Agreement and Plan of Reorganization - Peregrine Systems Inc. and Extricity Inc.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PEREGRINE SYSTEMS, INC.
UTILITY ACQUISITION CORPORATION
AND
EXTRICITY, INC.
DATED AS OF MARCH 11, 2001
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TABLE OF CONTENTS
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ARTICLE I THE MERGER.........................................................2
1.1 The Merger.......................................................2
1.2 Effective Time...................................................2
1.3 Effect of the Merger.............................................2
1.4 Certificate of Incorporation; Bylaws.............................2
1.5 Directors and Officers...........................................3
1.6 Effect on Company Capital Stock..................................3
1.7 Appraisal Rights.................................................6
1.8 Exchange of Certificates.........................................7
1.9 No Further Ownership Rights in Company Capital Stock.............9
1.10 Lost, Stolen, or Destroyed Certificates..........................9
1.11 Tax and Accounting Consequences..................................9
1.12 Taking of Necessary Action; Further Action.......................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
2.1 Organization of the Company.....................................10
2.2 Company Capital Structure.......................................10
2.3 Subsidiaries....................................................12
2.4 Authority.......................................................12
2.5 No Conflict.....................................................13
2.6 Consents........................................................13
2.7 Company Financial Statements....................................13
2.8 No Undisclosed Liabilities......................................14
2.9 Accounts Receivable.............................................14
2.10 Business Changes................................................14
2.11 Tax and Other Returns and Reports...............................17
2.12 Restrictions on Business Activities.............................19
2.13 Title to Properties; Absence of Liens and Encumbrances;
Equipment.......................................................20
2.14 Intellectual Property...........................................21
2.15 Product Warranties; Defects; Liabilities........................26
2.16 Agreements, Contracts and Commitments...........................26
2.17 Change of Control Payments......................................28
2.18 Interested Party Transactions...................................28
2.19 Compliance with Laws; Governmental Authorization................29
2.20 Litigation......................................................29
2.21 Insurance.......................................................29
2.22 Opinion of Financial Advisor....................................30
2.23 Minute Books; Books and Records.................................30
2.24 Environmental Matters...........................................30
2.25 Brokers' and Finders' Fees......................................31
2.26 Employees; Compensation.........................................31
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TABLE OF CONTENTS
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2.27 Employee Matters and Benefit Plans..............................31
2.28 Bank Accounts...................................................36
2.29 Indemnification Obligations.....................................36
2.30 Reorganization..................................................36
2.31 Information Statement...........................................36
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........36
3.1 Organization of Parent and Merger Sub...........................36
3.2 Authority.......................................................36
3.3 Parent Common...................................................37
3.4 SEC Filings; Parent Financial Statements........................37
3.5 No Undisclosed Liabilities......................................38
3.6 Absence of Certain Changes Or Events............................38
3.7 Litigation......................................................38
3.8 Brokers' and Finders' Fees......................................38
3.9 Information Statement...........................................38
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................39
4.1 Conduct of Business of the Company and the Subsidiaries.........39
ARTICLE V ADDITIONAL AGREEMENTS.............................................42
5.1 Preparation of Information Statement and Section 3(a)(10)
Permit..........................................................42
5.2 Stockholder Approval............................................44
5.3 Access to Information...........................................44
5.4 Confidentiality.................................................44
5.5 Public Disclosure...............................................44
5.6 Consents........................................................44
5.7 Affiliate Agreements............................................44
5.8 Legal Conditions to the Merger..................................45
5.9 Best Efforts; Additional Documents and Further Assurances.......45
5.10 Notification of Certain Matters.................................45
5.11 Reorganization..................................................45
5.12 Form S-8........................................................45
5.13 Nasdaq National Market..........................................46
5.14 Voting Agreements...............................................46
5.15 Noncompetition Agreement........................................46
5.16 Employment Agreements...........................................46
5.17 Blue Sky Laws...................................................46
5.18 Termination of Company Investor Rights..........................46
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TABLE OF CONTENTS
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5.19 No Solicitation.................................................46
5.20 Termination of 401(k) Plan......................................47
5.21 Termination of Company Severance Plans..........................47
5.22 Form 5500.......................................................47
5.23 Canadian Retirement Plan........................................47
5.24 Regulatory Filings; Reasonable Efforts..........................48
5.25 Employee Plan Service Credit....................................48
5.26 Warrant Exercises...............................................48
5.27 Tax Return......................................................48
5.28 D&O Insurance...................................................48
ARTICLE VI CONDITIONS TO THE MERGER.........................................49
6.1 Conditions to Obligations of Each Party to Effect the Merger....49
6.2 Additional Conditions to Obligations of the Company.............49
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub.............................................................50
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW..............51
7.1 Survival of Representations and Warranties......................51
7.2 Escrow Arrangements.............................................51
7.3 Limitation of Liability.........................................60
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..............................60
8.1 Termination.....................................................60
8.2 Effect of Termination...........................................61
8.3 Amendment.......................................................61
8.4 Extension; Waiver...............................................62
ARTICLE IX GENERAL PROVISIONS...............................................62
9.1 Notices.........................................................62
9.2 Expenses........................................................63
9.3 Interpretation..................................................64
9.4 Counterparts....................................................64
9.5 Entire Agreement; No Third Party Beneficiaries; Assignment......65
9.6 Severability....................................................65
9.7 Other Remedies..................................................65
9.8 Governing Law...................................................65
9.9 Rules of Construction...........................................65
9.10 Specific Performance............................................65
9.11 Waiver of Jury Trial............................................66
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of March 11, 2001 by and among Peregrine Systems, Inc., a
Delaware corporation ("PARENT"); Utility Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"); Extricity,
Inc., a Delaware corporation (the "COMPANY"); and with respect to certain
provisions of Article VII of this Agreement, Barry M. Ariko, as Securityholder
Agent (as defined in Article VII of this Agreement), and U.S. Bank Trust
National Association, as Escrow Agent (as defined in Article VII of this
Agreement).
RECITALS
A. The Boards of Directors of each of the Company, Parent, and Merger
Sub believe it to be in the best interests of each such company and each such
company's respective stockholders that the Company and Merger Sub combine into a
single company through the merger of Merger Sub with and into the Company (the
"MERGER") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all the outstanding
shares of capital stock of the Company ("COMPANY CAPITAL STOCK"), consisting of
the outstanding shares of Common Stock of the Company ("COMPANY COMMON") and the
outstanding shares of Preferred Stock of the Company ("COMPANY PREFERRED"), will
be converted into shares of Common Stock of Parent, par value $0.001 per share
("PARENT COMMON"), at the rate determined herein.
C. A portion of the shares of Parent Common otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. The Company, Parent, and Merger Sub desire to make certain
representations and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises, and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit A (the "Merger Certificate"), and the
applicable provisions of the General Corporation Law of the State of Delaware
("Delaware Law") and, to the extent applicable pursuant to Section 2115 thereof,
the General Corporation Law of the State of California ("California Law"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. The Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2. EFFECTIVE TIME. Unless this Agreement is earlier terminated pursuant
to Article IX hereof, the closing of the Merger (the "Closing") shall occur as
promptly as practicable following the satisfaction or waiver of the conditions
set forth in Article VI. The Closing shall take place at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304-1050, unless another place or time is agreed to by Parent
and the Company. The date upon which the Closing actually occurs is referred to
herein as the "Closing Date." On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing the Merger Certificate or like
instrument with the Secretary of State of the State of Delaware, in accordance
with the relevant provisions of Delaware Law (the time of acceptance by the
Secretary of State of Delaware of such filing, or such later time and date as
may be mutually agreed and set forth in the Merger Certificate, being referred
to herein as the "Effective Time").
1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers, and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, and duties of the Company and Merger Sub shall become the
debts, liabilities, and duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
PROVIDED, HOWEVER, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is Peregrine Force, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
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1.5. DIRECTORS AND OFFICERS. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6. EFFECT ON COMPANY CAPITAL STOCK. Subject to the terms and conditions
of this Agreement, as of the Effective Time, by virtue of the Merger, and
without any action on the part of the holder of any of the issued and
outstanding shares of Company Capital Stock:
(a) AGGREGATE SHARES OF PARENT COMMON. The aggregate maximum
number of shares of Parent Common to be issued (including Parent Common to be
reserved for issuance upon exercise of Company Options (as defined in Section
1.6(d)) to be assumed by Parent) in exchange for the acquisition by Parent of
all outstanding Company Capital Stock and all unexpired and unexercised options,
warrants, and any similar rights to acquire Company Capital Stock shall be
9,200,000 shares (the "AGGREGATE SHARES OF PARENT COMMON").
(b) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. All
shares of Company Capital Stock that are owned directly or indirectly by the
Company or any subsidiary of the Company, or by Parent or any subsidiary of
Parent, shall be cancelled and extinguished, and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY CAPITAL STOCK. Other than shares to be
cancelled pursuant to Section 1.6(b) above, Dissenting Shares (as defined in
Section 1.7(a) below), and fractional shares, if any, as provided in Section
1.6(h) below, and subject to the limitation that Parent shall in no event be
required to issue more than the Aggregate Shares of Parent Common, each
outstanding share of Company Capital Stock issued and outstanding immediately
prior to the Effective Time shall be cancelled and extinguished and shall be
converted automatically, without any action on the part of the holder thereof
and upon surrender in the manner provided in Section 1.8 hereof of the
certificate(s) representing such shares of Company Capital Stock, into that
number of shares of Parent Common determined as follows:
(i) Each outstanding share of Series F Preferred Stock
of the Company (the "SERIES F PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $6.45
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES F EXCHANGE RATIO"). The "AGGREGATE SERIES F PARENT COMMON" shall mean
the number of whole shares of Parent Common determined by multiplying (A) the
Series F Exchange Ratio by (B) the number of shares of Series F Preferred
outstanding immediately prior to the Effective Time (the "SERIES F SHARE
AMOUNT").
(ii) Each outstanding share of Series E Preferred Stock
of the Company (the "SERIES E PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $4.91
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES E EXCHANGE RATIO"). The "AGGREGATE SERIES E PARENT COMMON"
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shall mean the number of whole shares of Parent Common determined by multiplying
(A) the Series E Exchange Ratio by (B) the number of shares of Series E
Preferred outstanding immediately prior to the Effective Time (the "SERIES E
SHARE AMOUNT").
(iii) Each outstanding share of Series D Preferred Stock
of the Company (the "SERIES D PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $5.91
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES D EXCHANGE RATIO"). The "AGGREGATE SERIES D PARENT COMMON" shall mean
the number of whole shares of Parent Common determined by multiplying (A) the
Series D Exchange Ratio by (B) the number of shares of Series D Preferred
outstanding immediately prior to the Effective Time (the "SERIES D SHARE
AMOUNT").
(iv) Each outstanding share of Series C Preferred Stock
of the Company (the "SERIES C PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $5.10
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES C EXCHANGE RATIO"). The "AGGREGATE SERIES C PARENT COMMON" shall mean
the number of whole shares of Parent Common determined by multiplying (A) the
Series C Exchange Ratio by (B) the number of shares of Series C Preferred
outstanding immediately prior to the Effective Time (the "SERIES C SHARE
AMOUNT").
(v) Each outstanding share of Series B Preferred Stock
of the Company (the "SERIES B PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $2.75
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES B EXCHANGE RATIO"). The "AGGREGATE SERIES B PARENT COMMON" shall mean
the number of whole shares of Parent Common determined by multiplying (A) the
Series B Exchange Ratio by (B) the number of shares of Series B Preferred
outstanding immediately prior to the Effective Time (the "SERIES B SHARE
AMOUNT").
(vi) Each outstanding share of Series A Preferred Stock
of the Company (the "SERIES A PREFERRED") shall be converted into the right to
receive that number of shares of Parent Common determined by dividing (A) $1.00
by (B) the Parent Common Price (such ratio being referred to herein as the
"SERIES A EXCHANGE RATIO"). The "AGGREGATE SERIES A PARENT COMMON" shall mean
the number of whole shares of Parent Common determined by multiplying (A) the
Series A Exchange Ratio by (B) the number of shares of Series A Preferred
outstanding immediately prior to the Effective Time (the "SERIES A SHARE
AMOUNT").
(vii) Each outstanding share of Company Common shall be
converted into the right to receive that number of shares of Parent Common
determined by dividing (A) the Available Parent Common (as defined below) by (B)
the Aggregate Company Common (as defined below) (such ratio being referred to
herein as the "COMMON EXCHANGE RATIO").
The "AVAILABLE PARENT COMMON" shall equal the number of shares of Parent
Common determined by subtracting (i) the sum of the Aggregate Series F Parent
Common, the Aggregate Series E Parent Common, the Aggregate Series D Parent
Common, the Aggregate Series C Parent Common, the Aggregate Series B Parent
Common, and the Aggregate Series A Parent Common
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from (ii) the Aggregate Shares of Parent Common. The "AGGREGATE COMPANY COMMON"
shall equal the number determined by subtracting (i) the sum of (A) the Series F
Share Amount, (B) the Series E Share Amount, (C) the product of two times the
Series D Share Amount, (D) the product of two times the Series C Share Amount,
(E) the product of two times the Series B Share Amount, and (F) the product of
two times the Series A Share Amount from (ii) the Fully Diluted Company Capital
Stock. The "FULLY DILUTED COMPANY CAPITAL STOCK" shall mean the aggregate number
of shares of Company Common outstanding immediately prior to the Effective Time
(assuming exercise or conversion of all outstanding securities or similar rights
that are exercisable for or convertible into shares of Company Common, whether
vested or unvested and whether or not currently exercisable).
The "PARENT COMMON PRICE" shall mean the average, rounded to the nearest
whole cent, of the closing prices of the Parent Common in trading on the Nasdaq
National Market over the 30 calendar day period ending on the day three days
prior to the Effective Time.
The "EXCHANGE RATIO" or "EXCHANGE RATIOS" refer, as the case may require,
to the Series F Exchange Ratio, the Series E Exchange Ratio, the Series D
Exchange Ratio, the Series C Exchange Ratio, the Series B Exchange Ratio, the
Series A Exchange Ratio, and the Common Exchange Ratio. Each of the Exchange
Ratios shall be rounded to the nearest fourth decimal place.
Of the total number of shares of Parent Common to be issued pursuant to
this Section 1.6(c), ten percent (10%) shall be subject to the Escrow Fund
established pursuant to Article VII below (with fractional shares as to any
holder of Company Capital Stock to be rounded down to a whole share) (the
"ESCROW AMOUNT").
(d) STOCK OPTIONS. At the Effective Time, all options to purchase
Company Common (each, a "COMPANY OPTION") then outstanding under the Company's
1996 Stock Option Plan (the "OPTION PLAN") or otherwise (whether or not
exercisable and whether or not vested), shall remain outstanding following the
Effective Time and shall be assumed by Parent in accordance with the provisions
described below:
(i) Each Company Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Option Plan and/or as provided in the respective
option agreements, governing such Company Option immediately prior to the
Effective Time (including, without limitation, any vesting or repurchase rights
relating thereto), except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common equal to the product of the number
of shares of Company Common that were issuable upon exercise of such Company
Option immediately prior to the Effective Time multiplied by the Common Exchange
Ratio, rounded down to the nearest whole number of shares of Parent Common and
(B) the per share exercise price for the shares of Parent Common issuable upon
exercise of such assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Common at which
such Company Option was exercisable immediately prior to the Effective Time by
the Common Exchange Ratio, rounded up to the nearest whole cent.
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(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(e) STOCK SUBJECT TO REPURCHASE. All shares of Parent Common which
are issued in the Merger in exchange for shares of Company Common which, under
applicable stock purchase, stock restriction, or similar agreements with the
Company, are unvested or subject to a repurchase option or other condition of
forfeiture that by its terms does not terminate due to the Merger ("COMPANY
RESTRICTED STOCK"), will also be unvested or subject to the same repurchase
option or other condition, as the case may be, and the certificates evidencing
such shares will be marked with an appropriate legend.
(f) CAPITAL STOCK OF MERGER SUB. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid, and
nonassessable share of common stock, $0.001 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(g) ADJUSTMENTS TO EXCHANGE RATIOS. The Exchange Ratios shall be
adjusted, as appropriate, to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common or Company Capital Stock),
reorganization, recapitalization, or other like change with respect to Parent
Common or Company Capital Stock occurring after the date hereof and prior to the
Effective Time. Subject to the requirements of the first sentence of this
Section 1.6(g), no change in the outstanding shares of Company Common or Company
Preferred or option or similar right to acquire shares of Company Capital Stock
shall result in any increase in the Exchange Ratio.
(h) FRACTIONAL SHARES. No fractional shares of Parent Common shall
be issued, but in lieu thereof, each holder of shares of Company Capital Stock
who would otherwise be entitled to receive a fraction of a share of Parent
Common (after aggregating all fractional shares of Parent Common to be received
by such holder) shall be entitled to receive from Parent an amount of cash equal
to the product of (i) such fraction and (ii) the Parent Common Price.
1.7 APPRAISAL RIGHTS.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal rights for such shares in accordance with Section 262 of
Delaware Law or, to the extent applicable, dissenters' rights in accordance with
Chapter 13 of California Law and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("DISSENTING
SHARES"), shall not be converted into or represent a right to receive Parent
Common pursuant to Section 1.6, but the holder thereof shall only be entitled to
such rights as are granted by Delaware Law or California Law, as the case may
require. From and after the Effective Time, a holder of Dissenting Shares shall
not be
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entitled to exercise any of the voting rights or other rights of a stockholder
of the Surviving Corporation.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who either demands appraisal of such
shares under Delaware Law or exercises dissenters' rights in accordance with
Chapter 13 of California Law, shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal or dissent, as the case
may require, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive Parent Common and cash in lieu of fractional
shares as provided in Section 1.6, as the case may be, without interest thereon,
upon surrender of the certificate representing such shares of Company Capital
Stock.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock or exercise of
dissenters' rights with respect to such shares, withdrawals of such demands or
exercises, and any other instruments served pursuant to Delaware Law or
California Law and received by the Company and (ii) the opportunity to manage
and direct in all negotiations and proceedings with respect to demands for
appraisal under Delaware Law or the exercise of dissenters' rights under
California Law. The Company shall not, except with the prior written consent of
Parent, (i) voluntarily make any payment with respect to any demands for
appraisal of or the exercise of dissenters' rights with respect to capital stock
of the Company or (ii) offer to settle or settle any such demands or exercises.
1.8 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Mellon Investor Services LLC shall act as
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. As soon as practicable after
the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, through such reasonable procedures
as Parent may adopt, the aggregate number of shares of Parent Common issuable
pursuant to Section 1.6(a) and the aggregate cash payment owing pursuant to
Section 1.6(h) in exchange for outstanding shares of Company Capital Stock;
PROVIDED, HOWEVER, that, on behalf of the holders of Company Capital Stock
immediately prior to the Effective Time, and pursuant to Article VII hereof,
Parent shall deposit into an escrow account a number of shares of Parent Common
equal to the Escrow Amount out of the aggregate number of shares of Parent
Common otherwise issuable pursuant to Section 1.6. The portion of the Escrow
Amount contributed on behalf of each holder of Company Capital Stock shall be in
proportion to the aggregate number of shares of Parent Common which such holder
would otherwise be entitled to receive under Section 1.6 by virtue of ownership
of outstanding shares of Company Capital Stock immediately prior to the
Effective Time.
(c) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the
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"CERTIFICATES") whose shares were converted into the right to receive shares of
Parent Common pursuant to Section 1.6, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, and shall be in such form and have such other provisions as necessary to
effect the intent of this Agreement as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto
and subject to the requirements and restrictions of any other agreement between
Parent and any holder of Company Capital Stock on or before the Effective Time,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of whole shares of Parent Common (less the
number of shares of Parent Common to be deposited in the Escrow Fund on such
holder's behalf pursuant to Article VII hereof), plus cash in lieu of fractional
shares in accordance with Section 1.6(h), to which such holder is entitled
pursuant to Section 1.6, and the Certificate so surrendered shall forthwith be
cancelled. As soon as practicable after the Effective Time, and subject to and
in accordance with the provisions of Article VII hereof, Parent shall cause to
be distributed to the Escrow Agent (as defined in Article VII) a certificate or
certificates representing that number of shares of Parent Common equal to the
Escrow Amount, which shares shall be registered in the name of the Escrow Agent.
Such shares shall be beneficially owned by the holders on whose behalf such
shares were deposited in the Escrow Fund and shall be available to compensate
Parent as provided in Article VII. Until so surrendered as contemplated by this
Section 1.8, each outstanding Certificate that, immediately prior to the
Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, to evidence the
ownership of the number of full shares of Parent Common into which such shares
of Company Capital Stock shall have been so converted pursuant to this Agreement
and Delaware Law and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(h).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common with a record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the shares of Parent
Common represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange (i) will demonstrate to Parent's reasonable satisfaction that such
transfer was made in compliance with applicable securities laws and (ii) will
have paid to Parent or any agent designated
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by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common in any name other than that of the
registered holder of the certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, none of the Exchange Agent, the Surviving Corporation, or any party
hereto shall be liable to a holder of shares of Parent Common or Company Capital
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat, or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares of
Parent Common issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock. There shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article I.
1.10 LOST, STOLEN, OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen, or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen, or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common and cash for fractional
shares, if any, as may be required pursuant to Section 1.6; PROVIDED, HOWEVER,
that either of Parent or the Exchange Agent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the certificates alleged to have been
lost, stolen, or destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code (and this Agreement is intended to constitute a plan
of reorganization for purposes of Section 368 of the Code) and (ii) qualify for
accounting treatment as a purchase transaction.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub shall be fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
letter and schedules delivered thereto, each such disclosure referencing the
appropriate section number(s) of this Agreement as to which an exception exists,
supplied by the Company to Parent and dated as of the date hereof (the "COMPANY
SCHEDULES"), as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and each Subsidiary (as defined in Section 2.3) is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation. The Company and each Subsidiary has all requisite
corporate power to own, lease, and operate its properties and to carry on its
business as now being conducted and as currently proposed to be conducted. The
Company and each Subsidiary is duly qualified or licensed to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect (as defined in
Section 9.3 below) on the Company or such Subsidiary, as the case may be. The
Company has delivered to counsel for Parent a true and correct copy of its
Amended and Restated Certificate of Incorporation (the "RESTATED CERTIFICATE")
and its Bylaws, each as amended to date.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common and 18,126,650 shares of Company Preferred,
of which 3,055,000 shares have been designated Series A Preferred Stock; of
which 1,976,469 shares have been designated Series B Preferred Stock; of which
2,055,760 shares have been designated Series C Preferred Stock; of which
1,187,575 shares have been designated Series D Preferred Stock; of which
2,051,846 shares have been designated Series E Preferred Stock; and of which
7,800,000 shares have been designated Series F Preferred Stock. As of the date
of this Agreement, the Company has issued and outstanding 10,536,685 shares of
Company Common, 3,055,000 shares of Series A Preferred, 1,976,469 shares of
Series B Preferred, 1,954,937 shares of Series C Preferred, 1,187,575 shares of
Series D Preferred, 2,031,846 shares of Series E Preferred, and 7,751,937 shares
of Series F Preferred. In addition, 71,666 shares of the Company Common are
reserved for issuance upon the exercise of outstanding warrants to purchase
Company Common; 100,823 shares of Series C Preferred are reserved for issuance
upon the exercise of outstanding warrants to purchase Series C Preferred; 20,000
shares of Series E Preferred are reserved for issuance upon the exercise of
outstanding warrants to purchase Series E Preferred; and 47,000 shares of Series
F Preferred are reserved for issuance upon the exercise of outstanding warrants
to purchase Series F Preferred (each individually, a "WARRANT" and collectively,
the "WARRANTS"). All outstanding shares of Company Capital Stock are, and any
shares of Company Capital Stock issuable upon exercise of any outstanding
options, warrants, conversion rights, or other rights, will be, duly authorized,
validly issued, fully paid, and non-assessable and not subject to any preemptive
rights created by statute, the Restated Certificate,
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or any agreement to which the Company is a party or by which the Company is
bound. All outstanding Company Capital Stock and all other outstanding
securities of the Company have been issued in compliance with all applicable
federal and state securities laws. Each outstanding share of Company Preferred
is currently convertible into the number of shares of Company Common set forth
in Schedule 2.2. Schedule 2.2(a) sets forth a complete and accurate list of all
issued and outstanding shares of Company Capital Stock and each outstanding
Warrant, identifying the name and last known address of the registered holder
thereof and the acquisition date. Of the outstanding shares of Company Common,
3,408,765 shares constitute Company Restricted Stock that are subject to a right
of repurchase or other risk of forfeiture. Schedule 2.2(a) separately identifies
all outstanding Company Common that is Company Restricted Stock, describes the
applicable vesting terms, specifies the number of shares vested as of the date
of this Agreement, and indicates the extent, if any, to which the repurchase
option or similar vesting term will be accelerated by the transactions
contemplated by this Agreement.
(b) The Company has reserved 11,840,000 shares of Company Common
for issuance to employees, directors and consultants pursuant to the Option
Plan, of which 7,361,685 shares have been issued upon exercise of Company
Options and are reflected as outstanding Company Common in Section 2.2(a) above;
of which Company Options to acquire 3,542,240 shares of Company Common are
outstanding and unexercised; and of which 3,646,939 shares remain available for
future grants under the Option Plan. Schedule 2.2(b) sets forth in chronological
order for each outstanding Company Option the name of the holder of such option
or right, the last known address of such holder, an indication of whether such
holder is an employee of or consultant to the Company, the status of the option
as either an incentive stock option under Section 422 of the Code or a
nonstatutory stock option, the date of grant or issuance of such option or
right, the number or amount of securities as to which such option or right is
exercisable, the exercise price of such option or right and the vesting schedule
for such option or right, including the extent vested to the date of this
Agreement and an indication of the extent, if any, to which the exercisability
of such option or right will be accelerated and become exercisable by the
transactions contemplated by this Agreement.
(c) Except as set forth in Schedules 2.2(a) and 2.2(b) and except
for conversion rights of the Company Preferred, the Company has no commitment or
obligation of any character, either firm or conditional, written or oral, to
issue, deliver or sell, or repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, under offers, stock option agreements,
stock bonus agreements, stock purchase plans, incentive compensation plans,
warrants, calls, conversion rights, or otherwise, any shares of the capital
stock or other securities of the Company. There are no voting trusts or other
agreements or understandings to which the Company is a party with respect to the
shares of capital stock of the Company. Except as set forth in Schedules 2.2(a)
and 2.2(b), there are no securities of the Company issued, reserved for
issuance, or outstanding. Other than the Option Plan, the Company has never
adopted or maintained any stock option plan, stock purchase plan, or similar
plan providing for the equity compensation of any person. There are no (and have
never been any) outstanding or authorized stock appreciation, phantom stock,
profit participation, or other similar rights with respect to the Company. No
repricing of options or stock purchase rights or similar program to effectively
reduce the exercise price of an option or purchase price of a stock
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purchase right has occurred since the date of the Company's incorporation, nor
does there exist any stock option, stock grant or other equity incentive
arrangement with any employee, officer or consultant of the Company which is
required to be accounted for under variable plan accounting.
(d) As a result of the Merger, Parent will be the record and sole
beneficial owner of all outstanding shares of the Company's capital stock and
indirectly (through the Surviving Corporation as the record holder) all the
outstanding shares of capital stock of the Subsidiaries and all rights to
acquire or receive such capital stock of the Company and the Subsidiaries. At or
before the Effective Time, any rights of any holder or prospective holder of the
Company's securities to cause such securities to be registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and any information
rights, voting rights, rights of co-sale, rights to maintain equity percentage,
rights of first refusal and the like that may exist for the benefit of any such
holder or prospective holder shall have been terminated.
2.3 SUBSIDIARIES. Other than the Subsidiaries (as defined herein),
neither the Company nor any Subsidiary has, and neither the Company nor any
Subsidiary has ever had, any subsidiaries or affiliated companies and does not
otherwise own, and has never otherwise owned, any equity, debt, or other
ownership interest in, and does not control and has never controlled, directly
or indirectly, any other corporation, partnership, limited liability company,
joint venture business trust or association, or other entity. Schedule 2.3 sets
forth a complete and accurate list of each corporation, partnership, limited
liability company, joint venture, business trust or association, or other entity
in which the Company, directly or indirectly, holds an equity or similar
ownership interest (each, a "SUBSIDIARY" and collectively, the "SUBSIDIARIES").
Schedule 2.3 identifies, for each Subsidiary, the issued and outstanding capital
stock, the identity and address of each holder of the issued and outstanding
capital stock of such Subsidiary, and the number of shares of capital stock of
such Subsidiary held by such holder. Except as set forth in Schedule 2.3, all of
the outstanding shares of the capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are wholly
owned by the Company, free and clear of any Lien (as defined in Section 2.11).
There are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which any Subsidiary is a party or by which any
Subsidiary is bound, obligating such Subsidiary to issue, deliver, sell,
repurchase, or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of such Subsidiary's capital stock.
2.4 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger and this Agreement by the Company's stockholders as
contemplated by Section 5.2. The vote required of the Company's stockholders to
duly approve the Merger and this Agreement is that number of shares as would
constitute a majority of the outstanding shares of (a) the Company Common and
the Company Preferred, voting together as a single class, and (b) the Company
Preferred voting separately as a single class (in each case with each share of
Company Preferred being entitled to a number of votes equal to the number of
whole shares of Company Common into which such share of Company Preferred could
be converted on the record date for the
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vote). Holders of the requisite number of shares of Company Capital Stock
necessary to approve this Agreement and the Merger have executed and delivered
Voting Agreements in the form attached hereto as EXHIBIT B. The Company's Board
of Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms.
2.5 NO CONFLICT. The execution and delivery of this Agreement by the
Company do not, and as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation, or acceleration of
any obligation or loss of any benefit under (any such event, a "CONFLICT") (i)
any provision of the Restated Certificate or the Company's Bylaws or the similar
constituent documents of any Subsidiary or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any Subsidiary or their respective properties or
assets.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") is
required by or with respect to the Company or any Subsidiary in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Merger
Certificate with the Secretary of State of the State of Delaware; (ii) the
pre-merger notification and waiting period requirements (the "HSR APPROVAL") of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"); (iii) such consents, waivers, filings, approvals, and registrations as
may be required under applicable federal and state securities laws (including
the filing with the California Department of Corporations seeking the 3(a)(10)
Permit as contemplated by Section 5.1(b)); and (iv) such other consents,
waivers, authorizations, filings, approvals and registrations as are set forth
on Schedule 2.6.
2.7 COMPANY FINANCIAL STATEMENTS. Schedule 2.7 sets forth true and
correct copies of (i) the Company's audited, consolidated balance sheets as of
March 31, 2000 and March 31, 1999 and the related audited, consolidated
statements of income and cash-flows for the respective twelve-month periods then
ended (the "COMPANY YEAR-END FINANCIALS") and (ii) the Company's unaudited,
consolidated balance sheet as of February 15, 2001 and the related unaudited,
consolidated statements of income and cash-flows for the period beginning April
1, 2000 and ending February 15, 2001 (the "COMPANY INTERIM FINANCIALS"). The
Company Year-End Financials and the Company Interim Financials are collectively
referred to herein as the "COMPANY FINANCIALS." The Company Financials are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles in the United States
("GAAP") applied on a consistent basis throughout the periods indicated, and
consistent with each other, except for the absence of footnotes in the case of
the Company Interim Financials. The Company Financials present fairly the
consolidated financial condition and consolidated operating results of the
Company
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and the Subsidiaries as of the respective dates and for the periods indicated
therein, subject in the case of the unaudited financial statements to normal
year-end adjustments, which will not in any event be material. The Company's
unaudited, consolidated Balance Sheet as of February 15, 2001 is referred to
herein as the "COMPANY BALANCE SHEET."
2.8 NO UNDISCLOSED LIABILITIES. Neither of the Company nor any
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise),
except (i) liabilities provided for in Company Balance Sheet and (ii)
liabilities incurred since February 15, 2001 in the ordinary and usual course of
business, consistent with past practice. None of the liabilities described in
the foregoing sections (i) or (ii) could reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on the Company and the
Subsidiaries, taken as a whole.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable shown on the Company
Balance Sheet (net of reserves and deferred revenue balances indicated on the
Company Balance Sheet) or thereafter acquired until the Effective Time (net of
reserves and deferred revenue balances accrued in the ordinary course of
business and consistent with past practice) arose and are collectible in the
ordinary course of business, except that the value of any account receivable,
the collection of which is doubtful or which is subject to a defense or set-off,
has been written down to an amount not in excess of net realizable value or
adequate reserves or allowances therefor have been provided. None of the
receivables of the Company or any Subsidiary is subject to any claim of offset,
recoupment, set-off, or counterclaim, and, to the knowledge of the Company,
there are no facts or circumstances (whether asserted or unasserted) that would
give rise to any such claim. No person or entity has any lien, charge, pledge,
security interest, or other encumbrance on any such receivables, and no
agreement for deduction or discount has been made with respect to any of such
receivables.
2.10 BUSINESS CHANGES. Since December 31, 2000 (or such other date
specifically set forth herein), the Company and the Subsidiaries have (i)
conducted business only in the ordinary and usual course, consistent with past
practices, and (ii) without limiting the generality of the foregoing:
(a) There has not occurred any event, change, or circumstance
that, individually or in the aggregate, has resulted or could result in a
Material Adverse Effect on the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary has issued, or
authorized for issuance, any equity security, bond, note or other security of
the Company or any Subsidiary, except for shares of Company Common issued upon
the exercise of the outstanding Company Options listed in Schedule 2.2(b) or
shares of Company Capital Stock issued upon exercise of any of the Warrants, or
accelerated the vesting of any employee stock benefits (including vesting under
stock purchase agreements or exercisability of Company Options). Other than
outstanding Company Options listed in Schedule 2.2(b), neither the Company nor
any Subsidiary has granted or entered into any commitment or obligation to issue
or sell any such equity security, bond, note or other security of the Company or
any Subsidiary, whether pursuant to offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation plans, warrants, calls,
conversion rights or otherwise.
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(c) Neither the Company nor any Subsidiary has incurred any
additional debt for borrowed money, nor incurred any obligation or liability
(fixed, contingent or otherwise), except in the ordinary and usual course of the
business of the Company or such Subsidiary, consistent with past practices.
(d) Neither the Company nor any Subsidiary has paid any obligation
or liability (fixed, contingent or otherwise), or discharged or satisfied any
lien or encumbrance, or settled any liability, claim, dispute, proceeding, suit,
or appeal, pending or threatened against it or any of its assets or properties,
except for current liabilities included in the Company Balance Sheet and current
liabilities incurred since the date of the Company Balance Sheet in the ordinary
and usual course of business of the Company or such Subsidiary, consistent with
past practices.
(e) Neither the Company nor any Subsidiary has declared, set aside
for payment, or paid any dividend, or made any payment or other distribution on
or with respect to any share of Company Capital Stock or capital stock of any
Subsidiary.
(f) Neither the Company nor any Subsidiary has purchased, redeemed
or otherwise acquired or committed itself to acquire, directly or indirectly,
any share or shares of Company Capital Stock or capital stock of any Subsidiary.
(g) Neither the Company nor any Subsidiary has mortgaged, pledged,
otherwise encumbered or subjected to Lien any of its assets or properties,
tangible or intangible, nor has it committed itself to do any of the foregoing,
except for Liens for current Taxes (as defined in Section 2.11) which are not
yet due and payable and purchase money liens arising out of the purchase or sale
of products or services made in the ordinary and usual course of business,
consistent with past practice.
(h) Neither the Company nor any Subsidiary has disposed of, or
agreed to dispose of, any asset or property, tangible or intangible, except in
the ordinary and usual course of business, consistent with past practice, and in
each case for a consideration at least equal to the fair value of such asset or
property, nor has the Company or any Subsidiary leased or licensed to others
(including officers and directors of the Company or a Subsidiary), or agreed so
to lease or license, any asset or property, except for the licensing of the
Company's software to the customers of the Company and the Subsidiaries
(including resellers, independent software vendors, and original equipment
manufacturers) in the ordinary course of business consistent with past practice,
nor has the Company or any Subsidiary discontinued any product line or the
production, sale or other disposition of any of its products or services.
(i) Neither the Company nor any Subsidiary has purchased or agreed
to purchase or otherwise acquire any debt or equity securities of any
corporation, partnership, joint venture, firm or other entity. Neither the
Company nor any Subsidiary has made any expenditure or commitment for the
purchase, acquisition, construction or improvement of a capital asset, except in
the ordinary and usual course of business, consistent with past practice, and
the aggregate amount of all such expenditures and commitments made in the
ordinary and usual course of business has not exceeded $25,000.
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(j) Neither the Company nor any Subsidiary has entered into any
transaction or contract, or made any commitment to do the same, except in the
ordinary and usual course of business consistent with past practice and not
involving an amount in any case in excess of $25,000 (excluding agreements under
which the obligation of payment or performance has been satisfied in full).
Neither the Company nor any Subsidiary has waived any right of substantial value
or cancelled any debts or claims or voluntarily suffered any losses other than
in the ordinary and usual course of business, consistent with past practice.
(k) Neither the Company nor any Subsidiary has sold, assigned,
transferred or conveyed, or committed itself to sell, assign, transfer or
convey, any Company Intellectual Property (as defined in Section 2.14), except
for the licensing of the Company's software to the customers of the Company and
the Subsidiaries (including resellers, independent software vendors, and
original equipment manufacturers) in the ordinary and usual course of business,
consistent with past practice, and neither the Company nor any Subsidiary has
entered into any product development, technology or product sharing, or similar
strategic arrangement with any other party.
(l) Neither the Company nor any Subsidiary has since September 30,
2000 effected or agreed to effect any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus, incentive,
retirement, medical reimbursement, life insurance, deferred compensation or any
other employee benefit plan or arrangement (except as contemplated by this
Agreement).
(m) Neither the Company nor any Subsidiary has since September 30,
2000 paid or committed itself to pay to or for the benefit of any of its
directors, officers, employees, advisors or stockholders any compensation of any
kind other than wages, salaries, bonuses, and benefits at times and rates in
effect prior to September 30, 2000.
(n) Neither the Company nor any Subsidiary has effected or agreed
to effect any change, including by way of hiring or involuntary termination, in
its directors, executive officers, or key employees.
(o) Neither the Company nor any Subsidiary has incurred any work
stoppage, labor strike or other labor trouble, or any action, suit, claim, labor
dispute or grievance relating to any labor, safety or discrimination matter
involving the Company or any Subsidiary, including, without limitation, charges
of wrongful discharge or other unlawful labor practices or actions.
(p) Since September 29, 2000, the Company has not effected or
committed itself to effect any amendment or modification of the Restated
Certificate or the Company's Bylaws (except as contemplated by this Agreement),
nor has any Subsidiary effected or committed itself to effect any amendment or
modification of its constituent documents.
(q) The Company has not changed its accounting methods or
practices (including any change in depreciation or amortization policies or
rates, any changes in policies in making or reversing accruals, or any change in
capitalization of software development costs).
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(r) The Company has not revalued any of the assets of the Company
or any Subsidiary, other than in the ordinary and usual course of business,
consistent with past practice.
(s) Neither the Company nor any Subsidiary has made any loan to
any person or entity, and neither the Company nor any Subsidiary has guaranteed
the payment of any loan or debt of any person or entity, except for (x) travel
or similar advances made to employees in connection with their employment duties
in the ordinary and usual course of business, consistent with past practice, and
(y) accounts receivable incurred in the ordinary and usual course of business,
consistent with past practice.
(t) Neither the Company nor any Subsidiary has changed in any
material respect the prices or royalties set or charged by the Company or such
Subsidiary.
(u) Neither the Company nor any Subsidiary has commenced or
received any notice of threat or commencement of any lawsuit or proceeding
against or investigation of the Company, any Subsidiary, or their respective
affairs.
(v) Neither the Company nor any Subsidiary has negotiated or
agreed to do any of the things described in the preceding clauses (a) through
(u) (other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.11 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX"
or, collectively, "TAXES," means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts, (ii) any liability for the payment of any amounts of
the type described in clause (i) of this Section 2.11(a) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
and (iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) of this Section 2.11(a) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) The Company and each Subsidiary have accurately
prepared and timely filed, taking into effect any extension of time within which
to file (the circumstances of such extensions being described in the Company
Schedules), all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company, such Subsidiary, or their operations,
and such Returns are true and correct in all material respects and have been
completed in accordance with applicable law.
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(ii) The Company and each Subsidiary (A) have paid or
accrued all Taxes it is required to pay or accrue and (B) has withheld with
respect to its employees (and timely paid over to the appropriate taxing
authority) all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Neither the Company nor any Subsidiary has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company, or any Subsidiary, nor
has the Company or any Subsidiary executed any waiver of any statute of
limitations on or extended the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the
Company or any Subsidiary is presently in progress, nor has the Company or any
Subsidiary been notified of any request for such an audit or other examination.
(v) Neither the Company nor any Subsidiary has any
liability for unpaid federal, state, local or foreign Taxes which has not been
accrued or reserved against in the Company Financials, whether asserted or
unasserted, contingent or otherwise. The accruals for the Taxes of the Company
and the Subsidiaries shown on the Company Balance Sheet are sufficient to
discharge the Taxes for all periods (or the portion of any period) ending on or
prior to the date of the Company Balance Sheet. Neither the Company nor any
Subsidiary has incurred any liability for Taxes since the date of the Company
Balance Sheet other than in the ordinary and usual course of business,
consistent with past practices.
(vi) The Company has provided to Parent copies of all
federal, state, local, and foreign income and all state sales and use Returns of
the Company and each Subsidiary for all periods since the date of incorporation
of the Company or such Subsidiary, as the case may require.
(vii) There are not now, will not be before the Closing,
and will not be created as a result of the Closing any liens, pledges, charges,
claims, restrictions on transfer, mortgages, security interests or other
encumbrances of any sort (collectively, "LIENS") on the assets of the Company
relating to or attributable to Taxes, other than Liens for Taxes not yet due and
payable as of such time.
(viii) The Company has no knowledge of any reasonable
basis for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company or
any Subsidiary.
(ix) None of the assets of the Company or any
Subsidiary are treated as "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(x) There is no contract, agreement, plan or
arrangement to which the Company or any Subsidiary is a party, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of, or current or former independent contractor or service provider to,
the Company or any Subsidiary that, individually or collectively, could give
rise
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to the payment of any amount that would not be deductible pursuant to Sections
280G, 404 or 162(m) of the Code.
(xi) Neither the Company nor any Subsidiary has filed
any consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any
Subsidiary.
(xii) Neither the Company nor any Subsidiary is a party
to a tax sharing or allocation agreement, nor does the Company owe any amount
under any such agreement. Neither the Company nor any Subsidiary has been a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code) filing a consolidated income tax return or has any liability for the Taxes
of any person (other than the Company or such Subsidiary, as the case may
require) under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or agreement,
or otherwise. Neither the Company nor any Subsidiary has ever been a party to
any joint venture, partnership or other arrangement that could be treated as a
partnership for Tax purposes.
(xiii) Neither the Company nor any Subsidiary is or has
been at any time a "United States real property holding corporation" within the
meaning of Section 897 of the Code.
(xiv) No adjustment or deficiency relating to any Return
filed or required to be filed by the Company or any Subsidiary has been proposed
formally or, to the knowledge of the Company, informally by any tax authority to
the Company any Subsidiary or any representative thereof.
(xv) The Company and the Subsidiaries utilize the
accrual method of accounting for U.S. federal income tax purposes.
(xvi) Neither the Company nor any Subsidiary has any net
operating losses, capital loss carry-forwards, tax credits or other tax
attributes presently subject to limitation under Sections 382, 383 or 384 of the
Code or the Federal consolidated return regulations, or any comparable
provisions of state law (other than limitations imposed as a result of the
transactions contemplated pursuant to this Agreement).
(xvii) Neither the Company nor any Subsidiary has
distributed the capital stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code. No capital stock of the Company or any
Subsidiary has been distributed in a transaction satisfying the requirements of
Section 355 of the Code.
2.12 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompetition, field of use, "most favored nation," or otherwise), judgment,
injunction, order or decree to which the Company or any Subsidiary is a party or
otherwise binding upon the Company or any Subsidiary which has or could be
expected to have the effect of prohibiting or impairing any business practice of
the Company or any Subsidiary, any acquisition of property (tangible or
intangible) by the
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Company or any Subsidiary or the conduct of business by the Company or any
Subsidiary. Without limiting the foregoing, neither the Company nor any
Subsidiary has entered into any agreement under which the Company or any
Subsidiary (i) is restricted from selling, licensing or otherwise distributing
any of its products or services to any class of customers, in any geographic
area, during any period of time or in any segment of the market or (ii) is
required to offer or sell its products or services to any person on terms that
are not less favorable than the terms under which such products or services are
sold to other parties.
2.13..TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; EQUIPMENT.
(a) Neither the Company nor any Subsidiary owns any real property,
has ever owned any real property, or holds any right or option to purchase any
real property. Schedule 2.13(a) sets forth a complete list of all real property
currently leased by the Company and the Subsidiaries, the name of the lessor and
the lessee and the date of the lease and each amendment thereto and with respect
to any current lease, the aggregate annual rent. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default by (i) the Company or any Subsidiary, as the
case may require, or (ii) to the knowledge of the Company, any other party to
such leases). Neither the operations of the Company or any Subsidiary on such
real property, nor such real property, including improvements thereon, violate
any applicable building code, zoning requirement, or classification, or
pollution control ordinance or statute relating to the particular property or
such operations, where such violation could reasonably be expected to have a
Material Adverse Effect on the Company or such Subsidiary, and such
non-violation is not dependent, in any instance, on so-called non-conforming use
exceptions.
(b) The Company and each Subsidiary holds good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any Liens, except as reflected
in the Company Financials and except for Liens for Taxes not yet due and payable
and such imperfections of title and encumbrances, if any, which are not material
in character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
(c) Schedule 2.13(c) lists all items of equipment (the
"EQUIPMENT") owned or leased by the Company and the Subsidiaries, except
individual pieces of equipment with an individual value of less than $5,000. All
facilities, machinery, equipment, fixtures, vehicles, and other properties
owned, leased or used by the Company or the Subsidiaries are (i) adequate for
the conduct of the business of the Company or the Subsidiary, as the case may
require, as currently conducted and (ii) in good operating condition, regularly
and properly maintained, subject to normal wear and tear, and reasonably fit and
usable for the purposes for which they are being used.
(d) Neither the Company nor any Subsidiary has sold or otherwise
released for distribution any of its customer files and other customer
information relating to the current and former customers of the Company and the
Subsidiaries (the "COMPANY CUSTOMER INFORMATION").
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No person other than the Company possesses any claims or rights with respect to
use of the Company Customer Information.
2.14 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "COMMERCIAL SOFTWARE RIGHTS" shall mean packaged
commercially available software programs which have been licensed to the Company
or a Subsidiary pursuant to an end-user license and which are used in the
business of the Company or a Subsidiary but are in no way a component of the
products of the Company and the Subsidiaries and related Company Intellectual
Property.
(ii) "COMPANY INTELLECTUAL PROPERTY" shall mean any
Technology and Intellectual Property Rights, including the Company Registered
Intellectual Property Rights (as defined below), that are owned (in whole or in
part) by or exclusively licensed to the Company or a Subsidiary.
(iii) "INTELLECTUAL PROPERTY RIGHTS" shall mean any or
all of the following and all rights in, arising out of, or associated therewith:
(A) all United States and foreign patents and utility models and applications
therefor and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("PATENTS"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information; (C) all
copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world ("COPYRIGHTS"); (D) all
maskworks, maskwork registrations and applications therefor, and any equivalent
or similar rights in semiconductor masks, layouts, architectures or topology
("MASKWORKS"); (E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all World Wide Web addresses, domain names
and sites and applications and registrations therefor; (G) all trade names,
logos, common law trademarks and service marks, trademark and service mark
registrations and applications therefor and all goodwill associated therewith
throughout the world ("TRADEMARKS"); and (H) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.
(iv) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall
mean all United States, international and foreign: (A) Patents, including
applications therefor; (B) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations or
applications related to Trademarks and World Wide Web domain name registrations;
(C) Copyrights registrations and applications to register Copyrights; (D)
Maskwork registrations and applications to register Maskworks; and (E) any other
Technology that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any state,
government or other public or private legal authority at any time.
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(v) "TECHNOLOGY" shall mean any or all of the
following: (A) works of authorship including, without limitation, computer
programs, source code and executable code, whether embodied in software,
firmware or otherwise, computer code, documentation, designs, files, records,
data and maskworks; (B) inventions (whether or not patentable) and improvements;
(C) proprietary and confidential information, including technical data and
customer and supplier lists, trade secrets and know how; (D) databases, data
compilations and collections and technical data; (E) logos, trade names, trade
dress, trademarks and service marks; (F) World Wide Web addresses, domain names
and sites; (G) tools, methods and processes; and (H) all instantiations of the
foregoing in any form and embodied in any media.
(b) Schedule 2.14(b) lists all Registered Intellectual Property
Rights owned by, filed in the name of, or applied for, by the Company or any
Subsidiary (the "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property Rights or
Company Intellectual Property.
(c) Each item of Company Registered Intellectual Property Rights
is valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property Rights
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property Rights have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property Rights. Except as set forth on Schedule
2.14(c), there are no actions that must be taken by the Company or any
Subsidiary within one hundred twenty (120) days of the Closing Date, including
the payment of any registration, maintenance or renewal fees or the filing of
any responses to PTO office actions, documents, applications or certificates for
the purposes of obtaining, maintaining, perfecting or preserving or renewing any
Registered Intellectual Property Rights. In each case in which the Company or
any Subsidiary has acquired ownership of any Technology or Intellectual Property
Right from any person, the Company or such Subsidiary has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Technology and the associated Intellectual Property Rights (including the right
to seek past and future damages with respect thereto) to the Company or such
Subsidiary, as the case may require. To the maximum extent provided for by, and
in accordance with, applicable laws and regulations, the Company or a
Subsidiary, as applicable, has recorded each such assignment of a Registered
Intellectual Property Right assigned to the Company or a Subsidiary, as
applicable, with the relevant Governmental Entity, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be. Except as set forth on Schedule 2.14(c),
neither the Company nor any Subsidiary has claimed a particular status,
including "Small Business Status," in the application for any Intellectual
Property Rights, which claim of status was not at the time made, or which has
since become, inaccurate or false or that will no longer be true and accurate as
a result of the Closing.
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(d) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, the Company knows of no information, materials,
facts or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely affect any pending
application for any Company Registered Intellectual Property Right, and neither
the Company nor any Subsidiary has misrepresented, or failed to disclose, and
has no knowledge of any misrepresentation or failure to disclose, any fact or
circumstances in any application for any Company Registered Intellectual
Property Right that would constitute fraud or a misrepresentation with respect
to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property Right.
(e) Each item of Company Intellectual Property is free and clear
of any Liens except for non-exclusive licenses granted to end-user customers in
the ordinary course of business. The Company or a Subsidiary is the exclusive
owner or exclusive licensee of all Company Intellectual Property.
(f) All Company Intellectual Property will be fully transferable,
alienable or licensable by Surviving Corporation and/or Parent without
restriction and without payment of any kind to any third party.
(g) To the extent that any Company Technology has been developed
or created by a third party for the Company or a Subsidiary, the Company or such
Subsidiary has a written agreement with such third party with respect thereto,
and the Company or such Subsidiary thereby either (i) has obtained ownership of,
and is the exclusive owner of, or (ii) has obtained a license (sufficient for
the conduct of its business as currently conducted and as proposed to be
conducted) to, all such third party's Intellectual Property Rights in such
Technology by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(h) Except for "shrink-wrap" or similar Commercial Software
Rights, all Technology used in or necessary to the conduct of the business of
the Company or any Subsidiary as presently conducted or currently contemplated
to be conducted by the Company or such Subsidiary was written and created solely
by either (i) employees of the Company or such Subsidiary acting within the
scope of their employment or (ii) by third parties who have validly and
irrevocably assigned all of their rights, including Intellectual Property Rights
therein, to the Company or such Subsidiary, and no third party owns or has any
rights to any of the Company Intellectual Property.
(i) All employees of the Company and each Subsidiary have entered
into a valid and binding written agreement with the Company or such Subsidiary,
as the case may be, sufficient to vest title in the Company or such Subsidiary
of all Technology, including all accompanying Intellectual Property Rights,
created by such employee in the scope of his or her employment with the Company
or such Subsidiary.
(j) The Company and each Subsidiary have taken all steps that are
reasonably required to protect their respective rights in confidential
information and trade secrets of the
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Company or such Subsidiary or provided by any other person to the Company or
such Subsidiary. Without limiting the foregoing, the Company and each Subsidiary
has, and enforces, a policy requiring each employee, consultant and contractor
to execute a proprietary information, confidentiality and assignment agreement,
substantially in the form(s) attached hereto as Schedule 2.14(j), and all
current and former employees, consultants and contractors of the Company and
each Subsidiary have executed such an agreement.
(k) No person who has licensed Technology or Intellectual Property
Rights to the Company or a Subsidiary has ownership rights or license rights to
improvements made by the Company or such Subsidiary in such Technology or
Intellectual Property Rights.
(l) Neither the Company nor any Subsidiary has transferred
ownership of, or granted any exclusive license of or right to use, or authorized
the retention of any exclusive rights to use or joint ownership of, any
Technology or Intellectual Property Right that is or was Company Intellectual
Property, to any other person.
(m) Other than Commercial Software Rights and outbound licenses in
the standard form, subject to such reasonable variations from license to license
that are not individually materially adverse to the Company, set forth on
Schedule 2.14(m) (the "FORM LICENSE"), the contracts, licenses and agreements
listed on Schedule 2.14(m) list all contracts, licenses and agreements to which
the Company or any Subsidiary is a party with respect to any Technology or
Intellectual Property Rights. Neither the Company nor any Subsidiary is in
breach of or has failed to perform under, any of the foregoing contracts,
licenses or agreements and, to the Company's knowledge, no other party to any
such contract, license or agreement is in breach thereof or has failed to
perform thereunder.
(n) Other than the standard indemnities and warranties set forth
in the Form License, and subject to such reasonable variations therein that are
not individually materially adverse to the Company, Schedule 2.14(n) lists all
contracts, licenses and agreements between the Company or any Subsidiary and any
other person wherein or whereby the Company or any Subsidiary has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Company or such Subsidiary or such other person of the Intellectual Property
Rights of any person other than the Company or a Subsidiary.
(o) There are no contracts, licenses or agreements between the
Company or any Subsidiary and any other person with respect to Company
Intellectual Property under which there is, to the Company's knowledge, any
dispute regarding the scope of such agreement, or performance under such
agreement, including with respect to any payments to be made or received by the
Company or any Subsidiary thereunder.
(p) The operation of the businesses of the Company and the
Subsidiaries as currently conducted or as contemplated to be conducted by the
Company or such Subsidiary, including but not limited to the design,
development, use, import, branding, advertising, promotion, marketing,
manufacture and sale of the products, technology or services (including
products,
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technology or services currently under development) of the Company or such
Subsidiary, does not, will not, and will not when conducted by Parent and/or
Surviving Corporation in substantially the same manner following the Closing,
infringe or misappropriate any Intellectual Property Right of any person,
violate any right of any person (including any right to privacy or publicity) or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and neither the Company nor any Subsidiary has received notice
from any person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of the Company or such Subsidiary infringes or misappropriates any Intellectual
Property Right of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does the Company or such
Subsidiary have knowledge of any basis therefor).
(q) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(r) No Company Intellectual Property or service of the Company or
any Subsidiary is subject to any proceeding or outstanding decree, order,
judgment or settlement agreement or stipulation that restricts in any manner the
use, transfer or licensing thereof by the Company or any Subsidiary or may
affect the validity, use or enforceability of such Company Intellectual
Property.
(s) No (i) product, technology, service, or publication of the
Company or any Subsidiary, (ii) material published or distributed by the Company
or any Subsidiary, or (iii) conduct or statement of the Company or any
Subsidiary constitutes a defamatory statement or material or false advertising
or otherwise violates in any material respect any law or regulation.
(t) The Company Intellectual Property constitutes all the
Technology and Intellectual Property Rights used in and/or necessary to the
conduct of the businesses of the Company and the Subsidiaries as they currently
are conducted, and as they are currently planned or contemplated to be conducted
by the Company and the Subsidiaries, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
performance of services (including products, technology or services currently
under development).
(u) Neither this Agreement nor the transactions contemplated by
this Agreement, including the assignment to Parent, the Surviving Corporation,
or any Subsidiary, by operation of law or otherwise, of any contracts or
agreements to which the Company or a Subsidiary is a party, will result in (i)
either Parent's, the Surviving Corporation's, or any Subsidiary's granting to
any third party any right to or with respect to any Technology or Intellectual
Property Right owned by, or licensed to, either of them, (ii) either Parent's,
the Surviving Corporation's, or any Subsidiary's being bound by, or subject to,
any non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) either Parent's, the Surviving Corporation's, or
any Subsidiary's being obligated to pay any royalties or other amounts to any
third party in excess of those payable by Parent, the Company, or a Subsidiary,
respectively, prior to the Closing.
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(v) Neither the Company nor any Subsidiary has breached or
violated the terms of any license, sublicense, or other agreement relating to
any Commercial Software Rights, and the Company or a Subsidiary, as the case may
require, has a valid right to use such Commercial Software Rights under such
licenses and agreements. The Company and each Subsidiary are not and will not be
as a result of the execution and delivery of this Agreement or the performance
of the Company's obligations hereunder, in violation of any license, sublicense,
or agreement relating to Commercial Software Rights. No claims with respect to
Commercial Software Rights have been asserted or, to the knowledge of the
Company, are threatened by any person against the Company or a Subsidiary in
connection with any Commercial Software Right. To the knowledge of the Company,
there is no material unauthorized use, infringement, or misappropriation of any
Commercial Software Right by the Company or any Subsidiary or any employee or
former employee of the Company or any Subsidiary. To the knowledge of the
Company, no Commercial Software Right is subject to any outstanding order,
judgment, decree, stipulation, or agreement restricting in any matter the use
thereof by the Company or any Subsidiary.
2.15 PRODUCT WARRANTIES; DEFECTS; LIABILITIES. Each product manufactured,
sold, licensed, leased or delivered by the Company or any Subsidiary ("COMPANY
PRODUCT") has been in conformity with all applicable contractual commitments and
all express and implied warranties. Neither the Company nor any Subsidiary has
any liability or obligation (and to the Company's knowledge, there is no current
reasonable basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company or any
Subsidiary giving rise to any liability or obligation) for replacement or repair
thereof or other damages in connection therewith. No Company Product is subject
to any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale, license or lease set forth in the Form License,
subject to such reasonable variations therein that are not individually
materially adverse to the Company, or beyond that implied or imposed by
applicable law. Schedule 2.15 includes a copy of the standard terms and
conditions of sale, license, or lease for each of the Company Products and
copies of the Company's standard forms of license agreements and professional
services agreements.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as contemplated by
this Agreement or set forth on Schedule 2.16, neither the Company nor any
Subsidiary has, is a party to, or is bound by:
(a) any collective bargaining agreements;
(b) any employment or consulting agreement, contract or commitment
with any officer, employee, or member of the Company's Board of Directors or the
Board of Directors of any Subsidiary, other than those that are terminable at
the will of the Company or a Subsidiary, as the case may be;
(c) any bonus, deferred compensation, pension, profit sharing,
severance, or retirement plans or agreements, or any other employee benefit
plans or arrangements;
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(d) any stock option or stock purchase plan or arrangement (other
than the Option Plan), stock appreciation, bonus, deferred compensation,
pension, profit sharing or retirement plans, or any other employee benefit plans
or arrangements;
(e) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company or a
Subsidiary (other than standard offer letters relating to "at will" employment
which create no obligation of the Company or a Subsidiary other than such
obligations as may be created under applicable employment laws);
(f) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(g) any fidelity or surety bond or completion bond;
(h) any agreement or group of related agreements for the lease of
personal property having a value individually in excess of $25,000;
(i) any agreement of indemnification or guaranty other than as set
forth in the Form License, subject to such reasonable variations therein that
are not individually materially adverse to the Company;
(j) any agreement containing any covenant limiting the freedom of
the Company to engage in any line of business or to compete with any person or
entity;
(k) any agreement relating to the purchase of materials or capital
expenditures and involving future payments in excess of $25,000;
(l) any agreement relating to the disposition or acquisition of
assets (other than in the ordinary and usual course of business) or any interest
in any business enterprise;
(m) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by the Company or any Subsidiary or extension of credit to the Company
or any Subsidiary;
(n) any agreement concerning confidentiality (other than those
entered in the ordinary and usual course of business);
(o) any construction contracts;
(p) intentionally omitted;
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(q) any agreement pursuant to which the Company or a Subsidiary
has granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, including any agreements
which provide for source code escrow arrangements;
(r) any sales representative, original equipment manufacturer,
value added, remarketer or other agreement for distribution of the products or
services of the Company or any Subsidiary, or the products or services of any
other person or entity or any dealer, joint marketing (including any pilot
program), or development agreement;
(s) any agreement pursuant to which the Company or any Subsidiary
has advanced or loaned any amount to any stockholder of the Company or any
Subsidiary or any director, officer, employee, or consultant of the Company or
any Subsidiary other than business travel advances in the ordinary and usual
course of business, consistent with past practice; or
(t) to the extent not reported on the Company Balance Sheet, any
other agreement that involves payment by the Company or a Subsidiary of $25,000
or more or which is not cancelable without penalty within thirty (30) days.
Neither the Company nor any Subsidiary has breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under, any
of the terms or conditions of any agreement, contract or commitment required to
be set forth on any Company Schedule relating to the representations and
warranties set forth in Section 2.14 or on Schedule 2.16 (any such agreement,
contract or commitment, a "CONTRACT"). Each Contract is in full force and effect
and is not subject to any default of which the Company has knowledge thereunder
by any party obligated to the Company or a Subsidiary, as the case may be,
pursuant thereto.
2.17 CHANGE OF CONTROL PAYMENTS. Schedule 2.17 sets forth each plan or
agreement pursuant to which any amounts may become payable in cash or otherwise
(whether currently or in the future) to current or former officers, directors,
employees of or consultants to the Company or a Subsidiary as a result of or in
connection with the Merger.
2.18 INTERESTED PARTY TRANSACTIONS. No officer, director, or stockholder
of the Company (nor any descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has or has had an
economic interest), has or has had, directly or indirectly, (i) an economic
interest in any entity which has furnished or sold, or furnishes or sells,
services or products that the Company or any Subsidiary furnishes or sells, or
proposes to furnish or sell; (ii) an economic interest in any entity that
purchases from or sells or furnishes to the Company any goods or services; or
(iii) a beneficial interest in any Contract; PROVIDED, HOWEVER, that ownership
of no more than two percent (2%) of the outstanding voting stock of a publicly
traded corporation on the New York Stock Exchange or the Nasdaq National Market
shall not be deemed an "economic interest in any entity" for purposes of this
Section 2.18. There are no receivables of the Company or any Subsidiary owing by
any director, officer, employee of, or consultant to, or stockholder of the
Company or any Subsidiary (or any descendant, or spouse of any such persons, or
any trust, partnership, or corporation in which any of such persons has an
economic interest), other than advances in the ordinary and usual course of
business for reimbursable business expenses (as
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determined in accordance with the established employee reimbursement policies of
the Company or such Subsidiary and consistent with past practice). None of the
Company's stockholders has agreed to, or assumed, any obligation or duty to
guaranty or otherwise assume or incur any obligation or liability of the Company
or any Subsidiary.
2.19 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATION. Each of the
Company and the Subsidiaries has complied in all respects with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation, except where any
such non-compliance or violation would not have a Material Adverse Effect on the
Company or any Subsidiary. Schedule 2.19 lists each material federal, state,
county, local, or foreign governmental consent, license, permit, grant, or other
authorization issued to the Company or any Subsidiary (i) pursuant to which the
Company or any Subsidiary currently operates or holds any interest in any of its
properties or (ii) which is required for the operation of its business or the
holding of any such interest (collectively, the "COMPANY AUTHORIZATIONS"), which
Company Authorizations are in full force and effect. The Company or such
Subsidiary, as the case may require, is in material compliance with the terms of
each of the Company Authorizations.
2.20 LITIGATION. There is no claim, dispute, action, suit or appeal, or
proceeding of any nature pending or, to the Company's knowledge, threatened
against the Company or any Subsidiary, their properties, or any of their
officers, directors or employees (in their capacities as such), nor, to the
knowledge of the Company, is there any reasonable basis therefor or threat
thereof. To the knowledge of the Company, there is no investigation pending or
threatened against the Company or any Subsidiary, their properties or any of
their officers, directors or employees (in their capacities as such) by or
before any Governmental Entity. Neither the Company nor any Subsidiary is
subject to any order, writ, injunction, or decree of any court, agency,
authority, arbitration panel, or other tribunal, and neither the Company nor any
Subsidiary is in default with respect to any such notice, order, writ,
injunction, or decree. No Governmental Entity has at any time challenged or
questioned the legal right of the Company or any Subsidiary to conduct its
operations as presently or previously conducted.
2.21 INSURANCE. Schedule 2.21 lists all material insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
software errors and omissions, employees, officers, and directors of the Company
and the Subsidiaries as well as claims made by the Company and the Subsidiaries
under any insurance policy in the two years prior to the date of this Agreement.
There is no claim by the Company or any Subsidiary currently pending under any
of such policies or bonds as to which coverage has been questioned, denied, or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid, and the Company or the
Subsidiary, as applicable, is otherwise in compliance in all material respects
with the terms of such policies and bonds. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies. Neither the Company nor any Subsidiary has ever been denied
insurance coverage nor has any insurance policy of the Company or any Subsidiary
ever been cancelled for any reason.
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2.22 OPINION OF FINANCIAL ADVISOR. The Company has been advised by its
financial advisor, Deutsche Banc Alex. Brown, that in its opinion, as of the
date of this Agreement, the consideration to be received by holders of Company
Capital Stock in connection with the Merger (the "MERGER CONSIDERATION") is fair
to the stockholders of Company from a financial point of view. The Company shall
provide Parent a copy of the written confirmation of such opinion, dated as of
the date of this Agreement, promptly after receipt thereof.
2.23 MINUTE BOOKS; BOOKS AND RECORDS. The minute books of the Company
made available to counsel for Parent are the only minute books of the Company
and contain an accurate summary of all meetings of directors (or committees
thereof) and its stockholders or actions by written consent since the time of
incorporation of the Company. The books and records of the Company (i) are
accurate in all material respects and (ii) are in the Company's possession or
under its control.
2.24 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Neither the Company nor any Subsidiary has
(i) operated any underground storage tanks at any property that the Company or
any Subsidiary has at any time owned, operated, occupied or leased or (ii)
illegally released any substance that has been designated by any Governmental
Entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws
(a "HAZARDOUS MATERIAL"), but excluding office and janitorial supplies properly
and safely maintained. To the knowledge of the Company, no Hazardous Materials
are present, as a result of the deliberate actions of the Company or as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law, nor has the
Company disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (any or all of the foregoing being collectively referred to
as "HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity to prohibit, regulate
or control Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the business of the Company as such
activities and businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending or, to our
knowledge, threatened
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concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company. The Company is not aware of any fact or
circumstance which could involve the Company in any environmental litigation or
impose upon the Company any environmental liability.
2.25 BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.26 EMPLOYEES; COMPENSATION. Schedule 2.26 constitutes a full and
complete list of all current directors, officers, employees and consultants of
the Company, specifying their names and job designations, the total amount paid
or payable to such director, officer, employee, or consultant in the prior
fiscal year and from the beginning of the current fiscal year through February
15, 2001, and the basis of such compensation, whether fixed or commission or a
combination thereof.
2.27 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"AFFILIATE" set forth in Section 2.27(a)(i) below (such definition shall only
apply to this Section 2.27), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any Subsidiary or other
person or entity under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation;
(iv) "DOL" shall mean the United States Department of
Labor;
(v) "EMPLOYEE" shall mean any current, former, or
retired employee, consultant or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement, contract or understanding
between the Company or any Affiliate and any Employee;
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(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Company Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and
(xii) "PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning of
Section 3(2) of ERISA.
(b) SCHEDULE. Schedule 2.27(b) contains an accurate and complete
list of each Company Employee Plan, International Employee Plan, and each
Employee Agreement. Neither the Company nor any Affiliate has any plan or
commitment to establish any new Company Employee Plan, International Employee
Plan, or Employee Agreement, to modify any Company Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Company
Employee Plan or Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to Parent in writing, or as required by
this Agreement), or to adopt or enter into any Company Employee Plan,
International Employee Plan, or Employee Agreement and does it have any
intention or commitment to do any of the foregoing.
(c) DOCUMENTS. The Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee Plan,
International Employee Plan, and each Employee Agreement including (without
limitation) all amendments thereto and all related trust documents,
administrative service agreements, group annuity contracts, group insurance
contracts, and policies pertaining to fiduciary liability insurance covering the
fiduciaries for each Plan; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan; (iv) if the Company Employee Plan is funded, the
most recent annual and periodic accounting of Company Employee Plan assets; (v)
the most recent summary plan description together with the summary(ies) of
material modifications thereto, if any, required under ERISA with respect to
each Company Employee Plan; (vi) all IRS determination, opinion, notification
and advisory letters, and all applications and correspondence to or from the IRS
or the DOL with respect to any such application or letter; (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits,
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acceleration of payments or vesting schedules or other events which would result
in any material liability to the Company; (viii) all correspondence to or from
any governmental agency relating to any Company Employee Plan; (ix) model COBRA
forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years discrimination tests
for each Company Employee Plan; and (xi) all registration statements, annual
reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE.
(i) The Company and each Affiliate has performed in
all material respects all obligations required to be performed by the Company
and each such Affiliate under, is not in default or violation of, and has no
knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code.
(ii) Each Company Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination,
opinion, notification or advisory letter from the IRS with respect to each such
Company Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Company Employee Plan.
(iii) No "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan.
(iv) There are no actions, suits or claims pending, or,
to the knowledge of the Company or any Affiliate, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan.
(v) Each Company Employee Plan (other than any stock
option plan) can be amended, terminated or otherwise discontinued after the
Effective Time, in accordance with applicable law, without material liability to
the Parent, Surviving Corporation, Company or any of its Affiliates (other than
ordinary administration expenses).
(vi) There are no audits, inquiries or proceedings
pending or, to the knowledge of the Company or any Affiliates, threatened by the
IRS or DOL with respect to any Company Employee Plan.
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(vii) Neither the Company nor any Affiliate is subject
to any penalty or tax with respect to any Company Employee Plan under Section
502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) PENSION PLANS. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE EMPLOYER
PLANS. At no time has the Company or any Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan. Neither the Company nor any
Affiliate has at any time ever maintained, established, sponsored, participated
in, or contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
(g) NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee Plan
provides, or reflects or represents any liability to provide retiree health to
any person for any reason, except as may be required by COBRA or other
applicable statute, and neither the Company nor any Affiliate has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) HEALTH CARE COMPLIANCE. Neither the Company nor any Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(i) EFFECT OF TRANSACTION.
(i) Except as contemplated by Sections 5.20 and 5.21,
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company
Employment Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by
the Company or its Affiliates with respect to any Employee will be characterized
as a "parachute payment," within the meaning of Section 280G(b)(2) of the Code.
(j) EMPLOYMENT MATTERS. The Company and each Affiliate (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and
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hours, in each case, with respect to Employees; (ii) has withheld and reported
all amounts required by law or by agreement to be withheld and reported with
respect to wages, salaries and other payments to Employees; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund governed by or maintained by or on behalf of any governmental
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past practice).
There are no pending, threatened or reasonably anticipated claims or actions
against the Company or any Affiliate under any worker's compensation policy or
long-term disability policy.
(k) LABOR. No work stoppage or labor strike against the Company or
any Affiliate is pending, threatened or reasonably anticipated. Neither the
Company nor any Affiliate knows of any activities or proceedings of any labor
union to organize any Employees. There are no actions, suits, claims, labor
disputes or grievances pending, or, to the knowledge of the Company or any
Affiliate, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. Neither the
Company nor any Affiliate has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Company and its Affiliates are
not presently, nor have they been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no collective bargaining agreement is being negotiated by the Company or any
Affiliate.
(l) INTERNATIONAL EMPLOYEE PLAN. Each International Employee Plan
has been established, maintained and administered in compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan. No
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. Except as required by
law, no condition exists that would prevent Company or Parent from terminating
or amending any International Employee Plan at any time for any reason without
liability to the Company or its Affiliates (other than ordinary administration
expenses or routine claims for benefits).
(m) NO INTERFERENCE OR CONFLICT. To the knowledge of the Company
and each Affiliate, no stockholder, officer, employee or consultant of the
Company or any Affiliate is obligated under any contract or agreement subject to
any judgement, decree or order of any court or administrative agency that would
interfere with such person's efforts to promote the interests of the Company or
any Affiliate or that would interfere with the Company's or the Affiliate's
business. Neither the execution nor delivery of this Agreement, nor the carrying
on of the Company's or any Affiliate's business as presently conducted nor any
activity of such officers, directors, employees or consultants in connection
with the carrying on of the Company's and each Affiliate's business as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants is now bound.
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2.28 BANK ACCOUNTS. Schedule 2.28 constitutes a full and complete list of
all the bank accounts and safe deposit boxes of the Company and each Subsidiary,
the number of each such account or box, and the names of the persons authorized
to draw on such accounts or to access such boxes. All cash in such accounts is
held in demand deposits and is not subject to any restriction or documentation
as to withdrawal.
2.29 INDEMNIFICATION OBLIGATIONS. There are no actions, proceedings or
other events pending or threatened against any officer or director of the
Company or any Subsidiary which could reasonably be expected to give rise to any
indemnification obligation of Company or any Subsidiary to its officers and
directors under its Certificate of Incorporation, Bylaws or any agreement
between the Company or any Subsidiary and any of its officers or directors.
2.30 REORGANIZATION. The Company, each Subsidiary and each Company
Affiliate (as defined in Section 5.7) have not taken or agreed to take any
action that could reasonably be expected to cause the Merger to fail to qualify
as a tax-free reorganization within the meaning of Section 368(a) of the Code.
2.31 INFORMATION STATEMENT. None of the information supplied or to be
supplied by Company or any Subsidiary for inclusion or incorporation by
reference into any documents mailed or delivered to the stockholders of the
Company in connection with soliciting their consent to this Agreement or the
Merger or into any document anticipated to be filed with the California
Department of Corporations pursuant hereto or with the SEC (as defined in
Section 3.4(a)) in the event the S-4 Registration Statement (as defined in
Section 5.1(c)) is filed, will at the time the Permit is obtained or the S-4
Registration Statement is declared effective, as the case may be, and as of 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 are made,
not misleading. Notwithstanding the foregoing, neither the Company nor any
Subsidiary makes any representation or warranty with respect to any information
supplied by Parent which is contained in any of the foregoing documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION OF PARENT AND MERGER SUB. Parent and Merger Sub are
each corporations duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Each of Parent and Merger Sub has all
requisite corporate power to own, lease, and operate its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on Parent and Merger Sub, taken as a whole.
3.2 AUTHORITY. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution
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and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligations of Parent and Merger Sub, enforceable against each in accordance
with its terms. The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or the Certificate of Incorporation or Bylaws of Merger Sub or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule (including any applicable rule of The Nasdaq
National Market or the National Association of Securities Dealers, Inc.) or
regulation applicable to Parent and on which Parent's business, financial
condition, operations or prospects is substantially dependent, the breach,
violation, default, termination or forfeiture of which would (i) result in a
material adverse effect upon the ability of Parent or Merger Sub to consummate
the Merger, or (ii) reasonably be expected to have a Material Adverse Effect on
Parent. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Parent or Merger Sub in connection with the execution and delivery of
this Agreement by Parent and Merger Sub or the consummation by Parent and Merger
Sub of the transactions contemplated hereby except for (i) the filing of the
Merger Certificate with the Secretary of State of the State of Delaware; (ii)
HSR Approval; and (iii) such consents, approvals, order, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws (including the filing with the California
Department of Corporations seeking the 3(a)(10) Permit as contemplated by
Section 5.1).
3.3 PARENT COMMON. The shares of Parent Common to be issued pursuant to
the Merger will, when issued and delivered in accordance with this Agreement, be
duly authorized, validly issued, fully paid, and non-assessable and will be free
of any Liens created by Parent or Merger Sub and will not be subject to any
preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Parent or any agreement to which
Parent is a party or is bound; PROVIDED, HOWEVER, that the Parent Common to be
issued to Company Affiliates (as defined in Section 5.7) hereunder will be
subject to restrictions on transfer under applicable securities laws. The shares
of Parent Common issued by Parent in the Merger will be issued in compliance
with applicable federal and state securities laws.
3.4 SEC FILINGS; PARENT FINANCIAL STATEMENTS.
(a) Parent has furnished or made available to Company a true and
complete copy of its Annual Report on Form 10-K for the fiscal year ended March
31, 2000, its Quarterly Reports on Form 10-Q for the quarters ended June 30,
2000, September 30, 2000, and December 31, 2000, and its Current Reports on Form
8-K filed on May 22, 2000, June 29, 2000, November 3, 2000, November 13, 2000,
November 14, 2000 and December 11, 2000 (collectively, the "PARENT SEC
REPORTS"), which Parent filed with the Securities and Exchange Commission (the
"SEC") under the
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Securities Exchange Act of 1934, as amended. As of their respective filing
dates, (i) the Parent SEC Reports complied in all material respects with the
requirements of the Exchange Act, and (ii) none of the Parent SEC Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, except to the extent corrected by a document subsequently filed by
or on behalf of Parent with the SEC.
(b) The consolidated financial statements of Parent, including the
notes thereto, included in the Parent SEC Reports (the "PARENT FINANCIAL
STATEMENTS") are complete and correct in all material respects, comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited financial statements, as permitted by Form 10-Q of the SEC),
and fairly present the consolidated financial position of Parent and its results
of operations and cash flows as of the respective dates and for the periods
indicated therein (subject, in the case of the unaudited statements, to normal
recurring accounting adjustments). There have been no material changes in
Parent's accounting policies except as described in the notes to the Parent
Financial Statements.
3.5 NO UNDISCLOSED LIABILITIES. Neither Parent nor any of its
subsidiaries has any material liabilities (absolute, accrued, contingent or
otherwise) except (i) liabilities provided for in Parent's balance sheet as of
December 31, 2000 and (ii) liabilities incurred since December 31, 2000. None of
the liabilities incurred by Parent and its subsidiaries since December 31, 2000
could reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Parent.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2000, there
has not been: (i) any change, event or circumstance which has or could
reasonably be expected to have a Material Adverse Effect on Parent; (ii) any
split, combination or reclassification of any of Parent's capital stock; or
(iii) any material change by Parent in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP.
3.7 LITIGATION. Except as described in the Parent SEC Reports, there is
no action, suit, proceeding, claim, arbitration or investing pending or, to the
knowledge of Parent, threatened, which is reasonably likely to have a Material
Adverse Effect on Parent and the Subsidiaries, taken as a whole.
3.8 BROKERS' AND FINDERS' FEES. Except for fees to be paid to Credit
Suisse First Boston in connection with the transactions contemplated by this
Agreement, Parent has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.9 INFORMATION STATEMENT. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference into any
documents mailed or delivered to the stockholders of the Company in connection
with soliciting their consent to this Agreement or the
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Merger or into any document anticipated to be filed with the California
Department of Corporations pursuant hereto or with the SEC in the event the S-4
Registration Statement is filed, will at the time the Permit is obtained or the
S-4 Registration Statement is declared effective, as the case may be, and as of
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 are
made, not misleading. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by the
Company or any Subsidiary which is contained in any of the foregoing documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY AND THE SUBSIDIARIES. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company agrees, and
agrees to cause each Subsidiary, (except to the extent that Parent shall
otherwise consent in writing) to carry on its business in the usual, regular,
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance with all applicable laws and regulations, to pay its debts and
Taxes when due, to pay or perform all other obligations when due, and, to the
extent consistent with such business, to use all reasonable efforts consistent
with past practice and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees, and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired the goodwill and ongoing businesses
of the Company and the Subsidiaries at the Effective Time. The Company shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of the Company or the Subsidiaries and any event
which could have a Material Adverse Effect on the Company or any Subsidiary. In
addition, except as required or permitted by the terms of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, neither the Company nor any Subsidiary shall,
without the prior written consent of Parent, do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend, or
change the period of exercisability of any outstanding Company Options or
Company Common subject to vesting, or reprice Company Options or authorize cash
payments in exchange for any such outstanding options;
(b) Make any payments, or incur or enter into any agreement,
contract, or commitment or transaction requiring the Company to pay in excess of
$15,000 individually or $250,000 in the aggregate, excluding payroll (including
related taxes and benefits, and rent);
(c) Enter into, renew, amend, or otherwise modify any contracts,
agreements, or obligations relating to the distribution, sale, license, or
marketing by third parties of the products of the Company or any Subsidiary or
products licensed by the Company or any Subsidiary (other than renewals of
existing non-exclusive contracts, agreements, or obligations);
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(d) Modify, amend, renew or terminate any contract or agreement to
which the Company or a Subsidiary is a party or waive, release, or assign any
rights or claims thereunder;
(e) Transfer or license to any person or entity or otherwise
extend, amend, or modify any rights to any Company Intellectual Property (other
than pursuant to end-user licenses granted to customers of the Company or a
Subsidiary in the ordinary and usual course of business, consistent with past
practice, provided that in no event shall the Company or any Subsidiary license
on an exclusive basis or otherwise sell any Company Intellectual Property);
(f) Violate the terms of any of the contracts or agreements set
forth or described in the Company Schedules;
(g) Commence any litigation (except to enforce its rights under or
to interpret this Agreement or any other agreement, obligation or arrangement
contemplated hereby or entered into or established in connection herewith);
(h) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock or the capital stock of any Subsidiary, or split, combine or
reclassify any Company Capital Stock or the capital stock of any Subsidiary or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for any Company Capital Stock or the capital stock of any
Subsidiary;
(i) Purchase, redeem or otherwise acquire, directly or indirectly,
any Company Capital Stock, Company Options, or any other securities of the
Company or any Subsidiary, except repurchases of unvested shares at cost in
connection with the termination of the employment relationship with any employee
pursuant to stock option or stock purchase agreements in effect on the date
hereof;
(j) Issue, grant, deliver, sell, authorize, pledge or otherwise
encumber or propose the issuance, grant, delivery, sale, pledge, or encumbrance
of any shares of capital stock of the Company or any securities convertible into
or exercisable for capital stock of the Company or enter into any agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities (except for the issuance of any Company Common upon
exercise of presently outstanding Company Options or conversion of presently
outstanding Company Preferred);
(k) Cause, permit, or propose any amendments to the Restated
Certificate or the Company's Bylaws;
(l) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities or other ownership interest of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof; or acquire or
agree to acquire any assets in an amount in excess of $10,000 in the case of a
single transaction or in excess of $25,000 in the aggregate in any 30-day
period; or otherwise acquire or agree to enter into any joint ventures,
strategic partnerships, or alliances;
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(m) Sell, lease, license, or otherwise dispose of any of its
properties or assets, except sales of inventory, products, or services in the
ordinary and usual course of business, consistent with past practice;
(n) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the
Company or any Subsidiary; enter into any "keep well" or other agreement to
maintain any financial statement condition or enter into any agreement or
arrangement having the economic effect of any of the foregoing;
(o) Grant any severance or termination pay to, or enter any
agreement pertaining thereto with, any officer, director, consultant, or
employee, except payments made pursuant to written agreements outstanding on the
date hereof and disclosed in the Company Schedules, or adopt any new severance
plan, or amend or modify or alter in any manner any severance plan, agreement,
or arrangement existing on the date hereof;
(p) Adopt or amend any employee benefit plan, policy, or
arrangement (including any employee stock option or stock purchase plan, policy,
or arrangement) or enter into any employment or consulting contract or
collective bargaining agreement, extend employment or consultant offers, pay or
agree to pay any special bonus or special remuneration to any director,
consultant or employee, or increase the salaries or wage rates or fringe
benefits (including rights to severance or indemnification) of its directors,
officers, employees, or consultants;
(q) Effect or agree to effect, including by way of hiring or
involuntary termination, any change in the directors, officers, or employees of
the Company or any Subsidiary;
(r) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
or make any change in its accounting methods, principles, or practices;
(s) Pay, discharge or satisfy, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), or
litigation (whether or not commenced prior to the date of this Agreement) other
than the payment, discharge or satisfaction in the ordinary and usual course of
business, consistent with past practice, of liabilities reflected or reserved
against in the Company Financial Statements (or the notes thereto) or that arose
in the ordinary and usual course of business, consistent with past practice,
subsequent to February 15, 2001;
(t) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, consent
to any extension or waiver of the limitation period applicable to any claim or
assessment in respect to Taxes;
(u) Enter into any strategic alliance, joint development or joint
marketing agreement;
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(v) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement;
(w) Waive the benefits of, or agree to modify in any manner,
terminate, release any person from, or knowingly fail to enforce any
confidentiality or similar agreement to which the Company is a party or of which
the Company is a beneficiary; or
(x) Take, or agree orally or in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (w) above, or any other
action that would prevent the Company from performing or cause the Company not
to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF INFORMATION STATEMENT AND SECTION 3(A)(10) PERMIT.
(a) PREPARATION OF INFORMATION STATEMENT. As promptly as
practicable after the date of this Agreement, Parent and the Company shall
prepare an Information Statement (the "INFORMATION STATEMENT") to be distributed
to stockholders of the Company in connection with the solicitation of their
consent to the adoption and approval of this Agreement, the Merger, and the
transactions contemplated hereby. In addition, the Information Statement may be
filed with the Commissioner (as defined below) in connection with the 3(a)(10)
Permit or, alternatively, with the SEC as part of the S-4 Registration Statement
(as defined below). Parent and the Company shall each use its commercially
reasonable best efforts to cause the Information Statement to comply with the
applicable requirements of federal and state securities law (including, without
limitation, all applicable requirements under the Securities Act and the rules
and regulations promulgated by the SEC thereunder in the event Parent elects to
file the S-4 Registration Statement). Each of Parent and the Company agrees to
provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the
Information Statement or the S-4 Registration Statement, as the case may
require, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Statement or the S-4 Registration Statement, as
the case may require. The Company will promptly advise Parent, and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent shall obtain knowledge of any facts that might
make it necessary or appropriate to amend or supplement the Information
Statement or the S-4 Registration Statement, as the case may require, in order
to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Statement or the
S-4 Registration Statement, as the case may require, shall contain (i) the
unanimous recommendation of the Board of Directors of the Company that the
Company's stockholders adopt and approve this Agreement, the Merger, and the
other transactions contemplated hereby and (ii) the written opinion of Deutsche
Banc Alex. Brown, Inc., dated as of the date of this Agreement, to the effect
that, as of such date, the Merger Consideration was fair to the stockholders of
the Company from a financial point of view. Notwithstanding any other provision
of this Agreement, the
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Company shall not include in the Information Statement any information with
respect to Parent or its affiliates or associates, the form and content of which
information shall not have been approved by Parent prior to such inclusion.
(b) SECTION 3(a)(10) PERMIT: As soon as reasonably practicable
after the execution of this Agreement, Parent, with the cooperation of the
Company, shall prepare the necessary documentation to seek a permit (a "3(a)(10)
PERMIT") from the Commissioner (the "COMMISSIONER") of the Department of
Corporations of the State of California (after a hearing before such Department)
pursuant to Section 25121 of the California Corporate Securities Law of 1968, as
amended, such that the issuance of Parent Common in the Merger shall be exempt
from registration under Section 3(a)(10) of the Securities Act. After filing
with the Commission as part of the application (the "PERMIT APPLICATION")
seeking the 3(a)(10) Permit, no amendment or supplement to the Information
Statement shall be made without the approval of Parent and Company, which
approval shall not be unreasonably withheld or delayed.
(c) S-4 REGISTRATION STATEMENT. Notwithstanding Section 5.1(b)
above, in the event the 3(a)(10) Permit is not or cannot be obtained, or Parent
believes the 3(a)(10) Permit is not likely to be obtained, Parent may elect to
register the shares of Parent Common to be issued in connection with the Merger
under the Securities Act. In such event, Parent shall file with the SEC, with
the Company's cooperation and assistance, a document or documents that will
constitute (i) a Registration Statement on Form S-4 under the Securities Act,
(ii) such information similar to that set forth in the Information Statement as
may be required to comply with the Securities Act and the rules and regulations
thereunder, and (iii) a prospectus relating to the shares of Parent Common
(collectively, the "S-4 REGISTRATION STATEMENT"). Parent or Company, as the case
may require, shall furnish all information concerning Parent or Company as the
other party may reasonably request in connection with such actions and the
preparation of the S-4 Registration Statement. In the event the S-4 Registration
Statement is filed, each of Parent and Company shall use its commercially
reasonable efforts to cause the S-4 Registration Statement to become effective
as promptly as practicable after filing. Each of Parent and the Company shall
cause the S-4 Registration Statement to comply as to form and substance with
respect to such party in all material respects with the applicable requirements
of (i) the Exchange Act, (ii) the Securities Act, (iii) the rules and
regulations of the Nasdaq National Market.
(d) SECURITIES LAW COMPLIANCE; STOCKHOLDER SOLICITATION. The
parties hereto shall take all action required under any applicable laws in
connection with the issuance of shares of Parent Common pursuant to the Merger
and shall refrain from taking any action which would prevent, delay, or hinder
the issuance of the 3(a)(10) Permit or the effectiveness of the S-4 Registration
Statement. Not later than one business day after the issuance of the 3(a)(10)
Permit, or the effective date of the S-4 Registration Statement, as applicable,
the Company shall cause the Information Statement and any related consents and
other materials to be mailed in compliance with applicable laws to the
stockholders of the Company in connection with the solicitation of their consent
in favor of this Agreement, the Merger, and the transactions contemplated
hereby.
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5.2 STOCKHOLDER APPROVAL. The Company shall promptly after the date
hereof take all action reasonably necessary in accordance with Delaware Law,
California Law, and the Company's Certificate of Incorporation and Bylaws to
obtain the approval by the Company's stockholders of the Merger, this Agreement,
and the other transactions contemplated hereby. The Company agrees to use its
best efforts and to take all action reasonably necessary or advisable to secure
the necessary votes or written consents of its stockholders required by Delaware
Law and California Law to effect the Merger.
5.3 ACCESS TO INFORMATION. The Company shall afford Parent and its
accountants, legal counsel, and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of the properties, books, contracts, commitments and records of the Company and
(b) all other information concerning the business, properties, and personnel
(subject to restrictions imposed by applicable law) of the Company as Parent may
reasonably request. The Company agrees to provide Parent and its accountants,
legal counsel, and other representatives copies of internal financial statements
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 CONFIDENTIALITY. The parties acknowledge that the Company and Parent
have previously executed a Mutual Confidentiality Agreement, dated as of January
16, 2001 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, applicable securities laws) or, as to Parent, by the rules
and regulations of the Nasdaq National Market, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto unless approved by Parent and
the Company prior to release, provided that such approval shall not be
unreasonably withheld.
5.6 CONSENTS. The Company shall promptly apply for or otherwise seek and
use its best efforts to obtain, all consents and approvals required to be
obtained by it for the consummation of the Merger, including all consents,
waivers, or approvals under any of the agreements, contracts, licenses, or
leases of the Company in order to preserve the benefits thereunder for the
Surviving Corporation and otherwise in connection with the Merger. Such
consents, waivers, and approvals are set forth in Schedule 5.6 (the "CONTRACT
CONSENTS"); PROVIDED, HOWEVER, Parent shall review such consents, waivers, and
approvals promptly after the execution of this Agreement. Following such review,
Parent shall determine those consents, waivers or approvals, if any, that are
not, in Parent's reasonable judgment, material to the Company or its business
and such consents, waivers or approvals shall no longer be deemed "Contract
Consents" for purposes of this Agreement.
5.7 AFFILIATE AGREEMENTS. Schedule 5.7 sets forth those persons who are,
in the Company's reasonable judgment, "affiliates" of the Company within the
meaning of Rule 145 (each such person a "Company Affiliate") promulgated under
the Securities Act ("Rule 145"). The Company shall provide Parent such
information and documents as Parent shall reasonably request
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for purposes of reviewing such list. The Company shall use its best efforts to
deliver or cause to be delivered to Parent, concurrently with the execution of
this Agreement (and in any case prior to the Effective Time) from each of the
Affiliates of the Company, an executed Affiliate Agreement in the form attached
hereto as Exhibit C. Parent shall be entitled to place appropriate legends on
the certificates evidencing any Parent Common to be received by such Affiliates
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for Parent Common, consistent with the terms
of such Affiliate Agreements.
5.8 LEGAL CONDITIONS TO THE MERGER. Each of Parent, Merger Sub, and the
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on such party with respect to the Merger
and will promptly cooperate with and furnish information to any other party
hereto in connection with any such requirements imposed upon such other party in
connection with the Merger. Each party will take all reasonable actions to
obtain (and will cooperate with the other parties in obtaining) any consent,
authorization, order or approval of, or any registration, declaration, or filing
with, or an exemption by, any Governmental Entity, or other third party,
required to be obtained or made by such party or its subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement.
5.9 BEST EFFORTS; ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each of
the parties to this Agreement shall use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be reasonably necessary or
desirable for effecting completely the consummation of this Agreement, the
Merger, and the other transactions contemplated hereby.
5.10 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event which is likely to cause any
representation or warranty of the Company and Parent or Merger Sub,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time except as contemplated by
this Agreement (including the Company Schedules) and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.10 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.11 REORGANIZATION. No party to this Agreement shall take any action,
either prior to or subsequent to the Closing, that would cause the Merger to
fail to quality as a "reorganization" under Section 368(a) of the Code, and each
party agrees to file all Returns consistent with such treatment.
5.12 FORM S-8. Parent shall file a Registration Statement on Form S-8
with the SEC covering the shares of Parent Common issuable with respect to
assumed Company Options no later than 30 days after the Closing Date.
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5.13 NASDAQ NATIONAL MARKET. Parent shall authorize for listing on the
Nasdaq National Market (i) the shares of Parent Common issuable in connection
with the Merger and (ii) the shares of Parent Common issuable upon exercise of
Company Options to be assumed by Parent pursuant to this Agreement.
5.14 VOTING AGREEMENTS. Concurrently with the execution of this
Agreement, the Company will cause the persons and entities listed on Schedule
5.14 hereto to execute Voting Agreements in the form attached hereto as EXHIBIT
B (the "VOTING AGREEMENTS").
5.15 NONCOMPETITION AGREEMENT. On or before the Closing, the Company will
use reasonable efforts to cause the employees listed on Schedule 5.15 to execute
a Noncompetition Agreement in the form attached hereto as EXHIBIT D.
5.16 EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, the Company will cause the employees listed on Schedule 5.16 to
execute Employment Agreements in substantially the form attached hereto as
EXHIBIT E (the "EMPLOYMENT AGREEMENTS"). In addition, as of the Closing, all
employees listed on Schedule 5.16 shall continued to be employed by the Company,
and none of such employees shall have provided notice of termination or
otherwise expressed in writing his or her intent to resign as an employee.
5.17 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common pursuant hereto. The Company
shall assist Parent as may be necessary to comply with the securities and blue
sky laws of all jurisdictions which are applicable in connection with the
issuance of Parent Common pursuant hereto.
5.18 TERMINATION OF COMPANY INVESTOR RIGHTS. The Company shall take such
steps as may be necessary to provide for the termination as of the Closing of
all Company investor rights granted by the Company to its stockholders and in
effect prior to the Closing, including but not limited to rights of co-sale,
voting, registration, first refusal, board observation or information or
operational covenants.
5.19 NO SOLICITATION. From and after the date of this Agreement until the
earlier to occur of the Effective Time or termination of this Agreement pursuant
to its terms, the Company will not, and the Company will cause its directors,
officers, employees, representatives, investment bankers, agents, and affiliates
not to, directly or indirectly (i) solicit or encourage submission of any
Acquisition Proposal (as defined herein) by any person, entity, or group (other
than Parent and its affiliates, agents, and representatives) or (ii) participate
in any discussions or negotiations with, or disclose any information concerning
the Company to, or afford access to the properties, books, or records of the
Company, or otherwise assist or facilitate, or enter into any agreement or
understanding with, any person, entity, or group (other than Parent and its
affiliates, agents, and representatives) in connection with any Acquisition
Proposal with respect to the Company. For purposes of this Agreement, an
"ACQUISITION PROPOSAL" means any proposal or offer relating to (i) any merger,
consolidation, sale or license of substantial assets or similar transactions
involving the Company (other than sales or licenses of assets or inventory in
the ordinary course of business or
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as permitted by this Agreement) or (ii) sales by the Company of any Company
Capital Stock. The Company will immediately cease any and all existing
activities, discussion, or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company will promptly (i) notify
Parent if it receives any proposal or written inquiry or written request for
information in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) notify Parent of the significant terms and conditions of any
such Acquisition Proposal including the identity of the party making an
Acquisition Proposal. In addition, from and after the date of this Agreement,
until the earlier to occur of the Effective Time or termination of this
Agreement pursuant to its terms, the Company will not, and will cause its
directors, officers, employees, representatives, investment bankers, agents, and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation, or solicitation in support of any Acquisition
Proposal made by any person, entity or group (other than Parent).
5.20 TERMINATION OF 401(k) PLAN. The Company agrees to adopt resolutions
to terminate its 401(k) plan immediately prior to Closing, unless the Parent, in
its sole and absolute discretion, agrees to sponsor and maintain such plans by
providing the Company with written notice of such election before the Effective
Time. Unless the Parent provides such notice to the Company, the Parent shall
receive from the Company evidence that the Company's Board of Directors has
adopted resolutions to terminate the 401(k) plan (the form and substance of
which resolutions shall be subject to review and approval of the Parent),
effective as of the day immediately preceding the Closing Date.
5.21 TERMINATION OF COMPANY SEVERANCE PLANS. The Company and, as
applicable, its Affiliates (as defined in Section 2.27(a)(i)) each agree to
terminate any and all group severance, separation or salary continuation plans,
programs or arrangements that are covered under ERISA immediately prior to
Closing. Parent shall receive from the Company evidence that the plans of the
Company and, as applicable, each Affiliate have been terminated pursuant to
resolution of each such entity's Board of Directors (the form and substance of
which resolutions shall be subject to review and approval of the Parent),
effective as of the day immediately preceding the Closing Date but contingent on
the Closing.
5.22 FORM 5500. On or before the Closing Date, the Company shall prepare
and file Form Series 5500 for the Company's 401(k) plan for the 1998 plan year
(the "1998 FORM 5500"). Notwithstanding the foregoing, Parent shall be provided
with reasonable advance opportunity to review, comment, alter, and approve such
1998 Form 5500.
5.23 CANADIAN RETIREMENT PLAN. The Company intends to adopt a registered
retirement savings plan, as defined under Canadian tax laws (the "RRSP"), for
its eligible Canadian employees. The Company and Parent agree that the Company's
eligible employees shall, following the Closing, participate in Parent's RRSP
rather than Company's establishing, sponsoring, adopting or maintaining a
separate RRSP prior to Closing; PROVIDED, HOWEVER, that (i) such delay in
implementing Company's RRSP is legally permissible, as determined by Parent and
Company in good faith and (ii) if the parties reasonably agree that Company is
required to establish an RRSP,
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then Company shall utilize the same provider or carrier and such RRSP shall, to
the extent legally permissible, have substantially the same terms and conditions
as Parent's RRSP.
5.24 REGULATORY FILINGS; REASONABLE EFFORTS. As soon as may be reasonably
practicable, the Company and Parent each shall file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "DOJ") Notification and Report Forms relating
to the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. The Company and Parent each shall promptly (a) supply the other with
any information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; PROVIDED,
HOWEVER, that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, the Subsidiaries, or their
affiliates, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, properties, and stock.
5.25 EMPLOYEE PLAN SERVICE CREDIT. To the extent permitted by Parent's
employee benefit plan and applicable law, Parent will use reasonable efforts, or
will cause Company to use reasonable efforts, to give individuals who are
employed by Company and the Subsidiaries as of the Effective Time ("AFFECTED
EMPLOYEES") full credit for purposes of eligibility, vesting, benefit accrual
(excluding, however, benefit accrual under any defined benefit pension plans)
and determination of the level of benefits under any employee benefit plans or
arrangements maintained by Parent or any subsidiary of Parent for such Affected
Employees' service with Company or any subsidiary of the Company to the same
extent recognized by Company immediately prior to the Effective Time.
5.26 WARRANT EXERCISES. The Company shall use its commercially reasonable
best efforts to cause each holder of a Warrant that will not otherwise terminate
as a result of the Merger to exercise such Warrant immediately prior to the
Effective Time.
5.27 TAX RETURN. The Company shall file its Sales and Use Tax Return for
the period October 1, 2000 to January 31, 2001 with the Franchise Tax Board of
the State of California (the "SALES TAX RETURN"). The Sales Tax Return shall be
accurately prepared, shall be true and complete in all material respects, shall
be completed in accordance with applicable law, and no material penalty shall
have been assessed for late filing.
5.28 D&O INSURANCE. Prior to the Effective Time, the Company shall amend
each outstanding Indemnity Agreement (as set forth in Schedule 2.16(i)) with any
officer, director, consultant, or other agent of the Company such that all
obligations of the Company under Section 3 thereof (relative to the obligation
to obtain and maintain directors' and officers' liability insurance) shall
terminate immediately prior to the Effective Time. Parent agrees that such
Indemnity Agreements, as amended pursuant hereto, shall remain obligations of
Parent and the Surviving Corporation after the Closing.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger and the
other transactions contemplated hereby shall have been approved and adopted by
the stockholders of the Company by the vote or written consent, as required by
applicable law, of the requisite percentage of the outstanding Company Capital
Stock.
(b) GOVERNMENT APPROVALS. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement including, but not limited to, HSR
Approval, receipt of the 3(a)(10) Permit (or, if applicable, effectiveness of
the S-4 Registration Statement), the filing of the Merger Certificate with the
Secretary of State of the State of Delaware and such requirements under
applicable state securities laws, shall have been filed, occurred or been
obtained, other than filings with and approvals by foreign governments relating
to the Merger if failure to make such filings or obtain such approvals would not
be materially adverse to the Company or Parent and the Subsidiaries, taken as a
whole.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(d) TAX OPINIONS. The Company shall have received a written
opinion from Gray Cary Ware & Freidenrich LLP, counsel to the Company, and
Parent shall have received a written opinion from Wilson Sonsini Goodrich &
Rosati, P.C., counsel to Parent, in each case to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code. In
rendering such opinions, counsel may rely on (and to the extent reasonably
required, the parties to this Agreement shall make) reasonable representations
related thereto.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction on or prior to the Closing
Date of each of the following conditions, which may be waived, in writing,
exclusively by the Company:
(a) REPRESENTATIONS, WARRANTIES, AND COVENANTS. The
representations and warranties of Parent and Merger Sub contained in this
Agreement that are not qualified by
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materiality or Material Adverse Effect shall be true and correct in all material
respects, and the representations and warranties that are so qualified shall be
true and correct, in each case on the date of this Agreement and as of the
Closing Date, except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and Parent and Merger Sub shall have performed or complied in all
material respects with all covenants, obligations, and conditions of this
Agreement required to be performed or complied with by them on or prior to the
Closing Date. The Company shall have been provided with a certificate confirming
the foregoing executed on behalf of Parent by an authorized officer.
(b) LEGAL OPINION. The Company shall have received a legal opinion
from Wilson Sonsini Goodrich & Rosati, P.C., legal counsel to Parent, in
substantially the form attached hereto as EXHIBIT G.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement that are not qualified by
materiality or Material Adverse Effect shall be true and correct in all material
respects, and the representations and warranties that are so qualified shall be
true and correct, in each case on the date of this Agreement and as of the
Closing Date, except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and the Company shall have performed or complied in all material
respects with all covenants, obligations, and conditions of this Agreement
required to be performed on or complied with by it on or prior to the Closing
Date. Parent shall have been provided with a certificate confirming the
foregoing executed on behalf of the Company by its Chief Executive Officer and
by its Chief Financial Officer.
(b) AFFILIATE AGREEMENTS. Parent shall have received from each
Company Affiliate an executed Affiliate Agreement, which shall be in full force
and effect.
(c) EMPLOYMENT AGREEMENTS. The Employment Agreements shall have
been duly executed and delivered and shall be in full force and effect.
(d) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the Contract Consents
and the consents, approvals, and waivers set forth in Schedule 2.6.
(e) LEGAL OPINION. Parent shall have received a legal opinion from
Gray Cary Ware & Freidenrich LLP, legal counsel to the Company, in substantially
the form attached hereto as EXHIBIT H.
(f) INTENTIONALLY OMITTED.
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(g) APPRAISAL RIGHTS. Holders of not more than 3% of the
outstanding shares of Company Capital Stock shall have exercised, nor shall they
have any continued right to exercise, appraisal rights under Delaware Law or
dissenters' rights under California Law with respect to the transactions
contemplated by this Agreement.
(h) TERMINATION OF INVESTOR RIGHTS. Parent shall have been
furnished evidence satisfactory to it that all rights granted by the Company to
its stockholders and in effect prior to the Closing, including but not limited
to rights of co-sale, voting, registration, first refusal, board observation or
information or operational covenants, shall have terminated as of the Closing.
(i) FIRPTA COMPLIANCE. The Company shall have delivered to Parent
a properly executed statement in a form reasonably acceptable to Parent for
purposes of satisfying Parent's obligations under Treasury Regulation Section
1.1445-2(c)(3).
(j) ESCROW SCHEDULE. The Company shall have delivered the Escrow
Schedule (as defined in Section 7.2(a)) to Parent.
(k) GOVERNMENT FILINGS. Parent shall have been furnished evidence
satisfactory to it that (i) the 1998 Form 5500 has been filed in accordance with
Section 5.22 and (ii) the Sales Tax Return has been filed in accordance with
Section 5.27.
(l) IBM AGREEMENT. The Company and International Business Machines
Corporation ("IBM") shall have delivered evidence to Parent of an amendment,
satisfactory to Parent, of the provisions relating to a change-of-control of the
Company set forth in the Software OEM License Agreement dated August 18, 2000
between the Company and IBM.
(m) WARRANTS. Each outstanding Warrant shall have been exercised
immediately prior to the Effective time or shall have terminated as a result of
the Merger.
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties, and covenants and agreements of the Company in
this Agreement or in the certificate delivered at the Closing pursuant to
Section 6.3(a), in each case as modified by the Company Schedules, shall survive
the Merger and shall continue for the period following the Closing Date set
forth in Section 7.2(a).
7.2 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. At the Effective Time, each holder of shares of
Company Capital Stock (each, a "COMPANY STOCKHOLDER" and collectively, the
"COMPANY STOCKHOLDERS") will be deemed to have received and deposited with the
Escrow Agent (as defined below) the Escrow Amount (plus any additional shares as
may be issued upon any stock split, stock dividend or
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recapitalization effected by Parent after the Effective Time with respect to
shares constituting the Escrow Amount), without any act of any Company
Stockholder. As soon as practicable after the Effective Time, the Escrow Amount,
without any act of any Company Stockholder, will be deposited with U.S. Bank
Trust National Association (or other institution acceptable to Parent and the
Securityholder Agent (as defined in Section 7.2(g) below)) as Escrow Agent (the
"ESCROW AGENT"), such deposit to constitute an escrow fund (the "ESCROW FUND")
to be governed by the terms set forth herein and to be maintained at Parent's
cost and expense. The portion of the Escrow Amount contributed on behalf of each
Company Stockholder shall be in proportion to the aggregate Parent Common to
which such holder would otherwise be entitled under Section 1.6(a) and shall be
in the respective amounts listed opposite each Company Stockholder's name listed
in a schedule to be executed by the Company and delivered to Parent at Closing
(the "ESCROW SCHEDULE"). No shares of Parent Common contributed to the Escrow
Fund may be unvested or subject to any right of repurchase, risk of forfeiture,
or other condition in favor of Parent or the Surviving Corporation; PROVIDED,
HOWEVER, that to the extent a Company Stockholder does not hold shares that are
vested or free of a right of repurchase, risk of forfeiture, or other condition,
the shares of Parent Common to be deposited in the Escrow Fund on behalf of such
Company Stockholder shall be the first shares of Parent Common scheduled to vest
or to be released from such rights, risks, or conditions. The Escrow Fund shall
be available to compensate Parent and its affiliates (including the Surviving
Corporation) for any claims, losses, liabilities, damages, deficiencies, costs
and expenses, including reasonable attorneys' fees and expenses, and expenses of
investigation and defense (hereinafter individually a "LOSS" and collectively
"LOSSES") incurred by Parent, its officers, directors, or affiliates (including
the Surviving Corporation) directly or indirectly as a result of (i) any
inaccuracy or breach of a representation or warranty of the Company contained
herein (or in any certificate, instrument, schedule or document delivered by the
Company in connection with this Agreement or the Merger) or (ii) any failure by
the Company to perform or comply with any covenant or agreement contained
herein; PROVIDED, HOWEVER, that claims arising out of an inaccuracy or breach of
any representation or warranty or any covenant or agreement of the Company
contained in this Agreement or in any certificate, instrument, schedule or
document delivered by the Company at the Closing in connection with this
Agreement or the Merger must be asserted on or before 5:00 p.m. (California
Time) on the date that is one year following the Closing Date (the "EXPIRATION
DATE"). No portion of the Escrow Amount shall be contributed in respect of any
Company Options. Except for Excess Third Party Expenses (as defined in Section
9.2), Parent may not receive any shares from the Escrow Fund unless and until
Officer's Certificates (as defined in paragraph (d) below) identifying Losses,
the aggregate amount of which exceed $150,000, have been delivered to the Escrow
Agent as provided in paragraph (d), and either there is no objection thereto or
any objection has been resolved in accordance with the provisions of this
Article VII; in such case, Parent may recover from the Escrow Fund all Losses,
without regard to the $150,000 threshold, for which there is no objection or any
objection has been resolved in accordance with the provisions of this Article
VII.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m. (California Time) on the Expiration Date (the "ESCROW PERIOD"). The date of
commencement of the Escrow Period and the Expiration Date shall
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be certified to the Escrow Agent in a certificate signed by Parent and the
Securityholder Agent. Such amount (or some portion thereof) that is necessary in
the reasonable judgement of Parent, subject to the objection of the
Securityholder Agent and the subsequent arbitration of the matter in the manner
provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims concerning
facts and circumstances existing prior to the termination of the Escrow Period
and as are specified in an Officer's Certificate delivered to the Escrow Agent
prior to the termination of such Escrow Period, may be retained in the Escrow
Fund after termination of the Escrow Period. As soon as any or all such claims
have been resolved as evidenced by the written memorandum of the Securityholder
Agent and Parent, the Escrow Agent shall deliver to the Company Stockholders the
remaining portion of the Escrow Fund that is not required to satisfy such
claims. If no Officer's Certificate pertaining to unsatisfied claims is
delivered to the Escrow Agent at or prior to the termination of the Escrow
Period, upon termination of the Escrow Period, the Escrow Agent, without further
authorization or instruction, shall promptly distribute the remainder of the
Escrow Fund to the Company Stockholders in accordance with the provisions of
this Section 7.2(b). Deliveries of Escrow Amounts to the Company Stockholders
pursuant to this Section 7.2(b) shall be made in proportion to their respective
original contributions to the Escrow Fund (as set forth on the Escrow Schedule).
(c) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent or
any Company Stockholder, and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(ii) Any shares of Parent Common or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split or stock dividend) ("NEW SHARES") in respect of Parent Common in the
Escrow Fund which have not been released from the Escrow Fund shall be deposited
with the Escrow Agent and added to the Escrow Fund and become a part thereof.
New Shares issued in respect of shares of Parent Common which have been released
from the Escrow Fund shall not be added to the Escrow Fund but shall be
distributed to the record holders thereof. Cash dividends on Parent Common shall
not be added to the Escrow Fund but shall be distributed to the record holders
thereof.
(iii) Each Company Stockholder shall have voting rights
with respect to the shares of Parent Common contributed to the Escrow Fund by
such Company Stockholder (and on any voting securities and other equity
securities added to the Escrow Fund in respect of such shares of Parent Common).
(d) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on or
before 5:00 p.m. (California time) on the Expiration Date of a certificate
signed by any officer of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that
Parent has paid or properly accrued or reasonably anticipates that it will have
to pay or accrue Losses and (B) specifying in reasonable detail the
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individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresentation, breach of warranty or covenant to which
such item is related, the Escrow Agent shall, subject to the provisions of
Section 7.2(e) hereof, deliver to Parent out of the Escrow Fund, as promptly as
practicable, shares of Parent Common held in the Escrow Fund in an amount equal
to such Losses.
(ii) For the purposes of determining the number of
shares of Parent Common to be delivered to Parent out of the Escrow Fund
pursuant to Section 7.2(d)(i) hereof, each share of Parent Common shall be
valued at the Parent Common Price.
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent and for a period of thirty (30) days after
delivery of such Officer's Certificate, the Escrow Agent shall make no delivery
to Parent of any Escrow Amounts pursuant to Section 7.2(d) hereof unless the
Escrow Agent shall have received written authorization from the Securityholder
Agent to make such delivery. After the expiration of such thirty (30) day
period, the Escrow Agent shall make delivery of shares of Parent Common from the
Escrow Fund in accordance with Section 7.2(d) hereof, provided that no such
payment or delivery may be made if the Securityholder Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent (with a copy to Parent)
prior to the expiration of such thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agent shall so object
in writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
three arbitrators. Parent and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator,
each of which arbitrators shall be independent and have at least ten years
relevant experience. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys fees and costs, to the extent as a court of competent law or
equity, should the arbitrators determine that discovery was sought without
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substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.2(e) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators.
(iii) Any such arbitration shall be held in San Diego
County, California and shall be conducted by, and under the rules then in
effect, of the Judicial Arbitration and Mediation Services, Inc. For purposes of
this Section 7.2(f), in any arbitration hereunder in which any claim or the
amount is at issue, Parent shall be deemed to be the Non-Prevailing Party in the
event that the arbitrators award Parent less than the sum of one-half (1/2) of
the disputed amount plus any amounts not in dispute; otherwise, the Company
Stockholders as represented by the Securityholder Agent shall be deemed to be
the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative costs of the
arbitration, and the expenses, including without limitation, reasonable
attorneys' fees and costs, incurred by the other party to the arbitration.
Judgment upon any award rendered by the arbitrators may be entered in any court
having jurisdiction. The Securityholder Agent may pay such amounts contemplated
under this Section 7.2(f)(iii) and Section 7.2(i)(ii) or other amounts
contemplated in this Section 7.2 (including without limitation unreimbursed
expenses of counsel for the Company Stockholders and Parent, arbitrator fees and
administrative costs) by distributing shares of Parent Common from the Escrow
Fund with respect to which Parent has not made a claim; PROVIDED, HOWEVER, that
no shares of Parent Common may be distributed from the Escrow Fund prior to the
termination of the Escrow Period and such shares may be distributed only to the
extent that such shares are not required to satisfy any claim for Losses.
(g) SECURITYHOLDER AGENT OF THE COMPANY STOCKHOLDERS; POWER OF
ATTORNEY.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any Company Stockholder,
Barry M. Ariko shall be appointed as agent and attorney-in-fact (the
"SECURITYHOLDER AGENT") for each Company Stockholder (except such Company
Stockholders, if any, as shall have perfected their appraisal rights under
Delaware Law or dissenters' rights under California Law), for and on behalf of
the Company Stockholders, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the Company Stockholders from time to time upon not less than thirty
(30) days prior written notice to Parent and Escrow Agent; provided that the
Securityholder Agent may not be removed unless holders of a majority-in-interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Securityholder Agent may be
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filled by approval of the holders of a majority-in-interest of the Escrow Fund.
No bond shall be required of the Securityholder Agent, and the Securityholder
Agent shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from each of the Company Stockholders.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while acting in good
faith and in the exercise of reasonable judgment.
(h) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act, consent,
or instruction of the Securityholder Agent shall constitute a decision of all
the Company Stockholders for whom a portion of the Escrow Amount otherwise
issuable to them is deposited in the Escrow Fund and shall be final, binding and
conclusive upon each of such Company Stockholders, and the Escrow Agent and
Parent may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of each
every such Company Stockholder. The Escrow Agent and Parent are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent, or instruction of the Securityholder Agent.
(i) THIRD-PARTY CLAIMS.
(i) If any third party shall notify Parent or its
affiliates hereto with respect to any matter (hereinafter referred to as a
"THIRD PARTY CLAIM"), which may give rise to a claim by Parent against the
Escrow Fund, then Parent shall give notice to the Securityholder Agent within 30
days of Parent's becoming aware of any such Third Party Claim or of facts upon
which any such Third Party Claim will be based setting forth such material
information with respect to the Third Party Claim as is reasonably available to
Parent; PROVIDED, HOWEVER, that no delay or failure on the part of Parent in
notifying the Securityholder Agent shall relieve the Securityholder Agent and
the Company Stockholders from any obligation hereunder unless the Securityholder
Agent and the Company Stockholders are thereby materially prejudiced (and then
solely to the extent of such prejudice).
(ii) In case any Third Party Claim is asserted against
Parent or its affiliates, and Parent notifies the Securityholder Agent thereof
pursuant to Section 7.2(i)(i) herein, the Securityholder Agent and the Company
Stockholders will be entitled, if the Securityholder Agent so elects by written
notice delivered to Parent within 30 days after receiving Parent's notice, to
assume the defense thereof, at the expense of the Company Stockholders
independent of the Escrow Fund if:
a) Parent has reasonably determined that Losses which
may be incurred as a result of the Third Party Claim do not exceed either
individually, or when aggregated with all other Third Party Claims, the total
dollar value of the Escrow Fund determined in accordance with Section 7.2(d)(ii)
hereof;
b) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief;
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c) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of Parent, likely
to establish a precedential custom or practice adverse to the continuing
business interests of Parent; and
d) counsel selected by the Securityholder Agent is
reasonably acceptable to Parent.
If the Securityholder Agent and the Company Stockholders so
assume any such defense, the Securityholder Agent and the Company Stockholders
shall conduct the defense of the Third Party Claim actively and diligently. The
Securityholder Agent and the Company Stockholders shall not compromise or settle
such Third Party Claim or consent to entry of any judgment in respect thereof
without the prior written consent of Parent and/or its affiliates, as
applicable.
(iii) In the event that the Securityholder Agent assumes
the defense of the Third Party Claim in accordance with Section 7.2(i)(ii)
above, Parent or its affiliates may retain separate counsel and participate in
the defense of the Third Party Claim, but the fees and expenses of such counsel
shall be at the expense of Parent unless Parent or its affiliates shall
reasonably determine that there is a material conflict of interest between or
among Parent or its affiliates and the Securityholder Agent and the Company
Stockholders with respect to such Third Party Claim, in which case the
reasonable fees and expenses of such counsel will be borne by the Securityholder
Agent and the Company Stockholders out of the Escrow Fund. Parent or its
affiliates will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Securityholder Agent. Parent will cooperate in the defense of the
Third Party Claim and will provide full access to documents, assets, properties,
books and records reasonably requested by Securityholder Agent and material to
the claim and will make available all officers, directors, and employees
reasonably requested by Securityholder Agent for investigation, depositions, and
trial.
(iv) In the event that the Securityholder Agent fails
or elects not to assume the defense of Parent or its affiliates against such
Third Party Claim, which Securityholder Agent had the right to assume under
Section 7.2(i)(ii) above, Parent or its affiliates shall have the right to
undertake the defense, and Parent shall not compromise or settle such Third
Party Claim or consent to entry of any judgment in respect thereof without the
prior written consent of Securityholder Agent. In the event that the
Securityholder Agent is not entitled to assume the defense of Parent or its
affiliates against such Third Party Claim pursuant to Section 7.2(i)(ii) above,
Parent or its affiliates shall have the right to undertake the defense, consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim in any manner it may deem appropriate (and Parent or its
affiliates need not consult with, or obtain any consent from, the Securityholder
Agent in connection therewith); PROVIDED, HOWEVER, that except with the written
consent of the Securityholder Agent, no settlement of any such claim or consent
to the entry of any judgment with respect to such Third Party Claim shall alone
be determinative of the validity of the claim against the Escrow Fund. In each
case, Parent or its affiliates shall conduct the defense of the Third Party
Claim actively and diligently, and the Securityholder Agent and the Company
Stockholders will cooperate
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with Parent or its affiliates in the defense of that claim and will provide full
access to documents, assets, properties, books and records reasonably requested
by Parent and material to the claim and will make available all individuals
reasonably requested by Parent for investigation, depositions, and trial.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth in this Article VII,
and as set forth in any additional written escrow instructions which the Escrow
Agent may receive after the date of this Agreement which are signed by an
officer of Parent and the Securityholder Agent, and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the proper party
or parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The
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Escrow Agent is not responsible for determining and verifying the authority of
any person acting or purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common and may wait for settlement
of any such controversy by final appropriate legal proceedings or other means
as, in the Escrow Agent's discretion, the Escrow Agent may be required, despite
what may be set forth elsewhere in this Agreement. In such event, the Escrow
Agent will not be liable for damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court all documents and shares of Parent Common
held in escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such action, the
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
(vii) Parent and the Surviving Corporation agree jointly
and severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, and disbursements that may be imposed on Escrow
Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter; PROVIDED, HOWEVER, that in
the event the Escrow Agent shall be the Non-Prevailing Party in connection with
any claim or action initiated by a Company Stockholder or Company Stockholders,
then such Company Stockholder or Company Stockholders shall be responsible for
the indemnification of the Escrow Agent to the full extent provided by this
paragraph.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; PROVIDED,
HOWEVER, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: Parent and
the Securityholder Agent shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days after receiving such notice. If
Parent and the Securityholder Agent fail to agree upon a successor escrow agent
within such time, the Escrow Agent shall have the right to appoint a successor
escrow agent authorized to do business in the State of California. The successor
escrow agent shall execute and deliver an instrument accepting such appointment
and it shall, without further acts, be vested with all the estates, properties,
rights, powers, and duties of the predecessor escrow agent as if originally
named as escrow agent. The Escrow Agent shall be discharged from any further
duties and liability under this Agreement.
(k) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this
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Agreement. In the event that the conditions of this Agreement are not promptly
fulfilled, or if the Escrow Agent renders any service not provided for in this
Agreement, or if the parties request a substantial modification of its terms, or
if any controversy arises, or if the Escrow Agent is made a party to, or
intervenes in, any litigation pertaining to this escrow or its subject matter,
the Escrow Agent shall be reasonably compensated for such extraordinary services
and reimbursed for all costs, attorneys' fees, and expenses occasioned by such
default, delay, controversy or litigation. Parent promises to pay these sums
upon demand.
(l) CONSEQUENTIAL DAMAGES. In no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Escrow Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
7.3 LIMITATION OF LIABILITY. The maximum liability of the Company
Stockholders for Losses incurred by Parent and/or the Surviving Corporation
shall be limited to the Escrow Fund (the "MAXIMUM LIABILITY FOR LOSSES") and
resort to the Escrow Fund shall be the sole and exclusive right and remedy of
Parent and/or the Surviving Corporation for Losses. The maximum liability of
each Company Stockholder for any Losses incurred by Parent and/or the Surviving
Corporation shall be an amount equal to the product obtained by multiplying (x)
the lesser of the Maximum Liability for Losses or the amount of such Losses
actually incurred by Parent or the Surviving Corporation by (y) the ratio of (A)
the total number of shares of Parent Common Stock received by such person at the
Closing to (B) the aggregate number of shares of Parent Common Stock issued at
the Effective Time and shall only be payable out of the Escrow Fund in shares.
Parent agrees to present any claims for Losses solely against the Escrow Fund
established under this Article VII.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual written consent of the Company and Parent;
(b) by either Parent or the Company if: (i) the Effective Time has
not occurred by May 31, 2001 or, in the event Parent elects to file the S-4
Registration Statement, July 31, 2001 (provided that the right to terminate this
Agreement under this clause 8.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date); (ii)
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity that would make consummation of the Merger
illegal;
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(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
(d) by Parent if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) would not then be satisfied; PROVIDED, HOWEVER, that if such breach is
curable by the Company within thirty (30) days through the exercise of its
reasonable best efforts, then for so long as the Company continues to exercise
such reasonable best efforts Parent may not terminate this Agreement under this
Section 8.1(d) unless such breach is not cured within such thirty (30) day
period (but no cure period shall be required for a breach which by its nature
cannot be cured);
(e) by the Company if there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and as a result of such breach the conditions
set forth in Section 6.2(a), as the case may be, would not then be satisfied;
PROVIDED, HOWEVER, that if such breach is curable by Parent or Merger Sub within
thirty (30) days through the exercise of its reasonable best efforts, then for
so long as Parent or Merger Sub continues to exercise such reasonable best
efforts the Company may not terminate this Agreement under this Section 8.1(e)
unless such breach is not cured within such thirty (30) day period (but no cure
period shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void, and
there shall be no liability or obligation on the part of Parent, Merger Sub, or
the Company, or their respective officers, directors, or stockholders, provided
that (i) the provisions of Section 5.4 (Confidentiality) and this Article VIII
shall remain in full force and effect and survive any termination of this
Agreement and (ii) the termination of this Agreement shall not relieve any party
from any liability for any willful and knowing breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement.
8.3 AMENDMENT. Except as is otherwise required by applicable law, prior
to the Closing, this Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed by Parent and the Company and,
in respect of matters under this Agreement that expressly relate to the Escrow
Agent or Securityholder Agent, the Escrow Agent and the Securityholder Agent.
Except as is otherwise required by applicable law, after the Closing, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by Parent and by Company Stockholders who receive
more than 50% of the Parent
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Common issued or to be issued pursuant to Section 1.6, or by all of the Company
Stockholders in the case of an amendment to Article VII.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party 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 an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile or delivered by recognized overnight or international
courier service or personal delivery (as the situation may require) at the
respective address or facsimile number of the party receiving notice as set
forth below. Any party hereto may by notice so given change its address or
facsimile number for future notice hereunder. All such notices and other
communications hereunder shall be deemed given (i) upon confirmation of
delivery, if sent by facsimile and (ii) upon delivery, if sent by recognized
overnight or international courier service or personal delivery:
(a) if to Parent or Merger Sub, to:
Peregrine Systems, Inc.
3611 Valley Centre Drive
San Diego, California 92130
Attention: Richard T. Nelson, Vice President-Corporate Development
Eric P. Deller, Vice President and General Counsel
Telephone: (858) 481-5000
Facsimile: (858) 794-5057
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Douglas H. Collom
Robert F. Kornegay
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
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(b) if to the Company, to:
Extricity, Inc.
One Davis Drive
Belmont, California 94002
Attention: Barry M. Ariko
Chairman and Chief Executive Officer
Telephone: (650) 486-4500
Facsimile: (650) 486-4307
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Attention: Gregory M. Gallo
Joe C. Sorenson
Telephone: (650) 833-2000
Facsimile: (650) 833-2001
(c) if to the Securityholder Agent:
Barry M. Ariko
14740 Farwell Avenue
Saratoga, California 95070
Telephone: (408) 867-4042
Facsimile: (408) 867-4433
(d) if to the Escrow Agent:
U.S. Bank Trust National Association
One California Street
Suite 2550
San Francisco, California 94111
Attention: Ann Gadsby
Telephone: (415) 273-4532
Facsimile: (415) 273-4591
9.2 EXPENSES. In the event the Merger is not consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses. In the event the
Merger is consummated, the Surviving Corporation shall be responsible for the
payment of all Third Party Expenses, including Third Party Expenses incurred by
the Company; PROVIDED, HOWEVER, Parent shall have the right to approve in its
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sole discretion all expenses, including (without limitation) attorney, financial
advisor and accountant fees, in excess of $4,000,000 in the aggregate incurred
by Company in connection with this Agreement, the Merger and the transactions
hereby contemplated; PROVIDED, FURTHER, that (i) to the extent Third Party
Expenses incurred by the Company and payable to Deutsche Bank Alex. Brown, Inc.
exceed the amount described in Schedule 2.25 of the Company Schedules or (ii) to
the extent all other Third Party Expenses exceed $425,000 (the amounts specified
in (i) or (ii) being referred to herein as an "EXCESS THIRD PARTY EXPENSE"),
such Excess Third Party Expenses shall be deemed a "Loss" for purposes of
Article VII and shall be reimbursable to Parent in accordance with Article VII,
without requiring that such Loss meet or exceed the $150,000 threshold amount as
set forth in Section 7.2.
9.3 INTERPRETATION.
(a) The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "AGREEMENT" when used herein shall be deemed in each case to mean any
contract, commitment or other agreement, whether oral or written, that is
legally binding. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "THE BUSINESS
OF" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
(b) For purposes of this Agreement, the term "KNOWLEDGE" means, with
respect to a party hereto, knowledge of the executive officers of such party
after reasonable inquiry.
(c) For purposes of this Agreement, the term "PERSON" means any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(d) The term "MATERIAL ADVERSE EFFECT" when used in connection with
an entity means any change, event, violation, inaccuracy, circumstance or
effect, individually or when aggregated with other such changes, events,
violations, inaccuracies, circumstances or effects, that is materially adverse
to the business, assets, liabilities, financial condition or results of
operations of such entity and its subsidiaries taken as a whole; PROVIDED,
HOWEVER, in no event shall any change in Parent's stock price or trading volume
or the failure to meet or exceed Wall Street research analysts' or Parent's
internal earnings or other estimates or projections in and of itself constitute
a Material Adverse Effect.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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9.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. Other than
the Confidentiality Agreement, this Agreement, the schedules and exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein: (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
9.6 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void, or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 GOVERNING LAW. Except as mandatorily governed by Delaware Law, this
Agreement shall be governed by and construed in accordance with the laws of the
State of California, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. Each of the parties hereto
agrees that process may be served upon them in any manner authorized by the laws
of the State of California for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 SPECIFIC PERFORMANCE. 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 or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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9.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY, AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY, OR MERGER SUB
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent, and the Escrow Agent have caused this Agreement to be signed by their
duly authorized respective officers, all as of the date first written above.
EXTRICITY, INC. PEREGRINE SYSTEMS, INC.
a Delaware corporation a Delaware corporation
By: /s/ Barry M. Ariko By: /s/ Richard T. Nelson
------------------------------------ -------------------------------
Barry M. Ariko Richard T. Nelson
Chairman and Chief Executive Officer Vice President and Secretary
SECURITYHOLDER AGENT: UTILITY ACQUISITION CORPORATION
(as to the provisions of Article VII only) a Delaware corporation
By: /s/ Barry M. Ariko By /s/ Richard T. Nelson
------------------------------------ --------------------------------
Name: Barry M. Ariko Richard T. Nelson
---------------------------------- President and Chief Executive
Title: Chairman and Chief Executive Officer Officer
---------------------------------
ESCROW AGENT
(as to the provisions of Article VII only)
U.S. BANK TRUST NATIONAL ASSOCIATION
By: /s/ Ann Gadsby
-------------------------------
Name: Ann Gadsby
-------------------------------
Title: Vice President
------------------------------
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
EXHIBIT A Form of Merger Certificate
EXHIBIT B Form of Voting Agreement
EXHIBIT C Form of Company Affiliate Agreement
EXHIBIT D Form of Noncompetition Agreement
EXHIBIT E Form of Employment Agreement
EXHIBIT G Form of Legal Opinion of Counsel to Parent
EXHIBIT H Form of Legal Opinion of Counsel to the Company