or through the Internet by
following the instructions included with the enclosed proxy card.
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If you hold your shares through a broker, bank or other nominee,
you should follow the separate voting instructions provided by
the broker, bank or other nominee with the proxy statement.
Please contact your broker, bank or other nominee to determine
how to vote.
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Q:
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How do I vote in person at the special meeting?
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A:
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If you are a registered shareholder, you may attend the special
meeting and vote your shares in person at the meeting by giving
us a signed proxy card or ballot before voting is closed. If you
want to do that, please bring proof of identification with you.
Even if you plan to attend the meeting, we recommend that you
vote your shares in advance as described above, so your vote
will be counted even if you later decide not to attend.
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If you hold your shares through a broker, bank or other nominee,
you may vote those shares in person at the meeting only if you
obtain and bring with you a signed proxy from the appropriate
nominee giving you the right to vote the shares. To do this, you
should contact your broker, bank or nominee.
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Q:
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Can I change my vote?
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A:
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You may revoke or change your proxy at any time before it is
voted, except as otherwise described below.
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If you have not voted through your broker, bank or other nominee
because you are the registered shareholder, you may revoke or
change your proxy before it is voted by:
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filing a notice of revocation, which is dated a
later date than your proxy, with the Companys Secretary;
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submitting a duly executed proxy card bearing a
later date;
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submitting a new proxy by telephone or through the
Internet at a later time, but not later than 11:59 p.m.
(Eastern Time) on Monday, January 14, 2008, or the day
before the meeting date, if the special meeting is postponed; or
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voting by ballot at the special meeting.
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Simply attending the special meeting will not constitute
revocation of a proxy.
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If your shares are held in street name, you should
follow the instructions of your broker, bank or other nominee
regarding revocation or change of vote. If your broker, bank or
other nominee allows you to submit a vote by telephone or
through the Internet, you may be able to change your vote by
submitting new voting instructions by telephone or through the
Internet. You should contact your broker, bank or other nominee
to determine how you can change your vote.
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Q:
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If my shares are held in street name by my
broker, bank or other nominee, will my nominee vote my shares
for me?
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A:
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Yes, but only if you provide instructions to your broker, bank
or other nominee on how to vote. You should follow the
directions provided by your broker, bank or other nominee
regarding how to instruct your broker, bank or other nominee to
vote your shares. Without those instructions, your shares will
not be voted.
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Q:
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Will I have appraisal rights as a result of the Merger?
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A:
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Under the PBCL, holders of Common Stock are not entitled to
dissenters rights in connection with the proposed Merger because
the Common Stock is listed on a national securities exchange.
Under the PBCL, because the holders of Series B Preferred
Stock are entitled to vote separately as a class to approve the
proposed transaction, holders of Series B Preferred Stock
are not entitled to dissenters rights in connection with the
proposed Merger. Under the PBCL, holders of Series C
Preferred Stock are entitled to dissenters rights in connection
with the proposed Merger; however, as of the date of this proxy
statement all shares of Series C Preferred Stock are owned
by Merger Sub and it is anticipated that Merger Sub will vote in
favor of the adoption of the Merger Agreement and the related
Plan of Merger and the approval of the Merger.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date of the special meeting is earlier than the
special meeting and the date that the Merger is expected to be
completed. If you transfer your shares of Common Stock after the
record date but before the special meeting, you will retain your
right to vote at the special meeting, but will have transferred
the right to receive the merger consideration to be received by
our shareholders in the Merger. In order to receive the merger
consideration, you must hold your shares through completion of
the Merger.
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Q:
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Should I send in my stock certificates now?
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A:
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No. Assuming the Merger is completed, you will receive a
letter of transmittal with instructions informing you how to
send your share certificates to the exchange agent in order to
receive the merger consideration. You should use the letter of
transmittal to exchange the Company stock certificates for the
merger consideration to which you are entitled as a result of
the Merger.
Do not send any stock certificates with your
proxy.
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Q:
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When do you expect the Merger to be completed?
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A:
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We are working to complete the Merger as quickly as possible. In
addition to obtaining shareholder approval, all of the
conditions to the Merger must have been satisfied or waived. We
currently expect to complete the Merger promptly after
shareholder approval is obtained in the first quarter of 2008.
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Q:
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Will I owe any U.S. federal income tax as a result of the
Merger?
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A:
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Generally, the consideration received in the Merger will be
taxable for U.S. federal income tax purposes. You will recognize
taxable gain or loss in the amount of the difference between
$2.56 and your adjusted tax basis for each share of Verticalnet
stock that you own. For further information about the U.S.
federal income tax consequences of the Merger, see Special
Factors Material U.S. Federal Income Tax
Consequences of the Merger to Our Shareholders, beginning
on page 35. You should consult your own tax advisor for a
full understanding of how the Merger will affect your particular
tax circumstances.
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Q:
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Who will count the votes?
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A:
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A representative of our transfer agent will count the votes.
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Q:
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Who will bear the cost of this solicitation?
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A:
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The expenses of preparing, printing and mailing this proxy
statement and the proxies solicited hereby will be borne by
Verticalnet. Additional solicitation may be made by telephone,
facsimile or other contact by certain directors, officers,
employees or agents of Verticalnet, none of whom will receive
additional compensation with respect to any such solicitation.
We will reimburse them for their reasonable out-of-pocket
expenses.
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Q:
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Will a proxy solicitor be used?
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A:
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Yes. Verticalnet has retained Georgeson, Inc. to assist in the
solicitation of proxies for the special meeting and Verticalnet
estimates that it will pay Georgeson, Inc. a fee not to exceed
$7,500, a nominal fee per shareholder contact and reimbursement
of reasonable out-of-pocket expenses. Verticalnet has also
agreed to indemnify Georgeson, Inc. against certain losses,
costs and expenses.
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Q:
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Who can help answer my other questions?
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A:
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If you have more questions about the Merger or the special
meeting, or require assistance in submitting your proxy or
voting your shares or need additional copies of the proxy
statement or the enclosed proxy card, please contact the
Companys Investor Relations at
610-240-0600.
If your broker, bank or other nominee holds your shares, you can
also call your broker, bank or other nominee for additional
information.
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12
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you to
in this proxy statement, contain statements that are not
historical facts and that are considered
forward-looking
within the meaning of the
safe harbor provisions of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of
1934. We have based these forward-looking statements on our
current expectations about future events and financial
performance with respect to our operations, the expected
completion and timing of the Merger and other information
relating to the Merger. Statements that include words such as
may, will, project,
might, expect, believe,
anticipate, intend, could,
would, estimate, continue or
pursue, or other words or expressions of similar
meaning, may identify forward-looking statements. You should be
aware that forward-looking statements involve known and unknown
risks and certainties. Although we believe that the expectations
underlying these forward looking statements are reasonable,
there are a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements
speak only as of the date on which the statements were made and
we undertake no obligation to update or revise any
forward-looking statements made in this proxy statement or
elsewhere as a result of new information, future events or
otherwise, except as required by law. These forward-looking
statements should, therefore, be considered in light of various
important factors set forth from time to time in our filings
with the Securities and Exchange Commission, which we refer to
as the SEC. In addition to other factors and matters
contained in this document, these statements are subject to
risks, uncertainties and other factors, including, among others:
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the financial performance of Verticalnet through the date of
completion of the Merger;
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the occurrence of any event, change or other circumstances that
could give rise to a termination of the Merger Agreement,
including a termination under circumstances that could require
us to pay a termination fee;
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the failure to satisfy any conditions to consummation of the
Merger including the approval of our shareholders;
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the failure of the Merger to close for any reason;
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any significant delay in the expected completion of the Merger;
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our remedies against Parent with respect to certain breaches of
the Merger Agreement may not be adequate to cover our damages;
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the proposed transactions may disrupt current business plans and
operations and there may be potential difficulties in attracting
and retaining employees as a result of the announced Merger;
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due to restrictions imposed in the Merger Agreement, we may be
unable to respond effectively to competitive pressures, industry
developments and future opportunities;
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the effect of the announcement of the Merger on our business
relationships, operating results and business generally; and
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the costs, fees, expenses and charges we have incurred and may
incur related to the Merger, whether or not the Merger is
completed.
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The foregoing sets forth some, but not all, of the factors that
could impact our ability to achieve results described in any
forward-looking statements. A more complete description of the
risks applicable to us is provided in our filings with the SEC
available free of charge at the SECs web site at
http://www.sec.gov,
including our most recent filings on
Forms 10-Q
and
10-K.
See Where You Can Find Additional Information
beginning on page 55. Investors are cautioned not to place
undue reliance on these forward-looking statements. Investors
also should understand that it is not possible to predict or
identify all risk factors and that neither this list nor the
factors identified in our SEC filings should be considered a
complete statement of all potential risks and uncertainties. We
have no obligation to publicly update or release any revisions
to these forward-looking statements to reflect events or
circumstances after the date of this proxy statement.
13
THE
PARTIES TO THE MERGER
Verticalnet,
Inc.
400 Chester Field Parkway
Malvern, Pennsylvania 19355
Tel. No. 610-240-0600
Verticalnet, Inc.
, is a provider of On-Demand Supply
Management solutions to companies ranging in size from
mid-market to Global 2000. We provide a full scope of Supply
Management software, services, and domain expertise in areas
that include: Program Management, Spend Analysis, eSourcing,
Contract Management, and Supplier Performance Management. Our
solutions help our customers save money on the goods and
services they buy. In addition to traditional software
installation and application service provider hosting, we offer
the majority of our software products in an
on-demand delivery model. On-demand delivery enables
our customers to pay a single annual fee that includes software
license, maintenance, application hosting, customer/community
support, and training. We believe that our on-demand delivery
model mitigates the software implementation costs for our
customers, and reduces the obstacles to a successful supply
management initiative. In addition to implementation services,
we also provide customers with supply management business
process consulting, primarily in the areas of Spend Analysis and
Advanced Sourcing, and offer custom software development for
customers that desire to build additional supply management
capabilities.
Detailed descriptions about the Companys business and
financial results are contained in our filings with the SEC. See
Where You Can Find Additional Information beginning
on page 55 of this proxy statement.
BravoSolution
S.p.A and BravoSolution U.S.A., Inc.
Via
Rombon, 11
20134 Milano
Tel. No. 011 35 02 2105-12346
BravoSolution S.p.A.
, or Parent, is a leading
international provider of eSourcing solutions. Its mission is to
generate value by supporting its clients in the improvement of
procurement processes through innovative web-based technologies
and services. Founded in Italy in June 2000 by the Italcementi
Group, BravoSolution S.p.A. effectively combines professional
expertise and technological excellence in the area of sourcing
in order to deliver valuable results to its numerous customers
worldwide. BravoSolution S.p.A. has offices in London, Madrid,
Milan, Paris, Rome and Shanghai. In the United Kingdom,
BravoSolution S.p.A. is the sole approved provider of eSourcing
Services under the Framework Agreement managed by an Executive
Agency of the UK Treasury (OGC). BravoSolution S.p.A. has a team
of more than 250 professionals and has now managed over 70,000
online negotiations, totaling over $50 billion of spend.
BravoSolution U.S.A., Inc.
, which we refer to as Merger
Sub, is a Pennsylvania corporation formed for the sole purpose
of completing the Merger with the Company. Merger Sub is a
wholly-owned subsidiary of Parent. Merger Sub has not conducted
any activities to date other than activities incidental to its
formation and in connection with the transactions contemplated
by the Merger Agreement.
14
Time,
Place and Purpose of the Special Meeting
The enclosed proxy is solicited on behalf of our Board of
Directors for use at a special meeting of shareholders to be
held on Tuesday, January 15, 2008, at 10:00 a.m. local
time, or at any adjournments or postponements of the special
meeting. The special meeting will be held at the offices of
Morgan, Lewis and Bockius LLP located at 1701 Market
Street, Philadelphia, PA 19103. The Company intends to mail this
proxy statement and the accompanying proxy card on or about
December 14, 2007 to all shareholders entitled to vote at
the special meeting.
At the special meeting, shareholders will be asked to consider
and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of October 25, 2007, among the Company,
Parent, and Merger Sub, as they may be amended from time to
time, and the related Plan of Merger and to approve the merger
of Merger Sub, with and into the Company, with the Company
continuing as the surviving corporation (and to approve the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies). Our shareholders must adopt the
Merger Agreement and the related Plan of Merger for the Merger
to occur. If our shareholders fail to adopt the Merger
Agreement, the Merger will not occur.
Verticalnet shareholders also may be asked to transact such
other business as may properly come before the special meeting
or any postponements of the special meeting. The Company does
not expect a vote to be taken on any other matters at the
special meeting. If any other matters are properly presented at
the special meeting, however, the holders of the proxies, if
properly authorized, will have the authority to vote on these
matters in their discretion.
Verticalnet
Board Recommendation
Our Board of Directors has unanimously approved and adopted the
Merger Agreement, the related Plan of Merger, and the
transactions contemplated by the Merger Agreement, and has
determined that the Merger, the Merger Agreement and the related
Plan of Merger, and the transactions contemplated by the Merger
Agreement are fair to, and in the best interests of, the
Company.
Accordingly, our Board of Directors recommends that
you vote FOR the adoption of the Merger Agreement
and the related Plan of Merger, and the approval of the Merger,
and FOR the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies.
Record
Date, Voting Power and Quorum
Shareholders of record at the close of business on
December 10, 2007 are entitled to notice of, and to vote
at, the special meeting. On December 10, 2007, there were
2,542,309 shares of the Companys capital stock
outstanding and entitled to vote, consisting of
1,610,845 shares of Common Stock, 623,875 shares of
Series B Preferred Stock entitled to vote subject to the
voting cap as set forth in the Series B Statement of
Designation, and 307,589 shares of Series C Preferred
Stock entitled to vote subject to the voting cap set as forth in
the Series C Statement of Designation.
Each share of Common Stock entitles its holder to one vote on
all matters properly coming before the special meeting.
Each share of Preferred Stock entitles its holder to vote on all
matters properly coming before the special meeting in accordance
with the terms of the respective Statements of Designation with
Respect to the Shares of Preferred Stock, filed by the Company
with the Secretary of State of the Commonwealth of Pennsylvania.
The Series B and Series C Statements of Designation
provide that each holder of Preferred Stock votes on an as-
converted to Common Stock basis, provided, however, that each
holder is not entitled to cast a number of votes in excess of
the number determined by (i) dividing (A) the
per-share purchase price paid with respect to such holders
shares of Preferred Stock at the time such shares were
originally acquired from the Company, by (B) the applicable
closing bid price (adjusted for any stock dividends, stock
splits or similar transactions after such date) for shares of
the Common Stock as reported on the Nasdaq Capital Market on the
business day immediately prior to the closing date of the
purchase of the Preferred Stock, and (ii) multiplying that
quotient by the number of shares of Preferred Stock currently
held by such holder. Furthermore, in addition to the voting
limitations set forth in the preceding
15
sentence, the Series B Statement of Designation provides
that each holder of Series B Preferred Stock is not
permitted to vote shares owned by such holder that would result
in such holder being deemed to beneficially own a number of
shares of Common Stock in excess of 9.99% of the total number of
shares of Common Stock then issued and outstanding.
As of December 10, 2007, the record date for the special
meeting, holders of shares of Preferred Stock, in accordance
with the terms of the respective Statements of Designation with
Respect to the Shares of Preferred Stock, represent 36.6% of the
voting power of the outstanding shares of capital stock entitled
to vote at the special meeting.
A quorum of holders of all our capital stock (including Common
Stock, Series B Preferred Stock and Series C Preferred
Stock) entitled to vote at the special meeting must be present
for the special meeting to be held. The presence at the meeting,
in person or by proxy, of the holders of a majority of all our
capital stock (including Common Stock, Series B Preferred
Stock and Series C Preferred Stock) outstanding and
entitled to vote at the special meeting on the record date will
constitute a quorum. Any shares of our Common Stock held in
treasury by the Company are not considered outstanding for
purposes of determining a quorum.
A quorum of holders of the Series B Preferred Stock
entitled to vote at the special meeting must be present for the
class vote of the holders of outstanding shares of Series B
Preferred Stock. The presence, in person or by proxy, of
shareholders representing a majority of the shares of
Series B Preferred Stock outstanding and entitled to vote
at the special meeting on the record date will constitute a
quorum for the class vote of the holders of outstanding shares
of Series B Preferred Stock. Certain of our directors,
officers and shareholders, who beneficially own approximately
70% of our outstanding shares of Series B Preferred Stock
entitled to vote at the special meeting, have agreed to vote all
of their shares in favor of the approval and adoption of the
Merger, the Merger Agreement and the related Plan of Merger,
which assures that the quorum for the class vote of the holders
of Series B Preferred Stock will be obtained at the special
meeting.
Vote
Required for Approval
For us to complete the Merger, we need the affirmative vote of a
majority of the votes cast by the holders of the outstanding
shares of our capital stock that are entitled to vote at the
special meeting (assuming a quorum is present) and by a majority
of the votes cast by the holders of the outstanding shares of
our Series B Preferred Stock that are entitled to vote at
the special meeting, voting as a separate class (assuming a
quorum is present).
In order for your capital stock to be included in the vote, you
need to first determine if you are a registered shareholder
(that is, if you hold your shares of capital stock in
certificated form) or if you hold your shares through a broker,
bank or other nominee. If you are a registered shareholder, you
must submit your proxy and vote your shares by returning the
enclosed proxy card, marked, signed and dated, in the postage
prepaid envelope provided, or by telephone or through the
Internet, as indicated on the proxy card, or you may vote in
person at the special meeting. If you hold your shares through a
broker, bank or other nominee, you should follow the separate
voting instructions provided by the broker, bank or other
nominee with the proxy statement.
Abstentions and broker non-votes, if any, will be treated as
shares that are present and entitled to vote at the special
meeting for purposes of determining whether a quorum exists,
provided, however, that broker non-votes will only be treated as
so present and entitled to vote if the shares covered by the
broker non-vote are voted on a procedural matter at the special
meeting. A broker non-vote occurs when, as is the case with
respect to the vote regarding the adoption of the Merger
Agreement and the related Plan of Merger, and the approval of
the Merger, brokers are prohibited from exercising discretionary
authority in voting for beneficial owners who have not provided
voting instructions.
Because adoption of the Merger Agreement
and the related Plan of Merger, and the approval of the Merger,
requires the affirmative vote of a majority of votes cast by the
holders of the capital stock entitled to vote at the special
meeting that are outstanding on the record date, and a majority
of the votes cast by the holders Series B Preferred Stock
entitled to vote at the special meeting that are outstanding on
the record date, voting as a separate class, under the PBCL,
failures to vote, abstentions and broker non-votes, if any, are
not considered votes cast and therefore will have no
effect on the vote and will not be considered in determining
whether the proposals have received the requisite shareholder
vote.
16
Also, as of the date of this proxy statement, all shares of our
Series C Preferred Stock (representing, as of the record
date, 12.1% of the voting power of the outstanding shares of
capital stock entitled to vote at the special meeting) are owned
by Merger Sub and it is anticipated that Merger Sub will vote in
favor of the adoption of the Merger Agreement and the related
Plan of Merger and the approval of the Merger, and in favor of
the adjournment proposal.
Voting
by Directors and Executive Officers
Holders of all outstanding shares of Series B Preferred
Stock have entered into a Voting Agreement with Parent and the
Company, as amended (the Voting Agreement), pursuant
to which holders of our Series B Preferred Stock that as of
the record date represent 17.27% of the voting power of the
outstanding shares of capital stock entitled to vote at the
special meeting have agreed to vote all of their Common Stock
and Series B Preferred Stock FOR the adoption
of the Merger Agreement and the related Plan of Merger and the
approval of the Merger, and FOR the adjournment of
the special meeting, if necessary or appropriate, to solicit
additional proxies, and holders of our Series B Preferred
Stock that as of the record date represent 7.62% of the voting
power of the outstanding shares of capital stock entitled to
vote at the special meeting have agreed to grant an irrevocable
proxy to the Company to vote their Common Stock and
Series B Preferred Stock, in connection with the Merger and
any other extraordinary corporate transaction, in a manner that
the Company, acting through our Board of Directors, determines
in its sole discretion.
The Voting Agreement will terminate on the earliest to occur of
(i) the termination of the Merger Agreement in accordance
with its terms, (ii) the mutual written consent of Parent,
the Company and each of the shareholders party to the Voting
Agreement, and (iii) by each such shareholder upon the
execution or granting of any amendment, modification, change or
waiver with respect to the Merger Agreement or the Plan of
Merger that results in a decrease in the merger consideration.
The full text of the Voting Agreement is attached to this proxy
statement as Annex B. We encourage you to read the full
text of the Voting Agreement in its entirety. As a result of the
Voting Agreement, the separate class vote involving only shares
of our Series B Preferred Stock is assured.
Any Verticalnet shareholder of record entitled to vote may
submit a proxy by mail, or through the Internet or by telephone
as indicated on the proxy card, or may vote in person by
appearing at the special meeting. If no instructions are
indicated on your signed proxy card, your shares will be voted
FOR the adoption of the Merger Agreement and the
related Plan of Merger, and the approval of the Merger, and
FOR the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, and in
the discretion of the persons appointed as proxies on any other
matters properly brought before the special meeting for a vote.
If you wish to change your vote and your shares are held in
street name by your broker, you should follow the
instructions of your broker, bank or other nominee regarding
revocation or change of votes. If your broker, bank or other
nominee allows you to submit a vote by telephone or through the
Internet, you may be able to change your vote by submitting new
voting instructions by telephone or through the Internet.
Any Verticalnet shareholder of record who executes and returns a
proxy card (or submits a proxy via telephone or the Internet)
may revoke the proxy at any time before it is voted in any one
of the following ways:
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filing with the Companys corporate secretary, at or before
the special meeting, a written notice of revocation that is
dated a later date than the proxy;
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sending a later-dated proxy relating to the same shares to the
Companys corporate secretary, at or before the special
meeting;
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submitting a later-dated proxy by the Internet or by telephone,
at or before the special meeting; or
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attending the special meeting and voting in person by ballot.
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Simply attending the special meeting will not constitute
revocation of a proxy.
If you have instructed your broker to
vote your shares, the above-described options for revoking your
proxy do not apply and instead you must follow the directions
provided by your broker to change these instructions.
17
The Company does not expect that any matter other than the
proposal to adopt the Merger Agreement and the related Plan of
Merger, and to approve the Merger (and to approve the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies) will be brought before the
special meeting. If, however, such a matter is properly
presented at the special meeting or any postponement of the
special meeting, the persons appointed as proxies will have
discretionary authority to vote the shares represented by duly
executed proxies in accordance with their discretion and
judgment.
Please do NOT send in your share certificates with your proxy
card.
If the Merger is completed, shareholders
will be mailed a transmittal form following the completion of
the Merger with instructions for use in effecting the surrender
of certificates in exchange for the merger consideration.
The Company is soliciting proxies in connection with the special
meeting. The expenses of preparing, printing and mailing this
proxy statement and the proxies solicited hereby will be borne
by the Company. Additional solicitation may be made by
telephone, facsimile,
e-mail,
in
person or other contact by certain of our directors, officers,
employees or agents, none of whom will receive additional
compensation therefor. We will reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable
expenses for forwarding material to the beneficial owners of
shares held of record by others. We have also engaged Georgeson,
Inc. to assist in the solicitation of proxies for the special
meeting, and we estimate that we will pay them a fee of
approximately $7,500, a nominal fee per shareholder contact and
will reimburse them for reasonable administrative and
out-of-pocket expenses incurred in connection with such
solicitation.
Attending
the Special Meeting
In order to attend the special meeting in person, you must be a
shareholder of record on the record date, hold a valid proxy
from a record holder or be an invited guest of the Company. You
will be asked to provide proper identification at the
registration desk on the day of the special meeting or any
adjournment or postponement of the special meeting.
Questions
and Additional Information
If you have more questions about the Merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please contact the Companys Investor Relations:
Verticalnet, Inc.
400 Chester Field Parkway
Malvern, Pennsylvania 19355
Telephone:
(610) 240-0600
18
From time to time, we have, with our legal and financial
advisors, reviewed and evaluated strategic opportunities and
alternatives.
In recent years, as disclosed in the Companys annual
reports on
Form 10-K
and quarterly reports on
Form 10-Q,
the Companys liquid assets and expected cash flows from
operations have not been sufficient to fund operations and
financial commitments without raising additional capital. While
the Company was historically successful in raising such
additional capital through the sale of debt and equity
securities in private placement transactions, each of these
transactions imposed additional barriers to the Companys
growth.
On August 16, 2005, to support its working capital and debt
repayment obligations, the Company issued and sold senior
secured convertible promissory notes in an aggregate principal
amount of $6.6 million and warrants to purchase common
stock to various institutional investors. Pursuant to the terms
of the convertible notes, the Company made monthly payments of
principal and interest in cash, common stock or a combination of
cash and common stock. The issuance of common stock in payment
of the obligations under the convertible notes placed downward
pressure on the per share price of the Companys common
stock.
During the time period in which these convertible notes remained
outstanding, the Company considered various capital raising
transactions. The restrictive covenants and other limitations in
the convertible notes and related agreements constrained the
Companys ability to raise future capital.
In light of the Companys liquidity position, during the
spring of 2006 at the recommendation of the Companys
management our Board of Directors decided to engage a financial
advisor to explore various strategic transactions for the
Company.
In April 2006, the Company engaged a financial advisor (the
First Advisor). Following the engagement, the First
Advisor approached various strategic and financial parties to
gauge interest in pursuing a transaction with the Company.
During April 2006, the First Advisor and the Company prepared a
Confidential Information Memorandum for use in soliciting third
party bids to acquire the Company. Beginning in April 2006, at
the direction of our Board of Directors and management, the
First Advisor contacted approximately 48 parties, including
financial and strategic potential buyers. In the following
weeks, the Company, in conjunction with the First Advisor,
distributed confidentiality agreements to 26 parties. Of these
parties, the Company signed confidentiality agreements with, and
distributed the Confidential Information Memorandum to, 11
potential buyers. The Company and the First Advisor entered into
in-depth discussions with four of the parties that received the
Confidential Information Memorandum.
On May 15, 2006, in order to raise working capital, the
Company issued and sold a senior subordinated discounted
promissory note, in the original principal amount of
$5.3 million, in return for a payment of $4 million.
The senior subordinated discounted promissory note and related
agreements contained restrictive covenants and other limitations
on the Company.
During the summer of 2006, one of the parties with whom the
Company and the First Advisor held in-depth discussions
(Party A) expressed interest in exploring a
transaction in which Party A would acquire all of the
Companys outstanding shares of capital stock. Through the
remainder of the summer of 2006, the Company, our Board of
Directors, the First Advisor and the Companys legal
advisor, Morgan, Lewis and Bockius, LLP (Morgan
Lewis), discussed the structure of a potential merger
transaction with Party A. Party A and its advisors were granted
access to certain of the Companys due diligence materials
through an online data room. Throughout the summer and early
fall of 2006, Party A and its advisors reviewed the
Companys due diligence materials.
Party A initially informed the Company that based on its
preliminary valuation analysis, it would acquire all of our
issued and outstanding shares of Common Stock for a per share
price approximately 20% above the then current market price. On
September 8, 2006, the Company received a preliminary
non-binding indication of interest from Party A to acquire
the issued and outstanding capital stock for a price of $8.00
per share (as adjusted to reflect the
19
Companys August 2007
1-for-8
reverse stock split). The then current closing market price of
our Common Stock on that date was $7.44 (as adjusted to reflect
the Companys August 2007
1-for-8
reverse stock split).
Following Party As initial indication of interest, the
market price for shares of our Common Stock decreased
significantly. In September 2006, the Company and Party A, with
their legal and financial advisors, began negotiating a
definitive merger agreement to provide for the proposed
transaction and a voting agreement in which certain of the
Companys directors and officers would agree to vote in
favor of the transaction. Following substantial completion of
its due diligence review, in late September 2006 Party A
submitted a revised non-binding proposal to acquire all of our
issued and outstanding shares of Common Stock for $3.20 per
share (as adjusted to reflect the Companys
August 2007 1-for-8 reverse stock split). The then current
market price of our Common Stock on that date was $5.30 (as
adjusted to reflect the Companys August 2007
1-for-8
reverse stock split). In response to Party As revised
offer, our Board of Directors sought to reduce certain of the
Companys liabilities that would be incurred in connection
with the proposed transaction in an effort to improve Party
As per share offer for our Common Stock.
On October 13, 2006, Party A informed the Company that as a
result of changes in Party As internal business rationale
behind the proposed transaction, it was no longer interested in
pursuing a transaction with the Company. However, Party A
informed the Company that it would facilitate discussions
between the Company and several financial buyers that were
interested in pursuing transactions involving the Company and
Party A. These discussions were ultimately unsuccessful, and on
October 31, 2006, the Company concluded negotiations with
Party A and the financial buyers.
Following the completion of discussions with Party A, the First
Advisor continued to correspond with other interested parties.
During the fall of 2006 and continuing through January 2007, the
First Advisor and the Company engaged in discussions with a
financial buyer (Party B). Following the initial
discussions, Party B and the Company entered into a
confidentiality agreement. Soon after entering into the
confidentiality agreement, Party B and its advisors were granted
access to certain of the Companys due diligence materials.
Throughout this period, Party B and its advisors reviewed the
Companys due diligence materials. Following its initial
review of the due diligence materials, Party B submitted a
preliminary non-binding proposal in which Party B would pay the
holders of outstanding shares of capital stock of the Company
between approximately $0.82 and $2.46 per share (as adjusted to
reflect the Companys August 2007
1-for-8
reverse stock split). Our Board of Directors determined that
this valuation range was not acceptable and the Company ceased
discussions with Party B. In early 2007, following the
conclusion of the Companys discussions with Party B, our
Board of Directors terminated the engagement of the First
Advisor.
During January 2007, the Company was contacted by a strategic
buyer (Party C) regarding a transaction in which
Party C would acquire all of the Companys outstanding
shares of capital stock. Throughout the winter and spring of
2007, representatives from the Company and Party C met to
discuss a potential transaction. These discussions were of a
preliminary nature and did not result in any agreement regarding
terms of a potential transaction or an agreement to work toward
a potential transaction. Following the initial discussions,
Party C and the Company entered into a confidentiality
agreement. Soon after entering into the confidentiality
agreement, Party C and its advisors were granted access to
certain of the Companys due diligence materials through an
online data room. Throughout the winter and spring of 2007,
Party C and its advisors reviewed the Companys due
diligence materials.
At the time of discussions with Party C, the Companys
level of liquid assets necessitated an additional capital raise.
Given the uncertainty of discussions with Party C and other
potential acquirors, in January 2007, the Company engaged a
placement agent (the Second Advisor) to explore a
$10 and $15 million equity financing transaction. After
exploring interest from potential investors, the Second Advisor
informed the Company that the interest among investors was less
than originally estimated and it would need additional time to
complete the financing transaction.
In March 2007, a financial advisor contacted the Company
regarding a potential acquirer (Party D). Following
the initial discussions, Party D and the Company entered into a
confidentiality agreement. Soon after entering into the
confidentiality agreement, Party D and its advisors were granted
access to certain of the
20
Companys due diligence materials through an online data
room. Throughout the spring of 2007, Party D and its advisors
reviewed the Companys due diligence materials.
In March 2007, Party D conveyed a preliminary non-binding
proposal to acquire all of the Companys issued and
outstanding shares of capital stock for approximately $0.88 per
share (as adjusted to reflect the Companys August 2007
1-for-8
reverse stock split). The Company responded that it was not
interested in pursuing a transaction at this per share price.
On May 8, 2007, an in-person regularly scheduled quarterly
meeting of our Board of Directors was held. At this meeting,
Nathanael V. Lentz (President and Chief Executive Officer)
advised our Board of Directors regarding the status of
discussions with Party C and Party D and the Companys
current liquidity position and the viability of continued
operations without raising additional capital. Due to the delay
in Party Cs formulation of an offer and the Companys
working capital requirements, our Board of Directors determined
to proceed with the capital raising transaction being
coordinated by the Second Advisor.
On May 15, 2007, Party C submitted a preliminary
non-binding indication of interest to acquire all of our issued
and outstanding shares of capital stock for a per share price in
the range of $3.20 to $4.00 (as adjusted to reflect the
Companys August 2007
1-for-8
reverse stock split). However, Party C informed the Company that
it would first need to complete its due diligence review of the
Company before it moved forward with the proposed transaction.
On May 15, 2007, the Company issued and sold junior
unsecured notes to several investors, including members of our
management and Board of Directors for $600,000. The junior
unsecured notes were structured so that they would automatically
convert on a dollar-for-dollar basis in the Companys next
equity financing transaction.
On June 1, 2007, the Company completed the financing
transaction being coordinated by the Second Advisor and issued
and sold 8,700,000 shares of Series B Preferred Stock
to several individual and institutional investors for a per
share purchase price of $0.25. The aggregate purchase price of
$2.175 million consisted of $1.575 million in cash and
$600,000 of junior unsecured notes sold by the Company on
May 15, 2007 that automatically converted into the
Series B Preferred Stock on a dollar-for-dollar basis. The
purchasers of the Series B Preferred Stock were also
entitled to receive warrants to purchase shares of our Common
Stock, in an amount dependent upon the results of a shareholder
vote to be held on certain proposals at the Companys next
annual meeting of shareholders. Pursuant to the Series B
Preferred Stock Purchase Agreement, the Company agreed to seek
shareholder approval of certain proposals at its next annual
meeting of shareholders, including proposals to enable all the
Series B Preferred Stock to be convertible into shares of
our Common Stock and to amend the our Amended and Restated
Articles of Incorporation to increase the number of authorized
shares of our Common Stock by at least 35,000,000 shares.
In the event that the Companys shareholders did not
approve these proposals, the Company agreed to issue the
purchasers warrants to purchase approximately
3,375,000 shares of our Common Stock at an exercise price
equal to the closing bid price on the day prior to the
shareholders meeting. On August 16, 2007, the Company
received shareholder approval of these proposals. Thus, in
accordance with the Series B Preferred Stock Purchase Agreement,
on August 17, 2007, the Company issued the purchasers
warrants to purchase 543,750 shares of our Common Stock
with an exercise price per share equal to $2.64 and warrants to
purchase 543,750 shares of our Common Stock with an
exercise price per share equal to $5.60. The warrants were
valued by the Company at $1,736,000 as of the date of the
closing of the sale of the Series B Preferred Stock.
On June 1, 2007, a representative from Morgan Lewis
contacted the Company regarding an inquiry received from
Delzanno & Co. Inc. (Delzanno), a
financial consultant to BravoSolution S.p.A.
(BravoSolution). On June 2, 2007,
Mr. Lentz contacted a representative from Delzanno. This
discussion centered on BravoSolutions business objectives
and the Companys recent history and business objectives.
Mr. Lentz agreed to participate in a conference call with
members of BravoSolutions senior management that would
occur following the signing of a confidentiality agreement
between the parties.
On June 7, 2007, BravoSolution and the Company entered into
a confidentiality agreement, which, among other things, imposed
confidentiality, standstill and non-solicitation obligations on
the parties in connection with the evaluation of a possible
transaction.
21
On June 8, 2007, Mr. Lentz participated in a
conference call with a representative from Delzanno and members
of BravoSolutions senior management, including Federico
Vitaletti (President) and Antonino Pisana (Chief Financial
Officer). These discussions were of a preliminary nature
regarding the nature of the Companys business and did not
result in any agreement regarding the terms of a potential
transaction. The parties agreed on next steps in consideration
of a possible transaction, including BravoSolutions due
diligence review of the Company and the need for meetings to be
held between Mr. Lentz and other members of
BravoSolutions management team.
Beginning on June 11, 2007 and continuing throughout the
summer and fall of 2007, BravoSolution and its advisors reviewed
the Companys due diligence materials.
On June 20, 2007, a representative from Party C informed
Mr. Lentz that Party C was no longer interested in pursuing
a transaction with the Company at this time.
On June 25, 2007, Mr. Lentz met with members of
BravoSolutions senior management, including
Mr. Vitaletti, Mr. Pisana, Nader Sabbaghian (Managing
Director BravoSolution UK) and other executives, and
a representative from Delzanno, in Milan, Italy. These
discussions focused on the Companys business and capital
structure, structure of a potential transaction and
BravoSolutions business, objectives and strategies.
On June 26, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present. At this meeting, Mr. Lentz updated our Board
of Directors on the Companys liquidity position as well as
on the status of discussions with Party C, Party D and
BravoSolution. Our Board of Directors determined to continue
discussions with all parties and to authorize Mr. Lentz to
encourage Party D to submit a revised per share offer.
On June 28, 2007, Mr. Lentz contacted the financial
advisor for Party D. On June 29, 2007, Party Ds
financial advisor informed Mr. Lentz that Party D was
reconsidering its initial proposal.
Throughout the period of July 1 to July 25, 2007,
Mr. Lentz engaged in a number of discussions with Party D
and its financial advisor. The parties discussed the structure
of a potential transaction although no agreements were reached
on the material terms.
On July 17 and 18, 2007, a representative from Delzanno and
Mr. Sabbaghian met with certain members of the
Companys senior management in Malvern, Pennsylvania. These
discussions focused on the Companys business, product
development and customer relationships.
On July 25, 2007, Party D submitted a revised preliminary
non-binding proposal to acquire all of the Companys issued
and outstanding shares of capital stock for $2.00 per share (as
adjusted to reflect the Companys August 2007
1-for-8
reverse stock split). Party D also submitted a draft acquisition
agreement for the proposed transaction and requested an
exclusivity period to move forward with its proposal. The
closing of the transactions contemplated by Party Ds draft
acquisition agreement was contingent upon, among other things,
Party Ds receipt of third party financing to fund the
payment of the acquisition consideration, members of the
Companys management agreeing to a 50% reduction in any
severance or change in control benefits which they would
otherwise have been entitled to receive in connection with the
proposed acquisition, and the Companys reduction of the
amount of its accounts payables to less than $3 million.
On July 26, 2007, Mr. Lentz contacted Party D and its
financial advisor to discuss the terms of Party Ds
proposal, and in particular the financing contingency contained
in the draft acquisition agreement.
On July 30, 2007, BravoSolution submitted a preliminary
non-binding proposal to acquire all of the Companys issued
and outstanding shares of capital stock for a per share price in
the range of $2.40 to $3.20 (as adjusted to reflect the
Companys August 2007
1-for-8
reverse stock split).
On July 31, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present. At this meeting, Mr. Lentz advised our Board
of Directors regarding the status of discussions with Party D
and BravoSolution. Party D and BravoSolution, independently and
unaware of the identity of the other, were permitted to make
presentations to our Board of Directors. Party Ds Chief
Financial Officer and financial advisor made its presentation.
Mr. Vitaletti and a representative from Delzanno made a
presentation on
22
behalf of BravoSolution. During the meeting our Board of
Directors discussed the structure of each proposal with the
applicable party and clarified certain terms and conditions of
each proposal.
Following the presentations by Party D and BravoSolution, our
Board of Directors convened a separate meeting to discuss the
presentations. Our Board of Directors instructed Mr. Lentz
to proceed with both parties; however, subject to confirmation
of timing, structure and price of the proposed transaction and
confirmation that BravoSolution would agree to provide immediate
financing to support the Companys short-term working
capital needs, the Board of Directors requested that
Mr. Lentz should focus the Companys resources
primarily on BravoSolution. Our Board of Directors also
instructed Mr. Lentz to contact Party Ds financial
advisor with regard to the Boards objection to the third
party financing contingency.
On July 31, 2007, Mr. Lentz contacted Party Ds
financial advisor to discuss the financing contingency and the
per share price contained in Party Ds offer.
Mr. Lentz informed Party D that the Company would not agree
to a buyer financing contingency as a condition to the
consummation of the transaction. Mr. Lentz also discussed
the Companys financial position and the need for any
proposed transaction to include a bridge financing component to
address the Companys immediate short-term working capital
needs.
Between August 1 and August 3, 2007, Mr. Lentz had
numerous conversations with a representative from Delzanno with
regard to the structure of the transaction. Mr. Lentz also
discussed the Companys financial position and the
importance of a bridge financing component in the transaction
structure. The representative from Delzanno informed
Mr. Lentz that BravoSolution required an exclusivity period
in order to move further with its proposal. BravoSolution
previously indicated that it was considering structuring the
proposed transaction as an asset purchase; however, at the
insistence of our Board of Directors, BravoSolution communicated
a willingness to consider an equity structure in which it would
acquire all of the outstanding shares of the Companys
capital stock.
On August 6, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present.
At this meeting, Mr. Lentz updated our
Board of Directors on the status of discussions with Party D and
BravoSolution. Because Party Ds proposal included a price
per share less than BravoSolution and since Party D had not
responded to Mr. Lentzs previous discussion about the
removal of the financing contingency from its proposal, our
Board of Directors focused its discussion on a potential
transaction with BravoSolution. Our Board of Directors discussed
BravoSolutions request for exclusivity, and in agreement
with the Companys management, determined to agree to this
request and proceed further in exclusive negotiations with
BravoSolution.
On August 8, 2007, the Company entered into an exclusivity
letter agreement with BravoSolution pursuant to which the
Company agreed to negotiate exclusively with BravoSolution
regarding a potential acquisition transaction until the close of
business on September 28, 2007, subject to
BravoSolutions completion of due diligence and the parties
agreement on the terms of a non-binding letter of intent. The
exclusivity arrangement also provided that the Company would
nonetheless be permitted to have discussions with interested
parties with regard to a separate capital raising transaction.
On August 9, 2007, Mr. Lentz informed Party D that our
Board of Directors had determined to consider other strategic
alternatives.
Between August 13 and August 16, 2007, representatives from
BravoSolution met with members of the Companys management.
These discussions centered on the Companys core business
and employees.
On August 13, 2007, BravoSolution and its advisors were
granted access to the Companys due diligence materials
through an online data room. On or about this date,
BravoSolution engaged Greenberg Traurig, LLP, as its primary
legal counsel (Greenberg) and Ballard Spahr Andrews
& Ingersoll, LLP, as its special Pennsylvania counsel. At
this time, BravoSolutions representatives and financial
and legal advisors met with members of the Companys
management in Malvern, Pennsylvania for due diligence
discussions.
On August 30, 2007, Mr. Vitaletti and Mr. Lentz
discussed the results of BravoSolutions due diligence
review and the terms of the proposed transaction. Later that
day, Greenberg distributed a draft non-binding letter of intent
that reflected the parties discussions to date, including
BravoSolutions per share price range of $2.40 to $3.20
that it would be willing to pay to acquire all of the
Companys issued and outstanding shares of capital stock.
On
23
August 31, 2007, the Company entered into the non-binding
letter of intent with BravoSolution that reflected a merger
transaction in the proposed per share range.
On September 12 and September 13, 2007, Mr. Lentz met
with members of BravoSolutions advisors and senior
management, including Mr. Vitaletti, in Milan, Italy. These
discussions focused on the Companys business, anticipated
future performance and the current employee base.
On September 17, 2007, Greenberg distributed the initial
draft of the merger agreement to Morgan Lewis and the Company.
The merger agreement proposed that the transaction would be
structured as a one-step merger.
On September 17, 2007, the Company received an unsolicited
revised proposal from Party D to acquire all of the
Companys issued and outstanding shares of capital stock
for $2.50 per share. Party Ds revised proposal included
terms and conditions from its initial offer, including the
requirements that the Company reduce the amount of its accounts
payables to less than $3 million and that members of the
Companys senior management agree to a 50% reduction in any
severance or change in control benefits which they would
otherwise have been entitled to receive in connection with the
proposed acquisition. On September 18, 2007, as required
under the terms of the Companys exclusivity arrangement
with BravoSolution, the Company informed BravoSolution of the
receipt of this proposal from Party D, without identifying Party
D by name. In accordance with the terms of the exclusivity
letter, the Company informed Party Ds financial advisor
that it could not proceed further with its proposal at this time.
On September 18, 2007, the Company and BravoSolution
discussed the overall structure of the proposed transaction,
including that the per share price to be received by the holders
of the Companys capital stock (including common and
Series B Preferred Stock) would be $2.56 per share.
On September 19, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present. At this meeting, Mr. Lentz updated our Board
of Directors on the status of discussions with Party D and
BravoSolution. Our Board of Directors agreed that management
should continue its discussions with BravoSolution and seek an
increase in the per share consideration to be received by
shareholders in a potential transaction.
On September 19, 2007, Mr. Lentz contacted a
representative from Delzanno with regard to the proposed per
share price of $2.56 per share. Mr. Lentz was advised that
the $2.56 per share (for both common shareholders and
Series B Preferred Stock shareholders) was
BravoSolutions final offer at that time. After receiving
guidance from our Board of Directors, the Company agreed to
proceed in discussions with BravoSolution at its per share offer.
During the week of September 21, 2007, the Company engaged
in discussions with the Second Advisor with regard to a capital
raising transaction, to address the Companys long-term
working capital needs to provide for business continuity. While
these discussions were of a preliminary nature, the Company
discussed that any such transaction would require a significant
investment of over $10.0 million in order to adequately
address the Companys balance sheet requirements and ensure
business continuity.
On September 25, 2007, Mr. Lentz contacted
BravoSolutions advisor to further discuss the
Companys need for an infusion of working capital.
Mr. Lentz explained that the Companys immediate
short-term working capital needs would require funding during
the period between signing and closing of the proposed
transaction.
On September 25, 2007 a telephonic meeting of our Board of
Directors was held. At this meeting, Mr. Lentz advised our
Board of Directors regarding the status of discussions with
BravoSolution. Our Board of Directors discussed the structure of
the proposed transaction as well as BravoSolutions
position on the bridge financing.
On September 28, 2007, the board of directors of
BravoSolution approved the structure of the transaction and
instructed its advisors to proceed further with the transaction.
On September 28, 2007, the Company agreed to an extension
of the exclusive negotiation period with BravoSolution through
October 9, 2007.
During the week of October 1, 2007, the Companys
executive officers, representatives from Morgan Lewis and
Greenberg, and a representative from Delzanno discussed the
terms of a proposed financing transaction to address the
Companys immediate short-term working capital needs. The
parties agreed that the Company would issue a new series of
preferred stock to BravoSolution. These shares of Series C
Preferred Stock would be
24
convertible into common stock and would be entitled to vote on
the proposed transaction, subject to the terms and conditions
set forth in the Companys Statement of Designation of
Designation with Respect to the Shares of Series C
Preferred Stock.
During this same period, the Companys executive officers,
representatives from Morgan Lewis and Greenberg, and a
representative from Delzanno discussed the structure of the
proposed transaction with respect to the holders of
Series B Preferred Stock. Under the terms of the
Companys Statement of Designation of Designation with
Respect to the Shares of Series B Preferred Stock, as
disclosed in the Companys Current Report on
Form 8-K
filed with the SEC on June 6, 2007, while the number of
shares of Series B Preferred Stock did not adjust in
accordance with the Companys August 2007
1-for-8
reverse stock split, the conversion ratio that determined the
number of shares of our Common Stock issuable upon conversion of
the Series B Preferred Stock adjusted to account for the
effect of the reverse stock split. The Series B Preferred
Stock was initially convertible into shares of our Common Stock
at a ratio of one-to-one (subject to adjustment in accordance
with the Companys August 2007
1-for-8
reverse stock split); however, the holders of Series B
Preferred Stock that are not members of our Board of Directors
were entitled to receive a reduction in the conversion price, in
the event that the Company did not achieve a subsequent
financing transaction at or prior to December 31, 2007 in
which the Company received gross proceeds of at least
$3.825 million. In that case, the conversion price would be
reduced, resulting in the Series B Preferred Stock
converting into shares of our Common Stock on a one-for-one and
two-thirds basis (subject to adjustment in accordance with the
Companys August 2007
1-for-8
reverse stock split). In BravoSolutions previous
proposals, the closing of the proposed transaction was
structured such that it would close prior to December 31,
2007.
Following further discussions between the Companys
executive officers, representatives from Morgan Lewis and
Greenberg, and a representative from Delzanno, BravoSolution
revised its proposal such that it would agree to pay the holders
of Series B Preferred Stock that are not members of our
Board of Directors $0.38750 per share of Series B Preferred
Stock, in connection with their agreeing to the terms of a
voting agreement. This amount represents $3.10 per share of
Common Stock issuable upon conversion of the Series B
Preferred Stock, assuming the conversion of the Series B
Preferred Stock prior to December 31, 2007.
The holders of shares of Series B Preferred Stock that are
members of our Board of Directors would receive $0.26875 per
share of Series B Preferred Stock, in accordance with the
terms of the Companys Statement of Designation of
Designation with Respect to the Shares of Series B
Preferred Stock. Because the Company entered into the Merger
Agreement within six months from the closing date of the sale of
the Series B Preferred Stock, in connection with the Merger
these holders were only entitled to receive this amount, which
represents the product of $0.25 (the purchase price paid with
respect to each share), and 1.075.
Under the proposed structure of the voting agreement, certain
holders of Series B Preferred Stock would agree to vote in
favor of the proposed transaction and waive certain rights
including the adjustment to the conversion price and
participation rights in connection with the Companys
proposed bridge financing transaction with BravoSolution.
During the week of October 7, 2007, Mr. Lentz
discussed the terms and conditions of the proposed structure of
the transaction with the lead outside holder of Series B
Preferred Stock. Following these discussions, certain holders of
Series B Preferred Stock agreed in principal to terms of
the proposed transaction, subject to agreement on the formal
documentation.
On October 10, 2007, the Company agreed to extend the
exclusivity period with BravoSolution through October 23,
2007.
On October 16, 2007, Greenberg distributed a revised draft
of the merger agreement to Morgan Lewis and the Company. The
revised merger agreement reflected the changes resulting from
the proposed agreement with the holders of Series B
Preferred Stock and the Series C Preferred Stock financing
transaction.
On October 16, 2007, the Company distributed the initial
draft of the disclosure schedules to the merger agreement to
Greenberg.
25
On October 17, 2007, Morgan Lewis distributed the initial
drafts of the Series C Preferred Stock financing agreements
to Greenberg.
On October 18, 2007, Greenberg distributed the initial
draft of the proposed voting agreement pursuant to which certain
holders of Series B Preferred Stock, including certain
members of our Board of Directors, would agree to waive certain
rights and vote their shares in favor of the adoption of the
merger agreement and the approval of the merger.
During the week of October 19, 2007, numerous discussions
were held between Morgan Lewis, the Companys executive
officers, Greenberg and a representative from Delzanno related
to the merger agreement, the disclosure schedules, the voting
agreement and the Series C Preferred Stock financing
agreements. With respect to the merger agreement, these
discussions included the scope of representations, warranties
and covenants contained in the merger agreement, the conditions
under which BravoSolution would be obligated to close the
merger, our Board of Directors ability to consider
alternative transactions and the amount of the termination fee
that we would be obligated to pay to BravoSolution in the event
that it were to accept an alternative transaction. Drafts of
these documents were distributed among the parties.
During the course of these discussions, representatives of
Morgan Lewis proposed that any definitive merger agreement
should permit the board of directors to continue to actively
solicit and consider competing offers for a period of time after
the merger agreement was executed (a so-called go
shop provision). In light of the recent volatility of the
trading price of our Common Stock, the Company and our Board of
Directors insisted on the inclusion of the go shop
provision in the definitive merger agreement in order to further
explore acquisition transactions following the signing of the
definitive merger agreement. The parties agreed the Company
would be permitted to solicit alternative acquisition proposals
from third parties through November 19, 2007. After this
period, the Company would not be permitted to solicit other
proposals and may not share information or have discussions
regarding alternative proposals, except in certain
circumstances. The parties agreed that the Company would be
permitted to terminate the merger agreement under certain
circumstances, including if our Board of Directors determined in
good faith that it had received a superior proposal.
On October 19, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present. At this meeting, Mr. Lentz updated our Board
of Directors on the status of discussions with BravoSolution.
During the meeting a representative from Morgan Lewis reviewed
the directors fiduciary duties in the context of the
potential transaction. Our Board of Directors discussed the
overall rationale for the proposed transaction, including the
Series C Preferred Stock financing, as well as the history
of negotiations with BravoSolution. Our Board of Directors also
reviewed the strategic opportunities and alternative
transactions considered throughout this process.
During the week of October 25, 2007, numerous discussions
were held between Morgan Lewis, the Companys executive
officers, Greenberg and a representative from Delzanno related
to finalizing the merger agreement, the disclosure schedules,
the voting agreement and the Series C Preferred Stock
financing agreements. Drafts of these documents were distributed
between Morgan Lewis and Greenberg.
On October 25, 2007, a telephonic meeting of our Board of
Directors was held at which representatives from Morgan Lewis
were present. At this meeting, Mr. Lentz updated our Board
of Directors on the status of discussions with BravoSolution.
Our Board of Directors discussed the potential benefits of the
proposed merger transaction with BravoSolution. After these
discussions, our Board of Directors voted unanimously to approve
the merger agreement and the transactions contemplated by the
merger agreement. That evening, the merger agreement, the
voting agreement and the Series C Preferred Stock financing
agreements were executed.
On October 26, 2007, the Company and BravoSolution issued
press releases announcing the execution of the merger agreement
and the terms of the proposed acquisition of the Company by
BravoSolution.
On October 26, 2007, our Board of Directors held a
telephonic meeting at which representatives from
Morgan Lewis were present. Our Board of Directors
determined that a special committee (the Special
Committee) would coordinate the go-shop
process on behalf of the Company. The Merger Agreement provided
that, until 11:59 p.m., Eastern Standard Time on
November 19, 2007, the Company was permitted to initiate,
solicit and encourage Acquisition Proposals (as defined below),
and to enter into and maintain discussions or negotiations with
26
respect to Acquisition Proposals or otherwise cooperate with or
assist or participate in or facilitate any inquiries, proposals,
discussions or negotiations with respect to any such Acquisition
Proposal (See Terms of the Merger Agreement
Restrictions on Solicitations of Other Offers beginning on
page 42).
On October 29, 2007, the Special Committee and the Company
engaged a financial advisor to facilitate the
go-shop process (the Third Advisor). At
the direction of the Special Committee, the Third Advisor and
the Company contacted 16 parties, including financial and
strategic potential buyers, and the Company contacted
Party D. In the following days, the Company entered into a
confidentiality agreement with one additional party
(Party E) and entered into a new
confidentiality agreement with Party D.
On November 9, 2007, the Company and the Third Advisor had
a discussion with Party E. During this discussion, Party E
stated that while it was interested in purchasing certain assets
from the Company, it was not interested in pursuing a
transaction to acquire all of the Companys outstanding
capital stock. The Company informed Party E that it was not
interested in pursuing a transaction on these terms.
On November 12, 2007, at Party Ds request, the
Company provided the disclosure schedules to the Merger
Agreement. Following the distribution of the disclosure
schedules, Party D expressed its preliminary interest in
pursuing a transaction to acquire all of the Companys
issued and outstanding shares of capital stock. During the week
of November 12, 2007, the Company engaged in discussions
with Party D with regard to the terms and conditions of a
potential proposal.
On November 14, 2007, our Board of Directors held a
telephonic meeting at which representatives from Morgan Lewis
were present. Mr. Lentz and Gregory G. Schott, Chairman of
our Board of Directors on behalf of the Special Committee,
updated our Board of Directors on the status of discussions with
Party D. Our Board of Directors determined that the Company
should continue to explore a potential transaction with Party D.
On November 15, 2007, Mr. Schott contacted Party D to
further clarify the terms and conditions of its proposal. On
November 16, 2007, Party D notified the Company in writing
that while it needed to complete its review of the disclosure
schedules and the Companys due diligence materials, it was
prepared to move forward with a transaction to acquire all of
the issued and outstanding shares of capital stock of the
Company, in a transaction that Party D believed would constitute
a Superior Proposal (as defined below).
On November 16, 2007, our Board of Directors held a
telephonic meeting at which representatives from Morgan Lewis
were present. Mr. Lentz and Mr. Schott updated our
Board of Directors on the status of discussions with Party D.
Following a detailed discussion of Party Ds proposal, our
Board of Directors determined to advise BravoSolution that Party
D was an excluded party under the Merger Agreement
as Party Ds proposal was bona fide and was reasonably
likely to result in a Superior Proposal (See Terms of the
Merger Agreement Restrictions on Solicitations of
Other Offers beginning on page 42). Under the Merger
Agreement, as a result of the excluded party determination, the
Company was permitted to continue discussions with Party D until
December 9, 2007. Following this meeting, the members of
our Board of Directors convened an executive session to discuss
Party Ds proposal.
On November 19, 2007, the Company provided written notice
to BravoSolution of the excluded party determination with
respect to Party D. Similarly, on November 19, 2007, the
Company provided written notice to Party D that it had advised
BravoSolution of the excluded party determination.
During the weeks of November 19, November 26 and
December 3, 2007, Party Ds legal counsel submitted
draft transaction documents to Morgan Lewis. Representatives
from Party Ds legal counsel and Morgan Lewis discussed the
terms and conditions of the transaction documents. During this
period, Party D and its legal counsel requested and received
certain additional due diligence information provided to
BravoSolution.
On December 5, 2007, Party D contacted Mr. Lentz and
stated that Party D declined to make a final definitive proposal
to acquire all of the issued and outstanding shares of capital
stock of the Company.
On December 5, 2007, our Board of Directors held a
telephonic meeting at which representatives from
Morgan Lewis were present. Mr. Lentz updated our Board
of Directors on the termination of discussions with Party D.
27
On December 10, 2007, the Company informed BravoSolution
that Party D had not submitted a final definitive proposal to
acquire all of the issued and outstanding shares of capital
stock of the Company and was therefore no longer an
excluded party under the Merger Agreement. As a
result, the go shop process that was provided for by
the Merger Agreement ended on December 10, 2007.
Reasons
for the Merger; Recommendation of Our Board of
Directors
Our Board of Directors believes that the Merger Agreement, the
related Plan of Merger, the Merger and the transactions
contemplated thereby are fair to, and in the best interests of,
the Company. In reaching this conclusion, the Board of Directors
consulted with the Companys management and legal advisors,
and considered the short-term and long-term interests and
prospects of the Company and its shareholders, employees,
creditors, customers and other constituencies relevant under the
PBCL. In reaching its determinations, the Board of Directors
considered the following material factors and the potential
benefits of the Merger, each of which it believed supported its
decision (which are not listed in any relative order of
importance):
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Parent was the bidder who submitted the highest offer per share
for all classes of Company capital stock;
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the fact that the per share price of Parents offer, at
$2.56 per share of our Common Stock, represents a premium of 28%
over the $2.00 conversion price for the Series B Preferred
Stock financing which was completed on June 1, 2007;
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the Board of Directors understanding of and familiarity
with, the business, operations, management, financial condition,
earnings and prospects of the Company, as well as the risks
involved in achieving those prospects;
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the Companys shareholders consideration in the
Merger will consist entirely of cash, which will provide
liquidity and certainty of value to the Companys
shareholders;
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the fact that the Company faces significant short-term liquidity
challenges and Parents offer provided for bridge financing
that has enhanced the Companys ability to meet short-term
obligations to customers, employees, creditors and other
constituencies as they are coming due;
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the fact that continued listing on The Nasdaq Capital Market
requires us to meet certain qualitative standards, including
maintaining a certain number of independent Board members and
independent audit committee members, and certain quantitative
standards, including that we maintain at least $2.5 million
in shareholders equity and that the closing price of our
common stock not be less than $1.00 per share for 30 consecutive
trading days, and we have been unable to demonstrate compliance
with some of these requirements in the past and have been, and
continue to be, subject to delisting proceedings by Nasdaq;
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the fact that as of September 30, 2007, we did not have at
least $2.5 million of shareholders equity and therefore
are not in compliance with all continued listing standards for
The Nasdaq Capital Market and on November 28, 2007, we
received a determination letter from the staff of the Nasdaq
Stock Market that our Common Stock is subject to delisting as a
result of such non-compliance;
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the fact that the Company had engaged in extensive efforts to
sell the Company on acceptable terms to other potential
strategic and financial buyers in order to address its long term
solvency challenges;
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the fact that the Company has engaged in a competitive process
in an effort to increase the consideration to be received by
shareholders in the Merger;
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the fact that Parents offer is not qualified by any
financing contingency, which reduces the risk that the Merger
may not close;
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the fact that the employees of Parent have significant
experience within the Companys industry and can contribute
significant resources and critical relationships in enhancing
the strategic direction of the Company;
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the fact that Parents offer provides for payment in full
of the Companys existing senior subordinated discounted
promissory note;
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28
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the fact that Parents offer provides for full payment of
all trade debt, other indebtedness and contingent liabilities;
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the fact that Parents offer provides for full performance
of all obligations under customer contracts;
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the fact that the go shop process did not generate
any superior proposal to purchase all of the Companys
outstanding capital stock;
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the fact that the Merger is subject to approval of our
shareholders;
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the terms and conditions of the Merger Agreement including:
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the ability of our Board of Directors to actively solicit
alternative proposals through November 19, 2007 and to
terminate the Merger Agreement in order to accept a financially
superior proposal solicited during such period, subject to the
payment of a termination fee (the sum of 5.99% of the
Companys enterprise value and Parents transaction
expenses);
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the ability of our Board of Directors, even after
November 19, 2007, to terminate the Merger agreement in
order to accept an unsolicited financially superior proposal,
subject to the payment of the termination fee; and
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the provisions of the Merger Agreement that allow our Board of
Directors, under certain limited circumstances, to change its
recommendation that the Companys shareholders vote in
favor of the adoption of the Merger Agreement.
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The Board of Directors also considered and balanced against the
potential benefits of the Merger a variety of risks and other
potentially negative factors concerning the Merger. These
factors included the following which are not listed in any
relative order of performance:
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the fact that Parents offer per share of Common Stock was
below $5.61, which was the market price of our shares of Common
Stock on October 25, 2007, the last trading day before we
announced the Merger;
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the fact that Parents offer per share of Series B
Preferred Stock entitles holders of such shares to effectively
less consideration per share than they would have received if
the Merger was consummated after December 31, 2007;
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the fact that our Board of Directors did not receive a fairness
opinion from a financial advisor;
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the fact that, following the Merger, the Companys
shareholders will cease to participate in any future earnings
growth of the Company or benefit from any future increase in its
value;
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certain of the Companys directors and officers may have
conflicts of interest in connection with the Merger, as they may
receive certain benefits that are different from, and in
addition, to those of our other shareholders, including under
the employment agreement and release signed by Nathanael V.
Lentz;
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the merger consideration consists of cash and will therefore be
taxable to our shareholders for U.S. federal income tax
purposes;
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the conditions to the closing of the Merger;
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the restrictions on the conduct of the Companys business
prior to the completion of the Merger requiring the Company to
conduct its business only in the ordinary course, subject to
specific limitations or Parents consent, which could delay
or prevent the Company from undertaking business opportunities
that may arise pending the completion of the Merger;
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the possible disruption to the Companys business that
might result from the announcement of the Merger and the
resulting distraction of the attention of the Companys
management and employees; and
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the possible disruption to our business, and the likely negative
impact on the price of our Common Stock, if the Merger is not
consummated.
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29
In addition, our Board of Directors was aware of and considered
the interests that certain of the Companys Directors and
Executive officers may have with respect to the Merger that
differ from, or are in addition to, their interests as
shareholders of the Company (see Interests of
Verticalnets Directors and Executive Officers in the
Merger beginning on page 31).
Our Board of Directors considered all of the factors listed
above as a whole and decided that in their totality such factors
support the decision to approve, adopt and authorize the Merger
Agreement, the related Plan of Merger, the Merger and the other
transactions contemplated therein and to recommend that the
shareholders vote FOR the adoption of the Merger
Agreement and the related Plan of Merger, and the approval of
the Merger, and FOR the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies. The discussion of the information and factors
considered by our Board of Directors is not intended to be
exhaustive and may not include all of the factors considered by
our Board of Directors. Our Board of Directors did not quantify,
rank or otherwise assign relative or specific values to any of
the above factors or the other factors it considered. In
addition, our Board of Directors did not reach any specific
conclusion on each factor considered, but conducted an overall
assessment of these factors. Individual members of our Board of
Directors may have given different weight to different factors.
Our Board of Directors recommends that you vote
FOR the adoption of the Merger Agreement and the
related Plan of Merger, and the approval of the Merger, and
FOR the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies.
Plans
for Verticalnet after the Merger
Parent has advised Verticalnet that, following the consummation
of the Merger, it intends that Verticalnet will continue its
current operations, except that Verticalnet will cease to be an
independent public company and will instead be a subsidiary of
Parent and its common stock will cease to be publicly traded.
Following the consummation of the Merger, the registration of
Verticalnets common stock and Verticalnets reporting
obligation under the Exchange Act with respect to our common
stock will be terminated upon application to the SEC. In
addition, upon consummation of the Merger, Verticalnet common
stock will no longer be listed on any exchange or quotation
system, including NASDAQ, and price quotations will no longer be
available. Verticalnet will not be subject to the obligations
and constraints, and the related direct and indirect costs,
associated with having publicly traded equity securities.
Certain
Effects of the Merger
Effect
on Capital Stock
If the Merger Agreement is approved by our shareholders and the
other conditions to the completion of the Merger are either
satisfied or waived, Merger Sub will be merged with and into the
Company, with the Company continuing as the surviving
corporation. Upon the completion of the Merger, each issued and
outstanding share of Common Stock, other than shares held by the
Company, Parent, Merger Sub or their subsidiaries, will be
converted into the right to receive $2.56 in cash, without
interest and less any required withholding tax. In addition,
each issued and outstanding share of Series B Preferred
Stock will be converted into the right to receive either
$0.38750 or $0.26875 in cash, without interest and less any
required withholding tax. Under the terms of the Companys
Statement of Designation with Respect to the Shares of
Series B Preferred Stock, filed by the Company with the
Secretary of State of the Commonwealth of Pennsylvania on
May 31, 2007, and disclosed in the Companys Current
Report on
Form 8-K
filed with the SEC on June 6, 2007, because the Company
entered into the Merger Agreement within six months from the
closing date of the sale of the Series B Preferred Stock,
in connection with the Merger the holders of shares of
Series B Preferred Stock that are members of our Board of
Directors and management are entitled to receive an amount per
share of Series B Preferred Stock equal to $0.26875 in
cash, without interest and less any required withholding tax. In
accordance with the Statement of Designation with Respect to the
Shares of Series B Preferred Stock, this amount represents
the product of $0.25 (the purchase price paid with respect to
each share), and 1.075. In connection with the Merger, the
holders of Series B Preferred Stock that are not members of
our Board of Directors are entitled to receive an amount per
share of Series B Preferred Stock equal to $0.38750 in
cash, without interest and less any required withholding tax.
This amount represents $3.10 per share of Common
30
Stock issuable upon conversion of the Series B Preferred
Stock, assuming the conversion of the Series B Preferred
Stock prior to December 31, 2007.
Our shareholders will be required to surrender their shares upon
the completion of the Merger in exchange for such cash payments.
After completion of the Merger, shareholders will not have the
opportunity to liquidate their shares at a time and for a price
of their own choosing. If all eligible shares are converted, the
total merger consideration (excluding consideration to be paid
to option holders) expected to be paid is approximately
$4.5 million.
Each option, warrant or restricted stock unit to purchase our
Common Stock outstanding immediately prior to the effective time
of the Merger will be cancelled (other than certain specified
securities), and each holder of such option, warrant or
restricted stock unit will be entitled to receive, in full
settlement of such security, a cash payment equal to the product
of the number of shares subject to such option, warrant or
restricted stock unit, multiplied by the excess, if any, of
(a) $2.56 per share less (b) the exercise or
conversion price of such security, without interest and less any
required withholding tax. The exercise price of all outstanding
options to purchase shares of our Common Stock exceeds $2.56 per
share. Thus, there will be no payments made by the Company with
respect to such securities. The total amount expected to be paid
in respect of warrants and restricted stock is approximately
$14,300.
Effect
on Listing; Registration and Status of Verticalnet Common
Stock
Our Common Stock is registered as a class of equity securities
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) and is traded on The Nasdaq Capital
Market under the symbol VERT. As a result of the
Merger, Verticalnet will be a privately-held company, with no
public market for its Common Stock. After the Merger, our Common
Stock will cease to be traded on The Nasdaq Stock Market
(NASDAQ), and price quotations with respect to sales
of shares of our Common Stock in the public market will no
longer be available. In addition, registration of our Common
Stock under the Exchange Act will be terminated. This
termination and the delisting of Verticalnets Common Stock
from NASDAQ will make certain provisions of the Exchange Act
inapplicable to Verticalnet as a stand-alone company, such as:
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the requirement to furnish a proxy or an information statement
in connection with a shareholders meeting;
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the short-swing profit recovery provisions of
Section 16(b); and
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the liability provisions of the Exchange Act and the corporate
governance requirements under NASDAQ rules and regulations and
the certification and reporting provisions under the
Sarbanes-Oxley Act of 2002 (such as the requirement that certain
executive officers of Verticalnet certify the accuracy of
Verticalnets financial statements and that annual reports
contain managements report on the effectiveness of the
companys internal control over financial reporting).
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In addition, Verticalnet will no longer be required to file
periodic reports with the SEC after the effective time of the
Merger.
Interests
of Verticalnets Directors and Executive Officers in the
Merger
In considering the recommendation of our Board of Directors, you
should be aware that some of Verticalnets directors and
executive officers may be deemed to have interests in the Merger
that are different from, or in addition to, the interests of
Verticalnets shareholders generally. These interests may
present them with actual or potential conflicts of interest, and
these interests, to the extent material, are described below.
Our Board of Directors was aware of these interests and
considered that such interests may be different from or in
addition to the interests of our shareholders generally, among
other matters, in approving the Merger Agreement, the related
Plan of Merger and the transactions contemplated thereby,
including the Merger, and in determining to recommend that our
shareholders vote for adoption of the Merger Agreement and the
related Plan of Merger and the approval of the Merger.
31
Series B
Preferred Stock
Pursuant to the Merger Agreement and the related Plan of Merger,
at the effective time of the Merger, outstanding shares of the
Companys Series B Preferred Stock will be converted
into the right to receive either $0.38750 or $0.26875 per share
in cash, without interest and less any required withholding tax.
Certain shares of Series B Preferred Stock are beneficially
owned by members of our Board of Directors
Mr. Lentz, Michael J. Hagan and Mark L. Walsh. Under the
terms of the Companys Statement of Designation with
Respect to the Shares of Series B Preferred Stock, as
disclosed in the Companys Current Report on
Form 8-K
filed with the SEC on June 6, 2007, because the Company
entered into the Merger Agreement within six months from the
closing date of the sale of the Series B Preferred Stock,
in connection with the Merger these holders are entitled to
receive an amount per share of Series B Preferred Stock
equal to $0.26875. In accordance with the Statement of
Designation with Respect to the Shares of Series B
Preferred Stock, this amount represents the product of $0.25
(the purchase price paid with respect to each share), and 1.075.
The table below sets forth the amount that will be payable to
Mr. Lentz, Mr. Hagan and Mr. Walsh following the
effective time of the Merger with respect to shares of
Series B Preferred Stock beneficially owned by the
individual as of December 10, 2007.
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Cash-Out
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Value of
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Series B
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Name
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Preferred Stock
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Directors
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Nathanael V. Lentz
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$
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53,750
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Michael J. Hagan
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268,750
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Mark L. Walsh(1)
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53,750
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(1)
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Represents 200,000 shares of Series B Preferred Stock
owned by Ruxton Ventures, LLC. Mr. Walsh is the Managing
Partner of Ruxton Associates, LLC, which is the Managing Member
of Ruxton Ventures, LLC.
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Cash-Out
of Stock Options
As of the record date, there were approximately
23,607 shares of our Common Stock subject to stock options
granted under our equity compensation plans to current directors
and executive officers. The Merger Agreement provides for the
cancellation of options to purchase shares of our Common Stock
(other than certain specified securities), to the extent
outstanding and unexercised immediately prior to the effective
time of the Merger. Holders of such securities will receive from
the Company an amount (without interest and less any required
tax withholding), if any, in cash equal to the number of shares
of our common stock subject to the option multiplied by the
excess, if any, of $2.56 per share over the exercise price per
share of our common stock underlying such security.
The exercise price of all outstanding options to purchase shares
of our Common Stock, including those held by our directors and
executive officers, exceeds $2.56 per share. Thus, there will be
no payments made by the Company with respect to such securities.
Cash-Out
of Restricted Stock Units
As of the record date, there were approximately
3,587 shares of our Common Stock represented by restricted
stock units granted under our equity compensation plans held by
our directors and executive officers. The Merger Agreement also
provides for the cancellation of restricted stock units to
purchase shares of our common stock, to the extent outstanding
and unexercised immediately prior to the effective time of the
Merger. Holders of such securities will receive from the Company
an amount (without interest and less any required tax
withholding), if any, in cash equal to the number of shares of
our common stock subject to the restricted stock unit multiplied
by $2.56.
32
The table below sets forth the amount that will be payable to
each of our directors and executive officers (before any
applicable withholdings) following the effective time of the
Merger with respect to restricted stock units held by the
individual as of December 10, 2007.
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Aggregate
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Cash-Out Value
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of Restricted
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Name
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Stock Units
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Directors
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Gregory G. Schott
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$
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504
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Nathanael V. Lentz
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$
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6,876
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Michael J. Hagan
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0
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Vincent J. Milano
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0
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John N. Nickolas
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0
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Mark L. Walsh
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0
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Darryl E. Wash
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$
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504
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Executive Officers
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Christopher G. Kuhn
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$
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738
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Jonathan T. Cohen
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0
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Lentz
Employment Agreement
In connection with the signing of the Merger Agreement, Parent
required that the Company enter into an Employment Agreement
(the New Lentz Employment Agreement) and Release
(the Release) with Nathanael V. Lentz,
Verticalnets President and Chief Executive Officer.
Mr. Lentzs continued employment with the Company
pursuant to the terms of the New Lentz Employment Agreement, as
well as Mr. Lentzs release of the Company from any
and all claims, liabilities, demands or causes of action arising
out of, or relating in any way to Mr. Lentzs
employment with the Company prior to the effective time of the
Merger pursuant to the terms of the Release, were conditions
precedent to Parent signing the Merger Agreement. The Company
and Mr. Lentz entered into the Employment Agreement and
Release, each dated as of October 25, 2007, which will
become effective upon the closing of the Merger.
The New Lentz Employment Agreement provides for a base salary of
$250,000 and has a term of two years, with automatic renewal for
one year renewal terms unless either party gives at least one
year advance notice of non-renewal. The Company may terminate
the New Lentz Employment Agreement without cause with three
month advance notice of termination. If Mr. Lentz is
terminated without cause within one year from the effective time
of the Merger, he will receive, in exchange for a mutual general
release, continued medical benefits and the value of accrued
vacation and bonus; however, Mr. Lentz is not entitled to
receive any other severance payment. If Mr. Lentz is
terminated without cause after one year from the effective time
of the Merger, or if Mr. Lentz terminates his employment
for good reason after one year from the effective
time of the Merger, he will receive, in exchange for a mutual
general release, a lump sum cash payment in an amount equal to
one year of salary, and he will also receive continued medical
benefits and the value of accrued vacation and bonus. The New
Lentz Employment Agreement defines good reason as
failure by the Company to cure any of the following events
within 30 days after written notice that such an event has
occurred: (1) Mr. Lentz being transferred more than
50 miles without consent (unless such transfer is not more
than 250 miles and the Company pays reasonable moving
expenses); (2) a material reduction of authority, duties,
responsibilities or reporting relationship; or (3) any
failure of the Company materially to comply with and satisfy the
terms of the employment agreement. Mr. Lentzs
employment agreement provides for a cap to Mr. Lentzs
compensation if it produces a greater net benefit than an
uncapped award would after accounting for the increased tax
obligation resulting from being an excess parachute payment
under sections 280G and 4999 of the Internal Revenue Code.
The New Lentz Employment Agreement amends and restates the
existing employment agreement, dated as of October 1, 2001,
between Mr. Lentz and the Company, as amended (the
Old Lentz Employment Agreement). Under the Old Lentz
Employment Agreement, Mr. Lentz is entitled to base salary
of $380,000, a portion of which has been deferred, as well as
expanded severance benefits upon the occurrence of a change of
control of the Company. The New Lentz Employment Agreement
reduces the severance benefits that Mr. Lentz would have
been entitled to receive under the Old Lentz Employment
Agreement. Mr. Lentz will receive, at the effective time of
the
33
Merger, a lump sum cash payment in the amount of $760,000
(without interest and less any required tax withholding). This
amount represents the severance payment Mr. Lentz would
have otherwise been entitled to receive under the Old Lentz
Employment Agreement in connection with the Merger, assuming
that the Merger occurred on December 31, 2007.
Pursuant to the Release, Mr. Lentz will release the Company
from any and all claims, liabilities, demands or causes of
action arising out of, or relating in any way to
Mr. Lentzs employment with the Company prior to the
effective time of the Merger.
The foregoing description of the New Lentz Employment Agreement
and the Release is qualified in its entirety by reference to the
full text of the New Lentz Employment Agreement and the Release,
which are attached to this proxy statement as
Annex C
and
Annex D
, respectively.
Christopher
Kuhn and Jonathan Cohen Employment Agreements
Consummation of the Merger will constitute a change in control
under employment agreements between Verticalnet and Christopher
G. Kuhn (Vice President and General Counsel) and Jonathan T.
Cohen (Vice President and Chief Accounting Officer).
If within one year from the effective time of the Merger,
Mr. Cohen is terminated without cause or chooses to leave
for good reason, then he will receive, in exchange
for a mutual general release, a lump sum payment equal to his
salary for six months and a pro rata portion of any bonus
Mr. Cohen would have earned in the year of termination and
the Company will pay healthcare coverage for six months.
Mr. Cohens employment agreement provides for a cap to
Mr. Cohens compensation if it produces a greater net
benefit than an uncapped award would after accounting for the
increased tax obligation resulting from being an excess
parachute payment under sections 280G and 4999 of the
Internal Revenue Code. Mr. Cohens employment
agreement defines good reason after a change of
control as: (1) Mr. Cohen being transferred more than
50 miles without consent; (2) the Company taking any
action resulting in Mr. Cohen not being a Vice President of
the Company; (3) a material reduction of authority, duties,
or responsibilities after reasonable notice and a chance to
cure; (4) any failure of the Company materially to comply
with and satisfy the terms of Mr. Cohens employment
agreement; or (5) non-renewal of Mr. Cohens
employment agreement by the Company.
If within one year from the effective time of the Merger,
Mr. Kuhn is terminated without cause or chooses to leave
for good reason, then he will receive, in exchange
for a mutual general release, a lump sum payment equal to his
salary for six months and a pro rata portion of any bonus
Mr. Kuhn would have earned in the year of termination and
the Company will pay healthcare coverage for six months.
Mr. Kuhns employment agreement provides for a cap to
Mr. Kuhns compensation if it produces a greater net
benefit than an uncapped award would after accounting for the
increased tax obligation resulting from being an excess
parachute payment under sections 280G and 4999 of the
Internal Revenue Code. Mr. Kuhns employment agreement
defines good reason after a change of control as:
(1) Mr. Kuhn being transferred more than 50 miles
without consent; (2) the Company taking any action
resulting in Mr. Kuhn not being a Vice President of the
Company; (3) a material reduction of authority, duties, or
responsibilities after reasonable notice and a chance to cure;
(4) any failure of the Company materially to comply with
and satisfy the terms of Mr. Kuhns employment
agreement; or (5) non-renewal of Mr. Kuhns
employment agreement by the Company.
Benefits
on Qualifying Termination
The following table provides information regarding approximate
cash amounts payable, or the approximate value of benefits to be
provided, as a result of the Merger to Messrs. Lentz, Cohen
and Kuhn in respect of: (i) lump-sum payments, other than
accrued and unpaid salary, that will be provided to
Messrs. Cohen and Kuhn under their employment agreements if
a qualifying termination of employment occurs; and
(ii) healthcare benefits that will be provided to
Messrs. Lentz, Cohen and Kuhn under their employment
agreements. For purposes of this table, it is assumed that the
qualifying termination of employment event occurs on
December 31, 2007:
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Value of Benefits on
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Name
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Qualifying Termination
|
|
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Nathanael V. Lentz
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$
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12,000
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Christopher G. Kuhn
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$
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151,200
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Jonathan T. Cohen
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$
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146,000
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34
Potential
Future Employment
While Parent has requested, and been granted, the opportunity to
begin discussions with the other executive officers regarding
future employment following the effective time of the Merger,
and expects to begin these discussions shortly, as of the date
of this proxy statement, none of the other executive officers
have entered into any agreement or understanding with Parent
regarding employment after the effective time of the Merger.
Indemnification
of Executive Officers and Directors
The Merger Agreement contains provisions relating to the
indemnification of and insurance for Verticalnets
directors and officers. Under the Merger Agreement, Parent has
agreed that after the effective time of the Merger, it will
cause Verticalnet to indemnify and hold harmless
Verticalnets present and former officers for acts or
omissions occurring at or prior to the effective time of the
Merger to the fullest extent provided under applicable law or
provided under Verticalnets articles of incorporation and
bylaws (in each case, as in effect as of the date of the Merger
Agreement), subject to any limitation imposed under applicable
law.
Officers
and Directors Insurance
Under the Merger Agreement, Parent as agreed to provide, or will
cause the surviving corporation to provide, for a period of six
(6) years following the effective time of the Merger, a
commercially available run-off or tail policy with limits of
$5 million, plus an additional $10 million in Side A
coverage with zero retention to cover each party covered by the
Companys current officers and directors liability
insurance policy on terms with respect to such coverage and
amount no less favorable than those of the policy in effect on
the date of the Merger Agreement, provided however, that Parent
will not be obligated to pay an aggregate premium in excess of
200% of the amount per annum that the Company paid in its last
full fiscal year.
The foregoing summary of the indemnification of directors and
executive officers and directors and executive
officers insurance is not complete and is qualified in its
entirety by reference to the Merger Agreement, which is attached
to this proxy statement as
Annex A.
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders
The following is a summary of the material U.S. federal
income tax consequences of the Merger to certain holders of our
capital stock. This summary is based on the Internal Revenue
Code of 1986, as amended, referred to as the Code in
this proxy statement, regulations promulgated under the Code,
administrative rulings and pronouncements issued by the Internal
Revenue Service and court decisions now in effect. All of these
authorities are subject to change, possibly with retroactive
effect so as to result in tax consequences different from those
described below. We have not sought any ruling from the IRS with
respect to statements made and conclusions reached in this
discussion, and the statements and conclusions in this proxy are
not binding on the IRS or any court. We can provide no
assurances that the tax consequences described below will not be
challenged by the IRS or will be sustained by a court if so
challenged.
This summary does not address all of the U.S. federal
income tax consequences that may be applicable to a particular
holder of our capital stock. In addition, this summary does not
address the U.S. federal income tax consequences of the
Merger to holders of our capital stock who are subject to
special treatment under U.S. federal income tax laws,
including, for example, banks and other financial institutions,
insurance companies, tax-exempt investors, S corporations,
U.S. expatriates, dealers in securities, traders in
securities who elect the mark-to-market method of accounting for
their securities, regulated investment companies, mutual funds,
controlled foreign corporations, holders who hold their capital
stock as part of a hedge, straddle or conversion transaction,
holders whose functional currency is not the U.S. dollar,
holders who own 5% or more of all our capital stock, holders who
acquired our capital stock through the exercise of employee
stock options or other compensatory arrangements, holders who
are subject to the alternative minimum tax provisions of the
Code and holders who do not hold their shares of our capital
stock as capital assets within the meaning of
Section 1221 of the Code.
This discussion does not address the U.S. federal income
tax consequences to any holder of our capital stock who or
which, for U.S. federal income tax purposes, is a
nonresident alien individual, a foreign corporation, a
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foreign partnership or a foreign estate or trust. In addition,
this discussion does not address U.S. Federal estate or
gift tax consequences of the Merger, or the tax consequences of
the Merger under state, local, or foreign tax laws.
If a partnership or other passthrough entity (including any
entity treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of our capital stock, the tax
treatment of a partner in the partnership generally will depend
upon the status of the partner and the activities of the
partnership. A beneficial owner that is a partnership and
partners in such a partnership should consult their tax advisors
about the U.S. federal income tax consequences of the
Merger.
This summary is provided for general information purposes
only and is not intended as a substitute for individual tax
advice. Each holder of capital stock should consult the
holders individual tax advisors as to the particular tax
consequences of the Merger to such holder, including the
application and effect of any state, local, foreign or other tax
laws and the possible effect of changes to such laws.
Exchange of Capital Stock for Cash.
Generally,
the Merger will be taxable to the holders of our capital stock
for U.S. federal income tax purposes. A holder of our
capital stock receiving cash in the Merger generally will
recognize gain or loss for U.S. federal income tax purposes
in an amount equal to the difference between the amount of cash
received and the holders adjusted tax basis in our capital
stock surrendered. Any such gain or loss generally will be
capital gain or loss if our capital stock is held as a capital
asset at the effective time of the Merger. Any capital gain or
loss will be taxed as long-term capital gain or loss if the
holder has held our capital stock for more than one year prior
to the effective time of the Merger. If the holder has held our
capital stock for one year or less prior to the effective time
of the Merger, any capital gain or loss will be taxed as
short-term capital gain or loss. Currently, most long-term
capital gains for non-corporate taxpayers are taxed at a maximum
federal tax rate of 15%. The deductibility of capital losses is
subject to certain limitations. If a holder acquired different
blocks capital stock at different times and different prices,
such holder must determine the adjusted tax basis and holding
period separately with respect to each such block of capital
stock.
Information Reporting and Backup
Withholding.
Generally, holders of capital stock
will be subject to information reporting on the cash received in
the Merger unless such a holder is a corporation or other exempt
recipient. In addition, under the U.S. federal backup
withholding tax rules, the exchange agent will be required to
withhold 28% of all cash payments to which a holder of capital
stock is entitled in connection with the Merger unless such
holder provides under penalties of perjury on a
Form W-9
(or appropriate substitute form) a tax identification number,
certifies that such holder is a U.S. person and that tax
identification number is correct and that no backup withholding
is otherwise required, and otherwise complies with such backup
withholding rules. Each holder of capital stock should complete
and sign the
Form W-9
(or appropriate substitute form) included as part of the letter
of transmittal and return it to the paying agent, in order to
certify that the holder is exempt from backup withholding or to
provide the necessary information to avoid backup withholding.
Backup withholding is not an additional tax. Any amount withheld
from a payment to a holder of capital stock under these rules
will be allowed as a credit against such holders
U.S. federal income tax liability and may entitle such
holder to a refund, provided that the required information is
furnished timely to the IRS.
HOLDERS OF VERTICALNET CAPITAL STOCK ARE STRONGLY URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
UNITED STATES FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
IN THEIR PARTICULAR CIRCUMSTANCES.
Regulatory
and Other Governmental Approvals
We are unaware of any material federal, state or foreign
regulatory requirements or approvals required for the execution
of the Merger Agreement or completion of the Merger.
36
TERMS
OF THE MERGER AGREEMENT
The following is a summary of the material provisions of the
Merger Agreement and the related Plan of Merger and is qualified
in its entirety by reference to the complete text of the Merger
Agreement and the related Plan of Merger which are attached as
Annex A
and
Annex A-1
to this proxy
statement. We urge you to read the Merger Agreement and the
related Plan of Merger carefully and in its entirety because
they, and not this proxy statement, are the legal documents that
govern the Merger.
At the effective time of the Merger, upon the terms and subject
to the satisfaction or waiver of the conditions of the Merger
Agreement and in accordance with the PBCL, Merger Sub will merge
with and into Verticalnet and the separate corporate existence
of Merger Sub will end. Verticalnet will be the surviving
corporation in the Merger and will continue to be a Pennsylvania
corporation after the Merger and a wholly-owned subsidiary of
Parent. All of the Companys and Merger Subs
properties, assets, rights, privileges, immunities, powers and
franchises, and all of their debts, liabilities and duties, will
become those of the surviving corporation. Following completion
of the Merger, the Companys common stock will be delisted
from NASDAQ, deregistered under the Exchange Act, and no longer
be publicly traded. The Company will be a privately held
corporation and the Companys current shareholders will
cease to have any ownership interest in the Company or rights as
Company shareholders. Therefore, such current shareholders of
the Company will not participate in any future earnings or
growth of the Company and will not benefit from any appreciation
in value of the Company. The articles of incorporation and
bylaws of Merger Sub will be the articles of incorporation and
bylaws of the surviving corporation.
The directors of Merger Sub at the effective time of the Merger
will, from and after the effective time of the Merger, be the
initial directors of Verticalnet, as the surviving corporation.
Our officers at the effective time of the Merger will, from and
after the effective time of the Merger, be the initial officers
of Verticalnet, as the surviving corporation. Our current
officers are Nathanael V. Lentz, President and Chief Executive
Officer, Jonathan T. Cohen, Vice President and Chief Accounting
Officer and Christopher G. Kuhn, Vice President, General Counsel
and Secretary.
When
the Merger Becomes Effective
Verticalnet and Merger Sub will file articles of merger with the
Department of State of the Commonwealth of Pennsylvania on the
seventh (7th) business day after the satisfaction or waiver of
the conditions to the Merger Agreement, unless the parties agree
to another date.
The Merger will become effective at the time the articles of
merger are duly filed with the Department of State of the
Commonwealth of Pennsylvania or at such other later date and
time as Verticalnet and Parent agree and specify in the articles
of merger.
If our shareholders approve the Merger Agreement, the Company
and Parent intend to complete the Merger as soon as practicable
thereafter. The merger is expected to be completed during its
first fiscal quarter of 2008. Because the Merger is subject to
certain conditions, the exact timing of the Merger cannot be
determined.
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Each share of Common Stock, other than those shares held by the
Company as treasury stock, Parent or Merger Sub, will be
cancelled and converted automatically into the right to receive
$2.56 in cash, without interest and less any required
withholding tax.
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Each share of our Series B Preferred Stock, par value $0.01
per share (the Series B Preferred Stock) will
be cancelled and converted automatically into the right to
receive $0.38750 or $0.26875 in cash, without interest and less
any required withholding tax.
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Under the terms of the Companys Statement of Designation
with Respect to the Shares of Series B Preferred Stock, filed by
the Company with the Secretary of State of the Commonwealth of
Pennsylvania on May 31, 2007, and disclosed in the
Companys Current Report on Form 8-K filed with the SEC on
June 6, 2007, because the Company entered into the Merger
Agreement within six months from the closing date of the sale
37
of the Series B Preferred Stock, in connection with the
Merger the holders of shares of Series B Preferred Stock that
are members of our Board of Directors and management are
entitled to receive an amount per share of Series B
Preferred Stock equal to $0.26875 in cash, without interest and
less any required withholding tax. In accordance with the
Statement of Designation with Respect to the Shares of
Series B Preferred Stock, this amount represents the
product of $0.25 (the purchase price paid with respect to each
share), and 1.075. In connection with the Merger, the holders of
Series B Preferred Stock that are not members of our Board
of Directors are entitled to receive an amount per share of
Series B Preferred Stock equal to $0.38750 in cash, without
interest and less any required withholding tax. This amount
represents $3.10 per share of Common Stock issuable upon
conversion of the Series B Preferred Stock, assuming the
conversion of the Series B Preferred Stock prior to
December 31, 2007.
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Each share of our Series C Preferred Stock, par value $0.01
per share (the Series C Preferred Stock) is
held by Merger Sub and will be cancelled and no payment will be
made with respect to the Series C Preferred Stock.
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Treatment
of Our Stock Options, Warrants and Restricted Stock
Units
Upon completion of the Merger, each outstanding and unexercised
stock option, warrant and restricted stock unit (whether vested
or unvested) will be cancelled by the Company (other than
certain specified securities), and each holder of such option,
warrant or restricted stock unit will be entitled to receive, in
full settlement of such security, a cash payment (without
interest and less any required withholding taxes) equal to the
product of:
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the excess, if any, of (a) $2.56 per share over
(b) the exercise or conversion price of such security per
share of our Common Stock underlying such security, without
interest; and
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the number of shares subject to such security.
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Subject to any applicable withholding taxes, the payment for
options, warrants and restricted stock units will be made,
without interest, through our payroll systems or otherwise by
the Company. Certain options and warrants will not be
automatically cancelled upon completion of the Merger, as such
securities cannot be cancelled by the Company without the
consent of the holder.
Representations
and Warranties
The Merger Agreement contains representations and warranties of
the Company, Merger Sub and Parent, negotiated between the
parties and made as of specific dates solely for purposes of the
Merger Agreement, including setting forth the respective rights
of the parties with respect to their obligation to complete the
Merger. The representations and warranties are qualified by
information in confidential disclosure schedules provided by the
Company to Parent and Merger Sub in connection with the signing
of the Merger Agreement, and may be subject to important
limitations and qualifications as set forth in the Merger
Agreement, including a contractual standard of materiality
different from that generally applicable under federal
securities laws. The confidential disclosure schedules contain
information that modifies, qualifies and creates exceptions to
the representations and warranties set forth in the Merger
Agreement. Moreover, certain representations and warranties in
the Merger Agreement were used for the purpose of allocating
risk between the Company on one hand and Parent and Merger Sub
on the other hand, rather than establishing matters as facts.
Accordingly, you should not rely on the representations and
warranties in the Merger Agreement as characterizations of the
actual state of facts about the Company, Parent or Merger Sub.
The Merger Agreement contains a number of representations and
warranties made by the Company, Parent and Merger Sub that
relate to, among other things:
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corporate existence, good standing and qualification to conduct
business;
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due authorization, execution, delivery and validity of the
Merger Agreement;
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the required consents and approvals of government entities in
connection with the transactions contemplated by the Merger
Agreement;
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absence of any conflict with organizational documents or any
violation of agreements, laws or regulations as a result of the
consummation of the Merger; and
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the absence of undisclosed finders fees and fees payable
to financial advisors and consultants in connection with the
Merger.
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The Companys representations and warranties relate to,
among other things:
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our capitalization, including, in particular, the number of
shares of our Common Stock, Preferred Stock, warrants, stock
options and other equity-based interests;
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our organizational documents and those of our subsidiaries;
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our subsidiaries, including their corporate existence, good
standing and qualification to conduct business and the absence
of any conflict with their organizational documents or any
violation of their agreements, laws or regulations as a result
of the consummation of the Merger;
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compliance with applicable laws, and possession of required
consents, permits and licenses by us and our subsidiaries;
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our filings with the SEC, the absence of material misstatements
or omissions from such filings and the accuracy of information,
including financial information, contained in these documents,
and our compliance with the Sarbanes-Oxley Act of 2002 and other
matters related to our internal and disclosure controls;
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the absence of material changes and events concerning us and our
subsidiaries since June 30, 2007;
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the absence of undisclosed materials liabilities;
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matters relating to our assets and those of our subsidiaries;
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pending or threatened material litigation or investigations
against us and our subsidiaries;
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matters relating to our and our subsidiaries intellectual
property;
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matters relating to our and our subsidiaries operating and
applications computer software programs and databases;
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matters relating our and our subsidiaries owned and leased
real property and the leases related to our leased real property;
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our compliance and our subsidiaries compliance with
applicable laws including environmental laws;
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our material contracts and those of our subsidiaries and
performance obligations thereunder, including matters relating
to government contracts;
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licenses and permits
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completion and accuracy of our tax filings and payment of our
taxes;
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matters relating to the Employee Retirement Security Act of
1974, as amended, and our employee benefits;
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absence of changes in our benefit plans;
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labor matters;
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the absence of affiliate transactions requiring disclosure;
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inapplicability of state anti-takeover statutes to the Merger
Agreement and the Merger;
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the approval and recommendation by our Board of Directors of the
Merger Agreement, the related Plan of Merger, the Merger and the
other transactions contemplated by the Merger Agreement;
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the required vote of our shareholders in connection with the
adoption of the Merger Agreement and the related Plan of Merger;
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matters relating to our vendors and customers;
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matters relating to our product warranties and inventory
recording practices; and
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accuracy and compliance with applicable securities law of this
proxy statement
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our maintenance of insurance.
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Parent and Merger Sub also make representations and warranties
relating to the accuracy of information provided for this proxy
statement and lack of liabilities or obligations of Merger Sub.
Many of our representations and warranties are qualified as to
materiality or material adverse effect.
For purposes of the Merger Agreement, material adverse
effect means, with respect to the Company, any event,
circumstance, change, development, condition or effect that is
materially adverse to the business, financial condition or
results of operations of the Company and its subsidiaries taken
as a whole, the ability of the Company to consummate the
transactions contemplated by the Merger Agreement or the ability
of Parent to operate the business of the Company and our
subsidiaries, taken as a whole, immediately after the closing
(as a result of matters occurring prior to closing), other than
any material adverse effect resulting from:
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changes in general economic conditions or changes in securities
markets in general, except where such change has a significantly
disproportionate adverse impact on the Company and its
subsidiaries compared to other companies of similar size
operating in the industry in which the Company and its
subsidiaries operate;
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general changes in the industry in which the Company and its
subsidiaries operate, except where such change has a
significantly disproportionate adverse impact on the Company and
its subsidiaries compared to other companies of similar size
operating in the industry in which the Company and its
subsidiaries operate;
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changes arising directly out of the public announcement of the
transactions contemplated by the Merger Agreement; and
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any actions taken by the Company at the specific request of the
Parent.
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You should be aware that these representations and warranties
are made by the Company to Parent and Merger Sub, may be subject
to important limitations and qualifications agreed to by Parent
and Merger Sub, may or may not be accurate as of the date they
were made and do not purport to be accurate as of the date of
this proxy statement. The representations and warranties of the
parties to the Merger Agreement will expire upon the effective
time of the Merger or the termination of the Merger Agreement.
Conduct
of Our Business Pending the Merger
We have agreed to restrictions on the operation of the business
of the Company and our subsidiaries until either the effective
time of the Merger or the termination of the Merger Agreement.
In general, we have agreed to conduct business in the ordinary
course consistent with past practice and to use commercially
reasonable efforts to preserve intact the present business
organization and keep available the services of all officers,
employees and consultants who are integral to the current
operation of the business of the Company and our subsidiaries.
In addition, we have agreed that, among other things and subject
to certain exceptions, we are restricted from and must prevent
any of our subsidiaries from, without Parents prior
written consent:
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amending the Companys or its subsidiaries
organizational documents;
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issuing, selling, pledging, disposing, encumbering or granting
any shares of capital stock or any options, warrants, or any
other rights to acquire shares of capital stock;
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declaring or paying any dividend with respect to our capital
stock, membership interests or partnership interests;
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reclassifying, combining, splitting, redeeming or otherwise
acquiring any of our capital stock, membership interests or
partnership interests, or setting aside or paying any dividend
or other distribution in respect of such shares or interests;
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acquiring any entity or any assets in connection with
acquisitions or investments other than in the ordinary course of
business consistent with past practice but which in no event is
in excess of $15,000 individually or
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$30,000 in the aggregate, except where the contract for such
acquisition was in effect on the date of the Merger Agreement;
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committing to any single capital expenditure that is in excess
of $15,000 individually or $50,000 in the aggregate;
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selling, leasing, licensing, or otherwise disposing of any part
of our material assets, intellectual property or other rights
except in the ordinary course of business consistent with past
practice;
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mortgaging, encumbering or subjecting to a lien any material
portion of the Companys properties or assets other than in
the ordinary course of business consistent with past practice;
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incurring any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse the obligations of
any third party, or making any loans or advances or granting any
securities interests in any of its assets, including its
intellectual property;
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amending, modifying or terminating any material agreement other
than in the ordinary course of business consistent with past
practice, or cancelling, modifying or waiving any rights having
value in each case in excess of $50,000;
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entering into any new employee benefit plan, program or
arrangement or any new employment, severance or change of
control or consulting agreement, grant any general increase in
compensation payable to any officer or employee or amend any
such pre-existing arrangements to increase benefits provided
thereunder, except where such increases or new commitment is
required by a pre-existing contractual commitment disclosed to
Parent, law or to avoid imposition of taxes under Section 409A;
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paying, lending or advancing any amount to, selling, leasing or
transferring properties or assets to, or otherwise entering into
arrangements with affiliates other than wholly owned
subsidiaries;
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failing to keep in full force and effect insurance comparable in
amount and scope to coverage maintained as of the date of the
Merger Agreement;
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making any material changes in any method of accounting,
accounting principles or practice, except for any such change
required by reason of a concurrent change in generally accepted
accounting principles, or write off as uncollectible any
accounts receivable except in the ordinary course of business
consistent with past practice;
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making, changing or rescinding any material tax election,
changing an annual accounting period, adopting or changing any
accounting method, settling or compromising any material tax
liability, filing an amended tax return, entering into any
closing agreement or settling any material tax claim or
assessment, surrendering any right to claim a refund of a
material amount of taxes or consenting to any extension or
waiver of the limitation period applicable to any material tax
claim against us or our subsidiaries;
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settle, release or forgive any material claim or litigation or
waive any right thereto;
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adopt, approve or agree to adopt any shareholder rights plans;
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create any subsidiaries; or
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announce any intention to do any of the foregoing.
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Parent and Merger Sub are restricted from taking any action that
would, individually or in the aggregate, prevent, materially
delay or materially impede their ability to consummate the
Merger.
Shareholders
Meeting
The Merger Agreement requires us, as soon as reasonably
practicable, to call, give notice of, convene and hold a meeting
of our shareholders to adopt the Merger Agreement and the
related Plan of Merger. Except to the extent otherwise required
in order to comply with its fiduciary duties under applicable
law, our Board of Directors is required to recommend that our
shareholders vote in favor of adoption of the Merger Agreement
and the related
41
Plan of Merger and to approve the Merger, and to use its
reasonable best efforts to have the Merger Agreement, the
Related Plan of Merger and the Merger adopted and approved by
our shareholders.
Restrictions
on Solicitations of Other Offers
Until 11:59 p.m. Eastern Standard Time on
November 19, 2007, or the No-Shop Period Start Date, the
Company, our subsidiaries and our representatives were permitted
to:
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initiate, solicit and encourage, whether publicly or otherwise,
the submission of any inquiries, proposals or offers or any
other efforts or attempts that constitute or may reasonably be
expected to lead to an Acquisition Proposal for the Company; and
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enter into and maintain or continue discussions or negotiations
with respect to Acquisition Proposals for the Company or
otherwise facilitate any inquiries, proposals, discussions or
negotiations with respect to such Acquisition Proposals.
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On the No-Shop Period Start Date we agreed that we would notify
Parent in writing of:
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the identity of each person, which we refer to as an excluded
party, that, prior to the No-Shop Period Start Date, submitted
an Acquisition Proposal which, in the reasonable judgment of our
Board of Directors was bona fide and was or was reasonably
likely to result in a Superior Proposal.
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Except as may have related to any excluded party, after the
No-Shop Period Start Date we agreed that we would not, and we
would not authorize or permit any of our subsidiaries or
representatives to:
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directly or indirectly, initiate, solicit or knowingly encourage
any inquiries with respect to, or the making of, any Acquisition
Proposal; or
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engage in any negotiations or discussions concerning, or provide
access to our properties, books and records or any confidential
information or data to any person relating to an Acquisition
Proposal.
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In addition, we agreed that after the No-Shop Period Start Date
we would immediately cease and terminate with all persons any
such solicitation, encouragement, discussion or negotiations
existing at such time, unless the person was an excluded party.
Notwithstanding the aforementioned restrictions, at any time
prior to the adoption of the Merger Agreement by our
shareholders, the Company or our Board of Directors is permitted
to provide access to our properties, books and records and
provide other information and data in response to a request for
such information or data or to engage in discussions or
negotiations with, or provide any information to, a third party
to the extent that:
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we receive from such party an Acquisition Proposal for the
Company not solicited in violation of the Merger Agreement; and
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our Board of Directors determines in good faith, after
consultation with our legal counsel and financial advisors, that
(i) the Acquisition Proposal is credible and constitutes or
is reasonably likely to result in a Superior Proposal and
(ii) the failure to take such action would be inconsistent
with its fiduciary duties under applicable law.
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In such cases, the Company (a) will not, and will not allow
its representatives to, disclose any material non-public
information to such person without entering into a
confidentiality agreement that contains provisions that are no
less favorable in the aggregate to the Company than those
contained in the confidentiality agreement entered into with
Parent, and (b) will promptly provide to Parent any
material non-public information concerning the Company or its
subsidiaries provided to such other person which was not
previously provided or made available to Parent or Merger Sub.
Furthermore, if, at any time prior to the adoption of the Merger
Agreement and the related Plan of Merger, and the approval of
the Merger by our shareholders, our Board of Directors
(a) determines in good faith, after consultation with its
legal counsel and financial advisors, that an Acquisition
Proposal which did not result from a material breach of the
provisions described in the previous paragraphs is a Superior
Proposal and (b) determines in good faith, after
consultation with its legal counsel, that such action is
required in order for our Board of Directors to
42
act in a manner consistent with its fiduciary duties under
applicable law, we may terminate the Merger Agreement to enter
into a definitive agreement with respect to such Superior
Proposal, but only if:
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we give Parent prior written notice that we have received a
Superior Proposal and the material terms of such Superior
Proposal and identity of the person making such Superior
Proposal;
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Parent does not within five business days following our delivery
of receipt of the notice of a Superior Proposal and after
reasonable opportunity to negotiate with the Company, make an
offer within five business days of such written notice that
results in the Acquisition Proposal no longer being a Superior
Proposal; and
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we concurrently pay to Parent a termination fee. See Fees
and Expenses below.
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We have also agreed that following the No-Shop Period Start
Date, we will:
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notify Parent within 24 hours of our receipt of an
Acquisition Proposal, including the material terms and
conditions of the Acquisition Proposal and the identity of the
third party making the proposal, or any request for information
relating to the Company or our subsidiaries;
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keep Parent reasonably informed on a prompt basis of the status
of any proposals or offers; and
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provide a copy of any Acquisition Proposals or other proposals
or offers and any related material modifications thereto.
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As set forth in the Merger Agreement:
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Acquisition Proposal means any oral or written
inquiry, proposal, indication of interest or offer from any
person or group, whether in one transaction or a series of
transactions, relating to, or that could reasonably be expected
to lead to, (a) any direct or indirect acquisition by any
means of (i) 20% or more of the consolidated revenues, net
income, cash flows or assets of the Company and its
subsidiaries, taken as a whole, or (ii) 20% or more of the
equity securities of the Company (including by issuance thereof
by the Company) then outstanding; (b) any tender offer or
exchange offer, as defined under the Exchange Act, that, if
consummated, would result in any person or group beneficially
owning 20% or more of the equity securities of the Company then
outstanding; or (c) any merger, consolidation, business
combination, recapitalization, reorganization, share exchange,
joint venture, split-off, spin-off, liquidation, dissolution or
similar transaction involving the Company or any of its
subsidiaries, in each case other than the Merger and the other
transactions contemplated hereby.
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Superior Proposal means any bona fide, written offer
made (not in violation of the restrictions on solicitation) to
the Board of Directors by any person (other than Parent and its
affiliates) that if consummated would result in such person (or
its shareholders, partners, trustees or members) owning,
directly or indirectly, in a transaction or series of
transactions, more than 50% of the shares of Common Stock then
outstanding (or of the shares of the surviving entity in a
merger or the direct or indirect parent of the surviving entity
in a merger) or more than 50% of the assets of the Company,
that, in each case, the Board of Directors determines in good
faith (after receiving the advice of its outside legal counsel
and financial advisor), is (a) reasonably capable of being
consummated promptly in accordance with its terms (relative also
to the expected time of consummation of the transactions
contemplated by the Merger Agreement), and for which financing
(to the extent required) is then fully committed, taking into
account all legal, financial, regulatory and other aspects of
the offer and the person making the proposal and (b) more
favorable to the holders of the Common Stock from a financial
point of view than the Merger taking into account all the terms
and conditions of such offer and the Merger Agreement (including
any proposal by Parent to amend the terms of the Merger
Agreement in order to make it equally favorable to the holders
of the Common Stock from a financial point of view).
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43
Indemnification
and Insurance
The Merger Agreement contains provisions relating to the
indemnification and insurance for Verticalnets directors
and officers, such that, after the effective time of the Merger:
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Parent will cause the surviving corporation to assume all
obligations to provide indemnification, advancement of expenses
and exculpation from monetary liability for acts of omissions
occurring prior to the effective time of the Merger in favor of
any current or former directors or officers of the Company and
its subsidiaries as provided under the terms of Company
organizational documents or other agreements. From and after the
effective time of the Merger, Parent shall cause the articles of
incorporation and bylaws of the surviving corporation to contain
terms no less favorable with respect to indemnification and
advancement of expenses or exculpation from monetary liability
for acts or omissions occurring prior to the effective time of
the Merger than those in effect under the Companys
organizational documents or other agreements as of the date of
the Merger Agreement.
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The surviving corporation will indemnify each incumbent officer
and director of the Company or its subsidiaries as of the date
of the Merger Agreement for:
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all costs incurred in connection with any action related to his
or her capacity as an officer or director, including actions
related to the Merger,
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provided, that neither Parent nor the surviving corporation
shall be required to indemnify any incumbent officer or director
if such person is found to be liable to the Company or any of
its subsidiaries by a court of competent jurisdiction, or
nationally recognized U.S. counsel selected by Parent in
good faith finds that such person (i) failed to act in good
faith, (ii) failed to act in the best interests of the
Company or any of its subsidiaries, (iii) engaged in
intentional misconduct or knowing violation of law, or
(iv) derived improper personal benefit as a result of the
actions in question; or
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solely with respect to acts or omissions in connection with the
authorization and approval of documents relating to the Merger,
advance expenses incurred by incumbent officers and directors
incurred in defending any such action,
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provided, that such incumbent officer or director provides a
customary undertaking to repay any such advances if it is
determined that such person was not entitled to such
indemnification.
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Parent will provide, or will cause the surviving corporation to
provide, for a period of six (6) years following the
effective time of the Merger, a commercially available run-off
or tail policy with limits of $5 million, plus an
additional $10 million in Side A coverage with zero
retention to cover each party covered by the Companys
current officers and directors liability insurance policy on
terms with respect to such coverage and amount no less favorable
than those of the policy in effect on the date of the Merger
Agreement, provided however, that Parent will not be obligated
to pay an aggregate premium in excess of 200% of the amount per
annum that the Company paid in its last full fiscal year.
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Commercially
Reasonable Efforts Covenant
The Company, Parent and Merger Sub have agreed to use
commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to complete the Merger and the other transactions
contemplated by the Merger Agreement.
Shareholder
Litigation
We have agreed to keep Parent informed of, and cooperate with
Parent in connection with, any shareholder action against the
Company
and/or
its
officers or directors relating to the Merger, provided, however,
that we will not agree to any settlement in connection with such
shareholder action without Parents prior written consent.
44
Certain
Other Covenants
The Merger Agreement contains additional mutual covenants,
including covenants relating to preparation of this proxy
statement, cooperation regarding filings with governmental and
other agencies and organizations and obtaining any governmental
or third-party consents or approvals, public announcements and
further assurances.
Conditions
to the Completion of the Merger
Mutual
Closing Conditions
The obligations of each of Parent, Merger Sub and the Company to
consummate the Merger are subject to the satisfaction or waiver
at or before the effective time of the Merger of the following
conditions:
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approval of the Merger Agreement by our shareholders;
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absence of orders suspending the use of the proxy
statement; and
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absence of legal prohibitions on completion of the Merger.
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Additional
Closing Conditions for the Benefit of Parent and Merger
Sub
The obligation of Parent and Merger Sub to complete the Merger
is subject to the satisfaction or waiver at or before the
effective time of the following additional conditions:
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the Company has performed in all material respects its
obligations required to be performed by it at or prior to the
effective time of the Merger;
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the representations and warranties of the Company shall be true
and correct as of the effective time of the Merger (except to
the extent expressly made as of an earlier date, in which case
as of such earlier date), except (in the case of representations
and warranties other than those related to the absence of any
change, event or occurrence since June 30, 2007), for failures
to be true and correct that individually or in the aggregate
have not had or would not reasonably be expected to have a
material adverse effect (as defined above) on the Company;
provided, that for purposes of determining whether this
condition is satisfied, references to material adverse effect
and any other materiality qualification contained in such
representations and warranties (other than those related to the
absence of any change, event or occurrence since June 30, 2007)
shall be ignored;
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the Company has delivered a certificate signed by its chief
executive officer or chief financial officer to the foregoing
effect;
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the Company has obtained all consents and approvals of third
parties, other than those of governmental entities, required in
connection with the Merger Agreement and confidential disclosure
schedules thereto and the other documents and transactions
contemplated thereby, other than those consents or approvals
which if not obtained would not, individually or in the
aggregate result in a Company material adverse effect (as
defined above);
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since the date of the Merger Agreement there has not been a
Company material adverse effect (as defined above);
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the employment agreement of Nathanael V. Lentz and related
release shall have been executed by Nathanael V. Lentz
and the Company and delivered to Parent and shall be in full
force and effect; and
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the waiver by the holder of our senior subordinated discount
promissory note of any rights to the proceeds received by the
Company for shares of Series C Preferred Stock shall
continue to be in full force and effect.
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45
Additional
Closing Conditions for the Benefit of the Company
The obligation of the Company to complete the Merger is subject
to the satisfaction or waiver at or before the effective time of
the following additional conditions:
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Parent and Merger Sub have performed in all material respects
their obligations required to be performed by them at or prior
to the effective time of the Merger;
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the representations and warranties of Parent and Merger Sub
shall be true and correct in all material respects as of the
effective time of the Merger, (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date), except for failures to be true and correct that
individually or in the aggregate would not have or prevent or
materially delay the ability of Parent and Merger Sub to perform
their respective obligations under the Merger Agreement;
provided, that for purposes of determining whether this
condition is satisfied, references to any materiality
qualification contained in such representations and warranties
shall be ignored;
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the Company has received a certificate signed by the chief
executive officer or another senior officer of Parent to the
foregoing effect.
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The Merger Agreement contains provisions relating to the benefit
entitlements of Company employees after the effective time of
the Merger. Each company employee will be credited with his or
her years of service with the Company, our subsidiaries and
affiliates prior to the consummation of the Merger for purposes
of vesting and eligibility under any benefit plans covering
company employees after the effective time of the Merger. In
addition, each Company employee is immediately eligible to
participate in any employee benefit plan provided after the
effective time of the Merger to the extent that the Company
employee was enrolled in a comparable benefit plan prior to the
Merger.
With respect to any employee benefit plan providing medical,
dental, pharmaceutical
and/or
vision benefits in which any such employee first becomes
eligible to participate, on or after the effective time of the
Merger Parent will: (i) waive all pre-existing conditions,
exclusions and waiting periods with respect to participation and
coverage requirements, and (ii) provide credit towards any
deductible or out-of-pocket expense maximum under any such plans
for out-of-pocket amounts expended by such employee under the
employee plans during the current plan year.
For a more detailed description of other employee-related
matters, see The Merger Interests of
Verticalnets Directors and Executive Officers in the
Merger, beginning on page 31 of this proxy statement.
Termination
of the Merger Agreement
The Merger Agreement may be terminated at any time before the
effective time of the Merger, whether before or after approval
of the matters presented in connection with the Merger by our
shareholders, in any of the following ways:
(a) by mutual written consent of Parent and the Company,
(b) by either Parent or the Company if:
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our shareholders fail to adopt the Merger Agreement and approve
the Merger, provided that the Company cannot terminate for this
reason if it is in material breach of the Merger Agreement or
the failure to obtain shareholder approval of the Merger
Agreement was caused by a breach of the Voting Agreement by a
party thereto (other than the Parent or Merger Sub);
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there is a permanent legal prohibition to completing the Merger,
provided that the right to terminate will not be available for
either Parent or the Company whose failure to comply with any
provision of the Merger Agreement has resulted in such legal
prohibition; or
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the Merger has not been consummated on or before April 15,
2008, provided that neither Parent nor the Company can terminate
the Merger Agreement for this reason if its breach of any
obligation under the Merger Agreement has resulted in the
failure of the Merger to occur on or before that date.
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46
(c) by Parent if:
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the Companys breach of any representation or warranty or
failure to perform any covenant under the Merger Agreement that
would cause the conditions to closing not to be satisfied and
has not been or is incapable of being cured by the Company by
April 15, 2008 or within thirty (30) days after
written receipt of notice of the breach from Parent;
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(i) our Board of Directors fails to include its
recommendation to the shareholders regarding approval of the
Merger Agreement in the proxy statement, makes recommendation to
the shareholders against approval of the Merger Agreement or
resolves to do so, fails to reconfirm its recommendation of the
Merger Agreement within five (5) days after Parent so
requests in writing (which five day period will be extended for
an additional five days if the Company makes certain
certifications to Parent as specified in the Merger Agreement),
or if a tender offer or exchange offer for any outstanding
voting securities has been publicly disclosed, fails within ten
(10) business days of the commencement thereof to make
recommendations to the shareholders against acceptance of such
offer, (ii) any party to the Voting Agreement (other than
Parent of Merger Sub) breaches or fails to perform his, her or
its obligations thereunder in material respects, or
(iii) we breach or fail to perform any of our obligations
under the provisions of the Merger Agreement relating to the
solicitation of alternative Acquisition Proposals; or
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any person or group (other than Parent, Merger Sub or any of
their respective affiliates) become the beneficial owner of at
least a majority of our outstanding voting securities.
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(d) by the Company if:
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our Board of Directors concludes that an Acquisition Proposal is
a Superior Proposal and the Company (1) has given Parent
written notice of its intention to terminate the agreement and
provides Parent with five (5) business days during which to
make an offer at least as favorable to the shareholders of
Verticalnet (as set forth in greater detail above), and
(2) pays the applicable termination fee; or
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Parents breach of any representation or warranty or
failure to perform any covenant as set forth in the Merger
Agreement that would cause the condition to closing not to be
satisfied and has not been or is incapable of being cured by
Parent by April 15, 2008 or within thirty (30) days
after written receipt of notice of the breach from the Company.
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If the Merger Agreement is validly terminated, the Agreement
will become void without any liability on the part of any party
other than the payment of a termination fee in certain
circumstances discussed below. However, the provisions of the
Merger Agreement relating to the non-survival of
representations, warranties and agreements, termination fees and
expenses, governing law, succession and assignment and
jurisdiction and waiver of jury trial, will continue in effect
notwithstanding termination of the Merger Agreement. In
addition, no termination will relieve any party of any liability
or damages resulting from any breach by that party.
The Merger Agreement generally provides that each party will pay
its own fees and expenses in connection with the Merger
Agreement and the transactions contemplated by the Merger
Agreement, whether or not the Merger is completed.
Termination
Fees Payable by Verticalnet
We have agreed to pay Parent a termination fee (the sum of 5.99%
of the Companys enterprise value and the Parents
transaction expenses) if any of the following payment events
occur:
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we terminate the Merger Agreement in accordance with the
requirements for acceptance of a Superior Proposal as described
above under Terms of the Merger Agreement
Restrictions on Solicitation;
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47
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our Board of Directors fails to include its recommendation to
the shareholders regarding approval of the Merger Agreement in
the proxy statement, makes recommendation to the shareholders
against approval of the Merger Agreement or resolves to do so,
fails to reconfirm its recommendation of the Merger Agreement
within five (5) days after Parent so requests in writing
(which five day period will be extended for an additional five
days if the Company makes certain certifications to Parent as
specified in the Merger Agreement), or if a tender offer or
exchange offer for any outstanding voting securities has been
publicly disclosed, fails within ten (10) business days of
the commencement thereof to make recommendations to the
shareholders against acceptance of such offer, or
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the Merger Agreement is terminated by either us or Parent
because (1) the Merger has not been consummated on or
before April 15, 2008 (without the shareholder meeting
having occurred), (2) our shareholders fail to adopt the
Merger Agreement and approve the Merger, or by Parent because of
(3) a breach or failure by us to perform any of our
representations, warranties, covenants or other agreements that
would cause a failure of a condition to the Merger Agreement
that has not been or is incapable of being cured by
April 15, 2008 or within 30 days of receipt of notice
of the breach by Parent, (4) material failure to perform
obligations under or breach of the Voting Agreement by any party
thereto (other than Parent or Merger Sub), or (5) our
failure to perform or breach of obligations under the Merger
Agreement relating to the solicitation of alternative
Acquisition Proposals, but in each case only if prior to the
shareholder meeting an Acquisition Proposal shall have been
publicly disclosed or made known and within 12 months of
the termination, we enter into a definitive agreement related to
the Acquisition Proposal. For purposes of determining whether a
termination fee will be payable by us, each reference to 20% in
the definition of Acquisition Proposal shall be
deemed to be 50.1%.
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In addition, we have also agreed to pay all documented, out of
pocket expenses, including the reasonable fees and expenses of
lawyers, accountants, financial advisors, consultants and other
advisors, incurred by Parent or Merger Sub in connection with
entering into the Merger Agreement and acts and documents
relating thereto, provided, however, that if a termination fee
is payable, then we may reduce the amount of the termination fee
to be paid by the amount of any expense reimbursement.
If Verticalnet fails promptly to pay any of the termination fees
described above, Verticalnet also agrees to pay any costs and
expenses (including attorneys fees) incurred by the other
party in connection with any legal enforcement action for
payment of the termination fees described above with interest on
such unpaid amounts at the prime lending rate, as published in
the Wall Street Journal, calculated on a daily basis from the
date such amounts were required to be paid on the date of actual
payment.
Any provision of the Merger Agreement may be amended or waived
before the effective time of the Merger if, but only if, the
amendment or waiver is in writing and signed, in the case of an
amendment, by each party to the Merger Agreement or, in the case
of a waiver, by each party against whom the waiver is to be
effective; provided that, after approval of the Merger Agreement
by our shareholders and without their further approval, no
amendment or waiver that requires shareholder approval under
applicable law or NASDAQ rules may be made without such approval.
Exchange
and Payment Procedures
Before the Merger is effective, Parent will select a bank or
trust company reasonably acceptable to Verticalnet to act as
payment agent and make payment of the merger consideration as
described above. At or prior to the effective time of the
Merger, Parent will deposit with the payment agent the cash
sufficient to pay the per share merger consideration to the
equity holders entitled to receive such consideration.
As of the effective time of the Merger and following conversion
into the right to receive the merger consideration, the Company
will close its stock transfer books. After that time, there will
be no further transfer of shares of Verticalnet common stock on
such transfer books.
48
Promptly following the effective time of the Merger, the
surviving corporation will cause the payment agent to send you a
letter of transmittal and instructions advising you how to
surrender your certificates in exchange for the per share merger
consideration. The payment agent will pay you your per share
merger consideration after you have (1) surrendered your
stock certificates to the payment agent (or, if such shares of
Verticalnet common stock are held in book-entry or other
uncertificated form, upon the entry through a book-entry
transfer agent of the surrender of such shares of Verticalnet
common stock on a book-entry account statement) and
(2) provided to the payment agent your duly completed and
validly executed letter of transmittal and such other documents
as may be reasonably required by Parent. Interest will not be
paid or accrue in respect of the per share merger consideration.
The surviving corporation will reduce the amount of any per
share merger consideration paid to you by any required
withholding taxes.
You should not forward your stock
certificates to the payment agent without a letter of
transmittal, and you should not return your stock certificates
with the enclosed proxy card.
If any cash deposited with the payment agent is not claimed
within six months following the closing of the Merger, such cash
will be returned to the surviving corporation upon demand, and
after such transfer, any shareholders of Verticalnet who have
not properly surrendered their stock certificates may look only
to the surviving corporation for payment of the merger
consideration.
If you have lost your certificate, or if it has been stolen or
destroyed, if required by the surviving corporation, you will be
required to provide an affidavit to that fact and post a bond in
a reasonable amount that the surviving corporation directs as
indemnity against any claim that may be made against Parent, the
payment agent or the surviving corporation in respect of such
certificate.
If any Certificate representing the Companys securities
(Certificate) is lost, stolen or destroyed, the
exchange agent will deliver the applicable merger consideration
due in respect of the shares formerly represented by that
Certificate if:
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the shareholder asserting the claim of a lost, stolen or
destroyed Certificate makes an affidavit of that fact; and
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upon request of the surviving corporation, the shareholder posts
a bond in a reasonable amount designated by the surviving
corporation as security against any claim that may be made with
respect to that Certificate against the surviving corporation.
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Any portion of the exchange fund which remains undistributed to
our shareholders for six (6) months after the effective
time of the Merger will be delivered by the exchange agent to
Parent upon demand, and any of our shareholders who have not
previously surrendered their Certificates will be entitled to
look only to Parent and the surviving corporation for payment of
the merger consideration due in respect of the shares formerly
represented by their Certificates. None of Parent, Merger Sub or
Verticalnet will be liable to any former Verticalnet shareholder
for any merger consideration delivered to a public official
pursuant to applicable abandoned property, escheat or similar
laws.
49
The following is a summary of the material terms of the voting
agreement among Parent, the Company and the holders of the
shares of Series B Preferred Stock entered into
concurrently with the execution and delivery of the Merger
Agreement, and then amended and restated on November 20,
2007 (as amended, the Voting Agreement). This
summary is qualified in its entirety by reference to the
complete text of the Voting Agreement. The Voting Agreement,
attached as
Annex B
, contains the complete terms of
that agreement and shareholders should read it carefully and in
its entirety.
In connection with the execution of the Merger Agreement, each
holder of Series B Preferred Stock of the Company entered
into a Voting Agreement with Parent. All of these shareholders
other than Michael J. Hagan and Michael P. McNulty
(the Group One Shareholders) have agreed to vote the
shares of our capital stock owned by them
in favor
of the
adoption of the Merger Agreement and the related Plan of Merger,
and the approval of the Merger and in favor of the adjournment
of the special meeting, if necessary or appropriate, to solicit
additional proxies. As of the date of the Voting Agreement, the
Group One Shareholders were the beneficial owners with respect
to 842,179 shares of our Common Stock in the aggregate
(representing 4,679 shares of our Common Stock held
directly, and 837,500 shares of common stock issuable upon
conversion of 6,700,000 shares of Series B Preferred
Stock). As of the record date, the Group One Shareholders are
entitled to vote 17.27% of the outstanding voting stock of the
Company.
Each of the Group One Shareholders also agreed, until any
termination of the Voting Agreement, to vote these shares of
Common Stock and Series B Preferred Stock held by each such
shareholder
against
the following actions:
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actions or agreements that would reasonably be expected to
result in a breach in any material respect of any of the
Companys covenants, representations or warranties or other
obligations under the Merger Agreement;
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extraordinary corporate transactions, such as a merger, rights
offering, reorganization, recapitalization or liquidation
involving the Company or any of its subsidiaries (other than the
Merger);
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sales or transfers of a material amount of assets or capital
stock of the Company or any of its subsidiaries; or
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actions intended , or would reasonably be expected, to prevent
or materially delay or otherwise interfere with the Merger and
the other transactions contemplated by the Merger Agreement.
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Each of the Group One Shareholders has irrevocably granted to,
and appointed Parent and its designees, as such
shareholders proxy and attorney-in-fact to vote all of
such shareholders shares of Common Stock and Series B
Preferred Stock in accordance with the above description.
Notwithstanding the foregoing proxy, Parent shall not have and
exercise any voting rights under the Voting Agreement if such
voting rights when taken together with voting rights already
exercisable by Parent or Merger Sub with respect to any other
shares of capital stock of the Company would allow Parent to
have voting rights with respect to 20% or more of the
outstanding voting capital stock of the Company. We refer to any
such excess shares as the Excess Shares. Parent has
irrevocably granted to, and appointed the Company, as
Parents proxy and attorney-in-fact to vote all the Excess
Shares in a manner that the Company, acting through its Board of
Directors, determines in its sole discretion.
Furthermore, Michael J. Hagan and Michael P. McNulty (the
Group Two Shareholders) have agreed to grant an
irrevocable proxy to the Company to vote their Common Stock and
Series B Preferred Stock, in connection with the Merger and
any other extraordinary corporate transaction, in a manner that
the Company, acting through our Board of Directors, determines
in its sole discretion. As of the date of the Voting Agreement,
the Group Two Shareholders were the beneficial owners with
respect to 254,393 shares of Common Stock in the aggregate
(representing 4,393 shares of Common Stock held directly,
and 250,000 shares of Common Stock issuable upon conversion
of 2,000,000 shares of Series B Preferred Stock). As
of the record date, the Group Two Shareholders are entitled to
vote 7.62% of the outstanding voting stock of the Company.
50
In connection with the Voting Agreement, all signatory
shareholders to the Voting Agreement further agreed not to:
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sell, transfer, give, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer,
gift, pledge, encumbrance, assignment, or other disposition of
these shares or any interest contained therein;
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deposit the shares into a voting trust or grant any proxies or
enter into a voting arrangement, power of attorney or voting
trust with respect to any shares held by such shareholder, or
take any other action that would result in diminution of the
voting power represented by any of such shareholders
shares;
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purchase, acquire or accept any shares of capital stock or other
equity securities of the Company or other securities exercisable
for or convertible into shares of capital stock or equity
securities of the Company;
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exercise any right to convert any of such shareholders
shares of Series B Preferred Stock into shares of Common
Stock, pursuant to the Description and Designation of
Series B Preferred Stock;
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exercise any right of first refusal to purchase shares of the
Companys capital stock, warrants or any other securities,
pursuant to the Stock and Warrant Purchase Agreement, dated
June 1, 2007, by and among the Company and the purchasers
listed therein, including the shareholder; or
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commit or agree to take any of the foregoing actions.
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In addition, under the Voting Agreement, the Group One
Shareholders have agreed to the treatment of the shares of
Series B Preferred Stock contemplated by the Merger
Agreement, to waive its right to seek appraisal and to waive its
right to convert each such shareholders shares into common
stock.
Notwithstanding the foregoing, the Voting Agreement provides
that it will not restrict a director or officer of Verticalnet
from taking any action in his capacity as a director or officer
necessary for him to comply with his fiduciary duties as a
director or officer of the Company.
In addition, each shareholder party to the Voting Agreement
(other than the Group Two Shareholders and any shareholder who
is also a director or officer of the Company) has agreed that
for so long as the Voting Agreement is in effect, they will not,
nor will they authorize or permit any representative to,
knowingly solicit, initiate or encourage any alternative
Acquisition Proposal or participate or engage in any discussions
or negotiations with or provide any information relating to the
Company to any person making an alternative Acquisition Proposal.
The proxies granted by the Group One Shareholders and Group Two
Shareholders are irrevocable until the termination of the Voting
Agreement and will automatically terminate upon the termination
of the Voting Agreement. The Voting Agreement terminates on the
earlier to occur of (i) termination of the Merger Agreement
in accordance with its terms, (ii) the written agreement of the
parties to terminate, or (iii) at the option of any shareholder
upon the execution of any amendment, modification, change or
waiver with respect to the Merger Agreement that results in a
decrease in the merger consideration.
PAST
CONTACTS, TRANSACTIONS OR NEGOTIATIONS
Except as described under The Merger
Background of the Merger beginning on page 19 of this
proxy statement, there have not been any negotiations,
transactions or material contacts during the past two years
concerning any merger, consolidation, acquisition, tender offer
or other acquisition of any class of Verticalnets
securities, election of Verticalnets directors or sale or
other transfer of a material amount of Verticalnets assets
(i) between Verticalnet or any of its affiliates, on the
one hand, and Verticalnet, Parent and Merger Sub, their
respective executive officers, directors, members or controlling
persons, on the other hand, (ii) between any affiliates of
Verticalnet, or (iii) between Verticalnet and its
affiliates, on the one hand, and any person not affiliated with
Verticalnet who would have a direct interest in such matters, on
the other hand.
51
MARKET
PRICES OF COMMON STOCK
Our Common Stock is traded on the NASDAQ Capital Market under
the symbol VERT The following table sets forth the
high and low closing sales prices per share of our Common Stock
on the NASDAQ Capital Market for the periods indicated. On
June 12, 2006, we effected a one-for-seven reverse stock
split of our outstanding shares of Common Stock, and on
August 16, 2007, we effected a one-for-eight reverse split
of our outstanding shares of Common Stock. All references to
market prices of our Common Stock below reflect the results of
the reverse stock splits.
Market
Information
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Common Stock
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High
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Low
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Fiscal Year Ended December 31, 2005
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1st Quarter
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$
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89.60
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48.16
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2nd Quarter
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$
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53.76
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36.40
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3rd Quarter
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$
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45.36
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31.36
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4th Quarter
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$
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39.20
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20.72
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Fiscal Year Ending December 31, 2006
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1st Quarter
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$
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40.32
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26.88
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2nd Quarter
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$
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26.88
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8.08
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3rd Quarter
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$
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10.32
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7.08
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4th Quarter
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$
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8.45
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5.12
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Fiscal Year Ending December 31, 2007
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1st Quarter
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$
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6.18
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3.60
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2nd Quarter
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$
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6.80
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2.40
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3rd Quarter
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$
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6.40
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2.41
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4th Quarter (through December 10, 2007)
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$
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5.61
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2.28
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The Company has not declared or paid any dividend on its Common
Stock.
The closing sale price of our Common Stock on the NASDAQ Capital
Market on October 25, 2007, which was the last trading day
before we announced the Merger, was $5.61. On December 10,
2007, the last trading day before this proxy statement was
printed, the closing price for our Common Stock on the NASDAQ
Capital Market was $2.42. You are encouraged to obtain current
market quotations for the Common Stock in connection with voting
your shares.
As of December 10, 2007, the last trading day before this
proxy statement was printed, there were approximately
831 registered holders of shares of Verticalnet common
stock.
Shareholders should obtain a current market quotation for
Verticalnet Common Stock before making any decision with respect
to the Merger.
52
Under Section 1571 of the PBCL, the holders of any class or
series of shares of a corporation are not entitled to exercise
dissenters rights if the shares of the corporation are listed on
a national securities exchange. Consequently, since our Common
Stock is currently listed on NASDAQ, which is a national
securities exchange, the holders of our Common Stock will not
have the right to exercise dissenters rights in connection
with the proposed Merger.
Section 1571 of the PBCL further provides that holders of
any preferred or special class of securities will be granted
dissenters rights, even if they otherwise would be denied such
rights under the provision described above, unless the holders
of the preferred or special class of securities are granted the
right to vote separately as a class to approve the proposed
transaction. Because the holders of Series B Preferred are
entitled to vote separately as a class to approve the proposed
transaction, holders of shares of Series B Preferred Stock
are not entitled to dissenters rights in connection with the
proposed Merger. Furthermore, certain holders of Series B
Preferred Stock have waived dissenters rights under the Voting
Agreement.
Holders of Series C Preferred Stock are entitled to
dissenters rights in connection with the proposed Merger;
however, as of the date of this proxy statement all shares of
Series C Preferred Stock are owned by Merger Sub and Merger
Sub is expected to vote in favor of the adoption of the Merger
Agreement and the approval of the Merger and in favor of the
adjournment proposal.
If the Merger Agreement and the related Plan of Merger are
adopted and the Merger is completed, holders of
Verticalnets Common Stock and Preferred Stock who voted
against the adoption of the Merger Agreement will be treated the
same as shareholders who voted for the adoption of the Merger
Agreement and the related Plan of Merger and their shares will
automatically be converted into the right to receive the merger
consideration.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
Beneficial
Ownership Table
The following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of December 10,
2007 for: (1) each director and executive officer,
(2) all directors and executive officers as a group and
(3) each shareholder we believe to own beneficially more
than five percent of the outstanding Verticalnet common stock
(this data is based upon the Schedules 13D or 13G filed with the
SEC).
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Aggregate
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Percentage of
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Number of
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Shares of
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Shares
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Total
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Capital Stock
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Outstanding
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Beneficial
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Outstanding
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and Entitled
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Acquirable
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Ownership of
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and Entitled
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Name
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to Vote
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Within 60 Days(1)
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Common Stock(2)
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to Vote(3)
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Gregory G. Schott
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384
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984
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1,368
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*
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Nathanael V. Lentz
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23,618
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10,812
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40,491
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0.9
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%
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Michael J. Hagan
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98,707
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716
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129,726
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3.9
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%
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Vincent J. Milano
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384
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984
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1,368
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*
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John N. Nickolas
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384
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984
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1,368
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*
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Mark L. Walsh(4)
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21,662
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984
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28,707
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*
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Darryl E. Wash(5)(6)
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15,661
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1,252
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16,913
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*
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Jonathan T. Cohen
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407
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1,201
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1,608
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*
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Christopher G. Kuhn
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1,253
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4,166
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5,419
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*
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All directors and executive officers as a group (9 persons)
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162,460
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22,083
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226,968
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6.4
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%
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BravoSolution U.S.A., Inc.
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307,589
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0
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322,007
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12.1
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%
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*
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Represents less than 1%.
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53
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(1)
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Unless otherwise noted, reflects the number of shares that could
be purchased by exercise of options available at
December 10, 2007 or within 60 days thereafter under
Verticalnets stock option plans that are currently
exercisable.
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(2)
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The number of shares shown includes shares that are individually
or jointly owned, as well as shares over which the individual
has either sole or shared investment or voting authority. The
amounts and percentages of Common Stock beneficially owned are
reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. Under the
rules of the SEC, a person is deemed to be a beneficial
owner of a security if that person has or shares
voting power, which includes the power to vote or to
direct the voting of such security, or investment
power, which includes the power to dispose of or to direct
the disposition of such security. A person is also deemed to be
a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed a beneficial
owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no
economic interest.
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(3)
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Based on 2,542,309 shares of capital stock outstanding and
entitled to vote at the special meeting as of December 10,
2007, which is comprised of (i) 1,610,845 shares of
Common Stock, (ii) 623,875 shares of Series B
Preferred Stock entitled to vote at the special meeting subject
to the voting cap as set forth in Series B Statement of
Designation, and (iii) 307,589 shares of Series C
Preferred Stock entitled to vote at the special meeting subject
to the voting cap as set forth in Series C Statement of
Designation. The percentages shown do not include the number of
shares that could be purchased by exercise of options available
at December 10, 2007 or within 60 days thereafter
under Verticalnets stock option plans that are currently
exercisable.
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(4)
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Includes 18,939 shares of Series B Preferred Stock
entitled to vote at the special meeting, subject to the voting
cap as set forth in the Series B Statement of Designation,
and which are owned by Ruxton Ventures, LLC. Mr. Walsh is
the Managing Partner of Ruxton Associates, LLC, which is the
Managing Member of Ruxton Ventures, LLC.
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(5)
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Includes 1,957 shares of Common Stock owned by Ascend
Ventures, LP. Mr. Wash is the managing partner of Ascend
Ventures, LP. Mr. Wash disclaims beneficial ownership of
these shares in their entirety.
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(6)
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Includes 12,637 shares of Common Stock owned by
Halo-B2eMarkets, LLC. Mr. Wash is the managing member of
Halo-B2eMarkets,
LLC. Mr. Wash disclaims beneficial ownership of these
shares in their entirety.
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ADJOURNMENT
OF THE SPECIAL MEETING
We may ask our shareholders to vote on a proposal to adjourn the
special meeting to a later date to solicit additional proxies if
there are insufficient votes at the time of the special meeting
to adopt the Merger Agreement and the related Plan of Merger,
and approve the Merger. We currently do not intend to propose
adjournment at our special meeting if there are sufficient votes
to adopt the Merger Agreement and the related Plan of Merger,
and approve the Merger. If the proposal to adjourn our special
meeting for the purpose of soliciting additional proxies is
submitted to our shareholders for approval, such approval
requires the affirmative vote of the holders of a majority of
the shares of our capital stock present or represented by proxy
and entitled to vote on the matter.
Our Board of Directors unanimously recommends that you vote
FOR the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies.
FUTURE
SHAREHOLDER PROPOSALS
If the Merger is completed, there will be no public
participation in any future meetings of the Companys
shareholders. If the Merger is not completed, however,
shareholders will continue to be entitled to attend and
participate in meetings of shareholders. If the Merger is not
completed and assuming that the date of the 2008 annual meeting
of shareholders is not more than 30 days before or after
the anniversary date of the annual meeting of shareholders
relating to our 2007 fiscal year, any shareholder who intends to
present a proposal at the 2008 annual
54
meeting of shareholders must deliver the proposal to the
Secretary of Verticalnet at 400 Chester Field Parkway, Malvern,
Pennsylvania 19355:
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Not later than April 15, 2008, if the proposal is submitted
for inclusion in our proxy materials for that meeting pursuant
to Rule
14a-8
under
the Securities Exchange Act of 1934; and
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Not later than July 1, 2008, if the proposal is submitted
outside the processes of
Rule 14a-8
under the Securities and Exchange Act of 1934, in which case we
are not required to include the proposal in our proxy materials.
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In addition, our bylaws require that we be given advance notice
of shareholder nominations for election to our Board of
Directors. Such nominations for the 2008 annual meeting of
shareholders, other than those made by or on behalf of the Board
of Directors, shall be made by notice in writing delivered or
mailed by certified mail, return receipt requested to the
Secretary, in accordance with our by-laws. Our by-laws also
require that such notice contain certain additional information.
Copies of our by-laws can be obtained without charge from the
Secretary.
Other
Business at Special Meeting
Our Board of Directors does not know of any other business that
may be presented for consideration at the special meeting. If
any business not described herein should come before the special
meeting, the persons named in the enclosed proxy card will vote
on those matters in accordance with their discretion.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
The Company files annual, quarterly and current reports, proxy
statements and other documents with the SEC under the Exchange
Act. These reports, proxy statements and other information
contain additional information about the Company. Shareholders
may read and copy any reports, statements or other information
filed by the Company at the SECs public reference room at
Station Place, 100 F Street, N.E.,
Washington, D.C. 20549. You may also obtain copies of this
information by mail from the public reference section of the SEC
at Station Place, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. Please call
the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. The Companys SEC filings made electronically through
the SECs EDGAR system are available to the public at the
SECs website located at
http://www.sec.gov.
A list of shareholders will be available for inspection by
shareholders at the special meeting or any postponements thereof.
This proxy statement does not constitute the solicitation of
a proxy in any jurisdiction to or from any person to whom or
from whom it is unlawful to make such a proxy solicitation in
such jurisdiction.
Shareholders should not rely on information other than that
contained in this proxy statement. The Company has not
authorized anyone to provide information that is different from
that contained in this proxy statement. This proxy statement is
dated December 14, 2007. No assumption should be made that
the information contained in this proxy statement is accurate as
of any date other than that date, and the mailing of this proxy
statement will not create any implication to the contrary.
Notwithstanding the foregoing, in the event of any material
change in any of the information previously disclosed, the
Company will, where relevant and if required by applicable law,
update such information through a supplement to this proxy
statement.
55
Merger Agreement
AGREEMENT
AND PLAN OF MERGER
by and among
BRAVOSOLUTION S.P.A.,
BRAVOSOLUTION U.S.A., INC.,
and
VERTICALNET, INC.
Dated as of October 25, 2007
TABLE OF
CONTENTS
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Page
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ARTICLE 1 THE MERGER
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A-2
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Section 1.01
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The Merger
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A-2
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Section 1.02
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Closing
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A-2
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Section 1.03
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Effective Time
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A-2
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Section 1.04
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Effect of the Merger
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A-2
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Section 1.05
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Articles of Incorporation
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A-2
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Section 1.06
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Bylaws
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A-2
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Section 1.07
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Directors; Officers
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A-2
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Section 1.08
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Effect on Common Stock and Series C Preferred Stock
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A-3
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Section 1.09
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Effect on Series B Preferred Stock
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A-3
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Section 1.10
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Treatment of Options, Warrants and RSUs
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A-4
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ARTICLE 2 EXCHANGE OF CERTIFICATES
|
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A-4
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Section 2.01
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Exchange Fund
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|
A-4
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Section 2.02
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Exchange Procedures
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A-4
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Section 2.03
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No Further Ownership Rights in Shares and Company Securities
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|
A-5
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Section 2.04
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Termination of Exchange Fund
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|
A-5
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Section 2.05
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No Liability
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|
A-5
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Section 2.06
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Lost Certificates or Instruments
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A-5
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Section 2.07
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Withholding Rights
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A-5
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Section 2.08
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Further Assurances
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A-5
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Section 2.09
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Stock Transfer Books
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A-5
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-6
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Section 3.01
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Corporate Organization
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A-6
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Section 3.02
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Qualification to Do Business
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A-6
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Section 3.03
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No Conflict or Violation
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A-6
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Section 3.04
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Consents and Approvals
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A-6
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Section 3.05
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Authorization and Validity of Agreement
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A-7
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Section 3.06
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Capitalization and Related Matters
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A-7
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Section 3.07
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Subsidiaries
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A-9
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Section 3.08
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Company SEC Reports
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A-9
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Section 3.09
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Absence of Certain Changes or Events
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A-10
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Section 3.10
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Tax Matters
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A-11
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Section 3.11
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Absence of Undisclosed Liabilities; Closing Indebtedness; and
Company Transaction Expenses
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A-12
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Section 3.12
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Real Property
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A-13
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Section 3.13
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Assets of the Company and its Subsidiaries
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A-13
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Section 3.14
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Intellectual Property
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A-14
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Section 3.15
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Software
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A-15
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Section 3.16
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Licenses and Permits
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A-16
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Section 3.17
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Government Contracts
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A-16
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Section 3.18
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Compliance with Law; Sarbanes-Oxley Act
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A-16
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Section 3.19
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Litigation
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A-17
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A-i
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Page
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Section 3.20
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Material Contracts
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A-18
|
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Section 3.21
|
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Employee Plans
|
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A-19
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Section 3.22
|
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Insurance
|
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A-21
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Section 3.23
|
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Affiliate Transactions
|
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A-21
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Section 3.24
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Vendors and Customers
|
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A-21
|
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Section 3.25
|
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Labor Matters
|
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A-21
|
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Section 3.26
|
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Environmental Matters
|
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|
A-22
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Section 3.27
|
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No Brokers
|
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|
A-22
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|
Section 3.28
|
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State Takeover Statutes
|
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A-22
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Section 3.29
|
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Information Supplied
|
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A-23
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Section 3.30
|
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Board Approval
|
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A-23
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Section 3.31
|
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Vote Required
|
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A-23
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Section 3.32
|
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Illegal or Unauthorized Payments; Political Contributions
|
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A-23
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Section 3.33
|
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|
Product Warranty
|
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A-24
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Section 3.34
|
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Export
|
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A-24
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Section 3.35
|
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Inventory
|
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A-24
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
|
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A-24
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Section 4.01
|
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Organization
|
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A-24
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Section 4.02
|
|
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No Conflict or Violation
|
|
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A-24
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Section 4.03
|
|
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Consents and Approvals
|
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A-25
|
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Section 4.04
|
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Authorization and Validity of Agreement
|
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A-25
|
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|
Section 4.05
|
|
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No Brokers
|
|
|
A-25
|
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|
Section 4.06
|
|
|
Information Supplied
|
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|
A-25
|
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|
Section 4.07
|
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Merger Sub
|
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A-25
|
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|
Section 4.08
|
|
|
Sufficiency of Funds
|
|
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A-25
|
|
|
|
|
|
|
ARTICLE 5 COVENANTS OF THE COMPANY
|
|
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A-26
|
|
|
Section 5.01
|
|
|
Conduct of Business Before the Closing Date
|
|
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A-26
|
|
|
Section 5.02
|
|
|
Notice of Breach
|
|
|
A-27
|
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|
Section 5.03
|
|
|
Section 409A
|
|
|
A-28
|
|
|
Section 5.04
|
|
|
Exemption from Liability Under Section 16(b)
|
|
|
A-28
|
|
|
Section 5.05
|
|
|
Radcliffe Note
|
|
|
A-28
|
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|
Section 5.06
|
|
|
Series C Preferred Stock Purchase Agreement
|
|
|
A-28
|
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|
|
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ARTICLE 6 COVENANTS OF PARENT AND MERGER SUB
|
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|
A-28
|
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Section 6.01
|
|
|
Employee Benefits
|
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A-28
|
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|
Section 6.02
|
|
|
Directors and Officers Indemnification and Insurance
|
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A-28
|
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ARTICLE 7 ADDITIONAL COVENANTS OF THE PARTIES
|
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A-30
|
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Section 7.01
|
|
|
Preparation of Proxy Statement, Company Shareholders Meeting
|
|
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A-30
|
|
|
Section 7.02
|
|
|
Access to Information
|
|
|
A-30
|
|
|
Section 7.03
|
|
|
Commercially Reasonable Efforts
|
|
|
A-31
|
|
|
Section 7.04
|
|
|
Acquisition Proposal
|
|
|
A-31
|
|
|
Section 7.05
|
|
|
Shareholder Litigation
|
|
|
A-35
|
|
|
Section 7.06
|
|
|
Public Announcements
|
|
|
A-35
|
|
A-ii
|
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Page
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ARTICLE 8 CONDITIONS PRECEDENT
|
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|
A-35
|
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Section 8.01
|
|
|
Conditions to the Merger
|
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A-35
|
|
|
Section 8.02
|
|
|
Conditions to the Obligations of Parent and Merger Sub
|
|
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A-35
|
|
|
Section 8.03
|
|
|
Conditions to the Obligations of the Company
|
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A-36
|
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Section 8.04
|
|
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Frustration of Closing Conditions
|
|
|
A-36
|
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ARTICLE 9 TERMINATION
|
|
|
A-37
|
|
|
Section 9.01
|
|
|
Termination
|
|
|
A-37
|
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|
Section 9.02
|
|
|
Effect of Termination
|
|
|
A-38
|
|
|
Section 9.03
|
|
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Fees and Expenses
|
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A-38
|
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Section 9.04
|
|
|
Amendment
|
|
|
A-39
|
|
|
Section 9.05
|
|
|
Extension; Waiver
|
|
|
A-39
|
|
ARTICLE 10 MISCELLANEOUS
|
|
|
A-39
|
|
|
Section 10.01
|
|
|
Survival
|
|
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A-39
|
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|
Section 10.02
|
|
|
Successors and Assigns
|
|
|
A-40
|
|
|
Section 10.03
|
|
|
Governing Law; Jurisdiction; Remedies
|
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A-40
|
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|
Section 10.04
|
|
|
Severability; Construction
|
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|
A-41
|
|
|
Section 10.05
|
|
|
Notices
|
|
|
A-41
|
|
|
Section 10.06
|
|
|
Entire Agreement
|
|
|
A-42
|
|
|
Section 10.07
|
|
|
Parties in Interest
|
|
|
A-42
|
|
|
Section 10.08
|
|
|
Section and Paragraph Headings
|
|
|
A-42
|
|
|
Section 10.09
|
|
|
Counterparts
|
|
|
A-42
|
|
|
Section 10.10
|
|
|
Definitions
|
|
|
A-42
|
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|
EXHIBITS
|
|
|
|
|
|
|
|
|
Exhibit A
|
|
|
Plan of Merger
|
|
|
|
|
|
Exhibit B
|
|
|
Series C Preferred Stock Purchase Agreement
|
|
|
|
|
|
Exhibit C
|
|
|
Statement of Designation
|
|
|
|
|
|
Exhibit D
|
|
|
Voting Agreement
|
|
|
|
|
|
Exhibit E
|
|
|
Employment Agreement
|
|
|
|
|
|
Exhibit F
|
|
|
Release
|
|
|
|
|
|
Exhibit G
|
|
|
Radcliffe Waiver
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
Company Disclosure Schedule
|
|
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|
|
A-iii
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 25, 2007
(this
Agreement
), by and among BravoSolution
S.p.A., a corporation organized under the laws of Italy
(
Parent
), BravoSolution U.S.A., Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of Parent
(
Merger Sub
), and Verticalnet, Inc., a
Pennsylvania corporation (the
Company
).
RECITALS
WHEREAS, the Board of Directors of the Company (the
Company Board
) has (i) approved and
adopted this Agreement and the related Plan of Merger (the
Plan of Merger
; in substantially the form
attached hereto as
Exhibit A
), (ii) resolved to
recommend that the shareholders of the Company approve this
Agreement and the related Plan of Merger, and
(iii) declared fair and in the best interest of the Company
and its shareholders this Agreement and the merger of Merger Sub
with and into the Company (the
Merger
), upon
the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, pursuant to the terms of this Agreement, at the
Closing, by virtue of the Merger and without any action by the
holder thereof, (i) each outstanding share of the
Companys common stock, par value $0.01 per share (the
Company Common Stock
), issued and outstanding
immediately prior to the Effective Time, other than shares held
directly or indirectly by the Company, Parent or Merger Sub,
will be converted into the right to receive $2.56 per share in
cash, without interest (the
Common
Consideration
), and (ii) each outstanding share
of the Companys Series B Preferred Stock (the
Series B Preferred Stock
) issued and
outstanding immediately prior to the Effective Time, other than
shares held directly or indirectly by the Company, will be
converted into the right to receive either $0.38750 or $0.26875
per share in cash (in accordance with
Section 1.09
below), without interest (the
Series B
Consideration
and, together with the Common
Consideration, the
Merger Consideration
);
WHEREAS, the respective Boards of Directors of Parent and Merger
Sub have approved the Merger, this Agreement and the Plan of
Merger;
WHEREAS, as a condition and inducement to the Companys
willingness to enter into this Agreement, Merger Sub has agreed
that on October 31, 2007 it will acquire from the Company,
pursuant to the terms of a Stock Purchase Agreement, to be dated
as of such date, by and between the Company and Merger Sub, in
substantially the form attached hereto as
Exhibit B
(the
Series C Preferred Stock Purchase
Agreement
), 322,007 shares of the Companys
Series C Preferred Stock (the
Series C
Preferred Stock
) having the rights, preferences,
privileges and limitations set forth in the Description and
Designation of Series C Preferred Stock attached as
Exhibit A to the Statement with Respect to Shares of
Series C Preferred Stock of the Company to be dated as of
such date, in substantially the form attached hereto as
Exhibit C
(the
Statement of
Designation
), at an aggregate subscription price of
$824,337.92 (the
Series C Purchase
Price
);
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent and
Merger Subs willingness to enter into this Agreement,
certain holders of the Companys capital stock
(representing on the date hereof approximately 28% of the
Companys outstanding voting securities (but without taking
into account the issuance of the Series C Preferred
Stock)), have entered into a voting agreement with the Company,
in substantially the form attached hereto as
Exhibit D
(the
Voting Agreement
),
pursuant to which, in accordance with the terms and subject to
the conditions set forth therein, each such holder has agreed,
among other things, to vote such holders Shares in favor
of the adoption of this Agreement in accordance with and subject
to the terms set forth in the Voting Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Chief Executive Officer of the Company, Nathanael
Lentz, has agreed to (i) enter into a new employment
agreement with the Company, in substantially the form attached
hereto as
Exhibit E
(the
Employment
Agreement
), but which shall only go into effect
immediately prior to the Effective Time, and (ii) enter
into a mutual release agreement with the Company, in
substantially the form attached hereto as
Exhibit F
(the
Release
), but which shall only go into
effect immediately prior to the Effective Time;
A-1
WHEREAS, concurrently with the execution and delivery of this
Agreement, a duly authorized signatory of Radcliffe SPC, Ltd.
(
Radcliffe
) delivered to the Company and
Parent a waiver (in substantially the form attached hereto as
Exhibit G
) (the
Radcliffe Waiver
)
of any rights Radcliffe may have to any portion of the
Series C Purchase Price; and
WHEREAS, this Agreement is intended to constitute the plan of
merger required by Section 1922 of the Pennsylvania
Business Corporation Law of 1988, as amended (the
PBCL
) for the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section
1.01
The
Merger
.
Upon the terms and subject to the
conditions hereof, in accordance with the PBCL, at the Effective
Time, Merger Sub shall be merged with and into the Company and
the separate existence of Merger Sub shall thereupon cease by
virtue of the Merger, and the Company, as the surviving
corporation in the Merger (the
Surviving
Corporation
), shall by virtue of the Merger continue
its existence under the Laws of the Commonwealth of Pennsylvania.
Section
1.02
Closing
.
Unless
this Agreement shall have been terminated pursuant to the
provisions of
Section 9.01
, the closing of the
Merger (the
Closing
) will take place at
10:00 a.m. (Eastern Time) on the seventh Business Day after
the satisfaction or waiver (subject to applicable Law) of the
conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date, but subject to the
satisfaction or, where permitted, waiver of those conditions as
of the Closing) set forth in
Article 8
, unless
another time or date is agreed to in writing by the parties
hereto (the date of the Closing, the
Closing
Date
). The Closing shall be held at the offices of
Greenberg Traurig, LLP, The Met Life Building, 200 Park Avenue,
New York, New York, unless another place is agreed to in writing
by the parties hereto.
Section
1.03
Effective
Time
.
On the Closing Date, the parties shall
file with the Department of State of the Commonwealth of
Pennsylvania the Articles of Merger (the
Articles of
Merger
). The Merger shall become effective at such
time as the Articles of Merger have been accepted for record by
the Department of State of the Commonwealth of Pennsylvania or
at such subsequent date and time as Parent and the Company shall
agree and as shall be specified in the Articles of Merger in
accordance with the relevant provisions of the PBCL (the date
and time the Merger becomes effective being the
Effective Time
).
Section
1.04
Effect
of the Merger
.
From and after the Effective
Time, the Merger shall have the effects set forth in
Section 1929, and any other applicable provisions, of the
PBCL and this Agreement. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, immunities, powers, license,
authority and franchises of the Company and Merger Sub shall
vest entirely in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, and duties of each of
the Company and Merger Sub shall become the debts, liabilities,
obligations, restrictions, and duties of the Surviving
Corporation.
Section
1.05
Articles
of Incorporation
.
At the Effective Time, the
articles of incorporation of the Company shall be amended and
restated to read in its entirety as the articles of
incorporation of Merger Sub as in effect immediately prior to
the Effective Time, and as so amended shall be the articles of
incorporation of the Surviving Corporation after the Effective
Time, until thereafter amended as provided therein or by
applicable Law.
Section
1.06
Bylaws
.
The
bylaws of Merger Sub as in effect at the Effective Time shall be
the bylaws of the Surviving Corporation, until thereafter
amended as provided therein or by applicable Law.
Section
1.07
Directors;
Officers
.
The directors of Merger Sub
immediately prior to the Effective Time shall be the directors
of the Surviving Corporation and, unless otherwise directed in
writing by Parent, the officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving
Corporation, in each
A-2
case until their respective successors are duly elected and
qualified or until their death, resignation or removal in
accordance with the PBCL and the certificate of incorporation
and bylaws of the Surviving Corporation.
Section
1.08
Effect
on Common Stock and Series C Preferred Stock
.
At the Effective Time by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock held by the Company
as treasury stock and each share of Company Common Stock and
(when issued) Series C Preferred Stock owned directly or
indirectly by Parent or Merger Sub immediately prior to the
Effective Time, if any, shall be canceled and retired and shall
cease to exist, and no payment or distribution shall be made or
delivered with respect thereto.
(b) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (including
any such shares issued upon conversion of (when issued) the
Series C Preferred Stock or the Series B Preferred
Stock (as hereinafter defined) as set forth in
Section 1.09
, but excluding shares cancelled
pursuant to
Section 1.08(a)
) shall be converted into
the right to receive the Common Consideration, without interest
and subject to any required Tax withholding. Each such share
shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented such share
(a
Common Stock Certificate
) shall thereafter
cease to have any rights with respect to such share, except the
right to receive the Common Consideration, without interest and
subject to any required Tax withholding.
(c) Each share of common stock, par value $0.01 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common
stock, par value $0.01 per share, of the Surviving Corporation.
(d) If prior to the Effective Time, the Company should
split, combine or otherwise reclassify any of the Shares, or pay
a stock dividend or other stock distribution in any of the
Shares, or otherwise change any of the Shares into any other
securities, or make any other such stock dividend or
distribution in capital stock of the Company in respect of any
of the Shares, then the Merger Consideration payable for any of
such Shares pursuant to this
Section 1.08
or to
Section 1.09
will be appropriately adjusted to
reflect such split, combination, dividend or other distribution
or change.
Section
1.09
Effect
on Series B Preferred Stock
.
At the
Effective Time by virtue of the Merger and without any action on
the part of the holder thereof:
(a) Each share of Series B Preferred Stock held by the
Company as treasury stock and each share of Series B
Preferred Stock owned directly or indirectly by Parent or Merger
Sub immediately prior to the Effective Time, if any, shall be
canceled and retired and shall cease to exist, and no payment or
distribution shall be made or delivered with respect thereto.
(b) Each share of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time and held by
the Investor Purchasers (as such term is defined in the
Companys Description and Designation of Series B
Preferred Stock) shall be cancelled and automatically converted
into the right to receive $0.38750 per share in cash, without
interest and subject to any required Tax withholding.
(c) Each share of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time and held by
the Non-Investor Purchasers (as such term is defined in the
Companys Description and Designation of Series B
Preferred Stock) shall be cancelled and automatically converted
into the right to receive $0.26875 per share in cash, without
interest and subject to any required Tax withholding.
(d) Each such share of Series B Preferred Stock shall
cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented such share
(a
Series B Certificate
) shall
thereafter cease to have any rights with respect to such share,
except the right to receive the Series B Consideration,
without interest and subject to any required Tax withholding.
A-3
Section
1.10
Treatment
of Options, Warrants and RSUs
.
(a) Except as provided on Schedule 1.10(a) of the
Company Disclosure Schedule, each option (a
Company
Option
) granted under the Companys Amended and
Restated 1996 Equity Compensation Plan, Tigris Corporation 1998
Stock Option Program, Verticalnet, Inc. 1999 Equity Compensation
Plan, 1999 Isadra Nonqualified Plan, Atlas Commerce 1999 Long
Term Incentive Plan, Equity Compensation Plan for Employees
(1999), 2000 Equity Compensation Plan, 1999 Long Term Incentive
Plan and 2006 Omnibus Equity Company Compensation Plan
(collectively, the
Company Plans
), warrant (a
Company Warrant
), and restricted stock unit
(an
RSU
, and together with the Company
Options and the Company Warrants, the
Company
Securities
) to purchase shares of Company Common
Stock, to the extent outstanding and unexercised immediately
prior to the Effective Time (whether vested or unvested), will
at the Effective Time be cancelled and the holder of such
Company Security will, in full settlement of such Company
Security, receive from the Company an amount (without interest
and subject to any required Tax withholding), if any, in cash
equal to the product of (i) the excess, if any, of the
Merger Consideration over the exercise or conversion price per
share of Company Common Stock underlying such Company Security
multiplied by (ii) the number of shares of Company Common
Stock subject to such Company Security;
provided
that the
aggregate amount of such payment shall be rounded down to the
nearest whole cent. If the applicable exercise or conversion
price of any Company Security equals or exceeds the Merger
Consideration, such Company Security shall be cancelled without
payment of additional consideration, and all rights with respect
to such Company Security shall terminate as of the Effective
Time. Parent shall pay, or shall cause the Surviving Corporation
to pay, the consideration payable under this
Section 1.10
in respect of each Company Security as
soon as practicable following the Effective Time. The holders of
Company Securities shall have no further rights in respect of
any Company Securities from and after the Effective Time.
(b) Prior to the Effective Time, the Company shall
(i) adopt such resolutions and take such other actions as
are necessary in order to effectuate the actions contemplated by
Section 1.10(a)
prior to the Effective Time, and
(ii) use commercially reasonable best efforts to adopt such
resolutions and take such other actions as are necessary in
order to terminate each Company Plan or other agreement or
instrument representing Company Securities (an
Instrument
), in each case without paying any
consideration or incurring any debts or obligations on behalf of
the Company, Parent or the Surviving Corporation other than as
set forth in
Section 1.10(a)
;
provided
that
such resolutions and actions shall expressly be conditioned upon
the consummation of the Merger and the other transactions
contemplated hereby and shall be of no effect if this Agreement
is terminated.
ARTICLE 2
EXCHANGE OF
CERTIFICATES
Section
2.01
Exchange
Fund
.
At or prior to the Effective Time,
Parent shall deposit with a bank or trust company designated by
Parent and reasonably satisfactory to the Company (the
Exchange Agent
), in trust for the benefit of
holders of Shares and Company Securities (in each case which are
not to be cancelled pursuant to
Sections 1.08(a)
,
1.09
and
1.10
), for exchange in accordance with
Sections 1.08
,
1.09
and
1.10
, the cash
to be paid pursuant to this Agreement in exchange for
outstanding Shares and Company Securities. Any cash deposited
with the Exchange Agent, and any interest or other distributions
thereon, shall hereinafter be referred to as the
Exchange Fund
.
Section
2.02
Exchange
Procedures
.
As promptly as practicable after
the Effective Time, the Exchange Agent will send to each record
holder of a Certificate or Instrument, (a) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates or
Instruments shall pass, only upon delivery of the Certificates
or Instruments to the Exchange Agent and shall be in a form and
have such other provisions as Parent may reasonably specify) and
(b) instructions for use in effecting the surrender of the
Certificates or Instruments in exchange for the Merger
Consideration. As soon as reasonably practicable after the
Effective Time, each holder of a Certificate or Instrument, upon
surrender of a Certificate or Instrument to the Exchange Agent
together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the
Exchange Agent, shall be entitled to receive in exchange
therefor a check in the amount equal to the per share cash
amount of the Merger Consideration (after giving effect to any
required Tax withholdings) with respect to which the holder of
such Certificates or such Instruments is entitled under
A-4
Sections 1.08
,
1.09
or
1.10
, as
appropriate. The Exchange Agent shall accept such Certificates
or Instruments upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices.
No interest will be paid or will accrue on any cash payable upon
due surrender of the Certificates or Instruments. In the event
of a transfer of ownership of Shares or Company Securities that
is not registered in the transfer records of the Company, the
Merger Consideration with respect to such Shares or Company
Securities shall be paid to such a transferee only if the
Certificate or Instrument representing such Shares or Company
Securities is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer or other Taxes
have been paid.
Section
2.03
No
Further Ownership Rights in Shares and Company
Securities
.
The Merger Consideration paid
upon conversion or exchange of Shares or Company Securities in
accordance with the terms of
Article 1
and this
Article 2
shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares or Company
Securities.
Section
2.04
Termination
of Exchange Fund
.
Any portion of the Exchange
Fund that remains undistributed to the holders of Certificates
or Instruments for six (6) months after the Effective Time
shall be delivered to the Surviving Corporation or otherwise on
the instruction of the Surviving Corporation, and any holders of
Certificates or Instruments who have not theretofore complied
with this
Article 2
shall thereafter look only to
the Surviving Corporation and Parent (subject to abandoned
property, escheat or other similar laws) for the Merger
Consideration with respect to the Shares or Company Securities
formerly represented thereby to which such holders are entitled
pursuant to
Sections 1.08
,
1.09
and
1.10
.
Section
2.05
No
Liability
.
None of Parent, Merger Sub, the
Company, the Surviving Corporation or the Exchange Agent shall
be liable to any Person in respect of any Merger Consideration
from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar Law.
Section
2.06
Lost
Certificates or Instruments
.
If any
Certificate or Instrument shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate or Instrument to be lost,
stolen or destroyed and, if required by the Surviving
Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with
respect to such Certificate or Instrument or other documentation
(including an indemnity in customary form) reasonably requested
by Parent, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificate or Instrument the
applicable Merger Consideration with respect to the Shares or
Company Securities formerly represented thereby.
Section
2.07
Withholding
Rights
.
Each of the Exchange Agent, the
Surviving Corporation and Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Shares or Company Securities and
any such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the
Code
), and the
rules and regulations promulgated thereunder (
Treasury
Regulations
), or any provision of state, local or
foreign Tax Law. To the extent that amounts are so withheld by
the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares or
Company Securities in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as
the case may be.
Section
2.08
Further
Assurances
.
At and after the Effective Time,
the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of
the Company or Merger Sub, any deeds, bills of sale, assignments
or assurances and to take and do, in the name and on behalf of
the Company or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets acquired or to be
acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
Section
2.09
Stock
Transfer Books
.
At the close of business, New
York time, on the day the Effective Time occurs, the stock
transfer books of the Company shall be closed and there shall be
no further registration of transfers of Shares or Company
Securities thereafter on the records of the Company. From and
after the Effective Time, the
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holders of Certificates and Instruments shall cease to have any
rights with respect to such Shares or Company Securities
formerly represented thereby, except as otherwise provided
herein or by applicable Law. On or after the Effective Time, any
Certificates or Instruments presented to the Exchange Agent or
Parent for any reason shall be converted into the Merger
Consideration with respect to the Shares or Company Securities
formerly represented thereby in accordance with
Sections 1.08
,
1.09
and
1.10
.
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as set forth in reasonable detail in (i) the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2006 (the
Form 10-K
)
filed with the SEC on April 2, 2007 and any amendments
thereto filed with the SEC prior to the date of this Agreement
(other than disclosures in the Risk Factors sections
thereof or any such disclosures included in such filings that
are cautionary, predictive or forward-looking in nature) (it
being agreed that such disclosures shall not be exceptions to
Sections 3.04
,
3.05
and
3.06(a
)), or
(ii) the corresponding sections or subsections of the
disclosure letter delivered to Parent by the Company prior to
entering into this Agreement (the
Company Disclosure
Schedule
) (it being agreed that disclosure of any item
in any section or subsection of the Company Disclosure Schedule
shall be deemed disclosure with respect to any other section or
subsection only to the extent that the relevance of such item is
reasonably apparent;
provided
that no such disclosure
shall be deemed to qualify
Section 3.09(a)(i)
or
Section 5.01
unless expressly set forth in
Section 3.09(a)(i) or Section 5.01, as applicable, of
the Company Disclosure Schedule), the Company hereby represents
and warrants to Parent and Merger Sub that:
Section
3.01
Corporate
Organization
.
Each of the Company and its
Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization
and has all requisite corporate power to own its properties and
assets and to conduct its business as now conducted. Copies of
the Companys Restated Certificate of Incorporation and
Amended and Restated By-laws, together with all amendments
thereto to the date hereof (the
Company Organizational
Documents
) and the organizational documents of each
Subsidiary of the Company, with all amendments thereto to the
date hereof, have been made available to Parent, and such copies
are accurate and complete as of the date hereof.
Section
3.02
Qualification
to Do Business
.
Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign
corporation, limited liability company or partnership (as the
case may be) and is in good standing in every jurisdiction in
which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a
Company Material Adverse Effect.
Section
3.03
No
Conflict or Violation
.
The execution,
delivery and performance by the Company of this Agreement does
not and will not (a) violate or conflict with any provision
of any Company Organizational Documents or any of the
organizational documents of the Subsidiaries of the Company,
(b) assuming compliance with the matters referenced in
Section 3.04(a)-(c)
and receipt of the Company Shareholder Approval, violate any
provision of applicable Law, or (c) violate or result in a
breach of or constitute (with due notice or lapse of time or
both) a default under any note, bond, mortgage, indenture,
lease, license, contract or other agreement, instrument or
obligation to which the Company or any of its Subsidiaries is
bound or to which any of their respective properties or assets
is subject or result in the creation or imposition of any Lien
(other than any Permitted Lien) upon any of the assets,
properties or rights of either of the Company or any of its
Subsidiaries or result in or give to others any rights of
cancellation, modification, amendment, acceleration, revocation
or suspension of any of such note, bond, mortgage, indenture,
lease, license, contract, agreement, instrument or obligation
thereunder, or of any Licenses and Permits, except with respect
to clauses (b) and (c), for any violations, breaches,
conflicts or other occurrences which, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Company Material Adverse Effect.
Section
3.04
Consents
and Approvals
.
No consent, waiver,
authorization or approval of any Governmental Entity, and no
declaration or notice to or filing or registration with any
Governmental Entity, is required in
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connection with the execution and delivery of this Agreement by
the Company or the performance by the Company or its
Subsidiaries of their obligations hereunder or thereunder,
except for: (a) applicable requirements of the Securities
Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the
Securities Act
)
and of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the
Exchange Act
) and the rules and regulations
of NASDAQ; and (b) the consents, waivers, authorizations or
approvals of any Governmental Entity set forth on
Section 3.04 of the Company Disclosure Schedule.
Section
3.05
Authorization
and Validity of Agreement
.
The Company has
the requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement, the Plan of
Merger, the Voting Agreement, the Statement of Designation (when
filed in accordance with the terms of the Series C
Preferred Stock Purchase Agreement), the Employment Agreement,
the Radcliffe Waiver and all agreements and instruments related
thereto (collectively, the
Transaction
Documents
) and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents by the
Company and the performance by the Company of its obligations
hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by the Company Board and all other necessary
corporate action on the part of the Company, other than the
approval and adoption of this Agreement by the affirmative vote
of a majority of votes cast by all shareholders of the Company
entitled to vote thereon at a meeting at which a quorum is
present (the
Company Shareholder Approval
),
and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or the other
Transaction Documents and the transactions contemplated hereby
and thereby (subject to the filing of the Statement of
Designation (when filed in accordance with the terms of the
Series C Preferred Stock Purchase Agreement)). This
Agreement and each of the other Transaction Documents have been
duly and validly executed and delivered by the Company and,
assuming due execution and delivery by Parent and Merger Sub and
the other parties thereto (as applicable), shall constitute a
legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to (a) the
effect of bankruptcy, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors rights generally,
(b) general equitable principles (whether considered in a
proceeding in equity or at Law) and (c) an implied covenant
of good faith and fair dealing.
Section
3.06
Capitalization
and Related Matters
.
(a) The authorized capital stock of the Company consists of
120,000,000 shares of Company Common Stock and
35,000,000 shares of preferred stock, par value $0.01 per
share (the
Company Preferred Stock
). On the
date hereof:
(i) 1,617,625 shares of Company Common Stock are
issued and outstanding, including 6,780 restricted shares of
Company Common Stock (
Restricted Stock
),
(ii) 8,700,000 shares of Company Preferred Stock are
issued and outstanding, all of which are designated
Series B Preferred Stock,
(iii) 1,173 shares of Company Common Stock are held by
the Company as treasury shares; no shares of Company Preferred
Stock are held by the Company as treasury shares,
(iv) an aggregate of 112,427 shares of Company Common
Stock are reserved and available for issuance pursuant to the
Company Plans, and of such shares
(A) 70,953 shares of Company Common Stock are subject
to issuance pursuant to outstanding Company Options, and
(B) 6,780 shares of Company Common Stock are subject
to issuance pursuant to outstanding Restricted Stock and RSU
grants, and
(v) an aggregate of 1,385,178 shares of Company Common
Stock are reserved and available for issuance upon the exercise
of Company Warrants.
Other than the Company Plans, there is no plan or other Contract
providing for the grant of options, securities or other rights
exercisable or exchangeable for or into shares of Company Common
Stock by the Company or any of its Subsidiaries. No shares of
Company Common Stock are owned by any Subsidiary of the Company.
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Section 3.06(a) of the Company Disclosure Schedule sets
forth a true and complete list as of the date hereof, of
(x) all outstanding Company Options, the number of shares
of Company Common Stock (or other capital stock) subject
thereto, the grant dates, expiration dates and exercise prices
thereof, the names of the holders thereof and whether or not
each holder is a current employee of the Company or any of its
Subsidiaries and whether or not such Company Option is intended
to qualify as an incentive stock option under
Section 422 of the Code, (y) all outstanding shares of
Restricted Stock and RSUs, the number of shares of Company
Common Stock (or other capital stock) subject thereto (as
applicable), the grant dates, the dates any forfeiture or
repurchase conditions lapse, any repurchase prices and the names
of the holders thereof and whether or not each holder is a
current employee of the Company or any of its Subsidiaries and
(z) all outstanding Company Warrants, the number of shares
of Company Common Stock (or other capital stock) subject
thereto, the issuance dates, the maturity or expiration dates,
the exercise or conversion prices and the names of the holders
thereof. All outstanding Company Stock Options, shares of
Restricted Stock and RSUs are evidenced by written award
agreements, in each case in the forms set forth in
Section 3.01(a) of the Company Disclosure Schedule, and no
award agreement relating to any outstanding Company Stock
Option, Restricted Stock or RSU contains terms that are
inconsistent with such forms. Copies of all Instruments
evidencing Company Warrants have been made available to Parent
prior to the date hereof.
(b) On the date hereof, no shares of capital stock of, or
other equity or voting interests in, the Company, or any
securities convertible into, or exchangeable for, any such
stock, interests or securities, or any options, warrants, shares
of deferred stock, restricted stock awards, stock appreciation
or depreciation rights, dividend equivalent rights,
phantom stock awards or other calls or rights to
acquire or receive any such stock, interests or securities, or
other rights that are linked in any way to the value of the
Company Common Stock or the value of the Company or any part
thereof, were issued, reserved for issuance or outstanding.
Except as expressly permitted under
Section 5.01(a)(i)
of this Agreement, since the date
hereof, there have been no issuances by the Company of shares of
capital stock of, or other equity or voting interests in, the
Company, or any securities convertible into, or exchangeable
for, any such stock, interests or securities, or any options,
warrants, shares of deferred stock, restricted stock awards,
restricted stock unit awards, stock appreciation or depreciation
rights, dividend equivalent rights, phantom stock
awards or other calls or rights to acquire or receive any such
stock, interests or securities, or other rights that are linked
in any way to the value of the Company Common Stock or the value
of the Company or any part thereof.
(c) All outstanding shares of capital stock of the Company
are, and all shares which are issuable pursuant to the Company
Plans shall be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any
purchase option, call or put option, right of first offer or
refusal, preemptive right, subscription right or any similar
right under any provision of the PBCL, the Company
Organizational Documents or any Contract to which the Company is
a party or otherwise bound. Except as set forth in
Section 3.06(a)
, there are no (i) bonds,
debentures, notes or other evidences of indebtedness of the
Company or any of its Subsidiaries and (ii) securities or
other instruments or obligations of the Company or any of its
Subsidiaries, in each case, the value of which is based upon or
derived from any capital stock of, or other equity or voting
interest in, the Company or which has or which by its terms may
have at any time (whether actual or contingent) the right to
vote (or which is convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any
matters on which holders of Company Common Stock may vote
(whether generally in the election of Company directors or in
respect of any other matter for which holders of Company Common
Stock are entitled to vote as a matter of Law or pursuant to the
Company Organizational Documents). Except as set forth in
Section 3.06(a)
, there are no securities, options,
warrants, calls, rights or Contracts of any kind to which the
Company or any of its Subsidiaries is a party, or by which the
Company or any of its Subsidiaries is bound, obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of
capital stock of, or other equity or voting interests in, or
securities convertible into, or exchangeable or exercisable for,
shares of capital stock of, or other equity or voting interests
in, the Company or any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right or
Contract. With respect to the Company Options, (A) each
Company Option intended to qualify as an incentive stock
option under Section 422 of the Code so qualifies,
(B) each grant of a Company Option was duly authorized no
later than the date on which the grant of such Company Option
was by its terms to be effective by all necessary corporate
action, including, as applicable, approval by the Company Board
(or
A-8
a duly constituted and authorized committee thereof) and any
required shareholder approval by the necessary number of votes
or written consents, and the award agreement governing such
grant (if any) was duly executed and delivered by each party
thereto, (C) each such grant was made in accordance with
the terms of the Company Plans, the Exchange Act and all other
applicable Laws and regulatory rules or requirements, including
the rules of NASDAQ, (D) the per share exercise price of
each Company Option was not less than the fair market value of a
share of Company Common Stock on the applicable date of grant of
such Company Option and (E) each such grant was properly
accounted for in accordance with GAAP in the financial
statements (including the related notes) of the Company and
disclosed in the Company SEC Reports in accordance with the
Exchange Act and all other applicable Laws. Except as set forth
in
Section 3.06(a)
and except for the outstanding
shares of Restricted Stock and RSUs or except pursuant to the
cashless exercise, if any, or Tax withholding provisions under
which the Company Options, Restricted Stock and RSUs were
granted, there are no outstanding contractual or other
obligations of the Company or any of its Subsidiaries to
(I) repurchase, redeem or otherwise acquire any shares of
capital stock of, o r other equity or voting interests in, the
Company or any of its Subsidiaries or (II) vote or dispose
of any shares of capital stock of, or other equity or voting
interests in, the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is a party to any voting
agreements with respect to any shares of capital stock of, or
other equity or voting interests in, the Company or any of its
Subsidiaries and, to the Companys Knowledge, there are no
irrevocable proxies and no voting agreements or voting trusts
with respect to any shares of capital stock of, or other equity
or voting interests in, the Company or any of its Subsidiaries.
All outstanding Company Securities may by their terms be treated
in accordance with
Sections 1.08
,
1.09
and
1.10
.
(d) The Company has registered the Company Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act
and is in full compliance with all reporting requirements of the
Exchange Act and all NASDAQ requirements for the continued
listing and quotation of the Company Common Stock on the NASDAQ,
including applicable corporate governance requirements. On
August 31, 2007, the Office of General Counsel of the
NASDAQ Listing Qualifications Hearings issued a final written
decision granting the Companys request for continued
listing on the NASDAQ, and, to the Companys Knowledge,
there is no threat of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
(e) No appraisal or dissenters rights are available to the
holders of the Shares pursuant to Section 1571 of the PBCL.
Section
3.07
Subsidiaries
.
Each
Subsidiary of the Company is listed on Exhibit 21 of the
Form 10-K.
Other than such Subsidiaries, neither the Company nor any of its
Subsidiaries, directly or indirectly, owns or holds any rights
to acquire, any capital stock or any other securities, interests
or investments in any other Person.
Section
3.08
Company
SEC Reports
.
(a) Since December 31, 2003, the Company and its
Subsidiaries have filed or furnished, as applicable, on a timely
basis, each registration statement, prospectus, definitive proxy
statement or information statement, form, report, schedule and
other document (together with all amendments thereof and
supplements thereto) required to be filed by the Company
pursuant to the Exchange Act or the Securities Act or comparable
foreign Law or regulation with the SEC or any comparable foreign
regulatory authority or exchange (as such documents have since
the time of their filing been amended or supplemented, the
Company SEC Reports
). As of their respective
dates, after giving effect to any amendments or supplements
thereto filed prior to the date hereof, the Company SEC Reports
(i) complied as to form in all material respects with the
requirements of the Exchange Act or the Securities Act, as
applicable, and (ii) did not 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
therein, in light of the circumstances under which they were
made, not misleading. Each of the Company SEC Reports, at the
time of its filing, complied, or if not yet filed, when so filed
will comply, in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the
Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley
Act
), and any rules and regulations promulgated
thereunder, applicable to the Company SEC Reports. As of the
date of this Agreement, (i) there are no outstanding or
unresolved comments in comment letters received from the SEC
staff with respect to the Company SEC Reports, and (ii) to
the Knowledge of the Company, none of the Company SEC Reports is
the subject of ongoing review, comment or investigation by the
SEC. None of the Subsidiaries of the Company are, or have been,
subject to the reporting requirements of Section 13(a) or
15(d) of the Exchange Act.
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(b) The audited consolidated financial statements and
unaudited interim consolidated financial statements (including,
in each case, the notes, if any, thereto) included in the
Company SEC Reports complied as to form in all material respects
with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by
Form 10-Q
of the SEC) and fairly present (subject, in the case of the
unaudited interim financial statements included therein, to
normal year-end adjustments (that will not be material) and the
absence of complete footnotes) the consolidated financial
position of the Company or its predecessor and its consolidated
Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and cash flows for the
respective periods then ended.
Section
3.09
Absence
of Certain Changes or Events
.
(a) Since June 30, 2007, there has not been:
(i) any Company Material Adverse Effect;
(ii) any loss, damage, destruction or other casualty to the
material assets or properties of either of the Company or any of
its Subsidiaries;
(iii) any material change in any method of accounting or
accounting practice of either of the Company or any of its
Subsidiaries except for any such change required by reason of a
concurrent change in GAAP; or
(iv) any loss of the employment, services or benefits of
the chief executive officer of the Company and members of the
Companys senior management who report directly to such
chief executive officer.
(b) Since June 30, 2007, each of the Company and each
of its Subsidiaries has operated in the ordinary course of its
business and consistent with past practice and has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise);
(ii) failed to discharge or satisfy any Lien or pay or
satisfy any material obligation or liability (whether absolute,
accrued, contingent or otherwise), other than Permitted Liens
and liabilities being contested in good faith and for which
adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any Lien (other
than Permitted Liens) any of its material assets, properties or
rights;
(iv) sold or transferred any of its material assets, or
cancelled any material debts or claims or waived any material
rights;
(v) disposed of any patents, trademarks or copyrights or
any patent, trademark or copyright applications;
(vi) defaulted on any material obligation;
(vii) granted any increase in the compensation or benefits
of its key employees other than increases in the ordinary course
of business not exceeding 2% of the key employees annual
compensation then in effect or entered into any employment,
change of control, retention or severance agreement or
arrangement with any of them;
(viii) contractually committed to make any capital
expenditure for any periods after the date hereof or additions
to property, plant and equipment used in its operations other
than ordinary repairs and maintenance in excess of $50,000 in
the aggregate;
(ix) laid off any significant number of its employees;
(x) received notice from any domestic or international
distributor of its intention to terminate its relationship or
contract with the Company or any of its Subsidiaries or had any
such relationship or contract terminated by any such distributor;
(xi) discontinued the offering or the development of any
material services or product;
(xii) incurred any obligation or liability for the payment
of severance benefits;
A-10
(xiii) declared, paid, or set aside for payment any
dividend or other distribution in respect of any shares of its
or its Subsidiaries capital stock, membership interests or
other securities, or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its or its
Subsidiaries capital stock, membership interests or other
securities, or agreed to do so;
(xiv) made or suffered any amendment or termination of any
Customer Contract, modified or waived any material debts or
claims held by it, other than in the ordinary course, or waived
any right of material value, whether or not in the ordinary
course;
(xv) made any payment to any shareholder or other Affiliate
of the Company with respect to any indebtedness owed to such
shareholder or other Affiliate; or
(xvi) entered into any agreement or made any commitment to
do any of the foregoing.
Section
3.10
Tax
Matters
.
(a) (i) The Company and each of its Subsidiaries has
filed when due with the appropriate governmental entities all
Tax Returns it was required by applicable Law to file;
(ii) all such Tax Returns are true, correct and complete in
all material respects; (iii) the Company and each of its
Subsidiaries has timely paid all Taxes (except for Taxes which
are being contested in good faith by appropriate proceedings)
due with respect to the taxable periods covered by such Tax
Returns and all other Taxes due and owing by the Company and its
Subsidiaries (whether or not shown on any tax return); and
(iv) any liability of the Company or any of its
Subsidiaries for Taxes not yet due and payable, or which are
being contested in good faith, has been provided for on the
financial statements of the Company in accordance with GAAP.
(b) The Company has delivered or made available to Parent
correct and complete copies of all federal, state, local and
foreign Income Tax Returns filed by the Company or any of its
Subsidiaries since May 31, 2002.
(c) There is no material Action now pending with respect to
the Company or any of its Subsidiaries in respect of any Tax,
nor has any material claim for additional Tax been asserted in
writing by any taxing authority since May 31, 2002. Since
May 31, 2002, no claim has been made in writing by any
taxing authority in a jurisdiction where the Company or any of
its Subsidiaries has not filed a Tax Return that it is or may be
subject to Tax by such jurisdiction.
(d) (i) There is no outstanding request for any
extension of time for the Company or any of its Subsidiaries to
pay any Taxes or file any Tax Returns; (ii) there has been
no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of the Company or
any of its Subsidiaries that is currently in force; and
(iii) neither the Company nor any of its Subsidiaries is a
party to or bound by any Tax-sharing, Tax indemnity, Tax
allocation, pre-filing, or advance pricing agreement or similar
arrangements, whether written or unwritten, providing for the
payment of Taxes, payment for Tax losses, entitlements to
refunds or similar Tax matters.
(e) The Company and each of its Subsidiaries has withheld
and paid all material Taxes required to be withheld in
connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(f) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(g) Neither the Company nor any of its Subsidiaries has
elected at any time to be treated as an S corporation
within the meaning of Sections 1361 or 1362 of the Code or
under any comparable state or local Tax provision.
(h) None of the Company nor any of its Subsidiaries shall
be required to include in a taxable period ending after the
Closing taxable income attributable to income that accrued in a
prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the
long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable
provisions of state or local Tax Law, or for any other reason.
A-11
(i) Neither the Company nor any of its Subsidiaries has
distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by
Section 355 or Section 361 of the Code.
(j) There is no material Lien, other than a Permitted Lien,
affecting any of the assets, properties or rights of the Company
and its Subsidiaries that arose in connection with any failure
or alleged failure to pay any Tax.
(k) Neither the Company nor any of its Subsidiaries
(i) has been a member of an affiliated group (within the
meaning of Code § 1504(a)) filing a consolidated
federal income Tax Return (other than a group the common parent
of which is the Company) or (ii) has any liability for the
Taxes of any Person (other than any of the Company and its
Subsidiaries) under Treasury Regulations § 1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(l) Neither the Company nor any of its Subsidiaries
(i) is a partner for Tax purposes with respect to any joint
venture, partnership, or other arrangement or contract which is
treated as a partnership for Tax purposes, or (ii) owns a
single member limited liability company which is treated as a
disregarded entity.
(m) Neither the Company nor any of its Subsidiaries has
entered into any transaction identified as a reportable
transaction or listed transaction for purposes
of Code Section 6707A(c) or Treasury Regulations
Sections 1.6011-4(b)(2)
or 301.6111-2(b)(2).
(l) None of the Subsidiaries is an expatriated entity (as
defined in Section 7874(a)(2)(A) of the Code) or a
surrogate foreign corporation (within the meaning of
Section 7874(a)(2)(B) of the Code).
Section
3.11
Absence
of Undisclosed Liabilities; Closing Indebtedness; and Company
Transaction Expenses
.
(a) There are no material liabilities or obligations of the
Company or any Subsidiary thereof of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable
or otherwise, and there is no existing condition, situation or
set of circumstances that could be reasonably expected to result
in such a liability or obligation, other than
(a) liabilities or obligations disclosed and provided for
in the consolidated balance sheet of the Company as of
June 30, 2007 included in the Companys Quarterly
Report on
Form 10-Q
for the quarterly period then ended or (b) liabilities or
obligations incurred in the ordinary course of business
consistent with past practice since June 30, 2007. Neither
of the Company or any of its Subsidiaries is directly or
indirectly liable upon or with respect to (by discount,
repurchase agreements or otherwise), or obliged in any other way
to provide funds in respect of, or to guarantee or assume, any
material debt, obligation or dividend of any Person.
(b) Section 3.11(b) of the Company Disclosure Schedule
sets forth a complete and accurate list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of
the Company or any of its Subsidiaries in an aggregate principal
amount in excess of $50,000 is outstanding or may be incurred
and the respective principal amounts outstanding thereunder as
of the date of this Agreement. For purposes of this
Section 3.11(b)
, indebtedness means,
with respect to any Person, without duplication, (i) all
obligations of such Person for borrowed money, or with respect
to deposits or advances of any kind to such Person,
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all
obligations of such Person upon which interest charges are
customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person, (v) all obligations of
such Person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such Person or
creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of business), (vi) all
capitalized lease obligations of such Person, (vii) all
obligations of others secured by any lien on property or assets
owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (viii) all obligations
of such Person under interest rate or currency hedging
transactions (valued at the termination value thereof),
(ix) all letters of credit issued for the account of such
Person, and (x) all guarantees and arrangements having the
economic effect of a guarantee by such Person of any
indebtedness of any other Person. All of the outstanding
indebtedness of the type described in this
Section 3.11(b)
of the Company or any of its
Subsidiaries may be prepaid by the Company or its Subsidiary at
any time without the consent or approval of, or prior notice to,
any other Person, and without payment of any premium or penalty.
A-12
(c) The aggregate amount of all out-of-pocket costs and
expenses, including the fees and expenses of lawyers,
accountants, financial advisors, consultants and other advisors,
incurred by the Company in connection with the entering into of
this Agreement and the other Transaction Documents and the
carrying out of any and all acts contemplated hereunder and
thereunder (
Company Transaction Expenses
)
shall not exceed $500,000, unless any excess over $500,000 is
directly attributable to all such out-of-pocket costs and
expenses that are incurred by the Company in connection with the
review by the SEC of, and clearance of all SEC comments on, the
Proxy Statement.
Section
3.12
Real
Property
.
(a) Neither the Company nor any of the Subsidiaries has
ever held fee ownership of any real property.
Section 3.12(a) of the Company Disclosure Schedule sets
forth a list of all leases, licenses (for real property),
subleases and occupancy agreements, together with all amendments
thereto, in which either of the Company or its Subsidiaries has
a leasehold interest or similar occupancy rights, whether as
lessor or lessee (each, a
Lease
and
collectively, the
Leases
; the property
covered by Leases under which either of the Company or its
Subsidiaries is a lessee is referred to herein as the
Leased Real Property
). Neither the Company
nor any of its Subsidiaries is a party to any Contract (other
than a Lease) with the lessor of any of the Leased Real
Properties, which gives such lessor any right to terminate or
adversely alter the terms of the Lease to which such lessor is a
party. The Company or its Subsidiaries enjoys peaceful and
undisturbed possession of, the Leased Real Property pursuant to
the Leases. No option has been exercised under any of such
Leases, except options whose exercise has been evidenced by a
written document, a true, complete and accurate copy of which
has made available to Parent with the corresponding Lease. The
transactions contemplated by this Agreement do not require the
consent or approval of the other party or parties to the Leases.
(b) With respect to each Lease, (i) such Lease is in
full force and effect, (ii) all rents, required deposits
and additional rents due to date pursuant to each Lease have
been paid in full, (iii) the Company has not prepaid rent
or any other amounts due under a Lease more than thirty
(30) days in advance, and (iv) no party has any rights
of offset against any rents, required security deposits or
additional rents payable under such Lease. As of the date
hereof, no Lease has been materially modified or amended.
(c) None of the Leased Real Property is subject to any
option, lease, sublease, license or other agreement granting to
any Person or entity any right to the use, occupancy or
enjoyment of such property or any portion thereof or to obtain
title to all or any portion of such property.
(d) All material improvements, systems, equipment,
machinery and fixtures on the Leased Real Property are in good
operating condition and repair and generally are adequate and
suitable in all material respects for the present and continued
use, operation and maintenance thereof as now used, operated or
maintained. All improvements on the Leased Real Property
constructed by or on behalf of the Company or any Subsidiary
were constructed, to the Knowledge of the Company, in compliance
in all material respects with applicable Laws, ordinances and
regulations affecting such Leased Real Property, including but
not limited to the American with Disabilities Act.
(e) Each parcel of Leased Property is a separate lot for
real estate tax and assessment purposes (and no other real
property is included in such tax parcel), there are no Taxes,
assessments, fees, charges or similar costs or expenses imposed
by any Taxing Authority, association or other entity having
jurisdiction over such real property or portion thereof
(collectively, the
Real Estate Impositions
)
that are delinquent, and there is no pending or threatened
increase or special assessment or reassessment of any such Real
Estate Impositions.
Section
3.13
Assets
of the Company and its Subsidiaries
.
(a) The assets, properties and rights of each of the
Company and its Subsidiaries constitute all of the assets,
properties and rights which are used in the operation of their
business as currently conducted. There are no material assets,
properties, rights or interests of any kind or nature that
either of the Company or any of its Subsidiaries has been using,
holding or operating in their business prior to the Closing that
will not be used, held or owned by each of the Company or its
Subsidiaries immediately following the Closing.
(b) Each of the Company and its Subsidiaries has good and
marketable fee simple title, free and clear of any Liens other
than Permitted Liens, to, or a valid leasehold interest under
enforceable leases in, all of its material assets, properties
and rights.
A-13
Section
3.14
Intellectual
Property
.
(a) The Company and its Subsidiaries own all right, title
and interest in and to, or have valid and enforceable licenses
to use, possess, distribute
and/or
dispose of all the Intellectual Property, and such Intellectual
Property represents all intellectual property rights necessary
for the conduct of their business as and where conducted on the
date hereof or contemplated to be conducted on the Closing Date
or in relation to any product under development by the Company
or any of its Subsidiaries. Neither the execution of this
Agreement, or the other Transaction Documents nor the
transactions contemplated hereby or thereby will affect any
rights of the Company or its Subsidiaries with respect to the
Intellectual Property. There are no conflicts with or
infringements of any Intellectual Property by any third party,
including by any current or former employee or consultant of the
Company or any of its Subsidiaries. The conduct of the business
of the Company and its Subsidiaries (as and where conducted on
the date hereof or contemplated to be conducted on the Closing
Date or in relation to any product under development by the
Company or any of its Subsidiaries) does not conflict with,
violate, misappropriate, misuse or infringe any proprietary or
intellectual property right of any third party. There is no
Action pending or, to the Knowledge of the Company, threatened
against the Company or its Subsidiaries: (a) alleging any
such conflict, violation, misappropriation, misuse or
infringement with any third partys proprietary or
intellectual property rights; or (b) challenging the
Companys or its Subsidiaries ownership or use of, or
the validity or enforceability of any Intellectual Property.
(b) Section 3.14(b) of the Company Disclosure Schedule
sets forth a complete and current list of all
(i) registrations, certificates, applications, filings or
other material documents issued by, filed with, or recorded by,
any Governmental Entity pertaining to the Intellectual Property
(
Registered Intellectual Property
) as of the
date hereof and the owner of record, date of application or
issuance, and relevant jurisdiction as to each and (ii) any
works of authorship in which Company has material, unregistered
copyrights (e.g., software applications developed by or on
behalf of the Company). All Registered Intellectual Property is
owned by the Company
and/or
its
Subsidiaries, free and clear of all Liens other than Permitted
Liens. All Registered Intellectual Property is valid,
subsisting, unexpired, and all renewal fees and other
maintenance fees that have fallen due on or prior to the Closing
have been paid, and, except as set forth on Section 3.14(b)
of the Company Disclosure Schedule, no actions or fees of any
kind are due within 120 days of the Closing Date. No
Registered Intellectual Property is the subject of any Action
before any governmental, registration or other authority in any
jurisdiction. The consummation of the transactions contemplated
by this Agreement or any of the Transaction Documents will not
(i) alter, impair or result in the termination of any
Intellectual Property, or (ii) result in the creation of
any material Lien with respect to any of the Intellectual
Property owned or otherwise held by the Company or any of its
Subsidiaries.
(c) Section 3.14(c) of the Company Disclosure Schedule
sets forth a complete list of all agreements (whether written or
oral) pertaining to Intellectual Property as of the date hereof,
except for agreements pertaining to commercially available,
off-the-shelf software which has a value of less than $2,000.
The Company and its Subsidiaries are in compliance in all
material respects with all agreements pertaining to the
Intellectual Property, and are not under any obligation to pay
royalties or other payments in connection with any agreement,
nor restricted from assigning its rights respecting Intellectual
Property, such rights including the right to sue and obtain
damages for past and future infringements thereof, nor will the
Company or its Subsidiaries otherwise be, as a result of the
execution and delivery of this Agreement or the performance of
its obligations under this Agreement, in breach of any agreement
relating to the Intellectual Property. Neither the Company nor
its Subsidiaries is in material default of any such agreement.
(d) Neither the Company nor any of its Subsidiaries has
made any claim of a violation, infringement, misuse or
misappropriation by any third party (including any employee ,
former employee or consultant of the Company or its
Subsidiaries) of its rights to, or in connection with, any
Intellectual Property, which claim is pending. Except with
respect to provisions consistent with the Companys past
practice in Software license agreements with customers of the
Company made in the normal course of business, neither the
Company nor any of its Subsidiaries has entered into any
agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property.
(e) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all of its
Intellectual Property. All current and former employees,
consultants, contractors and other third parties of the Company
or its Subsidiaries who have contributed to the creation,
design, review, evaluation or development of
A-14
any Intellectual Property on behalf of the Company or any of its
Subsidiaries have executed written agreements (i) requiring
them to maintain the confidentiality of such Intellectual
Property to the extent that it consists of confidential
information
and/or
trade
secrets; and (ii) disclosing to the Company or its
Subsidiaries (as applicable) the creation of any inventions; and
(iii) assigning to the Company or its Subsidiaries, as
applicable, all right, title and interest in and to any
inventions and any other Intellectual Property created by such
employees or consultants in conjunction with their work for or
on behalf of the Company. To the Knowledge of the Company, no
such employee or consultant is in breach of any such agreements.
Section
3.15
Software
.
(a) Section 3.15(a) of the Company Disclosure Schedule
contains a complete and accurate list of all operating and
applications computer software programs and databases used,
manufactured, distributed, sold, licensed or marketed by the
Company and its Subsidiaries, or which are under development by
the Company and currently scheduled for release within six
months from the date hereof, that are material to the conduct of
their business (collectively, the
Software
).
The Software listed on Section 3.15(a) of the Company
Disclosure Schedule performs materially in accordance with the
written specifications and documentation of the Company with
respect to the specific Software sold or licensed by the Company
to its end users, and to the Knowledge of the Company, no third
party has asserted any claim of a breach of any warranty made,
expressly or impliedly, by the Company. None of the Software nor
any use thereof, conflicts with, infringes upon or violates any
intellectual property or other proprietary right of any other
Person and, no Action with respect to any such infringement or
violation is pending, or to the Knowledge of the Company,
threatened.
(b) The Company and its Subsidiaries have not purchased any
material amount of telecommunications equipment without
procuring a software license for the imbedded software in such
equipment nor is the Company or its Subsidiaries subject to any
claim for failing to procure such a license.
(c) Section 3.15(c) of the Company Disclosure Schedule
sets forth all software or other material that is distributed as
free software, open source software or
under a similar licensing or distribution model (
Open
Source Materials
) that is included in any Software or
other Intellectual Property owned by the Company or any of its
Subsidiaries, or that is otherwise used by the Company or any of
its Subsidiaries in any way, and describes the manner in which
such Open Source Materials were used (such description shall
include whether (and, if so, how) the Open Source Materials were
modified
and/or
distributed by the Company or any of its Subsidiaries). Except
as explicitly set forth in Section 3.15(c
)
of the
Company Disclosure Schedule, the Company or any of its
Subsidiaries has not (i) incorporated Open Source Materials
into, or combined Open Source Materials with, any Software or
other Intellectual Property owned or licensed by the Company or
any of its Subsidiaries; (ii) distributed Open Source
Materials in conjunction with any Software or other Intellectual
Property owned or licensed by the Company or any of its
Subsidiaries; or (iii) used Open Source Materials that
create, or purport to create, obligations for the Company or any
of its Subsidiaries with respect to any of its/their Software or
Intellectual Property rights or grant, or purport to grant, to
any third party, any rights or immunities under any Software or
Intellectual Property (including using any Open Source Materials
that require, as a condition of use, modification
and/or
distribution of such Open Source Materials that other software
incorporated into, derived from or distributed with such Open
Source Materials be (A) disclosed or distributed in source
code form, (B) be licensed for the purpose of making
derivative works, or (C) be redistributable at no charge).
(d) The Software is free of all viruses, worms, trojan
horses and other material known contaminants and does not
contain any bugs, errors or problems of a material nature that
would disrupt its operation or have an adverse impact on the
operation of other software programs or operating systems. The
Company and its Subsidiaries have the right to use all software
development tools, library functions, compilers, and other third
party software that are material to the business of the Company
or that are required to operate or modify the Software.
(e) Except pursuant to Software maintenance and license
agreements with customers of the Company made in the normal
course of business and as set forth on Section 3.15(e) of
the Company Disclosure Schedule, the Company does not have any
obligation owing to any third party to maintain, modify, improve
or upgrade any of the Software.
A-15
(f) The Company has not disclosed the source code for any
Software to any Person nor has the Company granted to any Person
to use such source code, other than to those Persons identified
in Section 3.15(f) of the Company Disclosure Schedule.
Section
3.16
Licenses
and Permits
.
(a) The Company and its Subsidiaries own or possess all
right, title and interest in and to each of their respective
material licenses, permits, franchises, registrations,
authorizations and approvals issued or granted to any of the
Company or its Subsidiaries by any Governmental Entity (the
Licenses and Permits
) and has taken all
necessary action to maintain such Licenses and Permits. The
Licenses and Permits are sufficient and adequate in all material
respects to permit the continued lawful conduct of the business
of the Company and its Subsidiaries, and none of the operations
of the Company or its Subsidiaries are being conducted in a
manner that violates in any material respects any of the terms
or conditions under which any License and Permit was granted.
(b) Each License and Permit has been duly obtained, is
valid and in full force and effect, and no petition, action,
investigation, notice of violation or apparent liability, notice
of forfeiture, order to show cause, complaint, or Action seeking
to revoke, reconsider the grant of, cancel, suspend, declare
invalid or modify any of the Licenses and Permits is pending or,
to the Knowledge of the Company, threatened before any
Governmental Entity. No notices have been received by and, to
the Knowledge of the Company, no claims have been filed against
the Company or its Subsidiaries alleging a failure to hold any
Licenses or Permits.
Section
3.17
Government
Contracts
.
(a) Neither the Company nor any of its Subsidiaries is a
party to any Contracts with any Governmental Entity.
(b) Neither the Company nor any of its Subsidiaries has
been suspended or debarred from bidding on Contracts or
subcontracts for any Governmental Entity, nor, to the Knowledge
of the Company, has any suspension or debarment action been
threatened or commenced.
(c) Neither the Company nor any of its Subsidiaries has
been, nor is now being, audited or investigated by any
Governmental Entity, or the inspector general or auditor general
or similar functionary of any Governmental Entity, nor, to the
Knowledge of the Company, has an audit or investigation been
threatened.
(d) Neither the Company nor any of its Subsidiaries has any
material dispute pending before a contracting office of, nor any
current claim pending against, any Governmental Entity, relating
to a Contract.
(e) Neither the Company nor any of its Subsidiaries has,
with respect to any government Contract, received a cure notice
advising the Company that it is or was in default under such
Contract.
(f) Neither the Company nor any of its Subsidiaries has
submitted any inaccurate, untruthful, or misleading cost or
pricing data, certification, bid, proposal, report, claim, or
any other information relating to a Contract to any Governmental
Entity that would be contrary in any material respect to any
applicable Laws.
(g) To the Knowledge of the Company, no employee, agent,
consultant, representative, or Affiliate of the Company or any
of its Subsidiaries is in receipt or possession of any
competitor or government proprietary or procurement sensitive
information related to the business of the Company of any of its
Subsidiaries under circumstances where there is reason to
believe that such receipt or possession is unlawful or
unauthorized.
Section
3.18
Compliance
with Law; Sarbanes-Oxley Act
.
(a) The operations of the business of the Company and its
Subsidiaries have been conducted in accordance in all material
respects with applicable Laws. Since December 31, 2004,
none of the Company or its Subsidiaries has received notice of
any violation (or any investigation with respect thereto) of any
such Laws or other legal requirement, and none of the Company or
its Subsidiaries is in material default with respect to any
order, writ, judgment, award, injunction or decree of any
Governmental Entity, applicable to any of its assets, properties
or operations. To the Knowledge of the Company, no legislative
or regulatory proposal or other proposal for a change in any
applicable Law or the interpretations thereof has been adopted
or is pending which could materially adversely affect the
Company or its Subsidiaries or the business of the Company or
its Subsidiaries.
A-16
(b) Except as permitted by the Exchange Act, including
Sections 13(k)(2) and (3) or rules of the SEC, since
the enactment of the Sarbanes-Oxley Act, neither the Company nor
any of its Affiliates has made, arranged or modified (in any
material way) any extension of credit in the form of a personal
loan to any executive officer or director of the Company.
(c) The Company maintains (i) disclosure controls and
procedures (as defined in
Rule 13a-15
or
15d-15,
as applicable, under the Exchange Act) designed to ensure that
information required to be disclosed by the Company is recorded
and reported on a timely basis to the individuals responsible
for the preparation of the Companys filings with the SEC
and other public disclosure documents and (ii) a system of
internal control over financial reporting (as defined in
Rule 13a-15
or
15d-15,
as applicable, under the Exchange Act) designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with GAAP which includes
policies and procedures that (i) pertain to the maintenance
of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the asset of the
Company, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts
and expenditures of the Company are being made only in
accordance with authorizations of management of the Company, and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect
on its financial statements. The Company has disclosed, based on
the most recent evaluation of its chief executive officer and
its chief financial officer prior to the date hereof, to the
Companys auditors and the audit committee of the Company
Board (x) any significant deficiencies in the design or
operation of its internal controls over financial reporting that
are reasonably likely to adversely affect the Companys
ability to record, process, summarize and report financial
information (and has identified for the Companys auditors
and audit committee of the Company Board any material weaknesses
in internal control over financial reporting) and (y) any
fraud, whether or not material, that involves management or
other employees who have a significant role in the
Companys internal control over financial reporting. The
Company has made available to Parent (i) a summary of any
such disclosure made by management to the Companys
auditors and the audit committee since December 31, 2004
and (ii) any communication since December 31, 2004
made by management or the Companys auditors to the audit
committee required or contemplated by the audit committees
charter or professional standards of the Public Company
Accounting Oversight Board. Since December 31, 2004, no
material written complaints from any source regarding
questionable accounting, internal accounting controls or
auditing matters have been received by the Company. No attorney
representing the Company or any of its Subsidiaries, whether or
not employed by the Company or any of its Subsidiaries, has
reported evidence of a material violation of securities laws,
material breach of fiduciary duty or similar material violation
by the Company or any of its officers, directors or agents to
the Companys chief legal officer, audit committee (or
other committee designated for the purpose) of the Company Board
or the Company Board pursuant to the rules adopted pursuant to
Section 307 of the Sarbanes-Oxley Act.
(d) The Company has made available to Parent a summary of
all complaints or observations relating to other matters made
since December 31, 2004 through the Companys
whistleblower hot-line or equivalent system for
receipt of employee complaints or observations regarding
possible violations of Law by the Company or any of its
Subsidiaries or any of their respective employees in respect of
such employees employment with the Company or its
Subsidiaries.
(e) The Companys or any Subsidiarys operation
of any web sites used in connection with the business, and
content thereof and data processed, collected, stored or
disseminated in connection therewith, do not violate any
applicable Law, the applicable Laws of any other jurisdiction,
including Directive 95/46/EC of the European Parliament and of
the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and
on the free movement of such data, and any Persons right
of privacy or publicity.
Section
3.19
Litigation
.
There
are no material civil, criminal, judicial or administrative
actions, suits, claims, hearings, arbitrations, investigations,
inquiries, audits or other proceedings (each, an
Action
) pending or, to the Knowledge of the
Company, threatened against, or brought by, the Company or any
of its Subsidiaries or any of their officers or directors
involving or relating to the Company or its Subsidiaries, the
material assets, properties or rights of any of the Company and
its Subsidiaries or the transactions contemplated by this
Agreement or any of the Transaction Documents. None of the
Company or any of its Subsidiaries is a party to or subject to
the provisions
A-17
of any material judgment, settlement, order, writ, injunction,
decree or award of any Governmental Entity imposed upon the
Company or any of its Subsidiaries or any of their respective
businesses, assets or properties.
Section
3.20
Material
Contracts
.
(a) Section 3.20 of the Company Disclosure Schedule
sets forth a complete and correct list of all Contracts as of
the date hereof.
(b) Each Contract is in full force and effect, valid,
binding and enforceable against the Company or its Subsidiaries
and, to the Knowledge of the Company, against the other parties
thereto in accordance with its terms, subject to (i) the
effect of bankruptcy, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors rights generally,
(ii) general equitable principles (whether considered in a
proceeding in equity or at Law) and (iii) an implied
covenant of good faith and fair dealing. Each of the Company and
its Subsidiaries has performed all obligations required to be
performed by it to date under, and is not in default or
delinquent in performance, status or any other respect (claimed
or actual) in connection with, any Contract, and no event has
occurred which, with due notice or lapse of time or both, would
constitute such a default, except as, individually or in the
aggregate, has not had and would not reasonably be expected to
have a Company Material Adverse Effect. The Company has sent no
notices of default under any Contract, which default remains
uncured, and to the Knowledge of the Company, no other party to
any Contract is in material default in respect thereof, and no
event has occurred which, with due notice or lapse of time or
both, would constitute such a default. The Company has made
available to Parent or its representatives true and complete
originals or copies of all the Contracts.
(c) A
Contract
means any agreement,
contract or commitment, oral or written, to which either of the
Company or any of its Subsidiaries is a party or by which it or
any of its assets are bound constituting:
(i) an agreement that would be required to be filed by the
Company as a material agreement pursuant to
Item 601(b)(10) of
Regulation S-K
under the Securities Act or disclosed by the Company on a
Current Report on
Form 8-K
or that if terminated or subject to a default by any party
thereto, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect;
(ii) an agreement (A) with a customer of the Company
or any of its Subsidiaries pursuant to which the Company or any
of its Subsidiaries has sold or will sell goods
and/or
services and has derived or expects to derive revenue of at
least $50,000 in any
12-month
period, or (B) with any customer that contains
most-favored nation, pursuant to which the Company
or any of its Subsidiaries has sold or will sell goods
and/or
services and has derived or expects to derive revenue of at
least $50,000 in any
12-month
period (the Contracts set forth in subsection (A) and
(B) collectively, the
Customer
Contracts
);
(iii) an agreement with a licensor, supplier or other
vendor of the Company or any of its Subsidiaries pursuant to
which the Company and its Subsidiaries has paid or is expected
to pay at least $50,000 to such licensor, supplier or other
vendor in any
12-month
period;
(iv) a mortgage, indenture, security agreement, guaranty,
pledge and other agreement or instrument relating to the
borrowing of money or extension of credit (other than accounts
receivable or accounts payable in the ordinary course of
business and consistent with past practice);
(v) an employment, change of control, retention, severance
or material consulting agreement or a collective bargaining
agreement or other material agreement with any association
representing employees;
(vi) any joint venture, partnership or limited liability
company agreement with third parties;
(vii) any non-competition agreement or any other agreement
or obligation which purports to limit in any material respect
(A) the manner in which, or the localities in which, the
business of the Company or its Subsidiaries may be conducted or
(B) the ability of either of the Company or its
Subsidiaries to provide any type of service presently conducted
by the Company or its Subsidiaries;
(viii) an agreement containing any exclusivity,
most-favored-nations (other than Customer Contracts),
non-disclosure, confidentiality or standstill provision;
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(ix) any Lease and any lease or sublease of personal
property to which the Company or any of its Subsidiaries is
party as either lessor or lessee;
(x) an agreement limiting or restricting the ability of
either of the Company or its Subsidiaries to make distributions
or declare or pay dividends in respect of its capital stock or
membership interests, as the case may be;
(xi) a material distribution, dealership, representative,
broker, sales agency, consulting or advertising contract;
(xii) an agreement requiring capital expenditures in excess
of $50,000;
(xiii) an agreement or offer to acquire all or a
substantial portion of the capital stock, business, property or
assets of any other Person or sell, transfer or otherwise
dispose of a substantial portion of the assets or capital stock
of the Company or any of its Subsidiaries;
(xiv) any agreement to indemnify any other Person against
any charge of infringement of any Intellectual Property;
(xv) any agreement (A) pursuant to which the Company
or any of its Subsidiaries has been granted, or grants, any
license to Intellectual Property material to the business of the
Company and its Subsidiaries, taken as a whole, or (B) for
the development for the benefit of the Company or any of its
Subsidiaries by any party other than the Company or its
Subsidiaries of any products or services or Intellectual
Property that is material to the Company and its Subsidiaries,
taken as a whole;
(xvi) any contract pursuant to which the Company or any of
its Subsidiaries has agreed or is required to provide any third
party with access to source code, to provide for source code to
be put in escrow or to refrain from granting license or
franchise rights to any other Person;
(xvii) any agreement (x)(A) between the Company or any of
its Subsidiaries and any Governmental Entity, or
(B) between the Company or any of its Subsidiaries, as a
subcontractor and any prime contractor to any Governmental
Entity, or (y) to the Knowledge of the Company, financed by
any Governmental Entity and subject to the rules and regulations
of any Governmental Entity concerning procurement;
(xviii) any power of attorney; or
(xix) any other material agreement not in the ordinary
course of the business of the Company and its Subsidiaries.
Section
3.21
Employee
Plans
.
(a) Section 3.21(a) of the Company Disclosure Schedule
sets forth a list: (i) all employee benefit
plans, as defined in Section 3(3) of ERISA, and all
other employee benefit agreements, plans, programs, policies or
arrangements, including, without limitation, any such
agreements, plans, programs, policies or arrangements providing
severance pay, sick leave, employment, severance, retention,
change in control, consulting, vacation pay, salary continuation
for disability, retirement benefits, deferred compensation,
bonus pay, incentive pay, stock options or stock awards,
hospitalization insurance, medical insurance, life insurance,
cafeteria benefits, dependent care reimbursements, prepaid legal
benefits, scholarships or tuition reimbursements, maintained or
sponsored by the Company or any of its Subsidiaries or to which
the Company or any of its Subsidiaries is currently obligated to
contribute thereunder for current or former employees, officers,
directors, agents, consultants and independent contractors of
the Company and its Subsidiaries (the
Employee Benefit
Plans
), and (ii) all employee pension
plans, as defined in Section 3(2) of ERISA, currently
maintained or sponsored by the Company or any trade or business
(whether or not incorporated) which is under control or treated
as a single employer with the Company under Section 414(b),
(c), (m), or (o) of the Code (a
ERISA
Affiliate
) or to which the Company or any ERISA
Affiliate is currently obligated to contribute thereunder (the
Pension Plans
).
(b) True, correct and complete copies of the following
documents, with respect to each of the Employee Benefit Plans
and Pension Plans, have been made available to Parent, to the
extent applicable: (i) all plans and related trust
documents, and amendments thereto; (ii) Forms 5500
filed for the three most recent plan years; (iii) the
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most recent IRS determination letter, if any, regarding the
tax-qualified status of such Employee Benefit Plan or Pension
Plan; (iv) the most recent summary plan descriptions,
annual reports and material modifications; (v) the most
recent actuarial report, if any; (vi) written descriptions
of the terms of all non-written agreements relating to the
Employee Benefit Plans or Pension Plans; and (vii) the most
recent written results of all compliance testing required
pursuant to Sections 125, 401(a)(4), 401(k), 401(m),
410(b), 415 and 416 of the Code.
(c) None of the Employee Benefit Plans or Pension Plans is
a multiemployer plan, as defined in Section 3(37) of ERISA
(
Multiemployer Plan
) or subject to
Title IV or Section 302 of ERISA or Sections 412
or 4971 of the Code. None of the Company or any ERISA Affiliate
has withdrawn at any time within the preceding six years from
any Multiemployer Plan or incurred any withdrawal liability
which remains unsatisfied and no circumstances have occurred or
exist which could reasonably be expected to result in any such
liability to the Company or any Subsidiary.
(d) Each Pension Plan that is intended to qualify under
Section 401(a) of the Code has received a determination
letter from the IRS or can rely on an opinion letter as to its
qualification and the trust maintained pursuant thereto is
exempt from federal income taxation under Section 501(a) of
the Code, and, to the Knowledge of the Company, nothing has
occurred with respect to the operation of any such Pension Plan
that would reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any material
liability, penalty or Tax under ERISA or the Code.
(e) All contributions (including all employer contributions
and employee salary reduction contributions) and all premiums
required to have been paid under any of the Employee Benefit
Plans or Pension Plans or by Law (without regard to any waivers
granted under Section 412 of the Code) to any funds or
trusts established thereunder or in connection therewith have
been made by the due date thereof (including any valid
extension) and all contributions for any period ending on or
before the Closing Date which are not yet due will be paid or
accrued prior to the Closing Date.
(f) To the Knowledge of the Company, there has been no
material violation of ERISA or the Code with respect to the
filing of applicable reports, documents and notices regarding
the Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of required reports,
documents or notices to the participants or beneficiaries of the
Employee Benefit Plans.
(g) There are no pending Actions (other than claims for
benefits in the ordinary course) which have been instituted or,
to the Knowledge of the Company, asserted against the Employee
Benefit Plans or Pension Plans, the assets of any of the trusts
under such plans or the plan sponsor or the plan administrator,
or against any fiduciary of the Employee Benefit Plans or
Pension Plans with respect to the operation or administration of
such plans or the investment of the assets of such plans (other
than routine benefit claims), nor does the Company have
Knowledge of facts which could reasonably form the basis for any
such claim or lawsuit. No Employee Benefit Plan or Pension Plan
has been the subject of an audit, investigation or examination
by any Governmental Entity to the Knowledge of the Company.
(h) The Employee Benefit Plans and Pension Plans have been
maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA and the Code (including
rules and regulations thereunder) and other applicable federal
and state laws and regulations. None of the Company, its
Subsidiaries, or, to the Knowledge of the Company, any
party in interest or disqualified person
with respect to the Employee Benefit Plans or Pension Plans, as
applicable, has engaged in a non-exempt prohibited
transaction within the meaning of Section 406 of
ERISA or 4975 of the Code pursuant to which the Tax or penalty
could be material. No stock or other security issued by the
Company or any Affiliate forms or has formed a part of the
assets of any Employee Benefit Plan or Pension Plan.
(i) None of the Employee Benefit Plans or Pension Plans
provide retiree life, health or death benefits except as may be
required under COBRA or any similar state or local Law at the
retirees own expense.
(j) Neither the execution and delivery of this Agreement,
and the other Transaction Documents nor the consummation of the
transactions contemplated hereby or thereby will, either alone
or together with the occurrence of subsequent events
(i) increase any benefits otherwise payable under any
Employee Benefit Plan or Pension Plan; (ii) result in the
acceleration of the time of payment or vesting of any benefits
under any Employee Benefit Plan,
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Pension Plan or Contract to any current or former employee; or
(iii) result in the payment of any amount that would,
individually or in combination with any other such payment, fail
to be deductible by reason of Section 280G of the Code.
(k) No Contract, Employee Benefit Plan, warrant or other
compensatory or equity-based arrangement with any employee,
officer or director of the Company contains any provision
requiring the Company to pay on behalf of, or otherwise
reimburse, any such individual for any income or excise Taxes
due by such individual upon payment of any benefits by the
Company, other than any such obligations as required by
applicable Law or regulations.
(l) Each nonqualified deferred compensation
plan (as defined in Section 409A(d)(1) of the Code)
of the Company has been operated in good faith compliance with
Section 409A of the Code, IRS Notice
2005-1,
or
the proposed regulations or final regulations promulgated under
Section 409A of the Code.
(m) All Company Employee Benefit Plans and all Company
Pension Plans subject to the laws of any jurisdiction outside of
the United States, if any, (i) have been maintained in
material compliance with all applicable requirements,
(ii) if they are intended to qualify for special Tax
treatment, meet all requirements for such treatment, and
(iii) if they are intended to be funded
and/or
book-reserved, are fully funded
and/or
book
reserved, as appropriate, based upon reasonable actuarial
assumptions.
Section
3.22
Insurance
.
The
Company has made available to Parent true, complete and accurate
copies of all material surety bonds, fidelity bonds and all
material policies of title, liability, fire, casualty, business
interruption, workers compensation, general/products
liability, automobile, primary and excess liability,
professional errors and omission, crime, director and officer
liability, fiduciary liability, and other forms of insurance
insuring each of the Company and its Subsidiaries and their
assets, properties and operations. All such policies and bonds
are in full force and effect. None of the Company or its
Subsidiaries is in material default under any provisions of any
such policy of insurance nor has any of the Company or its
Subsidiaries received notice of cancellation of or cancelled any
such insurance. For all material claims made under such policies
and bonds, the Company and its Subsidiaries have timely complied
with any applicable notice provisions.
Section
3.23
Affiliate
Transactions
.
There are no transactions,
agreements, arrangements or understandings between the Company
or any of its Subsidiaries, on the one hand, and any director,
officer or other Affiliate of the Company, on the other hand,
that would be required to be disclosed under Item 404 of
Regulation S-K
under the Securities Act and that are not so disclosed.
Section
3.24
Vendors
and Customers
.
(a) Section 3.24(a) of the Company Disclosure Schedule
sets forth a list of the 20 largest licensors, suppliers or
other vendors of the Company and its Subsidiaries. No such
licensor, supplier or vendor has expressed in writing or, to the
Knowledge of the Company, verbally to the Company or any of its
Subsidiaries its intention to cancel or otherwise terminate or
materially reduce or modify its relationship with the Company or
any of its Subsidiaries.
(b) Section 3.24(b) of the Company Disclosure Schedule
sets forth a list of the 20 largest customers of the Company and
its Subsidiaries. No such customer has expressed in writing or,
to the Knowledge of the Company, verbally to the Company or any
of its Subsidiaries its intention to cancel or otherwise
terminate or materially reduce or modify its relationship with
the Company or any of its Subsidiaries.
(c) The Company has not received any customer complaints
concerning its products or services that are reasonably likely
to lead to any cancellation or material reduction of any such
products or services.
Section
3.25
Labor
Matters
.
(a) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or other labor
union contract or similar scheme or arrangement applicable to
its employees nor does the Company have Knowledge of any
activities or proceedings of any labor union to organize any
such employees.
(b) Each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable Laws
relating to employment and employment practices, the
classification of employees, wages, hours, collective
bargaining, unlawful discrimination, civil rights, safety and
health, workers compensation and terms and conditions of
employment. There are no charges with respect to or relating to
either of the Company or its Subsidiaries
A-21
pending or, to the Knowledge of the Company, threatened before
the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful
employment practices. Neither the Company nor any of its
Subsidiaries has received any notice from any national, state,
local or foreign agency responsible for the enforcement of labor
or employment Laws of an intention to conduct an investigation
of either of the Company or its Subsidiaries and no such
investigation is in progress.
(c) There has been no mass layoff or
plant closing as defined by the Worker Adjustment
and Retraining Notification Act or any similar state or local
plant closing Law (
WARN
) with
respect to the current or former employees of the Company or its
Subsidiaries.
Section
3.26
Environmental
Matters
.
(a) Each of the Company and its Subsidiaries is, and has
been, in compliance in all material respects with all
Environmental Laws. Each of the Company and its Subsidiaries has
in effect all material licenses, permits and other
authorizations required under all Environmental Laws and all
such licenses, permits and other authorizations are in full
force and effect and the Company is in compliance in all
material respects with all such licenses, permits and
authorizations and such licenses, permits and authorizations are
transferable without cost.
(b) There is no material Action pending, or to the
Knowledge of the Company, threatened against the Company, any of
its Subsidiaries or any of their respective properties under any
Environmental Law, and the Company and its Subsidiaries have not
received any notice of material violation or potential liability
under any Environmental Laws from any Person or any Governmental
Entity inquiry, request for information, or demand letter under
any Environmental Law relating to operations or properties of
the Company or its Subsidiaries. None of the Company, its
Subsidiaries or respective properties or operations is subject
to any orders arising under Environmental Laws nor are there any
Actions pending or, to the Knowledge of the Company, threatened,
against the Company or its Subsidiaries under any Environmental
Law. None of the Company or its Subsidiaries has entered into
any agreement pursuant to which the Company or its Subsidiaries
has assumed or will assume any material liability under
Environmental Laws, including without limitation, any obligation
for costs of remediation, of any other Person.
(c) To the Knowledge of the Company, there has been no
release or threatened release of any Hazardous Material, on, at
or beneath any of the Leased Real Property or other properties
currently or previously owned or operated by the Company or its
Subsidiaries or any surface waters or groundwaters thereon
or thereunder which requires any material disclosure,
investigation, cleanup, remediation, monitoring, abatement, deed
or use restriction by the Company, or which would be expected to
give rise to any actual or alleged material liability for
personal injury, property damage, natural resources damage or
other material liability or damages to the Company or its
Subsidiaries under any Environmental Laws.
(d) None of the Company or its Subsidiaries has sent or
arranged for the disposal of any Hazardous Material, or
transported any Hazardous Material, that reasonably would be
expected to give rise to any material liability for any damages
or costs of investigation, remediation or any other action to
respond to the release or threatened release of any Hazardous
Material.
(e) The Company has made available to Parent copies of all
environmental studies, investigations, reports or assessments
concerning the Company, its Subsidiaries, the Leased Real
Property and any owned real property currently or previously
owned or operated by the Company or its Subsidiaries.
(f) None of the Company and its Subsidiaries is or will be
required to incur material cost or expense in order to cause
their operations or properties to comply with applicable
Environmental Laws.
Section
3.27
No
Brokers
.
Except as set forth on
Section 3.27 of the Company Disclosure Schedule, no broker,
finder or similar intermediary has acted for or on behalf of, or
is entitled to any brokers, finders or similar fee
or other commission from the Company or its Subsidiaries or
Affiliates in connection with this Agreement or any of the other
Transaction Documents or the transactions contemplated hereby or
thereby.
Section
3.28
State
Takeover Statutes
.
The Board of Directors of
the Company has taken all action necessary to ensure that any
restrictions on business combinations contained in the PBCL,
including (to the extent applicable) Sections 2538 through
2588, inclusive, of the PBCL, or in the Company Organizational
A-22
Documents, will not apply to this Agreement, the other
Transaction Documents, the Merger and the other transactions
contemplated hereby and thereby, and all such anti-takeover
statutes, rules, regulations and restrictions are inapplicable
to such. No other fair price,
moratorium, control share acquisition or
other similar anti-takeover statute or regulation or any
anti-takeover provision in the Companys Organizational
Documents is, or at the Effective Time will be, applicable to
the Company, the Company Common Stock, this Agreement, the other
Transaction Documents, the Merger and the other transactions
contemplated hereby and thereby.
Section
3.29
Information
Supplied
.
The information supplied or to be
supplied by the Company specifically for inclusion in the proxy
statement or any amendment or supplement thereto (the
Proxy Statement
) and to be sent to the
shareholders of the Company in connection with the Company
shareholders meeting to adopt this Agreement and the Merger (the
Company Shareholders Meeting
) shall not, on
the date the Proxy Statement is first mailed to the shareholders
of the Company or at the time of the Company Shareholders
Meeting or at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement shall, at
the time of the Company Shareholders Meeting, comply as to form
in all material respects with the requirements of the Exchange
Act.
Section
3.30
Board
Approval
.
The Company Board, at a meeting
duly called and held, by unanimous vote (a) has determined
that this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, including the
Merger, are advisable and fair to, and in the best interests of,
the Company and its shareholders, (b) has approved and
adopted this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, including the
Merger, and (c) has resolved, subject to
Section 7.04
, to recommend that the holders of the
shares of capital stock of the Company approve and adopt this
Agreement and the transactions contemplated hereby, including
the Merger. The Company hereby agrees to the inclusion in the
Proxy Statement of the recommendation of the Company Board
described in this
Section 3.30
(subject to the right
of the Company Board to withdraw, amend or modify such
recommendation in accordance with
Section 7.04
).
Section
3.31
Vote
Required
.
The Company Shareholder Approval is
the only vote of the holders of any class or series of the
Companys capital stock necessary to approve and adopt this
Agreement (and the other Transaction Documents) and the
transactions contemplated hereby (and thereby), including the
Merger.
Section
3.32
Illegal
or Unauthorized Payments; Political Contributions
.
(a) Neither the Company or its Subsidiaries nor, to the
Knowledge of the Company, any of the respective officers,
directors, employees, agents or other representatives of the
Company or its Subsidiaries or any other business entity or
enterprise with which the Company or any of its Subsidiaries is
or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift
of money, property, or services, whether or not in contravention
of applicable Law, (i) as a kickback or bribe to any Person
or (ii) to any political organization, or the holder of or
any aspirant to any elective or appointive public office, except
for personal political contributions not involving the direct or
indirect use of funds of the Company or any of its Subsidiaries.
(b) None of the Company, any Subsidiary or, to the
Knowledge of the Company, any directors or officers, agents or
employees of the Company or any Subsidiary, has
(i) provided remuneration or received any remuneration in
violation of 42 U.S.C.
1320a-7b(b),
the Federal anti-kickback statute or any similar
Law, or (ii) participated in providing financial or
reimbursement information to customers that was reported to
government reimbursement agencies and that was untrue or
misleading in violation of 31 U.S.C. 3729, the
Federal False Claims Act or any similar Law
(c) Neither the Company, nor any of its Subsidiaries, nor
any of their respective representatives has, in connection with
the operation of their respective businesses, (a) used any
corporate or other funds for unlawful contributions, payments,
gifts or entertainment, or made any unlawful expenditures
relating to political activity to government officials,
candidates or members of political parties or organizations, or
established or maintained any unlawful or unrecorded funds in
violation of Section 104 of the Foreign Corrupt Practices
Act or any other similar Law, (b) paid, accepted or
received any unlawful contributions, payments, expenditures or
gifts, or (c) violated or operated in noncompliance with
any export restrictions, anti-boycott regulations, embargo
regulations or other applicable Laws.
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Section
3.33
Product
Warranty
.
No product of the Company or any of
its Subsidiaries manufactured, sold, leased or delivered by the
Company or any of its Subsidiaries is subject to any oral or
written guaranty, warranty or other indemnity to its customers
with respect to the quality or absence of defects of such
product beyond the Companys and its Subsidiaries
applicable regular or standard or usual terms and conditions of
sale or lease or as otherwise provided by applicable Law. There
are no claims pending, or to the Knowledge of the Company,
anticipated or threatened against the Company or any of its
Subsidiaries with respect to the quality of, or existence of
defects in, any of their products. The Company has made
available to Parent information which is accurate and complete
in all material respects, regarding all returns of defective or
expired products given to customers since December 31,
2004, and such information in each case accurately describes the
cause which, to the Knowledge of the Company, resulted in the
return, allowance or credit. Neither the Company nor any of its
Subsidiaries has since December 31, 2004 paid or been
required to pay or received a request or demand for payment of
any damages, including any direct, incidental or consequential
damages, to any Person in connection with any product.
Section
3.34
Export
.
(a) In the three-year period prior to the date hereof, the
Company and its Subsidiaries and, to the Knowledge of the
Company, any and all distributors of the Companys and its
Subsidiaries products have (i) complied with all
applicable laws or regulations related to the sale, marketing,
promotion or export of goods promulgated or enforced by the
Office of Foreign Assets Control in the United States Department
of the Treasury, the United States Department of Commerce or any
other department or agency of the United States federal
government, including the Arms Export Control Act, the trading
with the Enemy Act, the International Emergency Economic Powers
Act, the Export Administration Act, the 1930 Tariff Act, the
Foreign Corrupt Practices Act, the Export Administration
Regulations, the International Traffic in Arms Regulations, the
United States Customers Regulations (the
Trade
Laws
) and (ii) made reasonable efforts to ensure
that no products have been sold directly or indirectly to any
entity where such sales are, or were at any time during the
previous two years, prohibited by these Trade Laws or other
regulations, including, in the case of each of clause (i)
and (ii) with respect to any sales made in Iran or to any
Person in Iran.
(b) Neither the Company nor any of its Subsidiaries has
received notice that it has been the subject of any
investigation, complaint or claim of any violation of any Trade
Law by any Governmental Entity.
Section
3.35
Inventory
.
All
inventory reflected on the Companys financial statements
included in the Company SEC Reports and all other inventory
acquired by the Company or any of its Subsidiaries was acquired
in the ordinary course of business and in a manner consistent
with each of the Companys and each of its
Subsidiarys regular inventory practices. Adequate reserves
have been established on the Companys financial statements
and on the books and records of the Company and each of its
Subsidiaries with respect to excessive and obsolete inventory
(it being agreed that, for purposes of this
Section 3.35
the term excessive and obsolete
inventory shall refer to any inventory which
(a) cannot be sold at current prices in the ordinary course
of business, (b) are not usable in the production of
current products of the Company and its Subsidiaries or
(c) consists of on-hand quantities in excess of one
years historical sales or usage).
ARTICLE 4
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
Section
4.01
Organization
.
Each
of Parent and Merger Sub is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization, and has all requisite corporate power to own its
properties and assets and to conduct its businesses as now
conducted.
Section
4.02
No
Conflict or Violation
.
The execution,
delivery and performance by Parent and Merger Sub of this
Agreement do not and will not (a) violate or conflict with
any provision of any of Parents organizational documents
or the organizational documents of Merger Sub, (b) violate
any provision of Law, or any order, judgment or decree of any
Governmental Entity, (c) result in the creation or
imposition of any Lien (other than any Permitted Lien) upon any
of the assets, properties or rights of either Parent or Merger
Sub or (d) violate or result in a breach of
A-24
or constitute (with due notice or lapse of time or both) a
default under any material contract, agreement or instrument to
which Parent or Merger Sub is a party or by which it is are
bound or to which any of its properties or assets is subject,
except in each case as would not, individually or in the
aggregate, prevent or materially delay the ability of Parent and
Merger Sub to perform their respective obligations under this
Agreement.
Section
4.03
Consents
and Approvals
.
No consent, waiver,
authorization or approval of any Governmental Entity, and no
declaration or notice to or filing or registration with any
Governmental Entity, is required in connection with the
execution and delivery of this Agreement by Parent or Merger Sub
or the performance by Parent or its Subsidiaries or Merger Sub
of their obligations hereunder or thereunder, except for
applicable requirements of the Securities Act, the Exchange Act
and the rules and regulations of NASDAQ.
Section
4.04
Authorization
and Validity of Agreement
.
Parent and Merger
Sub have all requisite corporate power and authority to execute,
deliver and perform their obligations under this Agreement and
the other Transaction Documents to which either Parent or Merger
Sub is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents to which either Parent or
Merger Sub is a party by Parent and Merger Sub and the
performance by Parent and Merger Sub of their obligations
hereunder and thereunder and the transactions contemplated
hereby and thereby have been duly authorized by the Board of
Directors of each of Parent and Merger Sub (and, with respect to
Merger Sub, Parent as sole shareholder of Merger Sub), and all
other necessary corporate action on the part of Parent and
Merger Sub, and no other corporate proceedings on the part of
Parent and Merger Sub are necessary to authorize this Agreement
and the other Transaction Documents to which either Parent or
Merger Sub is a party, and the transactions contemplated hereby
and thereby. This Agreement and the other Transaction Documents
to which either Parent or Merger Sub is a party have been duly
and validly executed and delivered by Parent and Merger Sub and,
assuming due execution and delivery by the Company and the other
parties thereto (as applicable), shall constitute their legal,
valid and binding obligation, enforceable against them in
accordance with its terms, subject to (a) the effect of
bankruptcy, fraudulent conveyance, reorganization, moratorium
and other similar Laws relating to or affecting the enforcement
of creditors rights generally, (b) general equitable
principles (whether considered in a proceeding in equity or at
Law) and (c) an implied covenant of good faith and fair
dealing.
Section
4.05
No
Brokers
.
No broker, finder or similar
intermediary has acted for or on behalf of, or is entitled to
any brokers, finders or similar fee or other
commission from Parent or Merger Sub in connection with this
Agreement and the other Transaction Documents to which either
Parent or Merger Sub is a party or the transactions contemplated
hereby or thereby. Delzanno & Co., Inc. has acted as a
consultant and received a non-contingent monthly consulting fee
from Parent in connection with the transactions contemplated by
this Agreement and the other Transaction Documents to which
either Parent or Merger Sub is a party.
Section
4.06
Information
Supplied
.
The information supplied or to be
supplied by Parent specifically for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first
mailed to the shareholders of the Company or at the time of the
Company Shareholders Meeting or at the Effective Time, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section
4.07
Merger
Sub
.
Merger Sub was formed for the purpose of
engaging in the transactions contemplated by this Agreement and
the other Transaction Documents. All of the outstanding capital
stock of Merger Sub is directly owned of record and beneficially
by Parent. Except for obligations or liabilities incurred in
connection with its incorporation or organization and the
transactions contemplated by this Agreement and the other
Transaction Documents, Merger Sub has not and will not have
incurred, directly or indirectly, any obligations or liabilities
or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangement with
any other Person. Merger Sub has no Subsidiaries.
Section
4.08
Sufficiency
of Funds
.
Merger Sub will have sufficient
funds at the Effective Time for the payment of the Merger
Consideration and to perform its other obligations with respect
to the transactions contemplated by this Agreement and the other
Transaction Documents to which either Parent or Merger Sub is a
party.
A-25
ARTICLE 5
COVENANTS OF
THE COMPANY
The Company hereby covenants as follows:
Section
5.01
Conduct
of Business Before the Closing Date
.
(a) The Company covenants and agrees that, during the
period from the date hereof to the earlier of the termination of
this Agreement in accordance with its terms and the Effective
Time (except as otherwise expressly provided by the terms of
this Agreement or the Employment Agreement), unless Parent shall
otherwise consent in writing: (i) the businesses of the
Company and its Subsidiaries shall be conducted, in all material
respects, in the ordinary course of business and in a manner
consistent with past practice and, in all material respects, in
compliance with applicable Laws; (ii) the Company shall and
shall cause its Subsidiaries to continue to maintain, in all
material respects, its assets, properties, rights and operations
in accordance with present practice in a condition suitable for
their current use; and (iii) the Company shall use its
commercially reasonable efforts consistent with the foregoing to
preserve substantially intact the business organization of the
Company and its Subsidiaries, to keep available the services of
the present officers and key employees of the Company and its
Subsidiaries and to preserve, in all material respects, the
present relationships of the Company and its Subsidiaries with
Persons with which the Company or any of its Subsidiaries has
significant business relations. Without limiting the generality
of the foregoing, neither the Company nor any of its
Subsidiaries shall (except as otherwise expressly provided by
the terms of this Agreement or the Employment Agreement),
between the date of this Agreement and the earlier of the
termination of this Agreement in accordance with its terms and
the Effective Time, directly or indirectly do, any of the
following without the prior written consent of Parent:
(i) make any change in any of its organizational documents;
issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance
of, any shares of capital stock (other than upon the exercise of
options to purchase shares of Company Common Stock outstanding
on the date hereof) or other equity securities or grant any
option, warrant or right to acquire any capital stock or other
equity securities or issue any security convertible into or
exchangeable for such securities or alter in any way any its
outstanding securities or make any change in outstanding shares
of capital stock or other ownership interests or its
capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(ii) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any of
its capital stock;
(iii) make any sale, assignment, transfer, abandonment,
sublease, assignment or other conveyance of its material assets,
Intellectual Property or other rights or any part thereof, other
than dispositions of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business and
consistent with past practice;
(iv) subject any of its or its Subsidiaries assets,
properties or rights or any part thereof, to any Lien or suffer
such to exist other than Permitted Liens;
(v) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any shares of the capital stock, membership
interests or partnership interests or other ownership interests
of the Company and its Subsidiaries or declare, set aside or pay
any dividends or other distribution in respect of such shares or
interests;
(vi) (A) acquire any corporation, partnership, other
business organization or any division thereof in any transaction
or series of related transactions (including by merger,
consolidation or acquisition of stock or assets or any other
business combination); (B) acquire assets outside of the
ordinary course of business consistent with past practice from
any Person for consideration in excess of $15,000 individually
or $30,000 in the aggregate, other than any such acquisitions
required under the terms of Contracts in effect as of the date
of this Agreement (including by merger, consolidation, or
acquisition of stock or assets or any other business
combination); (C) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or
otherwise become responsible for, the obligations of any Person,
or make any loans or advances, or grant any security interest in
any of its assets, including any of its Intellectual Property;
(D) enter
A-26
into any material contract or agreement outside of the ordinary
course of business consistent with past practice; or
(E) authorize, or make any commitment with respect to any
single capital expenditure that is in excess of $15,000
individually or $50,000 in the aggregate;
(vii) amend, modify or terminate any material contract,
instrument or agreement other than in the ordinary course of
business and consistent with past practice, or cancel, modify or
waive any debts or claims held by it or waive any rights having
in each case a value in excess of $50,000;
(viii) enter into any new (or amend any existing to
increase benefits or otherwise) employee benefit plan, program
or arrangement or any new (or amend any existing to increase
benefits or otherwise) employment, severance, change of control
or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation
payable or to become payable to any employee, except as
otherwise provided pursuant to the terms of any plan or
agreement, as required by Law, to the extent necessary to avoid
imposition of any Taxes under Section 409A (but only to the
extent such amendment does not materially increase the cost of
such plan, program or arrangement to the Company, without regard
to the time value of money) or for increases in compensation to
employees as required under pre-existing contractual provisions
that have been disclosed to Parent;
(ix) pay (other than with respect to compensatory payments
to current or former employees, officers, consultants or
directors, in each case (A) in the ordinary course of
business consistent with past practice, (B) as required
under agreements in effect as of the date hereof or
(C) which have been accrued for on the Companys
balance sheet), lend or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any
agreement or arrangement with, any of its Affiliates (other than
wholly owned Subsidiaries);
(x) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained as of the
date hereof;
(xi) make any change in any method of accounting or
accounting principle, method, estimate or practice except for
any such change required by reason of a concurrent change in
GAAP, or write off as uncollectible any accounts receivable
except in the ordinary course of business and consistent with
past practice;
(xii) make or change any material Tax election, change an
annual accounting period, adopt or change any accounting method,
file any amended Tax Return, enter into any closing agreement,
settle any material Tax claim or assessment relating to the
Company or any of its Subsidiaries, surrender any right to claim
a refund of a material amount of Taxes or consent to any
extension or waiver of the limitation period applicable to any
material Tax claim or assessment relating to the Company or any
of its Subsidiaries;
(xiii) settle, release or forgive any material claim or
litigation or waive any right thereto;
(xiv) adopt, approve, or agree to adopt, a shareholder
rights plan;
(xv) create any Subsidiaries; or
(xvi) announce any intention, enter into any agreement or
otherwise make a commitment, to do any of the foregoing.
(b) Nothing contained in this Agreement shall give to
Parent or Merger Sub, directly or indirectly, rights to control
or direct the operations of the Company or its Subsidiaries
prior to the Closing Date. Prior to the Closing Date, the
Company and its Subsidiaries shall exercise, consistent with the
terms and conditions of this Agreement, complete control and
supervision of its and its Subsidiaries operations.
Section
5.02
Notice
of Breach
.
From and after the date hereof and
until the earlier to occur of the Closing Date or the
termination of this Agreement pursuant to
Article 9
hereof, the Company shall promptly give Parent written notice
with particularity upon having Knowledge of any matter that
constitutes or is reasonably expected to result in a breach of
any representation, warranty, agreement or covenant contained in
this Agreement. Notwithstanding the above, the delivery of any
notice pursuant to this Section will not limit or otherwise
affect the remedies available hereunder to Parent or the
conditions to such Parents obligation to consummate the
Merger.
A-27
Section
5.03
Section 409A
(a).
To
the extent requested by Parent, the Company will work with
Parent in good faith to amend each Company Employee Benefit Plan
and Company Pension Plan to comply with or be exempt from
Section 409A of the Code (if applicable).
Section
5.04
Exemption
from Liability Under Section 16(b)
.
The
Company Board (or a committee thereof) shall adopt a resolution
in advance of the Effective Time that exempts the disposition of
Company equity securities by those officers and directors of the
Company who are subject to the reporting requirements of
Section 16(a) of the Exchange Act pursuant to the Merger
from the short-swing profits liability provisions of
Section 16 of the Exchange Act by reason of
Rule 16b-3.
Section
5.05
Radcliffe
Note
.
The Company covenants and agrees that,
during the period from the date hereof to the earlier of the
termination of this Agreement in accordance with its terms and
the Effective Time, it shall not, unless Parent shall otherwise
consent in writing, extend beyond April 1, 2008 the
maturity of, or make any material change to, the Senior
Subordinated Discount Promissory Note, dated August 16,
2005, issued to Radcliffe SPC, Ltd. or any agreement or
instrument related thereto (the
Radcliffe
Note
).
Section
5.06
Series C
Preferred Stock Purchase Agreement
.
The
Company covenants and agrees that on October 31, 2007, in
accordance with the terms of the Series C Preferred Stock
Purchase Agreement, it shall issue to Merger Sub the
Series C Preferred Stock, upon the payment by Merger Sub to
the Company of the Series C Purchase Price.
ARTICLE 6
COVENANTS OF
PARENT AND MERGER SUB
Section
6.01
Employee
Benefits
.
(a) Employees of Company and its Subsidiaries who continue
their employment with the Surviving Corporation or who become
employees of Parent or any subsidiary of Parent
(
Continuing Employees
) shall be given credit
for all service with the Company and its Subsidiaries (and their
respective predecessors) (or service credited by the Company and
its Subsidiaries for similar plans, programs or policies) under
all employee benefit and fringe benefit plans, programs and
policies of the Parent or its Affiliates in which they become
participants for purposes of eligibility, vesting and level of
benefits (except to the extent such service credit will result
in benefit accrual under any defined benefit pension plans or
otherwise result in a duplication of benefits).
(b) If a Continuing Employee becomes eligible to
participate in any medical, dental or health plan of the Parent
or any of its Affiliates, Parent shall cause such plan to
(A) waive any preexisting condition limitations for
conditions covered under the applicable medical, health or
dental plans of the Company (the
Company Welfare
Plans
) and (B) honor any deductible and
out-of-pocket expenses incurred by such employee and his or her
beneficiaries under the Company Welfare Plans during the portion
of the applicable plan year preceding the Closing.
(c) Except as provided in this
Section 6.01
,
nothing in this Agreement shall limit or restrict the right of
Parent or any of its Subsidiaries to modify, amend, terminate or
establish employee benefit plans or arrangements, in whole or in
part, at any time after the Effective Time.
(d) No provision of this
Section 6.01
shall
create any third party beneficiary rights in any Continuing
Employee or any current or former director or consultant of the
Company or its Subsidiaries located in the United States in
respect of continued employment (or resumed employment) or any
other matter.
Section
6.02
Directors
and Officers Indemnification and Insurance
.
(a) All rights to indemnification and rights to advancement
of expenses and exculpation from monetary liability for acts or
omissions occurring prior to the Effective Time and existing as
of the date hereof in favor of any current or former directors
or officers of the Company and its Subsidiaries (each, an
Indemnitee
) as provided in the Company
Organizational Documents and any indemnification or other
contracts of the Company in effect on the date hereof, if any,
shall be assumed in the Merger by the Surviving Corporation,
without further action, at the Effective Time and shall survive
the Merger and continue in full force and effect in accordance
with their terms.
A-28
From and after the Effective Time, Parent shall cause the
articles of incorporation and bylaws of the Surviving
Corporation to contain provisions no less favorable with respect
to exculpation from monetary liability for acts or omissions
occurring prior to the Effective Time and with respect to
indemnification and advancement of expenses, if any, than those
in effect as of the date hereof in the Company Organizational
Documents, and such provisions shall not be amended, repealed or
modified in a manner that would adversely affect the rights
thereunder of the Indemnitees.
(b) From and after the Effective Time, the Surviving
Corporation hereby agrees that it will: (i) indemnify and
hold harmless each present director and officer of the Company
or any of its Subsidiaries existing on the date hereof
(collectively,
Incumbent Management
) against
any costs or expenses (including reasonable attorneys
fees), judgments, fines, losses, claims, damages or liabilities
(collectively,
Costs
) incurred in connection
with any Action by reason of the fact that such Incumbent
Management was acting in his or her capacity as a director or
officer of the Company or any of its Subsidiaries, as
applicable, whether asserted or claimed prior to, at or after
the Effective Time, including the transactions contemplated by
this Agreement;
provided
,
however
, that neither
Parent nor the Surviving Corporation shall be required to
indemnify any Incumbent Management pursuant to this
Section 6.02(b)
if such Incumbent Management is
adjudged by a court of competent jurisdiction to be liable to
the Company or any of its Subsidiaries, or it shall be
determined in good faith (by independent U.S. counsel
having national recognition reasonably selected by Parent) that
such Incumbent Management (A) failed to act in good faith,
(B) acted (or omitted to act) in a manner which such
Incumbent Management reasonably believed was not in the best
interests of the Company or any of its Subsidiaries, as
applicable, (C) acted (or omitted to act) in a manner
involving intentional misconduct, dishonesty, fraud or a knowing
violation of Law, or (D) if as a result of such action (or
omission), such Incumbent Management derived an improper
personal benefit; and (ii) solely with respect to acts or
omissions in connection with the authorization and approval of
the Transaction Documents and the consummation by the Company of
the Merger and the other transactions contemplated hereby and
thereby, advance expenses (including reasonable attorneys
fees) incurred by Incumbent Management in defending any such
Action;
provided
that such Incumbent Management provides
a customary undertaking to repay such advances to Parent or the
Surviving Corporation if it is ultimately determined that such
Incumbent Management is not entitled to indemnification under
this
Section 6.02(b)
.
(c) Parent or the Surviving Corporation shall have the
right to assume and control the defense of any Action for which
indemnification or advance expenses is sought under this
Section 6.02
or under the Company Organizational
Documents or any indemnification contracts of the Company.
Parent and the Surviving Corporation shall be obligated to pay
for only one law firm or counsel for all Indemnitees in any
jurisdiction, except to the extent there is, under applicable
standards of professional conduct, a conflict on any significant
issue between the positions of such Indemnitee and any other
Indemnitee, in which case each Indemnitee with a conflicting
position on a significant issue shall be entitled to retain
separate counsel mutually satisfactory to Parent and such
Indemnitee. The Indemnitee shall cooperate in the defense of any
such matter. Parent shall not be liable for any settlement
effected without its prior written consent (the decision with
respect to which shall not unreasonably be delayed by Parent).
(d) Parent shall, or shall cause the Surviving Corporation
to, obtain a commercially available run-off or tail policy
(
Run-Off Insurance
), which shall (i) be
for a term of six-years and have limits of $5 million, plus
an additional $10 million in Side A coverage (with zero
retention), (ii) be negotiated and implemented solely by
Parent and its agents, (iii) provide coverage for each
person or entity covered by the Companys current
directors and officers liability insurance policy in
effect on the date hereof, (iv) not be cancelable by
Parent, its agents or the Surviving Corporation during the
six-year term thereof, and (v) be no less favorable with
respect to coverage terms and amounts (including with respect to
exclusions, self-retention, premiums, notice requirements and
deductibles) in any material respect than the Companys
current primary directors and officers liability
insurance policy coverage in effect as of the date hereof;
provided
,
however
, that in no event shall Parent
or the Surviving Corporation be obligated or required to pay
premiums for Run-Off Insurance under this
Section 6.02(d)
in excess of 200% of the amount of
the current net annual premiums paid by the Company for such
directors and officers liability insurance (which current net
annual premiums are hereby represented and warranted by the
Company to be $398,000). Subject to this
Section 6.02(d)
, Parent or its agents shall have the
right to substitute the insurance company providing the
Companys current directors and officers
liability insurance policy with another
A-29
financially sound insurance company of recognized reputation
with an A.M. Best rating of A and a surplus of XII or
better.
ARTICLE 7
ADDITIONAL
COVENANTS OF THE PARTIES
Section
7.01
Preparation
of Proxy Statement, Company Shareholders Meeting
.
(a) As promptly as reasonably practicable after the date
hereof, the Company shall prepare and file with the SEC the
Proxy Statement (and in any event use best efforts to file the
Proxy Statement within 25 days after the date of this
Agreement). The Company shall consult with Parent and provide
Parent and its counsel a reasonable opportunity to review and
comment on such Proxy Statement (and any amendment or supplement
thereto) and shall reasonably consider such comments prior to
filing. The parties shall reasonably cooperate with each other
in the preparation of the Proxy Statement and to have such
document cleared by the SEC as promptly as reasonably
practicable after such filing. The Proxy Statement shall include
the recommendation of the Company Board in favor of approval and
adoption of this Agreement and the Merger (the
Company
Recommendation
), except to the extent the Company
Board shall have withdrawn, amended or modified such
recommendation of this Agreement to the extent such action is
permitted by
Section 7.04
. The Company
shall use its commercially reasonable efforts to cause the Proxy
Statement to be mailed to its shareholders as promptly as
practicable upon the earlier of (x) receiving notification
that the SEC is not reviewing the Proxy Statement and
(y) the conclusion of any SEC review of the Proxy
Statement. The Company shall promptly provide copies, consult
with Parent and prepare written responses with respect to any
written comments received from the SEC with respect to the Proxy
Statement and advise Parent of any oral comments received from
the SEC. The Proxy Statement will comply as to form in all
material respects with the applicable provisions of the Exchange
Act and the rules and regulations thereunder and the rules and
regulation of NASDAQ.
(b) The Company shall make all necessary filings with
respect to the Merger and the transactions contemplated thereby
and by the other Transaction Documents under the Exchange Act
and the rules and regulations thereunder. The Company will
advise Parent, promptly after it receives notice thereof, of any
request by the SEC for any amendment or supplement to the Proxy
Statement or comments thereon and responses thereto or requests
by the SEC for additional information. The Company shall provide
Parent and its counsel a reasonable opportunity to review and
comment on any such comments by the SEC and any amendment or
supplement to the Proxy Statement made in response thereto and
shall reasonably consider such comments prior to filing. If at
any time prior to the Effective Time, any information relating
to Parent or the Company, or any of their respective Affiliates,
officers or directors, should be discovered by Parent or the
Company that should be set forth in an amendment or supplement
to the Proxy Statement, so that such documents would not include
any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed
with the SEC and, to the extent required by applicable Law,
disseminated to the shareholders of the Company.
(c) The Company shall cause the Company Shareholders
Meeting to be duly called and held as soon as reasonably
practicable following the commencement of the mailing of the
Proxy Statement for the purpose of obtaining the Company
Shareholder Approval. In connection with such meeting, the
Company will (i) subject to
Section 7.04(e)
and
(f)
, use its reasonable best efforts to obtain the
Company Shareholder Approval and (ii) otherwise comply with
all legal requirements applicable to such meeting. Subject to
Section 7.04(e)
and
(f)
, the Company shall
not postpone, delay or adjourn the Company Shareholder Meeting
without Parents prior written consent.
Section
7.02
Access
to Information
.
(a) The Company shall, and shall cause each of its
Subsidiaries to, afford to Parent and to Parents officers,
employees, accountants, counsel, financial advisors, agents and
other representatives, reasonable access during normal business
hours at all times prior to the Effective Time to all their
respective properties, assets, books, records, Contracts,
Licenses and Permits, documents, information, directors,
officers, employees, attorneys,
A-30
accountants, auditors, other representatives of the Company and
its Subsidiaries and records, and shall cause each of its
Subsidiaries to make available to Parent, and provide to Parent
copies or originals if specifically requested by Parent of,
(i) each report, schedule, form, statement and other
document filed or received by it during such period pursuant to
the requirements of any applicable Law or Order, (ii) all
organizational documents, stock certificates and other evidences
of equity interests and investments, shareholders
registers and other registers of equity interests, minute books,
certificates of good standing, authorizations to do business and
certified accounts of each Subsidiary of the Company, and
(iii) all other information concerning its business,
properties and personnel as Parent reasonably may request;
provided
that no investigation pursuant to this
Section 7.02
shall affect or be deemed to modify any
representation or warranty made by the Company herein. The
Company and Parent shall, and shall cause each of their
respective Subsidiaries to, cooperate to obtain an orderly
transition and integration process in connection with the Merger
to minimize the disruption to, and preserve the value of, the
business of the Surviving Corporation and its Subsidiaries
during the period from and after the Effective Time.
(b) The Company shall furnish to Parent (i) weekly
reports of the Companys cash position (including sources
and uses of cash) and (ii) as soon as they become
available, any financial and management reports that are
typically prepared for the Companys management in the
ordinary course of business.
(c) All information obtained by Parent, Merger Sub or the
Company pursuant to this
Section 7.02
shall be kept
confidential in accordance with the confidentiality agreement,
dated August 8, 2007 (the
Confidentiality
Agreement
), between Parent and the Company.
Section
7.03
Commercially
Reasonable Efforts
.
(a) Subject to the other terms and conditions of this
Agreement, each party shall use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable
under applicable Law to consummate the Merger and the other
transactions contemplated by this Agreement and the other
Transaction Documents as soon as reasonably practicable after
the date hereof.
(b) Notwithstanding anything to the contrary contained in
this Agreement, in connection with any filing or submission
required or action to be taken by either Parent or the Company
to consummate the Merger, in no event shall Parent or any of its
Subsidiaries or Affiliates be obligated to propose or agree to
accept any undertaking or condition, to enter into any consent
decree, to make any divestiture, or accept any operational
restriction, or take or commit to take any action that could
reasonably be expected to limit (A) the freedom of action
of Parent or its Subsidiaries or Affiliates with respect to the
operation of, or Parents or its Subsidiaries or
Affiliates ability to retain, the Company or any
businesses, product lines or assets of the Company, or
(B) the ability to retain, own or operate any portion of
the businesses, product lines, or assets, of Parent or any of
its Subsidiaries or Affiliates, or alter or restrict in any way
the business or commercial practices of the Company, Parent or
its Subsidiaries or Affiliates.
(c) The parties shall use their commercially reasonable
efforts to obtain all consents, waivers, authorizations and
approvals of all third parties, including Governmental Entities,
necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement and by the other
Transaction Documents, and to provide any notices to third
parties required to be provided prior to the Effective Time;
provided
that, without the prior written consent of
Parent, the Company shall not incur any significant expense or
liability or agree to any significant modification to any
contractual arrangement to obtain such consents or certificates,
and to provide any notices to third parties required to be
provided prior to the Effective Time.
Section
7.04
Acquisition
Proposal.
(a) During the period beginning on the date of this
Agreement and continuing until 11:59 p.m. (EST) on
November 19, 2007 (the
No-Shop Period Start
Date
), the Company and its Subsidiaries and their
respective directors, officers, employees, investment bankers,
attorneys, accountants and other advisors or representatives and
controlled Affiliates (collectively,
Representatives
), shall have the right to:
(i) initiate, solicit and encourage Acquisition Proposals,
including by way of providing access to non-public information
to any Person pursuant to (but only pursuant to) an Acceptable
Confidentiality Agreement;
provided
that the Company
shall concurrently therewith provide to Parent and Merger Sub
any non-public information concerning the Company or its
Subsidiaries that is provided to any Person given such access
which had not previously been provided or made available to
Parent
A-31
or Merger Sub; and (ii) enter into and maintain or continue
discussions or negotiations with respect to Acquisition
Proposals, or otherwise cooperate with or assist or participate
in, or facilitate any such inquiries, proposals, discussions or
negotiations.
(b) Except as expressly permitted by
Section 7.04(c)
and except as may relate to any
Excluded Party, the Company and its Subsidiaries and their
respective employees, officers and directors shall, and the
Company shall direct its and its Subsidiaries other
Representatives to, (i) on the No-Shop Period Start Date,
immediately cease any existing solicitations, discussions or
negotiations with any Persons that may be ongoing with respect
to any Acquisition Proposal (and the Company shall use
commercially reasonable efforts to have all copies of all
non-public information it or its Subsidiaries or their
respective Representatives have distributed since August 8,
2007 to Persons in connection with their consideration of an
Acquisition Proposal (other than with respect to Parent and its
Affiliates), destroyed or returned to the Company as soon as
possible); and (ii) from the No-Shop Period Start Date
until the Effective Time or if earlier, the termination of this
Agreement in accordance with
Article 9
, not
(A) initiate, solicit, encourage or facilitate any
Acquisition Proposal or the making or receipt thereof, including
by way of furnishing non-public information or taking any action
to render any of the anti-takeover statutes contained in the
PBCL (including Sections 2538 through 2588 thereof)
inapplicable to any transaction with any Person (other than
Parent and its Affiliates), or (B) initiate, engage in,
encourage, facilitate, continue or otherwise participate in any
discussions or negotiations regarding, or furnish to any Person
(other than Parent and its Affiliates) any information with
respect to, assist or participate in any effort or attempt by
any Person (other than Parent and its Affiliates) with respect
to, or otherwise cooperate in any way with, any Acquisition
Proposal or the making or receipt thereof. On the No-Shop Period
Start Date, the Company shall provide written notice to Parent
which identifies (x) all Excluded Parties, and
(y) those Excluded Parties who (subject to the other
provisions of this Agreement) are reasonably expected to enter
into a definitive and binding Acquisition Agreement with the
Company providing for a Superior Proposal on or prior to the
Extended Go-Shop End Date.
(c) Notwithstanding the provisions of
Section 7.04(b)
but subject to the next succeeding
sentence of this
Section 7.04(c)
, at any time
following the No-Shop Period Start Date and prior to the time,
but not after, the Company Shareholder Approval, the Company may
(A) provide information in response to a request therefor
by a Person who has made an unsolicited bona fide written
Acquisition Proposal after the date of this Agreement that did
not result in a breach of this
Section 7.04
, if the
Company receives from the Person so requesting such information
an executed Acceptable Confidentiality Agreement;
provided
that the Company shall concurrently therewith
provide to Parent and Merger Sub any non-public information
concerning the Company or its Subsidiaries that is provided to
any Person making such Acquisition Proposal that is given such
access and that had not previously been provided or made
available to Parent, Merger Sub or their Representatives; or
(B) engage or participate in any discussions or
negotiations with any Person who has made such an unsolicited
bona fide written Acquisition Proposal, if and only to the
extent that, prior to taking any action described in
clause (A) or (B) above, and after entering into an
Acceptable Confidentiality Agreement with such Person, the
Company Board determines in good faith (1) after
consultation with its outside legal counsel, that failure to
take such action would be inconsistent with the directors
fiduciary duties under applicable Law, and (2) after
consultation with its outside counsel and financial advisor,
that such Acquisition Proposal either constitutes a Superior
Proposal or is reasonably likely to result in a Superior
Proposal. Notwithstanding the foregoing, the parties agree that
the Company may continue to engage in the activities described
in
Section 7.04(a)
with respect to any Excluded
Parties, including with respect to any amended proposal
submitted by such Excluded Parties following the No-Shop Period
Start Date and prior to the Extended Go-Shop End Date. From and
after the No-Shop Period Start Date, the Company shall promptly
advise Parent orally (with written confirmation to follow within
24 hours) after receipt by the Company of any Acquisition
Proposal, including the material terms and conditions thereof
and the identity of the Person making any such Acquisition
Proposal (and attaching a true and complete copy thereof). The
Company shall keep Parent reasonably informed on a prompt basis
of the status and material terms (including all changes to the
status and material terms) of any such Acquisition Proposal.
From and after the date hereof, the Company shall not and shall
cause its Subsidiaries not to enter into any confidentiality or
other agreement with any Person or group that restricts or
prohibits the Company or any of its Subsidiaries from providing
to Parent the foregoing information regarding (including the
identity of the Person submitting) an Acquisition Proposal or
which provides for any exclusive right of negotiation or
dealing. The Company agrees not to release any third party from,
or waive any provisions of, any
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confidentiality or standstill agreement to which the Company is
a party and will use its reasonable best efforts to enforce any
such agreement at the request of or on behalf of Parent.
(d) For purposes of this Agreement:
Acceptable Confidentiality Agreement
means a confidentiality agreement that contains confidentiality
and standstill provisions that are no less favorable in the
aggregate to the Company than those contained in the
Confidentiality Agreement.
Acquisition Proposal
means any oral or
written inquiry, proposal, indication of interest or offer from
any Person or group, whether in one transaction or a series of
transactions, relating to, or that could reasonably be expected
to lead to, (a) any direct or indirect acquisition by any
means of (i) 20% or more of the consolidated revenues, net
income, cash flows or assets of the Company and its
Subsidiaries, taken as a whole, or (ii) 20% or more of the
equity securities of the Company (including by issuance thereof
by the Company) then outstanding; (b) any tender offer or
exchange offer, as defined under the Exchange Act, that, if
consummated, would result in any Person or group beneficially
owning 20% or more of the equity securities of the Company then
outstanding; or (c) any merger, consolidation, business
combination, recapitalization, reorganization, share exchange,
joint venture, split-off, spin-off, liquidation, dissolution or
similar transaction involving the Company or any of its
Subsidiaries, in each case other than the Merger and the other
transactions contemplated hereby.
Excluded Party
means any Person from
whom the Company has received, after the date hereof and prior
to the No-Shop Period Start Date, a written Acquisition Proposal
that the Company Board determines in good faith, after receiving
the advice of its outside legal counsel and financial advisor
and after entering into an Acceptable Confidentiality Agreement
with such Person, is bona fide and constitutes a Superior
Proposal or is reasonably likely to result in a Superior
Proposal;
provided
,
however
, that any Excluded
Party shall cease to be an Excluded Party for all purposes under
this Agreement on the earlier of (i) such time as the
Acquisition Proposal made by such Person fails to constitute
either a Superior Proposal or an Acquisition Proposal that is
reasonably likely to result in a Superior Proposal and
(ii) the 20th day after the No-Shop Period Start Date
(as may be extended pursuant to
Section 7.04(e)(I)(B)
, the
Extended Go-Shop
End Date
) if a definitive and binding Acquisition
Agreement providing for such Superior Proposal is not entered
into by the Company and such Person on or before the Extended
Go-Shop End Date.
Superior Proposal
means any bona fide,
written offer made (not in violation of
Section 7.04
) to the Company Board by any Person
(other than Parent and its Affiliates) that if consummated would
result in such Person (or its shareholders, partners, trustees
or members) owning, directly or indirectly, in a transaction or
series of transactions, more than 50% of the shares of Company
Common Stock then outstanding (or of the shares of the surviving
entity in a merger or the direct or indirect parent of the
surviving entity in a merger) or more than 50% of the assets of
the Company, that, in each case, the Company Board determines in
good faith (after receiving the advice of its outside legal
counsel and financial advisor), is (a) reasonably capable
of being consummated promptly in accordance with its terms
(relative also to the expected time of consummation of the
transactions contemplated by this Agreement), and for which
financing (to the extent required) is then fully committed,
taking into account all legal, financial, regulatory and other
aspects of the offer and the Person making the proposal and
(b) more favorable to the holders of the Company Common
Stock from a financial point of view than the Merger taking into
account all the terms and conditions of such offer and this
Agreement (including any proposal by Parent to amend the terms
of this Agreement pursuant to
Section 7.04(e)
).
(e) Except as set forth in this
Section 7.04(e)
, prior to the Company Shareholder
Approval, neither the Company Board nor any committee thereof
shall:
(i) withhold or withdraw or qualify or modify in a manner
adverse to Parent or Merger Sub (or propose or resolve (publicly
or otherwise) to withhold or withdraw or to qualify or modify in
a manner adverse to Parent or Merger Sub) the Company
Recommendation, or adopt, approve or recommend or propose or
resolve to adopt, approve or recommend (publicly or otherwise)
an Acquisition Proposal (any such action, an
Adverse
Recommendation
); or
(ii) cause or permit the Company or any of its Subsidiaries
to enter into any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger agreement,
option agreement, joint
A-33
venture agreement, partnership agreement or similar agreement
(x) constituting or relating to, or that is intended or
could reasonably be expected to lead to, any Acquisition
Proposal, other than a confidentiality agreement referred to in
Sections 7.04(a)
or
7.04(c)
entered into in
the circumstances referred to in such Sections, or
(y) requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by
this Agreement (any of (x) or (y), an
Acquisition
Agreement
).
Notwithstanding the foregoing, but subject to the Companys
compliance at all times with the provisions of
Section 7.04
, (
I
) if a written Acquisition
Proposal is made prior to the Company Shareholder Approval, the
Company Board may make an Adverse Recommendation, if (but only
if):
A. the Company Board has determined in good faith (after
receiving the advice of its outside legal counsel and financial
advisor) that (1) it is required to make such Adverse
Recommendation in order to comply with its fiduciary duties
under applicable Law, and (2) such Acquisition Proposal
constitutes a Superior Proposal;
B. the Company shall have provided Parent with five
(5) Business Days notice (the
Notice
Period
) following Parents receipt of written
notice (a
Notice of Superior Proposal
) from
the Company representing to Parent that the Company Board has
received a Superior Proposal not in violation of the provisions
of
Section 7.04
, specifying the material terms and
conditions of such Superior Proposal (and attaching the most
current and complete version of any written agreement or offer
relating thereto), identifying the Person making such Superior
Proposal and stating that the Company Board intends to make an
Adverse Recommendation;
provided
,
however
, that,
prior to any such Adverse Recommendation occurring, any
amendment to a financial or other term of such Superior Proposal
shall require a new Notice of Superior Proposal (a
Subsequent Notice
) and a new five
(5) Business Day Notice Period (a
Subsequent
Notice Period
);
provided
,
further
,
however
, that, any such Notice Period or Subsequent
Notice Period, as the case may be, shall result in an automatic
extension of the Extended Go-Shop End Date for a term equal to
such notice period(s), if (and only if) such Superior Proposal
is from an Excluded Party identified in the notice provided by
the Company to Parent pursuant to the last sentence of
Section 7.04(b)
;
C. during such Notice Period or Subsequent Notice Period,
as the case may be, if requested by Parent, the Company shall
have engaged in good faith negotiations with Parent and its
Representatives to amend this Agreement in such a manner that
the Acquisition Proposal that was determined to constitute a
Superior Proposal is no longer determined to constitute a
Superior Proposal; and
D. at the end of the Notice Period or any Subsequent Notice
Period, as the case may be, such Acquisition Proposal has not
been withdrawn and continues to constitute a Superior Proposal,
and (
II
) after an Adverse Recommendation is made in
accordance with the foregoing clause (I), the Company shall be
entitled to enter into a definitive and binding Acquisition
Agreement providing for such Superior Proposal if (but only if)
this Agreement is terminated by the Company pursuant to
Section 9.01(e)
and, concurrently with and as a
condition to the effectiveness of any such termination by the
Company, the Company shall have (x) paid all amounts due to
Parent pursuant to
Sections 9.02
and
9.03
,
and (y) entered into such definitive and binding
Acquisition Agreement. The Company agrees that it will not enter
into an Acquisition Agreement providing for a Superior Proposal
referred to in this
Section 7.04(e)
until at least
the sixth (6th) Business Day after it has provided the Notice of
Superior Proposal or Subsequent Notice, as the case may be.
(f) Nothing contained in this
Section 7.04
shall prohibit the Company from at any time taking and
disclosing to its shareholders a position contemplated by
Rule 14d-9
or
Rule 14e-2(a)
promulgated under the Exchange Act or making any disclosure
required by
Rule 14a-9
promulgated under the Exchange Act or Item 1012(a) of
Regulation M-A
or from making any other disclosure to its shareholders or in
any other regulatory filing if, in the good faith judgment of
the Company Board (after receiving the advice of its outside
legal counsel and financial advisor), failure to so disclose
would be inconsistent with its obligations under applicable Law;
provided
,
however
, that (except in the case of a
stop-look-and-listen communication pursuant to
Rule 14d-9(f)
under the Exchange Act) if any such disclosure does not
concurrently and expressly reaffirm the Company Recommendation
or if it has the effect of withdrawing or qualifying or
modifying in a
A-34
manner adverse to Parent or Merger Sub the Company
Recommendation, then such disclosure shall be deemed to be an
Adverse Recommendation for all purposes of this Agreement and
Parent shall have the right to terminate this Agreement as set
forth in
Section 9.01(f)
and receive the
Break-Up
Fee
in accordance with
Sections 9.02
and
9.03.
Section
7.05
Shareholder
Litigation.
The Company shall keep Parent
informed of, and cooperate with Parent in connection with, any
shareholder Action against the Company
and/or
its
directors or officers relating to the Merger or the other
transactions contemplated by this Agreement or the other
Transaction Documents;
provided
,
however
, that no
settlement in connection with such shareholder Action shall be
agreed to without Parents prior written consent.
Section
7.06
Public
Announcements.
The initial press release
relating to this Agreement shall be a joint release the text of
which has been agreed to by each of Parent and the Company.
Thereafter, each of the Company, Parent and Merger Sub agrees
that no public release or announcement concerning the
transactions contemplated hereby or by the other Transaction
Documents shall be issued by any party without the prior written
consent of the Company and Parent (which consent shall not be
unreasonably withheld or delayed), except as such release or
announcement may be required by applicable Law or the rules or
regulations of any applicable securities exchange, in which case
the party required to make the release or announcement shall use
its commercially reasonable efforts to allow each other party
reasonable time to comment on such release or announcement in
advance of such issuance;
provided
,
however
, that
upon prior consultation with the other party, each of the
parties may make statements that are not inconsistent with
previous press releases, public disclosures or public statements
made by any of the parties in compliance with this
Section 7.06.
ARTICLE 8
CONDITIONS
PRECEDENT
Section
8.01
Conditions
to the Merger.
The obligations of each party
to effect the Merger shall be subject to the satisfaction, at or
prior to the Effective Time, of the following conditions:
(a)
Shareholder Approval.
The
Company shall have obtained the Company Shareholder Approval.
(b)
Proxy Statement.
No orders
suspending the use of the Proxy Statement shall have been issued
and no proceeding for that purpose shall have been initiated by
the SEC.
(c)
No Order.
No Governmental
Entity of competent jurisdiction shall have enacted or issued an
order, decree, judgment, injunction or taken any other action
(whether temporary, preliminary or permanent) that is in effect
and restrains, enjoins or otherwise prohibits or makes illegal
the consummation of the Merger (collectively, an
Order
);
provided
,
however
, that
the party claiming the failure of the condition set forth in
this
Section 8.01(c)
shall have used commercially
reasonable efforts to have such Order vacated.
Section
8.02
Conditions
to the Obligations of Parent and Merger
Sub.
The obligations of Parent and Merger Sub
to consummate the Merger are subject to the satisfaction or
waiver (where legally permissible), on or prior to the Effective
Time, of the following additional conditions:
(a)
Representations and
Warranties.
The representations and
warranties of the Company contained in this Agreement shall be
true and correct as of the date hereof and as of the Effective
Time as though made on and as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case
as of such earlier date), except (in the case of representations
and warranties other than those contained in
Section 3.09(b)
) for failures to be true and correct
that individually or in the aggregate have not had or would not
reasonably be expected to have a Company Material Adverse
Effect;
provided
, that for purposes of determining
whether the condition in this
Section 8.02(a)
is
satisfied, references to Company Material Adverse
Effect and any other materiality qualification contained
in such representations and warranties (other than those
contained in
Section 3.09(b)
) shall be ignored.
A-35
(b)
Agreements and Covenants.
The
Company shall have performed or complied in all material
respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to
the Effective Time.
(c)
Officer Certificate.
The
Company shall have delivered to Parent a certificate, dated the
date of the Closing, signed by the Chief Executive Officer and
Chief Financial Officer of the Company, certifying as to the
satisfaction of the conditions specified in
Sections 8.02(a)
and
8.02(b).
(d)
Third Party Consents.
The
Company shall have obtained (i) all consents and approvals
of third parties listed on Section 8.02(d) of the Company
Disclosure Schedule and (ii) any other consent or approval
of any third party (other than a Governmental Entity), required
in connection with this Agreement and the transactions
contemplated hereby and by the other Transaction Documents,
other than (in the case of clause (ii)) consents or approvals
which if not obtained would not, individually or in the
aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
(e)
No Company Material Adverse
Effect.
Since the date of this Agreement,
there shall not have occurred any Effect that, individually or
in the aggregate, has had, or is reasonably expected to have, a
Company Material Adverse Effect.
(f)
Employment Agreement.
The
Employment Agreement shall have been executed by
Nathanael Lentz and the Company and delivered to Parent,
and shall be in full force and effect.
(g)
Release.
The Release shall
have been executed by Nathanael Lentz and the Company and
delivered to Parent, and shall be in full force and effect.
(h)
Radcliffe Waiver.
The
Radcliffe Waiver shall continue to be in full force and effect.
Section
8.03
Conditions
to the Obligations of the Company
.
The
obligations of the Company to consummate the Merger are subject
to the satisfaction or waiver (where permissible) of the
following additional conditions:
(a)
Representations and
Warranties.
The representations and
warranties of Parent and Merger Sub contained in this Agreement
shall be true and correct in all material respects as of the
date hereof and as of the Effective Time, as though made on and
as of the Effective Time (except to the extent expressly made as
of an earlier date, in which case as of such earlier date),
except for failures to be true and correct that individually or
in the aggregate would not have or prevent or materially delay
the ability of Parent and Merger Sub to perform their respective
obligations under this Agreement;
provided
, that for
purposes of determining whether the condition in this
Section 8.03(a)
is satisfied, references to any
materiality qualification contained in such representations and
warranties shall be ignored.
(b)
Agreements and
Covenants.
Parent and Merger Sub shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective
Time.
(c)
Officer Certificate.
Parent
shall have delivered to the Company a certificate, dated the
date of the Closing, signed by the Chief Executive Officer or
Chief Financial Officer of Parent, certifying as to the
satisfaction of the conditions specified in
Sections 8.03(a)
and
8.03(b).
Section
8.04
Frustration
of Closing Conditions.
No party may rely on
the failure of any condition set forth in this
Article 8
to be satisfied if such partys
failure to comply with any provision of this Agreement in a
material respect has been the proximate cause of, or resulted
in, the failure of the condition.
A-36
ARTICLE 9
TERMINATION
Section
9.01
Termination.
This
Agreement may be terminated and abandoned, whether before or
after receipt of the Company Shareholder Approval (except as set
forth in this
Section 9.01
), prior to the Effective
Time, by action taken by the Board of Directors of the
terminating party, only as follows:
(a) by the mutual written consent of Parent and the Company;
(b) by either of the Company or Parent by written notice to
the other:
(i) if at the Company Shareholders Meeting (or at any
adjournment or postponement thereof permitted by this Agreement)
the Company Shareholder Approval is not obtained (provided that
the right to terminate this Agreement under this
Section 9.01(b)(i)
shall not be available to the
Company if at such time the Company is in material breach this
Agreement or the failure to obtain such approval was caused by a
breach of the Voting Agreement by any party thereto (other than
Parent and Merger Sub));
(ii) if any Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any
Order that is in effect and restrains, enjoins or otherwise
prohibits or makes illegal the consummation of the Merger, and
such Order shall have become final and non-appealable;
provided
,
however
, that the right to terminate
this Agreement under this
Section 9.01(b)(ii)
shall
not be available to a party if such partys failure to
comply with any provision of this Agreement in any material
respect has been the proximate cause of, or proximately resulted
in, such Order; or
(iii) if the consummation of the Merger shall not have
occurred on or before April 15, 2008 (the
Outside
Date
);
provided
,
however
, that the right
to terminate this Agreement under this
Section 9.01(b)(iii)
shall not be available to a
party if such partys failure to comply with any provision
of this Agreement in a material respect has been the proximate
cause of, or resulted in, the failure of the Merger to occur on
or before the Outside Date.
(c) by written notice from Parent to the Company, if the
Company breaches or fails to perform any of its representations,
warranties or covenants contained in this Agreement, which
breach or failure to perform would give rise to the failure of a
condition set forth in
Section 8.02(a)
or
8.02(b)
, and such condition is incapable of being
satisfied by the Outside Date or such breach has not been cured
by the Company within thirty (30) days after the
Companys receipt of written notice of such breach from
Parent;
(d) by written notice from the Company to Parent if Parent
or Merger Sub breaches or fails to perform any of its
representations, warranties or covenants contained in this
Agreement, which breach or failure to perform would give rise to
the failure of a condition set forth in
Section 8.03(a)
or
8.03(b)
and such condition
is incapable of being satisfied by the Outside Date or such
breach has not been cured by Parent or Merger Sub within thirty
(30) days after Parents receipt of written notice of
such breach from the Company;
(e) by written notice from the Company to Parent, at any
time prior to the Company Shareholder Approval, in accordance
with, and subject to the terms and conditions of,
Section 7.04(e)(II)
;
(f) by written notice from Parent to the Company, if
(i) the Company Board (or any committee thereof) shall
(A) fail to include the Company Recommendation in the Proxy
Statement, (B) make an Adverse Recommendation or resolve to
do so, (C) fail to reconfirm the Company Recommendation
within five days after Parent so requests in writing (which five
day period will be extended for one additional five day period
if the Company certifies to Parent prior to the expiration of
the initial five day period that the Company Board is in good
faith seeking to obtain additional information regarding its
decision to reconfirm the Company Recommendation), or
(D) if a tender offer or exchange offer for any outstanding
voting securities has been publicly disclosed (other than by
Parent or an Affiliate of Parent), the Company Board (or any
committee thereof) fails within ten (10) Business Days of
the commencement thereof to recommend against acceptance of such
tender or exchange offer by the holders thereof (including by
taking no position or a neutral position with respect to the
acceptance of such tender offer or exchange offer by such
holders), (ii) any party to the Voting Agreement (other
than Parent or Merger Sub), breaches or fails to perform his,
her or its obligations thereunder
A-37
in any material respects, or (iii) the Company breaches or
fails to perform any of its obligations under
Section 7.04
; or
(g) by Parent, if any Person or group (as defined in
Section 13(d)(3) under the Exchange Act) (other than
Parent, Merger Sub or any of their respective Affiliates) shall
have become the beneficial owner (as defined in
Rule 13d-3
promulgated under the Exchange Act) of at least a majority of
the outstanding voting securities of the Company.
Section
9.02
Effect
of Termination.
(a) Subject to the remainder of this
Section 9.02
and to
Section 9.03
, in the
event of the termination of this Agreement pursuant to
Section 9.01
, this Agreement shall forthwith become
null and void and have no effect, without any liability on the
part of Parent, Merger Sub or the Company and each of their
respective directors, trustees, officers, employees, partners,
shareholders or shareholders, and all rights and obligations of
any party hereto shall cease, except for the agreements
contained in
Sections 7.02(b)
(Confidentiality),
7.06
(Public Announcements), this
9.02
(Effect of
Termination),
9.03
(Fees and Expenses) and
Article 10
(Miscellaneous), which shall remain in
full force and effect and survive any termination of this
Agreement;
provided
,
however
, that nothing
contained in this
Section 9.02(a)
shall relieve any
party hereto from liabilities or damages arising out of any
fraud or willful breach by such party of any of its
representations, warranties, covenants or other agreements
contained in this Agreement.
(b) The Company shall pay to Parent an amount in cash equal
to the sum of (x) 5.99% of Company Enterprise Value and
(y) Parent Transaction Expenses (the
Break-Up
Fee
) if;
(i) this Agreement is terminated by the Company pursuant to
Section 9.01(e)
;
(ii) this Agreement is terminated by Parent pursuant to
Section 9.01(f)
(other than paragraphs (ii) and
(iii) thereof); or
(iii) this Agreement is terminated by the Company or Parent
pursuant to
Section 9.01(b)(iii)
(without the
Company Shareholder Meeting having occurred) or
Section 9.01(b)(i)
, or by Parent pursuant to
Section 9.01(c)
,
Section 9.01(f)(ii)
or
Section 9.01(f)(iii)
, if, at any time after the date of
this Agreement and before such termination, an Acquisition
Proposal shall have been publicly announced by any Person or
group (other than Parent or any of its Affiliates) disclosed or
made known to the Company, and remain outstanding at the time of
such termination, and within 12 months of such termination
the Company shall have entered into a definitive agreement with
respect to, or shall have consummated, any Acquisition Proposal
(substituting 50.1% for 20% in the definition thereof) (which
need not be the same Acquisition Proposal made prior to
termination).
(c) Any fee due under
Section 9.02(b)
shall be
paid by the Company by wire transfer of
same-day
funds:
(i) in the case of
Section 9.02(b)(i)
,
concurrently with (and as condition to the effectiveness of)
such termination;
(ii) in the case of
Sections 9.02(b)(ii)
,
within one Business Day of such termination; and
(iii) in the case of
Section 9.02(b)(iii)
,
concurrently with the consummation of such Acquisition Proposal
(including any such consummation occurring after the twelve
(12) month period referred to in such Section with respect
to any definitive agreement referred to therein entered into
during such twelve (12) month period).
Section
9.03
Fees
and Expenses.
(a) Except as set forth in
Section 9.02
and
this
Section 9.03
, whether or not the Merger is
consummated, all out-of-pocket costs and expenses that are
incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated
hereby and by the other Transaction Documents, including all
fees and expenses of lawyers, accountants, financial advisors,
consultants and other advisors, shall be paid by the party
incurring such costs and expenses.
(b) If this Agreement is terminated by Parent or the
Company pursuant to
Section 9.01(b)(i)
(if, at any
time after the date of this Agreement and before such
termination, an Acquisition Proposal shall have been publicly
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announced by any Person (other than Parent or any of its
Affiliates), disclosed or made known to the Company and remains
outstanding at the time of such termination) or
Section 9.01(b)(iii)
(without the Company
Shareholder Meeting having occurred) or by Parent pursuant to
and in accordance with
Section 9.01(c)
, the Company
shall pay to Parent within five Business Days after the date of
termination all documented, reasonable out-of-pocket costs and
expenses, including the reasonable fees and expenses of lawyers,
accountants, financial advisors, consultants and other advisors,
incurred by Parent or Merger Sub in connection with the entering
into of this Agreement and the other Transaction Documents and
the carrying out of any and all acts contemplated hereunder and
thereunder (
Parent Transaction Expenses
);
provided
,
however
, that if a
Break-Up
Fee
is payable by the Company pursuant to
Section 9.02(b)(iii)
, then the Company may reduce
the amount to be paid by it pursuant to such Section by the
amount of any expense reimbursement paid by the Company to the
Buyer pursuant to this
Section 9.03(b).
(c) If this Agreement is terminated by the Company pursuant
to
Section 9.01(d)
, Parent shall pay to the Company
within five Business Days after the date of termination all
documented, reasonable out-of-pocket costs and expenses,
including the reasonable fees and expenses of lawyers,
accountants, financial advisors, consultants and other advisors,
incurred by the Company in connection with the entering into of
this Agreement and the other Transaction Documents and the
carrying out of any and all acts contemplated hereunder and
thereunder.
(d) The parties acknowledge that the agreements contained
in
Sections 9.02
and
9.03
are an integral
part of the transactions contemplated by this Agreement and the
other Transaction Documents, and that, without these agreements,
the parties would not enter into this Agreement. If one party
fails to promptly pay to the other any expense reimbursement or
fee due under
Sections 9.02
or
9.03
, the
defaulting party shall pay the costs and expenses (including
reasonable legal fees and expenses) in connection with any
action, including the filing of any Action, taken to collect
payment of such amounts, together with interest on such unpaid
amounts at the prime lending rate prevailing during such period
as published in The Wall Street Journal, calculated on a daily
basis from the date such amounts were required to be paid to the
date of actual payment.
(e) The parties further acknowledge and agree that
(i) damages attributable to a termination of this Agreement
as referenced in
Sections 9.02
and
9.03
are
uncertain in amount, (ii) the fees provided in
Sections 9.02
and
9.03
are a reasonable fee
and estimate of such damages at the time the parties hereto
executed and delivered this Agreement and (iii) the amounts
to be paid pursuant to this
Section 9.03
constitute
liquidated damages negotiated at arms-length and do not
constitute, and are not intended by the parties to operate as, a
penalty.
Section
9.04
Amendment.
This
Agreement may be amended by the parties hereto, by action taken
or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company,
but, after any such approval, no amendment shall be made which
by Law requires further approval by such shareholders without
such further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto.
Section
9.05
Extension;
Waiver.
At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf
of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE 10
MISCELLANEOUS
Section
10.01
Survival.
None
of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of
any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that
by their terms apply or are to be performed in whole or in part
after the Effective Time.
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Section
10.02
Successors
and Assigns.
No party hereto shall assign
this Agreement or any rights or obligations hereunder without
the prior written consent of the other parties hereto and any
such attempted assignment without such prior written consent
shall be void and of no force and effect;
provided
, that,
without the prior consent of the Company, each of Parent and
Merger Sub may assign any of its rights hereunder to its
Affiliates (but shall remain liable for all of its obligations
under this Agreement). This Agreement shall inure to the benefit
of and shall be binding upon the successors and permitted
assigns of the parties hereto.
Section
10.03
Governing
Law; Jurisdiction; Remedies.
(a) This Agreement shall be construed, performed and
enforced in accordance with, and governed by, the laws of the
State of New York (except to the extent that mandatory
provisions of Pennsylvania law are applicable), without giving
effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction).
The parties hereto irrevocably elect as the sole judicial forum
for the adjudication of any matters arising under or in
connection with this Agreement, and consent to the jurisdiction
of, the courts of the State of New York.
(b) Any Action arising out of or relating to this Agreement
or the transactions contemplated hereby shall be heard and
determined in any New York federal court sitting in the Borough
of Manhattan of The City of New York;
provided
,
however
, that if such federal court does not have
jurisdiction over such Action, such Action may be heard and
determined in any New York state court sitting in the Borough of
Manhattan of The City of New York. Consistent with the preceding
sentence, the parties hereby (a) submit to the exclusive
jurisdiction of any federal or state court sitting in the
Borough of Manhattan of The City of New York for the purpose of
any Action arising out of or relating to this Agreement or the
transactions contemplated hereby brought by either party hereto,
and (b) irrevocably waive, and agree not to assert by way
of motion, defense, or otherwise, in any such Action, any claim
that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from
attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or
that this Agreement or the transactions contemplated hereby may
not be enforced in or by any of the above-named courts. Each
party hereto further irrevocably consents to the service of
process out of any of the aforementioned courts in any such
suit, action or other proceeding by the mailing of copies
thereof by mail to such party at its address set forth in this
Agreement, such service of process to be effective upon
acknowledgment of receipt of such registered mail;
provided
that nothing in this
Section 10.03
shall affect the right of any party to serve legal process in
any other manner permitted by Law. The consent to jurisdiction
set forth in this
Section 10.03
shall not constitute
a general consent to service of process in the State of New York
and shall have no effect for any purpose except as provided in
this
Section 10.03.
The parties hereto
agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by Law. Without limiting the foregoing, each party
agrees that service of process on such party as provided in
Section 10.05
as to giving notice thereunder shall
be deemed effective service of process on such party.
(c) The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms on a
timely basis or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to seek an injunction
or other equitable relief to prevent breaches of this Agreement
and to seek to enforce specifically the terms and provisions of
this Agreement in any court identified in
Section 10.03(b)
, this being in addition to any
other remedy to which they are entitled at Law or in equity.
(d)
WAIVER OF JURY TRIAL.
EACH OF
THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO
HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY
A-40
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.03(D)
Section
10.04
Severability;
Construction.
(a) Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision
hereof is invalid or unenforceable, the parties hereto agree
that the court making such determination shall have the power to
limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified. In the event such court
does not exercise the power granted to it in the prior sentence,
the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable
term or provision that shall achieve, to the extent possible,
the economic, business and other purposes of such invalid or
unenforceable term.
(b) This Agreement has been freely and fairly negotiated
among the parties. If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if
drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party because of
the authorship of any provision of this Agreement. Any reference
to any applicable Law will be deemed to refer to such Law as in
effect on the date hereof and all rules and regulations
promulgated thereunder, unless the context requires otherwise.
The words include, includes, and
including will be deemed to be followed by
without limitation. Pronouns in masculine, feminine,
and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to
include the plural and vice versa, unless the context otherwise
requires. The words this Agreement, herein,
hereof, hereby, hereunder,
and words of similar import refer to this Agreement as a whole
and not to any particular subdivision unless expressly so
limited. The parties intend that each representation, warranty,
and covenant contained herein will have independent
significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative
levels of specificity) which the party has not breached will not
detract from or mitigate the fact that the party is in breach of
the first representation, warranty, or covenant. Time is of the
essence in the performance of this Agreement.
Section
10.05
Notices.
All
notices and other communications provided for herein shall be in
writing and shall be deemed to have been duly given, delivered
and received (a) if delivered personally or (b) if
sent by facsimile, registered or certified mail (return receipt
requested) postage prepaid, or by courier guaranteeing next day
delivery, in each case to the applicable party to whom it is
directed at the addresses indicated below:
If to the Company:
Verticalnet, Inc.
400 Chester Field Parkway
Malvern, PA 19355
Attention: Nathanael V. Lentz
President and Chief Executive Officer
Fax:
(610) 240-9470
Copy to (such copy not to constitute notice):
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: James W. McKenzie, Jr.
Fax:
(877) 432-9652
A-41
If to Parent or Merger Sub:
BravoSolution S.p.A.
Via Rombon, 11
20134 Milano
Attention: Federico Vitaletti
Chief Executive Officer
Fax: +39 02 210512242
Copy to (such copy not to constitute notice):
Greenberg Traurig, LLP
The Met Life Building
200 Park Avenue
New York, New York 10166
Attention: Lorenzo Borgogni
Daniel P. Raglan
Fax:
(212) 801-6400
or, as to each of the foregoing, at such other address as
shall be designated by such party in a written notice to other
parties complying as to delivery with the terms of this
Section 10.05.
Notices delivered personally shall be
effective on the day so delivered, notices sent by registered or
certified mail shall be effective five (5) days after
mailing, notices sent by facsimile shall be effective when
receipt is acknowledged, and notices sent by courier
guaranteeing next day delivery shall be effective on the day of
actual delivery by the courier.
Section
10.06
Entire
Agreement.
This Agreement and the
Confidentiality Agreement contain the entire understanding among
the parties hereto with respect to the transactions contemplated
hereby and supersede and replace all prior and contemporaneous
agreements and understandings, oral or written, with regard to
such transactions. All Exhibits and Schedules hereto and any
documents and instruments delivered pursuant to any provision
hereof are expressly made a part of this Agreement as fully as
though completely set forth herein.
Section
10.07
Parties
in Interest.
Except for the rights to
continued indemnification and insurance pursuant to
Section 6.02
hereof (of which the Persons entitled
to indemnification or insurance, as the case may be, are the
intended beneficiaries following the Effective Time), nothing in
this Agreement is intended to confer any rights or remedies
under or by reason of this Agreement on any Persons other than
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement is intended to relieve or
discharge the obligations or liability of any third Persons to
the Company or Parent. No provision of this Agreement shall give
any third parties any right of subrogation or action over or
against the Company or Parent.
Section
10.08
Section
and Paragraph Headings.
The section and
paragraph headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
Section
10.09
Counterparts.
This
Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will
constitute one and the same instrument, and delivered by means
of a facsimile or portable document format (pdf) transmission.
This Agreement will become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties. For purposes of determining
whether a party has signed this Agreement or any document
contemplated hereby or any amendment or waiver hereof, only a
handwritten original signature on a paper document or a
facsimile copy of such a handwritten original signature shall
constitute a signature, notwithstanding any applicable Law
relating to or enabling the creation, execution or delivery of
any contract or signature by electronic means.
Section
10.10
Definitions.
(a) As
used in this Agreement:
Affiliate
shall mean, with respect to
any Person, any other Person that directly, or through one or
more intermediaries, controls or is controlled by or is under
common control with such Person.
Board of Directors
shall mean the
Board of Directors of any specified Person.
A-42
Business Day
shall mean any day on
which banks are not required or authorized to close in New York,
New York or Milan, Italy.
Company Enterprise Value
shall mean
the sum of (i) the aggregate Merger Consideration offered
for each outstanding share of Company Common Stock and each
outstanding share of Series B Preferred Stock and
(ii) $5,310,396, which represents as of the date hereof the
principal amount outstanding at maturity of the Radcliffe Note.
Company Material Adverse Effect
means
any Effect that is materially adverse to (i) the business,
financial condition or results of operations of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to consummate the transactions contemplated by this
Agreement or (iii) the ability of Parent to operate the
business of the Company and its Subsidiaries, taken as a whole,
immediately after the Closing (as a result of matters occurring
prior to Closing);
provided
,
however
, that in no
event shall any of the following be deemed to constitute a
Company Material Adverse Effect: (a) any Effect that
results from changes in general economic conditions or changes
in securities markets in general (b) any Effect that
results from general changes in the industry in which the
Company and its Subsidiaries operate, (c) any Effect
directly arising out of to the public announcement of the
transactions contemplated by this Agreement, (d) any Effect
that results from any action taken by the Company at the
specific request of Parent;
except
in the case of
clauses (a) and (b), for any Effect that has a
significantly disproportionate adverse impact on the Company and
its Subsidiaries compared to other companies of similar size
operating in the industry in which the Company and its
Subsidiaries operate.
Effect
means any event, circumstance,
change, development, condition or effect.
Environmental Laws
shall mean any
federal, state, local or foreign, statute, regulation,
ordinance, order, decree, directive or other requirement of Law
(including, without limitation, common law) relating to human
health, safety or welfare, wildlife, natural resources, flora,
fauna or the environment (including, without limitation, indoor
or outdoor air, water, water vapor, groundwater, drinking water,
surface or subsurface land, noise and odor), or to the
identification, generation, use, labeling, processing, control,
transportation, handling, discharge, emission, treatment,
storage, disposal, investigation, removal, remediation,
import/export, or monitoring of, or exposure to, any pollutant,
contaminant, hazardous or solid waste, or any hazardous or toxic
substance, or material.
ERISA
shall mean the Employee
Retirement Income Security Act of 1974, as amended.
GAAP
shall mean United States
generally accepted accounting principles as in effect from time
to time.
Governmental Entity
shall mean any
federal, state, local or foreign governmental, regulatory or
administrative authority, branch, agency or commission or any
court, tribunal, judicial or arbitral body.
Hazardous Material
shall mean any
product, substance, gas, chemical, microbial matter, material or
waste, whose presence, nature, quantity or concentration, either
by itself or in combination with other materials is
(a) potentially injurious to human health or safety, the
environment or natural resources; or (b) regulated,
monitored or subject to reporting by any Governmental Entity
relating to Environmental Laws.
Intellectual Property
shall mean all
of the following, owned or used by the Company and its
Subsidiaries: material (a) trademarks (whether registered
or unregistered) and service marks, trade dress, product
configurations, trade names and other indications of origin,
applications or registrations in any jurisdiction pertaining to
the foregoing and all goodwill associated therewith;
(b) inventions (whether or not patentable), discoveries,
improvements, ideas, know-how, formula methodology, processes,
technology, software (including password unprotected
interpretive code or source code, object code, binary code,
development documentation, programming tools, drawings,
specifications and data), proprietary products, proprietary
rights and applications and patents in any jurisdiction
pertaining to the foregoing, including re-issues, continuations,
divisions,
continuations-in-part,
renewals or extensions; (c) trade secrets, including
confidential information and the right in any jurisdiction to
limit the use or disclosure thereof; (d) rights of
copyright (whether registered or unregistered), copyrighted and
copyrightable writings, designs, software, mask works, works of
authorship in any medium (whether or not copyrightable) or other
works, applications or registrations in any jurisdiction for the
foregoing and all moral rights related thereto;
(e) database rights; (f) Internet Web sites, domain
names and applications and registrations pertaining thereto and
all intellectual property used in connection with or contained
in all versions of the Web sites of the Company and its
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Subsidiaries; (g) all other intellectual property or
proprietary rights of any kind, including writings of any kind,
printed or graphic matter (including all preparatory materials
such as sketches, drafts, outtakes, outlines and drawings);
(h) rights under all agreements relating to the foregoing;
(i) books and records pertaining to the foregoing; and
(j) claims or causes of action arising out of or related to
past, present or future infringement or misappropriation of the
foregoing.
IRS
shall mean the United States
Internal Revenue Service.
Knowledge
shall mean, with respect to
the Company, the actual knowledge of the executives of the
Company after due inquiry of the employees of the Company and
its Subsidiaries who have administrative or operational
responsibility for the particular subject matter in question.
Law
means any federal, national,
supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule, code, order, requirement or rule of
law (including common law).
Lien
shall mean any mortgage, pledge,
security interest, encumbrance or title defect, lease, lien
(statutory or other), conditional sale agreement, claim, charge,
limitation or restriction.
NASDAQ
shall mean The NASDAQ Global
Market, Inc.
Permitted Liens
shall mean
(a) liens for utilities and current Taxes and assessments
not yet due and payable, (b) mechanics,
carriers, workers, repairers,
materialmens, warehousemens, and other similar liens
arising or incurred in the ordinary course of business not yet
due and payable, if the same shall not at the time be delinquent
or thereafter can be paid without penalty or are being contested
in good faith by appropriate proceedings and for which
appropriate reserves have been included on the balance sheet of
the applicable Person (provided that, in the case of assets
material to the business of the Company or any of its
Subsidiaries, taken as a whole, such liens do not and would not
reasonably be expected to materially impair the continued use or
operation of such assets or, in the case of any real property,
render the title to such real property unmarketable), and
(c) Liens set forth on Section 10.10(b) of the Company
Disclosure Schedule.
Person
shall mean an individual,
corporation, limited liability company, partnership,
association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
Shares
shall mean shares of Company
Common Stock, Series B Preferred Stock and (when issued)
Series C Preferred Stock.
Subsidiary
when used with respect to
any party shall mean any corporation, partnership or other
organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority
of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its
Subsidiaries.
Tax Return
shall mean any report,
return, information return, filing, claim for refund or other
information, including any schedules or attachments thereto, and
any amendments to any of the foregoing required to be supplied
to a taxing authority in connection with Taxes.
Taxes
shall mean all federal, state,
local or foreign taxes, including, without limitation, income,
gross income, gross receipts, production, excise, employment,
sales, use, transfer, ad valorem, value added, profits, license,
capital stock, franchise, severance, stamp, withholding, Social
Security, employment, unemployment, disability, workers
compensation, payroll, utility, windfall profit, custom duties,
personal property, real property, taxes required to be collected
from customers on the sale of services, registration,
alternative or add-on minimum,
A-44
estimated and other taxes, governmental fees or like charges of
any kind whatsoever, whether disputed or not, including any
interest, penalties or additions thereto; and
Tax
shall mean any one of them.
(b) The following terms have the meaning set forth in the
sections set forth below:
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Defined Term
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Location of Definition
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Acquisition Agreement
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§7.04(e)
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Acquisition Proposal
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§7.04(d)
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Action
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§3.19
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Adverse Recommendation
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§7.04(e)
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Agreement
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Preamble
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Articles of Merger
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§1.03
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Break-Up
Fee
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§9.02(b)
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Closing
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§1.02
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Closing Date
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§1.02
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Code
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§2.07
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Common Consideration
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Recitals
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Common Stock Certificate
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§1.08(b)
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Company
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Preamble
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Company Board
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Recitals
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Company Common Stock
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Recitals
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Company Disclosure Schedule
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Article 3
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Company Option
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§1.10
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Company Organizational Documents
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§3.01
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Company Plans
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§1.10(a)
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Company Preferred Stock
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§3.06(a)
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Company Recommendation
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§7.01(a)
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Company SEC Reports
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§3.08(a)
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Company Securities
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§1.10(a)
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Company Shareholder Approval
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§3.05
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Company Shareholders Meeting
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§3.29
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Company Transaction Expenses
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§3.11(c)
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Company Warrants
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§1.10(a)
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Company Welfare Plans
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§6.01(b)
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Confidentiality Agreement
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§7.02(c)
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Continuing Employees
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§6.01(a)
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Contract
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§3.20(c)
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Costs
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§6.02(b)
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Customer Contracts
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§3.20(c)(ii)
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Effective Time
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§1.03
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Employee Benefit Plans
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§3.21(a)
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Employment Agreements
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Recitals
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ERISA Affiliate
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§3.21(a)
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Exchange Act
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§3.04
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Exchange Agent
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§2.01
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Exchange Fund
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§2.01
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Excluded Party
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§7.04(d)
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Extended Go-Shop End Date
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§7.04(d)
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Form 10-K
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Article 3
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Incumbent Management
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§6.02(b)
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Indemnitee
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§6.02(a)
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Instrument
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§1.10(b)
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Lease
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§3.12(a)
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Leased Real Property
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§3.12(a)
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A-45
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Defined Term
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Location of Definition
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Licenses and Permits
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§3.16(a)
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Merger
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Recitals
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Merger Consideration
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Recitals
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Merger Sub
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Preamble
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Multiemployer Plan
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§3.21(c)
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No-Shop Period Start Date
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§7.04(a)
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Notice of Superior Proposal
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§7.04(e)
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Notice Period
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§7.04(e)
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Open Source Materials
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§3.15(c)
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Order
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§8.01(c)
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Outside Date
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§9.01(b)(iii)
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Parent
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Preamble
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Parent Transaction Expenses
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§9.03(b)
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PBCL
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Recitals
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Pension Plans
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§3.21(a)
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Plan of Merger
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Recitals
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Proxy Statement
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§3.29
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Radcliffe
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Recitals
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Radcliffe Note
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§5.05
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Radcliffe Waiver
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Recitals
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Real Estate Impositions
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§3.12(e)
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Registered Intellectual Property
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§3.14(b)
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Representatives
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§7.04(a)
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Restricted Stock
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§3.06(a)(i)
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RSU
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§1.10(a)
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Run-Off Insurance
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§6.02(d)
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Sarbanes-Oxley Act
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SEC
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Article 3
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Securities Act
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§3.04
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Series C Preferred Stock
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Recitals
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Series C Purchase Price
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Recitals
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Series C Preferred Stock Purchase Agreement
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Series B Consideration
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Series B Preferred Stock
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Software
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Statement of Designation
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Recitals
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Subsequent Notice
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Subsequent Notice Period
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Surviving Corporation
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Trade Laws
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Transaction Documents
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Treasury Regulations
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Voting Agreement
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WARN
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§3.25(c)
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[Remainder
of Page Intentionally Left Blank]
A-46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
BRAVOSOLUTION S.P.A.
|
|
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By:
|
/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
|
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Title:
|
Chief Executive Officer
|
BRAVOSOLUTION U.S.A., INC.
|
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By:
|
/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
VERTICALNET, INC.
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By:
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/s/ Nathanael
V. Lentz
|
Name: Nathanael V. Lentz
A-47
Exhibit A
to Merger Agreement
Plan of Merger
(see Annex A-1 to this Proxy Statement)
A-48
Exhibit B
to Merger Agreement
Series C Preferred Stock Purchase Agreement
STOCK PURCHASE AGREEMENT
(this
Agreement
), dated as of October 25,
2007, by and between Verticalnet, Inc., a Pennsylvania
corporation, with headquarters located at 400 Chester Field
Parkway, Malvern, Pennsylvania 19355 (the
Company
), and BravoSolution U.S.A., Inc., a
Pennsylvania corporation (
Buyer
).
WHEREAS, the Company has authorized the sale and issuance of
322,007 shares (the
Shares
) of the
Companys Series C Preferred Stock, par value $0.01
per share (the
Preferred Stock
); and
WHEREAS, Buyer wishes to purchase, and the Company wishes to
sell, the Shares upon the terms and conditions stated in this
Agreement.
NOW, THEREFORE
, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, and intended to be legally bound hereby, the
parties hereto agree as follows:
1.
PURCHASE AND SALE; CLOSING; PURCHASE PRICE.
(a)
Purchase and Sale of the
Shares.
Upon the following terms and
conditions, the Company shall issue and sell to Buyer, and Buyer
shall purchase from the Company, the Shares. The Company and
Buyer are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities
registration afforded by Section 4(2) of the
U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the
Securities
Act
), including Regulation D
(
Regulation D
),
and/or
upon
such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of
the investments to be made hereunder.
(b)
Closing.
The date and time of
the closing of the transactions contemplated by this Agreement
(the
Closing
) shall be 10:00 a.m., New
York City time, on October 31, 2007, provided that the
conditions to the Closing set forth in Sections 5 and 6
below shall have been satisfied (or waived) (the
Closing Date
), at the offices of Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia,
PA 19103, unless another place is agreed to in writing by the
parties hereto.
(c)
Purchase Price.
The aggregate
purchase price for the Shares to be purchased by Buyer is
$824,337.92 (the
Purchase Price
).
(d)
Form of Payment.
On the
Closing Date, Buyer shall pay the Purchase Price to the Company
for the Shares to be issued and sold to Buyer at the Closing, by
wire transfer of immediately available funds in accordance with
the Companys written wire instructions.
2.
BUYERS REPRESENTATIONS AND
WARRANTIES.
Buyer represents and warrants to the Company that:
(a)
No Public Sale or
Distribution.
Buyer is acquiring the Shares
for its own account and not with a view towards, or for resale
in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the
Securities Act;
provided
,
however
, that by making
the representations herein, Buyer does not agree to hold any of
the Shares for any minimum or other specific term and reserves
the right to dispose of the Shares at any time in accordance
with or pursuant to a registration statement or an exemption
under the Securities Act.
(b)
Knowledge and
Experience.
Buyer has knowledge and
experience in financial and business matters such that Buyer is
capable of evaluating the merits and risks of the investment in
the Shares.
(c)
Reliance on Exemptions.
Buyer
understands that the Shares are being offered and sold to it in
reliance on exemptions from the registration requirements of
United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and
Buyers compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of Buyer to acquire the Shares.
A-49
(d)
Information.
Buyer and its
advisors have been furnished with all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Shares that have been
requested by Buyer. Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence
investigations conducted by Buyer or its advisors, if any, or
its representatives shall modify, amend or affect Buyers
right to rely on the Companys representations and
warranties contained herein. Buyer understands that its
investment in the Shares involves a high degree of risk. Buyer
has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision
with respect to its acquisition of the Shares.
(e)
No Governmental Review.
Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed on or made
any recommendation or endorsement of the Shares or the fairness
or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering
of the Shares.
(f)
Transfer or Resale.
Buyer
understands that the Shares and the Conversion Shares (as
defined below) are restricted securities and must be held
indefinitely unless they are registered under the Securities Act
or an exemption from registration is available. Buyer
acknowledges that it is familiar with Rule 144 of the rules
and regulations of the Securities and Exchange Commission, as
amended, promulgated pursuant to the Securities Act
(
Rule 144
), and that Buyer has been
advised that Rule 144 permits resales only under certain
circumstances. Buyer understands that to the extent that
Rule 144 is not available, Buyer will be unable to sell any
Securities, Conversion Shares or Warrant Shares without either
registration under the Securities Act or the existence of
another exemption from such registration requirement.
(g)
Legends.
Buyer understands
that the certificates representing the Shares or the Conversion
Shares shall bear any legend that is required by the blue
sky laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may
be placed against transfer of such stock certificates):
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY
SUCH SECURITIES.
(h)
Authorization; Validity;
Enforcement.
Buyer has the requisite power
and authority to enter into and perform its obligations under
this Agreement, and each of the other agreements entered into by
the parties hereto in connection with the transactions
contemplated by the Transaction Documents (as defined below).
This Agreement has been, and when the other Transaction
Documents to which Buyer is a party are executed and delivered
in accordance with the terms and conditions contemplated hereby
and thereby, such documents shall have been, duly and validly
authorized, executed and delivered on behalf of Buyer and shall
constitute the legal, valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective
terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation
and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors rights and remedies.
A-50
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Buyer that:
(a)
Organization and
Qualification.
The Company is duly organized
and validly existing in good standing under the laws of the
jurisdiction in which it was formed, and has the requisite power
and authority to own its properties and to carry on its business
as now being conducted.
(b)
Preferred Stock.
The Shares
shall have the rights set forth in the Statement With Respect to
the Series C Preferred Stock, attached as
Exhibit A
hereto (the
Statement of Designation
).
(c)
Issuance of Securities.
The
Shares have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms
hereof, shall be validly issued and outstanding, free and clear
of all liens, encumbrances and rights of refusal of any kind
other than restrictions on transfer imposed by applicable
securities laws. When the shares of the Companys Common
Stock are issued upon conversion of the Shares (the
Conversion Shares
) in accordance with the
terms of this Agreement and the Statement of Designation, such
shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and
rights of refusal of any kind, other than restrictions on
transfer imposed by applicable securities laws, and the holders
shall be entitled to all rights accorded to a holder of shares
of Common Stock.
(d)
Authorization; Enforcement;
Validity.
The Company has the requisite power
and authority to enter into and perform its obligations under
this Agreement, the Statement of Designation (when filed in
accordance with the terms of this Agreement) and the
Registration Rights Agreement, as set forth as
Exhibit B
hereto (together with the Agreement, the
Transaction Documents
). The execution and
delivery of the Transaction Documents and the consummation by
the Company of the transactions contemplated hereby and thereby
have been duly authorized by the Companys Board of
Directors and no further filing, consent or authorization is
required by the Company, its Board of Directors or its
shareholders (except for the filing of the Statement of
Designation in accordance with the terms of this Agreement).
This Agreement has been, and when the other Transaction
Documents to which Company is a party are executed and delivered
in accordance with the terms and conditions contemplated hereby
and thereby, constitute legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be
limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable
creditors rights and remedies.
(e)
Offer of Shares.
The offer by
the Company of the Shares is exempt from registration under the
Securities Act.
(f)
No General Solicitation; Placement Agents
Fees.
None of the Company, any of its
affiliates, or any Person acting on its or their behalf, has
engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Shares. The Company
shall be responsible for the payment of any placement
agents fees, financial advisory fees, or brokers
commissions (other than for persons engaged by any Buyer or its
investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and
hold Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys fees and
out-of-pocket expenses) arising in connection with any such
claim. The Company has not engaged any placement agent or other
agent in connection with the sale of the Shares.
4.
COVENANTS; REGISTER; ISSUANCE AND RESERVATION OF
SHARES.
(a)
Disclosure of Transactions and Other Material
Information.
On or before 5:00 p.m., on
the fourth Business Day following the Closing Date, the Company
shall file a Current Report on
Form 8-K,
describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the Securities
Exchange Act of 1934, as amended (the
8-K
Filing
). The Company shall be entitled, with the prior
approval of Buyer, to make any other press release or other
public disclosure as is required by applicable law and
regulations.
A-51
(b)
Register.
The Company shall
maintain at its principal executive offices, a register for the
Shares, in which the Company shall record the name and address
of the person in whose name the Shares have been issued
(including the name and address of each transferee).
(c)
Issuance of Shares.
On the
Closing Date, the Company shall deliver to Buyer certificates
representing the Shares.
(d)
Reservation of Common
Stock.
The Company shall at all times reserve
and keep available out of its authorized but unissued Common
Stock, solely for issuance upon the conversion of the Shares,
one hundred percent (100%) of the applicable number of shares of
Common Stock as is expressly permitted to be issued from time to
time upon the conversion of the Shares outstanding at the time,
in accordance with the Statement of Designation.
(e)
Short Sales.
Buyer shall not
engage in any short sale of the Common Stock.
(f)
Statement of Designation.
On
the next business day after the date of this Agreement, the
Company shall file the Statement of Designation with the
Secretary of State of the Commonwealth of Pennsylvania.
(g)
Conversion Cap.
In the event
that the aggregate number of shares of Common Stock that would
be issued upon conversion of the Shares equals or exceeds the
Conversion Cap (as defined in the Statement of Designation), as
promptly as practicable the Company shall convene a special
meeting of the Companys shareholders to approve the
issuance of shares of Common Stock upon conversion of the Shares
in excess of the Conversion Cap, as required by and in
accordance with the Nasdaq Marketplace Rules then in effect.
5.
CONDITIONS TO THE COMPANYS OBLIGATION TO
SELL.
The obligation of the Company hereunder to issue and sell the
Shares to Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the
Companys benefit and may be waived by the Company at any
time in their discretion by providing Buyer with prior written
notice thereof:
(a) Buyer shall have executed and delivered to the Company
each of the Transaction Documents, which shall be in full force
and effect as of the Closing.
(b) Buyer shall have delivered to the Company the Purchase
Price by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(c) The representations and warranties of Buyer shall be
true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyer shall
have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Buyer
at or prior to the Closing Date.
(d) The Secretary of State of the Commonwealth of
Pennsylvania shall have accepted the Companys filing of
the Statement of Designation.
6.
CONDITIONS TO BUYERS OBLIGATION TO
PURCHASE.
The obligation of Buyer hereunder to purchase the Shares at the
Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these
conditions are for Buyers sole benefit and may be waived
by Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(a) The Company shall have executed and delivered to Buyer
each of the Transaction Documents, which shall be in full force
and effect as of the Closing.
(b) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and
conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior
to the Closing Date.
A-52
(c) The Secretary of State of the Commonwealth of
Pennsylvania shall have accepted the Companys filing of
the Statement of Designation.
7.
MISCELLANEOUS.
(a)
Governing Law; Waiver of Jury
Trial.
(i) This Agreement shall be construed, performed and
enforced in accordance with, and governed by, the laws of the
State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New
York or any other jurisdiction). The parties hereto irrevocably
elect as the sole judicial forum for the adjudication of any
matters arising under or in connection with this Agreement, and
consent to the jurisdiction of, the courts of the State of New
York.
(ii) Any claims, actions, suits or proceedings (each, an
Action
) arising out of or relating to this
Agreement or the transactions contemplated hereby shall be heard
and determined in any New York federal court sitting in the
Borough of Manhattan of The City of New York;
provided
,
however
, that if such federal court does not have
jurisdiction over such Action, such Action may be heard and
determined in any New York state court sitting in the Borough of
Manhattan of The City of New York. Consistent with the preceding
sentence, the parties hereby (a) submit to the exclusive
jurisdiction of any federal or state court sitting in the
Borough of Manhattan of The City of New York for the purpose of
any Action arising out of or relating to this Agreement or the
transactions contemplated hereby brought by either party hereto,
and (b) irrevocably waive, and agree not to assert by way
of motion, defense, or otherwise, in any such Action, any claim
that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from
attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or
that this Agreement or the transactions contemplated hereby may
not be enforced in or by any of the above-named courts. Each
party hereto further irrevocably consents to the service of
process out of any of the aforementioned courts in any such
suit, action or other proceeding by the mailing of copies
thereof by mail to such party at its address set forth in this
Agreement, such service of process to be effective upon
acknowledgment of receipt of such registered mail; provided that
nothing in this Section 7(a)(ii) shall affect the right of
any party to serve legal process in any other manner permitted
by law. The consent to jurisdiction set forth in this
Section 7(a)(ii) shall not constitute a general consent to
service of process in the State of New York and shall have no
effect for any purpose except as provided in this Section
7(a)(ii). The parties hereto agree that a final judgment in any
such Action shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Without limiting the foregoing, each party
agrees that service of process on such party as provided herein
as to giving notice thereunder shall be deemed effective service
of process on such party.
(iii) The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific
terms on a timely basis or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an
injunction or other equitable relief to prevent breaches of this
Agreement and to seek to enforce specifically the terms and
provisions of this Agreement in any court identified in
Section 7(a)(ii), this being in addition to any other
remedy to which they are entitled at law or in equity.
(iv)
WAIVER OF JURY TRIAL.
EACH OF
THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO
HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS
A-53
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 7(a)(iv).
(b)
Severability;
Construction.
(i) Any term or provision of
this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making
such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so
modified. In the event such court does not exercise the power
granted to it in the prior sentence, the parties hereto agree to
replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that shall achieve, to
the extent possible, the economic, business and other purposes
of such invalid or unenforceable term.
(ii) This Agreement has been freely and fairly negotiated
among the parties. If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if
drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party because of
the authorship of any provision of this Agreement. Any reference
to any applicable Law will be deemed to refer to such Law as in
effect on the date hereof and all rules and regulations
promulgated thereunder, unless the context requires otherwise.
The words include, includes, and
including will be deemed to be followed by
without limitation. Pronouns in masculine, feminine,
and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to
include the plural and vice versa, unless the context otherwise
requires. The words this Agreement, herein,
hereof, hereby, hereunder,
and words of similar import refer to this Agreement as a whole
and not to any particular subdivision unless expressly so
limited. The parties intend that each representation, warranty,
and covenant contained herein will have independent
significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative
levels of specificity) which the party has not breached will not
detract from or mitigate the fact that the party is in breach of
the first representation, warranty, or covenant. Time is of the
essence in the performance of this Agreement.
(c)
Notices.
All notices and other
communications provided for herein shall be in writing and shall
be deemed to have been duly given, delivered and received
(a) if delivered personally or (b) if sent by
facsimile, registered or certified mail (return receipt
requested) postage prepaid, or by courier guaranteeing next day
delivery, in each case to the applicable party to whom it is
directed at the addresses indicated below: If to Buyer:
At the address set forth on the signature page hereto.
If to the Company:
Verticalnet, Inc.
400 Chester Field Parkway
Malvern, PA 19355
Telephone: (610) 640-8030
Facsimile: (610) 240-9470
Attention: Legal
Copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Telephone: (215) 963-5134
Facsimile: (215) 963-5001
Attention: James W. McKenzie, Jr.
A-54
or, as to each of the foregoing, at such other address as
shall be designated by such party in a written notice to other
parties complying as to delivery with the terms of this
Section 7(c). Notices delivered personally shall be
effective on the day so delivered, notices sent by registered or
certified mail shall be effective five (5) days after
mailing, notices sent by facsimile shall be effective when
receipt is acknowledged, and notices sent by courier
guaranteeing next day delivery shall be effective on the day of
actual delivery by the courier.
(d)
No Third Party
Beneficiaries.
This Agreement is intended for
the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person.
(e)
Entire Agreement.
This
Agreement, the Statement of Designation and the Registration
Rights Agreement contain the entire understanding among the
parties hereto with respect to the transactions contemplated
hereby and supersede and replace all prior and contemporaneous
agreements and understandings, oral or written, with regard to
such transactions. All Exhibits and Schedules hereto and any
documents and instruments delivered pursuant to any provision
hereof are expressly made a part of this Agreement as fully as
though completely set forth herein.
(f)
Section and
Paragraph Headings.
The section and
paragraph headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
(g)
Counterparts.
This Agreement
may be executed in two or more counterparts, each of which will
be deemed an original but all of which together will constitute
one and the same instrument, and delivered by means of a
facsimile or portable document format (pdf) transmission. This
Agreement will become effective when one or more counterparts
have been signed by each of the parties and delivered to the
other parties. For purposes of determining whether a party has
signed this Agreement or any document contemplated hereby or any
amendment or waiver hereof, only a handwritten original
signature on a paper document or a facsimile copy of such a
handwritten original signature shall constitute a signature,
notwithstanding any applicable law relating to or enabling the
creation, execution or delivery of any contract or signature by
electronic means.
(h)
Amendments.
No provision of
this Agreement may be amended other than by an instrument in
writing signed by the parties hereto.
(i)
Successors and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including
any purchasers of the Shares and affiliates of Buyer. Subject to
the foregoing, neither the Company nor Buyer shall assign this
Agreement or any rights or obligations hereunder without the
prior written consent of the other party hereto.
(j)
Further Assurances.
Each party
shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents,
as any other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
[Signature
Page Follows]
A-55
IN WITNESS WHEREOF,
Buyer and the Company have caused
their respective signature page to this Stock Purchase Agreement
to be duly executed as of the date first written above.
VERTICALNET, INC.
|
|
|
|
By:
|
/s/ Nathanael
V. Lentz
|
Name: Nathanael V. Lentz
A-56
[Buyers
Counterpart Signature Page to Stock Purchase
Agreement]
BRAVOSOLUTION U.S.A., INC.
|
|
|
|
By:
|
/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
Address:
|
|
|
|
BravoSolution U.S.A., Inc.
c/o BravoSolution
S.p.A.
Via Rombon, 11
20134 Milano
Attention:
|
Federico Vitaletti
Chief Executive Officer
Fax: +39 02 210512242
|
For purposes of Section 7(c) notice, copy to (such copy not
to constitute notice):
|
|
|
|
Greenberg Traurig, LLP
The Met Life Building
200 Park Avenue
New York, New York 10166
Attention:
|
Lorenzo Borgogni, Esq.
Daniel P. Raglan, Esq.
Tel:
(212) 801-9200
Fax:
(212) 801-6400
|
A-57
Exhibit A
to Stock Purchase Agreement
Statement of Designation
(See Exhibit C to Annex A to this Proxy
Statement)
A-58
Exhibit B
to Stock Purchase Agreement
Registration Rights Agreement
This Registration Rights Agreement (this
Agreement
) is made and entered into as of
October 25, 2007 by and between Verticalnet, Inc., a
Pennsylvania corporation (the
Company
), and
BravoSolution U.S.A., Inc., a Pennsylvania corporation (the
Purchaser
).
This Agreement is being entered into pursuant to the Stock
Purchase Agreement dated as of the date hereof among the Company
and the Purchaser (the
Purchase Agreement
).
The Company and the Purchaser hereby agree as follows:
1.
Definitions
.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the
following meanings:
Affiliate
means, with respect to any
Person, any other Person that directly or indirectly controls or
is controlled by or under common control with such Person. For
the purposes of this definition,
control
,
when used with respect to any Person, means the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise; and the terms of
affiliated
,
controlling
and
controlled
have meanings correlative to the foregoing.
Business Day
means any day except
Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the state of New York
generally are authorized or required by law or other government
actions to close.
Commission
means the Securities and
Exchange Commission.
Common Stock
means the Companys
Common Stock, par value $0.01 per share.
Conversion Shares
means the shares of
Common Stock issuable upon conversion of the Shares issued to
the Purchaser pursuant to the Purchase Agreement.
Effectiveness Period
shall mean the
period beginning on the date any such Registration Statement is
declared effective by the Commission and ending on the date that
is the earlier of (a) the date when all such Registrable
Securities covered by such Registration Statement have been sold
or (b) the date on which such Registrable Securities may be
sold pursuant to Rule 144.
Exchange Act
means the Securities
Exchange Act of 1934, as amended.
Filing Date
means the filing date of
any Registration Statement in accordance with
Section 2
or
Section 3
.
Holder
or
Holders
means the holder or holders, as the case may be, from time to
time of Registrable Securities.
Person
means an individual or a
corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
Proceeding
means an action, claim,
suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
Prospectus
means the prospectus
included in the Registration Statement (including, without
limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, as well as any free
writing prospectus, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the
Registration Statement, and all other
A-59
amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference in such Prospectus.
Registrable Securities
means the
Conversion Shares.
Registration Statement
means any
registration statement and any additional registration statement
contemplated by
Section 2
or
Section 3
,
including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such
registration statement.
Rule 144
means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Rule 158
means Rule 158
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Rule 424
means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Securities Act
means the Securities
Act of 1933, as amended.
Series B Financing
means the
transactions contemplated by that certain Stock and Warrant
Purchase Agreement, dated as of June 1, 2007, by and among
the Company and the purchasers, pursuant to which the Company
issued and sold shares of Series B Preferred Stock, par
value $0.01 per share, and warrants to purchase shares of Common
Stock.
2.
Piggy Back Registration Rights
.
(a) If the Company proposes to file a Registration
Statement under the Securities Act for purposes of a public
offering of securities of the Company, it shall notify all
Holders of Registrable Securities in writing (the
Company Notice
). Each Holder shall have the
right (the
Piggyback Right
), subject to the
limitations set forth in this
Section 2
, to include
in such Registration Statement the Registrable Securities then
held by such Holder. In order to exercise the Piggyback Right, a
Holder shall give written notice to the Company (the
Piggyback Notice
) no later than 15 days
following the date on which the Company gives the Company
Notice. The Piggyback Notice shall set forth the number of
Registrable Securities that such Holder desires to include in
such Registration Statement.
(b) If the Registration Statement under which the Company
gives notice under this
Section 2
is for an
underwritten offering, the Company shall so advise the Holders
of Registrable Securities in the Company Notice. In such event,
the right of any such Holder to be included in a registration
pursuant to this
Section 2
shall be conditioned upon
such Holders participation in such underwritten offering
and the inclusion of such Holders Registrable Securities
in the underwritten offering to the extent provided herein. All
Holders proposing to distribute their Registrable Securities by
means of such underwritten offering shall enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten,
the number of shares that may be included in the underwriting
shall be allocated in the following order of priority:
(i) first, to the securities acquired in the Series B
Financing; (ii) second, to the Holders, up to the full
number of Registrable Securities requested to be included in
such registration on a pro rata basis based on the total number
of Registrable Securities requested to be included in such
registration by the Holders; (iii) third, to the Company,
all securities proposed to be registered by the Company for its
own account; and (iv) fourth, to any other holders, the
number of securities requested to be included by any other
holders, in proportion as nearly as practicable, to the
respective amounts of securities of the Company owned by them.
Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration. If any
Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the
Company and the underwriter, delivered at least 10 Business Days
prior to the effective date of such Registration Statement.
A-60
(c) The Company shall use its commercially reasonable
efforts to (i) have such Registration Statement declared
effective by the Commission (x) within 90 days after
the Filing Date if such Registration Statement is not reviewed
by the Commission or (y) within 120 days after the
Filing Date if such Registration Statement is reviewed by the
Commission and (ii) keep such Registration Statement
continuously effective under the Securities Act until the end of
the Effectiveness Period. Each Holder acknowledges and agrees
that the Company shall be permitted to exclude such
Holders Registrable Securities from a Registration
Statement if such Holder fails to timely comply with the
Companys request for information pursuant to
Section 4(m)
; provided if such Holder provides such
information prior to the filing of such Registration Statement
the Company shall use commercially reasonable efforts to include
such Registrable Securities on such Registration Statement.
(d) Notwithstanding anything to the contrary set forth in
this Agreement, in the event that following the exercise of the
Piggyback Right and the inclusion in such Registration Statement
of all or part of the Registrable Securities then held by such
Holder, the Commission informs the Company that such
Registration Statement cannot be filed as a secondary offering
on
Form S-3
due to the aggregate number of securities to be registered
thereunder, the Company shall as promptly as practicable convert
the
Form S-3
at issue in this paragraph (d) into a Registration
Statement on
Form S-1.
(e) Notwithstanding anything to the contrary set forth in
this Agreement, the Piggyback Right shall not be exercisable by
any Holder and the Company shall have no obligation under this
Agreement with respect to the registration statement to be filed
by the Company pursuant to Section 4 of that certain
Registration Rights Agreement, dated as of June 1, 2007, by
and among the Company and the purchasers, as amended and
modified (the
Series B Registration Rights
Agreement
); provided such registration statement is
filed on or prior to November 5, 2007.
3.
Demand Rights
.
(a) Subject to the conditions of this
Section 3
, in the event that the Agreement of
Merger, dated as of October 25, 2007, by and among the
Company, the Purchaser and BravoSolution, S.p.A. has been
terminated in accordance with Article 9 thereof, the
Holders of a majority of the Registrable Securities then
outstanding (the
Initiating Holders
) may
request in writing (the
Demand Request
) that
the Company file a Registration Statement under the Securities
Act covering the registration of at least 20% of the Registrable
Securities then outstanding. The Demand Request shall set forth
the number of Registrable Securities owned by the Initiating
Holders to be included in the Registration Statement. In such
event, the Company shall:
(i) as promptly as practicable but in any event within ten
days of the receipt of the Demand Request, give written notice
of such request to all Holders (the
Demand
Notice
);
(ii) subject to the limitations set forth in this
Section 3
, prepare and file, as expeditiously as is
commercially reasonable, and in any event within 90 days of
receipt of such request (the
Demand Registration Filing
Date
), a Registration Statement under the Securities
Act covering the Registrable Securities specified by the
Initiating Holders in the Demand Request and such other
Registrable Securities with respect to which the Company has
received written requests for inclusion within such Registration
Statement within 15 days after the Company has given the
Demand Notice; and
(iii) use its commercially reasonable efforts to cause the
Registration Statement to be declared effective.
(b) The Registration Statement shall be a resale
registration statement on
Form S-3,
except (i) if the Company is not then eligible to register
for resale the Registrable Securities on
Form S-3,
in which case such registration shall be on another appropriate
form in accordance with the Securities Act and the rules
promulgated thereunder or (ii) if the Initiating Holders
request and include in the Demand Request that such Registration
Statement be on
Form S-1
(or such other another appropriate form in accordance with the
Securities Act and the rules promulgated thereunder), in which
case such registration shall be on such other appropriate form.
The Company shall use its commercially reasonable efforts to
(i) have such Registration Statement declared effective by
the Commission (x) within 90 days after the Demand
Registration Filing Date if such Registration Statement is not
reviewed by the Commission or (y) within 120 days
after the Demand Registration Filing Date if such Registration
Statement is reviewed by the Commission and (ii) keep such
Registration Statement continuously effective under the
Securities Act during the Effectiveness Period. Each Holder
acknowledges and agrees that the Company shall be permitted to
A-61
exclude such Holders Registrable Securities from a
Registration Statement if such Holder fails to timely comply
with the Companys request for information pursuant to
Section 4(m)
; provided if such Holder provides such
information prior to the filing of such Registration Statement
the Company shall use commercially reasonable efforts to include
such Registrable Securities on such Registration Statement.
(c) If the Initiating Holders intend to distribute the
Registrable Securities covered by their Demand Request by means
of an underwritten offering, they shall so advise the Company in
the Demand Request, and the Company shall include such
information in the Demand Notice. In such event, the right of
any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holders
participation in such underwritten offering and the inclusion of
such Holders Registrable Securities in the underwritten
offering to the extent provided herein. All Holders proposing to
distribute their securities by means of such underwritten
offering shall enter into an underwriting agreement in customary
form with an underwriter or underwriters selected for such
underwriting by the Initiating Holders and reasonably acceptable
to the Company. Notwithstanding any other provision of this
Section 3
, if the underwriter advises the Company
that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable
Securities), then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of securities that may be
included in the underwriting shall be allocated to the Holders
of such Registrable Securities on a pro rata basis based on the
number of Registrable Securities held by all such Holders;
provided
,
however
, that the Company shall first
exclude all other securities from the underwriting and
registration before it reduces the number of Registrable
Securities requested by the Holders. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn
from the registration. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter,
delivered at least 10 Business Days prior to the effective date
of such Registration Statement.
(d) The Company shall not be required to effect any
registration pursuant to this
Section 3
:
(i) after the Company has filed two Registration Statements
pursuant to this
Section 3
; or
(ii) if the Company shall furnish to the Holders requesting
a Registration Statement pursuant to this
Section 3
,
a certificate signed by the Chief Executive Officer of the
Company stating that in the reasonable judgment of the Board of
Directors of the Company, it would be detrimental to the Company
and its shareholders for such Registration Statement to be
effected at such time, in which event the Company shall have the
right to defer such filing for a period of not more than
90 days after receipt of the request of the Initiating
Holders;
provided
,
however
, that the Company may
not utilize this right more than once in any 12 month
period.
4.
Registration Procedures
.
In
connection with the Companys registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
applicable Filing Date, a Registration Statement on the
appropriate form. The Registration Statement required hereunder
shall contain (except if otherwise directed by Holders owning a
majority of the Registrable Securities outstanding at such time)
substantially the
Plan of Distribution
attached hereto as
Annex A
. Subject to
this Agreement, the Company shall use its commercially
reasonable efforts to cause the Registration Statement to become
effective and remain effective as provided herein;
provided
,
however
, that not less than five
(5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be
incorporated therein by reference), the Company shall
(i) furnish to the Holders, copies of all such documents
proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel
and independent certified public accountants to respond to such
inquiries as shall be necessary to conduct a reasonable
investigation within the meaning of the Securities Act. Unless
otherwise advised by outside counsel to the Company, the Company
shall not file the Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities shall reasonably object
in writing within three (3) Business Days of their receipt
thereof.
A-62
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the
Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period
and prepare and file with the Commission such additional
Registration Statements as necessary in order to register for
resale (if applicable) under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed
pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond
as promptly as possible, but in no event later than twenty
(20) Business Days, to any comments received from the
Commission with respect to the Registration Statement or any
amendment thereto and as promptly as possible provide the
Holders true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and
(iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in
accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
as promptly as possible (and, in the case of (i)(A) below, not
less than three (3) days prior to such filing) (i)(A) when
a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is filed; (B) when
the Commission notifies the Company whether there will be a
review of such Registration Statement and whenever
the Commission comments in writing on such Registration
Statement and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has
become effective; (ii) of any written request by the
Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose;
and (v) of the occurrence of any event that makes any
statement made in the Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or
the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of, (i) any order
suspending the effectiveness of the Registration Statement or
(ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest
of the Registrable Securities, (i) promptly incorporate in
a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company
reasonably agrees should be included therein and (ii) make
all required filings of such Prospectus supplement or such
post-effective amendment as soon as reasonably practicable after
the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(f) Furnish to each Holder, without charge, at least one
conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules contained
therein, and to the extent requested by such Person, all
exhibits and all documents incorporated or deemed to be
incorporated therein by reference (including those previously
furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, without charge, as
many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or
A-63
supplement thereto by each of the selling Holders in connection
with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its commercially reasonable efforts to register or qualify
or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities
for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement;
provided
,
however
, that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action that
would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is
not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free of all restrictive
legends (provided that the issuance of such unlegended
certificates is in compliance with applicable securities laws),
and to enable such Registrable Securities to be in such
denominations as any Holder may request in writing at least two
(2) Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by
Section 4(c)(v)
, as promptly as possible, prepare a
supplement or amendment, including a post-effective amendment,
to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(k) Use its reasonable best efforts to cause all
Registrable Securities relating to the Registration Statement to
be listed on The Nasdaq Capital Market or any other securities
exchange, quotation system or market, if any, on which the
Companys Common Stock or similar securities issued by the
Company are then listed or traded as and when required pursuant
to the Purchase Agreement.
(l) Comply in all material respects with all applicable
rules and regulations of the Commission and make generally
available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any
12-month
period (or 90 days after the end of any
12-month
period if such period is a fiscal year) commencing on the first
day of the first fiscal quarter of the Company after the
effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish
to the Company information regarding such Holder and the
distribution of such Registrable Securities as is required by
law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish
such information within a reasonable time after receiving such
request. The Company may require each Holder, upon three
(3) Business Days notice, to furnish to the Company a
certified statement as to, among other things, the number of
shares of Common Stock beneficially owned by such Holder and
name of the natural person(s) that has voting and dispositive
control over such shares.
(n) If (i) there is material non-public information
regarding the Company which the Companys Board of
Directors (the
Board
) reasonably determines
not to be in the Companys best interest to disclose and
which the Company is not otherwise required to disclose, or
(ii) there is a significant business opportunity
(including, but not limited to, the acquisition or disposition
of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar
transaction) available to the Company which the Board reasonably
determines not to be in the Companys best interest to
disclose, then the Company may (x) postpone or suspend
filing of the Registration Statement for a period not to exceed
45 consecutive days or (y) postpone
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or suspend effectiveness of the Registration Statement for a
period not to exceed 30 consecutive days; provided that the
Company may not postpone or suspend effectiveness of the
Registration Statement under this
Section 4(n)
for
more than 60 days in the aggregate during any 360 day
period;
provided
,
however
, that no such
postponement or suspension shall be permitted for consecutive
30 day periods arising out of the same set of facts,
circumstances or transactions.
5.
Holders Rights and Obligations
.
(a) If the Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right to require (if
such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed
or prepared subsequent to the time that such reference ceases to
be required.
(b) Each Holder covenants and agrees that (i) it will
not sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then
amended or supplemented as contemplated in
Section 4(g)
and notice from the Company that such
Registration Statement and any post-effective amendments thereto
have become effective as contemplated by
Section 4(c)
and (ii) it and its officers,
directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to
them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
(c) Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in
Section 4(c)(ii)
,
4(c)(iii)
,
4(c)(iv)
,
4(c)(v)
or
4(n)
, such Holder will forthwith
discontinue disposition of such Registrable Securities under the
Registration Statement until such Holders receipt of the
copies of the supplemented Prospectus
and/or
amended Registration Statement contemplated by
Section 4(j)
, or until it is advised in writing by
the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or
Registration Statement.
6.
Registration Expenses
.
All fees
and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent
specified in this
Section 6
, shall be borne by the
Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities
are sold pursuant to the Registration Statement; provided,
however, that except as expressly set forth herein, in no event
shall such fees and expenses borne by the Company include any
underwriting fees, discounts, commissions or fees attributable
to the sale of the Registrable Securities. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with
respect to filings required to be made with The Nasdaq Capital
Market
and/or
each
other securities exchange or market on which Registrable
Securities are required hereunder to be listed, (B) with
respect to filing fees required to be paid to the National
Association of Securities Dealers, Inc. and the NASD Regulation,
Inc. and (C) in compliance with state securities or Blue
Sky laws, (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of
prospectuses is requested by the Holders of a majority of the
Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses,
(iv) Securities Act liability insurance, if the Company so
desires such insurance, and (v) fees and expenses of all
other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement,
including, without limitation, the Companys independent
public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent
public accountants of a comfort letter or comfort letters). In
addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
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7.
Indemnification
.
(a)
Indemnification by the
Company
.
The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal
as a result of a pledge or any failure to perform under a margin
call of Common Stock), investment advisors and employees of each
of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person,
to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and
reasonable attorneys fees) and expenses (collectively,
Losses
)(as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or
review), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus
or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case
of any Prospectus or form of prospectus or supplement thereto,
in the light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based
solely upon information regarding such Holder or such other
Indemnified Party furnished in writing to the Company by such
Holder expressly for use therein and (ii) that the
foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any untrue statement, allegedly untrue
statement, omission or alleged omission made in any preliminary
prospectus but eliminated or remedied in the final prospectus
(filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any
Holder, underwriter, broker or other Person acting on behalf of
Holders of the Registrable Securities, from whom the Person
asserting any loss, claim, damage, liability or expense
purchased the Registrable Securities which are the subject
thereof, if a copy of such final prospectus had been made
available to such Person and such Holder, underwriter, broker or
other Person acting on behalf of Holders of the Registrable
Securities and such final prospectus was not delivered to such
Person with or prior to the written confirmation of the sale of
such Registrable Securities to such Person. The Company shall
notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b)
Indemnification by
Holders
.
Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review), as
incurred, arising solely out of or based solely upon:
(x) such Holders failure to comply with the
prospectus delivery requirements of the Securities Act or
(y) any untrue statement of a material fact contained in
the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any
omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder or other Indemnifying Party
to the Company specifically for inclusion in the Registration
Statement or such Prospectus. Notwithstanding anything to the
contrary contained herein, no Holder shall be liable under this
Section 7(b)
that amount which exceeds the gross
proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(c)
Conduct of Indemnification
Proceedings
.
If any Proceeding shall be
brought or asserted against any Person entitled to indemnity
hereunder (an
Indemnified Party
), such
Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the
Indemnifying Party
) in
writing, and the Indemnifying Party shall have the right to
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment
of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that such failure shall have
proximately and materially adversely prejudiced the Indemnifying
Party.
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An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless:
(1) the Indemnifying Party has agreed in writing to pay
such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding
and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel
(which shall be reasonably acceptable to the Indemnifying Party)
that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement
includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such
Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within ten
(10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all
such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d)
Contribution
.
If a claim for
indemnification under
Section 7(a)
or
7(b)
is
unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such
indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect
the relative fault attributable to the Indemnifying Party on the
one hand and the Indemnified Party on the other in connection
with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in this Agreement,
any reasonable attorneys or other reasonable fees or
expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified
for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its
terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this
Section 7(d)
were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties. Notwithstanding
anything to the contrary contained herein, the Holders shall be
liable under this
Section 7(d)
for only that amount
as does not exceed the net proceeds to such Holder as a result
of the sale of Registrable Securities pursuant to such
Registration Statement.
8.
Rule 144
. As long as any
Holder owns any Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be
filed by
A-67
the Company after the date hereof pursuant to Section 13(a)
or 15(d) of the Exchange Act and, upon the written request of
any Holder, to promptly furnish to such Holder true and complete
copies of all such filings. As long as any Holder owns any
Registrable Securities, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will prepare and furnish to the Holders and make
publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially
similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to
have been made under the Exchange Act. The Company further
covenants that it will take such further action as any Holder
may reasonably request in writing, all to the extent required
from time to time to enable such Person to sell the shares of
Common Stock issuable upon conversion of the Shares without
registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions relating
to such sale pursuant to Rule 144.
9.
Miscellaneous
.
(a)
Remedies
.
In the event of a
breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
(b)
Failure to File Registration Statement and
Effectiveness of Registration Statement
.
The
Company and the Purchaser agree that the Purchaser will suffer
damages if a Registration Statement filed pursuant to
Section 3 hereof, is not filed on or prior to the
applicable Filing Date and not declared effective by the
Commission on or prior to 120 days after the applicable
Filing Date. The Company and the Purchaser further agree that it
would not be feasible to ascertain the extent of such damages
with precision. Accordingly, if (A) such Registration
Statement is not filed on or prior to the applicable Filing
Date, or (B) the Registration Statement is not declared
effective by the Commission on or prior to 120 days after
the applicable Filing Date (either such failure being referred
to as an
Event
, and for purposes of
clauses (A) and (B) the date on which such Event
occurs, being referred to as
Event Date
), the
Company shall pay in cash an amount, as partial liquidated
damages and not as a penalty, to the Purchaser, as long as such
Shares are outstanding, an amount equal to 1% of the product
obtained by multiplying the number of Shares then held by the
Purchaser by $0.25 for the first calendar month and 1% of the
product obtained by multiplying the number of Shares then held
by a Purchaser by $0.25 per calendar month thereafter or portion
thereof from the Event Date until the applicable Event is cured
or until the Registrable Securities are saleable under
Rule 144. Notwithstanding anything to the contrary in this
paragraph (b), if (i) either of the Events described in
clauses (A) or (B) shall have occurred, (ii) on
or prior to the applicable Event Date the Company shall have
exercised its rights under
Section 4(n)
hereof and
(iii) the postponement or suspension permitted pursuant to
such
Section 4(n)
shall remain effective as of such
applicable Event Date, then the applicable Event Date shall be
deemed instead to occur on the second Business Day following the
termination of such postponement or suspension which is
permitted pursuant to
Section 4(n)
.
(c)
Amendments and Waivers
.
The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given, unless the same shall be in writing and signed by
the Company and the Holders of a majority of the Registrable
Securities outstanding.
(d)
Notices
.
Any and all notices
or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed
given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice
prior to 5:00 p.m., New York City time, on a Business Day,
(ii) the Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than
5:00 p.m., New York City time, on any date and earlier than
11:59 p.m., New York City time, on such date,
(iii) the
A-68
Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or
(iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications
shall be with respect to each Holder at its address set forth in
the Purchase Agreement , or with respect to the Company,
addressed to:
Verticalnet, Inc.
400 Chester Field Parkway
Malvern, PA 19355
Attention: General Counsel
Tel. No.:
(610) 240-0600
Fax No.:
(610) 240-9470
with copies (which copies
shall not constitute notice
to the Company) to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: James W. McKenzie, Jr.
Tel. No.:
(215) 963-5134
Fax No.:
(215) 963-5001
or to such other address or addresses or facsimile number or
numbers as any such party may most recently have designated in
writing to the other parties hereto by such notice.
(e)
Successors and Assigns
.
This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns and shall
inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written
consent of a majority in interest of the Holders. Each Purchaser
may assign its rights hereunder in the manner and to the Persons
as permitted under the Purchase Agreement.
(f)
Assignment of Registration
Rights
.
The rights of each Holder hereunder,
including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this
Agreement, shall be assignable by each Holder to any Affiliate
of such Holder or any other Holder or Affiliate of any other
Holder of all or a portion of the Registrable Securities if:
(i) the Holder agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within five (5) days
after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such
registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state
securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this
Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase
Agreement. In addition, each Holder shall have the right to
assign its rights hereunder to any other Person with the prior
written consent of the Company, which consent shall not be
unreasonably withheld. The rights to assignment shall apply to
the Holders (and to subsequent) successors and assigns.
(g)
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(h)
Governing Law
.
This Agreement
shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to
any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This
Agreement shall not be interpreted or construed
A-69
with any presumption against the party causing this Agreement to
be drafted. The Company and the Holders agree that venue for any
dispute arising under this Agreement will lie exclusively in the
state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise
forum
non conveniens
or any other argument that New York is not
the proper venue. The Company and the Holders irrevocably
consent to personal jurisdiction in the state and federal courts
of the state of New York. The Company and the Holders consent to
process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agree that such
service shall constitute good and sufficient service of process
and notice thereof. Nothing in this
Section 9(g)
shall affect or limit any right to serve process in any other
manner permitted by law. The Company and the Holders hereby
agree that the prevailing party in any suit, action or
proceeding arising out of or relating to this Agreement, shall
be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.
(i)
Cumulative Remedies
.
The
remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
(j)
Severability
.
The provisions
of this Agreement are severable and, in the event that any court
of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of
a provision of this Agreement and this Agreement shall be
reformed and construed as if such invalid or illegal or
unenforceable provision, or part of such provision, had never
been contained herein, so that such provisions would be valid,
legal and enforceable to the maximum extent possible.
(k)
Headings
.
The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
(l)
Termination of Registration
Rights
.
All registration rights granted under
this Agreement and the Companys obligations with respect
thereto, shall terminate and be of no further force and effect
and the Registrable Securities then owned by or issuable to such
Holder shall no longer be deemed Registrable
Securities, if all Registrable Securities held by and
issuable to such Holder could be sold under Rule 144,
including Rule 144(k).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed by their
respective authorized persons as of the date first indicated
above.
VERTICALNET, INC.
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By:
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/s/ Nathanael
V. Lentz
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Name: Nathanael V. Lentz
A-71
[PURCHASER
COUNTERPART SIGNATURE PAGE]
BRAVOSOLUTION U.S.A., INC.
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By:
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/s/ Federico
Vitaletti
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Name: Federico Vitaletti
[REGISTRATION RIGHTS AGREEMENT]
A-72
Annex A
to Registration Rights Agreement
Plan of Distribution
The selling shareholders may, from time to time, sell any or all
of their shares of common stock on any stock exchange, market or
trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices.
The selling shareholders may use any one or more of the
following methods when selling shares:
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ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
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an exchange distribution in accordance with the rules of the
applicable exchange;
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privately negotiated transactions;
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short sales;
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through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
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broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per
share; and
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a combination of any such methods of sale.
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The selling shareholders may also sell shares under
Rule 144 under the Securities Act, if available, rather
than under this prospectus.
The selling shareholders may also engage in short sales against
the box, puts and calls and other transactions in our securities
or derivatives of our securities and may sell or deliver shares
in connection with these trades.
Broker-dealers engaged by the selling shareholders may arrange
for other brokers-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the
selling shareholders (or, if any broker-dealer acts as agent for
the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these
commissions and discounts to exceed what is customary in the
types of transactions involved. Any profits on the resale of
shares of common stock by a broker-dealer acting as principal
might be deemed to be underwriting discounts or commissions
under the Securities Act. Discounts, concessions, commissions
and similar selling expenses, if any, attributable to the sale
of shares will be borne by a selling shareholder. The selling
shareholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under
the Securities Act.
In connection with the sale of our common stock or interests
therein, the selling shareholders may enter into hedging
transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.
The selling shareholders may also sell shares of our common
stock short and deliver these securities to close out their
short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities. The
selling shareholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
The selling shareholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock
owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer
and sell the shares of common stock from time to time under this
prospectus after we have filed an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act of
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1933 amending the list of selling shareholders to include the
pledgee, transferee or other successors in interest as selling
shareholders under this prospectus.
The selling shareholders also may transfer the shares of common
stock in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell
the shares of common stock from time to time under this
prospectus after we have filed an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933 amending the list of selling shareholders
to include the pledgee, transferee or other successors in
interest as selling shareholders under this prospectus.
The selling shareholders and any broker-dealers or agents that
are involved in selling the shares of common stock may be deemed
to be underwriters within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any
profit on the resale of the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock. We have agreed to
indemnify the selling shareholders against certain losses,
claims, damages and liabilities, including liabilities under the
Securities Act.
The selling shareholders have advised us that they have not
entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or
coordinating broker acting in connection with a proposed sale of
shares of common stock by any selling shareholder. If we are
notified by any selling shareholder that any material
arrangement has been entered into with a broker-dealer for the
sale of shares of common stock, if required, we will file a
supplement to this prospectus. If the selling shareholders use
this prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the
Securities Act.
The anti-manipulation rules of Regulation M under the
Securities Exchange Act of 1934 may apply to sales of our
common stock and activities of the selling shareholders.
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Exhibit C to Merger Agreement
STATEMENT WITH RESPECT TO SHARES
OF
SERIES C PREFERRED STOCK
OF
VERTICALNET, INC.
Pursuant to Section 1522 of
Business Corporation Law of the Commonwealth of
Pennsylvania
VERTICALNET, INC., a Pennsylvania corporation (the
Corporation
), certifies that pursuant to the
authority contained in ARTICLE EIGHTH of its Amended and
Restated Articles of Incorporation, as amended (the
Articles of Incorporation
), and in accordance
with the provisions of Section 1522 of the Business
Corporation Law of the Commonwealth of Pennsylvania, the Board
of Directors of the Corporation at a meeting duly called and
held on October 25, 2007, duly approved and adopted the
following resolution, which resolution remains in full force and
effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Articles of Incorporation, the Board of
Directors does hereby designate, create, authorize and provide
for the issue of one series of Preferred Stock, having a par
value of $0.01 per share, which shall be designated as
Series C Preferred Stock (the
Series C
Preferred Stock
) consisting of 322,007 shares,
and each share of Series C Preferred Stock shall have the
rights, preferences, privileges and limitations set forth in the
Description and Designation of Series C Preferred Stock,
attached hereto as
Exhibit A
.
IN WITNESS WHEREOF, the Corporation has caused this Statement
with Respect to Shares of Series C Preferred Stock to be
signed by Nathanael V. Lentz, its President, on the
26th day of October, 2007.
VERTICALNET, INC.
|
|
|
|
By:
|
/s/ Nathanael
V. Lentz
|
Name: Nathanael V. Lentz
A-75
Exhibit A
to Series B Statement of Designation
Description and Designation of Series C Preferred
Stock
1.
Designation of Series C Preferred
Stock
.
A total of 322,007 shares of the
Corporations Preferred Stock shall be designated the
Series C Preferred Stock
, par value
$0.01 per share.
2.
Dividends
.
The holders of the
Series C Preferred Stock shall be entitled to receive,
when, if and as declared by the Board of Directors of the
Corporation (the
Board
), out of funds legally
available therefor, dividends in an amount equal to the per
share dividend declared by the Board otherwise payable to the
holders of the Corporations Common Stock, par value $0.01
per share (
Common Stock
).
3.
Voting Rights
.
(a) Except as otherwise provided herein or as provided by
law, the holders of the Series C Preferred Stock shall have
full voting rights and powers, subject to the Voting Cap (as
defined in Section 3(b)) and the Conversion Cap (as defined
in Section 6(h)), if applicable, equal to the voting rights
and powers of holders of Common Stock and shall be entitled to
notice of any shareholders meeting in accordance with the Bylaws
of the Corporation, as amended (the
Bylaws
),
and shall be entitled to vote, with respect to any question upon
which holders of Common Stock are entitled to vote, including,
without limitation, the right to vote for the election of
directors, voting together with the holders of Common Stock as
one class. Each holder of shares of Series C Preferred
Stock shall be entitled to vote on an As-Converted Basis (as
defined below), determined on the record date for the taking of
a vote, subject to the Voting Cap set forth in Section 3(b)
and the Conversion Cap set forth in Section 6(h), or, if no
record date is established, at the day prior to the date such
vote is taken or any written consent of shareholders is first
executed. Fractional votes shall not, however, be permitted and
any fractional voting rights resulting from the above formula
(after aggregating all shares into which shares of Series C
Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded
upward).
As-Converted Basis
means, as of the
time of determination, that number of shares of Common Stock
which a holder of Series C Preferred Stock would hold if
all shares of Series C Preferred Stock held by such holder
were converted into shares of Common Stock pursuant to
Section 6 hereof (at the then applicable Conversion Value
(as defined in Section 6(e)).
(b) Notwithstanding anything to the contrary contained
herein, no holder of shares of Series C Preferred Stock
shall cast a number of votes in excess of the number (the
Voting Cap
) determined by (i) dividing
(A) the per-share purchase price paid with respect to such
holders shares of Series C Preferred Stock under the
Purchase Agreement, dated as of October 25, 2007, by and
between the Corporation and that certain purchaser (the
Purchase Agreement
), by (B) the
applicable closing bid price (adjusted for any stock dividends,
stock splits or similar transactions after such date) for shares
of the Common Stock as reported on the Nasdaq Capital Market on
the business day immediately prior to the Closing Date (as
defined in the Purchase Agreement) and (ii) multiplying
that quotient by the number of shares of Series C Preferred
Stock currently held by such holder which were originally
acquired by such holder or a prior transferor from the
Corporation pursuant to the Purchase Agreement. If the foregoing
calculation results in a fraction of a share, such fraction will
be rounded to the nearest whole number (with one-half being
rounded upward). Nothing contained in this Section 3(b)
shall limit or otherwise restrict the right of any holder of
shares of Series C Preferred Stock to convert any shares of
Series C Preferred Stock held by such holder into Common
Stock or the voting rights that it will have hereunder or upon
conversion.
4.
Rights on Liquidation
.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (any
such event being hereinafter referred to as a
Liquidation
), before any distribution of
assets of the Corporation shall be made to or set apart for the
holders of the Common Stock or any other class of preferred
stock, the holders of Series C Preferred Stock shall be
entitled to receive payment out of such assets of the
Corporation in an amount equal to $2.56 per share of
Series C Preferred Stock (such applicable foregoing amount
being referred to as the
Liquidation
Preference
for the Series C Preferred Stock);
provided
,
however
, that such holders right
to payment shall be subordinate to the rights of the holder of
the Senior Subordinated Discount Promissory Note, dated
May 15, 2006, and the rights of the holders of the
Corporations Series B Preferred Stock. If the assets
of the Corporation available for distribution to the holders of
Series C Preferred Stock shall not be sufficient to make
the
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full payment herein required, such assets shall be distributed
pro-rata among the holders of Series C Preferred Stock
based on the aggregate Liquidation Preferences of the shares of
Series C Preferred Stock held by each such holder.
(b) If the assets of the Corporation available for
distribution to shareholders exceed the aggregate amount payable
with respect to all shares of Series C Preferred Stock then
outstanding, then, after the payment required by
paragraph 4(a) above shall have been made or irrevocably
set aside, the holders of Common Stock shall be entitled to
receive payment of a pro rata portion of such remaining assets
based on the aggregate number of shares of Common Stock held or
deemed to be held by such holder. The holders of Series C
Preferred Stock shall not have the right to participate in such
aforementioned distribution.
5.
Actions Requiring the Consent of Holders of
Series C Preferred Stock
.
As long as at
least 50% of the shares of Series C Preferred Stock remain
outstanding, the consent of the holders of at least 50% of the
shares of Series C Preferred Stock at the time outstanding,
given in accordance with the Articles and the Bylaws, shall be
necessary for effecting or validating any of the following
transactions or acts:
(a) Any amendment, alteration or repeal of any of the
provisions of this Certificate of Designation in a manner that
will adversely affect the rights of the holders of the Series C
Preferred Stock; provided however, that no such consent shall be
required for the Corporation to amend the Articles of
Incorporation (the
Articles
) to increase the
Corporations authorized shares of Common Stock or
undesignated Preferred Stock; and
(b) The authorization or creation by the Corporation of, or
the increase in the number of authorized shares of, any stock of
any class, or any security convertible into stock of any class,
or the authorization or creation of any new class of preferred
stock (or any action which would result in another series of
preferred stock), in each case, ranking in terms of liquidation
preference, pari passu with or senior to, the Series C
Preferred Stock in any manner;
provided
,
however
,
that no such consent shall be required for the Corporation to
amend the Articles to increase the Corporations authorized
shares of Common Stock or undesignated Preferred Stock.
6.
Conversion
.
(a)
Right to Convert
.
Subject to
the limitations set forth in Section 6(h), the holder of
any share or shares of Series C Preferred Stock shall have
the right at any time, at such holders option, to convert
all or any lesser portion of such holders shares of
Series C Preferred Stock into such number of fully paid and
non-assessable shares of Common Stock as is determined by
dividing (A) the aggregate Liquidation Preference of the
shares of Series C Preferred Stock to be converted by
(B) the Conversion Value (as defined in Section 6(e))
then in effect for such Series C Preferred Stock. No
fractional shares or scrip representing fractional shares shall
be issued upon the conversion of any Series C Preferred
Stock. With respect to any fraction of a share of Common Stock
called for upon any conversion, such fractional share shall be
rounded to the nearest whole number (with one-half being rounded
upward) and the Corporation shall issue to the holder one share
of the Common Stock.
(b)
Mandatory Conversion
.
If the
Corporation enters into an agreement (a
Triggering
Agreement
) that contemplates the occurrence of a
Conversion Triggering Event (as defined below), as promptly as
practicable following entering into a Triggering Agreement, the
Corporation shall deliver a written notice to the holders of the
Series C Preferred Stock (the
Company
Notice
) that the Corporation intends to convert all of
the outstanding Series C Preferred Stock into Common Stock
and either the specific date of such conversion or the
conditions that must be satisfied prior to the closing of the
transactions contemplated by a Triggering Agreement (the
Mandatory Conversion Date
). For a period of
10 days following receipt of the Company Notice, such
holder shall have the option (the
Investor
Conversion
), exercisable by delivery of an executed
Conversion Notice (as defined in Section 6(c)(i)) to elect
to receive either (i) an amount equal to the aggregate
Liquidation Preference of the shares of Series C Preferred
Stock, which amount shall be paid at the closing of the
Conversion Triggering Event, or (ii) to convert such
holders shares of the Series C Preferred Stock into
such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing (A) the aggregate
Liquidation Preference of the shares of Series C Preferred
Stock to be converted by (B) the applicable Conversion
Value. In the event that such holder fails to deliver the
Conversion Notice with the
10-day
period following its receipt of the Company Notice, then such
holders Series C Preferred Stock shall be converted
by the Corporation on the Mandatory Conversion Date into
A-77
such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing (A) the aggregate
Liquidation Preference of the shares of Series C Preferred
Stock to be converted by (B) the applicable Conversion
Value, without the requirement of any further action or consent
by the holders of shares of Series C Preferred Stock (the
Mandatory Conversion
). Nothing in this
Section 6(b) shall be construed so as to limit the right of
a holder of Series C Preferred Stock to convert pursuant to
Section 6(a) at any time.
Conversion Triggering Event
means: a
transaction or series of related transactions pursuant to which
the Corporation: (i) sells, conveys or disposes of all or
substantially all of its assets (the presentation of any such
transaction for shareholder approval being conclusive evidence
that such transaction involves the sale of all or substantially
all of the assets of the Corporation); or (ii) merges or
consolidates with or into, or engages in any other business
combination with, any other person or entity, in any case that
results in the holders of the voting securities of the
Corporation immediately prior to such transaction holding or
having the right to direct the voting of 50% or less of the
total outstanding voting securities of the Corporation or such
other surviving or acquiring person or entity immediately
following such transaction;
provided
,
however
,
that a Conversion Triggering Event shall not include any
transaction or series of transactions between the Company and
that certain purchaser under the Purchase Agreement or such
purchasers affiliates, that otherwise contemplates the
occurrence of the matters set forth in (i) or (ii) of
the definition a Conversion Triggering Event.
(c)
Mechanics of Conversion
.
(i) Such right of conversion (other than the Mandatory
Conversion) shall be exercised by the holder of shares of
Series C Preferred Stock by delivering to the Corporation a
conversion notice in the form attached hereto as
Exhibit A
(the
Conversion
Notice
), appropriately completed and duly signed and
specifying the number of shares of Series C Preferred Stock
that the holder elects to convert (the
Converting
Shares
) into shares of Common Stock, and by surrender
not later than two (2) business days thereafter of the
certificate or certificates representing such Converting Shares.
The Conversion Notice shall also contain a statement of the name
or names (with addresses and tax identification or social
security numbers) in which the certificate or certificates for
Common Stock shall be issued, if other than the name in which
the Converting Shares are registered. As promptly as practicable
after the receipt of the Conversion Notice, the Corporation
shall issue and deliver, or cause to be delivered, to the holder
of the Converting Shares or such holders nominee, a
certificate or certificates for the number of shares of Common
Stock issuable upon the conversion of such Converting Shares.
Except for conversions resulting from an Investor Conversion or
a Mandatory Conversion, all of which shall occur on the
Mandatory Conversion Date, such conversion shall be deemed to
have been effected as of the close of business on the date of
receipt by the Corporation of the Conversion Notice (the
Conversion Date
), and the person or persons
entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the holder or
holders of record of such shares of Common Stock as of the close
of business on the Conversion Date.
(ii) Subject to Section 6(c)(iii) (applicable to
Mandatory Conversions), the Corporation shall issue certificates
representing the shares of Common Stock to be received upon
conversion of the Series C Preferred Stock (the
Conversion Shares
) (and certificates for
unconverted Series C Preferred Stock) as promptly as
practicable following the Conversion Date and shall transmit the
certificates by messenger or reputable overnight delivery
service to reach the address designated by such holder as
promptly as practicable after the receipt by the Corporation of
such Conversion Notice. If certificates evidencing the
Conversion Shares are not received by the holder within ten
(10) business days of the Conversion Notice or, in the
event the Corporation has delivered a Company Notice, within ten
(10) business days of the Mandatory Conversion Date, then
the holder will be entitled to revoke and withdraw its
Conversion Notice, in whole or in part, at any time prior to its
receipt of those certificates. In lieu of delivering physical
certificates representing the Conversion Shares, provided the
Corporations transfer agent is participating in the
Depository Trust Company (
DTC
) Fast Automated
Securities Transfer (
FAST
) program, upon
request of the holder, the Corporation shall use its
commercially reasonable efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon
conversion, by crediting the account of the holders prime
broker with DTC through its Deposit Withdrawal Agent Commission
(
DWAC
) system. Such holder and the
Corporation agree to coordinate with DTC to accomplish this
objective. The person or persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common Shares
at the close of business on the Conversion Date.
A-78
(iii) Subject to the provisions of Section 6(h), in
the event of a Mandatory Conversion, each holders shares
of Series C Preferred Stock subject to such Mandatory
Conversion shall be converted on the Mandatory Conversion Date
into shares of Common Stock as if such holder thereof had
delivered a Conversion Notice with respect to such shares on
such date. Promptly thereafter, the holders of the Series C
Preferred Stock shall deliver their certificates evidencing the
Series C Preferred Stock to the Corporation or its duly
authorized transfer agent, and upon receipt thereof, the
Corporation shall issue or cause its transfer agent to issue
certificates evidencing the Common Stock into which the shares
Series C Preferred Stock have been converted as promptly
thereafter as is practicable.
(d)
Conversion Cap
.
To the extent
that any shares of Series C Preferred Stock are not
automatically converted upon the occurrence of an Investor
Conversion, a Mandatory Conversion or a conversion pursuant to
Section 6(a), on account of the application of
Section 6(h), such shares of Series C Preferred Stock
shall be deemed converted automatically under this
Section 6 at the first moment thereafter when
Section 6(h) would not prevent such conversion.
Notwithstanding the preceding sentence, upon the occurrence of
an Investor Conversion, a Mandatory Conversion or a conversion
pursuant to Section 6(a), the right to the Liquidation
Preference of the Series C Preferred Stock and any special
rights of its Series C Preferred Stock shall cease
immediately.
(e)
Conversion Value
.
The initial
conversion value for the Series C Preferred Stock shall be
$2.56, such value to be subject to adjustment in accordance with
the provisions of this Section 6. Such conversion value in
effect from time to time, as adjusted pursuant to this
Section 6, is referred to herein as a
Conversion
Value
. All of the remaining provisions of this
Section 6 shall apply separately to each Conversion Value
in effect from time to time with respect to Series C
Preferred Stock.
(f)
Stock Dividends, Subdivisions and
Combinations
.
If at any time while the
Series C Preferred Stock is outstanding, the Corporation
shall:
(i) cause the holders of its Common Stock to be entitled to
receive a dividend payable in, or other distribution of,
additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then in each such case the Conversion Value shall be multiplied
by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this Paragraph 6(f) shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend
or distribution, and any adjustment pursuant to
clauses (ii) or (iii) of this Paragraph 6(f)
shall become effective immediately after the effective date of
such subdivision or combination. If any event requiring an
adjustment under this paragraph occurs during the period that a
Conversion Value is calculated hereunder, then the calculation
of such Conversion Value shall be adjusted appropriately to
reflect such event.
(g)
Subsequent Equity Sales
.
(i) If, at any time prior to December 31, 2008 while
the shares of Series C Preferred Stock are outstanding, the
Corporation issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible,
exercisable or exchangeable for shares of Common Stock or
otherwise entitling any person or entity to acquire shares of
Common Stock (collectively,
Common Stock
Equivalents
) at an effective net price to the
Corporation per share of Common Stock (the
Effective
Price
) less than the Conversion Value, then the
Conversion Value shall be reduced to equal the Effective Price.
For purposes of this paragraph, in connection with any issuance
of any Common Stock Equivalents, (A) the maximum number of
shares of Common Stock potentially issuable at any time upon
conversion, exercise or exchange of such Common Stock
Equivalents (the
Deemed Number
) shall be
deemed to be outstanding upon issuance of such Common Stock
Equivalents, (B) the Effective Price applicable to such
Common Stock shall equal the minimum dollar value of
consideration payable to the Corporation to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into
Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further
adjustment shall be made to the Conversion Value upon the actual
issuance of Common Stock upon conversion, exercise or exchange
of such Common Stock Equivalents. The Effective
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Price of Common Stock or Common Stock Equivalents issued in any
transaction in which more than one type of securities are issued
shall give effect to the allocation by the Corporation of the
aggregate amount paid for such securities among the different
securities issued in such transaction.
(ii)
Certain Issues
Excepted
.
Notwithstanding anything herein to
the contrary set forth herein, the Corporation shall not be
required to make any adjustment to the Conversion Value in
connection with (i) securities issued pursuant to the
conversion or exercise of convertible or exercisable securities
issued or outstanding on or prior to the date hereof or issued
pursuant to the Purchase Agreement, (ii) securities issued
in connection with strategic license agreements or other
partnering arrangements so long as such issuances are not for
the purpose of raising capital, provided that the number of
securities to be issued would be less than 5% of the outstanding
shares of Common Stock prior to the issuance of such securities
(on a fully-diluted basis, assuming the conversion or exercise
of all outstanding convertible or exercisable securities) as of
the effective date of such arrangement or agreement, or
(iii) Common Stock issued or options to purchase Common
Stock, restricted stock, restricted stock units or other equity
compensation granted or issued pursuant to the
Corporations equity compensation plans, stock option plans
and employee stock purchase plans (whether now existing or
hereafter created so long as such plans are approved by the
Corporations shareholders).
(h)
Conversion
Cap
.
Notwithstanding anything to the contrary
set forth herein, the maximum number of shares of Common Stock
that may be issued upon conversion of the shares of
Series C Preferred Stock shall not equal or exceed 19.99%
of the shares of Common Stock outstanding on the day immediately
prior to the Closing Date (the
Conversion
Cap
), which as of the date hereof is
322,008 shares, unless the Corporation shall have
previously obtained shareholder approval of the issuance of
shares of Common Stock upon conversion of the Series C
Preferred Stock in an amount in excess of the Conversion Cap
(
Shareholder Approval
). In the event that the
aggregate number of shares of Common Stock that would be issued
upon conversion of the shares of Series C Preferred Stock
equals or exceeds the Conversion Cap, and the Corporation has
not previously obtained Shareholder Approval, then the number of
shares of Common Stock which the holder of shares of
Series C Preferred Stock would be entitled to acquire
through the conversion of the shares of Series C Preferred
Stock shall be reduced pro rata among holders of shares of
Series C Preferred Stock (in proportion to a fraction, the
numerator of which shall be the total number of shares of Common
Stock issuable to the holder of shares of Series C
Preferred Stock upon conversion of such shares of Series C
Preferred Stock, and the denominator of which shall be the
aggregate number of shares of Common Stock issuable upon
conversion of all shares of Series C Preferred Stock) so
that the aggregate number of shares of Common Stock issuable
upon conversion of the shares of Series C Preferred Stock
does not equal or exceed the Conversion Cap.
7.
Other Provisions Applicable to
Adjustments
.
The following provisions shall
be applicable to the making of adjustments to the number of
shares of Common Stock into which the Series C Preferred
Stock is convertible and the current Conversion Value provided
for in Section 6:
(a)
When Adjustments to be
Made
.
The adjustments required by
Section 6 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that
any adjustment to the Conversion Value that would otherwise be
required may be postponed (except in the case of a subdivision
or combination of shares of the Common Stock, as provided for in
Section 6(f)) up to, but not beyond the Conversion Date if
such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the shares of
Common Stock into which the Series C Preferred Stock is
convertible immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by Section 6 and not previously made,
would result in a minimum adjustment or on the Conversion Date.
For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
(b)
Fractional Interests
.
In
computing adjustments under Section 6, fractional interests
in Common Stock shall be taken into account to the nearest
1/100th of a share.
(c)
Escrow of Stock
. If after any
property becomes distributable pursuant to Section 6 by
reason of the taking of any record of the holders of Common
Stock, but prior to the occurrence of the event for which such
record is taken, a holder of the Series C Preferred Stock
either converts the Series C Preferred Stock or such holder
is unable to convert shares pursuant to Section 6(h), such
holder of Series C Preferred Stock shall continue to be
entitled to receive any shares of Common Stock issuable upon
conversion under Section 6 by
A-80
reason of such adjustment (as if such Series C Preferred
Stock were not yet converted) and such shares or other property
shall be held in escrow for the holder of the Series C
Preferred Stock by the Corporation to be issued to holder of the
Series C Preferred Stock upon and to the extent that the
event actually takes place. Notwithstanding any other provision
to the contrary herein, if the event for which such record was
taken fails to occur or is rescinded, then such escrowed shares
shall be canceled by the Corporation and escrowed property
returned to the Corporation.
8.
Certificate as to
Adjustments
.
Upon the occurrence of each
adjustment or readjustment of the Conversion Value pursuant to
Section 6(f), the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of
Series C Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of
Series C Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Value at
the time in effect for the Series C Preferred Stock and
(iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received
upon the conversion of Series C Preferred Stock owned by
such holder.
9.
Reservation of Shares
.
The
Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Stock, solely for issuance
upon the conversion of shares of Series C Preferred Stock,
one hundred percent (100%) of the applicable number of shares of
Common Stock expressly permitted herein to be issued from time
to time upon the conversion of the shares of Series C
Preferred Stock outstanding at the time (subject to the
limitations on conversion up to the Conversion Cap set forth in
section 6(h)).
10.
Transfer, Continuing Rights and Compliance with
Securities Laws
.
(a)
Transferability of shares of Series C
Preferred Stock
.
Subject to compliance with
any applicable securities laws and Section 10(c) the shares
of Series C Preferred Stock or the shares of Common Stock
issuable upon conversion of the shares of Series C
Preferred Stock may be transferred by a holder without the
consent of the Corporation. The certificates representing the
shares of Series C Preferred Stock or the shares of Common
Stock issuable upon conversion of the shares of Series C
Preferred Stock are exchangeable at the principal office of the
Corporation for certificates representing the same aggregate
number of shares of Series C Preferred Stock or shares of
Common Stock issuable upon conversion of the shares of Series C
Preferred Stock.
(b)
Legends
.
(i) The Corporation shall stamp or imprint all certificates
representing shares of Series C Preferred Stock and the
shares of Common Stock issued upon conversion of the
Series C Preferred Stock with legends in substantially the
following form:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY
SUCH SECURITIES.
(c)
Compliance with Securities
Laws
.
The Corporation agrees to reissue
certificates representing the shares of Series C Preferred
Stock and the shares of Common Stock issuable upon conversion of
the shares of Series C Preferred Stock, without the legend
set forth above if at such time, prior to making any transfer of
any such securities, the holder of such shares of Series C
Preferred Stock shall give written notice to the Corporation
upon the occurrence of: (a) either (i) the Corporation
has received an opinion of counsel reasonably satisfactory to
the
A-81
Corporation, to the effect that the registration of such
securities under the Securities Act of 1933, as amended (the
Securities Act
) is not required in connection
with such proposed transfer, (ii) a registration statement
under the Securities Act covering such proposed disposition has
been filed by the Corporation with the Securities and Exchange
Commission and has become effective under the Securities Act,
(iii) the Corporation has received other evidence
reasonably satisfactory to the Corporation that such
registration and qualification under the Securities Act and any
applicable state securities laws are not required, or
(iv) the holder provides the Corporation with reasonable
assurances that such security can be sold pursuant to
Rule 144 under the Securities Act; and (b) either
(i) the Corporation has received an opinion of counsel
reasonably satisfactory to the Corporation, to the effect that
registration or qualification under the securities or blue
sky laws of any state is not required in connection with
such proposed disposition, or (ii) compliance with
applicable state securities or blue sky laws has
been effected or a valid exemption exists with respect thereto.
The Corporation will respond to any such notice from a Holder
within three (3) business days. In the case of any proposed
transfer hereunder, the Corporation will use reasonable efforts
to comply with any such applicable state securities or
blue sky laws, but shall in no event be required,
(x) to qualify to do business in any state where it is not
then qualified, (y) to take any action that would subject
it to tax or to the general service of process in any state
where it is not then subject, or (z) to comply with state
securities or blue sky laws of any state for which
registration by coordination is unavailable to the Corporation.
The Corporation shall to maintain books for the registration and
the registration of transfer of the shares of Series C
Preferred Stock.
11.
Notices of Record Date
.
In the
event of any fixing by the Corporation of a record date for the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend or a dividend set forth in
Section 2 hereof) or other distribution, any shares of
Common Stock or other securities, or any right to subscribe for,
purchase or otherwise acquire, or any option for the purchase
of, any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall
mail to each holder of Series C Preferred Stock at least
five (5) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for
the purpose of such dividend, distribution or rights, and the
amount and character of such dividend, distribution or right.
12.
Notices
.
All notices,
requests, consents and other communications hereunder shall be
in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally
recognized overnight express courier, postage prepaid or by
facsimile, or (B) if delivered from outside the United
States, by international express courier or facsimile, and shall
be deemed given (i) if delivered by first-class registered
or certified mail, three business days after so mailed,
(ii) if delivered by nationally recognized overnight
carrier, one business day after so mailed, (iii) if
delivered by International Federal Express, two business days
after so mailed, (iv) if delivered by facsimile, upon
electronic confirmation of receipt and shall be delivered as
addressed as follows:
(a) if to the Corporation, to:
Verticalnet, Inc.
300 Chesterfield Parkway
Malvern, PA 19355
Attn: General Counsel
Fax:
(610) 240-9470
(b) if to a holder of Series C Preferred Stock, to the
address or facsimile number appearing on the Corporations
shareholder records or, in either case, to such other address or
facsimile number as the Corporation or a holder of Series C
Preferred Stock may provide to the other in accordance with this
Section.
13.
Stock Transfer Taxes
.
The
issue of stock certificates upon conversion of the Series C
Preferred Stock shall be made without charge to the converting
holder for any transfer tax in respect of such issue; provided,
however, that the Corporation shall be entitled to withhold any
applicable withholding taxes with respect to such issue, if any.
The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the
issue and delivery of shares in any name other than that of the
holder of any of the Series C Preferred Stock converted,
and the Corporation shall not be required to issue or deliver
any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the
Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
A-82
EXHIBIT A
FORM OF
CONVERSION NOTICE
(To be executed by the registered holder in order to convert
shares of Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert the number
of shares of Series C Convertible Preferred Stock (the
Series C Preferred Stock
) indicated
below into shares of common stock, par value $0.01 per share
(the
Common Stock
), of Verticalnet, Inc., a
Pennsylvania corporation (the
Corporation
),
according to the Description and Designation of the
Series C Preferred Stock and the conditions hereof, as of
the date written below. The undersigned hereby requests that
certificates for the shares of Common Stock to be issued to the
undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as
indicated below. If the shares of Common Stock are to be issued
in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect
thereto. A copy of the certificate representing the
Series C Preferred Stock being converted is attached
hereto, the original of which will be delivered to the
Corporation promptly following the date hereof.
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Date of
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Conversion (Date of Notice)
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Number
of shares
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of Series C Preferred Stock owned prior to Conversion
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Number
of shares
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of Series C Preferred Stock to be Converted
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Number
of shares
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of Common Stock to be Issued
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Applicable
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Conversion Value
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Number
of shares
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of Series C Preferred Stock owned subsequent to Conversion
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Conversion Information:[NAME OF HOLDER]
Address of Holder:
Issue Common Stock to (if different than above):
Mandatory Conversion Option (check if
applicable):
Liquidation Preference,
or
Conversion into shares of Common Stock
The undersigned represents, subject to the accuracy of
information filed under the Securities Act and the Exchange Act
by the Corporation with respect to the outstanding Common Stock
of the Corporation, as of the date hereof that, after giving
effect to the conversion of Preferred Shares pursuant to this
Conversion Notice, the undersigned will not exceed the
Conversion Cap contained in Section 6(h) of the
Description and Designation of the Series C Preferred Stock.
Name of Holder
Name:
A-83
Exhibit D
to Merger Agreement
Voting Agreement
(See Annex B to this Proxy Statement)
A-84
Exhibit E
to Merger Agreement
Employment
Agreement
(See Annex C to this Proxy Statement)
A-85
Exhibit F
to Merger Agreement
Release
(See Annex D to this Proxy Statement)
A-86
Exhibit G
to Merger Agreement
Radcliffe Waiver
WAIVER TO
SENIOR SUBORDINATED DISCOUNT NOTE
This Waiver to Senior Subordinated Discount Note (the
Waiver
), dated as of
October
25, 2007,
is made and entered into by and between Verticalnet, Inc., a
Pennsylvania corporation (the
Company
), and
Radcliffe SPC, Ltd., for and on behalf of the Class A
Convertible Crossover Segregated Portfolio (including its
registered assigns, the
Holder
). Capitalized
terms used but not defined herein shall have the meanings
ascribed to such terms in the Senior Subordinated Discount Note
dated May 16, 2006 issued by the Company in favor of the
Holder (the
Original Note
).
WHEREAS, the Original Note was in the aggregate principal amount
of $5,300,000 and had a maturity date of the earlier of
(i) November 18, 2007, (ii) the date on which any
Fundamental Transaction is consummated, or (iii) such
earlier time as provided in the Original Note;
WHEREAS, on December 20, 2006, the Company and the Holder
executed Amendment Number 1 to Senior Subordinated Discount Note
(
Amendment Number 1
), whereby, among other
things, the Original Note was amended to increase the aggregate
principal amount of the Original Note from $5,300,000 to
$5,500,000 and simultaneously extend the maturity date of the
Original Note to the earlier of (i) April 1, 2008,
(ii) the date on which any Fundamental Transaction is
consummated, or (iii) such earlier time as provided in the
Original Note (the Original Note as amended pursuant to
Amendment Number 1
,
Amendment Number 2 (as defined below)
and Amendment Number 3 (as defined below) is hereinafter
referred to as the
Amended Note
);
WHEREAS, on March 28, 2007, the Company and the Holder
executed Amendment Number 2 to Senior Subordinated Discount Note
(
Amendment Number 2
) to (i) amend the
Amended Note to (a) provide the Company with the unilateral
option to further extend the maturity date of the Amended Note
to September 30, 2008, such option exercisable by the
Company no later than December 31, 2007; (b) provide
that upon the exercise of such option, the then outstanding
principal amount of the Amended Note will increase by $575,000;
and (c) provide that if the Company completes a financing
transaction (as set forth therein) which would not otherwise be
deemed to constitute a Fundamental Transaction while the Amended
Note is outstanding, then 25% (the
Percentage
) of the gross proceeds of such
financing transaction shall be paid to the Holder upon
consummation of such financing transaction and applied towards
the repayment of the then outstanding principal amount of the
Amended Note, and (ii) set forth the Companys
agreement to pay $55,000 to the Holder on the later of
April 6, 2007 or the date that the Senior Indebtedness has
been paid in full in consideration of the Holder granting the
option referenced above; and
WHEREAS, on June 1, 2007, the Company and the Holder
executed Amendment Number 3 to Senior Subordinated Discount Note
(
Amendment Number 3
) to (i) provide for
the Holders consent to (a) the transactions
contemplated by that certain Series B Preferred Stock and
Warrant Purchase Agreement, dated as of June 1, 2007, by
and among the Company and certain purchasers, including the use
of proceeds thereof and (b) the manner of Companys
future payment to the holders of Senior Indebtedness, and
(ii) amend the Amended Note to (a) provide that upon
the later of July 3, 2007 or the date on which the Senior
Indebtedness has been paid in full, the Company shall pay to the
Holder an amount as set forth therein, which shall by applied to
and reduce the then outstanding Principal, and (b) increase
the Percentage to 50%
;
WHEREAS, the Company has now resolved to recommend to its
shareholders that they approve an Agreement and Plan of Merger
(the
Merger Agreement
), to be executed by the
Company concurrently with the execution and delivery of this
Waiver, whereby the Company will be acquired by BravoSolution
U.S.A., Inc. (
Bravo USA
), a wholly-owned
subsidiary of BravoSolution S.p.A, a corporation organized under
the laws of Italy (
Bravo Italy
);
WHEREAS, concurrently with the execution and delivery of the
Merger Agreement, and as a condition and inducement to the
Companys willingness to enter into the Merger Agreement,
Bravo USA will acquire from the Company newly issued shares of
the Companys Series C Preferred Stock (the
Series C Preferred
) at an aggregate
subscription price of $824,331.92 (the
Financing
Transaction
), pursuant to the terms of a purchase
A-87
agreement (the
Series C Preferred Purchase
Agreement
; substantially in the form attached hereto
as Exhibit A);
WHEREAS, pursuant to Section 14(h) of the Amended Note, the
Company is required to pay to the Holder an amount equal to 50%
of the gross proceeds received by the Company upon completion of
the Financing Transaction; and
WHEREAS, at the request of the Company and subject to the terms
and conditions set forth herein, the Holder desires to waive,
and consent to, the matters described herein.
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual promises and covenants hereinafter set forth and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
1.
Waiver.
Subject to the sale of
the Series C Preferred upon substantially all of the terms
and conditions set forth in the Series C Preferred Purchase
Agreement, the Holder hereby agrees and acknowledges that,
notwithstanding any provision to the contrary set forth in the
Amended Note (including, specifically Section 14(h)
thereof) and the other Transaction Documents, the Company is
permitted to complete the Financing Transaction without being
required to pay to the Holder any portion of the gross proceeds
received by the Company upon completion of the Financing
Transaction, and without being deemed to be in breach as a
result of the failure to pay to the Holder any such proceeds.
2.
Consent.
(a) The Holder
hereby acknowledges and agrees that, subject to the sale of the
Series C Preferred upon substantially all of the terms and
conditions set forth in the Series C Preferred Purchase
Agreement, (i) the Financing Transaction shall and does not
constitute an Event of Default, and (ii) the Financing
Transaction alone, and not as such transaction may be deemed to
be part of a series of transactions in connection with the
Merger Agreement, shall not constitute a Fundamental Transaction.
(b) The Company hereby acknowledges and agrees that
consummation of the transactions contemplated by the Merger
Agreement would constitute a Fundamental Transaction and the
Holder is not waiving any rights with respect thereto, including
the right to require repayment in full of the Amended Note upon
consummation of such Fundamental Transaction.
3.
Modification.
Except as
expressly set forth in this Waiver, the foregoing shall not
constitute (a) a modification or alteration of the terms,
conditions or covenants of the Amended Note or other Transaction
Documents, or (b) a waiver, release or limitation upon the
exercise by the Holder of any of its rights, legal or equitable,
thereunder. The Company shall not be permitted to make any
payments on account of the Series C Preferred until the
obligations under the Amended Note have been paid and satisfied
in full.
4.
Governing Law.
This Waiver
shall be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation
and performance of this Waiver shall be governed by, the
internal laws of the Commonwealth of Pennsylvania, without
giving effect to any choice of law or conflict of law provision
or rule (whether of the Commonwealth of Pennsylvania or any
other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the Commonwealth of
Pennsylvania.
5.
Counterparts.
This Waiver may
be executed in any number of counterparts (delivery of which may
occur via facsimile or
e-mail
in
pdf format), each of which when so executed and delivered shall
be an original hereof, and it shall not be necessary in making
proof of this Waiver to produce or account for more than one
counterpart hereof.
6.
Severability.
The provisions of
this Waiver and other agreements and documents referred to
herein are to be deemed severable, and the invalidity or
unenforceability of any provision shall not affect or impair the
remaining provisions which shall continue in full force and
effect.
[Signature
page follows]
A-88
IN WITNESS WHEREOF, the parties have caused this Waiver to be
executed effective as of the date first written above.
VERTICALNET, INC.
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By:
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/s/ Nathanael
V. Lentz
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Name: Nathanael V. Lentz
RADCLIFFE SPC, LTD.
for and on behalf of the Class A Convertible Crossover
Segregated Portfolio
By: RG Capital Management, L.P.
By: RGC Management Company, LLC
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By:
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/s/ Gerald
F. Stahlecker
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Name: Gerald F. Stahlecker
A-89
Exhibit A
to Waiver
Form of Series C Purchase Agreement
(See Exhibit B to Annex A of this Proxy
Statement)
A-90
PLAN OF MERGER
OF
BRAVOSOLUTION U.S.A., INC.
(a Pennsylvania corporation)
WITH AND INTO
VERTICALNET, INC.
(a Pennsylvania corporation)
This PLAN OF MERGER (the
Plan of Merger
) is
dated as of October 25, 2007 by and among BravoSolution
S.P.A., a corporation organized under the laws of Italy
(
Bravo
), BravoSolution U.S.A., Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of Bravo
(
BravoSolution
), and Verticalnet, Inc., a
Pennsylvania corporation (the
Company
, and
together with each of Bravo and BravoSolution, each a
Party
and collectively, the
Parties
).
RECITALS
WHEREAS, the Parties are parties to that certain Agreement of
Merger, dated as of October 25, 2007 (the
Merger
Agreement
) by and among the Company, BravoSolution and
Bravo; and
WHEREAS, pursuant to the Merger Agreement, at the closing of the
Merger (the
Closing
), BravoSolution will
merge with and into the Company (the
Merger
)
with the Company as the surviving corporation (the
Surviving Corporation
); and
WHEREAS, the Board of Directors of each of the Company and
BravoSolution has approved and adopted the Plan of Merger in
accordance with the Pennsylvania Business Corporation Law of
1988, as amended (
PBCL
).
NOW, THEREFORE, the Parties, in consideration of the mutual
covenants herein contained and intending to be legally bound,
agree as follows:
1.
Parties to Merger.
Bravo,
BravoSolution and the Company shall effect the Merger in
accordance with and subject in all respects to the terms and
conditions of the Merger Agreement. In the event of any conflict
between the Plan of Merger and the Merger Agreement, the Merger
Agreement shall govern.
2.
Merger; Governing Law.
At the
Effective Time (as defined in Section 3 hereof), upon
compliance with the applicable provisions of the PBCL,
BravoSolution shall be merged with and into the Company with the
Company as the Surviving Corporation, and the separate existence
of BravoSolution shall cease. The Surviving Corporation shall
continue to be governed by the laws of the Commonwealth of
Pennsylvania.
3.
Filing and Effective Time.
On
the date of the Closing, the Parties shall file Articles of
Merger with the Department of State of the Commonwealth of
Pennsylvania in accordance with Section 1926 of the PBCL.
The Merger shall become effective upon filing of the Articles of
Merger with the Department of State of the Commonwealth of
Pennsylvania or at such subsequent date and time as Bravo and
the Company shall agree and as shall be specified in the
Articles of Merger in accordance with the relevant provisions of
the PBCL (the
Effective Time
).
4.
Articles of Incorporation.
At
the Effective Time, the Articles of Incorporation of the Company
shall be amended and restated to read in their entirety as the
Articles of Incorporation of BravoSolution as in effect
immediately prior to the Effective Time and, as so amended,
shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time until thereafter amended in
accordance therewith and with applicable law, and the Surviving
Corporation shall continue to be a corporation organized and
governed by the laws of the Commonwealth of Pennsylvania.
5.
Bylaws.
At the Effective Time,
the Bylaws of BravoSolution as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter altered, amended or repealed in the
manner therein provided or provided by applicable law.
A-1-1
6.
Board of Directors and
Officers.
At the Effective Time, the
directors of BravoSolution immediately prior to the Effective
Time shall be the directors of the Surviving Corporation and,
unless otherwise directed by Bravo in writing, the officers of
the Company immediately prior to the Effective Time will be the
officers of the Surviving Corporation; each such director and
officer shall hold office until their respective successors are
duly elected and qualified or until their death resignation or
removal, in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation and applicable law.
7.
Effect of Merger.
At the
Effective Time, the Merger shall have the effect set forth in
Section 1929 of the PBCL and any other applicable provision
of the PBCL.
8.
Merger Consideration.
At the
Closing, by virtue of the Merger and without any action by the
holder thereof, (a) each outstanding share of the
Companys common stock, par value $0.01 per share (the
Company Common Stock
), issued and outstanding
immediately prior to the Effective Time, other than shares held
directly or indirectly by the Company, BravoSolution or Bravo,
will be converted into the right to receive $2.56 per share in
cash, without interest (the
Common
Consideration
), and (b) each outstanding share of
Series B Preferred Stock (the
Series B
Preferred Stock
) issued and outstanding immediately
prior to the Effective Time, other than shares held directly or
indirectly by the Company, will be converted into the right to
receive either $0.38750 or $0.26875 per share in cash (in
accordance with Section 10 below), without interest (the
Series B Consideration
and, together
with the Common Consideration, the
Merger
Consideration
).
9.
Effect on Stock.
At the
Effective Time by virtue of the Merger and without any action on
the part of the holder thereof, (a) each share of Company
Common Stock held by the Company as treasury stock and each
share of Company Common Stock and Series C Preferred Stock
owned directly or indirectly by BravoSolution or Bravo
immediately prior to the Effective Time, if any, shall be
canceled and retired and shall cease to exist, and no payment or
distribution shall be made or delivered with respect thereto,
and each holder of a certificate which immediately prior to the
Effective Time represented such share (a
Certificate
) shall thereafter cease to have
any rights with respect to such share; (b) each share of
common stock, par value $0.01 per share, of BravoSolution issued
and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation; and (c) if prior to
the Effective Time, the Company should split, combine or
otherwise reclassify any shares of Company Common Stock or
Series B Preferred Stock (collectively, the
Shares
), or pay a stock dividend or other
stock distribution on any of the Shares, or otherwise change any
of the Shares into any other securities, or make any other such
stock dividend or distribution in capital stock of the Company
in respect of any of the Shares, then the Merger Consideration
payable for any of such Shares pursuant to this item or the next
will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
10.
Treatment of Series B Preferred
Stock.
(a) Each share of the Companys Series B
Preferred Stock issued and outstanding immediately prior to the
Effective Time held by the Investor Purchasers (as defined in
the Companys Description and Designation of Series B
Preferred Stock) shall be cancelled and automatically converted
into the right to receive $0.38750 per share in cash.
(b) Each share of the Companys Series B
Preferred Stock issued and outstanding immediately prior to the
Effective Time held by the Non-Investor Purchasers (as defined
in the Companys Description and Designation of
Series B Preferred Stock) issued shall be cancelled and
automatically converted into the right to receive $0.26875 per
share in cash.
11.
Counterparts.
This Plan of
Merger may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will
constitute one and the same instrument, and delivered by means
of a facsimile or portable document format (pdf) transmission.
This Plan of Merger will become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties. For purposes of determining
whether a party has signed this Plan of Merger or any document
contemplated hereby or any amendment or waiver hereof, only a
handwritten original signature on a paper document or a
facsimile copy of such a handwritten original signature shall
constitute a signature, notwithstanding any applicable law
relating to or enabling the creation, execution or delivery of
any contract or signature by electronic means.
A-1-2
IN WITNESS WHEREOF, each party has caused this Plan of Merger to
be duly executed as of the date first written above.
BRAVOSOLUTION S.P.A.
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By:
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/s/ Federico
Vitaletti
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Name: Federico Vitaletti
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Title:
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Chief Executive Officer
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BRAVOSOLUTION U.S.A., INC.
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By:
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/s/ Federico
Vitaletti
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Name: Federico Vitaletti
VERTICALNET, INC.
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By:
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/s/ Nathanael
V. Lentz
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Name: Nathanael V. Lentz
A-1-3
Voting
Agreement
AMENDED AND RESTATED
VOTING AGREEMENT,
dated as of November 20, 2007 (the
Agreement
), by and among BRAVOSOLUTION
S.P.A., a corporation organized under the laws of Italy
(
Parent
), VERTICALNET, INC., a Pennsylvania
corporation (the
Company
), and each of the
shareholders of the Company listed on
Schedule I
to
this Agreement (each, a
Shareholder
and,
collectively, the
Shareholders
).
RECITALS
WHEREAS, as of the date hereof, each Shareholder is the record
and beneficial owner of the number of shares (the
Shares
) of Series B Preferred Stock, par
value $.01 per share, of the Company (the
Company
Preferred Stock
) set forth opposite such
Shareholders name on
Schedule I
attached
hereto (such Shares, together with any other shares of capital
stock of the Company set forth on
Schedule I
attached hereto, and any other shares of capital stock acquired
by such Shareholder after the date hereof and during the term of
this Agreement (including through the exercise of any stock
options, warrants, convertible preferred stock, or any other
convertible or exchangeable securities or similar instruments of
the Company), being collectively referred to herein as such
Shareholders
Subject Shares
);
WHEREAS, Parent, BRAVOSOLUTION U.S.A., INC., a Pennsylvania
corporation and a wholly-owned subsidiary of Parent
(
Merger Sub
), and the Company, entered into
an Agreement and Plan of Merger, dated as of October 25,
2007 (as it may be amended or supplemented from time to time,
the
Merger Agreement
), pursuant to which,
upon the terms and subject to the conditions thereof, Merger Sub
will be merged with and into the Company, and the Company will
be the surviving entity (the
Merger
) and a
wholly-owned subsidiary of Parent;
WHEREAS, concurrently with the execution and delivery of the
Merger Agreement, and as a condition and material inducement to
the Companys willingness to enter into the Merger
Agreement, Merger Sub entered into a Stock Purchase Agreement
with the Company (the
Series C Preferred Stock
Purchase Agreement
), pursuant to the terms of which
Merger Sub acquired from the Company on October 31, 2007,
322,007 shares of the Companys Series C
Preferred Stock (the
Series C Preferred
Stock
);
WHEREAS, concurrently with the execution and delivery of the
Merger Agreement, and as a condition and material inducement to
Parent and Merger Subs willingness to enter into the
Merger Agreement and the Series C Preferred Stock Purchase
Agreement, the Shareholders entered into a voting agreement with
the Company and Parent, dated as of October 25, 2007 (the
Existing Voting Agreement
);
WHEREAS, it was the intention of the parties to the Existing
Voting Agreement that no more than 19.99% of the Companys
outstanding voting power would be subject to Section 2(a),
Section 2(b) and Section 7 of the Existing Voting
Agreement;
WHEREAS, the parties to the Existing Voting Agreement wish to
amend the Existing Voting Agreement such that, among others, the
Subject Shares of MICHAEL J. HAGAN, an individual resident in
Newtown, Pennsylvania (
Hagan
), and MICHAEL P.
McNULTY, an individual resident in Berwyn, Pennsylvania
(
McNulty
), are not subject to
Sections 2(a), 2(b) and 7 of the Existing Voting Agreement
(and that any provision or interpretation to the contrary be
void
ab initio
), and that instead, Hagan and McNulty
grant an irrevocable proxy to the Company to vote their Subject
Shares, in connection with the Merger and any other
extraordinary corporate transaction, in a manner that the
Company, acting through its Board of Directors, determines in
its sole discretion;
WHEREAS, in addition, the parties to the Existing Voting
Agreement wish to amend the Existing Voting Agreement to
(i) revoke all prior proxies given by Hagan and McNulty
with respect to their Subject Shares, (ii) provide for a
grant of an irrevocable proxy of Hagan and McNultys
Subject Shares to the Company to vote, in connection with the
Merger and any other extraordinary corporate transaction, in a
manner that the Company, acting through its Board of Directors,
determines in its sole discretion, and (iii) reflect the
issuance of the Series C Preferred Stock and the subsequent
dilution of the percentage of voting stock outstanding of each
of the Shareholders.
B-1
NOW, THEREFORE, the parties hereto hereby agree to amend and
restate the Existing Voting Agreement, and the Existing Voting
Agreement is hereby amended and restated in its entirety as
follows:
Section
1.
Defined
Terms.
Capitalized terms used but not defined
herein have the meanings set forth in the Merger Agreement.
Section
2.
Voting
of Shares.
(a)
Voting.
For so long as this
Agreement is in effect, each Shareholder (other than Hagan and
McNulty) hereby agrees to vote (or cause to be voted) all of
such Shareholders Subject Shares, at every annual, special
or other meeting of the shareholders of the Company, and at any
adjournment or adjournments thereof, or pursuant to any consent
in lieu of a meeting or otherwise:
(i) in favor of the Merger and the Merger Agreement and
adoption of the Plan of Merger, substantially in the form
attached hereto as
Exhibit A
(the
Plan of
Merger
), and the approval of the other transactions
contemplated thereby, and any actions required in furtherance
thereof, including, any class vote from the holders of Company
Preferred Stock;
(ii) against any action or agreement that such Shareholder
would reasonably expect to result in a breach in any material
respect of any covenant, representation or warranty or any other
obligation of the Company under the Merger Agreement; and
(iii) against (A) any extraordinary corporate
transaction, such as a merger, rights offering, reorganization,
recapitalization or liquidation involving the Company or any of
its subsidiaries (other than the Merger), (B) a sale or
transfer of a material amount of assets or capital stock of the
Company or any of its subsidiaries or (C) any action that
is intended, or would reasonably be expected, to prevent or
materially delay or otherwise interfere with the Merger and the
other transactions contemplated by the Merger Agreement.
(b)
Grant of Irrevocable Proxy to
Parent.
Each Shareholder hereby irrevocably
grants to, and appoints, Parent and any individual who shall
hereafter be designated by Parent, and each of them, such
Shareholders proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such
Shareholder, to vote, or cause to be voted, such
Shareholders Subject Shares, or grant a consent or
approval in respect of such Shareholders Subject Shares,
at every annual, special or other meeting of the shareholders of
the Company, and at any adjournment or adjournments thereof, or
pursuant to any consent in lieu of a meeting or otherwise, with
respect to the matters and in the manner specified in
Section 2(a)
hereof;
provided that
the
foregoing proxy shall terminate immediately upon termination of
this Agreement in accordance with its terms. Each Shareholder
understands and acknowledges that Parent is entering into the
Merger Agreement in reliance upon the Shareholders
execution and delivery of this Agreement. Each Shareholder
hereby affirms that the irrevocable proxy set forth in this
Section 2(b)
is given in connection with the
execution of the Merger Agreement, and that such irrevocable
proxy is given to secure the performance of the duties of such
Shareholder under this Agreement. Subject to this
Section 2(b)
, this grant of proxy is coupled with an
interest and may under no circumstances be revoked. Each
Shareholder hereby ratifies and confirms all actions that any
proxy appointed or designated pursuant to this
Section 2(b)
may lawfully do or cause to be done in
accordance herewith. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of
Section 1759 of the Pennsylvania Business Corporation Law
of 1988, as amended. Upon the execution hereof, all prior
proxies given by each Shareholder with respect to the Shares are
hereby revoked and, for so long as this Agreement is in effect,
no subsequent proxies will be given. All references to
Shareholder in this
Section 2(b)
refers
in each instance, for purposes of this
Section 2(b)
only, to all Shareholders other than Hagan and McNulty whose
proxy is given exclusively pursuant to
Section 2(d)
hereof.
(c)
Grant of Irrevocable Proxy by
Parent.
Notwithstanding any other provision
of this Agreement to the contrary, it is intended that, and
Parent hereby agrees that, Parent shall not have and exercise
voting rights under this Agreement with respect to any
Shareholders Subject Shares, if and to the extent such
rights, when taken together with voting rights exercisable by
Parent or any of its Affiliates with respect to any other Shares
or shares of capital stock of the Company, would allow Parent to
have voting rights with respect to 20% or more of the
outstanding voting capital stock of the Company (any such excess
shares, the
Excess Shares
). Parent hereby
irrevocably grants to, and appoints, the Company and any
individual who shall hereafter be designated
B-2
by the Company, and each of them, Parents proxy and
attorney-in-fact (with full power of substitution), for and in
the name, place and stead of Parent, to vote, or cause to be
voted, the Excess Shares, or grant a consent or approval in
respect thereof, at every annual, special or other meeting of
the shareholders of the Company, and at any adjournment or
adjournments thereof, or pursuant to any consent in lieu of a
meeting or otherwise, with respect to any matters requiring the
vote, consent or approval of such shareholders;
provided that
the foregoing proxy shall be exercised as the Company,
acting through its Board of Directors, determines in its sole
discretion. Parent hereby affirms that the irrevocable proxy set
forth in this
Section 2(c)
is given in connection
with the execution of the Merger Agreement. Subject to this
Section 2(c)
, this grant of proxy is coupled with an
interest and may under no circumstances be revoked. Parent
hereby ratifies and confirms all actions that any proxy
appointed or designated hereby may lawfully do or cause to be
done in accordance herewith. Such irrevocable proxy is executed
and intended to be irrevocable in accordance with the provisions
of Section 1759 of the PBCL.
(d)
Grant of Irrevocable Proxy to the
Company.
Each of Hagan and McNulty hereby,
severally and not jointly, irrevocably grants to, and appoints,
the Company and any individual who shall hereafter be designated
by the Company, and each of them, such Shareholders proxy
and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of such Shareholder, to vote, or
cause to be voted, such Shareholders Subject Shares, or
grant a consent or approval in respect of such
Shareholders Subject Shares, at every annual, special or
other meeting of the shareholders of the Company, and at any
adjournment or adjournments thereof, or pursuant to any consent
in lieu of a meeting or otherwise, with respect to (i) the
Merger and the Merger Agreement and adoption of the Plan of
Merger, and the other transactions contemplated thereby, and any
actions required in furtherance thereof, including, any class
vote from the holders of Company Preferred Stock; (ii)
(A) any extraordinary corporate transaction, such as a
merger, rights offering, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries
(other than the Merger), or (B) a sale or transfer of a
material amount of assets or capital stock of the Company or any
of its subsidiaries; and (iii) any other related matters
requiring the vote, consent or approval of such Shareholder;
provided that
the foregoing proxy shall terminate
immediately upon termination of this Agreement in accordance
with its terms; and
provided further that
the foregoing
proxy shall be exercised as the Company, acting through its
Board of Directors, determines in its sole discretion. Each of
Hagan and McNulty, severally and not jointly, understands and
acknowledges that Parent is entering into the Merger Agreement
in reliance upon their execution and delivery of this Agreement.
Subject to this
Section 2(d)
, this grant of proxy is
coupled with an interest and may under no circumstances be
revoked. Each of Hagan and McNulty, severally and not jointly,
hereby ratifies and confirms all actions that any proxy
appointed or designated hereby may lawfully do or cause to be
done in accordance herewith. Such irrevocable proxy is executed
and intended to be irrevocable in accordance with the provisions
of Section 1759 of the Pennsylvania Business Corporation
Law of 1988, as amended. Upon the execution hereof, all prior
proxies given by Hagan and McNulty with respect to the Shares
are hereby revoked and, for so long as this Agreement is in
effect, no subsequent proxies will be given.
Section
3.
Dissenters
Rights.
Each Shareholder (other than Hagan
and McNulty) hereby waives, and agrees not to, for so long as
this Agreement is in effect, exercise or assert, any dissenters
rights or similar rights under Section 1571(b)(2)(ii) of
the Pennsylvania Business Corporation Law of 1988, as amended,
15 Pa. C.S. §§ 1101, et seq.
(
PBCL
), in connection with the Merger.
Section
4.
Fiduciary
Responsibilities.
No Shareholder executing
this Agreement who is or becomes during the term hereof a
director or officer of the Company makes (or shall be deemed to
have made) any agreement or understanding herein in his or her
capacity as such director or officer. Without limiting the
generality of the foregoing, each Shareholder signs solely in
his, her or its capacity as the record
and/or
beneficial owner, as applicable, of such Shareholders
Subject Shares and nothing herein shall limit or affect any
actions taken by such Shareholder (or a designee of such
Shareholder) in his or her capacity as an officer or director of
the Company in exercising his or her or the Companys or
the Company Boards rights in connection with the Merger
Agreement or otherwise and such actions shall not be deemed to
be a breach of this Agreement.
B-3
Section
5.
Representations
and Warranties of Shareholder.
Each
Shareholder, severally and not jointly, represents and warrants
to Parent as follows:
(a)
Binding Agreement.
Such
Shareholder has the capacity to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. Such Shareholder has duly and validly executed and
delivered this Agreement and this Agreement constitutes a legal,
valid and binding obligation of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting
creditors rights generally and by general equitable
principles (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(b)
No Conflict.
Neither the
execution and delivery of this Agreement by such Shareholder,
nor the performance by such Shareholder of its obligations
hereunder will, (i) require any consent, approval,
authorization or permit of, registration, declaration or filing
(except for such filings as may be required under the federal
securities laws or as would not reasonably be expected to
prevent, materially delay or otherwise materially impair such
Shareholders ability to perform its obligations hereunder)
with, or notification to, any governmental entity, (ii) if
such Shareholder is an entity, result in a violation of, or
default under, or conflict with any provision of its certificate
of incorporation, bylaws, partnership agreement, limited
liability company agreement or similar organizational documents,
(iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, or
acceleration) under any contract, trust, agreement, instrument,
commitment, arrangement or understanding applicable to such
Shareholder or such Shareholders Subject Shares, or result
in the creation of a security interest, lien, charge,
encumbrance, equity or claim with respect to any of such
Shareholders Subject Shares, except, in the case of clause
(iii), as would not reasonably be expected to prevent,
materially delay or otherwise materially impair such
Shareholders ability to perform its obligations hereunder,
(iv) require any consent, authorization or approval of any
Person other than a governmental entity, except, in the case of
clause (iv), as would not reasonably be expected to prevent,
materially delay or otherwise materially impair such
Shareholders ability to perform its obligations hereunder
or (v) violate or conflict with any order, writ,
injunction, decree, rule, regulation or law applicable to such
Shareholder or such Shareholders Subject Shares. If such
Shareholder is a married individual and such Shareholders
Subject Shares constitute community property or otherwise need
spousal approval in order for this Agreement to be a legal,
valid and binding obligation of such Shareholder, this Agreement
has been duly authorized, executed and delivered by, and
constitutes a legal, valid and binding obligation of, such
Shareholders spouse, enforceable against such spouse in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors rights generally
and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
(c)
Ownership of Shares.
Such
Shareholder is the record and beneficial owner of, and has good,
valid and marketable title to, the Shares set forth opposite
such Shareholders name on
Schedule I
attached
hereto free and clear of any security interests, liens, charges,
encumbrances, equities, claims, options or limitations of
whatever nature and free of any other limitation or restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such Shares). There are no outstanding
options or other rights to acquire from such Shareholder, or
obligations of such Shareholder to sell or to dispose of, any of
such Shareholders Shares, and none of such
Shareholders Shares are subject to vesting. Such
Shareholder holds exclusive power to vote the Shares set forth
opposite such Shareholders name on
Schedule I
attached hereto. As of the date of this Agreement, the Shares
set forth opposite such Shareholders name on such
Schedule I
attached hereto represent all of the
shares of capital stock of the Company owned (beneficially or of
record) by such Shareholder, except shares of Company Common
Stock which may be acquired by such Shareholder upon exercise of
options, if any, or conversion of the Series B Preferred
Stock, if any, held by such Shareholder as set forth in such
Schedule.
(d)
Proxy Statement.
Each
Shareholder agrees that none of the information relating to such
Shareholder or his, her or its controlled Affiliates provided by
or on behalf of such Shareholder for
B-4
inclusion in the Proxy Statement will, from the time the Proxy
Statement is first filed with the SEC to the time the Proxy
Statement is first published, sent or given to shareholders of
the Company, contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(e)
Broker Fees.
No broker,
investment banker, financial advisor or other person is entitled
to any brokers, finders, financial advisors or
other similar fee or commission based upon arrangements made by
or on behalf of such Shareholder in connection with its entering
into this Agreement.
Section
6.
Representations
and Warranties of Parent.
Parent represents
and warrants to the Shareholders as follows:
(a)
Binding Agreement.
Parent is a
corporation duly incorporated, validly existing and in good
standing under the laws of the Republic of Italy and has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent
and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors
of Parent, and no other corporate proceedings on the part of
Parent are necessary to authorize the execution, delivery and
performance of this Agreement by Parent and the consummation of
the transactions contemplated hereby (except as described in
Section 4.04 of the Merger Agreement). Parent has duly and
validly executed this Agreement and this Agreement constitutes a
legal, valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting
creditors rights generally and by general equitable
principles (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(b)
No Conflict.
Neither the
execution and delivery by Parent of this Agreement, nor the
performance by Parent of its obligations hereunder will,
(i) require any consent, approval, authorization or permit
of, registration, declaration or filing (except for such filings
as may be required under the federal securities laws or as would
not reasonably be expected to prevent, materially delay or
otherwise materially impair Parents ability to perform its
obligations hereunder) with, or notification to, any
governmental entity, (ii) result in a violation of, or
default under, or conflict with any provision of its charter
(
atto costitutivo
) and bylaws (
statuto
),
(iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, or
acceleration) under any contract, trust, agreement, instrument,
commitment, arrangement or understanding applicable to Parent,
except, in the case of clause (iii), as would not reasonably be
expected to prevent, materially delay or otherwise materially
impair Parents ability to perform its obligations
hereunder, (iv) require any consent, authorization or
approval of any Person other than a governmental entity, except,
in the case of clause (iv), as would not prevent, materially
delay or otherwise materially impair such Parents ability
to perform its obligations hereunder or (v) violate or
conflict with any order, writ, injunction, decree, rule,
regulation or law applicable to Parent.
Section
7.
Transfer
and Other Restrictions.
For so long as this
Agreement is in effect:
(a)
Certain Prohibited Transfers and
Purchases.
Each Shareholder agrees not to:
(i) sell, transfer, exchange, pledge, encumber, assign or
otherwise dispose (collectively, the
Transfer
) of, or enter into any contract,
option or other arrangement or understanding with respect to the
Transfer of, such Shareholders Subject Shares or any
interest contained therein (other than, if the transactions
contemplated by the Merger Agreement are consummated, by
operation of law in the Merger);
(ii) grant any proxies or powers of attorney or enter into
a voting agreement or other arrangement with respect to such
Shareholders Subject Shares, other than this Agreement;
B-5
(iii) enter into, or deposit such Shareholders
Subject Shares into, a voting trust or take any other action
which would, or could reasonably be expected to, result in a
diminution of the voting power represented by any of such
Shareholders Subject Shares;
(iv) purchase, acquire or accept any shares of capital
stock or other equity securities of the Company or other
securities exercisable for or convertible into shares of capital
stock or equity securities of the Company;
(v) exercise any right to convert any of such
Shareholders Subject Shares into shares of Company Common
Stock, pursuant to the Description and Designation of
Series B Preferred Stock (the
Statement of
Designation
), including Section 6(a) thereof;
(vi) exercise any right of first refusal to purchase shares
of the Companys capital stock, warrants or any other
securities of the Company, pursuant to the Stock and Warrant
Purchase Agreement, dated as of June 1, 2007, by and among
the Company and the purchasers listed therein, including the
Shareholder (the
Series B Purchase
Agreement
), including Section 3.1(t)
thereof; or
(vii) commit or agree to take any of the foregoing actions.
(b)
Waiver of Rights.
Each
Shareholder hereby waives any and all rights such Shareholder
has or may acquire under the Statement of Designation to convert
any of such Shareholders Subject Shares into shares of
Company Common Stock, to receive any dividends or other
payments, to receive any notices and to purchase shares of
Company Common Stock, including without limitation: (i) any
rights under Sections 6(a) and 6(i) of the Statement of
Designation to convert any of such Shareholders Subject
Shares into shares of Company Common Stock using a reduced
Conversion Value (as defined in the Statement of Designation) if
the Company fails to complete a Subsequent Financing (as defined
in the Statement of Designation) on or before December 31,
2007; (ii) any rights under Sections 6(a) and 6(g) of
the Statement of Designation to convert any of such
Shareholders Subject Shares into shares of Company Common
Stock using a reduced Conversion Value if the Company issues
additional shares of Company Common Stock or rights, warrants,
options, or other securities convertible into or exchangeable or
exercisable for shares of such Company Common Stock prior to
April 15, 2008; (iii) any right under
Section 6(b) of the Statement of Designation to receive an
amount equal to the aggregate Liquidation Preference (as defined
in the Statement of Designation) or to convert any of such
Shareholders Subject Shares into shares of Company Common
Stock arising from the Companys execution or performance
of the Merger Agreement; and (iv) any rights under
Section 3.1(t) of the Series B Purchase Agreement to
purchase shares of the Companys capital stock, warrants or
any other security of the Company upon the Companys sale
and issuance to Parent or any of its Affiliates of Series C
Preferred Stock or any other securities of the Company.
(c)
Consideration.
Each
Shareholder hereby acknowledges and agrees that the only
consideration payable in respect of such Shareholders
Subject Shares shall be as set forth in the Plan of Merger.
(d)
Efforts.
For so long as this
Agreement is in effect, each Shareholder agrees not to take any
action which would make any representation or warranty of such
Shareholder herein untrue or incorrect in any material respect
or knowingly take any action that would have the effect of
preventing or disabling it from performing its obligations under
this Agreement. Subject to
Section 4
hereof, for so
long as this Agreement is in effect, each Shareholder shall use
such Shareholders reasonable efforts to take, or cause to
be taken, all actions (including executing and delivering such
additional documents) and do, or cause to be done, and to assist
and cooperate with the other parties hereto in doing, all
things, in each case, as may reasonably be deemed by Parent to
be necessary or desirable to carry out the provisions of this
Agreement.
(e)
Additional Shares.
In the
event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of
shares of capital stock of the Company on, of or affecting any
Shareholders Subject Shares or (ii) any Shareholder
becomes the beneficial owner of any additional shares of capital
stock of the Company or other securities entitling the holder
thereof to vote or give consent with respect to the matters set
forth in
Section 2(a)
hereof, then the terms of this
Agreement shall
B-6
apply to the shares of capital stock or other securities of the
Company held by such Shareholder immediately following the
effectiveness of the events described in clause (i) or such
Shareholder becoming the beneficial owner thereof, as described
in clause (ii), as though they were such Shareholders
Subject Shares hereunder. Each Shareholder hereby agrees, while
this Agreement is in effect, to notify Parent of the number of
any new shares of capital stock of the Company acquired by such
Shareholder, if any, after the date hereof.
Section
8.
No
Solicitation.
For so long as this Agreement
is in effect, no Shareholder shall, nor shall such Shareholder
permit any investment banker, attorney or other advisor or
representative of such Shareholder to, directly or indirectly
through another Person, solicit, initiate or encourage, or take
any other action to facilitate, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal;
provided that
any
action which is permitted by the Merger Agreement to be taken by
a Shareholder in his or her capacity as a director or officer or
which is permitted by
Section 4
hereof shall not be
prohibited by the foregoing; and
provided further that
this
Section 8
shall not apply to Hagan or
McNulty.
Section
9.
Specific
Enforcement.
The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with the terms hereof or were otherwise breached and that the
non-breaching party shall be entitled to specific performance of
the terms hereof in addition to any other remedy which may be
available at law or in equity. It is accordingly agreed that the
non-breaching party will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any
state or federal court located in New York, New York, Borough of
Manhattan, the foregoing being in addition to any other remedy
to which they are entitled at law or in equity. In addition,
each of the parties hereto (i) consents to submit itself to
the exclusive jurisdiction of any state or federal court located
in New York, New York, Borough of Manhattan, in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will
not attempt to deny or defeat such personal jurisdiction 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 of the transactions contemplated by this
Agreement in any court other than a state or federal court
located in New York, New York, Borough of Manhattan. EACH OF THE
PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
Section 10.
Termination.
This
Agreement shall terminate and cease to have any force or effect
on the earlier of (i) the termination of the Merger
Agreement in accordance with its terms, (ii) the written
agreement of the parties hereto to terminate this Agreement, or
(iii) at the option of any Shareholder, the execution or
granting of any amendment, modification, change or waiver with
respect to the Merger Agreement or the Plan of Merger subsequent
to the date of this Agreement that results in a decrease in the
price to be paid with respect to such Shareholders Subject
Shares as set forth in the Plan of Merger;
provided,
however
, that (x)
Sections 11 (Notices)
,
13
(Entire Agreement)
,
14 (Amendment)
,
15 (Successors
and Assigns)
,
16 (Execution in Counterparts;
Effectiveness)
,
17 (Governing Law)
,
18
(Severability)
,
19 (Interpretation)
and
20
(Shareholder Obligations Several and Not Joint)
shall
survive any termination of this Agreement and
(y) termination of this Agreement shall not relieve any
party from liability for any breach of its obligations hereunder
committed prior to such termination.
Section
11.
Notices.
All
notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested)
or sent by overnight carrier or by telecopier (upon confirmation
of receipt) to the parties at the following addresses or at such
other as shall be specified by the parties by like notice:
(i) if to Parent or the Company, to the appropriate address
set forth in Section 10.05 of the Merger Agreement; and
(ii) if to a Shareholder, to the appropriate address set
forth on
Schedule I
hereto.
B-7
Section
12.
Certain
Events.
Each Shareholder agrees that this
Agreement and the obligations hereunder shall attach to such
Shareholders Subject Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such
Shareholders Subject Shares shall pass, whether by
operation of law or otherwise, including such Shareholders
heirs, guardians, administrators or successors.
Section
13.
Entire
Agreement.
This Agreement (including the
documents and instruments referred to herein) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof.
Section
14.
Amendment.
This
Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement
executed by Parent, the Shareholders and (with respect to any
provisions setting forth rights or obligations of the Company
only) the Company;
provided that
, with respect to the
obligations of any individual Shareholder under this Agreement,
this Agreement may be amended with the approval of such
Shareholder and Parent notwithstanding the failure to obtain the
approval of other Shareholders.
Section
15.
Successors
and Assigns.
This Agreement shall not be
assigned by operation of law or otherwise without the prior
written consent of the other parties hereto. This Agreement will
be binding upon, inure to the benefit of and be enforceable by
each party and such partys heirs, beneficiaries,
executors, successors, representatives and permitted assigns.
Section
16.
Execution
in Counterparts; Effectiveness.
This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, and delivered
by means of facsimile transmission or otherwise, each of which
when so executed and delivered shall be deemed to be an original
and all of which when taken together shall constitute one and
the same agreement. This Agreement shall become effective when
counterparts hereof executed by, or on behalf of, each of the
parties hereto shall have been received by Parent.
Section
17.
GOVERNING
LAW.
THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW), OTHER THAN TO
THE EXTENT PENNSYLVANIA LAW GOVERNS THE MERGER, THE VALIDITY OF
THE VOTING AGREEMENT AND THE GRANT OF IRREVOCABLE PROXY SET
FORTH HEREIN.
Section
18.
Severability.
If
any provision of this Agreement shall be held to be illegal,
invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire
Agreement. Such provision shall be deemed to be modified to the
extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced
accordingly.
Section
19.
Interpretation.
The
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement has been freely
and fairly negotiated among the parties. If an ambiguity or
question of intent or interpretation arises, this Agreement will
be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or
disfavoring any party because of the authorship of any provision
of this Agreement. Any reference to any applicable law will be
deemed to refer to such law as in effect on the date hereof and
all rules and regulations promulgated thereunder, unless the
context requires otherwise. The words include,
includes, and including will be deemed
to be followed by without limitation. Pronouns in
masculine, feminine, and neuter genders will be construed to
include any other gender, and words in the singular form will be
construed to include the plural and vice versa, unless the
context otherwise requires. The words this
Agreement, herein, hereof,
hereby, hereunder, and words of similar
import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.
Section
20.
Shareholder
Obligations Several and Not Joint.
The
obligations of each Shareholder hereunder shall be several and
not joint and no Shareholder shall be liable for any breach of
the terms of this Agreement by any other Shareholder.
B-8
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed, individually or by its respective
officer thereunto duly authorized, as of the date first written
above.
BRAVOSOLUTION S.P.A.
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By:
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/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
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Title:
|
Chief Executive Officer
|
VERTICALNET, INC.
Name: Christopher Kuhn
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Title:
|
Vice President and General Counsel
|
RUXTON VENTURES LLC
Name: Mark L. Walsh
HELLER CAPITAL INVESTMENTS
Name: Ronald Heller
OCTAGON CAPITAL PARTNERS
Name: Stera Hess
B-9
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ACT CAPITAL PARTNERS, L.P.
|
Name: Amir L Ecker
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/s/ Joyce
Hagan
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Michael J. Hagan
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Spouse
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/s/ Denise
McNulty
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Michael P. McNulty
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Spouse
|
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/s/ Suzanne
Lentz
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|
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Nathanael V. Lentz
|
|
Spouse
|
|
|
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/s/ Maria
Ecker
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|
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Amir L Ecker
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|
Spouse
|
|
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/s/ Richard
Chakejian
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Jacqueline Chakejian
|
|
Spouse
|
|
|
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/s/ Linda
Nagelberg
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|
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David S. Nagelberg CGM IRA Custodian
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|
Spouse
|
B-10
SCHEDULE I
TO
VOTING AGREEMENT
|
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Number of Shares of
|
|
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Number of Other
|
|
|
|
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Company Preferred
|
|
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Shares of Company
|
|
|
Percentage of Voting
|
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Name and Address of Shareholder
|
|
Stock
|
|
|
Stock
|
|
|
Stock Outstanding(1)
|
|
|
Nathanael V. Lentz
|
|
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200,000
|
|
|
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4,679
|
|
|
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0.93
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%
|
Ruxton Ventures LLC
|
|
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200,000
|
|
|
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0
|
|
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0.74
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%
|
Michael J. Hagan
(2)
|
|
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1,000,000
|
|
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4,010
|
|
|
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3.88
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%
|
Michael P. McNulty
(2)
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1,000,000
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|
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383
|
|
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3.74
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%
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Heller Capital Investments
|
|
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4,000,000
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|
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0
|
|
|
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7.03
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%
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Amir L. Ecker
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|
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300,000
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|
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0
|
|
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1.12
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%
|
ACT Capital Partners, L.P.
|
|
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500,000
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|
|
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0
|
|
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1.86
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%
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Jacquline Chakejian
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400,000
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|
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0
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1.49
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%
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Octagon Capital Partners
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100,000
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0
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|
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0.37
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%
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David S. Nagelberg CGM IRA
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1,000,000
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|
|
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0
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3.72
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%
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|
|
|
|
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|
|
|
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Total
|
|
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8,700,000
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|
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9,072
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17.27
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(3)%
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|
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|
|
|
|
|
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|
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(1)
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|
Based on 2,542,309 shares outstanding, which is comprised
of (i) 1,610,845 shares of common stock,
(ii) 623,875 shares of Series B Preferred
entitled to vote pursuant to the Voting Cap set forth in
Series B Designation of Rights, and
(iii) 307,589 shares of Series C Preferred
entitled to vote pursuant to the Voting Cap set forth in
Series C Designation of Rights.
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(2)
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Such Shareholder is not subject to
Section 2(a)
,
Section 2(b)
or
Section 8
of this
Agreement.
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(3)
|
|
Based on the shares outstanding that are subject to
Section 2(a)
,
Section 2(b)
and
Section 8
of this Agreement.
|
B-11
Exhibit A
to Voting Agreement
PLAN OF
MERGER
OF
BRAVOSOLUTION U.S.A., INC.
(a Pennsylvania corporation)
WITH AND
INTO
VERTICALNET,
INC.
(a
Pennsylvania corporation)
This PLAN OF MERGER (the
Plan of Merger
) is
dated as of October 25, 2007 by and among BravoSolution
S.P.A., a corporation organized under the laws of Italy
(
Bravo
), BravoSolution U.S.A., Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of Bravo
(
BravoSolution
), and Verticalnet, Inc., a
Pennsylvania corporation (the
Company
, and
together with each of Bravo and BravoSolution, each a
Party
and collectively, the
Parties
).
RECITALS
WHEREAS, the Parties are parties to that certain Agreement of
Merger, dated as of October 25, 2007 (the
Merger
Agreement
) by and among the Company, BravoSolution and
Bravo; and
WHEREAS, pursuant to the Merger Agreement, at the closing of the
Merger (the
Closing
), BravoSolution will
merge with and into the Company (the
Merger
)
with the Company as the surviving corporation (the
Surviving Corporation
); and
WHEREAS, the Board of Directors of each of the Company and
BravoSolution has approved and adopted the Plan of Merger in
accordance with the Pennsylvania Business Corporation Law of
1988, as amended (
PBCL
).
NOW, THEREFORE, the Parties, in consideration of the mutual
covenants herein contained and intending to be legally bound,
agree as follows:
1.
Parties to Merger.
Bravo,
BravoSolution and the Company shall effect the Merger in
accordance with and subject in all respects to the terms and
conditions of the Merger Agreement. In the event of any conflict
between the Plan of Merger and the Merger Agreement, the Merger
Agreement shall govern.
2.
Merger; Governing Law.
At the
Effective Time (as defined in Section 3 hereof), upon
compliance with the applicable provisions of the PBCL,
BravoSolution shall be merged with and into the Company with the
Company as the Surviving Corporation, and the separate existence
of BravoSolution shall cease. The Surviving Corporation shall
continue to be governed by the laws of the Commonwealth of
Pennsylvania.
3.
Filing and Effective Time.
On
the date of the Closing, the Parties shall file Articles of
Merger with the Department of State of the Commonwealth of
Pennsylvania in accordance with Section 1926 of the PBCL.
The Merger shall become effective upon filing of the Articles of
Merger with the Department of State of the Commonwealth of
Pennsylvania or at such subsequent date and time as Bravo and
the Company shall agree and as shall be specified in the
Articles of Merger in accordance with the relevant provisions of
the PBCL (the
Effective Time
).
4.
Articles of Incorporation.
At
the Effective Time, the Articles of Incorporation of the Company
shall be amended and restated to read in their entirety as the
Articles of Incorporation of BravoSolution as in effect
immediately prior to the Effective Time and, as so amended,
shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time until thereafter amended in
accordance therewith and with applicable law, and the Surviving
Corporation shall continue to be a corporation organized and
governed by the laws of the Commonwealth of Pennsylvania.
5.
Bylaws.
At the Effective Time,
the Bylaws of BravoSolution as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter altered, amended or repealed in the
manner therein provided or provided by applicable law.
B-12
6.
Board of Directors and
Officers.
At the Effective Time, the
directors of BravoSolution immediately prior to the Effective
Time shall be the directors of the Surviving Corporation and,
unless otherwise directed by Bravo in writing, the officers of
the Company immediately prior to the Effective Time will be the
officers of the Surviving Corporation; each such director and
officer shall hold office until their respective successors are
duly elected and qualified or until their death resignation or
removal, in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation and applicable law.
7.
Effect of Merger.
At the
Effective Time, the Merger shall have the effect set forth in
Section 1929 of the PBCL and any other applicable provision
of the PBCL.
8.
Merger Consideration.
At the
Closing, by virtue of the Merger and without any action by the
holder thereof, (a) each outstanding share of the
Companys common stock, par value $0.01 per share (the
Company Common Stock
), issued and outstanding
immediately prior to the Effective Time, other than shares held
directly or indirectly by the Company, BravoSolution or Bravo,
will be converted into the right to receive $2.56 per share in
cash, without interest (the
Common
Consideration
), and (b) each outstanding share of
Series B Preferred Stock (the
Series B
Preferred Stock
) issued and outstanding immediately
prior to the Effective Time, other than shares held directly or
indirectly by the Company, will be converted into the right to
receive either $0.38750 or $0.26875 per share in cash (in
accordance with Section 10 below), without interest (the
Series B Consideration
and, together
with the Common Consideration, the
Merger
Consideration
).
9.
Effect on Stock.
At the
Effective Time by virtue of the Merger and without any action on
the part of the holder thereof, (a) each share of Company
Common Stock held by the Company as treasury stock and each
share of Company Common Stock and Series C Preferred Stock
owned directly or indirectly by BravoSolution or Bravo
immediately prior to the Effective Time, if any, shall be
canceled and retired and shall cease to exist, and no payment or
distribution shall be made or delivered with respect thereto,
and each holder of a certificate which immediately prior to the
Effective Time represented such share (a
Certificate
) shall thereafter cease to have
any rights with respect to such share; (b) each share of
common stock, par value $0.01 per share, of BravoSolution issued
and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation; and (c) if prior to
the Effective Time, the Company should split, combine or
otherwise reclassify any shares of Company Common Stock or
Series B Preferred Stock (collectively, the
Shares
), or pay a stock dividend or other
stock distribution on any of the Shares, or otherwise change any
of the Shares into any other securities, or make any other such
stock dividend or distribution in capital stock of the Company
in respect of any of the Shares, then the Merger Consideration
payable for any of such Shares pursuant to this item or the next
will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
10.
Treatment of Series B Preferred
Stock.
(a) Each share of the Companys Series B
Preferred Stock issued and outstanding immediately prior to the
Effective Time held by the Investor Purchasers (as defined in
the Companys Description and Designation of Series B
Preferred Stock) shall be cancelled and automatically converted
into the right to receive $0.38750 per share in cash.
(b) Each share of the Companys Series B
Preferred Stock issued and outstanding immediately prior to the
Effective Time held by the Non-Investor Purchasers (as defined
in the Companys Description and Designation of
Series B Preferred Stock) issued shall be cancelled and
automatically converted into the right to receive $0.26875 per
share in cash.
11.
Counterparts.
This Plan of
Merger may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will
constitute one and the same instrument, and delivered by means
of a facsimile or portable document format (pdf) transmission.
This Plan of Merger will become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties. For purposes of determining
whether a party has signed this Plan of Merger or any document
contemplated hereby or any amendment or waiver hereof, only a
handwritten original signature on a paper document or a
facsimile copy of such a handwritten original signature shall
constitute a signature, notwithstanding any applicable law
relating to or enabling the creation, execution or delivery of
any contract or signature by electronic means.
B-13
IN WITNESS WHEREOF, each party has caused this Plan of Merger to
be duly executed as of the date first written above.
BRAVOSOLUTION S.P.A.
|
|
|
|
By:
|
/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
|
|
|
|
Title:
|
Chief Executive Officer
|
BRAVOSOLUTION U.S.A., INC.
|
|
|
|
By:
|
/s/ Federico
Vitaletti
|
Name: Federico Vitaletti
VERTICALNET, INC.
|
|
|
|
By:
|
/s/ Nathanael
V. Lentz
|
Name: Nathanael V. Lentz
B-14
Annex C
EMPLOYMENT
AGREEMENT
Nathanael
Lentz
This Employment Agreement, dated October 25, 2007 (this
Agreement
), among Nathanael Lentz (the
Employee
), Verticalnet, Inc., a
Pennsylvania corporation (the
Company
)
and, solely for purposes of the guarantee described herein, and
other purposes specifically noted herein, BravoSolution S.p.A.,
a corporation organized under the laws of Italy (the
Parent
):
Pursuant to an Agreement and Plan of Merger (the
Merger Agreement
) dated
October 25, 2007, BravoSolution U.S.A., Inc., a
wholly-owned subsidiary of Parent (
Merger
Sub
), shall merge with and into the Company (the
Merger
). Pursuant to the terms of the
Merger, the Company (i) shall be the surviving corporation,
(ii) shall become a wholly owned subsidiary of Parent, and
(iii) shall be renamed BravoSolution U.S.A., Inc. As a
condition to the Merger, Parent has required that Employee enter
into this Agreement with the Company concurrently with the
execution and delivery of the Merger Agreement, and that this
Agreement go into effect immediately prior to the closing of the
Merger.
Therefore, this Agreement is entered into by the parties hereto
intending to be legally bound and shall go into effect
immediately prior to the closing of the Merger, subject to the
prior satisfaction of all other conditions precedent to the
closing of the Merger that are not otherwise satisfied at the
closing of the Merger (the
Effective
Time
).
Now, therefore, the Company and Employee, each intending to be
legally bound by this Agreement, agree as follows:
The Employee shall be employed in the position of Chief
Executive Officer and President of the Company and shall perform
duties consistent with this position as are assigned by the
BravoSolution Group CEO (Group CEO) to whom employee
shall report. Employee shall also serve on the International Top
Management Committee of BravoSolution Group, which includes,
among others, all the country managing directors and general
managers, the Group CFO and the Group CEO.
The Employee shall devote substantially all of his business time
and efforts to the performance of his duties under this
Agreement, however, the Employee may (a) serve on civic or
charitable boards or committees, (b) if previously
authorized by the Group CEO, serve on corporate boards as a
non-employee board member, and (c) manage Employees
personal investments. The Employee must inform the members of
the board of directors of the Company (with written notice to
the Group CEO) in advance of any additional corporate boards on
which he plans to serve. The Employee cannot serve on any
corporate board that would violate the Employees
non-competition restrictions.
The initial term of employment under this Agreement (the
Initial Term
) begins at the Effective
Time and extends for two (2) years. This Agreement renews
automatically for one (1) year renewal terms (a
Renewal Term
) unless either the
Employee or the Company gives the other party written notice of
nonrenewal at least one (1) year before the end of the
Initial Term or any Renewal Term then in effect. The Initial
Term plus any Renewal Term then in effect are the term of this
Agreement (the
Employment Term
). The
Employment Term may be terminated early as provided in this
Agreement under Section 8 through Section 12.
The Employees annual base salary shall be two hundred
fifty thousand dollars ($250,000) (the
Salary
), and is payable in
installments when the Company customarily pays its officers. The
Salary will be reviewed annually, as
C-1
part of the Employees annual performance evaluation, based
on the recommendation of the Group CEO to determine whether the
Salary should be increased, provided, however, that if the
Company meets its budget for the preceding fiscal year, the
Salary shall be increased by a minimum positive amount equal to
the Salary in effect multiplied by the percentage increase in
the Consumer Price Index for such year.
The Employee shall participate in an annual bonus program which
shall provide for a maximum bonus payment equal to 100% of
Salary, subject to the achievement of targets that are to be
agreed between the Employee and the Group CEO after the
Effective Time (the
Target Bonus
). In
addition there will be a special bonus program of $50,000 for
2008, subject to the achievement of targets that are to be
agreed between the Employee and the Group CEO after the
Effective Time. Beginning 2009 or earlier (at the sole
discretion of Group CEO), the Employee may be offered the
opportunity to participate in the Parents profit sharing
long term incentive plan for specified senior executives of the
Parent .
(a)
Compensation and Benefits
Generally.
The Employee shall be entitled to
participate in any benefits, bonus or other compensation
programs established for officers of the Company generally.
(b)
Vacation.
The Employee shall be
entitled to five (5) weeks paid vacation per full calendar
year, which shall accrue in accordance with the Companys
vacation policy as in effect from time to time.
(c)
Directors and Officers
Insurance.
During the Employment Term, the
Employee will be a member of the Companys board of
directors and shall be entitled to directors and officers
insurance coverage for his acts and omissions while an officer
of the Company on a basis no less favorable to the Employee than
the coverage provided to current officers of the Parent.
(d)
Termination of Predecessor
Agreement.
Upon the Effective Time, this
Agreement shall amend and restate the Employment Agreement,
dated October 1, 2001, between the Employee and the Company
(the
Predecessor Agreement
), and the
Predecessor Agreement shall terminate and be of no force and
effect after the Effective Time.
|
|
7.
|
Confidential
Information, Non-Competition and Non-Solicitation
|
The Employee agrees to continue to be covered by the terms of
the Predecessor Companys Confidential Information,
Invention and Non-Competition Agreement that the Employee
entered into upon the commencement of employment with the
Predecessor Company, except that (1) the restrictive period
after termination of employment in Section 6 (titled:
Non-Solicitation of Customers and Employees; Non-Competition)
shall be 12 months instead of 18 months and
(2) the geographic scope of subsection (c) of
Section 6 shall be expanded to include, in addition to the
United States and Canada, the countries of Italy, China, France,
United Kingdom, Mexico, Spain and Germany.
If the Employee dies during the Employment Term, then the
Employment Term shall terminate, and thereafter neither the
Company nor Parent shall not have any further liability or
obligation to the Employee, the Employees executors,
administrators, heirs, assigns or any other person claiming
under or through the Employee, except that the Employees
estate shall receive any unpaid Salary that has accrued through
the date of termination.
If the Employee becomes totally disabled, then the
Employment Term shall terminate, and thereafter neither the
Company or Parent shall have any further liability or obligation
to the Employee hereunder, except as follows: the Employee shall
receive (a) any unpaid Salary that has accrued through the
date of termination, (b) continued Salary for 3 months
following the date the Employee is considered totally disabled,
and (c) whatever benefits that he may be entitled to
receive under any then existing disability benefit plans of the
Company.
C-2
The term
totally disabled
means:
(a) if the Employee is considered totally disabled under
the Companys group disability plan in effect at that time,
if any, or (b) in the absence of any such plan, under
applicable Social Security regulations.
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10.
|
Termination
for Cause
|
The Company may terminate the Employee for Cause
immediately upon notice from the Company. If the Employee is
terminated for Cause, then the Employment Term shall terminate
and thereafter neither the Company nor Parent shall have any
further liability or obligation to the Employee, except that the
Employee shall receive any unpaid Salary that has accrued
through the date of termination.
The term Cause means: (a) the Employee is convicted of a
felony, or (b) in the reasonable determination of the
Company, the Employee has done any one of the following:
(1) committed an act of fraud, embezzlement, or theft in
connection with the Employees duties in the course of his
employment with the Company, (2) caused intentional,
wrongful damage to the property of the Company or Parent,
(3) materially breached (other than by reason of illness,
injury or incapacity) the Employees obligations under this
Agreement or under any written confidentiality, non-competition,
or non-solicitation agreement between the Employee and the
Company, that the Employee shall not have remedied within
30 days after receiving written notice from the Company
specifying the details of the breach, or (4) engaged in
gross misconduct or gross negligence in the course of the
Employees employment with the Company.
|
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11.
|
Termination
by the Employee
|
The Employee may terminate this Agreement by giving the Company
written notice of termination three months in advance of the
termination date (with a copy to the Group CEO). The Company may
waive this notice period but will compensate the Employee
through the date which is 90 days after the date the
Company receives the written notice. If the Employee terminates
employment prior to the expiration of the 90 day notice
period or the date agreed to by the Company, no further payments
will be made after his actual termination date and Employee must
repay to Company the after tax amount he would have received
between his actual termination date and the expiration of the
notice period. If the Employee terminates this Agreement, then
on the actual termination date, the Employment Term shall
terminate and thereafter neither the Company nor Parent shall
have further liability or obligation to the Employee under this
Agreement, except that the Employee shall receive any unpaid
Salary that has accrued through the termination date. After the
termination date, the Employee shall be required to adhere to
the covenants against non-competition and non-solicitation
described in Section 7 of this Agreement.
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12.
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Termination
without Cause by the Company
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The Company may terminate the Employee without Cause by giving
the Employee written notice of termination three months in
advance of the termination date. The Company may waive this
notice period and set an earlier termination date provided the
Company pays Employees salary for the remainder of the
three month notice period after the termination date.
(1) If the Employee is terminated without Cause within one
(1) year from the Effective Time, then the Employment Term
shall terminate and thereafter the Employee shall be entitled
only to the following under this Agreement:
(2) the Employees group healthcare (medical, dental
and prescription drug) coverage will be continued for one year,
to be paid in full by the Company, and
(3) the Employee will receive any accrued vacation or
accrued bonus payments, and
(4) the Employees covenants against non-competition
(as described in Section 7 of this Agreement) shall be
reduced to a six (6) month period from the termination
date, and
C-3
(5) the Employee and the Company will enter into a mutual
general release.
(a) If the Employee is terminated without Cause or Employee
terminates for Good Reason after one (1) year from the
Effective Time, then the Employment Term shall terminate and
thereafter the Employee shall be entitled only to the following
under this Agreement:
(1) the Company will pay to the Employee a lump sum
severance payment (the
Severance
Payment
) in the amount equal to one year of the
Salary then in effect, and
(2) the Employees group healthcare (medical, dental
and prescription drug) coverage will be continued for one year,
to be paid in full by the Company, and
(3) the Employee will receive any accrued vacation or
accrued bonus payments, and
(4) the Employees covenants against non-competition
(as described in Section 7 of this Agreement) shall be
reduced to a six (6) month period from the termination
date, and
(5) the Employee and the Company will enter into a mutual
general release.
The term
Good Reason
means the failure of the
Company to cure any of the following events within 30 days
of written notice to the Company from Employee that such event
has occurred (provided such notice is given within 90 days
of the occurrence):
(a) the transfer, without the Employees prior written
consent, to a location that is more than 50 miles from the
Employees principal place of business immediately
preceding the transfer, provided however that in the case of a
transfer of not more than 200 miles, such transfer shall
not constitute grounds for Good Reason if the Company pays the
reasonable (for senior executives, as determined by Mercer
consulting or other consulting firm agreeable to Company or
Employee) moving expenses of Employee and his immediate family
members.
(b) a material reduction of the Employees authority,
duties or responsibilities, or reporting relationship, or
(c) any failure of the Company materially to comply with
and satisfy the terms of this Agreement.
Notwithstanding anything to the contrary in this Agreement, if
the Employee is a disqualified individual (as
defined in Section 280G(c) of the Code), and any severance
benefit provided for in this Agreement, together with any other
payments which Employee has the right to receive from the
Company and its affiliates, would constitute a parachute
payment (as defined in Section 280G(b)(2) of the
Code), then any payments hereunder shall be either:
(a) reduced (but not below zero) so that the present value
of such total amounts received by Employee will be one dollar
($1.00) less than three times the Employees base
amount (as defined in Section 280G of the Code) and
so that no portion of such amounts received by the Employee
shall be subject to the excise tax imposed by Section 4999
of the Code or
(b) paid in full,
whichever of (a) or (b) produces the better net
after-tax position to the Employee (taking into account any
applicable excise tax under Section 4999 of the Code and
any applicable income tax).
The determination as to whether any such reduction in the amount
of the severance benefit is necessary shall be made initially by
the Company in good faith. If a reduced payment is made and
through error or otherwise that payment, when aggregated with
other payments from the Company (or its affiliates) used in
determining if a parachute payment exists, exceeds
one dollar ($1.00) less than three times the Employees
base amount, then the Employee shall immediately repay such
excess to the Company upon notification that an overpayment has
been made.
C-4
Any payments provided for in this Agreement shall be paid net of
any applicable income tax withholding required under federal,
state or local law.
This Agreement is governed by Pennsylvania law.
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16.
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Entire
Agreement; Amendments
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This Agreement sets forth the entire understanding among the
parties hereto, and shall supersede all prior employment,
severance and change of control agreements and any related
agreements that the Employee has with the Parent, Company or any
subsidiary, or any predecessor company, including the
Predecessor Agreement. Employee acknowledges that as of the
Effective Time, the Predecessor Agreement is no longer in force
and thereafter Employee has no claim with respect to the
Predecessor Agreement against the Parent, Company or any
subsidiary, or any predecessor company. This Agreement may not
be modified or amended in any way except by a written amendment
executed by the Employee, and the Company.
All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any
successor as a result of a merger or similar reorganization) and
assigns of the parties hereto, except that the duties and
responsibilities of the Employee hereunder are of a personal
nature and shall not be assignable in whole or in part by the
Employee.
C-5
IN WITNESS WHEREOF
, the parties hereto, intending to be
legally bound, have hereunto duly executed this Employment
Agreement as of the day and year first written above.
VERTICALNET, INC.
Name: Christopher Kuhn
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Title:
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Vice President and General Counsel
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EMPLOYEE:
Name: Nathanael Lentz
GUARANTEE
:
For good and valuable consideration, and intending to be legally
bound hereby, the obligations of the Company under this
Agreement at the Effective Time shall be guaranteed by
BravoSolution S.p.A. for a period limited to three months after
closing of the Merger.
BRAVOSOLUTION S.P.A.
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By:
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/s/ Federico
Vitaletti
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Name: Federico Vitaletti
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Title:
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Chief Executive Officer
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[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
C-6
Annex D
RELEASE
OF CLAIMS
BETWEEN NATHANAEL LENTZ
AND
VERTICALNET, INC.
Pursuant to an Agreement and Plan of Merger (the
Merger
Agreement
) dated October 25, 2007, BravoSolution
U.S.A., Inc. (the
Merger Sub
), a wholly-owned
subsidiary of BravoSolution S.p.A., a corporation organized
under the laws of Italy (the
Parent
), shall
merge with and into Verticalnet, Inc., a Pennsylvania
corporation (the
Company
) (the
Merger
). Pursuant to the terms of the Merger,
the Company (i) shall be the surviving corporation,
(ii) shall become a wholly owned subsidiary of Parent, and
(iii) shall be renamed BravoSolution U.S.A., Inc.
As a condition to the Merger, Nathanael Lentz
(
Employee
) has entered into an employment
agreement (
Employment Agreement
) with the
Company, concurrently with the execution and delivery of the
Merger Agreement, but which will only go into effect immediately
prior to the closing of the Merger.
In consideration for the Employee agreeing to the terms of the
Employment Agreement, and conditioned upon his execution of the
attached General Release of Claims Agreement (the
Release
) concurrently with the execution of
said Employment Agreement (which Release shall only go into
effect if the Employment Agreement becomes effective), the
Employee shall receive at the Effective Time (as such term is
defined in the Employment Agreement) a lump sum cash payment in
the amount of $760,000, less applicable tax withholding (the
Lump Sum Payment
).
VERTICALNET, INC.
Name: Christopher Kuhn
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Title:
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Vice President & General Counsel
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Nathanael Lentz
Dated:
October 25, 2007
D-1
Attachment
GENERAL
RELEASE OF CLAIMS AGREEMENT
Employee and the Company hereby agree as follows:
Employee
Release of Claims
In consideration of the Companys agreement to pay the Lump
Sum Payment , and in consideration of the obligations set forth
in this Release, Employee hereby fully and forever releases and
discharges the Company and its officers, directors,
shareholders, investors, administrators, employees, agents,
successors, predecessors, subsidiaries and assigns from any and
all claims, liabilities, demands or causes of action arising out
of, or relating in any way to, (i) Employees
employment with the Company prior to the Merger, and
(ii) Employees employment agreement, dated
October 1, 2001, between the Employee and the Company.
Employee understands and agrees that this Release is a full and
complete waiver of all claims, whether known or unknown by
Employee, including but not limited to, claims of wrongful
discharge, breach of contract, breach of the covenant of good
faith and fair dealing, violation of public policy, defamation,
personal injury, emotional distress, claims under Title VII
of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act of 1967, the Americans
with Disabilities Act, the Equal Pay Act of 1963, the Fair Labor
Standards Act, the Fair Employment and Housing Act, the Employee
Retirement Income Security Act of 1974, as amended
(ERISA) with regard to the Lump Sum Payment, any
family and medical leave acts, and any other state and federal
laws and regulations relating to employment or employment
discrimination. Employee agrees that this payment is in full
satisfaction and settlement of any such claims, liabilities,
demands or causes of action, and Employee will not file any
lawsuit or institute any proceeding asserting any such claim.
This Release does not, however, extend to releasing the Company
from any responsibilities, or liability the Company may incur,
through a breach of this Release, and Employee retains all
rights and claims with respect to any such breach.
Company
Release of Claims
In consideration of Employees promises stated herein, and
in consideration of the obligations set forth in this Release,
Company hereby fully and forever releases and discharges the
Employee and his heirs, assigns, estate, relatives, of any other
trust, entity or other person in which Employee holds a current
or future actual or beneficial interest from any and all claims,
liabilities, demands or causes of action arising out of or
relating in any way to Employees employment with the
Company prior to the Merger.
Company understands and agrees that this Release is a full and
complete waiver of all claims, whether known or unknown by
Company. The Company agrees that this payment is in full
satisfaction and settlement of any such claims, liabilities,
demands or causes of action, and Company will not file any
lawsuit or institute any proceeding asserting any such claim.
This Release does not, however, extend to releasing Employee
from any responsibilities, or liability Employee may incur,
through a breach of this Release, and Company retains all rights
and claims with respect to any such breach.
General
Provisions
In addition, and in further consideration of the foregoing,
Employee and Company expressly waive any and all rights and
benefits conferred upon any of them by the provisions of any
state statute providing that a general release does not extend
to claims known or suspected at the time of the release.
Employee represents and warrant that up through the date on
which he executes this Release, Employee has been in compliance
with the terms of the Confidential Information and Invention
Assignment Agreement (the
Confidentiality
Agreement
) which Employee signed and entered into with
the Company.
D-2
The parties hereby acknowledge they have read and understand the
foregoing Release and sign it voluntarily and without coercion.
Each further acknowledge the opportunity to consider and review
this Release and to consult with an attorney concerning the
waivers contained in this Release, that each has done so and
that the waivers made herein are knowing, conscious and with
full appreciation that each is forever foreclosed from pursing
any of the rights so waived.
Nathanael Lentz
Date October 25, 2007
VerticalNet, Inc.
Name: Christopher Kuhn
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Title:
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Vice President & General Counsel
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Date October 25, 2007
D-3
PROXY FOR
THE SPECIAL MEETING OF SHAREHOLDERS OF
VERTICALNET, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
Please sign and date this proxy, and indicate your vote, on the
back of this card. Please return this card in the enclosed
envelope as soon as possible. Your vote is important.
When you sign and return this proxy card, you:
Appoint Christopher G. Kuhn and Jonathan T. Cohen and each of
them (or any substitutes they may appoint to take their place),
as proxies to vote your shares as you have instructed on the
reverse side of this card, at the Special Meeting to be held on
Tuesday, January 15, 2008 in the offices of Morgan,
Lewis & Bockius, LLP, 1701 Market Street,
Philadelphia, Pennsylvania, and at any adjournments or
postponements of the meeting;
Authorize the proxies to vote, in their discretion, upon any
other business properly presented at the Special
Meeting; and
Revoke any previous proxy you may have signed.
(Continued
and to be Signed and Dated on the Reverse Side)
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VOTE BY INTERNET OR TELEPHONE OR MAIL
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24 Hours a Day, 7 Days a
Week
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VERTICALNET, INC.
400 CHESTER FIELD PARKWAY MALVERN PA 19355
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VOTE BY INTERNET - www.voteproxy.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on Monday January 14, 2008, or the day before the meeting date, if the Special Meeting is adjourned or postponed. Have your proxy card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
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VOTE BY PHONE - 1-800-PROXIES (1-800-776-9437)
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Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time on Monday
January 14, 2008, or the day before the meeting date, if
the Special Meeting is adjourned or postponed. Have your proxy
card in hand when you call and then follow the instructions.
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VOTE BY MAIL
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Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Verticalnet, Inc.,
c/o American
Stock Transfer & Trust Company, 6201
15
th
Street, Brooklyn, NY 11219-9821.
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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VERTICALNET,
INC.
VERTICALNETS
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSALS.
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Vote On Proposal
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For
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Against
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Abstain
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PROPOSAL 1
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PROPOSAL TO ADOPT THE AGREEMENT OF MERGER, DATED AS OF
OCTOBER 25, 2007, AMONG VERTICALNET, INC., BRAVOSOLUTION
S.P.A., AND BRAVOSOLUTION U.S.A., INC., AND THE RELATED PLAN OF
MERGER, AND TO APPROVE THE MERGER
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o
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o
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o
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PROPOSAL 2
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PROPOSAL TO ADJOURN THE SPECIAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE
INSUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO ADOPT
THE AGREEMENT OF MERGER, AND RELATED PLAN OF MERGER, AND TO
APPROVE THE MERGER.
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o
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o
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o
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In their discretion, the Proxies are authorized to vote upon
such other matters as may properly come before the Special
Meeting and at any postponement or adjournment thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS. IF
ANY OTHER MATTER COMES BEFORE THE SPECIAL MEETING, THE PROXIES
WILL VOTE THIS PROXY IN THEIR DISCRETION ON SUCH MATTER.
Please sign exactly as your name appears herein. If shares are
held by joint owners, both must sign. When signing as an
attorney, executor, administrator, trustee, or guardian, give
your full title as such. If shares are held by a corporation,
the corporations president or other authorized officer
must sign using the corporations full name. If shares are
held by a partnership, an authorized person must sign using the
partnerships full name.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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