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EXHIBIT 2.4
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of December 1, 1997 among McAfee Associates, Inc., a Delaware
corporation ("PARENT"), DNA Acquisition Corporation., a Delaware corporation and
a wholly-owned subsidiary of Parent ("MERGER SUB") and Helix Software Company,
Inc., a Georgia corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "MERGER") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger all of the issued and outstanding shares of
common stock of the Company (the "COMPANY COMMON STOCK") shall be converted into
the right to receive an aggregate five hundred fifty thousand (550,000) shares
of common stock (the "MERGER CONSIDERATION") of Parent (the "PARENT COMMON
STOCK"). Parent is entering into a Registration Rights Agreement pursuant to
which Parent shall file a registration statement providing for the sale of
Parent Common Stock received pursuant to the Merger and the transactions
hereunder.
C. Fifty-five thousand (55,000) shares of Parent Common Stock otherwise
payable by Parent in connection with the Merger shall be placed into escrow by
Parent, the release of which amount shall be contingent upon certain events and
conditions.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. To facilitate the Merger and the transactions contemplated hereby,
as of the date hereof, the parties to the Stockholders Agreement dated July 21,
1990 and the Company have entered into a Termination of Shareholder Agreement
(the "TERMINATION AGREEMENT").
F. Certain key employees of the Company, as of the date hereof, are
each entering into an Employment Agreement with Parent (collectively, the
"EMPLOYMENT AGREEMENTS").
G. The parties intend, that the transactions contemplated by this
Agreement will qualify as a "Reorganization" within the meaning of Section
368(a)(1)(A) and (a)(2)(E) 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 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 the Delaware General Corporation Law ("DELAWARE LAW")
and Georgia Business Corporation Code ("GEORGIA LAW"), Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease and the Company shall continue as the surviving corporation and as a
wholly-owned subsidiary of Parent. (The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "SURVIVING
CORPORATION.")
1.2 Effective Time. The closing of the Merger (the "CLOSING") is taking
place concurrently with the signing of this Agreement. The date hereof is
referred to as the "CLOSING DATE." On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger (or like
instrument) with the Secretaries of State of the States of Delaware and Georgia,
respectively (the "CERTIFICATES OF MERGER"), in accordance with the relevant
provisions of Delaware and Georgia law, respectively (the time of acceptance by
the Secretaries of State of Delaware and Georgia of such filings being referred
to herein as the "EFFECTIVE TIME").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law and
Georgia Law respectively. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of the Company, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, to hold office in accordance with the Certificate of Incorporation
and Bylaws of the Surviving Corporation. The officers of Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation.
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1.6 Effect on Capital Stock.
(a) Certain Definitions.
(i) "OUTSTANDING COMMON" shall mean, immediately
prior to the Effective Time, all issued and outstanding shares of Company Common
Stock, including shares of Company Common Stock issuable upon the exercise of
outstanding Company Options (each as defined below).
(ii) "PROPORTIONATE ESCROW INTEREST" applicable to
each Company Stockholder, shall mean the quotient obtained by dividing (x) the
total number of shares of Company Common Stock held of record by such Company
Stockholder, by (y) the total number of shares of Company Common Stock held of
record by all the Company Stockholders, in each case, as of immediately prior to
the Effective Time.
(iii) "NASDAQ" shall mean the Nasdaq National
Market.
(b) Consideration of Company Common Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of Merger Sub,
the Company or the Company Stockholders, each share of the Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares, as defined in Section 1.7(a) and shares of Company Common
Stock owned by Parent, Merger Sub or held in the treasury of the Company) will
be canceled and extinguished and be converted automatically into the right to
receive, upon surrender of the certificate representing such share in the manner
provided in Section 1.8, a number of shares of Parent Common Stock equal to a
fraction the numerator of which is 550,000 and the denominator of which is the
Outstanding Common (the "MERGER CONSIDERATION"). Such conversion shall be made
in accordance with the terms and subject to the conditions set forth below and
throughout this Agreement, including, without limitation, the escrow provisions
set forth in Article IV hereof.
(c) Escrow. Promptly after the Effective Time, from the Merger
Consideration otherwise payable pursuant to Section 1.6(b), Parent shall deposit
fifty-five thousand (55,000) shares of Parent Common Stock (the "ESCROW AMOUNT")
into an escrow account pursuant to Section 1.8 and Article IV.
(d) Capital Stock of Merger Sub. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock held by a holder who has exercised
and perfected appraisal rights for such
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shares in accordance with Georgia Law (or other applicable law) and who, as of
the Effective Time, has not effectively withdrawn or lost such appraisal rights
("DISSENTING SHARES"), shall not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by Georgia Law or other
law, as the case may be.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration as provided in Section 1.6, without interest thereon, upon
surrender of the certificate representing such shares.
(c) The Company shall give Parent and the Company
Stockholder's Agent (as defined in Article IV) (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of Georgia law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. To the extent that Parent or the Company makes any payment or payments
in respect of any Dissenting Shares (which payments, after the Effective Time
shall not be made by Parent without the consent of the Company Stockholder
Agent, which consent may not be unreasonably withheld), Parent shall be entitled
to recover under the terms of Article IV hereof the aggregate amount by which
such payment or payments exceed the aggregate Merger Consideration that
otherwise would have been payable in respect of such shares.
1.8 Surrender of Certificates; Payment of Merger Consideration.
(a) Parent to Provide Merger Consideration; Escrow Funding.
Promptly after the Effective Time, Parent shall make available for exchange in
accordance with this Article I, the Parent Common Stock deliverable pursuant to
Section 1.6 in exchange for outstanding shares of Company Common Stock; provided
that Parent shall deposit into the Escrow Fund (as defined in Section 4.2)
pursuant to Article IV the Escrow Amount as contemplated in Section 1.6(c). The
portion of the amounts contributed on behalf of each holder of Company Common
Stock into the Escrow Fund shall be equal to such holder's Proportionate Escrow
Interest.
(b) Exchange Procedures. Upon surrender to Parent or an agent
appointed by it of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") duly endorsed in blank or accomplished by stock powers duly
executed in blank, the holder of record of such Certificate shall be entitled to
receive in exchange therefor the applicable Merger Consideration pursuant to
Section 1.6 (subject to the escrow provisions of Section 1.8 and Article IV) and
the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock, will be deemed from and after the
Effective Time, to evidence only the
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right to receive the Merger Consideration in respect of each such share (subject
to Section 1.13 and subject to the escrow provisions of Section 1.8 and Article
IV).
(c) Transfers of Ownership. If any payment or delivery is to
be made to a person other than the holder in whose name the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
payment thereof that the Certificate so surrendered will be properly endorsed
and accompanied by all documents required to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
(d) Payments With Respect to Unexchanged Shares. No interest
on any Merger Consideration payable at or after the Effective Time shall be
paid.
(e) 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 to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) fifty dollars ($50.00).
1.9 No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof shall be deemed to have been
delivered 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 the Merger Consideration due under Section
1.6 with respect to such Company Common Stock shall be delivered to the person
entitled thereto (subject to the escrow provisions of Article IV).
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, Parent shall make payment in exchange for such lost, stolen
or destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such amount, if any, as may be required pursuant to Section 1.6;
provided, however, that Parent may, in its sole discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver an agreement (in form and substance
satisfactory to it) to indemnify Parent against any claim that may be made
against Parent with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.11 Tax and Accounting Treatment. The Merger shall constitute a tax
free reorganization under the Internal Revenue Code of 1986, as amended (the
"CODE"), and will be treated as a pooling of interest for financial accounting
purposes.
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1.12 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 the Company and Merger Sub or to vest Parent with a 100%
ownership interest in the Surviving Corporation or to vest the Company
Stockholders with the Parent Common Stock to which they are entitled hereunder
and for other actions required under this Agreement, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary and/or desirable action.
1.13 Purchase Price Adjustment. The Merger Consideration will be
subject to adjustment as follows:
(a) Tangible Net Worth Adjustment.
(i) Closing Balance Sheet. As soon as practicable
(but in no event later than 45 days) following the Closing Date, the Company
will, at the expense of the Surviving Corporation, prepare and cause to be
audited by Coopers & Xxxxxxx LLP, independent accountants, and the Company will
deliver to Parent and the Company Stockholders' Agent (as defined in Article
IV), a balance sheet of the Company as of the Closing Date (the "CLOSING BALANCE
SHEET"). The Closing Balance Sheet will be prepared in accordance with generally
accepted accounting principles ("GAAP") consistent with the basis of accounting
and procedures and methods employed by the Company in its financial statements
delivered pursuant to Section 2.6. During the conduct of the audit, the Company
will cooperate in all respects with the independent auditors for the purposes of
completing the Closing Balance Sheet. In addition, the Company and the
independent auditors shall be available for periodic inquiry by Parent, the
Company Stockholders' Agent and the Company, and the independent auditors will
answer such questions as Parent or the Company Stockholders' Agent may have and
provide such additional schedules and materials as Parent or the Stockholders'
Agent may reasonably request in order to permit a meaningful review of the
Closing Balance Sheet.
(ii) Definition. "TANGIBLE NET WORTH" will mean the
aggregate of all tangible assets (net of all reserves and excluding all
intangible assets, including without limitation, all goodwill and capitalized
software) set forth in the Closing Balance Sheet, less all liabilities of any
kind (including without limitation accounts payable, royalties payable, warranty
reserves, accrued bonuses, accrued vacation, employee expense obligations,
deferred revenue, litigation reserves and debt and other liabilities) set forth
in the Closing Balance Sheet determined in accordance with GAAP; provided,
however, that (x) any compensation expense arising from the exercise of Company
Options on or prior to the Closing Date will not be reflected in the Closing
Balance Sheet and (y) reasonable payments by the Company of fees and expenses of
up to $800,000 to its investment bankers, accountants, and attorneys in
connection with this Agreement and the transactions contemplated hereby will not
be included in the Closing Balance Sheet for purposes of calculating Tangible
Net Worth pursuant to this Section 1.13(a)(ii).
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(iii) Disputes. At any time within thirty (30) days
following the delivery of the Closing Balance Sheet to Parent and the Company
Stockholders' Agent (the "REVIEW PERIOD"), Parent or the Company Stockholders'
Agent may dispute any amounts reflected or not reflected on the Closing Balance
Sheet to the extent the net effect of all such disputed amounts in the aggregate
would affect the Tangible Net Worth amount, but only on the basis that such
amounts were not arrived at in accordance with Section 1.13(a)(i); each of
Parent and the Company Stockholders' Agent will notify the other of each such
disputed item, and will specify the amount thereof in dispute, not later than
the expiration of the Review Period. If Parent and the Company Stockholders'
Agent are able to resolve all the disputed items within 20 days following
expiration of the Review Period, then the Closing Balance Sheet agreed upon by
Parent and the Company Stockholders' Agent will be final, binding and conclusive
on the parties hereto. If Parent and the Company Stockholders' Agent are unable
to resolve any disputed item and are therefore unable to agree as to the Closing
Balance Sheet and the resultant Tangible Net Worth amount within 20 days
following the expiration of the Review Period, the items remaining in dispute
shall be submitted for resolution to a nationally recognized accounting firm
(the member of which who will be primarily responsible for resolving such
disputes will have had substantial auditing experience and substantial
experience in arbitration or other dispute resolution proceedings concerning
accounting issues) selected by mutual agreement of Parent and the Company
Stockholders' Agent (or failing such agreement (as to both such accounting firm
and such member) between Parent and the Company Stockholders' Agent within 10
days after such 20 day period, as selected by mutual agreement between Parent's
independent accountants and the Company's independent accountants (prior to the
Merger), or, failing agreement by such accountants within 10 days after such
prior 10 day period, as appointed by the American Arbitration Association) (the
"ACCOUNTANTS"). The Accountants will, within 30 days after submission,
determine, based solely on presentations by Parent and the Company Stockholders'
Agent (and their representatives) and not by independent review, and render a
written report to the parties upon, such remaining disputed items and the
resultant calculation of the Closing Balance Sheet and the Tangible Net Worth
amount in accordance with the provisions hereof, and such report and the
Resultant Closing Balance Sheet will be final, binding and conclusive on the
parties hereto. In resolving any disputed item, the Accountants may not assign a
value to such item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either
party. The fees and disbursements of the Accountants (and of the American
Arbitration Association, if any) (a) will be paid out of the Escrow Fund
established under Article IV if the Tangible Net Worth amount finally determined
pursuant to this Section 1.13(a)(iii) shall be more than $25,000 below the
Tangible Net Worth amount reflected on the Closing Balance Sheet originally
submitted pursuant to Section 1.13(a)(i) hereof, or (b) will be borne by Parent
if the Tangible Net Worth amount finally determined pursuant to this Section
1.13(a)(iii) is equal to or less than $25,000 below the Tangible Net Worth
amount reflected on the Closing Balance Sheet originally submitted pursuant to
Section 1.13(a)(i) hereof. Parent and the Company hereby agree to cooperate and
work in good faith and as expeditiously as reasonably possible to resolve any
and all Closing Balance Sheet disputes.
(iv) Adjustment. In the event that the Tangible Net
Worth of the Company as of the Closing Date as reported in the Closing Balance
Sheet (or, if different, the Restated Closing Balance Sheet determined pursuant
to subparagraph (iii) above) is less than $2,000,000, then Parent shall provide
written notice of such deficiency to the Escrow Agent pursuant to the provisions
of Article IV,
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and the deficiency shall be payable to the Parent as an escrow claim thereunder
(pursuant to the procedure set forth in such Article IV).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as of the
date hereof, subject to such exceptions as are specifically disclosed in the
disclosure schedule supplied by the Company to Parent (the "COMPANY SCHEDULES"
or "DISCLOSURE SCHEDULES") and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition or results
of operations of the Company (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). The Company has delivered a true and correct copy of its Certificate
of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
1,000,000 shares, all of which are designated as Common Stock. The Company
Common Stock is held by the persons and in the amounts set forth on Schedule
2.2(a). All outstanding shares of the Company's Common Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of the Company or any agreement to which the Company is a party or by which it
is bound.
(b) As of November 25,1997, the Company has reserved 9,650
shares of Company Common Stock for issuance to employees and consultants, all of
which shares will be issued prior to the Closing Date by exercise of outstanding
options (collectively, the "COMPANY OPTIONS"). Schedule 2.2(b) sets forth for
each such outstanding Company Option the name of the holder of such option, the
number of shares of Company Common Stock subject to such option, the exercise
price of such option and the vesting schedule for such option. Except for the
Company Options described in Schedule 2.2(b) above, there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
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call, right, commitment or agreement. The holders of Company Options have been
or will be given, or shall have properly waived, any required notice prior to
the Merger and all such rights will be terminated at or prior to the Effective
Time. Upon the Effective Time without any further action necessary, all Company
Options that shall not have been exercised at or prior to the Effective Time
shall be canceled such that there shall be no outstanding Company Options after
the Effective Time. As a result of the Merger and assuming that Parent owns all
the shares of Merger Sub capital stock, immediately after the Merger, Parent
will be the record owner of all outstanding capital stock of the Company and
rights to acquire capital stock of the Company and no other person or entity
will be a record or beneficial owner of any capital stock of the Company or
rights to acquire capital stock of the Company.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in (other than stock
or other interest in a public company not exceeding a 1% interest), or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company (including the
unanimous approval of this Agreement and the Merger by the Company's
Stockholders). The Company's Board of Directors has unanimously approved the
Merger and this Agreement. Each of this Agreement and each other document
executed by the Company in connection with this Agreement and the Merger has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms
except as such enforceability may be subject to the laws of general application
relating to bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance-injunctive relief or other equitable remedies.
The Shareholder Termination Agreement and each other document executed by any
Company Stockholder in connection with this Agreement and the Merger has been
duly executed and delivered by each Company Stockholder that is a party thereto
and constitutes valid and binding obligations of each such Company Stockholder,
enforceable in accordance with their terms except as such enforceability may be
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. Except as set forth on Schedule
2.4, the execution and delivery by the Company of each of this Agreement and
each other document executed by the Company in connection with this Agreement
and the Merger does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "CONFLICT") (i)
any provision of the Certificate of Incorporation or Bylaws of the Company or
(ii) any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
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commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any
third party (so as not to trigger any Conflict), is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for the
filing of the Certificates of Merger with the appropriate Secretaries of State
and such other consents, waivers, authorizations, filings, approvals and
registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
audited balance sheet as of May 31, 1997 and the related audited statements of
income and cash flow for the twelve-month period then ended and the Company's
reviewed balance sheet as of September 30, 1997 (the "Current Balance Sheet")
(collectively, the "COMPANY FINANCIALS"). The Company Financials are correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other (except in the case of the
current Balance Sheet and related unaudited statements for normal year end
adjustments or as otherwise noted in the Company Financials). The Company
Financials fairly present in all material respects the financial condition and
operating results of the Company as of the dates and during the periods
indicated therein, subject to normal year-end adjustments, which will not be
material in amount or significance in the aggregate.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, in excess of $5,000
individually or $15,000 in the aggregate, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles).
2.7 No Changes. Except as set forth in Schedule 2.7, since May 30,
1997, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on that date;
(b) capital expenditure or commitment by the Company, in
excess of $10,000 individually or $25,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(d) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
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(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any of its capital stock;
(h) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement other than normal course of business salary increases in connection
with ongoing yearly reviews or promotions (none of which exceeds 10% of the
previous year's salary);
(i) acquisition, sale or transfer of any asset of the Company,
except in the ordinary course of business as conducted on that date;
(j) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;
(k) loan by the Company to any person or entity (other than
(i) loans to all employees aggregating to no more than $5,000 and (ii) expense
advances to employees, all of which are immaterial in any amount and are issued
in the normal course of business), incurring by the Company of any indebtedness,
guaranteeing by the Company of any indebtedness, issuance or sale of any debt
securities of the Company or guaranteeing of any debt securities of others;
(l) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company in excess of $10,000.
(m) the commencement or notice or, to the best knowledge of
the Company, threat of commencement of any lawsuit or proceeding against or
investigation of the Company or its affairs;
(n) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(o) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities;
(p) change in pricing or royalties set or charged by the
Company;
(q) any event or condition of any character that has or could
be reasonably expected to have a Material Adverse Effect on the Company; or
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(r) negotiation or agreement, oral or written, by the Company
or any officer or employees thereof to do any of the things described in the
preceding clauses (a) through (q) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES," means any and all federal, state, local and
foreign 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.
(b) Tax Returns and Audits. Except as set forth in Schedule
2.8:
(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("RETURNS") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns will be true and correct in all material respects and will have been
completed in accordance with applicable law in all material respects.
(ii) The Company as of the Effective Time: (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld other than any Taxes to be paid by
such employees as a result of the receipt of the Merger Consideration.
(iii) The Company has not been adjudicated delinquent
by any Tax Authority in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company, nor has the Company
executed any 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
the Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against on the November Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has no knowledge of any basis for the
assertion of any such liability attributable to the Company, its assets or
operations.
(vi) The Company has provided to Parent or its legal
counsel copies of all federal and state income and all state sales and use Tax
Returns filed for fiscal years 1994, 1995 and 1996.
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(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("LIENS") on the assets of the Company relating
to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, the Company will not be
a party to any contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of the Company that could obligate the Company to pay any amount that
would not be deductible pursuant to Section 280G of the Code.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books and
records in all material respects.
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of materially prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of business by the
Company as presently conducted.
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company owns no real property, nor has it ever owned
any real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and effective in accordance with their respective
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terms, and there is not with respect to the Company or to the knowledge of the
Company, any other party to such leases any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default) under such leases that would result in any monetary damage to the
Company or materially interfere with the present use of the property subject to
such lease.
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens, except as reflected in the Company
Financials or in Schedule 2.10(b) and except for liens for taxes not yet due and
payable and such imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
(c) Except as described in Schedule 2.10(c), the equipment
(the "EQUIPMENT") owned or leased by the Company is, taken as a whole, (i)
adequate for the conduct of the business of the Company as currently conducted
and (ii) in good operating condition, regularly and properly maintained, subject
to normal wear and tear.
2.11 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 rights in, arising out of, or associated therewith: (i) all United
States, international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all 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) all copyrights, copyright registrations
and applications therefor and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, common law trademarks
and service marks; trademark and service xxxx registrations and applications
therefor throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world, and (viii) any
similar or equivalent rights to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, Company or any of its
material subsidiaries.
"Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any
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other Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued, filed with, or recorded by any
state, government or other public legal authority.
"Company Registered Intellectual Property" means all of
the Registered Intellectual Property owned by, or filed in the name of, Company.
(a) Except as set forth in Section 2.15 of the Disclosure
Schedule, no material Company Intellectual Property or Company Registered
Intellectual Property or product or service of Company is subject to any
proceeding or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by Company, or
which may affect the validity, use or enforceability of such Company
Intellectual Property.
(b) All necessary registration, maintenance and renewal fees
currently due in connection with Company Registered Intellectual Property has
been made and all necessary documents, recordations and certificates in
connection with such Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property.
(c) Company owns and has good and exclusive title to, or has
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to, each material item of Company Intellectual
Property free and clear of any lien or encumbrance (excluding licenses and
related restrictions); and Company is the exclusive owner of all trademarks and
trade names used in connection with the operation or conduct of the business of
Company, including the sale of any products or the provision of any services by
Company.
(d) Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which Company otherwise expressly
purports to own.
(e) To the extent that any material Intellectual Property has
been developed or created by a third party for Company, 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 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 Intellectual Property by operation of law or by
valid assignment.
(f) Except as set forth in Schedule 2.11(f) of the Disclosure
Schedule, the Company has not transferred ownership of, or granted any exclusive
distribution rights or exclusive license with respect to, any Intellectual
Property that is or was Company Intellectual Property, to any third party.
(g) The Company Schedules list all material contracts,
licenses and agreements to which Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to
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any third party (other than end-user licenses in the ordinary course); or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to Company.
(h) All material contracts, licenses and agreements relating
to the Company Intellectual Property are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements. Company is in material
compliance with, and has not materially breached any term any of such contracts,
licenses and agreements and, to the knowledge of Company, all other parties to
such contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Company's rights under such contracts, licenses and agreements
to the same extent Company would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay.
(i) The operation of the business of Company as such business
currently is conducted, including Company's design, development, manufacture,
marketing and sale of the products or services of Company (including with
respect to products currently under development) has not, does not and will not
infringe or misappropriate the Intellectual Property of any third party
(provided that with respect to patent rights, such representation is limited to
Company's knowledge) or, to its knowledge, constitute unfair competition or
trade practices under the laws of any jurisdiction.
(j) Except as set forth in Schedule 2.15, the Company has not
received notice from any third party that the operation of the business of
Company or any act, product or service of Company, infringes or misappropriates
the Intellectual Property of any third party or constitutes unfair competition
or trade practices under the laws of any jurisdiction.
(k) Except as set forth on Schedule 2.15, items 1 and 2, to
the knowledge of Company, no Person has or is infringing or misappropriating any
Company Intellectual Property.
(l) Company has taken reasonable steps to protect Company's
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, and, without limiting the foregoing, Company has and
enforces 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 have executed such an agreement, except where the failure to do so is
not reasonably expected to be material to Company.
2.12 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements,
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(ii) any agreements or arrangements that contain any
severance pay or post- employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $10,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000,
(xi) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the
purchase of raw materials involving $10,000 or more other than purchases in the
ordinary course of business,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement, or
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(xvi) any other agreement, contract or commitment
that involves $10,000 or more and is not cancelable without penalty within
thirty (30) days.
Except for such alleged breaches, violations and defaults, and events
that would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, all as noted in Schedule 2.12(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment to which it is a party or by which it is bound and which
are required to be set forth in Schedule 2.12(a) (any such agreement, contract
or commitment, a "CONTRACT"). Each agreement, contract or commitment set forth
in any of the Company Schedules is in full force and effect and, except as
otherwise disclosed in Schedule 2.12(b), is not subject to any default
thereunder of which the Company has knowledge by any party obligated to the
Company pursuant thereto. The Company has obtained, or will obtain prior to the
Effective Time, all necessary consents, waivers and approvals of parties to any
Contract as are required in connection with the Merger.
2.13 Interested Party Transactions. Except as set forth on Schedule
2.13, no officer, director or, to the knowledge of the Company, stockholder of
the Company (nor to the knowledge of the Company any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has an interest), has, directly or
indirectly, (i) a direct interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells, or
proposes to furnish or sell, or (ii) a direct interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Schedule
2.12(a); provided, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed an
"interest in any entity" for purposes of this section 2.13. The Company
Schedules set forth each plan or agreement pursuant to which any amounts may
become payable (whether currently or in the future) to current or former
officers and directors of Company as a result of or in connection with the
Merger.
2.14 Governmental Authorization. Schedule 2.14 accurately lists each
material consent, license, permit, grant or other authorization issued to the
Company by a governmental entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
(herein collectively called "COMPANY AUTHORIZATIONS"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its business
substantially as it is currently and has been conducted or hold any interest in
its properties or assets.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit, claim or proceeding of any nature pending or, to the knowledge of
the Company, threatened against the Company, its properties or any of its
officers or directors in their capacity as such, nor, to the knowledge of the
Company, is there any basis therefor. Except as set forth in Schedule 2.15,
there is no investigation pending or threatened against the Company, its
properties or any of its officers or directors (nor, to the knowledge of the
Company, is there any basis therefor) by or before any governmental entity.
Schedule 2.15 sets forth, with respect to any pending or threatened action,
suit, proceeding or
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investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. Except as set forth in
Schedule 2.15, no governmental entity has at any time challenged or questioned
the legal right of the Company to manufacture, offer or sell any of its products
in the present manner or style thereof.
2.16 Accounts Receivable.
(a) The Company has made available to Parent a list of all
accounts receivable of the Company reflected on the Current Balance Sheet
("ACCOUNTS RECEIVABLE") along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the
ordinary course of business, are carried at values determined in accordance with
generally accepted accounting principles consistently applied and are
collectible except to the extent of reserves therefor set forth in the Current
Balance Sheet. No person has any Lien on any of such Accounts Receivable and no
request or agreement for material deduction or discount has been made with
respect to any of such Accounts Receivable.
2.17 Minute Books. The minutes of corporate proceedings and consents of
the Company made available to counsel for Parent are the only minute books of
the Company and contain a reasonably accurate summary of the meetings of
directors (or committees thereof) referred to therein.
2.18 Environmental Matters.
(a) Hazardous Material. 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, (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies or similar
items, are present in any material quantities, as a result of the deliberate
actions of the Company, or, to the 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 the
Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company disposed of, transported, sold,
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.
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(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's knowledge, threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Company.
The Company is not aware of any fact or circumstance which could involve the
Company in any material environmental litigation or impose upon the Company any
material environmental liability.
(e) Capital Expenditures. The Company is not aware of any
capital expenditures which are required in order for it to comply with
Environmental Laws.
2.19 Brokers' and Finders' Fees. Except for any payment due to pursuant
to the engagement letter with Xxxxxx Brothers, Inc. dated October 6, 1997, (a
true and correct copy of which has been provided to Parent) The Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
2.20 Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c)
or (m) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to any
plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any "Employee" (as defined below), and pursuant
to which the Company or any Affiliate has or may have any material liability
contingent or otherwise;
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(iv) "EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting or similar agreement or contract
between the Company or any Affiliate and any Employee;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA; and
(viii) "PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement. The
Company does not have any plan or commitment, whether legally binding or not, to
establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any
Company Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent where
available or applicable (i) correct and complete copies of all documents
embodying or relating to each Company Employee Plan and each Employee Agreement
including all amendments thereto and written interpretations thereof and (ii)
all communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company.
(d) Employee Plan Compliance. (i) The Company has performed in
all material respects all obligations required to be performed by it under each
Company Employee Plan and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in material
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Employee Plan; (iii) there are
no actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; and
(iv) except as described in Schedule 2.20(d), each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other
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than ordinary administration expenses typically incurred in a termination
event); (v) there are no inquiries or proceedings pending or, to the knowledge
of the Company or any affiliates, threatened by the IRS or DOL with respect to
any Company Employee Plan; and (vi) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) Effect of Transaction.
(i) Except as provided in Section 1.6 of this
Agreement, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made
by the Company or Parent or any of their respective affiliates with respect to
any Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in
all material respects with all applicable federal and state laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees (other than amounts which may be
required to be withheld as a result of an Employee's receipt of Merger
Consideration); (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) (other than
routine payments to be made in the normal course of business and consistent with
past practice) is not
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liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits for Employees.
(j) Labor. No work stoppage or labor strike against the
Company is pending or, to the knowledge of the Company, threatened. The Company
is not involved in or, to the knowledge of the Company, threatened with, any
labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a material liability to the Company. The
Company is not presently, nor has it been in the past, a party to, or bound by,
any collective bargaining agreement or union contract with respect to Employees
and no collective bargaining agreement is being negotiated by the Company.
2.21 Compliance with Laws. The Company has materially complied with, is
not in material violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation, domestic or
foreign.
2.22 Warranties; Indemnities. Schedule 2.22 indicates all warranty and
indemnity claims in excess of $5,000 made against the Company.
2.23 Software Development Agreements. The Company has not violated, is
not in violation of, nor would the entry into this Agreement or consummation of
the Merger cause any violation of, any terms or provisions of any agreement
under which the Company has or had an obligation to develop, supply or
distribute software to or for any third party, excluding end-user licenses for
object code executed in the ordinary course of business, nor is the Company nor
would the Company be, under any circumstances, under any obligation to deliver
source code to any third party, except delivery of source code to a third party
exclusively for the internal use of such third party to support, maintain and
develop its software products, which products are (i) used only for programming
of such third party's hardware products and (ii) distributed only to such third
party's customers only in object code format. In any such case after delivery of
such source code the Company does not have nor would it have under any
circumstances, any other obligation of any nature to any such third party,
including without limitation any support or similar obligation.
2.24 Pooling of Interests. To the knowledge of Company, based on
consultation with its independent accountants, neither the Company nor any of
its directors, officers, affiliates or stockholders has taken or agreed to take
any action which would preclude Parent's ability to account for the Merger as a
pooling of interests under GAAP.
2.25 Insurance. Section 2.25 of the Schedule sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers'
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compensation coverage and bond and surety arrangements) to which the Company has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past three (3) years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Company has been covered during the past three (3)
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Section
2.25(e) of the Disclosure Schedule describes any self-insurance arrangements
affecting the Company.
2.26 Bank Accounts. Section 2.26 of the Schedule contains a true,
correct and complete list as of the date hereof of all banks, trust companies,
savings and loan associations and brokerage firms in which the Company has an
account or safe deposit box and the names of all persons authorized by the
Company to draw thereon or have access thereto.
2.27 Materiality. The matters and items excluded from the
representations and warranties set forth in this Article by operations of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to have a Material
Adverse Effect.
2.28 Solvency. The Company is solvent.
2.29 Predecessor Status. Set forth in Section 2.29 of the Disclosure
Schedule is a listing of all predecessor companies of the Company and the names
of any Entities from which, since October 31,
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1991, the Company previously acquired material properties or assets. The Company
has never been a subsidiary or division of another entity, nor part of an
acquisition that was later rescinded.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect on the ability of Parent and Merger Sub to consummate
the transactions contemplated hereby.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The execution and delivery of this Agreement by the Company
does not, and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a Conflict (as defined in Section 2.4) under (i) any provision of the
Certificate of Incorporation or Bylaws of Parent or Merger Sub or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity (as defined
in Section 2.4) or any third party (so as not to trigger any Conflict), is
required by or with respect to Parent or Merger Sub in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for the filing of the Certificates of Merger with
the appropriate Secretaries of State.
3.3 SEC Filings; Material Adverse Change. Parent has filed all forms,
reports and documents required to be filed by Parent with the SEC since January
1, 1997, and has made available to Company such forms, reports and documents in
the form filed with the SEC. All such required forms, reports and
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documents (including those that Parent may file subsequent to the date hereof)
are referred to herein as the "PARENT SEC REPORTS." As of their respective
dates, the Parent SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Reports, and (ii) 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 the light of the circumstances under which they were
made, not misleading. Except as disclosed in the Parent SEC Reports filed by
Parent and publicly available prior to the date of this Agreement, as of the
date hereof, there has not been any material adverse change with respect to
Parent that would require disclosure under the Securities Act.
3.4 Parent Common Stock. The shares of Parent Common Stock to be issued
in connection with the Merger, when issued in accordance with the terms and
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and will not be subject to any preemptive or other
statutory right of stockholders and will be issued in compliance with applicable
United States Federal and state securities laws.
3.5 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.6 Acknowledgment. Parent and Merger Sub acknowledge that they and
their representatives and advisors have had the opportunity to ask questions of
and receive answers from the Company and its representatives to the extent that
Parent, Merger Sub and their representatives and advisors have deemed necessary
and appropriate and to review all written documentation and other information
requested by them and provided by the Company, for the purpose of evaluating the
Company, the merger of the Company and Merger Sub and the other transactions
contemplated by this Agreement and the agreements contemplated hereby. In
entering into this Agreement and in performing their obligations hereunder,
Parent and Merger Sub have relied solely upon their own due diligence, their
knowledge of the industry in which the business of the Company is conducted and
the representations and warranties of the Company expressly set forth in this
Agreement, and not upon any other representations, warranties or statements of
any kind; provided, however, that such diligence and knowledge shall not be
deemed a waiver by Parent or Merger Sub of any of their rights with respect to
the representations and warranties of the Company.
3.7 Continuity of Business Enterprise. It is the present intention of
Parent to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
3.8 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory,
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consulting and all other fees and expenses of third parties ("THIRD PARTY
EXPENSES") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses.
3.9 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents and approvals are set forth in
Schedule 2.4) so as to preserve all rights of, and benefits to, the Company
thereunder.
3.10 Reasonable Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable best
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
4.1 Survival of Representations and Warranties. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger and continue until March 31, 1998.
4.2 Escrow Arrangements.
(a) Escrow Funds. As provided in Section 1.8, at the Effective
Time, without any act of any stockholder, the Escrow Amount will be deposited
into an escrow account with Greater Bay Trust Company, as Escrow Agent (the
"ESCROW AGENT"), such deposit to constitute an escrow fund (the "ESCROW FUND").
The Escrow Fund is to be governed by the terms set forth herein and maintained
at Parent's sole cost and expense. The portion of the Escrow Amount contributed
on behalf of each Company Stockholder shall correspond to such stockholder's
Proportionate Escrow Interest.
(b) The Escrow Fund shall be available to compensate Parent
and its affiliates for any claim, loss, expense, liability or other damage,
including reasonable attorneys' fees, to the extent of the amount of such claim,
loss, expense, liability or other damage (collectively "LOSSES") that Parent or
any of its affiliates has incurred or reasonably anticipates incurring (in the
case of an extension of the Escrow Period pursuant to Section 4.2(c)) by reason,
directly or indirectly, of the breach by the Company of any representation,
warranty, covenant or agreement of the Company contained herein.
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Losses shall not include amounts recovered from insurance. Parent and the
Surviving Company shall undertake commercially reasonable efforts to claim and
collect insurance to which they are entitled with respect to any Losses.
(c) Termination and Distribution of Escrow Funds. On March 31,
1998, the Escrow shall terminate; provided, however, that such portion of the
Escrow, which, in the reasonable judgment of Parent, subject to the objection of
the Company Stockholder Agent and the subsequent arbitration of the matter in
the manner provided in Section 4.2(i) hereof, is necessary to satisfy any
identified but unsatisfied Losses specified in any Officer's Certificate
theretofore delivered to the Escrow Agent prior to termination of the Escrow,
shall remain in the Escrow (and the Escrow shall remain in existence) until the
earlier of (i) the expiration of the statute of limitations applicable to such
claims or (ii) the resolution of such claims. As soon as all such claims have
been resolved or the statute of limitations has expired, the Escrow Agent shall
deliver to the appropriate security holders of the Company the remaining portion
of the Escrow not required to satisfy such claims. Deliveries of Escrow Amounts
to Company Stockholders pursuant to this Section 4.2(c) shall be made according
to each stockholder's Proportionate Escrow Interest as certified to the Escrow
Agent by the Company Stockholders' Agent.
(d) Protection of Escrow Funds. The Escrow Agent shall hold
and safeguard the Escrow Funds during their existence, shall treat such fund as
a trust fund in accordance with the terms of this Agreement and not as the
property of Parent and shall hold and dispose of the Escrow Funds only in
accordance with the terms hereof.
(e) Claims Upon Escrow Funds. In the event Parent incurs or
becomes aware of any Losses or potential Losses for which it is entitled to
indemnity under this Article IV, it shall deliver to the Escrow Agent and the
Company Stockholder Agent a certificate signed by any officer of Parent (an
"OFFICER'S CERTIFICATE"): (A) stating that Parent has (i) incurred or (ii) for
purposes of extending the Escrow pursuant to Section 4.2(c) above, reasonably
anticipates that it will have to incur Losses, (B) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the date
each such item was paid or properly incurred, or the basis for such anticipated
liability, and either the nature of the misrepresentation, breach of warranty or
claim or the litigation matter to which such item is related. Upon the receipt
of a certificate pursuant to clause (A)(i) above the Escrow Agent shall, subject
to the provisions of Section 4.2(h) hereof, deliver to Parent out of the Escrow
Fund, as promptly as practicable, such amounts held in the Escrow Fund equal to
such Losses incurred. In determining the number of shares of Parent Common Stock
to be paid out by the Escrow Agent pursuant to this Article IV, such shares
shall be valued by the Escrow Agent at the closing price (the "ESCROW PRICE") of
Parent Common Stock on the NASDAQ or, if the Parent Common Stock is not then
listed on the NASDAQ, the principal securities market on which the Parent Common
Stock is traded, as reported in the Wall Street Journal or similar national
financial publication on the Closing Date. Upon request by the Escrow Agent, a
duly authorized officer of the Company shall deliver a certificate of the Escrow
Price.
The Parent shall not be entitled to receive any disbursement
or cause any amount to be retained in Escrow with respect to any Losses arising
in respect of any individual occurrence or
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circumstance unless the aggregate amount of all Losses shall exceed $175,000;
provided, further, that in the event the aggregate amount of such Losses of
Parent shall exceed $175,000, then Parent shall be entitled to recover from the
Escrow Fund only Losses in excess of $175,000.
(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Company Stockholder Agent (as defined in Section
4.2(i)) and for a period of ten (10) business days after such delivery, the
Escrow Agent shall make no delivery to Parent of any amounts out of the Escrow
Fund, pursuant to Section 4.2(e)(A)(i) hereof unless the Escrow Agent shall have
received written authorization from the Company Stockholder Agent to make such
delivery. After the expiration of such ten (10) business day period, the Escrow
Agent shall make delivery of an amount from the Escrow Fund in accordance with
Section 4.2(e)(A)(i) hereof, provided that no such payment or delivery may be
made, or retained for purposes of extending the Escrow pursuant to Section
4.2(c), if the Company Stockholder Agent shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such ten (10) business
day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Company Stockholder Agent shall so
object in writing to any claim or claims made in any Officer's Certificate, the
Company Stockholder Agent and Parent shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If the
Company Stockholder Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute amounts from the Escrow Funds in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Company Stockholder Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained upon the conclusion of such
litigation or both parties agree to arbitration; and in either such event the
matter shall be settled by binding arbitration conducted by three arbitrators.
Parent and the Company Stockholder Agent shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator. The arbitrators
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgement of the arbitrators, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys fees and costs, to the same
extent as a court of competent law or equity, should the arbitrators determine
that discovery was sought without substantial justification or that discovery
was refused or objected to without substantial justification. The decision of a
majority of the three arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in Section 4.2(h) hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Funds in
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accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Xxxxx County, California under the rules then
in effect of the American Arbitration Association. For purposes of this Section
4.2(g), in any arbitration hereunder in which any claim or the amount thereof
stated in the Officer's Certificate is at issue, Parent shall be deemed to be
the Non-Prevailing Party in the event that the arbitrators award Parent less
than the sum of one-half (1/2) of the disputed amount; otherwise, the
stockholders of the Company as represented by the Agent shall be deemed to be
the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the out-of-pocket expenses, including
without limitation, reasonable attorneys' fees and costs, incurred by the other
party to the arbitration in connection therewith.
(h) Agent of the Company Stockholders; Power of Attorney.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any stockholder, Xxxxxxx X.
Xxxxx shall be appointed as agent and attorney-in-fact (the "COMPANY STOCKHOLDER
AGENT") for each stockholder of the Company on whose behalf any Parent Common
Stock was deposited into the Escrow Fund (except such stockholders, if any, as
shall have perfected their Dissenters Rights under Georgia law), for and on
behalf of stockholders of the Company, to give and receive notices and
communications, to authorize delivery to Parent of Parent Common Stock from the
Escrow Fund in satisfaction of claims by Parent, to object to such deliveries,
to agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of Company Stockholder Agent for the accomplishment of the foregoing.
Such agency may be changed by the stockholders of the Company from time to time
upon not less than thirty (30) days prior written notice to Parent; provided
that the Company Stockholder Agent may not be removed unless holders of a
two-thirds interest of the Escrow Funds agree to such removal and to the
identity of the substituted agent. No bond shall be required of the Company
Stockholder Agent, and the Company Stockholder Agent shall not receive
compensation for his services. Notices or communications to or from the Company
Stockholder Agent shall constitute notice to or from each of the stockholders of
the Company.
(ii) The Company Stockholder Agent shall not be
liable for any act done or omitted hereunder as Agent while acting in good faith
and in the exercise of reasonable judgment. The stockholders of the Company on
whose behalf the amounts were contributed to the Escrow Funds shall severally
indemnify the Company Stockholder Agent and hold the Company Stockholder Agent
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Company Stockholder Agent and arising out of or in
connection with the acceptance or administration of the Company Stockholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Company Stockholder Agent.
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(i) Actions of the Company Stockholder Agent. A decision, act,
consent or instruction of the Company Stockholder Agent shall constitute a
decision of all the stockholders for whom a portion of the amounts otherwise
issuable to them are deposited in the Escrow Funds and shall be final, binding
and conclusive upon each of such stockholders, and the Escrow Agent and Parent
may rely upon any such decision, act, consent or instruction of the Agent as
being the decision, act, consent or instruction of each and every such
stockholder of the Company. The Escrow Agent and Parent are hereby relieved from
any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Company Stockholder Agent.
(j) Third-Party Claims. Parent shall have the right in its
sole discretion to defend and to settle any third-party claim; provided,
however, that any counsel retained to defend a third party claim to be satisfied
from the Escrow Fund shall be reasonably acceptable to the Company Stockholder
Agent and Parent shall not settle any such third party claim without the prior
consent of the Company Stockholder Agent, which consent shall not be
unreasonably withheld.
(k) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Company Stockholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
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(v) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to Parent and the Company
Stockholder Agent to this Agreement; provided, however, that no such resignation
shall become effective until the appointment of a successor escrow agent which
shall be accomplished as follows: Parent and the Company Stockholder Agent shall
use their best efforts to mutually agree upon a successor agent within thirty
(30) days after receiving such notice. If the parties fail to agree upon a
successor escrow agent within such time, Parent shall have the right to appoint
a successor escrow agent. The successor escrow agent selected in the preceding
manner shall execute and deliver an instrument accepting such appointment and it
shall thereupon be deemed the Escrow Agent hereunder and it shall without
further acts be vested with all the estates, properties, rights, powers, and
duties of the predecessor Escrow Agent as if originally named as Escrow Agent.
Thereafter, the predecessor Escrow Agent shall be discharged for any further
duties and liabilities under this Agreement.
4.3 Limitation on Liability. Notwithstanding any other provision of
this Agreement to the contrary, absent fraud or bad faith, the liability of the
Company and the Company Stockholders with respect to any claim for a breach of
any representation, warranty, covenant or agreement contained in this Agreement
shall be limited to the assets of the Escrow Fund, and no Company Stockholder
shall have any liability to Parent or the Surviving Corporation arising from any
breach after the termination of the Escrow other than with respect to claims
made prior to such termination under Section 4.2(c) (and liability with such
claims shall be limited to the amount held in the Escrow as a result thereof).
ARTICLE V
GENERAL PROVISIONS
5.1 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 mailed by registered or certified mail (postage prepaid and
return receipt requested) or sent via facsimile (with a copy of such notice or
other communication and a confirmation of complete transmission delivered
personally or sent by certified or registered mail, postage prepaid and return
receipt requested, no later than the close of business on the third business day
following such transmission) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
McAfee Associates, Inc.
0000 Xxxxxx Xxx.
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Helix Software Company, Inc.
00-00 00xx Xxxxxx
Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx, Esq.
Facsimile No.: (000) 000-0000
(c) if to the Escrow Agent, to:
Greater Bay Trust Company
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Eva Paivah
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Each notice transmitted in the manner described in this Section 5.1 shall be
deemed to have been given, received and become effective for all purposes at the
time it shall have been (i) delivered to the addressee as indicated by the
return receipt (if transmitted by mail or commercial delivery service), or the
affidavit of the messenger (if transmitted by personal delivery) or (ii)
presented for delivery to the addressee as so indicated during normal business
hours, if such delivery shall have been refused for any reason.
5.2 Interpretation. 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
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headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
5.3 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.
5.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person (including, without limitation, those persons listed on any
exhibits hereto) any rights or remedies hereunder; and (c) without the prior
written consent of each party shall not be assigned by operation of law or
otherwise, except that Parent may assign its rights and obligations hereunder to
an affiliate of Parent provided that parent shall remain liable for all its
obligations hereunder notwithstanding such assignment. Any assignment of rights
or delegation of duties under this Agreement by a party without the prior
written consent of the other parties, if such consent is required hereby, shall
be void.
5.5 Severability. If any provision of this Agreement shall hereafter be
held to be invalid, unenforceable or illegal, in whole or in part, in any
jurisdiction under any circumstances for any reason, (i) such provision shall be
reformed to the minimum extent necessary to cause such provision to be valid,
enforceable and legal while preserving the intent of the Parties as expressed
in, and the benefits to the Parties provided by, this Agreement or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any other
provision of this Agreement.
5.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The Company Stockholders are intended to be third
party beneficiaries of the representations and warranties of Parent and Merger
Sub contained herein and it is expressly acknowledged that no provision of this
Agreement (other than Article IV) in any way limits or results in a waiver of
any right of a Company Stockholder to bring an action against Parent and/or
Merger Sub for damages incurred by such Company Stockholder arising from or
relating to any such breach.
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5.7 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 laws thereof.
5.8 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.
5.9 Confidentiality. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential ("CONFIDENTIAL INFORMATION");
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is generally
known to the public and did not become so known through any violation of law,
(c) became known to the public through no fault of such party, (d) is later
lawfully acquired by such party from other sources, (e) is required to be
disclosed by order of court or government agency with subpoena powers (provided
that such party shall given the other party prior notice of such order and a
reasonable opportunity to object or take other available action), (f) is
disclosed in the course of any litigation between any of the parties hereto or
(g) is developed independently by either party without reference to, or specific
knowledge of, the other parties' Confidential Information. Notwithstanding the
foregoing, it is acknowledged that Parent may publicly disclose the material
terms of this Agreement following the date hereof in a manner reasonably
satisfactory to the Company.
5.10 Company Employee Bonuses. Parent agrees to use its best efforts to
cause the Surviving Corporation to pay all employee bonuses accrued and payable
as set forth on the Closing Balance Sheet.
* * * *
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IN WITNESS WHEREOF, Parent, Merger Sub, Escrow Agent and the Company
have caused this Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
COMPANY PARENT
By /s/ XXXXXXX XXXXX By /s/ XXXXXXX X. XXXXXX
----------------------------- -------------------------------------
Xxxxxxx X. Xxxxxx,
Chief Executive Officer
Name Xxxxxxx Xxxxx
--------------------------
Title President
--------------------------
MERGER SUB ESCROW AGENT*
By /s/ XXXXXXX XXXXX By /s/ GREATER BAY TRUST COMPANY
---------------------------- -------------------------------------
Xxxxxxx Xxxxx, President
Name Mr. Hali
-----------------------------------
Title Executive Vice President
----------------------------------
* With respect to the matters set forth in Article IV only.
***REORGANIZATION AGREEMENT***
37
MCAFEE ASSOCIATES, INC.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MCAFEE ASSOCIATES, INC.,
HELIX SOFTWARE COMPANY, INC.
AND
DNA ACQUISITION CORP.
DATED AS OF DECEMBER 1, 1997
38
INDEX OF SCHEDULES
COMPANY SCHEDULE DESCRIPTION
---------------- ------------
2.2(a) Stockholder List
2.2(b) Option List
2.4 Governmental And Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns And Audits
2.10(a) Leased Property
2.10(b) Liens On Property
2.10(c) Equipment
2.11 Intellectual Property
2.12(a) Agreements, Contracts And Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.14 Governmental Authorizations
2.15 Litigation
2.19 Expenses Of Transaction
2.20(b) Employee Benefit Plans And Employees
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Options
2.20(h)(i) Effect Of Transaction
2.20(j) Labor Disputes
2.21 Insurance
2.24 Warranties; Indemnities
2.25 Insurance
2.26 Bank Accounts
2.29 Predecessor Status
39
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER..........................................................2
1.1 The Merger...................................................2
1.2 Effective Time...............................................2
1.3 Effect of the Merger.........................................2
1.4 Certificate of Incorporation; Bylaws.........................2
1.5 Directors and Officers.......................................2
1.6 Effect on Capital Stock......................................3
1.7 Dissenting Shares............................................3
1.8 Surrender of Certificates; Payment of Merger Consideration...4
1.9 No Further Ownership Rights in Company Common Stock..........5
1.10 Lost, Stolen or Destroyed Certificates.......................5
1.11 Tax and Accounting Treatment.................................5
1.12 Taking of Necessary Action; Further Action...................5
1.13 Purchase Price Adjustment....................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY .....................8
2.1 Organization of the Company..................................8
2.2 Company Capital Structure....................................8
2.3 Subsidiaries.................................................9
2.4 Authority....................................................9
2.5 Company Financial Statements................................10
2.6 No Undisclosed Liabilities..................................10
2.7 No Changes..................................................10
2.8 Tax and Other Returns and Reports...........................11
2.9 Restrictions on Business Activities.........................13
2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment ....................................13
2.11 Intellectual Property.......................................14
2.12 Agreements, Contracts and Commitments.......................16
2.13 Interested Party Transactions...............................18
2.14 Governmental Authorization..................................18
2.15 Litigation..................................................18
2.16 Accounts Receivable.........................................18
2.17 Minute Books................................................19
2.18 Environmental Matters.......................................19
2.19 Brokers' and Finders' Fees..................................19
2.20 Employee Benefit Plans......................................20
2.21 Compliance with Laws........................................22
2.22 Warranties; Indemnities.....................................22
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
2.23 Software Development Agreements............................23
2.24 Pooling of Interests.......................................23
2.26 Bank Accounts..............................................24
2.27 Materiality................................................24
2.28 Solvency...................................................24
2.29 Predecessor Status.........................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........24
3.1 Organization, Standing and Power...........................24
3.2 Authority..................................................24
3.3 SEC Filings; Material Adverse Change.......................25
3.4 Parent Common Stock........................................25
3.5 Brokers' and Finders' Fees.................................25
3.8 Expenses...................................................26
3.9 Consents...................................................26
3.10 Reasonable Efforts.........................................26
ARTICLE IV SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW...............26
4.1 Survival of Representations and Warranties.................26
4.2 Escrow Arrangements........................................27
ARTICLE V GENERAL PROVISIONS................................................31
5.1 Notices....................................................31
5.2 Interpretation.............................................33
5.3 Counterparts...............................................33
5.4 Entire Agreement; Assignment...............................33
5.5 Severability...............................................33
5.6 Other Remedies.............................................33
5.7 Governing Law..............................................34
5.8 Rules of Construction......................................34
5.9 Confidentiality............................................34
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