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EXHIBIT 2.1
[CONFORMED COPY]
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CRITICAL PATH, INC.,
INITIALIZE ACQUISITION CORP.
AND
ISOCOR
DATED AS OF OCTOBER 20, 1999
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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; Closing..............................................2
1.3 Effect of the Merger.................................................2
1.4 Articles of Incorporation; Bylaws....................................2
1.5 Directors and Officers...............................................3
1.6 Effect on Capital Stock..............................................3
1.7 Surrender of Certificates............................................4
1.8 No Further Ownership Rights in Company Common Stock..................6
1.9 Lost, Stolen or Destroyed Certificates...............................6
1.10 Tax Consequences.....................................................7
1.11 Taking of Necessary Action; Further Action...........................7
1.12 Dissenting Shares....................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY..........................7
2.1 Organization and Qualification; Subsidiaries.........................8
2.2 Articles of Incorporation and Bylaws.................................8
2.3 Capitalization.......................................................8
2.4 Authority Relative to this Agreement................................10
2.5 No Conflict; Required Filings and Consents..........................11
2.6 Compliance; Permits.................................................12
2.7 SEC Filings; Financial Statements...................................12
2.8 No Undisclosed Liabilities..........................................13
2.9 Absence of Certain Changes or Events................................13
2.10 Absence of Litigation...............................................14
2.11 Employee Benefit Plans..............................................14
2.12 Labor Matters.......................................................17
2.13 Registration Statement; Proxy Statement.............................17
2.14 Restrictions on Business Activities.................................18
2.15 Title to Property...................................................18
2.16 Taxes...............................................................18
2.17 Environmental Matters...............................................20
2.18 Brokers.............................................................21
2.19 Intellectual Property...............................................21
2.20 Agreements, Contracts and Commitments...............................24
2.21 Insurance...........................................................26
2.22 Opinion of Financial Advisor........................................26
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TABLE OF CONTENTS
(CONTINUED)
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2.23 Board Approval......................................................26
2.24 Vote Required.......................................................26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........26
3.1 Organization and Qualification; Subsidiaries........................26
3.2 Articles of Incorporation and Bylaws................................27
3.3 Capitalization......................................................27
3.4 Authority Relative to this Agreement................................28
3.5 No Conflict; Required Filings and Consents..........................28
3.6 SEC Filings; Financial Statements...................................29
3.7 Registration Statement; Proxy Statement.............................30
3.8 No Undisclosed Liabilities..........................................30
3.9 Absence of Certain Changes or Events................................30
3.10 Absence of Litigation...............................................31
3.11 Employee Benefit Plans..............................................31
3.12 Tax Returns and Audits..............................................34
3.13 Environmental Matters...............................................35
3.14 Intellectual Property...............................................36
3.15 Board Approval......................................................39
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...............................39
4.1 Conduct of Business by Company......................................39
4.2 Conduct of Business by Parent.......................................42
ARTICLE V ADDITIONAL AGREEMENTS..............................................42
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations...............................................42
5.2 Meeting of Company Shareholders.....................................43
5.3 Confidentiality; Access to Information..............................45
5.4 No Solicitation.....................................................46
5.5 Public Disclosure...................................................48
5.6 Reasonable Efforts; Notification....................................48
5.7 Stock Options, Warrants and Employee Benefits.......................49
5.8 Form S-8 ...........................................................50
5.9 Indemnification.....................................................50
5.10 Nasdaq Listing......................................................50
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TABLE OF CONTENTS
(CONTINUED)
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5.11 Regulatory Filings; Reasonable Efforts..............................50
5.12 401(k) Plan.........................................................51
5.13 Treatment as a Reorganization.......................................51
5.14 Certain Subsidiaries................................................51
ARTICLE VI CONDITIONS TO THE MERGER..........................................51
6.1 Conditions to Obligations of Each Party to Effect the Merger........51
6.2 Additional Conditions to Obligations of Company.....................52
6.3 Additional Conditions to the Obligations of Parent and Merger Sub...53
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................54
7.1 Termination.........................................................54
7.2 Notice of Termination; Effect of Termination........................56
7.3 Fees and Expenses...................................................56
7.4 Amendment...........................................................57
7.5 Extension; Waiver...................................................57
ARTICLE VIII GENERAL PROVISIONS..............................................57
8.1 Non-Survival of Representations and Warranties......................57
8.2 Notices ...........................................................58
8.3 Interpretation; Knowledge...........................................59
8.4 Counterparts........................................................60
8.5 Entire Agreement; Third Party Beneficiaries.........................60
8.6 Severability........................................................60
8.7 Other Remedies; Specific Performance................................60
8.8 Governing Law.......................................................61
8.9 Rules of Construction...............................................61
8.10 Assignment..........................................................61
8.11 WAIVER OF JURY TRIAL................................................61
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INDEX OF EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Stock Option Agreement
Exhibit C Employees Accepting Offer Letters
Exhibit D Form of Agreement of Merger
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
October 21, 1999, among Critical Path, Inc., a California corporation
("PARENT"), Initialize Acquisition Corp., a California corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and ISOCOR, a California
corporation ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement
(as defined in Section 1.2 below) and in accordance with the California
Corporations Code ("CALIFORNIA LAW"), Parent and Company intend to enter into a
business combination transaction.
B. The Board of Directors of Company (i) has determined that the
Merger (as defined in Section 1.1) is fair to, and in the best interests of,
Company and its shareholders, (ii) has approved this Agreement, the Merger (as
defined in Section 1.1) and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the shareholders of Company
approve this Agreement and approve the Merger.
C. Concurrently with the execution of this Agreement, and as a
condition to and an inducement to Parent's willingness to enter into this
Agreement, certain affiliates of Company are entering into Voting Agreements in
substantially the form attached hereto as Exhibit A (the "COMPANY VOTING
AGREEMENTS").
D. Concurrently with the execution of this Agreement, and as a
condition to and an inducement to Parent's willingness to enter into this
Agreement, Company shall execute and deliver a Stock Option Agreement in favor
of Parent in substantially the form attached hereto as Exhibit B (the "STOCK
OPTION AGREEMENT"). The Board of Directors of Company has approved the Stock
Option Agreement.
E. Concurrently with the execution of this Agreement, and as a
condition to and an inducement to Parent's willingness to enter into this
Agreement, the employees of Company listed on Exhibit C hereto are executing
employment offer letters with Parent which agreements shall be held in escrow
until, shall be subject to, and shall become effective upon the Closing (as
defined below).
F. 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,
the receipt and sufficiency of which are hereby acknowledged, 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 and the
applicable provisions of California Law, Merger Sub shall be merged with and
into Company (the "MERGER"), the separate corporate existence of Merger Sub
shall cease and Company shall continue as the surviving corporation. Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the conditions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
with the Secretary of State of the State of California in accordance with the
relevant provisions of California Law a duly executed Agreement of Merger
substantially in the form of Exhibit D hereto (the "AGREEMENT OF MERGER") and
officers' certificates (collectively, the "MERGER DOCUMENTS") (the time of such
filing or such later time as may be agreed in writing by Company and Parent and
specified in the Merger Documents, being referred to herein as the "EFFECTIVE
TIME") shall be as soon as practicable on or after the Closing Date (as herein
defined). Unless the context otherwise requires, the term "AGREEMENT" as used
herein refers to this Agreement and Plan of Reorganization, as the same may be
amended from time to time, and all exhibits and schedules thereto. The closing
of the Merger (the "CLOSING") shall take place at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, at a time and date to be specified
by the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time, date and location as the parties hereto agree in writing (the
"CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of California Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the Articles of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be "Initialize Inc."
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(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common
Stock, no par value, of Company (the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), or which
constitute Dissenting Shares (as defined below), will be canceled and
extinguished and automatically converted (subject to Sections 1.6(e) and (f))
into the right to receive 0.4707 shares of Common Stock of Parent (the "PARENT
COMMON STOCK") (the "EXCHANGE RATIO") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.9). If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with Company, then the shares of Parent
Common Stock issued in exchange for such shares of Company Common Stock will
also be unvested and subject to the same repurchase option, risk of forfeiture
or other condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends. The Company
shall take all action that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or other
agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company
Common Stock held by Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of Company or of Parent immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase Company Common Stock then outstanding
under Company's 1992 Stock Option Plan, 1996 Directors' Stock Option Plan and
1999 Stock Option Plan (collectively, the "COMPANY OPTION PLANS") shall be
assumed by Parent in accordance with Section 5.7 hereof. Purchase rights
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outstanding under Company's 1996 Employee Stock Purchase Plan (the "ESPP") shall
be treated as set forth in Section 5.7.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
no par value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, no par value
per share, of the Surviving Corporation. Each certificate evidencing ownership
of shares of Merger Sub Common Stock shall evidence ownership of such shares of
capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), extraordinary
cash dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Parent Common Stock or
Company Common Stock occurring on or after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall, upon
surrender of such holder's Certificates(s) (as defined in Section 1.7(c))
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Parent Common Stock for the ten (10)
most recent days that Parent Common Stock has traded ending on the trading day
immediately prior to the Effective Time, as reported on the Nasdaq National
Market System ("NASDAQ").
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust
company reasonably acceptable to Company to act as the exchange agent (the
"EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent, for exchange
in accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock, and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(f) and any dividends or distributions to which holders
of shares of Company Common Stock may be entitled pursuant to Section 1.7(d).
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(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d), (i) a letter of transmittal in
customary form (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 contain such other provisions 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 Stock, cash in lieu of any fractional shares pursuant to
Section 1.6(f) and any dividends or other distributions pursuant to Section
1.7(d). Upon surrender of Certificates 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, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time, payment in lieu of fractional shares which
such holders have the right to receive pursuant to Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 1.7(d) as to dividends and other
distributions, to evidence only the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Common Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing
shares of Parent Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered, it will
be a condition of the issuance thereof that the Certificates so
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surrendered will be properly endorsed and otherwise in proper form for transfer
and that the persons requesting such exchange will have paid to Parent or any
agent designated by it any transfer or other taxes required by reason of the
issuance of certificates representing shares of Parent Common Stock in any name
other than that of the registered holder of the Certificates 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) Required Withholding. Each of the Exchange Agent, Parent
and the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as are required to
be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable legal requirement.
To the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Sections 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common 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 canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates 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, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, 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, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
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1.10 Tax Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any 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 Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action.
1.12 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock that are outstanding immediately
prior to the Effective Time and that are held by Company shareholders who shall
not have voted such shares in favor of the Merger and who shall, after the
taking of such vote, have properly demanded payment therefor in accordance with
Chapter 13 of California Law ("Dissenting Shares") shall not be converted into
or be exchangeable for the right to receive the consideration provided in
Section 1.6(a), but the holders thereof shall be entitled to payment therefor in
accordance with the provisions of and subject to the conditions set forth in
Chapter 13 of California Law; provided, however, that if (a) any holder of
Dissenting Shares shall subsequently deliver a written withdrawal of such
holder's demand for payment of such shares at their fair market value (with the
written approval of Company or the Surviving Corporation), (b) any holder fails
to establish such holder's entitlement to dissenters' rights or (c) neither any
holder of Dissenting Shares nor the Surviving Corporation has filed a petition
demanding a determination of the value of all Dissenting Shares within the time
provided in California Law, such holder or holders, as the case may be, shall
forfeit the right to payment of such shares at their fair market value and such
shares shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the
consideration provided in Section 1.6(a) of this Agreement, without any interest
thereon, upon surrender of the certificate or certificates representing such
Dissenting Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date hereof and as of the Closing Date, Company represents and
warrants to Parent and Merger Sub, subject to such exceptions as are
specifically disclosed in writing in the disclosure letter supplied by Company
to Parent dated as of the date hereof and certified by a duly authorized officer
of Company, which disclosure shall provide an exception to or otherwise qualify
the representations or warranties of Company specifically referred to in such
disclosure and such other
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representations and warranties to the extent such disclosure shall reasonably
appear to be applicable to such other representations or warranties (the
"COMPANY SCHEDULE"), as follows:
2.1 Organization and Qualification; Subsidiaries.
(a) Each of Company and its Subsidiaries (as defined in
Section 8.3) is a corporation duly incorporated, formed or validly existing and
in good standing to the extent applicable, as the case may be, under the laws of
the jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted, except where the failure to do so
would not, individually, or in the aggregate, have a Material Adverse Effect (as
defined in Section 8.3). Each of Company and its subsidiaries is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders ("APPROVALS") necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Material
Adverse Effect on Company.
(b) Company has no Subsidiaries except for the entities
identified in Section 2.1(b) of the Company Schedule. Neither Company nor any of
its Subsidiaries has agreed nor is obligated to make nor is bound by any
written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment or undertaking of any
nature, as of the date hereof or as may hereafter be in effect (a "CONTRACT")
under which it may become obligated to make, any future investment in or capital
contribution to any other entity. Neither Company nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in or any interest
convertible, exchangeable or exercisable for, any equity or similar interest in,
any corporation, partnership, joint venture or other business, association or
entity.
(c) Company and each of its Subsidiaries is qualified to do
business as a foreign corporation, (or other entity, as applicable) and is in
good standing, under the laws of all jurisdictions where the nature of their
business requires such qualification and where the failure to so qualify would
have a Material Adverse Effect on the Company.
2.2 Articles of Incorporation and Bylaws. Company has previously
furnished to Parent a complete and correct copy of its Amended and Restated
Articles of Incorporation and Bylaws as amended to date (together, the "COMPANY
CHARTER DOCUMENTS"). Such Company Charter Documents and equivalent
organizational documents of each Subsidiary are in full force and effect.
Company is not in violation of any of the provisions of Company Charter
Documents, and no Subsidiary of Company is in violation of its equivalent
organizational documents.
2.3 Capitalization.
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(a) The authorized capital stock of Company consists of
50,000,000 shares of Company Common Stock and 2,000,000 shares of Preferred
Stock ("COMPANY PREFERRED STOCK"), no par value. At the close of business three
(3) business days prior to the date hereof, (i) 10,422,135 shares of Company
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable; (ii) no shares of Company Common Stock were held by
Subsidiaries of Company; (iii) 225,016 shares of Company Common Stock were
available for future issuance pursuant to Company's ESPP; (iv) 2,950,000 shares
of Company Common Stock were reserved for issuance upon the exercise of
outstanding options to purchase Company Common Stock under the 1992 Stock Option
Plan; (v) 150,000 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding options to purchase Company Common Stock under the
1996 Directors' Stock Option Plan; (vi) 350,000 shares of Company Common Stock
were reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the 1999 Stock Option Plan; (vii) 104,866 shares of
Company Common Stock were available for future grant under the 1992 Stock Option
Plan; (viii) 65,000 shares of Company Common Stock were available for future
grant under the 1996 Directors' Stock Option Plan; (ix) 224,500 shares of
Company Common Stock were available for future grant; and (x) sufficient shares
of Company Common Stock were reserved for future issuance pursuant to the Stock
Option Agreement. As of the date hereof, no shares of Company Preferred Stock
were issued or outstanding. Section 2.3(a) of the Company Schedule sets forth
the following information with respect to each Company Stock Option (as defined
in Section 5.8) outstanding as of the date of this Agreement: (i) the name and
address of the optionee; (ii) the particular plan pursuant to which such Company
Stock Option was granted; (iii) the number of shares of Company Common Stock
subject to such Company Stock Option; (iv) the exercise price of such Company
Stock Option; (v) the date on which such Company Stock Option was granted; (vi)
the applicable vesting schedule; (vii) the date on which such Company Stock
Option expires; and (viii) whether the exercisability of such option will be
accelerated in any way by the transactions contemplated by this Agreement, and
indicates the extent of acceleration. Company has made available to Parent
accurate and complete copies of all stock option plans pursuant to which Company
has granted such Company Stock Options that are currently outstanding and the
form of all stock option agreements evidencing such Company Stock Options. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instrument pursuant to which they
are issuable, would be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 2.3(a) of the Company Schedule,
there are no commitments or agreements of any character to which Company is
bound obligating Company to accelerate the vesting of any Company Stock Option
as a result of the Merger. All outstanding shares of Company Common Stock, all
outstanding Company Stock Options, and all outstanding shares of capital stock
of each Subsidiary of Company have been issued and granted in compliance with
(i) all applicable securities laws and other applicable Legal Requirements (as
defined below) and (ii) all requirements set forth in applicable Contracts. For
the purposes of this Agreement, "LEGAL REQUIREMENTS" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code,
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15
edict, decree, rule, regulation, ruling or requirement issues, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below) and (ii) all requirements set
forth in applicable contracts, agreements, and instruments.
(b) Except for securities Company owns free and clear of all
liens, pledges, hypothecations, charges, mortgages, security interests,
encumbrances, claims, infringements, interferences, options, rights of first
refusal, preemptive rights, community property interests or restrictions of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset) directly or indirectly through one or more Subsidiaries, and except for
shares of capital stock or other similar ownership interests of Company's
Subsidiaries that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such Subsidiaries (which
shares or other interests do not materially affect Company's control of such
Subsidiaries), as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any Subsidiary of Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.3(b) of the Company Schedule or as
set forth in Section 2.3(a) hereof and except for the Stock Option Agreement,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Company or any of
its Subsidiaries is a party or by which it is bound obligating Company or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of Company or any of its Subsidiaries or
obligating Company or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement and except as set forth in
Section 2.3(b) of the Company Schedule, there are no registration rights and
there is, except for Company Voting Agreements, no voting trust, proxy, rights
plan, antitakeover plan or other agreement or understanding to which Company or
any of its Subsidiaries is a party or by which they are bound with respect to
any equity security of any class of Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its Subsidiaries.
2.4 Authority Relative to this Agreement. Company has all necessary
corporate power and authority to execute and deliver this Agreement, the
Agreement of Merger and the Stock Option Agreement, and to perform its
obligations hereunder and thereunder and, subject to obtaining the approval of
the shareholders of Company of this Agreement, the Agreement of Merger and the
Merger, to consummate the transactions contemplated hereby and thereby
(including the Merger).
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16
The execution and delivery of this Agreement, the Agreement of Merger and the
Stock Option Agreement by Company and the consummation by Company of the
transactions contemplated hereby and thereby (including the Merger) have been
duly and validly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement, the Agreement of Merger or the Stock Option
Agreement or to consummate the transactions so contemplated (other than the
approval of this Agreement, the Agreement of Merger and the Merger by holders of
a majority of the outstanding shares of Company Common Stock in accordance with
California Law and the Company Charter Documents). This Agreement, the Agreement
of Merger and the Stock Option Agreement have been duly and validly executed and
delivered by Company and, assuming the due authorization, execution and delivery
thereof by Parent and Merger Sub, constitute legal and binding obligations of
Company, enforceable against Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement, the
Agreement of Merger and the Stock Option Agreement by Company do not, and the
performance of this Agreement and the Stock Option Agreement by Company shall
not, (i) conflict with or violate the Company Charter Documents or the
equivalent organizational documents of any of Company's Subsidiaries, (ii)
subject to obtaining the approval of Company's shareholders of this Agreement
and the Merger and compliance with the requirements set forth in Section 2.5(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Company or any of its Subsidiaries or by which its or any
of their respective properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or materially impair Company's or any of
its Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Company or any of its Subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Company or any of
its Subsidiaries is a party or by which Company or any of its Subsidiaries or
its or any of their respective properties are bound or affected, except, with
respect to clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on Company or any of its Subsidiaries taken as a
whole.
(b) The execution and delivery of this Agreement, the
Agreement of Merger and the Stock Option Agreement by Company do not, and the
performance of this Agreement by Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
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17
domestic or foreign (a "GOVERNMENTAL ENTITY"), except (A) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
state securities laws ("BLUE SKY LAWS"), the pre-merger notification
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") and of foreign Governmental Entities and the rules and
regulations thereunder, the rules and regulations of Nasdaq, and the filing and
recordation of the Merger Documents as required by California Law and (B) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company or, after
the Effective Time, Parent, or prevent consummation of the Merger or otherwise
prevent the parties hereto from performing their obligations under this
Agreement.
2.6 Compliance; Permits.
(a) Except as set forth in Section 2.6(a) of the Company
Schedule, neither Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Company or any of its Subsidiaries or by which its or any
of their respective properties is bound or affected, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company or any of its
Subsidiaries is a party or by which Company or any of its Subsidiaries or its or
any of their respective properties is bound or affected, except for any
conflicts, defaults or violations that (individually or in the aggregate) would
not cause Company to lose any material benefit or incur any material liability.
No investigation or review by any Governmental Entity is pending or, to the
knowledge of Company, threatened against Company or its Subsidiaries, nor has
any Governmental Entity indicated to Company an intention to conduct the same,
other than, in each such case, those the outcome of which could not,
individually or in the aggregate, reasonably be expected to have the effect of
prohibiting or materially impairing any acquisition of property that is material
to Company and its Subsidiaries taken as a whole by Company or any of its
Subsidiaries or the conduct of business by Company and its Subsidiaries taken as
a whole.
2.7 SEC Filings; Financial Statements.
(a) Company has made available to Parent a correct and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Company with the Securities and Exchange Commission
("SEC") for the two calendar years prior to the date of this Agreement (the
"COMPANY SEC REPORTS"), which are all the forms, reports and documents required
to be filed by Company with the SEC for the two calendar years prior to the date
of this Agreement. The Company SEC Reports (A) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and (B) did not at the time they were filed (and if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated
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18
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of Company's
Subsidiaries is required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including,
in each case, any related notes thereto) contained in Company SEC Reports was
prepared in accordance with generally accepted accounting principles ("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 statements, do not
contain footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents in all material respects the consolidated financial position of Company
and its Subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to be material in amount.
(c) Company has previously furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.8 No Undisclosed Liabilities. Except as set forth in Section 2.8 of
the Company Schedule, neither Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Company and its Subsidiaries taken as a whole, except (i)
liabilities provided for in Company's balance sheet included in Company's report
on Form 10-Q filed on August 13, 1999 or (ii) liabilities incurred since June
30, 1999 in the ordinary course of business, none of which is material to the
business, results of operations or financial condition of Company and its
Subsidiaries, taken as a whole.
2.9 Absence of Certain Changes or Events. Except as set forth in
Section 2.9 of the Company Schedule, since June 30, 1999, there has not been:
(i) any Material Adverse Effect on Company, (ii) any declaration, setting aside
or payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Company's or any of its Subsidiaries' capital
stock, or any purchase, redemption or other acquisition by Company of any of
Company's capital stock or any other securities of Company or its Subsidiaries
or any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) any split, combination or reclassification of any of Company's or any of
its Subsidiaries' capital stock, (iv) any granting by Company or any of its
Subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Company or any of its
Subsidiaries of any bonus,
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except for bonuses made in the ordinary course of business consistent with past
practice, or any granting by Company or any of its Subsidiaries of any increase
in severance or termination pay or any entry by Company or any of its
Subsidiaries into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) entry by
Company or any of its Subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any Intellectual Property (as
defined in Section 2.19) other than licenses in the ordinary course of business
consistent with past practice or any amendment or consent with respect to any
licensing agreement filed or required to be filed by Company with the SEC, (vi)
any material change by Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets of Company other than in the ordinary course of
business.
2.10 Absence of Litigation. Except as set forth in Section 2.10 of the
Company Schedule, there are no claims, actions, suits or proceedings pending or,
to the knowledge of Company, threatened (or, to the knowledge of Company, any
governmental or regulatory investigation pending or threatened) against Company
or any of its Subsidiaries or any properties or rights of Company or any of its
Subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign.
2.11 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements (whether or not set
forth in a written document and including, without limitation, all "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) covering any active, former
employee, director or consultant of Company, any Subsidiary of Company or any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with Company within the
meaning of Section 414 of the Code (an "AFFILIATE"), with respect to which
Company has liability, are listed in Section 2.11(a) of the Company Schedule
(collectively, the "PLANS"). Company has provided, or will provide within five
(5) business days of the date hereof, to Parent: (i) correct and complete copies
of all documents embodying each Plan including (without limitation) all
amendments thereto, all related trust documents, and all material written
agreements and contracts relating to each such Plan; (ii) 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 Plan; (iii) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Plan; (iv) all IRS or DOL
determination, opinion, notification and advisory letters; (v) all material
correspondence to or from any governmental agency relating to any
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20
Plan; (vi) samples of all COBRA forms and related notices; (vii) all
discrimination tests for each Plan for the most recent three (3) plan years;
(viii) the most recent annual actuarial valuations, if any, prepared for each
Plan; (ix) if the Plan is funded, the most recent annual and periodic accounting
of Plan assets; (x) all material written agreements and contracts relating to
each Plan, including, but not limited to, administrative service agreements,
group annuity contracts and group insurance contracts; (xi) all material
communications to employees or former employees, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability under any Plan or proposed Plan; (xii) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Plan; and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with any Plan. None
of the Plans is self-insured.
(b) Each Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Plans. No suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought, or to the knowledge of
Company is threatened, against or with respect to any such Plan. There are no
audits, inquiries or proceedings pending or, to the knowledge of Company,
threatened by the Internal Revenue Service (the "IRS") or Department of Labor
(the "DOL") with respect to any Plans. All contributions, reserves or premium
payments required to be made or accrued as of the date hereof to the Plans have
been timely made or accrued. Any Plan intended to be qualified under Section
401(a) of the Code and each trust intended to qualify under Section 501(a) of
the Code (i) has either obtained a favorable determination, notification,
advisory and/or opinion letter, as applicable, as to its qualified status from
the IRS or still has a remaining period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such letter and to make
any amendments necessary to obtain a favorable determination, and (ii)
incorporates or has been amended to incorporate all provisions required to
comply with the Tax Reform Act of 1986 and subsequent legislation to the extent
such amendment or incorporation is required as of the Closing Date. Company does
not have any plan or commitment to establish any new Plan, to modify any Plan
(except to the extent required by law or to conform any such Plan 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 enter into any new
Plan. Each Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration expenses
and expenses for benefits accrued but not yet paid).
(c) Neither Company, any Subsidiary of Company, nor any of
their Affiliates has at any time ever maintained, established, sponsored,
participated in, or contributed to any plan subject to Title IV of ERISA or
Section 412 of the Code and at no time has Company or any
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21
Subsidiary of Company contributed to or been requested to contribute to any
"multiemployer plan," as such term is defined in ERISA or to any plan described
in Section 413(c) of the Code. Neither Company, any Subsidiary of Company, nor
any officer or director of Company or any Subsidiary of Company is subject to
any liability or penalty under Section 4975 through 4980B of the Code or Title I
of ERISA. 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
408 of ERISA, has occurred with respect to any Plan which could subject Company
or any Subsidiary of Company to material liabilities.
(d) Neither Company, any of its Subsidiaries, nor any of their
Affiliates has, prior to the Effective Time and in any material respect,
violated any of the health continuation requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), the requirements of the
Family Medical Leave Act of 1993, as amended, the requirements of the Women's
Health and Cancer Rights Act, as amended, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, as amended, or any similar provisions of
state law applicable to employees of Company or any of its Subsidiaries. None of
the Plans promises or provides retiree medical or other retiree welfare benefits
to any person except as required by applicable law, and neither Company nor any
of its Subsidiaries has represented, promised or contracted (whether in oral or
written form) to provide such retiree benefits to any employee, former employee,
director, consultant or other person, except to the extent required by statute.
(e) Neither Company nor any of its Subsidiaries is bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of Company or any
of its Subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the knowledge of Company, no campaign to
establish such representation is in progress. There is no pending or, to the
knowledge of Company, threatened labor dispute involving Company or any of its
Subsidiaries and any group of its employees nor has Company or any of its
Subsidiaries experienced any labor interruptions over the past three (3) years,
and Company and its Subsidiaries consider their relationships with their
employees to be good. The Company and its Subsidiaries are in compliance in all
material respects with all applicable material foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours.
(f) Except as disclosed on Schedule 2.11(f) of the Company
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any shareholder, director or employee of Company
or any of its Subsidiaries under any Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
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22
(g) Each International Employee Plan (as defined below) has
been established, maintained and administered in all material respects 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. Furthermore, 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. For purposes of this Section
"INTERNATIONAL EMPLOYEE PLAN" shall mean each Plan that has been adopted or
maintained by Company or any Subsidiary of Company, whether informally or
formally, for the benefit of current or former employees of Company or any
Subsidiary of Company outside the United States.
(h) Except as set forth on Section 2.11(h) of Company's
Schedule, no payment or benefit that will or may be made by the Company or
Parent or any of their respective affiliates in connection with the Merger with
respect to any Employee will be characterized as an "excess parachute payment",
within the meaning of Section 280G(b)(1) of the Code.
2.12 Labor Matters. Except as set forth on Section 2.12 of Company's
Schedule, (i) there are no material controversies pending or, to the knowledge
of Company, threatened, between Company or any of its Subsidiaries and any of
their respective employees which controversies have or will have a Material
Adverse Effect on Company or any of its Subsidiaries; (ii) as of the date of
this Agreement, neither Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Company or any of its Subsidiaries nor does Company or any
of its Subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) as of the date of this Agreement, neither
Company nor any of its Subsidiaries has any knowledge of any strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of Company or any of its Subsidiaries.
2.13 Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of the Parent Common Stock in or as a
result of the Merger (the "S-4") will, at the time the S-4 becomes effective
under the Securities Act, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary in
order to make such statements therein, in light of the circumstances under which
they are made, not misleading; and (ii) the proxy statement/prospectus to be
filed with the SEC by Company pursuant to Section 5.1(a) hereof (the "PROXY
STATEMENT/PROSPECTUS") will, at the date mailed to the shareholders of Company
and at the time of the special shareholders meeting of Company (the "COMPANY
SHAREHOLDERS' MEETING") in connection with the transactions contemplated hereby
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
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23
made, not misleading. The Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained in any of the foregoing
documents.
2.14 Restrictions on Business Activities. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or any of
its Subsidiaries or to which Company or any of its Subsidiaries is a party which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Company or any of its
Subsidiaries, any acquisition of property by Company or any of its Subsidiaries
or the conduct of business by Company or any of its Subsidiaries as currently
conducted other than such effects, individually or in the aggregate, which have
not had and will not have, a Material Adverse Effect on Company any its
Subsidiaries taken as a whole.
2.15 Title to Property. Neither Company nor any of its Subsidiaries
owns any material real property. Company and each of its Subsidiaries have good
and defensible title to all of their material properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or materially interfere with the present
use of the property affected thereby; and all leases pursuant to which Company
or any of its Subsidiaries lease from others material real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or event of default of Company or any of its Subsidiaries or, to Company's
knowledge, any other party (or any event which with notice or lapse of time, or
both, would constitute a material default and in respect of which Company or any
of its Subsidiaries has not taken adequate steps to prevent such default from
occurring), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
have a Material Advance Effect on Company and its Subsidiaries taken as a whole.
All the plants, structures and equipment owned by Company and its Subsidiaries,
and to the knowledge of Company, all the plants, structures and equipment leased
by Company, except such as may be under construction, are in good operating
condition and repair, in all material respects.
2.16 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, 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 and any obligations under any
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24
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. Except as set forth in Section
2.16(b) of the Company Schedule:
(i) Company and each of its Subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed by
Company and each of its Subsidiaries with any Tax authority prior to the date
hereof, except such Returns which are not material to Company. Company and each
of its Subsidiaries have paid all Taxes shown to be due on such Returns.
(ii) Company and each of its Subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income Taxes, Taxes pursuant to the Federal Insurance Contribution Act,
Taxes pursuant to the Federal Unemployment Tax Act and other Taxes required to
be withheld, except such Taxes which are not material to Company.
(iii) Neither Company nor any of its Subsidiaries has
been delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company or any of its
Subsidiaries, nor has Company or any of its Subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of
Company or any of its Subsidiaries by any Tax authority is presently in
progress, nor has Company or any of its Subsidiaries been notified in writing of
any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by
Company or any of its Subsidiaries has been proposed in writing, formally or
informally, by any Tax authority to the Company or any of its Subsidiaries or
any representative thereof.
(vi) Neither the Company nor any of its Subsidiaries has
any liability for any material unpaid Taxes which has not been accrued for or
reserved on Company balance sheet included in Company's report on Form 10-Q
filed on August 13, 1999, whether asserted or unasserted, contingent or
otherwise, which is material to Company, other than any liability for unpaid
Taxes that may have accrued since June 30, 1999 in connection with the operation
of the business of Company and its Subsidiaries in the ordinary course.
(vii) There is no contract, agreement, plan or
arrangement to which Company or any of its Subsidiaries is a party as of the
date of this Agreement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of Company
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or any of its Subsidiaries that, individually or collectively, would reasonably
be expected to give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code. There is no
contract, agreement, plan or arrangement to which Company or any of its
Subsidiaries is a party or by which it is bound to compensate any individual for
excise taxes paid pursuant to Section 4999 of the Code.
(viii) Neither Company nor any of its Subsidiaries 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 Company or any of its
Subsidiaries.
(ix) Neither Company nor any of its Subsidiaries is
party to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement other than between Company and its
Subsidiaries.
(x) None of Company's or its Subsidiaries' assets is
tax exempt use property within the meaning of Section 168(h) of the Code.
(xi) Neither Company nor any of its Subsidiaries has
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997. The stock of
neither Company nor any of its Subsidiaries has been distributed in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997.
2.17 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to Company or any of its Subsidiaries, no underground storage tanks
and no amount of 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,
but excluding office and janitorial supplies, (a "HAZARDOUS MATERIAL") are
present, as a result of the actions of Company or any of its Subsidiaries or any
affiliate of Company, or, to Company's knowledge, 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 Company or
any of its Subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result
in a Material Adverse Effect to Company (in any individual case or in the
aggregate) (i) neither Company nor any
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of its Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Effective Time, and (ii) neither Company
nor any of its Subsidiaries has disposed of, transported, sold, used, released,
exposed its employees or others to or manufactured any product containing a
Hazardous Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Company and its Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of Company's and its
Subsidiaries' Hazardous Material Activities and other businesses of the Company
and its Subsidiaries as such activities and businesses are currently being
conducted, except any Company Environmental Permits the failure of which to
obtain or renew would not result in a Material Adverse Effect on Company and its
Subsidiaries taken as a whole.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Company's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against Company or any of its Subsidiaries in a writing delivered to Company or
any of its Subsidiaries concerning any Company Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of Company or any of its
Subsidiaries. To Company's knowledge, there is not any fact or circumstance
which could involve Company or any of its Subsidiaries in any environmental
litigation or impose upon Company any material environmental liability.
2.18 Brokers. Except as set forth in Section 2.18 of the Company
Schedules, Company has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders fees or agent's commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.19 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or
associated therewith: (i) patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof ("PATENTS"); (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing;
(iii) copyrights, copyrights registrations and applications therefor,
and all other
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rights corresponding thereto throughout the world; (iv) domain names,
uniform resource locators ("URLS") and other names and locators
associated with the Internet ("DOMAIN NAMES"); (v) industrial designs
and any registrations and applications therefor; (vi) trade names,
logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor; (vii) all databases and
data collections and all rights therein; (viii) all moral and economic
rights of authors and inventors, however denominated, and (ix) any
similar or equivalent rights to any of the foregoing (as applicable).
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company and its
Subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all Intellectual Property that
is the subject of an application, certificate, filing, registration or
other document issued, filed with, or recorded by any private, state,
government or other legal authority.
"COMPANY REGISTERED Intellectual PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, Company or any
of its Subsidiaries.
(a) Section 2.19(a) of the Company Schedule is a complete and
accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property has been issued or registered and lists any
proceedings or actions before any court or 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.
(b) Section 2.19(b) of the Company Schedule is a complete and
accurate list (by name and version number) of all current versions of current
products or service offerings of Company or any of its Subsidiaries ("COMPANY
PRODUCTS").
(c) No Company Intellectual Property or Company Product is
subject to any material proceeding or outstanding decree, order, judgment,
contract, license, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Company or any of its Subsidiaries, or which
may affect the validity, use or enforceability of such Company Intellectual
Property or Company Product.
(d) Company owns and has good and exclusive title to, each
material item of Company Intellectual Property owned by it free and clear of any
lien or encumbrance (excluding non-exclusive licenses and related restrictions
granted in the ordinary course). Without limiting the foregoing, (i) Company
owns exclusively, and has good title to, all copyrighted works that are Company
Products or which Company or any of its Subsidiaries otherwise purports to own
and
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(ii) except as would not have a Material Adverse Effect, to the extent that any
Patents would be infringed by any Company Products, Company is the exclusive
owner of such Patents.
(e) To the extent that any material technology, material
software or material Intellectual Property has been developed or created
independently or jointly by a third party for Company or any of its Subsidiaries
or is incorporated into any of Company Products, Company has a written agreement
with such third party with respect thereto and Company thereby either (i) has
obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
perpetual, non-terminable 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 in such work, material or invention by operation of law or
by valid assignment, to the fullest extent it is legally possible to do so.
(f) Neither Company nor any of its Subsidiaries has
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is material Company Intellectual Property, to any
third party, or knowingly permitted Company's rights in such material Company
Intellectual Property to lapse or enter the public domain.
(g) Section 2.19(g) of the Company Schedule lists all
contracts, licenses and agreements to which Company or any of its Subsidiaries
is a party: (i) with respect to Company Intellectual Property licensed or
transferred to any third party resulting in, or which may result in, annual
payments of $1,000,000 or more to Company and its Subsidiaries (other than
end-user licenses in the ordinary course in the period subsequent to January 1,
1999); or (ii) pursuant to which a third party has licensed or transferred any
material Intellectual Property to Company resulting in, or which may result in,
annual payments of $500,000 or more by Company or any of its Subsidiaries in the
period subsequent to January 1, 1999.
(h) Each material contract, license and agreement listed in
Section 2.19(h) of the Company Schedule is a legal and binding obligation of
Company or the Subsidiary of Company which is a party thereto, and, to the
knowledge of Company or the Subsidiary of Company, is a legal and binding
obligation on any other party thereto, in each case enforceable against Company,
the Subsidiary of Company or such other party in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles, and, to the knowledge of
Company, there has not occurred any material default by any party thereto which
remains unremedied as of the date hereof.
(i) The operation of the business of Company and its
Subsidiaries as such business currently is conducted, including (i) Company's
and its Subsidiaries' design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of Company and its
Subsidiaries (including Company Products) and (ii) Company's use of any
product, device or process, to its knowledge and except as would not have a
Material Adverse Effect, has not and
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does not and will not infringe or misappropriate the Intellectual Property of
any third party or constitute unfair competition or trade practices under the
laws of any jurisdiction.
(j) Neither Company nor any of its Subsidiaries has received
written notice from any third party that the operation of the business of
Company or any of its Subsidiaries or any act, product or service of Company or
any of its Subsidiaries, infringes or misappropriates the Intellectual Property
of any third party or constitutes unfair competition or trade practices under
the laws of any jurisdiction.
(k) To the knowledge of Company, no person has infringed or is
infringing or misappropriating any material Company Intellectual Property.
(l) Company and each of its Subsidiaries has taken
commercially reasonable steps to protect Company's and its Subsidiaries' rights
in Company's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Company or any of its Subsidiaries, and, without limiting the
foregoing, each of Company and its Subsidiaries has and uses its best
commercially reasonable efforts to enforce a policy requiring each employee and
contractor to execute a proprietary information/confidentiality agreement
substantially in the form provided to Parent and all current and former
employees and contractors of Company and any of its Subsidiaries have executed
such an agreement, except where the failure to do so would not have a Material
Adverse Effect on Company or its Subsidiaries taken as a whole.
(m) The Company Products will be fully compatible in normal
operation with changes to outputs, data or other information in relation to
dates arising in the year 2000 and beyond, without a material loss of
performance or a material loss of use, affected by hardware or third party
software (including but not limited to operating systems) or unauthorized
modifications made to Company Products. To Company's knowledge, all of Company's
and its Subsidiaries' Information Technology (as defined below) is Year 2000
Compliant, and will not cause an interruption in the ongoing operations of
Company's or any of its Subsidiaries' business on or after January 1, 2000
except such interruptions as would not have a Material Adverse Effect on Company
and its Subsidiaries taken as a whole. For purposes of the foregoing, the term
"INFORMATION TECHNOLOGY" shall mean and include all material software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services (other than general utility services
including gas, electric, telephone and postal) that are owned or used by Company
or any of its Subsidiaries in the conduct of their business, or purchased by
Company or any of its Subsidiaries from third-party suppliers.
2.20 Agreements, Contracts and Commitments. Except as contemplated by
this Agreement, including the Schedules hereto, neither Company nor any of its
Subsidiaries is a party to or is bound by:
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(a) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right 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;
(b) any material agreement of indemnification or any guaranty
other than any agreement of indemnification entered into in connection with the
sale or license of software products in the ordinary course of business;
(c) any material agreement, contract or commitment containing
any covenant limiting in any respect the right of Company or any of its
Subsidiaries to engage in any line of business or to compete with any person or
granting any exclusive distribution rights;
(d) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Company or any of its Subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Company or any of its
Subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than Company's
Subsidiaries;
(e) any dealer, distributor, joint marketing or development
agreement currently in force under which Company or any of its Subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety (90)
days or less, or any material agreement pursuant to which Company or any of its
Subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Company or
any of its Subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(f) except as set forth in Section 2.20(f) of the Company
Schedule, any other agreement, contract or commitment that provides for
individual or aggregate payments by Company in the period subsequent to January
1, 1998 in excess of $500,000, or to Company in excess of $1,000,000 in the
period subsequent to January 1, 1998.
Except as set forth in Section 2.20 of the Company Schedule, neither
Company nor any of its Subsidiaries, nor to Company's knowledge any other party
to a Company Contract (as defined below), is in breach, violation or default
under, and neither Company nor any of its Subsidiaries has received written
notice that it has breached, violated or defaulted under, any of the material
terms or conditions of any of the agreements, contracts or commitments to which
Company or any of its Subsidiaries is a party or by which it is bound that are
required to be disclosed in the Company Schedule (any such agreement, contract
or commitment, a "COMPANY CONTRACT") in such a manner as would permit any other
party to cancel or terminate any such Company Contract, or would permit
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any other party to seek material damages or other remedies (for any or all of
such breaches, violations or defaults, in the aggregate).
2.21 Insurance. Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of Company and its Subsidiaries (collectively,
the "INSURANCE POLICIES") which are of the type and in amounts customarily
carried by persons conducting businesses similar to those of Company and its
Subsidiaries. Except as set forth in Section 2.21 of the Company Schedule, there
is no material claim by Company or any of its Subsidiaries pending under any of
the material Insurance Policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds.
2.22 Opinion of Financial Advisor. Company has been advised in writing
by its financial advisor, BancBoston Xxxxxxxxx Xxxxxxxx Inc. that in its written
opinion, as of the date of this Agreement, the Exchange Ratio is fair to the
shareholders of Company from a financial point of view.
2.23 Board Approval. The Board of Directors of Company has, as of the
date of this Agreement, unanimously (i) approved, subject to shareholder
approval, this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby, (ii) determined that the Merger is in the best
interests of the shareholders of Company and is on terms that are fair to such
shareholders and (iii) recommended that the shareholders of Company approve this
Agreement and the Merger.
2.24 Vote Required. The affirmative vote of a majority of the votes
that holders of the outstanding shares of Company Common Stock are entitled to
vote with respect to the Merger is the only vote of the holders of any class or
series of Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby pursuant to California Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the disclosure letter and referencing a specific representation supplied by
Parent to Company dated as of the date hereof and certified by a duly authorized
officer of Parent (the "PARENT SCHEDULE"), as follows:
3.1 Organization and Qualification; Subsidiaries. Each of Parent and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing, to the extent applicable, under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being
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32
conducted, except where the failure to do so would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Each of Parent and its
Subsidiaries is in possession of all Approvals necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Except as set forth in Section 3.1 of the Parent Schedule,
each of Parent and its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would
not, either individually or in the aggregate, have a Material Adverse Effect on
Parent.
3.2 Articles of Incorporation and Bylaws. Parent has previously
furnished to Company complete and correct copies of its Articles of
Incorporation and Bylaws as amended to date. Such Articles of Incorporation and
Bylaws and equivalent organizational documents of each of its Subsidiaries are
in full force and effect. Parent is not in violation of any of the provisions of
the Company Charter Documents, and no subsidiary of Company is in violation of
any of its equivalent organizational documents.
3.3 Capitalization. The authorized capital stock of Parent consists
of (i) 150,000,000 shares of Parent Common Stock, par value $0.001 per share,
and (ii) 5,000,000 shares of Preferred Stock, par value $0.001 per share
("PARENT PREFERRED STOCK"). As of October 19, 1999, (i) 43,299,259 shares of
Parent Common Stock were issued and outstanding, (ii) no shares of Parent Common
Stock were held in treasury by Parent or by Subsidiaries of Parent, (iii)
600,000 shares of Parent Common Stock were reserved for future issuance pursuant
to Parent's employee stock purchase plan, (iv) 13,450,862 shares of Parent
Common Stock were reserved for issuance upon the exercise of outstanding options
to purchase Parent Common Stock and 532,247 and 34,226 options to purchase
Parent Common Stock are outstanding under the 1996 Amplitude Stock Option Plan
and the 1998 dotOne Stock Option Plan, respectively, but no shares of Parent
Common Stock were reserved for issuance upon their exercise (all options to
purchase Parent Common Stock referred to collectively hereinafter as "PARENT
OPTIONS"). As of the date hereof, no shares of Parent Preferred Stock were
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $0.001 per share, all of which, as of
the date hereof, are issued and outstanding. All of the outstanding shares of
Parent's and Merger Sub's respective capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. All shares of Parent Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall, and the shares of Parent Common Stock to be issued pursuant to the Merger
will be, duly authorized, validly issued, fully paid and nonassessable. All of
the outstanding shares of capital stock (other than directors' qualifying
shares) of each of Parent's Subsidiaries is duly authorized, validly issued,
fully paid and
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33
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another Subsidiary of Parent free and clear of all security
interests, liens, claims, pledges, agreements, limitations in Parent's voting
rights, charges or other encumbrances of any nature whatsoever.
3.4 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, the Agreement of Merger and the Stock Option Agreement, and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby (including the Merger). The
execution and delivery of this Agreement, the Agreement of Merger and the Stock
Option Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby and thereby (including the
Merger) have been duly and validly authorized by all necessary corporate action
on the part of Parent and Merger Sub, and no other corporate proceedings on the
part of Parent or Merger Sub are necessary to authorize this Agreement, the
Agreement of Merger and the Stock Option Agreement, or to consummate the
transactions so contemplated (including the Merger). This Agreement, the
Agreement of Merger and the Stock Option Agreement have been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery thereof by Company, constitute legal and
binding obligations of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with their respective terms.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and
Merger Sub and the Stock Option Agreement by Parent do not, and the performance
of this Agreement by Parent and Merger Sub and the Stock Option Agreement by
Parent shall not, (i) conflict with or violate the Articles of Incorporation,
Bylaws or equivalent organizational documents of Parent or any of its
Subsidiaries, (ii) subject to compliance with the requirements set forth in
Section 3.5(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its Subsidiaries or by which
it or their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair Parent's or any such
Subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any of its Subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its Subsidiaries is a party or by which Parent or any of its Subsidiaries or its
or any of their respective properties are bound or affected, except, with
respect to clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not in the case of clauses (ii) or
(iii), individually or in the aggregate, have a Material Adverse Effect on
Parent.
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(b) The execution and delivery of this Agreement and the
Agreement of Merger by Parent and Merger Sub and the Stock Option Agreement and
the Agreement of Merger by Parent do not, and the performance of this Agreement
by Parent and Merger Sub will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity except
(i) for applicable requirements, if any, of the Securities Act, the Exchange
Act, Blue Sky Laws, the pre-merger notification requirements of the HSR Act and
of foreign governmental entities and the rules and regulations thereunder, the
rules and regulations of Nasdaq, and the filing and recordation of the Merger
Documents as required by California Law and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent consummation of the Merger or otherwise
prevent Parent or Merger Sub from performing their respective obligations under
this Agreement or (y) could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.
3.6 SEC Filings; Financial Statements.
(a) Parent has made available to Company a correct and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC on or after January 29, 1999 (the
"PARENT SEC REPORTS"), which are all the forms, reports and documents required
to be filed by Parent with the SEC since that date. The Parent SEC Reports (A)
were prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (B) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of Parent's Subsidiaries is required to
file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including,
in each case, any related notes thereto) contained in the Parent SEC Reports was
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 statements, do not contain footnotes as permitted by Form 10-Q
of the Exchange Act) and each fairly presents in all material respects the
consolidated financial position of Parent and its Subsidiaries at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal adjustments which were not or are not expected to
be material in amount.
(c) Since the date of the balance sheet included in Parent's
report on Form 10-Q filed on August 16, 1999, and until the date hereof, there
has not occurred any Material Adverse Effect on Parent.
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3.7 Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 becomes effective under the Securities
Act, contains any untrue statement of a material fact or omits 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; and (ii) the Proxy Statement/Prospectus will, at the date mailed to
the shareholders of Company and at the time of Company Shareholders' Meeting 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. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated by the SEC thereunder. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any information supplied by
Company which is contained in any of the foregoing documents.
3.8 No Undisclosed Liabilities. Except as set forth in Section 3.8 of
the Parent Schedules, neither Parent nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its Subsidiaries taken as a whole, except (i)
liabilities provided for in Parent's balance sheet included in Parent's report
on Form 10-Q filed on August 16, 1999 or (ii) liabilities incurred since June
30, 1999 in the ordinary course of business, none of which is material to the
business, results of operations or financial condition of Parent and its
Subsidiaries, taken as a whole.
3.9 Absence of Certain Changes or Events. Except as set forth in
Section 3.9 of the Parent Schedules since June 30, 1999, there has not been: (i)
any Material Adverse Effect on Parent, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Parent's or any of its Subsidiaries' capital
stock, or any purchase, redemption or other acquisition by Parent of any of
Parent's capital stock or any other securities of Parent or its Subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) any split, combination or reclassification of any of Parent's or any of
its Subsidiaries' capital stock, (iv) any granting by Parent or any of its
Subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Parent or any of its
Subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by Parent or any of its
Subsidiaries of any increase in severance or termination pay or any entry by
Parent or any of its Subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of
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which are materially altered upon the occurrence of a transaction involving
Parent of the nature contemplated hereby, (v) entry by Parent or any of its
Subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property (as defined in Section
2.19) other than licenses in the ordinary course of business consistent with
past practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed by Parent with the SEC, (vi) any
material change by Parent in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, or (vii) any revaluation by
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable or
any sale of assets of the Parent other than in the ordinary course of business.
3.10 Absence of Litigation. Except as set forth in Section 3.10 of the
Parent Schedules, there are no claims, actions, suits or proceedings pending or,
to the knowledge of Parent, threatened (or, to the knowledge of Parent, any
governmental or regulatory investigation pending or threatened) against Parent
or any of its Subsidiaries or any properties or rights of Parent or any of its
Subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign.
3.11 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements (whether or not set
forth in a written document and including, without limitation, all "employee
benefit plans" within the meaning of Section 3(3) of ERISA covering any active,
former employee, director or consultant of Parent, any Subsidiary of Parent or
any trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with Parent within the meaning
of Section 414 of the Code (a "PARENT AFFILIATE"), or with respect to which
Parent has liability, are listed in Section 3.11(a) of the Parent Schedule
(collectively, the "PARENT PLANS"). Parent has provided to Company: (i) correct
and complete copies of all documents embodying each Plan including (without
limitation) all amendments thereto, all related trust documents, and all
material written agreements and contracts relating to each such Plan; (ii) 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 Plan; (iii) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Plan; (iv) all IRS or DOL
determination, opinion, notification and advisory letters; (v) all material
correspondence to or from any governmental agency relating to any Plan; (vi)
samples of all COBRA forms and related notices; (vii) all discrimination tests
for each Plan for the most recent three (3) plan years; (viii) the most recent
annual actuarial valuations, if any, prepared for each Plan; (xi) if the Plan is
funded, the most recent annual and periodic accounting of Plan assets; (x) all
material written agreements and contracts relating to each Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (xi) all
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material communications to employees or former employees relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would result
in any material liability under any Plan or proposed Plan; (xii) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Plan; and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with any Plan.
(b) Each Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Parent Plans. No
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought, or to the knowledge of
Parent is threatened, against or with respect to any such Plan. There are no
audits, inquiries or proceedings pending or, to the knowledge of Parent,
threatened by the IRS or DOL with respect to any Parent Plans. All
contributions, reserves or premium payments required to be made or accrued as of
the date hereof to the Parent Plans have been timely made or accrued. Any Plan
intended to be qualified under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code (i) has either obtained a
favorable determination, notification, advisory and/or opinion letter, as
applicable, as to its qualified status from the IRS or still has a remaining
period of time under applicable Treasury Regulations or IRS pronouncements in
which to apply for such letter and to make any amendments necessary to obtain a
favorable determination, and (ii) incorporates or has been amended to
incorporate all provisions required to comply with the Tax Reform Act of 1986
and subsequent legislation to the extent such amendment or incorporation is
required as of the Closing Date. Parent does not have any plan or commitment to
establish any new Plan, to modify any Plan (except to the extent required by law
or to conform any such Plan to the requirements of any applicable law, in each
case as previously disclosed to Company in writing, or as required by this
Agreement), or to enter into any new Plan. Each Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Company, Parent or any of its Parent Affiliates (other than
ordinary administration expenses and expenses for benefits accrued but not yet
paid).
(c) Neither Parent, any of its Subsidiaries, nor any of their
Parent Affiliates has at any time ever maintained, established, sponsored,
participated in, or contributed to any plan subject to Title IV of ERISA or
Section 412 of the Code and at no time has Parent or any of its Subsidiaries
contributed to or been requested to contribute to any "multiemployer plan," as
such term is defined in ERISA or to any plan described in Section 413(c) of the
Code. Neither Parent, any of its Subsidiaries, nor any officer or director of
Parent or any of its Subsidiaries is subject to any liability or penalty under
Section 4975 through 4980B of the Code or Title I of ERISA. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA,
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and not otherwise exempt under Section 408 of ERISA, has occurred with respect
to any Plan which could subject Parent or its Subsidiaries to material
liabilities.
(d) Neither Parent, any of its Subsidiaries, nor any of their
Parent Affiliates has, prior to the Effective Time and in any material respect,
violated any of the health continuation requirements of COBRA, the requirements
of the Family Medical Leave Act of 1993, as amended, the requirements of the
Women's Health and Cancer Rights Act, as amended, the requirements of the
Newborns' and Mothers' Health Protection Act of 1996, as amended, or any similar
provisions of state law applicable to employees of the Parent or any of its
Subsidiaries. None of the Parent Plans promises or provides retiree medical or
other retiree welfare benefits to any person except as required by applicable
law, and neither Parent nor any of its Subsidiaries has represented, promised or
contracted (whether in oral or written form) to provide such retiree benefits to
any employee, former employee, director, consultant or other person, except to
the extent required by statute.
(e) Neither Parent nor any of its Subsidiaries is bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of Parent or any
of its Subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the knowledge of Parent, no campaign to
establish such representation is in progress. There is no pending or, to the
knowledge of Parent, threatened labor dispute involving Parent or any of its
Subsidiaries and any group of its employees nor has Parent or any of its
Subsidiaries experienced any labor interruptions over the past three (3) years,
and Parent and its Subsidiaries consider their relationships with their
employees to be good. The Parent and its Subsidiaries are in compliance in all
material respects with all applicable material foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours.
(f) Except as disclosed on Schedule 3.11(f) of the Parent
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any shareholder, director or employee of Parent or
any of its Subsidiaries under any Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(g) Each International Employee Plan (as defined below) 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.
Furthermore, 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 the Parent from
terminating or amending any International Employee Plan at any time for any
reason. For purposes of this Section "INTERNATIONAL EMPLOYEE
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PLAN" shall mean each Plan that has been adopted or maintained by the Parent or
any of its Subsidiaries, whether informally or formally, for the benefit of
current or former employees of the Parent or any of its Subsidiaries outside the
United States.
3.12 Tax Returns and Audits. Except as set forth in Section 3.12 of
the Parent Schedules:
(a) Parent and each of its Subsidiaries have timely filed all
Returns relating to Taxes required to be filed by the Parent and each of its
Subsidiaries with any Tax authority prior to the date hereof, except such
Returns which are not material to the Parent. The Parent and each of its
Subsidiaries have paid all Taxes shown to be due on such Returns.
(b) The Parent and each of its Subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income Taxes, Taxes pursuant to the Federal Insurance Contribution Act,
Taxes pursuant to the Federal Unemployment Tax Act and other Taxes required to
be withheld, except such Taxes which are not material to the Parent.
(c) Neither the Parent nor any of its Subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Parent or any of its
Subsidiaries, nor has the Parent or any of its Subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(d) No audit or other examination of any Return of the Parent
or any of its Subsidiaries by any Tax authority is presently in progress, nor
has the Parent or any of its Subsidiaries been notified in writing of any
request for such an audit or other examination.
(e) No adjustment relating to any Returns filed by the Parent
or any of its Subsidiaries has been proposed in writing, formally or informally,
by any Tax authority to the Parent or any of its Subsidiaries or any
representative thereof.
(f) Neither the Parent nor any of its Subsidiaries has any
liability for any material unpaid Taxes which has not been accrued for or
reserved on the Parent balance sheet included in the Parent's report on Form
10-Q filed on August 16, 1999, whether asserted or unasserted, contingent or
otherwise, which is material to the Parent, other than any liability for unpaid
Taxes that may have accrued since June 30, 1999 in connection with the operation
of the business of the Parent and its Subsidiaries in the ordinary course.
(g) There is no contract, agreement, plan or arrangement to
which the Parent or any of its Subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Parent or any of its
Subsidiaries that, individually or collectively, would reasonably be expected to
give rise to the
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payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code. There is no contract, agreement, plan or arrangement
to which the Parent or any of its Subsidiaries is a party or by which it is
bound to compensate any individual for excise taxes paid pursuant to Section
4999 of the Code.
(h) Neither the Parent nor any of its Subsidiaries 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 Parent or any of its
Subsidiaries.
(i) Neither the Parent nor any of its Subsidiaries is party to
or has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement other than between the Company and its Subsidiaries.
(j) None of the Parent's or its Subsidiaries' assets is tax
exempt use property within the meaning of Section 168(h) of the Code.
(k) Neither the Parent nor any of its Subsidiaries has
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997. The stock of
neither the Parent nor any of its Subsidiaries has been distributed in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997.
3.13 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to the Parent or any of its Subsidiaries, no underground storage tanks
and no amount of a Hazardous Material are present, as a result of the actions of
the Parent or any of its Subsidiaries or any Parent Affiliates, or, to the
Parent's knowledge, 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 Parent or any of its Subsidiaries has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result
in a Material Adverse Effect to the Parent (in any individual case or in the
aggregate) (i) neither the Parent nor any of its Subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, and (ii) neither the Parent nor any of its Subsidiaries has
engaged in Hazardous Materials Activities in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect prior to or
as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
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(c) Permits. The Parent and its Subsidiaries currently hold
all environmental approvals, permits, licenses, clearances and consents (the
"PARENT ENVIRONMENTAL PERMITS") necessary for the conduct of the Parent's and
its Subsidiaries' Hazardous Material Activities and other businesses of the
Parent and its Subsidiaries as such activities and businesses are currently
being conducted except any Parent Environmental Permits the failure of which to
obtain or renew would not result in a Material Adverse Effect on Parent.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to the Parent's knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against the Parent or any of its Subsidiaries in a writing delivered to
the Parent or any of its Subsidiaries concerning any Parent Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Parent or
any of its Subsidiaries. To Parent's knowledge, there is no fact or circumstance
which could involve the Parent or any of its Subsidiaries in any environmental
litigation or impose upon the Parent any material environmental liability.
3.14 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"PARENT INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Parent and it Subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all Intellectual Property that
is the subject of an application, certificate, filing, registration or
other document issued, filed with, or recorded by any private, state,
government or other legal authority.
"PARENT REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Parent or
any of its Subsidiaries.
(a) Section 3.14(a) of the Parent Schedule is a complete and
accurate list of all Parent Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Parent Registered
Intellectual Property has been issued or registered and lists any proceedings or
actions before any court or tribunal (including the PTO) or equivalent authority
anywhere in the world) related to any of the Parent Registered Intellectual
Property.
(b) Section 3.14(b) of the Parent Schedule is a complete and
accurate list (by name and version number) of all current versions of current
products or service offerings of the Parent or any of its Subsidiaries ("PARENT
PRODUCTS").
(c) No Parent Intellectual Property or Parent Product is
subject to any proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation restricting in any
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manner the use, transfer, or licensing thereof by Parent or any of its
Subsidiaries, or which may affect the validity, use or enforceability of such
Parent Intellectual Property or Parent Product.
(d) Parent owns and has good and exclusive title to, each
material item of Parent Intellectual Property owned by it free and clear of any
lien or encumbrance (excluding non-exclusive licenses and related restrictions
granted in the ordinary course). Without limiting the foregoing: (i) Parent owns
exclusively, and has good title to, all copyrighted works that are Parent
Products or which Parent or any of its Subsidiaries otherwise purports to own;
and (ii) except as would not have a Material Adverse Effect, to the extent that
any Patents would be infringed by any Parent Products, Parent is the exclusive
owner of such Patents.
(e) Except as set forth in Section 3.14(e) of the Parent
Schedules, to the extent that any material technology, material software or
material Intellectual Property has been developed or created independently or
jointly by a third party for Parent or any of its Subsidiaries or is
incorporated into any of the Parent Products, Parent has a written agreement
with such third party with respect thereto and Parent thereby either (i) has
obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
perpetual, non-terminable 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 in such work, material or invention by operation of law or
by valid assignment, to the fullest extent it is legally possible to do so.
(f) Neither Parent nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is material Parent Intellectual Property, to any third party, or
knowingly permitted Parent's rights in such material Parent Intellectual
Property to lapse or enter the public domain.
(g) Section 3.14(g) of the Parent Schedule lists all
contracts, licenses and agreements to which Parent or any of its Subsidiaries is
a party: (i) with respect to Parent Intellectual Property licensed or
transferred to any third party resulting in, or which may result in, annual
payments of $1,000,000 or more to the Parent or any Subsidiary of Parent (other
than end-user licenses in the ordinary course) in the period subsequent to
January 1, 1999; or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to Parent resulting in, or which
may result in, annual payments of $500,000 or more by Parent or any Subsidiary
of Parent in the period subsequent to January 1, 1999.
(h) Each material contract, license and agreement listed in
Section 3.14(h) of the Parent Schedule is a legal and binding obligation of
Parent or any of its Subsidiaries which is a party thereto, and, to the
knowledge of the Parent and any of its Subsidiaries, is a legal and binding
obligation on any other party thereto, in each case enforceable against the
Parent, Parent's Subsidiary or such other party in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
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rights generally and by general equitable principles, and, to the knowledge of
Parent, there has not occurred any material default by any party thereto which
remains unremedied as of the date hereof.
(i) Except as set forth in Section 3.14(i) of the Parent
Schedules, the operation of the business of the Parent and its Subsidiaries as
such business currently is conducted, including (i) Parent's and its
Subsidiaries' design, development, manufacture, distribution, reproduction,
marketing or sale of the products or services of Parent and its Subsidiaries
(including Parent Products ) and (ii) the Parent's use of any product, device or
process, to its knowledge and except as would not have a Material Adverse
Effect, has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(j) Except as set forth in Section 3.14(j) of the Parent
Schedules, neither Parent nor any of its Subsidiaries has received written
notice from any third party that the operation of the business of Parent or any
of its Subsidiaries or any act, product or service of Parent or any of its
Subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(k) To the knowledge of Parent, no Person has infringed or is
infringing or misappropriating any material Parent Intellectual Property.
(l) Parent and each of its Subsidiaries has taken commercially
reasonable steps to protect Parent's and its Subsidiaries' rights in Parent's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to Parent or
any of its Subsidiaries, and, without limiting the foregoing, each of Parent and
its Subsidiaries has and uses commercially reasonable efforts to enforce a
policy requiring each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Company and all current and former employees and contractors of Parent and any
of its Subsidiaries have executed such an agreement, except where the failure to
do so would not have a Material Adverse Effect on Company or any of its
Subsidiaries.
(m) Except as set forth in Section 3.14(m) of the Parent
Schedules, the Parent Products will be fully compatible in normal operation with
changes to outputs, data or other information in relation to dates arising in
the year 2000 and beyond, without a material loss of performance or a material
loss of use, affected by hardware or third party software (including but not
limited to operating systems) or unauthorized modifications made to the Parent
Products. Except as set forth in Section 3.14(m) of the Parent Schedules, to the
Parent's knowledge, all of Parent's and its Subsidiaries' Information Technology
(as defined below) is Year 2000 Compliant, and will not cause an interruption in
the ongoing operations of Company's or any of its Subsidiaries' business on or
after January 1, 2000 except such interruptions as would not have a Material
Adverse Effect on Parent or its Subsidiaries. For purposes of the foregoing, the
term "INFORMATION TECHNOLOGY" shall
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mean and include all material software, hardware, firmware, telecommunications
systems, network systems, embedded systems and other systems, components and/or
services (other than general utility services including gas, electric, telephone
and postal) that are owned or used by the Parent or any of its Subsidiaries in
the conduct of their business, or purchased by the Parent or any of its
Subsidiaries from third-party suppliers.
3.15 Board Approval. The Board of Directors of Parent has, as of the
date of this Agreement unanimously (i) approved, subject to shareholder
approval, this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby, (ii) determined that the Merger is in the best
interests of the shareholders of Parent and is on terms that are fair to such
shareholders and (iii) recommended that the shareholders of Parent approve this
Agreement and the Merger.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
Subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in the usual, regular and ordinary course
consistent with past practices, in substantially the same manner as heretofore
conducted and in compliance with all applicable laws and regulations (except
where noncompliance would not have a Material Adverse Effect), pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve
substantially 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 with which it has significant business dealings.
In addition, except as permitted by the terms of this Agreement, without
the prior written consent of Parent, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company shall not do any of the
following and shall not permit its Subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to any officer or
employee in excess of $10,000, except pursuant to applicable law, written
agreements outstanding, or policies existing,
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on the date hereof and as previously disclosed in writing or made available to
Parent, 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;
(c) Transfer or license to any person or otherwise extend,
amend or modify any material rights to Company Intellectual Property, or enter
into grants to transfer or license to any person future patent rights, other
than in the ordinary course of business consistent with past practices, provided
that in no event shall Company license on an exclusive basis or sell any Company
Intellectual Property;
(d) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(e) Except as set forth in Section 4.1(e) of the Company
Schedule, purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its Subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise
encumber or agree to any of the foregoing with respect to any shares of capital
stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter into
other agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than (x) the issuance delivery and/or
sale of (i) shares of Company Common Stock pursuant to the exercise of stock
options outstanding as of the date of this Agreement, and (ii) shares of Company
Common Stock issuable to participants in the ESPP consistent with the terms
thereof and (y) the granting of stock options (and the issuance of Company
Common Stock upon exercise thereof), in the ordinary course of business and
consistent with past practices, in an amount not to exceed options to purchase
(and the issuance of Company Common Stock upon exercise thereof) 300,000 shares
in the aggregate (provided that none of these options to purchase 300,000 shares
may be granted to officers or directors of Company, and the vesting of these
options to purchase 300,000 shares shall not accelerate upon the Closing);
(g) Amend Company Charter Documents (or similar governing
instruments of any of its Subsidiaries);
(h) Except as disclosed in Section 4.1(h) of the Company
Schedule, acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a
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portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or otherwise acquire or agree to enter into any joint ventures,
strategic partnerships or alliances that provide for exclusivity of territory or
otherwise restrict Company or its Subsidiaries' ability to compete;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of Company and its
Subsidiaries;
(j) Except as disclosed in Section 4.1(j) of the Company
Schedule, incur any indebtedness for borrowed money in excess of $250,000 in the
aggregate or guarantee any such indebtedness of another person (other than any
of its Subsidiaries), issue or sell any debt securities or options, warrants,
calls or other rights to acquire any debt securities of Company, enter into any
"keep well" or other agreement to maintain any financial statement condition or
enter into any arrangement having the economic effect of any of the foregoing,
other than in connection with the financing of ordinary course trade
payables/receivables consistent with past practice;
(k) Except as disclosed in Section 4.1(k) of the Company
Schedule, adopt or amend any employee benefit plan, policy or arrangement, any
employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any special
bonus or special remuneration to any director 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, except in
the ordinary course of business consistent with past practices;
(l) Except as disclosed in Schedule 4.1(1) of the Company
Schedule, (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (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, settlement or satisfaction, in the
ordinary course of business consistent with past practices or in accordance with
their terms, or liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of Company included in
Company SEC Reports or incurred since the date of such financial statements, or
(ii) waive the benefits of, agree to modify in any manner, terminate, release
any person from or knowingly fail to enforce any confidentiality or similar
agreement to which Company or any of its Subsidiaries is a party or of which
Company or any of its Subsidiaries is a beneficiary;
(m) Except in the ordinary course of business consistent with
past practices, modify, amend or terminate any material contract or material
agreement to which Company or any
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Subsidiary thereof is a party or waive, delay the exercise of, release or assign
any material rights or claims thereunder;
(n) Except as required by GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(o) Except as set forth in Section 4.1(o) of the Company
Schedule, incur or enter into any agreement, contract or commitment requiring
Company or any of its Subsidiaries to pay in excess of $500,000 in any 12 month
period;
(p) Engage in any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code;
(q) Except as set forth in Section 4.1(s) of the Company
Schedule, settle any litigation.
(r) Make any tax election that, individually or in the
aggregate, is reasonably likely to adversely affect in any material respect the
tax liability or tax attributes of Company or any of its Subsidiaries or settle
or compromise any material income tax liability;
(s) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (r) above.
4.2 Conduct of Business by Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
Subsidiaries shall, except to the extent that Company shall otherwise consent in
writing, carry on its business, in the usual, regular and ordinary course
consistent with past practices, in substantially the same manner as heretofore
conducted and in compliance with all applicable laws and regulations (except
where noncompliance would not have a Material Adverse Effect), pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve
substantially 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 with which it has significant business dealings.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
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(a) As promptly as practicable after the execution of this
Agreement, Company and Parent will prepare, and file with the SEC, the Proxy
Statement/Prospectus, and Parent will prepare and file with the SEC the S-4 in
which the Proxy Statement/Prospectus will be included as a prospectus. Each of
Parent and Company shall 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 Proxy Statement/Prospectus and the S-4, 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 Proxy
Statement/Prospectus and the S-4. Each of Company and Parent will respond to any
comments of the SEC, and will use its respective commercially reasonable efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and Company will cause the Proxy
Statement/Prospectus to be mailed to its shareholders at the earliest
practicable time after the S-4 is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Parent will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other Federal, foreign or Blue Sky or related
securities laws in order to consummate the Merger and the transactions
contemplated by this Agreement (the "OTHER FILINGS"). Each of Company and Parent
will notify the other promptly upon the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the S-4, the Proxy Statement/Prospectus and will supply the other
with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the S-4, the Proxy Statement/Prospectus or the Merger. Each of
Company and Parent will cause all documents that it is responsible for filing
with the SEC under this Section 5.1(a) to comply in all material respects with
all applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus or the S-4, Company or
Parent, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to
shareholders of Company, such amendment or supplement.
(b) Subject to Section 5.2(c) below, the Proxy
Statement/Prospectus will include the recommendation of the Board of Directors
of Company in favor of approval of this Agreement, the Agreement of Merger and
approval of the Merger.
5.2 Meeting of Company Shareholders.
(a) Promptly after the date hereof, Company will take all
action reasonably necessary in accordance with California Law and Company
Charter Documents to convene Company Shareholders' Meeting to be held as
promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
S-4, for the purpose of voting upon this Agreement, the Agreement of Merger and
the Merger. Company will use its commercially reasonable efforts to solicit from
its shareholders proxies in
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favor of the approval of this Agreement, the Agreement of Merger and the
approval of the Merger and will take all other action necessary or advisable to
secure the vote or consent of its shareholders required by the rules of Nasdaq
or California Law to obtain such approvals. Notwithstanding anything to the
contrary contained in this Agreement, Company may adjourn or postpone Company
Shareholders' Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Prospectus/Proxy Statement is provided to
Company's shareholders in advance of a vote on the Merger and this Agreement or,
if as of the time for which Company Shareholders' Meeting is originally
scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of Company
Shareholders' Meeting. Company shall ensure that Company Shareholders' Meeting
is called, noticed, convened, held and conducted, and that all proxies solicited
by Company in connection with Company Shareholders' Meeting are solicited, in
compliance with California Law, Company Charter Documents, the rules of Nasdaq
and all other applicable legal requirements. Company's obligation to call, give
notice of, convene and hold Company Shareholders' Meeting in accordance with
this Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal.
(b) Subject to Section 5.2(c), (i) the Board of Directors of
Company shall recommend that Company's shareholders vote in favor of and approve
this Agreement, the Agreement of Merger and the Merger at Company Shareholders'
Meeting; (ii) the Prospectus/Proxy Statement shall include a statement to the
effect that the Board of Directors of Company has recommended that Company's
shareholders vote in favor of and approve this Agreement, the Agreement of
Merger and the Merger at Company Shareholders' Meeting; and (iii) neither the
Board of Directors of Company nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify in a manner adverse
to Parent, the recommendation of the Board of Directors of Company that
Company's shareholders vote in favor of and approve this Agreement, the
Agreement of Merger and the Merger.
(c) Nothing in this Agreement shall prevent the Board of
Directors of Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger or taking any other action which is
prohibited by Section 5.2(b) if (i) a Superior Offer (as defined below) is made
to Company and is not withdrawn, (ii) neither Company nor any of its
representatives shall have violated any of the restrictions set forth in Section
5.4, and (iii) the Board of Directors of Company concludes in good faith, after
consultation with its outside counsel, that, in light of such Superior Offer,
the withholding, withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company and Company's shareholders under applicable
law. Nothing contained in this Section 5.2 shall limit Company's obligation to
hold and convene the Company Shareholders' Meeting (regardless of whether the
recommendation of the Board of Directors of the
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Company shall have been withdrawn, amended or modified). For purposes of this
Agreement, "Superior Offer" shall mean an unsolicited, bona fide written offer
made by a third party to consummate any of the following transactions: (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Company pursuant to which the
shareholders of Company immediately preceding such transaction hold less than
51% of the equity interest in the surviving or resulting entity of such
transaction; (ii) a sale or other disposition by Company of assets (excluding
inventory and used equipment sold in the ordinary course of business)
representing in excess of 50% of the fair market value of Company's business
immediately prior to such sale, or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by
Company), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 50% of the voting power
of the then outstanding shares of capital stock of Company, in each case on
terms that the Board of Directors of Company determines, in its reasonable
judgment (based on a written opinion of an investment bank of nationally
recognized reputation) to be more favorable to Company shareholders from a
financial point of view than the terms of the Merger and the consideration of
which reasonably likely exceeds the value of the consideration in the Merger
(after taking into account all relevant factors, including any conditions to the
Superior Offer, the timing of the consummation of the transaction pursuant to
the Superior Offer, the risk of nonconsummation thereof and the need for any
required governmental or other consents, filings and approvals); provided,
however, that any such offer shall not be deemed to be a "Superior Offer" if any
financing required to consummate the transaction contemplated by such offer is
not committed and is not likely in the judgment of Company's Board of Directors
to be obtained by such third party on a timely basis.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have
previously executed a Confidentiality Agreement, dated as of October 4, 1999
(the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
(b) Access to Information.
(i) Company will afford Parent and its accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Company during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of Company, as Parent
may reasonably request. No information or knowledge obtained by Parent in any
investigation pursuant to this Section 5.3 will 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.
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(ii) Parent will afford Company and its accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Parent during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of Parent, as Company
may reasonably request. No information or knowledge obtained by Company in any
investigation pursuant to this Section 5.3 will 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 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII, Company
and its Subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as defined below), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in
discussions with any person with respect to any Acquisition Proposal, (iv)
subject to Section 5.2(c), approve or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any contract, agreement
or commitment providing for any Acquisition Transaction (as defined below) or
accepting any Acquisition Proposal; provided, however, that this Section 5.4(a)
shall not prohibit Company from furnishing nonpublic information regarding
Company and its Subsidiaries to, entering into a confidentiality agreement with
or entering into negotiations or discussions with, any person or group in
response to a Superior Offer submitted by such person or group (and not
withdrawn) if (1) neither Company nor any representative of Company and its
Subsidiaries shall have violated any of the restrictions set forth in this
Section 5.4, (2) the Board of Directors of Company concludes in good faith,
after consultation with its outside legal counsel, that such action is required
in order for the Board of Directors of Company to comply with its fiduciary
obligations to Company and Company's shareholders under applicable law, (3) (x)
at least forty-eight (48) hours prior to furnishing any such nonpublic
information to, or entering into discussions or negotiations with, such person
or group, Company gives Parent written notice of the identity of such person or
group and of Company's intention to furnish nonpublic information to, or enter
into discussions or negotiations with, such person or group and (y) Company
receives from such person or group an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such person or group by or on behalf
of Company, and (4) contemporaneously with furnishing any such nonpublic
information to such person or group, Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information
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has not been previously furnished by Company to Parent). Company and its
Subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of Company or any of its Subsidiaries or any investment
banker, attorney or other advisor or representative of Company or any of its
Subsidiaries shall be deemed to be a breach of this Section 5.4 by Company. In
addition to the foregoing, Company shall (i) provide Parent with at least
twenty-four (24) hours prior notice (or such lesser prior notice as provided to
the members of Company's Board of Directors but in no event less than eight
hours) of any meeting of Company's Board of Directors at which Company's Board
of Directors is reasonably expected to consider a Superior Offer, (ii) provide
Parent with at least five (5) business days prior written notice of a meeting of
Company's Board of Directors at which Company's Board of Directors is reasonably
expected to recommend a Superior Offer to its shareholders and together with
such notice a copy of the definitive documentation relating to such Superior
Offer and (iii) provide Parent with reasonable notice of the material terms of
the Superior Offer and reasonable opportunity to make a counter-offer prior to
any commitment by Company with respect to the Superior Offer.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
offer or proposal (other than an offer or proposal by Parent, Merger Sub or any
affiliate thereof) relating to any Acquisition Transaction. For the purposes of
this Agreement, "ACQUISITION TRANSACTION" shall mean any transaction or series
of related transactions other than the transactions contemplated by this
Agreement involving: (A) any acquisition or purchase from Company by any person
or "group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 30% interest in the total outstanding
voting securities of Company or any of its Subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 30% or more of the total outstanding voting
securities of Company or any of its Subsidiaries; (B) any merger, consolidation,
business combination or similar transaction involving Company or any of its
Subsidiaries; (C) any sale, lease, exchange, transfer, license, acquisition or
disposition of more than 50% of the assets of Company; or (D) any liquidation or
dissolution of Company.
(b) In addition to the obligations of Company set forth in
paragraph (a) of this Section 5.4, Company as promptly as practicable shall
advise Parent orally and in writing of any request received by Company for
non-public information which Company reasonably believes would lead to an
Acquisition Proposal or of any Acquisition Proposal, or any inquiry received by
Company with respect to or which Company reasonably believes would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group making
any such request, Acquisition Proposal or inquiry. Company
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will keep Parent informed in all material respects of the status and details
(including material amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry.
(c) Nothing contained in this Section 5.4 shall prevent the
Board of Directors of the Company from complying with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer by
a third party or from making such disclosure as may be required by applicable
law.
5.5 Public Disclosure. Parent and Company will consult with each
other and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or NASD
requirements for companies whose securities are traded on Nasdaq.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using commercially reasonable efforts
to accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all consents, approvals or waivers from third parties required as a result of
the transactions contemplated in this Agreement, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Company and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use its commercially reasonable efforts to enable the Merger and the
other transactions contemplated by this Agreement to be consummated as promptly
as practicable on the terms contemplated by this Agreement. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed to
require Parent or Company or any Subsidiary or affiliate thereof
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to agree to any divestiture by itself or any of its affiliates of shares of
capital stock or of any business, assets or property, or the imposition of any
material limitation on the ability of any of them to conduct their business or
to own or exercise control of such assets, properties and stock.
(b) Company shall give prompt notice to Parent upon becoming
aware that any representation or warranty made by it contained in this Agreement
has become untrue or inaccurate, or of any failure of Company to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.3(a) or 6.3(b) would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to Company upon becoming
aware that any representation or warranty made by it or Merger Sub contained in
this Agreement has become untrue or inaccurate, or of any failure of Parent or
Merger Sub to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 6.2(a) or
6.2(b) would not be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
5.7 Stock Options, Warrants and Employee Benefits.
(a) Stock Options. At the Effective Time, each outstanding
option to purchase shares of Company Common Stock (each, a "COMPANY STOCK
OPTION") under Company Option Plans, whether or not vested, shall by virtue of
the Merger be assumed by Parent. Each Company Stock Option so assumed by Parent
under this Agreement will continue to have, and be subject to, the same terms
and conditions of such options immediately prior to the Effective Time
(including, without limitation, any repurchase rights or vesting provisions and
provisions regarding the acceleration of vesting on certain transactions, other
than the transactions contemplated by this Agreement), except that (i) each
Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Stock Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent.
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(b) ESPP. Prior to the Effective Time, outstanding purchase
rights under Company's ESPP shall be exercised in accordance with the terms of
the ESPP as described in Section 18(b) of the ESPP and each share of Company
Common Stock purchased pursuant to such exercise shall by virtue of the Merger,
and without any action on the part of the holder thereof, be converted into the
right to receive a number of shares of Parent Common Stock equal to the Exchange
Ratio without issuance of certificates representing issued and outstanding
shares of Company Common Stock to ESPP participants. The Company agrees that it
shall terminate the ESPP immediately following the aforesaid purchase of shares
of Company Common Stock thereunder. Parent shall provide for the participation
of the employees of the Surviving Corporation in the employee stock purchase
plan of Parent no later than two weeks after the Closing Date. Service with
Company shall constitute service for the purpose of eligibility to participate
in the Parent's employee stock purchase plan.
5.8 Form S-8. Parent agrees to file, if available for use by Parent,
a registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options within 30 days after the
Effective Time.
5.9 Indemnification.
From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Company pursuant to any indemnification agreements between Company and its
directors and officers in effect immediately prior to the Effective Time (the
"INDEMNIFIED PARTIES") and any indemnification provisions under Company Charter
Documents as in effect on the date hereof. The Articles of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in Company Charter Documents as in effect
on the date hereof, which provisions will not be amended, repealed or otherwise
modified for a period of six (6) years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of Company, unless such modification is required by law. Parent will
cause the Surviving Corporation to maintain Director and Officer insurance on
the same terms as the current policies with respect to the Indemnified Parties
for the three (3) years following the Effective Time.
5.10 Nasdaq Listing. Parent agrees to cause the listing on Nasdaq the
shares of Parent Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, subject to official notice of issuance.
5.11 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, 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 ("DOJ") Notification and
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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. 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 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 Company, its
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.
5.12 401(k) Plan. Company shall cause its 401(k) plan to terminate
effective as of the day immediately preceding the Closing Date. From and after
the Closing Date, Parent shall provide for the participation by employees of the
Surviving Corporation in a 401(k) plan that is substantially similar to the
401(k) plan in which employees of Parent participate. Parent shall recognize
service with Company for the purpose of eligibility to participate and vesting
under such 401(k) plan.
5.13 Treatment as a Reorganization. Neither Parent nor Merger Sub
shall take any action prior to or following the Merger that could reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
5.14 Certain Subsidiaries. In connection with its ISOCOR Switzerland
AG and ISOCOR Italia S.P.A. subsidiaries, Company will cooperate with Parent
and will use its reasonable efforts to obtain, prior to the Effective Time,
agreements necessary to extend for an additional year the obligations of such
subsidiaries to purchase all shares thereof held by such subsidiaries'
shareholders.
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) Company Shareholder Approval. This Agreement and the
Agreement of Merger shall have been approved and the Merger shall have been duly
approved, by the requisite vote under California law, by the shareholders of
Company.
(b) Registration Statement Effective; Proxy Statement. The SEC
shall have declared the S-4 effective. No stop order suspending the
effectiveness of the S-4 or any part thereof
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shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger,
substantially on the terms contemplated by this Agreement. All waiting periods,
if any, under the HSR Act relating to the transactions contemplated hereby will
have expired or terminated early and all material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the transactions
contemplated hereby shall have been obtained.
(d) Tax Opinions. Parent and Company shall each have received
written opinions from their respective tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Parent or Company does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to such party if counsel to the other party renders such opinion to
such party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable
to the shareholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
6.2 Additional Conditions to Obligations of Company. The obligation
of Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and
warranty of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except (A) in each case, or in the aggregate, as does
not constitute a Material Adverse Effect on Parent and Merger Sub, (B) for
changes contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
as set forth in the preceding clause A) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material
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Adverse Effect" qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the Parent
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded). Company shall have received a certificate with respect to
the foregoing signed on behalf of Parent by an authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Parent and its Subsidiaries, taken as a whole, shall have occurred
since the date of this Agreement.
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at 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. Each representation and
warranty of Company contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Company provided, however, such Material
Adverse Effect qualifier shall be inapplicable with respect to representations
and warranties contained in Section 2.3, (B) for changes contemplated by this
Agreement and (C) for those representations and warranties which address matters
only as of a particular date (which representations shall have been true and
correct (subject to the qualifications as set forth in the preceding clause (A)
as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Schedule made or purported to have been made after the date of this
Agreement shall be disregarded). Parent shall have received a certificate with
respect to the foregoing signed on behalf of Company by an authorized officer of
Company.
(b) Agreements and Covenants. Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial Officer
of Company.
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(c) Material Adverse Effect. No Material Adverse Effect with
respect to Company and its Subsidiaries, taken as a whole, shall have occurred
since the date of this Agreement.
(d) Consents. Company shall have obtained all consents,
waivers and approvals required in connection with the consummation of the
transactions contemplated hereby in connection with the agreements, contracts,
licenses or leases set forth on Schedule 6.3(d).
(e) Acceptance of Offer Letters. Xx. Xxxx Xxxx and at least
eight (8) of the other individuals listed on Exhibit C hereto shall not have
revoked their acceptance of offers of employment with Parent and each of those
individuals will be employed by Parent as of the Closing Date and each of those
individuals, other than as indicated on Exhibit C, shall have entered into a
Covenant Not to Compete or Solicit.
(f) Dissenting Shares. The aggregate number of Dissenting
Shares shall be less than 5% of the outstanding shares of Company Common Stock.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the requisite approval of the
shareholders of Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have
been consummated by June 30, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by either Company or Parent if the required approval of
the shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company shareholders duly convened therefor or at any adjournment thereof;
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(e) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then Company may not terminate this Agreement under this Section 7.1(e) for
thirty (30) days after delivery of written notice from Company to Parent of such
breach, provided Parent continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Company may not terminate this
Agreement pursuant to this Section 7.1(e) if it shall have materially breached
this Agreement or if such breach by Parent is cured during such thirty (30)-day
period);
(f) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through the exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement under this Section 7.1(f) for
thirty (30) days after delivery of written notice from Parent to Company of such
breach, provided Company continues to exercise commercially reasonable efforts
to cure such breach (it being understood that Parent may not terminate this
Agreement pursuant to this Section 7.1(f) if it shall have materially breached
this Agreement or if such breach by Company is cured during such thirty (30)-day
period);
(g) by Parent, upon a breach of the provisions of Section 5.4
of this Agreement;
(h) by Parent if a Triggering Event (as defined below) shall
have occurred.
For the purposes of this Agreement, a "Triggering Event" shall be deemed
to have occurred if: (i) the Board of Directors of Company or any committee
thereof shall for any reason have withdrawn or shall have amended or modified in
a manner adverse to Parent its recommendation in favor of, the approval of the
Agreement or the approval of the Merger; (ii) Company shall have failed to
include in the Proxy Statement/Prospectus the recommendation of the Board of
Directors of Company in favor of the approval of the Agreement and the approval
of the Merger; (iii) Board of Directors of Company fails to reaffirm its
recommendation in favor of the approval of the Agreement and the approval of the
Merger within five (5) business days after Parent requests in writing that such
recommendation be reaffirmed at any time following the making, announcement or
submission of an Acquisition Proposal; (iv) the Board of Directors of Company or
any committee thereof shall have approved or recommended any Acquisition
Proposal; or (v) a tender or exchange offer relating
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to securities of Company shall have been commenced by a person unaffiliated with
Parent and Company shall not have sent to its securityholders pursuant to Rule
14e-2 promulgated under the Securities Act, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Company recommends rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon (or,
if the termination is pursuant to Section 7.1(f) or Section 7.1(g) and the
proviso therein is applicable, thirty (30) days after) the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect and the Merger shall be abandoned, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8 (General
Provisions), each of which shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any intentional
or willful 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
and the abandonment of the Merger in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, (i) that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the S-4 (including financial statements and exhibits) and
any amendments or supplements thereto and (ii) that Company shall reimburse
Parent for reasonable expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby in an amount equal to up to
$2,000,000 in the event that a Termination Fee (as defined below) shall become
due and payable and as of the date that the Termination Fee becomes due and
payable.
(b) Company Payments.
(i) Company shall pay to Parent in immediately
available funds, within one (1) business day after demand by Parent, an amount
equal to $11,484,800 (the "Termination Fee") if this Agreement is terminated by
Parent pursuant to Section 7.1(g).
(ii) Company shall pay to Parent in immediately
available funds, within one (1) business day after demand by Parent, an amount
equal to the Termination Fee if this Agreement is terminated by Parent pursuant
to Section 7.1(h); provided, however, that no
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Termination Fee shall be payable pursuant to this Section 7.3(b)(ii) in the
event that a Triggering Event occurs pursuant to Section 7.1(h) in response to
an unsolicited tender offer made by a third party pursuant to Regulation 14(d)
of the Exchange Act and no Acquisition Transaction is consummated within twelve
(12) months of the Triggering Event.
(iii) Company shall pay Parent in immediately available
funds, within one (1) business day after demand by Parent, an amount equal to
the Termination Fee, if (A) this Agreement is terminated by Parent or Company,
as applicable, pursuant to Section 7.1(b) or (d) and (B) within 12 months of
termination of this Agreement, Company shall enter into an agreement for an
Acquisition Transaction or shall consummate an Acquisition Transaction.
(iv) The Company acknowledges that the agreements
contained in this Section 7.3(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if Company fails to pay in a timely
manner the amounts due pursuant to this Section 7.3(b) and, in order to obtain
such payment, Parent makes a claim that results in a judgment against Company
for the amounts set forth in this Section 7.3(b), Company shall pay to Parent
its reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made. Payment of the fees
described in this Section 7.3(b) shall not be in lieu of damages incurred in the
event of breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties 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. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of Company, Parent and Merger Sub contained in
this Agreement shall terminate at the Effective
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Time, and only the covenants that by their terms survive the Effective Time
shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Critical Path, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, President & CEO
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to Company, to:
ISOCOR
0000 Xxxxx Xxxx Xxxx.
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, President & CEO
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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with a copy to:
Venture Law Group
A Professional Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise indicated
the words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." 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, with respect to any matter in question, that any
of the executive officers of such party (as defined in the rules and regulations
of the Securities and Exchange Commission) has actual knowledge of such matter.
(c) For purposes of this Agreement, 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 changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), capitalization, financial condition or results of operations of such
entity and its Subsidiaries taken as a whole (it being understood that neither
of the following alone shall be deemed, in and of itself, to constitute a
Material Adverse Effect: (a) a change in the market price or trading volume of
the entity's Common Stock, (b) a loss of suppliers or customers as a result of
the public announcement or pendency of the transactions contemplated hereby) or
(c) changes in general economic conditions or changes affecting the industry
generally in which such entity operates.
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(d) For purposes of this Agreement, the term "PERSON" shall
mean 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.
(e) For purposes of this Agreement, the term "SUBSIDIARY"
means with respect to Company, the Surviving Corporation, Parent or any other
person, any corporation, partnership, joint venture, limited liability company
or other legal entity of which (i) Company, the Surviving Corporation, Parent or
such other person, as the case may be, (either alone or through or together with
any other subsidiary) owns, directly or indirectly, more than 25% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity or (ii) which constitutes a "SIGNIFICANT
SUBSIDIARY" of such entity within the meaning of Rule 12b-2 of the Exchange Act.
8.4 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.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Schedule
and the Parent Disclosure Schedule (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, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.9.
8.6 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.
8.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not
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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. 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 seek 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.
8.8 Governing 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 law
thereof.
8.9 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.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. 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.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, 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, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
CRITICAL PATH, INC.
By: /s/ Xxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
INITIALIZE ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
ISOCOR
By: /s/ Xxxx Xxxx
-----------------------------------
Name: Xxxx Xxxx
Title: President & CEO
68
EXHIBIT A
FORM OF COMPANY VOTING AGREEMENT
See Exhibit 2.3
69
EXHIBIT B
FORM OF STOCK OPTION AGREEMENT
See Exhibit 2.2
70
EXHIBIT C
EMPLOYEES ACCEPTING OFFER LETTERS
Officers
Xxxx Xxxxxxx
Xxxx Xxxxx
Xxxxx Xxxxxxx
Xxxxx Xxxx
Xxxx Xxxx
Xxxxxx Xxxxxxx
Engineers*
Xxxx Xxxxxxxx
Xxxxx Xxxxxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxx
----------------
* Will not be required to sign a Covenant Not to Compete or Solicit.
C-2
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EXHIBIT D
AGREEMENT OF MERGER
This Agreement of Merger, dated as of [January__], 2000 (the "Merger
Agreement"), between Ocean Acquisition Corporation, a California corporation
("Merger Sub"), and Ocean, a California corporation ("Target") (collectively,
the "Constituent Corporations").
The parties hereto hereby agree as follows:
1. MERGER. Upon the terms and subject to the conditions of this Merger
Agreement and an Agreement and Plan of Reorganization among the Constituent
Corporations and Continent ("Parent"), Merger Sub shall be merged with and into
Target, and Target shall be the surviving corporation of the merger (the
"Merger").
2. EFFECTIVE TIME OF MERGER. The Merger shall become effective at such time
(the "Effective Time") as this Merger Agreement and the officers' certificate of
Target is filed with the Secretary of State of the State of California pursuant
to Section 1103 of the California General Corporation Law ("GCL").
3. EFFECT OF MERGER. At the Effective Time of the Merger, the separate
existence of Merger Sub shall cease, and Target ("Surviving Corporation") shall
succeed, without other transfer, to all of the rights and properties of each
Constituent Corporation and shall be subject to all the debts and liabilities of
each Constituent Corporation in the same manner as if Surviving Corporation had
itself incurred them. All rights of creditors and all liens upon the property of
each Constituent Corporation shall be preserved unimpaired, provided that such
liens upon property of Merger Sub shall be limited to the property affected
thereby immediately prior to the Effective Time of the Merger.
4. ARTICLES OF INCORPORATION; BYLAWS. (a) At the Effective Time, the
Articles of Incorporation of the Surviving Corporation shall be amended and
restated to read in their entirety as set forth in Exhibit A hereto.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
72
5. DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time.
6. EFFECT ON CAPITAL STOCK. (a) At the Effective Time of the Merger (i) all
shares of Target Common Stock that are owned directly or indirectly by Target,
Merger Sub or any other subsidiary of Parent shall be cancelled without any
conversion thereof, and no securities of Merger Sub or other consideration shall
be delivered in exchange therefor, (ii) each of the other issued and outstanding
shares of Target Common Stock (other than shares, if any, held by persons who
have not voted such shares for approval of the Merger and with respect to which
such persons shall become entitled to exercise dissenters' rights in accordance
with Chapter 13 of the GCL, referred to hereinafter as "Dissenting Shares")
shall be converted automatically into and exchanged for 0.____ shares of Common
Stock of Parent ("Parent Common Stock") (the "Exchange Ratio"). Those shares of
Parent Common Stock to be issued as a result of the Merger are referred to
herein as the "Parent Shares".
(b) Any Dissenting Shares shall not be converted into Parent Common
Stock but shall be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to the
GCL. If after the Effective Time any Dissenting Shares shall lose their status
as Dissenting Shares, then as of the occurrence of the event which causes the
loss of such status, such shares shall be converted into Parent Common Stock in
accordance with Section 7(a) above.
(c) Each share of Common Stock, no par value per share, of Merger Sub
(the "Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock, no par value per share, of the Surviving
Corporation. Each certificate evidencing ownership of shares of Merger Sub
Common Stock shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(d) No fraction of a share of Parent Common Stock will be issued by
virtue of the Merger, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock
that otherwise would be received by such holder) shall, upon surrender of such
holder's certificates(s) representing shares of Target Common Stock, receive
from Parent an amount of cash (rounded to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of one share of Parent Common Stock for the ten (10) most
recent days that Parent Common Stock has traded ending on the trading day
immediately prior to the Effective Time, as reported on the Nasdaq National
Market System.
(e) The conversion of Target Common Stock into Parent Common Stock
shall occur automatically at the Effective Time of the Merger without action by
the holders thereof. Each
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holder of Target Common Stock shall thereupon be entitled to receive shares of
Parent Common Stock in accordance with the Agreement and Plan of Reorganization.
7. TERMINATION. (a) Notwithstanding the approval of this Merger Agreement
by the stockholders of Target, this Merger Agreement shall terminate forthwith
in the event that the Agreement and Plan of Reorganization shall be terminated
as therein provided.
(b) In the event of the termination of this Merger Agreement as
provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of Target, Merger Sub or Parent or their
respective officers or directors, except as otherwise provided in the Agreement
and Plan of Reorganization.
(c) This Merger Agreement may be signed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one
agreement.
(d) This Merger Agreement may be amended by the parties hereto any
time before or after approval hereof by the stockholders of Target, but, after
such approval, no amendments shall be made which by law require the further
approval of such stockholders without obtaining such approval. This Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement of Merger
as of the date first written above.
OCEAN ACQUISITION CORPORATION:
By: _______________________________________
[Name],
[Title]
By: _______________________________________
[Name],
[Title]
OCEAN:
By: _______________________________________
Xxxx Xxxx,
President and Chief Executive Officer
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75
By: _______________________________________
Xxxxx X. Xxxxxx,
Secretary
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
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76
EXHIBIT A TO AGREEMENT OF MERGER
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TARGET
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OFFICERS' CERTIFICATE
OF
OCEAN
Xxxx Xxxx, President and Chief Executive Officer, and Xxxxx Xxxxxx, Secretary,
of Ocean, a corporation duly organized and existing under the laws of the State
of California (the "Company"), do hereby certify:
1. That they are the duly elected, acting and qualified President and Chief
Executive Officer and the Secretary, respectively, of the Company.
2. There are two authorized classes of shares, consisting of 50,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. There were
_____________ shares of Common Stock outstanding and entitled to vote on the
Agreement of Merger in the form attached.
3. The Agreement of Merger in the form attached were duly approved by the
Board of Directors of the Company in accordance with the California General
Corporation Law.
4. Approval of the Agreement of Merger by the holders of at least a
majority of the outstanding shares of Common Stock (voting as a single class)
was required. The percentage of the outstanding shares of the Company's Common
Stock entitled to vote on the Agreement of Merger which voted to approve the
Agreement of Merger equaled or exceeded the vote required.
Each of the undersigned declares under penalty of perjury that
the statements contained in the foregoing certificate are true of their own
knowledge. Executed in [Santa Xxxxxx] [Menlo Park], California on [January __],
2000.
By: ____________________________________
Xxxx Xxxx,
President and Chief Executive Officer
By: ____________________________________
Xxxxx X. Xxxxxx,
Secretary
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The following Schedules have been omitted from this Exhibit 2.1:
2.1(b) Company Subsidiaries; Future Investment or Capital Contribution
to another entity; Equity Ownership in other Business Association or Entity.
2.3(a) Company Stock Options
2.3(b) Rights with respect to Company Securities
2.5(a)(iii) No Conflicts
2.6 Compliance; Permits
2.8 Undisclosed Liabilities.
2.9 Certain Changes or Events.
2.10 Litigation.
2.11 Employee Benefit Plans.
2.12 Labor Matters. Discrepancy
2.16 Taxes.
2.18 Brokers
2.19 Intellectual Property.
2.20 Agreements, Contracts and Commitments.
2.21 Insurance.
3.1 Organization and Qualification; Subsidiaries.
3.2 Articles of Incorporation and Bylaws.
3.3 Capitalization.
3.4 Authority Relative to this Agreement.
3.5 No Conflict; Required Filings and Consents.
3.6 SEC Filings; Financial Statements.
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3.7 Registration Statement; Proxy Statement.
3.8 No Undisclosed Liabilities.
3.9 Absence of Certain Changes or Events.
3.10 Absence of Litigation.
3.11 Employee Benefits Plan.
3.12 Tax Returns and Audits.
3.13 Environmental Matters.
3.14 Intellectual Property.
4.1 Conduct of Business by Company
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