EXECUTION COPY
AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
KANA COMMUNICATIONS, INC.
KONG ACQUISITION CORP.
AND
NETDIALOG, INC.
Dated as of December 3, 1999
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION 1
ARTICLE 1 THE MERGER 2
1.1 The Merger...................................................................................2
1.2 Effective Time...............................................................................2
1.3 Effect of the Merger on Constituent Corporations.............................................2
1.4 Articles of Incorporation and Bylaws of Surviving Corporation................................3
1.5 Directors and Officers of Surviving Corporation..............................................3
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect on Outstanding
Securities of the Company....................................................................3
1.7 Dissenting Shares............................................................................6
1.8 Exchange Procedures..........................................................................7
1.9 No Further Ownership Rights in Company Capital Stock.........................................8
1.10 Lost, Stolen or Destroyed Certificates.......................................................8
1.11 Exemption from Registration..................................................................9
1.12 Further Action...............................................................................9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS 9
2.1 Organization, Standing and Power.............................................................9
2.2 Capital Structure............................................................................9
2.3 Authority....................................................................................11
2.4 Company Financial Statements.................................................................11
2.5 Absence of Changes...........................................................................12
2.6 Absence of Undisclosed Liabilities...........................................................14
2.7 Litigation...................................................................................14
2.8 Restrictions on Business Activities..........................................................14
2.9 Governmental Authorization...................................................................14
2.10 Title to Property............................................................................14
2.11 Intellectual Property........................................................................15
2.12 Manufacturing and Marketing Rights...........................................................16
2.13 Taxes........................................................................................16
2.14 Employee Benefit Plans.......................................................................16
2.15 Certain Agreements Affected by the Merger....................................................19
2.16 Employee Matters.............................................................................19
2.17 Affiliate Transactions.......................................................................20
2.18 Compliance With Laws.........................................................................20
2.19 Minute Books.................................................................................20
2.20 Complete Copies of Materials.................................................................20
2.21 Brokers' and Finders' Fees...................................................................20
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2.22 Support Agreements; Irrevocable Proxies......................................................20
2.23 Vote Required................................................................................21
2.24 Board Approval...............................................................................21
2.25 [Reserved]...................................................................................21
2.26 Contracts....................................................................................21
2.27 No Breach of Contracts.......................................................................22
2.28 Material Third Party Consents................................................................22
2.29 Product Releases.............................................................................22
2.30 Pooling of Interests.........................................................................22
2.31 Representations Complete.....................................................................22
2.32 Year 2000....................................................................................22
2.33 Products Liability...........................................................................23
2.34 Service Provider Agreements..................................................................23
2.35 Foreign Corrupt Practices Act................................................................24
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 24
3.1 Organization and Qualification...............................................................24
3.2 Authority Relative to this Agreement.........................................................24
3.3 SEC Documents; Parent Financial Statements...................................................25
3.4 No Conflicts.................................................................................26
3.5 Information to be Supplied by Parent.........................................................26
3.6 Ownership of Merger Sub; No Prior Activities.................................................26
3.7 Investment Advisors..........................................................................26
3.8 Tax-Free Reorganization......................................................................27
3.9 Capitalization...............................................................................27
3.10 Third-Party Consents.........................................................................27
3.11 Disclosure...................................................................................27
3.12 Third Party Beneficiaries....................................................................27
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME 27
4.1 Conduct of Business of the Company...........................................................27
4.2 No Solicitation..............................................................................28
ARTICLE 5 ADDITIONAL AGREEMENTS 28
5.1 Information Statement; Restricted Stock......................................................28
5.2 Shareholder Approval.........................................................................29
5.3 Access to Information........................................................................30
5.4 Confidentiality..............................................................................30
5.5 Expenses.....................................................................................30
5.6 Public Disclosure............................................................................31
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5.7 Approvals....................................................................................31
5.8 Notification of Certain Matters..............................................................31
5.9 Pooling of Interests Accounting..............................................................31
5.10 Company Affiliate Agreements.................................................................31
5.11 Parent Affiliate Agreements..................................................................31
5.12 Additional Documents and Further Assurances..................................................32
5.13 Form S-8.....................................................................................32
5.14 Company's Auditors...........................................................................32
5.15 Additional Affiliate Agreements..............................................................32
5.16 Directors' and Officers' Indemnification.....................................................32
5.17 Benefit Arrangements.........................................................................33
5.18 Treatment as Reorganization..................................................................33
5.19 Registration of Parent Common Stock..........................................................33
ARTICLE 6 CONDITIONS TO THE MERGER 34
6.1 Conditions to Obligations of Each Party to Effect the Merger.................................34
6.2 Additional Conditions to Obligations of the Company..........................................34
6.3 Additional Conditions to the Obligations of Parent and Merger Sub............................35
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW PROVISIONS 38
7.1 Survival of Representations, Warranties, Covenants and Agreements............................38
7.2 Escrow Provisions............................................................................38
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER 46
8.1 Termination..................................................................................46
8.2 Effect of Termination........................................................................46
ARTICLE 9 MISCELLANEOUS PROVISIONS 46
9.1 Notices......................................................................................46
9.2 Entire Agreement.............................................................................48
9.3 Further Assurances; Post-Closing Cooperation.................................................48
9.4 Waiver.......................................................................................48
9.5 Third Party Beneficiaries....................................................................48
9.6 No Assignment; Binding Effect................................................................48
9.7 Headings.....................................................................................49
9.8 Invalid Provisions...........................................................................49
9.9 Governing Law................................................................................49
9.10 Construction.................................................................................49
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9.11 Counterparts.................................................................................49
9.12 Specific Performance.........................................................................49
ARTICLE 10 DEFINITIONS 49
10.1 Definitions..................................................................................49
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EXHIBITS & SCHEDULES
Exhibit A Form of Support Agreement
Exhibit B-1 Form of California Agreement of Merger
Exhibit B-2 Form of Delaware Certificate of Merger
Exhibit C Form of Shareholder Certificate
Exhibit D-1 Form of Parent and Merger Sub Officer's Certificates
Exhibit D-2 Form of Parent and Merger Sub Secretary's Certificates
Exhibit E Matters to be Covered by Legal Opinion of Xxxxxxx,
Phleger & Xxxxxxxx LLP
Exhibit F-1 Form of Company Officer's Certificate
Exhibit F-2 Form of Company Secretary's Certificate
Exhibit G Matters to be Covered by Legal Opinion of Venture Law
Group
Exhibit H-1 Form of Founder Non-Competition Agreement
Exhibit H-2 Form of Key Employee Non-Competition Agreement
Exhibit I Form of Company Affiliate Agreement
Exhibit J Form of Parent Affiliate Agreement
Exhibit K Depositary Agent Fee Schedule
Exhibit L Form of Lock-Up Agreement
Schedule A Identified Risks
Schedule 2.10 List of Real Property
Schedule 2.11 List of Patents, Trademarks, Tradenames, Copyrights
and Licenses
Schedule 2.14 Company Employee Plans
Schedule 2.16 List of Employees with H-1 Visas
Schedule 2.26 List of Material Contracts
Schedule 2.28 List of Material Third Party Consents
Schedule 2.29 List of Product Releases
Schedule 5.10 List of Company Affiliates
Schedule 5.11 List of Parent Affiliates
Schedule 6.3(l) List of Key Employees
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AGREEMENT AND
PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
December 3, 1999, by and among KANA COMMUNICATIONS, INC. a Delaware corporation
("PARENT"), KONG ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("MERGER SUB"), and NETDIALOG, INC., a California
corporation (the "COMPANY"), and with respect to Section 7.2 only, ChaseMellon
Shareholder Services, L.L.C. as Depositary Agent (the "DEPOSITARY AGENT"), and
Xxxxxx Xxxxx, as Shareholders' Agent (the "SHAREHOLDERS' AGENT"). Capitalized
terms used and not otherwise defined herein have the meanings set forth in
Article 10.
RECITALS
A. The respective Boards of Directors of each of Parent, Merger Sub and the
Company believe it is in the best interests of Parent, Merger Sub and the
Company and their respective shareholders that Parent acquire the Company
through the merger of Merger Sub with and into the Company (the "MERGER") and,
in furtherance thereof, have approved the Merger.
B. The Boards of Directors of each of Parent, Merger Sub and the Company
have approved the Merger and this Agreement and the transactions contemplated
hereby.
C. Pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, (i) all of the shares of capital stock and
Convertible Promissory Notes of the Company which are issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive shares of Common Stock of Parent ("PARENT COMMON STOCK")
and (ii) all Company Options and Company Warrants then outstanding (whether
vested or unvested) will become exercisable for Parent Common Stock, on the
terms and subject to the conditions set forth herein.
D. As an inducement to Parent and Merger Sub to enter into this Agreement,
certain shareholders of the Company have concurrently herewith entered into
Support Agreements with Parent in substantially the form attached hereto as
EXHIBIT A ("SUPPORT AGREEMENTS") pursuant to which, among other things, such
shareholders have agreed to vote the shares of Company Capital Stock owned by
them in favor of the Merger.
E. Parent, Merger Sub and the Company intend that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and in furtherance thereof intend that this Agreement shall be a
"Plan of Reorganization" within the meaning of Sections 354(a) and 361(a) of the
Internal Revenue Code.
F. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
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G. A portion of the shares of Parent Common Stock otherwise issuable or
reserved for issuance by Parent in connection with the Merger shall be placed in
escrow by Parent, the release of which amount shall be contingent upon certain
events and conditions, all as set forth in ARTICLE 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the California
Code and the DGCL, 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 wholly-owned subsidiary of Parent. The
Company is sometimes referred to herein as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated pursuant to
SECTION 8.1, the closing of the Merger (the "CLOSING") will take place as
promptly as practicable, but no later than two (2) Business Days following
satisfaction or waiver of the conditions set forth in ARTICLE 6 at the offices
of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California, unless another place or time is agreed to by Parent and the
Company. The date upon which the Closing actually occurs is herein referred to
as the "CLOSING DATE." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a California Agreement of Merger (or like
instrument), in substantially the form attached hereto as EXHIBIT B-1 (the
"CALIFORNIA AGREEMENT OF MERGER"), with the Secretary of State of the State of
California and the filing of a certificate of merger in substantially the form
attached hereto as EXHIBIT B-2 (the "DELAWARE CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware, in each case in accordance with the
relevant provisions of applicable law (the time of acceptance by the Secretary
of State of the State of California of such filing, or such later time agreed to
by the parties and set forth in the California Agreement of Merger, being
referred to herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER ON CONSTITUENT CORPORATIONS. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the California Code and the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Merger Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Merger Sub and the Company shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
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1.4 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION.
(a) The certificate of incorporation of the Merger Sub as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Corporation, until thereafter amended as provided by such
certificate of incorporation and applicable law.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the certificate of incorporation
and applicable law.
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 MAXIMUM NUMBER OF SHARES OF PARENT COMMON STOCK TO BE ISSUED; EFFECT ON
OUTSTANDING SECURITIES OF THE COMPANY. The maximum number of shares of Parent
Common Stock to be issued (including Parent Common Stock to be reserved for
issuance upon exercise of any of the Company Options to be assumed by Parent as
provided herein) in exchange for the acquisition by Parent of all shares of
Company Capital Stock which are issued and outstanding immediately prior to the
Effective Time, all vested and unvested Company Options which are then
outstanding, all other Options of the Company which are then outstanding, any
Company Convertible Promissory Notes which are then outstanding, any other
securities convertible into, or exchangeable for, Company Capital Stock and any
other right to acquire Company Capital Stock or securities convertible into, or
exchangeable for, Company Capital Stock., shall not exceed the Aggregate Share
Number (as defined below). No adjustment shall be made in the number of shares
of Parent Common Stock issued in the Merger as a result of any consideration (in
any form whatsoever) received by the Company from the date hereof to the
Effective Time as a result of any exercise, conversion or exchange of Company
Options or Company Warrants. On the terms and subject to the conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Parent or Merger Sub, the Company or any holder of any
Company security, the following shall occur:
(a) CONVERSION OF COMPANY CAPITAL STOCK AND COMPANY CONVERTIBLE
PROMISSORY NOTES. Subject to SECTION 1.6(e), at the Effective Time, each share
of Company Capital Stock and each Company Convertible Promissory Note, which is
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Capital Stock to be canceled pursuant to SECTION 1.6(b) and
any Dissenting Shares (as provided in SECTION 1.7)) will be canceled and
extinguished and each share of Company Preferred Stock and Common Stock and each
Company Convertible Promissory Note which is issued and outstanding immediately
prior to the Effective Time shall be converted automatically into the right to
receive, that number of shares of Parent Common Stock equal to the Common Stock
Exchange Ratio, the Preferred Stock Exchange Ratio or the Note Exchange Ratio,
as the case may be. For purposes of this Agreement:
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(i) "AGGREGATE COMMON NUMBER" means 22,515,718 shares, which is the
aggregate number of shares of Company Common Stock outstanding immediately prior
to the Effective Time (including all shares of Company Common Stock issued or
issuable upon conversion of all shares of Company Preferred Stock and upon
exercise, conversion or exchange of all unvested and vested Company Options and
Company Warrants which are not exercised, converted, exchanged or expired as of
the Effective Time).
(ii) "AGGREGATE SHARE NUMBER" means 622,031 shares, which is the
number of shares of Parent Common Stock equal to the quotient obtained by
dividing the sum of ninety million (90,000,000) by $144.6875, which is the
average of the last sale prices of Parent Common Stock as traded on the NNM for
the four (4) trading days beginning on November 15, 1999 and ending on November
18, 1999 (the "CLOSING PRICE").
(iii) "COMMON STOCK EXCHANGE RATIO" means 0.02763, which is the
quotient obtained by dividing (x) the Aggregate Share Number minus the Preferred
Share Number minus the Note Share Number by (y) the Aggregate Common Number less
the number of shares of Company Preferred Stock outstanding as of the Effective
Time.
(iv) "NOTE EXCHANGE RATIO" is not applicable.
(v) "NOTE SHARE NUMBER" means zero shares, which is the quotient
obtained by dividing (i) the aggregate cash amount that (but for the waivers
contemplated by Section 6.3(o)) would otherwise be due to be paid at the
Effective Time pursuant to the Company Convertible Promissory Notes outstanding
immediately prior to the Effective Time by (ii) the Closing Price.
(vi) "PREFERRED SHARE NUMBER" means zero shares, which is the total
number of shares of Parent Common Stock issued in connection with the Merger to
holders of Company Preferred Stock.
(vii) "PREFERRED STOCK EXCHANGE RATIO" is not applicable.
(b) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each share
of Company Capital Stock owned by Parent or the Company or any Subsidiary of
Parent or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Parent, Merger Sub or the Company.
(c) COMPANY OPTIONS AND COMPANY STOCK PLAN. At the Effective Time all
unexpired and unexercised Company Options then outstanding, whether vested or
unvested, shall be assumed by Parent in accordance with provisions described
below.
(i) At the Effective Time, each unexpired and unexercised Company
Option issued pursuant to the NetDialog, Inc. 1997 Stock Plan adopted on August
18, 1997 (the "COMPANY STOCK PLAN") which is then outstanding, whether or not
exercisable, whether or not vested, shall by virtue of the Merger be assumed by
Parent together with the Company Stock Plan in such manner that (i) Parent is
"assuming a stock option in a transaction to which Section
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424(a) applied" within the meaning of Section 424 of the Internal Revenue Code,
or (ii) such transaction, to the extent that Section 424 of the Internal Revenue
Code does not apply to any such Company Options, would be a transaction within
Section 424 of the Internal Revenue Code. Each Company Option so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions as were applicable to such Company Option immediately prior
to the Effective Time (including, without limitation, any repurchase rights or
vesting provisions), PROVIDED THAT (A) such Company Option shall be exercisable
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Capital Stock that were issuable upon exercise
of such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio applicable to the Company Capital Stock subject to such Company
Option (rounded down to the nearest whole number of shares of Parent Common
Stock) and (B) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed Company Option shall be equal to
the quotient determined by dividing the exercise price per share of Company
Capital Stock at which such Company Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio applicable to the series of Company
Capital Stock subject to such Company Option (rounded up to the nearest whole
cent). Parent shall, from and after the Effective Time, upon exercise of the
Company Options in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby and shall, as
promptly as practicable after the Effective Time, issue to each holder of an
outstanding Company Option a document evidencing the foregoing assumption by
Parent.
(ii) It is the intention of the parties that the Company Options
assumed by Parent shall qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Internal Revenue Code to the same
extent the Company Options qualified as incentive stock options immediately
prior to the Effective Time and the provisions of this SECTION 1.6(c) shall be
applied consistent with this intent.
(iii) At the Effective Time, Parent shall assume the Company's
obligations, and shall be assigned the Company's repurchase rights and purchase
options, under any Restricted Stock Purchase Agreements entered into pursuant to
the Company Stock Plan. Any and all restrictions on the Company Restricted Stock
issued pursuant to the Company Stock Plan or such other agreements which do not
lapse in accordance with their terms (as such terms were in effect on the date
of this Agreement) shall continue in full force and effect until such
restrictions lapse pursuant to the terms of such agreements, and any repurchase
rights or purchase options which the Company has with respect to the Company
Restricted Stock shall also continue in full force and effect until such
repurchase rights or purchase options lapse pursuant to their terms.
(iv) At the Effective Time, Parent shall assume all Company
Warrants which have not expired or been exercised prior thereto. Each Company
Warrant so assumed by Parent under this Agreement shall continue to have, and be
subject to, the same terms and conditions as were applicable to such Company
Warrant immediately prior to the Effective Time (including, without limitation,
any repurchase rights or vesting provisions), PROVIDED THAT (A) such Company
Warrant shall be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Capital Stock that
were issuable upon exercise of such Company Warrant immediately prior to the
Effective Time multiplied by
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the Exchange Ratio applicable to the Company Capital Stock subject to such
Company Warrant (rounded down to the nearest whole number of shares of Parent
Common Stock) and (B) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Warrant shall be
equal to the quotient determined by dividing the exercise price per share of
Company Capital Stock at which such Company Warrant was exercisable immediately
prior to the Effective Time by the Exchange Ratio applicable to the series of
Company Capital Stock subject to such Company Warrant (rounded up to the nearest
whole cent). Parent shall, from and after the Effective Time, upon exercise of
the Company Warrants in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby and shall, as
promptly as practicable after the Effective Time, issue to each holder of an
outstanding Company Warrant a document evidencing the foregoing assumption by
Parent.
(d) ADJUSTMENTS TO EXCHANGE RATIOS. The Exchange Ratios shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock dividend (including any dividend or distribution
of securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock or Company Capital Stock occurring after the date
hereof and prior to the Effective Time.
(e) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued in the Merger, but in lieu thereof, each holder of shares of
Company Capital 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 be entitled to receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (a)
such fraction, multiplied by (b) the Closing Price.
(f) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock of the Surviving Corporation. From and
after the Effective Time, each share certificate of Merger Sub theretofore
evidencing ownership of any such shares shall 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 Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with the California
Code and who, as of the Effective Time, has not effectively withdrawn or lost
such dissenters' rights ("DISSENTING SHARES") shall not be converted into or
represent a right to receive Parent Common Stock pursuant to SECTION 1.6, but
the holder thereof shall only be entitled to such rights as are granted by the
California Code.
(b) Notwithstanding the provisions of SECTION 1.7(a) above, if any
holder of shares of Company Capital Stock who demands purchase of such shares
under the California Code shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's dissenters' rights, then, as of the later of
(i) the Effective Time or (ii) the occurrence of such
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event, such holder's shares shall automatically be converted into and represent
only the right to receive Parent Common Stock as provided in SECTION 1.6,
without interest thereon, upon surrender to the Company of the certificate
representing such shares in accordance with SECTION 1.8 of this Agreement.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any written demands for purchase of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the California Code and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for purchase of any shares of Company Capital Stock under the California
Code. The Company shall not, except with the prior written consent of Parent or
as may be required under applicable law, voluntarily make any payment with
respect to any demands for purchase of Company Capital Stock or offer to settle
or settle any such demands.
1.8 EXCHANGE PROCEDURES.
(a) PARENT COMMON STOCK. On the Closing Date, Parent shall deposit
with the Exchange Agent for exchange in accordance with this ARTICLE 1, the
aggregate number of shares of Parent Common Stock issuable in exchange for
outstanding shares of Company Capital Stock and cash in an amount sufficient to
permit the payment of cash in lieu of fractional shares pursuant to SECTION
1.6(e); PROVIDED, HOWEVER, that, on behalf of the holders of Company Capital
Stock, Parent shall deposit into an escrow account a number of shares of Parent
Common Stock equal to the Escrow Amount. The portion of the Escrow Amount
contributed on behalf of each holder of Company Capital Stock shall be in
proportion to the aggregate number of shares of Parent Common Stock which such
holder would otherwise be entitled to receive by virtue of ownership of
outstanding shares of Company Capital Stock.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time (and in any event no later than ten (10) Business Days after the Effective
Time), the Parent shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the "CERTIFICATES") and
which shares were converted into the right to receive shares of Parent Common
Stock pursuant to SECTION 1.6, (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock and cash in lieu of fractional shares. Upon surrender of
a Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of whole shares of Parent Common Stock
(less the number of shares of Parent Common Stock to be deposited in the Escrow
Fund on such holder's behalf pursuant to ARTICLE 7 hereof), to which such holder
is entitled pursuant to SECTION 1.6 and cash in lieu of fractional shares, and
the Certificate so surrendered shall be canceled. As soon as practicable after
the Effective Time, and subject to and in accordance with the provisions of
ARTICLE 7 hereof, Parent shall cause to be distributed to the Depositary Agent a
certificate or
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certificates (in such denominations as may be requested by the Depositary Agent)
representing that number of shares of Parent Common Stock equal to the Escrow
Amount, which certificate shall be registered in the name of the Depositary
Agent. Such shares shall be beneficially owned by the holders on whose behalf
such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in ARTICLE 7. Until surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Capital Stock shall have
been so converted and cash in lieu of fractional shares.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF COMPANY
CAPITAL STOCK. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this SECTION 1.8(c)) with respect to such whole shares of Parent Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued pursuant to the Merger in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Capital Stock, and there shall
be no further registration of transfers on the records of the Company of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this ARTICLE 1.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue
certificates representing such shares of Parent Common Stock and cash in lieu of
fractional shares in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof; PROVIDED,
HOWEVER, that Parent or the Exchange Agent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to provide an indemnity or deliver a bond in
such sum as it may reasonably direct as
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indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 EXEMPTION FROM REGISTRATION. The shares of Parent Common Stock to be
issued pursuant to SECTION 1.6 in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act, by reason of
Section 4(2) of the Securities Act and SEC rules and regulations promulgated
thereunder. The shares of Parent Common Stock to be issued pursuant to SECTION
1.6 in connection with the Merger and the assumption by Parent of all Company
Options pursuant to SECTION 1.6 hereof will be qualified under the California
Code, pursuant to Section 25102(f) thereof.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND SHAREHOLDERS
Except as disclosed in the Company Disclosure Schedule, the Company and its
shareholders, jointly and severally, represent and warrant to Parent and the
Surviving Corporation as follows:
2.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on the Company. The Company has delivered a
true and correct copy of the articles of incorporation and bylaws or other
charter documents, as applicable, of the Company as amended to date, to Parent.
The Company is not in violation of any of the provisions of its articles of
incorporation or bylaws. The Company does not own and never has owned directly
or indirectly any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, subsidiary, partnership, joint venture or other business
association or entity.
2.2 CAPITAL STRUCTURE. The authorized capital stock of the Company consists
of 30,000,000 shares of Common Stock (the "Company Common Stock") and 17,000,000
shares of Preferred Stock, all of which are designated Series A Preferred Stock
(the "Company Preferred Stock"), of which there are issued and outstanding, as
of the date hereof, 5,000,527 shares of Company Common Stock and 15,156,051
shares of Company Preferred Stock, all of which 15,156,051 shares of Company
Preferred Stock will be converted into shares of Company Common Stock
immediately prior to the Effective Time of the Merger so that at the Effective
Time there will be issued and outstanding 20,156,578 shares of Company Common
Stock, no
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shares of Company Preferred Stock, 71,640 shares of Company Common Stock
issuable upon exercise of all outstanding Company Warrants, 2,287,500 shares of
Company Common Stock issuable upon conversion of all outstanding Company Options
and no shares of Company Common Stock issuable upon conversion of outstanding
Company Convertible Promissory Notes or other Company Equity Equivalents. As of
the date hereof, there are 1,875,000 shares of the Company's capital stock
outstanding unvested and subject to the Company's right of repurchase. There are
no other outstanding shares of Company Capital Stock or voting securities and no
outstanding commitments to issue any shares of Company Capital Stock or voting
securities after October 31, 1999 other than pursuant to the exercise of options
outstanding as of such date under the Company Stock Plan and pursuant to stock
options granted by the Company's Board of Directors on December 2, 1999 (which
number of option shares is included in the number of shares listed below as
shares subject to outstanding, unexercised options). Section 2.2 of the Company
Disclosure Schedule sets forth a complete capitalization table of the Company as
of the date hereof, including the names, numbers and types of securities held by
all holders of Company Capital Stock, securities convertible into, or
exchangeable for, Company Capital Stock (including, without limitation, Company
Options, Company Warrants and Company Convertible Promissory Notes) and other
rights to acquire Company Capital Stock or securities convertible into, or
exchangeable for, Company Capital Stock. Section 2.2 of the Company Disclosure
Schedule also sets forth, with respect to any Company Options or Company Capital
Stock subject to repurchase prior to vesting, the vesting commencement date and
the schedule of vesting, and with respect to all Company Capital Stock, the
purchase date and (if different) the holding period commencement period date for
purposes of SEC Rule 144. All outstanding shares of the Company Capital Stock
are duly authorized, validly issued, fully paid and non-assessable and are free
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the articles of incorporation or
bylaws of the Company or any agreement to which the Company is a party or by
which it is bound. As of the close of business on the date hereof, the Company
has reserved (i) sufficient shares of Company Common Stock for issuance upon
conversion of the outstanding Company Preferred Stock and warrants, and (ii)
2,600,000 shares of Company Common Stock for issuance to employees and
consultants pursuant to the Company Stock Plan, of which 2,287,500 shares are
subject to outstanding, unexercised options, and no shares are subject to
outstanding stock purchase rights. The Company will not issue or grant
additional options under the Company Stock Plan except in the ordinary course of
business consistent with past practice. Each share of Company Preferred Stock is
convertible into one (1) share of Company Common Stock. Except for (i) the
rights created pursuant to this Agreement and (ii) Company's right to repurchase
any unvested shares under the Company Stock Plan, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
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 capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend, modify or enter into any such option, warrant,
call, right, commitment or agreement. The consummation of the Merger shall not
cause an acceleration in the vesting or lapse of any restriction or right of any
of the Company's securities. Except as set forth on the Company Disclosure
Schedule, there are no contracts, commitments or agreements relating to voting,
purchase or sale of Company Capital Stock (i) between or among the Company and
any of its shareholders and (ii) to the
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Company's knowledge, between or among any of the Company's shareholders. The
terms of the Company Stock Plan and the applicable stock option agreements and
the warrants and warrant agreements permit the assumption or substitution of
options or warrants, as applicable, to purchase Parent Capital Stock as provided
in this Agreement, without the consent or approval of the holders of such
securities, the Company shareholders, or otherwise. True and complete copies of
all agreements and instruments relating to or issued under the Company Stock
Plan have been provided to Parent and such agreements and instruments have not
been amended, modified or supplemented, and there are no agreements to amend,
modify or supplement such agreements or instruments in any case from the form
provided to Parent. All outstanding shares of Company Common Stock and Company
Preferred Stock were issued in compliance with all applicable federal and state
securities laws.
2.3 AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement and the other agreements attached as exhibits
hereto (the "Ancillary Agreements"), and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's shareholders as contemplated by
Section 6.1(d). This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in (i) any material
violation of any provision of the articles of incorporation or bylaws of the
Company, as amended, or (ii) 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
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its properties
or assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental or Regulatory Authority 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 (i) the filing of the California Agreement of Merger as provided in
Section 1.2; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on the Company
and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.4 COMPANY FINANCIAL STATEMENTS. The Company has delivered to Parent its
audited financial statements on a consolidated basis for the year ended December
31, 1998 and its unaudited financial statements (balance sheet, statement of
operations and statement of cash flows) on a consolidated basis as at, and for
the fiscal year ended on the Company Balance Sheet Date (collectively, the
"COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles (except
that the
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unaudited financial statements do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other. The
Company Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. The Company maintains and
will continue to maintain until the Effective Time a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
2.5 ABSENCE OF CHANGES. Since the Company Balance Sheet Date, the Company
has conducted its business in the ordinary course consistent with past practice.
In addition, since the Company Balance Sheet Date, there has not occurred:
(i) any change, event or condition (whether or not covered by
insurance) that shall result in, or might reasonably be expected to result
in, a Material Adverse Effect to the Company;
(ii) any acquisition, sale or transfer of any material asset of the
Company;
(iii) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or
any revaluation by the Company of any of its assets, any change in any
material election in respect of Taxes, adoption or change of any accounting
method in respect of Taxes, entered into any tax allocation agreement, tax
sharing agreement, tax indemnity agreement or closing agreement, settlement
or compromise of any claim or assessment in respect of Taxes, or consented
to any extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes with any Taxing Authority or otherwise;
(iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of
its shares of capital stock, except repurchases of its capital stock
pursuant to agreements existing on November 12, 1999 with the Company's
employees and consultants upon their departure from the Company;
(v) any issuance or sale of any shares of Company Capital Stock or
securities convertible into or exchangeable for Company Capital Stock,
except for shares of Company Capital Stock issued upon the exercise of
options, warrants or other rights to purchase Company Capital Stock
existing on November 12, 1999;
(vi) any agreement entered into by the Company with respect to the
Intellectual Property of the Company or any third party, other than
licenses by the Company to its customers entered into in the ordinary
course of the Company's business and purchases or licenses of off-the-shelf
software for employee use;
(vii) any contract entered into by the Company with respect to a
Business Combination;
(viii) any indebtedness or any other liability in excess of $25,000
incurred or guaranteed by the Company;
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(ix) any material contract entered into by the Company, or any
material amendment or termination of, or default under, any material
contract to which the Company is a party or by which it is bound;
(x) any termination by the Company of any its employees;
(xi) any amendment or change to the Company Restated Articles or the
Bylaws of the Company;
(xii) other than in the ordinary course of business consistent with
past practice, any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its
directors or employees;
(xiii) any transaction with any officer, director, Affiliate or
Associate of the Company, other than pursuant to any Contract disclosed to
Parent pursuant to (and so identified in) Section 2.5(xiii) or 2.17 of the
Company Disclosure Schedule;
(xiv) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the real or personal property
or equipment of the Company or in an amount exceeding fifty thousand
dollars ($50,000) individually or one hundred fifty thousand dollars
($150,000) in the aggregate;
(xv) any failure to pay or otherwise satisfy any Liabilities presently
due and payable of the Company except such Liabilities which are being
contested in good faith by appropriate means or proceedings and which are
immaterial in amount;
(xvi) any failure to renew any insurance policy, any cancellation or
material amendment of any insurance policy of the Company or any failure to
give any required notice or make any claim (if any) under all such policies
in a timely fashion;
(xvii) any failure to procure, maintain, renew, extend or enforce any
Intellectual Property, including submission of required documents or fees
during the prosecution of patent, trademark or other applications for
Registered Intellectual Property rights;
(xviii) any Action or Proceeding commenced or, to the knowledge of the
Company, threatened by or against the Company;
(xix) any transfer (by way of a License or otherwise) to any Person of
rights to any Intellectual Property (including, without limitation, source
code licenses) other than non-exclusive transfers of object code to the
Company's customers, distributors or other licensees in the ordinary course
of business consistent with past practice;
(xx) any other action outside the ordinary course of the Company's
business that would reasonably be expected to be materially detrimental to
the Company's business prospects; or
(xxi) any discussion with third parties, negotiation or agreement or
any acquiescence in respect of any arrangement or understanding, to do,
engage in or cause or
-13-
having the effect of any of the foregoing (other than negotiations with
Parent and its representatives regarding the transactions contemplated by
this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no obligations or
liabilities of any nature (matured or unmatured, fixed or contingent) other than
(i) those set forth or adequately provided for in the Company Balance Sheet,
(ii) those not required to be set forth in the Company Balance Sheet under
generally accepted accounting principles and (iii) those incurred in the
ordinary course of business since the Company Balance Sheet Date and consistent
with past practice.
2.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of the Company,
threatened against the Company or any of its properties or any of its officers
or directors (in their capacities as such). There is no judgment, decree or
order against the Company, or, to the knowledge of the Company, any of its
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on the Company. The Company Disclosure Schedule also lists all litigation
that the Company has pending against other parties.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment,
injunction, order or decree binding upon the Company which has or could
reasonably be expected to have the effect of prohibiting or impairing any
current or future business practice of the Company, any acquisition of property
by the Company or the conduct of business by the Company as currently conducted
or as currently proposed to be conducted by the Company.
2.9 GOVERNMENTAL AUTHORIZATION. The Company has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental or Regulatory Authority (i) pursuant to
which the Company currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of the Company's business
or the holding of any such interest (herein collectively called "COMPANY
AUTHORIZATIONS"), and all of such Company Authorizations are in full force and
effect, except where the failure to obtain or have any such Company
Authorizations could not reasonably be expected to have a Material Adverse
Effect on the Company.
2.10 TITLE TO PROPERTY. Company has good and marketable title to all of
its properties, interests in properties and assets, real and personal, reflected
in the Company Balance Sheet or acquired after the Company Balance Sheet Date
(except properties, interests in properties and assets sold or otherwise
disposed of since the Company Balance Sheet Date in the ordinary course of
business), or with respect to leased properties and assets, valid leasehold
interests in, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the Company Balance Sheet. The plants, property and
equipment of the Company that are used in the operations of its business are in
good operating condition and repair, subject to normal wear
-14-
and tear. All properties used in the operations of the Company are reflected in
the Company Balance Sheet to the extent generally accepted accounting principles
require the same to be reflected. SCHEDULE 2.10 identifies each parcel of real
property owned or leased by the Company.
2.11 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property that is used or currently
proposed to be used in the business of the Company as currently conducted or as
currently proposed to be conducted by the Company. The Company has not (i)
licensed any of its Intellectual Property in source code form to any party or
(ii) entered into any exclusive agreements relating to its Intellectual Property
with any party.
(b) SCHEDULE 2.11 lists (i) all patents and patent applications and
all registered trademarks, trade names and service marks, registered copyrights,
and maskworks, included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company is
authorized to use any third party patents, trademarks or copyrights, including
software ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS") which are incorporated in,
are, or form a part of any Company product.
(c) To the Company's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of the Company or any Intellectual Property right of any third party to the
extent licensed by or through the Company by any third party, including any
employee or former employee of the Company. The Company has not entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(d) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks and copyrights
held by the Company are valid and subsisting. The Company (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; (ii) has no knowledge that the
manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service xxxx, copyright, trade secret or other proprietary
right of any third party and (iii) has not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party.
-15-
(f) The Company has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information"). All use, disclosure or appropriation of Confidential Information
owned by the Company by or to a third party has been pursuant to the terms of a
written agreement between the Company and such third party. All use, disclosure
or appropriation of Confidential Information not owned by the Company has been
pursuant to the terms of a written agreement between the Company and the owner
of such Confidential Information, or is otherwise lawful.
(g) The Company does not believe it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company other than those which have been
assigned to the Company.
(h) Pursuant to various agreements or pursuant to its own development,
the Company acquired the exclusive right, title and interest in and to any and
all technology marketed, offered, sold or licensed by the Company (whether
currently, in the past or currently proposed). The Company has secured all third
party consents and assignments required to be obtained in connection with such
transfer to the Company.
2.12 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted rights
to manufacture, produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.13 TAXES. The Company and any consolidated, combined, unitary or
aggregate group for Tax (as defined below) purposes of which the Company is or
has been a member, have timely filed all Tax Returns required to be filed by
them and have paid all Taxes shown thereon to be due. The Company has provided
adequate accruals in accordance with generally accepted accounting principles in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. There is (i) no material claim for Taxes
that is a lien against the property of the Company is currently being asserted
against the Company other than liens for Taxes not yet due and payable, (ii) no
audit of any Tax Return of the Company being conducted by a Tax authority, (iii)
no extension of the statute of limitations on the assessment of any Taxes
granted by the Company and currently in effect, and (iv) no agreement, contract
or arrangement to which the Company is a party that may result in the payment of
any amount that would not be deductible by reason of Sections 280G (other than
agreements or arrangements for which shareholder approval meeting the
requirements of Section 280G(b)(5)(B) will be obtained prior to the Closing) or
404 of the Code.
2.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.14 lists, with respect to the Company, and any trade or
business (whether or not incorporated) which is treated as a single employer
with the Company (an "ERISA Affiliate") within the meaning of Section 414(b),
(c), (m) or (o) of the Code, (i) all material employee benefit plans (as defined
in Section 3(3) of ERISA, (ii) each loan to a non-officer employee in excess of
$10,000, loans to officers and directors and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
-16-
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of the Company and that
do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of the Company of greater than
$10,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of the Company (together, the "Company Employee
Plans").
(b) The Company has furnished to Parent a copy of each of the Company
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and any material employee communications relating
thereto) and has, with respect to each Company Employee Plan which is subject to
ERISA reporting requirements, provided copies of the Form 5500 reports filed
since inception. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter, opinion, advisory or notification as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
Internal Revenue Service for such a determination letter, opinion, advisory or
notification (or has time remaining in which to apply for such a determination
letter, opinion, advisory or notification) prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter, opinion,
advisory or notification and to make any amendments necessary to obtain a
favorable determination. The Company has also furnished Parent with the most
recent Internal Revenue Service determination letter, opinion, advisory or
notification issued with respect to each such Company Employee Plan, and nothing
has occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Company Employee
Plan subject to Code Section 401(a).
(c) (i) None of the Company Employee Plans promise or provide retiree
medical or other retiree welfare benefits to any person (except as may be
required by COBRA); (ii) there has been no "prohibited transaction," as such
term is defined in Section 406 of ERISA and Section 4975 of the Code (except
with respect to a prohibited transaction exempt under Section 4975 of the Code
or Section 408 of ERISA), with respect to any Company Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) each Company Employee Plan has been administered in accordance with its
terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect on the Company, and the
Company and each ERISA Affiliate have performed all obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any material default or violation by any
other party to, any of the Company Employee Plans; (iv) neither the Company nor
any ERISA Affiliate is subject to any liability or penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the Company
Employee Plans; (v) all material contributions required to be made by the
Company or ERISA Affiliate to any Company
-17-
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Company Employee Plan for the
current plan years; (vi) with respect to each Company Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Company Employee Plan
is covered by, and neither the Company nor any ERISA Affiliate has incurred or
expects to incur any liability under Title IV of ERISA or Section 412 of the
Code; and (viii) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Parent (other than ordinary administrative expenses
typically incurred in a termination event). With respect to each Company
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, the Company has prepared in good faith and
timely filed all requisite governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan except as would not have in the
aggregate a Material Adverse Effect on the Company. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
the Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor (other than routine benefits claims).
(d) With respect to each Company Employee Plan, the Company has
complied with (i) the applicable health care continuation and notice provisions
of COBRA and the regulations (including proposed regulations) thereunder (to the
knowledge of the Company and through the services of a third party
administrator), (ii) the applicable requirements of the Family Medical and Leave
Act of 1993 and the regulations thereunder, except to the extent that such
failure to comply would not, in the aggregate, have a Material Adverse Effect,
and (iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations (including proposed regulations)
thereunder, except to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of the Company or any ERISA Affiliate to severance benefits or any
other payment or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or service provider (except as
required under Section 411(d)(3) of the Code).
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company, or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company Employee
Plan which would materially increase the per capita expense of maintaining such
Plan above the level of per capita expense incurred with respect to that Plan
for the most recent fiscal year included in the Company Financial Statements.
(g) The Company does not currently maintain, sponsor, participate in
or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed
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to, any pension plan (within the meaning of Section 3(2) of ERISA) which is
subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or
Section 412 of the Code.
(h) Neither the Company nor any ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
2.15 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director or employee of the Company, (ii) materially increase any benefits
otherwise payable by the Company or (iii) result in the acceleration of the time
of payment or vesting of any such benefits.
2.16 EMPLOYEE MATTERS. The Company is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any material respect in any unfair labor practice. The Company
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries, and other payments to employees; and is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing. The Company is not 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 or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending
claims against the Company under any workers compensation plan or policy or for
long term disability. There are no controversies pending or, to the knowledge of
the Company, threatened, between the Company and any of its respective
employees, which controversies have or could reasonably be expected to result in
an action, suit, proceeding, claim, arbitration or investigation before any
agency, court or tribunal, foreign or domestic. The Company is not a party to
any collective bargaining agreement or other labor unions contract nor does the
Company know of any activities or proceedings of any labor union or efforts to
organize any such employees. Since November 1, 1999, no employees of the Company
have given notice to the Company, nor is the Company otherwise aware, that any
such employee intends to terminate his or her employment with the Company. There
are no written employment or separation agreements, or oral employment or
separation agreements other than those establishing an "at-will" employment
relationship between the Company and any of its employees. The Company does not
have any obligation (a) to provide any particular form or period of notice prior
to termination except such obligations as are imposed by law generally or (b) to
pay any of such employees any severance benefits in connection with their
termination of employment service. In addition, no severance pay will become due
to any Company employees or other service providers in connection with the
Merger, as a result of any Company agreement, plan or program. The Company is in
compliance with the Immigration Control and Reform Act of 1986 and has verified
employment eligibility and obtained completed I-9 forms for each of its
employees. Set forth on Schedule 2.16 is a list of all of the Company's
employees requiring H-1 visas.
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2.17 AFFILIATE TRANSACTIONS. Except as disclosed in Section 2.5(xiii) or
2.17 of the Company Disclosure Schedule, (i) there are no Contracts or
Liabilities between the Company, on the one hand, and (A) any current or former
officer, director, shareholder, or to the Company's knowledge, any Affiliate or
Associate of the Company or (B) any Person who, to the Company's knowledge, is
an Associate of any such officer, director, shareholder or Affiliate, on the
other hand, (ii) the Company does not provide or cause to be provided any
assets, services or facilities to any such current or former officer, director,
shareholder, Affiliate or Associate, except for such items as secretarial
services, office space and the like, which are provided to employees in the
ordinary course of business, (iii) neither the Company nor any such current or
former officer, director, shareholder, Affiliate or Associate provides or causes
to be provided any assets, services or facilities to the Company and (iv) the
Company does not beneficially own, directly or indirectly, any Investment Assets
of any such current or former officer, director, shareholder, Affiliate or
Associate. Insurance. The Company has policies of insurance and bonds of the
type and in amounts which the Company believes are adequate given the business
or assets of the Company. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company is otherwise in
compliance with the terms of such policies and bonds. The Company has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.18 COMPLIANCE WITH LAWS. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on the Company.
2.19 MINUTE BOOKS. The minute books of the Company made available to Parent
contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written consent since the time of incorporation of
the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects.
2.20 COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document which has been requested by
Parent or its counsel in connection with their legal and accounting review of
the Company.
2.21 BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.22 SUPPORT AGREEMENTS; IRREVOCABLE PROXIES. Holders of at least 95% of
the shares of Company Capital Stock issued and outstanding as of the record date
for the Company Shareholder Action have agreed in writing to approve the Merger
pursuant to Support Agreements and pursuant to Irrevocable Proxies attached
thereto as EXHIBIT A ("IRREVOCABLE PROXIES").
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2.23 VOTE REQUIRED. The affirmative vote of holders of at least a majority
of the shares of Company Common Stock outstanding on the record date set for
determining the shareholders of the Company entitled to vote on the Merger and
the affirmative vote of holders of at least two-thirds (2/3) of the shares of
Preferred Stock outstanding on the record date set for determining the
shareholders of the Company entitled to vote on the Merger is necessary to
approve this Agreement and the transactions contemplated hereby.
2.24 BOARD APPROVAL. The Board of Directors of the Company has unanimously
(i) approved this Agreement and the Merger, (ii) determined that in its opinion
the Merger is in the best interests of the shareholders of the Company and is on
terms that are fair to such shareholders and (iii) recommended that the
shareholders of the Company approve this Agreement and the Merger.
2.25 [RESERVED].
2.26 CONTRACTS. Except for the Contracts described in SCHEDULE 2.26, the
Company is not a party to or bound by any material contract (each a "Contract"),
including without limitation:
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$20,000 over the life of the contract;
(c) any contract that expires or may be renewed at the option of any
person other than the Company so as to expire more than one year after the date
of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with generally accepted accounting principles;
(e) any contract for capital expenditures in excess of $20,000 in the
aggregate;
(f) any contract which requires the Company to maintain the
confidentiality of any proprietary information of any third party or any other
material confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property involving in the case of any such contract more than $50,000
over the life of the contract;
(h) any contract with any person with whom the Company does not deal
at arm's length within the meaning of the Internal Revenue Code; or
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(i) any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
2.27 NO BREACH OF CONTRACTS. The Company has performed all of the material
obligations required to be performed by it and is entitled to all benefits
under, and is not alleged to be in default in respect of any Contract. Each of
the Contracts is in full force and effect, unamended, and there exists no
default or event of default or event, occurrence, condition or act, with respect
to the Company or to the Company's knowledge with respect to the other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or conditions, would become a default or event
of default under any Contract. True, correct and complete copies of all
Contracts have been delivered to Parent.
2.28 MATERIAL THIRD PARTY CONSENTS. SCHEDULE 2.28 includes every contract
which requires a third party consent by nature of the Merger and which, if no
notation occurs to make Parent a party thereto or if no consent to assignment is
obtained, would have a material adverse effect on Parent's ability to operate
the Company's business in the same manner as the business was operated by the
Company prior to the Effective Time.
2.29 PRODUCT RELEASES. The Company has provided Parent a Schedule of
Product Releases, which Schedule is attached hereto as SCHEDULE 2.29. The
Company believes there is a reasonable basis for achieving the release of
products on the schedule described in SCHEDULE 2.29 and is not aware of any
change in its circumstances or other fact that has occurred that would cause it
to believe that it will be unable to meet such release schedule.
2.30 POOLING OF INTERESTS. Neither the Company, nor, to the knowledge of
the Company, any of its directors, officers or shareholders has taken any action
which would interfere with Parent's ability to account for the Merger as a
pooling of interests transaction.
2.31 REPRESENTATIONS COMPLETE. The Company has provided Parent with all the
information reasonably available to it that Parent has requested for deciding
whether to enter into this Agreement and all information that the Company
believes is reasonably necessary to enable Parent to make such a decision. None
of the representations or warranties made by the Company herein or in any
Schedule hereto, including the Company Disclosure Schedule, or certificate
furnished by the Company to Parent pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
2.32 YEAR 2000. All computer software products that are licensed, sold or
otherwise distributed to others by the Company and to the best of the Company's
knowledge, after due inquiry, all computer software products that are owned by
the Company, exclusively licensed to the Company or are otherwise required for
the conduct of its business (collectively, "SOFTWARE") are Year 2000 Compliant.
As used herein, "YEAR 2000 COMPLIANT" shall mean, with respect to any such
Software, the ability of such Software to perform the following date-related
functions:
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(a) consistently handle date information before, during and after
January 1, 2000, including, but not limited to, accepting date input, providing
date output and performing calculations on dates or portions of dates;
(b) function accurately in accordance with the documentation relating
to the applicable software and without interruption before, during and after
January 1, 2000, without any change in operations associated with the advent of
the new century;
(c) respond to two-digit date input in a way that resolves any
ambiguity as to the century; and
(d) store and provide output of date information in ways that are
unambiguous as to century.
2.33 PRODUCTS LIABILITY. There are no claims against the Company, fixed or
contingent, asserting (a) any damage, loss or injury caused by any product or
(b) any breach of any express or implied product warranty or any other similar
claim with respect to any product other than standard warranty obligations (to
replace, repair or refund) made by the Company in the ordinary course of
business, except for those claims that, if adversely determined against the
Company, would not have a Material Adverse Effect. As used herein, "product"
shall mean any products manufactured, designed, developed, distributed, sold,
re-sold, customized or serviced by the Company.
2.34 SERVICE PROVIDER AGREEMENTS. To the Company's knowledge, no service
provider of the Company is in violation of any term of any employment agreement
(whether written or verbal), patent or trademark disclosure agreement, or any
other contract or agreement relating to the relationship of any such service
provider with the Company or any other party (including prior employers), or any
term of any judgment, decree or order, because of the nature of such
relationship to the Company, and resulting in a Material Adverse Effect on the
Company. Each current service provider of the Company has executed a proprietary
information and inventions agreement (or similar agreement) with the Company in
the form then being used by the Company, which forms have been previously
delivered to Parent by the Company. The Company has the rights to any and all
Intellectual Property Rights developed by each such former service provider
while providing services to the Company. Each employee or consultant-inventor
has executed a written agreement validly assigning his or her rights to the
Company on all inventions, pending patent applications, all patents issued, and
all other intellectual property rights developed by such service provider while
working for or on behalf of the Company to the extent that the failure to obtain
such written agreements is material to the business condition or future
prospects of the Company. To the extent the Company has ever utilized
consultants or independent contractors, each consultant or independent
contractor has executed a written agreement, validly assigning to the Company
his or her rights in and to all copyrights and works of authorship relating to
products, services or technology designed, developed, manufactured, licensed,
sold, marketed or serviced by the Company and its business to the extent that
the failure to obtain such written agreements is material to the business
condition or future prospects of the Company. To the Company's knowledge, none
of the Company's service providers is in violation of the foregoing agreements.
None of the Company's current service providers is obligated under any contract
(including licenses, covenants or commitments of any nature) or
-23-
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would materially
conflict with the Company's business as conducted or as proposed to be conducted
or that would prevent any such service provider from assigning inventions to the
Company. It is not now and the Company is not aware that it will be necessary
for the Company to utilize any inventions material to the business condition or
future prospects of the Company of any of its service providers (or people it
currently intends to hire) made prior to their employment by or relationship
with the Company, that are material to the business condition or future
prospects of the Company.
2.35 FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person acting on behalf
of the Company has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company,
subject to such exceptions as specifically disclosed with respect to specific
sections of this ARTICLE 3 in the Parent Disclosure Schedule delivered herewith
and dated as of the date hereof, as follows:
3.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware,
and 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 all requisite corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use and lease
its Assets and Properties. Each of Parent and Merger Sub is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use, licensing or leasing of its Assets and Properties,
or the conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
Material Adverse Effect on Parent or Merger Sub. Neither Parent or Merger Sub is
in material violation of any of the provisions of its certificate of
incorporation or bylaws.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Sub has
full corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements, to perform its respective obligations hereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Parent and Merger Sub of this Agreement and the Ancillary Agreements
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate and shareholder action of Parent and Merger Sub, and no other
corporate
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action on the part of either Parent or Merger Sub is required to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation by Parent and Merger Sub of the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements to
which Parent or Merger Sub is a party has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization and the
valid execution and delivery hereof by the Company, constitutes a legal, valid
and binding obligation of Parent and Merger Sub enforceable against Parent and
Merger Sub in accordance with its respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental or Regulatory Authority 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 (i) the filing of the California Agreement of Merger as provided in Section
1.2; (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the securities laws of any foreign country; and (iii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Parent or Merger
Sub and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
3.3 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished or
made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since September 21, 1999, and provided all documents
filed since November 24, 1999, all in the form so filed. As of their respective
filing dates, such SEC Documents filed by Parent and all SEC Documents filed
after the date hereof but before the Closing complied or will comply in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC thereunder, as the case may be, and
none of the SEC Documents contained or will contain any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent such SEC Documents
have been corrected, updated or superseded by a document subsequently filed with
the SEC and if filed after November 24, 1999, provided to the Company. The
financial statements of Parent, including the notes thereto, included in the SEC
Documents (the "PARENT FINANCIAL STATEMENTS") comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to audit adjustments).
There has been no change in Parent's accounting policies except as described in
the notes to the Parent Financial Statements. Except as reflected or reserved
against in the Parent Financial Statements, Parent has no material Liabilities,
except for Liabilities and obligations (i) incurred in the ordinary course of
business since the date of the most recent Parent Financial Statements or (ii)
that would not be required to be reflected or reserved against in the balance
sheet of Parent prepared in accordance with GAAP. Parent has
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filed all SEC Documents required to be filed by it under the Exchange Act and
the Securities Act in a timely manner.
3.4 NO CONFLICTS. The execution and delivery by Parent and Merger Sub of
this Agreement does not, and the performance by Parent of its obligations under
this Agreement and the consummation of the transactions contemplated hereby do
not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Parent or Merger Sub;
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Parent or Merger Sub or their respective Assets or
Properties;
(c) except as would not have a Material Adverse Effect on Parent, (i)
conflict with or result in a violation or breach of, (ii) constitute a default
(or an event that, with or without notice or lapse of time or both, would
constitute a default) under, (iii) require Parent to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result of the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(vi) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon Parent or Merger Sub or any of their respective Assets or
Properties, or (vii) result in the loss of a material benefit under, any of the
terms, conditions or provisions of any Contract or License to which Parent or
Merger Sub is a party or by which any of their Assets and Properties are bound.
3.5 INFORMATION TO BE SUPPLIED BY PARENT. The information supplied by
Parent for inclusion in the Information Statement shall not, on the date the
Information Statement is first mailed to the Company's shareholders and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Company Shareholders Action which
has become false or misleading. Notwithstanding the foregoing, Parent and Merger
Sub make no representation, warranty or covenant with respect to any information
supplied by the Company which is contained in any of the foregoing documents.
3.6 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. As of the date hereof and
the Effective Time, except for obligations or Liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
3.7 INVESTMENT ADVISORS. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in
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connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of Parent or Merger Sub.
3.8 TAX-FREE REORGANIZATION. To the knowledge of Parent after Good Faith
Consultation with Parent's independent accountants and Parent's legal counsel,
neither Parent nor any of its directors, officers or shareholders has taken any
action which could reasonably be expected to jeopardize the status of the Merger
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code.
3.9 CAPITALIZATION. The authorized capital stock of Parent consists of
100,000,000 shares of Common Stock, $0.001 par value per share, 5,000,000 shares
of Preferred Stock, $0.001 par value per share, of which 27,074,948 shares of
Common Stock, and no shares of Preferred Stock were issued and outstanding as
December 1, 1999. The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, and non-assessable.
Based upon, and subject to (i) the representations, warranties and covenants of
the Company set forth herein and (ii) the representations, warranties and
covenants of the Company Shareholders set forth in the Shareholder Certificates,
the shares of Parent Common Stock to be issued pursuant to the Merger if issued
in accordance with the terms of this Agreement, will be issued in compliance
with all applicable federal securities laws.
3.10 THIRD-PARTY CONSENTS. Neither Parent nor Merger Sub is required to
obtain from any third party any consent, waiver or approval for the consummation
of the Merger (other than consents which will be obtained at or prior to the
Closing and consents, the absence of which could not reasonably be expected to
have a Material Adverse Effect on Parent or Merger Sub or to prevent the
consummation of the transactions contemplated by this Agreement).
3.11 DISCLOSURE. None of the representations or warranties made by Parent
or Merger Sub herein or in any Schedule hereto, including Parent Disclosure
Schedule, or certificate furnished by Parent or Merger Sub to the Company or the
Company Shareholders or, when all such documents are read together in their
entirety, contains or will contain at the Effective Time or omits or will omit
at the Effective Time, to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances in which
they were made, not misleading.
3.12 THIRD PARTY BENEFICIARIES. The Company Shareholders shall be third
party beneficiaries of the representations and warranties of Parent and Merger
Sub made in this Article 3.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (unless Parent shall give
its prior consent in writing, which consent shall not be unreasonably withheld)
to carry on its business in the ordinary course consistent with the Company's
fiscal year 1999 budget provided prior to the date of this Agreement to Parent,
to pay its Liabilities and Taxes consistent with the Company's past practices
(and in any event
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when due), to pay or perform other obligations when due consistent with the
Company's past practices (other than Liabilities, Taxes and other obligations,
if any, contested in good faith through appropriate proceedings), and, to the
extent consistent with such business, to use reasonable efforts and institute
all policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having business dealings with it, all
with the express purpose and intent of preserving unimpaired its goodwill and
ongoing businesses at the Effective Time. Except as expressly contemplated by
this Agreement, the Company shall not, without the prior written consent of
Parent, which consent shall not be unreasonably withheld, take, or agree in
writing or otherwise to take, any of the actions described in SECTION 2.5 of
this Agreement, or any other action that would make any of its representations
or warranties contained in this Agreement untrue or incorrect in any material
respect or prevent the Company from performing or cause the Company not to
perform its agreements and covenants hereunder.
4.2 NO SOLICITATION. Until the earlier of the Effective Time or the date of
termination of this Agreement pursuant to the provisions of SECTION 8.1 hereof,
the Company will not take, nor will the Company permit any of its directors,
officers, agents, employees, affiliates, attorneys, accountants, financial
advisers or other representatives (collectively, "REPRESENTATIVES") to (directly
or indirectly): (i) solicit, encourage, initiate, entertain, review or
participate in any negotiations or discussions with respect to an offer or
proposal, oral, written, or otherwise, formal or informal to acquire all or any
part of Company, whether by purchase of assets, exclusive license, joint venture
formation, purchase of stock, business combination or otherwise, (ii) disclose
any information not customarily disclosed to any Person concerning Company and
which Company believes would be used for the purposes of formulating any such
offer or proposal, (iii) assist, cooperate with, facilitate or encourage any
Person to make any offer or proposal to acquire all or any part of Company
(directly or indirectly) (a "COMPETING PROPOSED TRANSACTION"), (iv) other than
affiliates, agree to, enter into a contract regarding, approve, recommend or
endorse any transaction involving a Competing Proposed Transaction, or (v)
authorize or permit any of Company's Representatives to take any such action.
Company shall notify Parent as promptly as practical if any proposal or offer
(formal or informal, oral, written or otherwise), or any inquiry or contact with
any Person with respect thereto, regarding a Competing Proposed Transaction is
made or is outstanding on the date hereof, such notice to include the identity
of the Person proposing such Competing Proposed Transaction and the terms
thereof, and shall keep Parent apprised, on a current basis of the status of any
such Competing Proposed Transaction and of any modifications to the terms
thereof. Company immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties other than Parent conducted
heretofore with respect to any Competing Proposed Transaction.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 INFORMATION STATEMENT; RESTRICTED STOCK.
(a) The Company has prepared, with the cooperation of Parent, an
information statement (the "INFORMATION STATEMENT") for the shareholders of the
Company to
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approve this Agreement, the California Agreement of Merger and the transactions
contemplated hereby and thereby. The Information Statement constitutes a
disclosure document for the offer and issuance of the shares of Parent Common
Stock to be received by the holders of Company Capital Stock in the Merger.
Parent and the Company shall have used reasonable commercial efforts to cause
the Information Statement to comply with applicable federal and state securities
laws requirements. Each of Parent and the Company has provided to the other such
information concerning its business and financial statements and affairs as, in
the reasonable judgment of the providing party or its counsel, may be required
or appropriate for inclusion in the Information Statement, and in any amendments
or supplements thereto, and has caused its counsel and auditors to cooperate
with the other's counsel and auditors in the preparation of the Information
Statement. The Company will promptly advise Parent, and Parent will promptly
advise the Company, in writing if at any time prior to the Effective Time either
the Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Statement contains
the recommendation of the Board of Directors of the Company that the Company
shareholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are advisable and
fair and reasonable to the shareholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company has not included in (and shall not
include in any amendment to) the Information Statement any information with
respect to Parent or its affiliates or associates, the form and content of which
information shall not have been approved by Parent prior to such inclusion.
(b) Parent and the Company shall use commercially reasonable efforts
to effect the issuance of the shares of Parent Common Stock to be issued
pursuant to SECTION 1.6 in a private placement pursuant to Section 4(2) of the
Securities Act and SEC rules and regulations promulgated thereunder, on terms
and conditions that are reasonably satisfactory to Parent. The parties hereto
acknowledge and agree that: (i) as a condition to effecting such issuance as a
private placement pursuant to Section 4(2) of the Securities Act, Parent shall
be entitled to obtain from each shareholder of the Company a Shareholder
Certificate in the form attached hereto as EXHIBIT C (or such other form as
shall be reasonably satisfactory to Parent) and that Parent will be relying upon
the representations made by each shareholder of the Company in the applicable
Shareholder Certificate in connection with the issuance of Parent Common Stock
to such shareholder, (ii) the shares of Parent Common Stock so issued pursuant
to SECTION 1.6 will not be registered under the Securities Act at the Effective
Time and will constitute "restricted securities" within the meaning of the
Securities Act until such time as they are subsequently registered under the
Securities Act or are otherwise transferable pursuant to an exemption from the
registration requirements thereof; and (iii) the certificates representing the
shares of Parent Common Stock shall bear appropriate legends to identify such
privately placed shares as being restricted under the Securities Act, to comply
with applicable state securities laws and, if applicable, to notice the
restrictions on transfer of such shares.
5.2 SHAREHOLDER APPROVAL. The Company has given written notice of this
Agreement and the Company Shareholders Action to all Company shareholders and
has used its best efforts to take all other action necessary in accordance with
California Law and its articles of incorporation and bylaws to secure the
written consent of all of its shareholders. The Company shall not take any
action to encourage the withdrawal of any such consent prior to the
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Effective Time. The materials which have been submitted to the shareholders of
the Company in respect of the Merger have been subject to prior review and
comment by Parent and have included information regarding the Company, the terms
of the Merger and this Agreement, the unanimous recommendation of the Board of
Directors of the Company in favor of the Merger, this Agreement and the
transactions contemplated hereby and such other documents (including the
Shareholder Certificate) in order to satisfy the applicable the requirements of
the Securities Act and SEC rules and regulations promulgated thereunder in
connection with the issuance and sale of Parent Company Stock in the Merger.
5.3 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Parent, Merger Sub and their
respective officers, employees, accountants and counsel reasonably full access
to all buildings, offices, and other facilities and to all Books and Records of
the Company, whether located on the premises of the Company or at another
location; (ii) permit Parent and Merger Sub to make such inspections as they may
reasonably require; (iii) cause its officers to furnish Parent and Merger Sub
such financial, operating, technical and product data and other information with
respect to the business and Assets and Properties of the Company as Parent and
Merger Sub from time to time may reasonably request, including financial
statements and schedules; (iv) allow Parent and Merger Sub the opportunity to
interview such employees and other personnel and Affiliates of the Company with
the Company's prior written consent, which consent shall not be unreasonably
withheld or delayed; and (v) assist and cooperate with Parent and Merger Sub in
the development of integration plans for implementation by Parent and the
Surviving Corporation following the Effective Time; PROVIDED, HOWEVER, that no
investigation pursuant to this SECTION 5.3 shall affect or be deemed to modify
any representation or warranty made by the Company herein.
5.4 CONFIDENTIALITY. The parties acknowledge that Parent and the Company
have previously executed a non-disclosure agreement (the "CONFIDENTIALITY
AGREEMENT"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms. Without limiting the foregoing, all
information furnished to Parent, Merger Sub and their respective officers,
employees, accountants and counsel by the Company, and all information furnished
to the Company by Parent and its respective officers, employees, accountants and
counsel, shall be covered by the Confidentiality Agreement, and Parent and the
Company shall be fully liable and responsible under the Confidentiality
Agreement for any breach of the terms and conditions thereof by their respective
subsidiaries (including Merger Sub), officers, employees, accountants and
counsel.
5.5 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("THIRD PARTY EXPENSES") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses; PROVIDED, that, if the Merger is
consummated, Parent agrees to pay Third Party Expenses of up to $50,000
(excluding fees set forth on Schedule 5.5) incurred by the Company and the
Company agrees that Parent will have full recourse to the Escrow Fund pursuant
to Article 7 for payment of Third Party Expenses in excess of $50,000 (excluding
fees set forth on Schedule 5.5) whether such Third Party Expenses have been paid
by
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the Company, accrued by the Company or have been incurred (and not accrued
and paid) by the Company.
5.6 PUBLIC DISCLOSURE. Unless otherwise required by Law (including federal
and state securities laws) or, as to Parent, by the rules and regulations of the
NASD, prior to the Effective Time, no public disclosure (whether or not in
response to any inquiry) of the existence of any subject matter of, or the terms
and conditions of, this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release; PROVIDED, HOWEVER, that
such approval shall not be unreasonably withheld or delayed.
5.7 APPROVALS. Parent and the Company shall use all commercially reasonable
efforts required to obtain all Approvals from Governmental or Regulatory
Authorities or under any of the Contracts or other agreements as may be required
in connection with the Merger (all of which Approvals are set forth in the
Disclosure Schedule) so as to preserve all rights of and benefits to the Company
thereunder and Parent and the Company shall provide each other with such
assistance and information as is reasonably required to obtain such Approvals.
5.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this SECTION 5.8 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.9 POOLING OF INTERESTS ACCOUNTING. The Company, Parent and Merger Sub
have used and shall continue to use their respective best efforts (i) to allow
the business combination to be effected by the Merger to be accounted for as a
Pooling of Interests from and after the Effective Time, and (ii) to cause their
respective employees, directors, shareholders, Affiliates and Associates not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the Merger as a Pooling of Interests
from and after the Effective Time.
5.10 COMPANY AFFILIATE AGREEMENTS. SCHEDULE 5.10 sets forth those persons
who, in the Company's reasonable judgment, after consultation with legal counsel
and accounting advisors, are or could reasonably be expected to be deemed to be
Affiliates of the Company. Company shall use its commercially reasonable efforts
to deliver or cause to be delivered to Company prior to the Closing an executed
Company Affiliate Agreement, in the form attached hereto as EXHIBIT I from each
of the Company Affiliates contemporaneously with the execution and delivery of
this Agreement.
5.11 PARENT AFFILIATE AGREEMENTS. SCHEDULE 5.11 sets forth those persons
who, in Parent's reasonable judgment, after consultation with legal counsel and
accounting advisors, are or could reasonably be expected to be deemed to be
Affiliates of Parent. Parent shall use its commercially reasonable efforts to
deliver or cause to be delivered to Parent prior to the Closing
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from each of the Parent Affiliates, an executed Parent Affiliate Agreement, in
the form attached hereto as EXHIBIT J from each of the Parent Affiliates
contemporaneously with the execution and delivery of this Agreement.
5.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of the other party hereto, has used and shall use all requisite
commercially reasonable efforts to execute and deliver such other instruments
(including the execution by Company of the resolution and amendment to terminate
Company's 401(k) Plan prior to Closing) and do and perform such other acts and
things (including all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government or Regulatory Authority or Person
required in connection with the Merger; PROVIDED, HOWEVER, that Parent shall not
be obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval,
except statutory or regulatory fees in connection with approvals from any
Government or Regulatory Authority) as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.13 FORM S-8. Parent shall file a registration statement on Form S-8 for
the shares of Parent Common Stock issuable with respect to assumed Company
Options to the extent the shares of Parent Common Stock issuable upon exercise
of such Company Options qualify for registration on Form S-8 prior to the
expiration of the lock-up period set forth in the form of Lock-Up Agreement
attached hereto as EXHIBIT L.
5.14 COMPANY'S AUDITORS. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (ii) the review of any Company audit or review work
papers including the examination of selected audited financial statements and
data, and (iii) the delivery of such representations from the Company's
independent accountants as may be reasonably requested by Parent or its
accountants.
5.15 ADDITIONAL AFFILIATE AGREEMENTS. Each of the Company and Parent agrees
that if any Person would have been a Company Affiliate or Parent Affiliate had
such Person been a shareholder of the Company or Parent, respectively, as of the
date of this Agreement, the Company or Parent, as appropriate, shall use
commercially reasonable efforts to cause such person to execute and deliver to
the Company or Parent a Company Affiliate Agreement or Parent Affiliate
Agreement, as appropriate, promptly upon such Person attaining such status.
5.16 DIRECTORS' AND OFFICERS' INDEMNIFICATION. From and after the Effective
Time, Parent will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers existing prior to
the date hereof (copies of which have been provided to Parent).
(a) Parent shall (i) assume, as of the Effective Time, and shall
perform, for a period of three (3) years from and after the Effective Time, all
obligations of the Company under Article IV of the Company Restated Articles and
Article VI of the Bylaws of the Company, in each case as such instruments were
in effect on the date hereof and whether or not such
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instruments have thereafter been amended or repealed, and (ii) shall pay all
amounts that become due and payable under such provisions (or would become due
under such provisions if such provisions had remained in force during such
three-year period).
(b) This SECTION 5.16 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Company and each indemnified
party, shall be binding, jointly and severally, on all successors and assigns of
the Surviving Corporation and Parent, and shall be enforceable by the
indemnified persons.
(c) Notwithstanding anything to the contrary in this SECTION 5.16,
Parent and the Surviving Corporation shall not be liable for any amounts payable
to an indemnified person resulting from any claim or action brought by such
indemnified person of the Company or any of their Affiliates.
(d) The Company hereby represents and warrants to Parent that no claim
for indemnification has been made by any director or officer of the Company and,
to the knowledge of the Company, no basis exists for any such claim for
indemnification.
5.17 BENEFIT ARRANGEMENTS. Parent and the Company agree that, following the
Effective Time, Parent will provide (or will cause the Company to provide)
benefits to the Company's employees as of the Effective Time (other than with
respect to contributions by the Company to the Company 401(k) Plan, as to which
no comparable contributions are made by Parent) that are at least as favorable,
taken as a whole, as the benefits currently provided to employees of Parent
performing functions similar to those to be performed by such Company employees
after the Effective Time. From and after the Effective Time, Parent shall grant
Company employees as of the Effective Time credit for all service (to the same
extent as service with Parent is taken into account with respect to similarly
situated employees of Parent) with the Company prior to the Effective Time for
(i) eligibility and vesting purposes and (ii) for purposes of vacation accrual
after the Effective Time as if such service with the Company was service with
Parent. Parent and the Company agree that where applicable with respect to any
medical or dental benefit plan of Parent, Parent shall provide that any covered
expenses incurred on or before the Effective Time by a Company employee or a
Company employee's covered dependents shall be taken into account for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of Parent.
5.18 TREATMENT AS REORGANIZATION. Neither Parent nor Merger Sub nor the
Company shall take any action prior to or following the Closing that would cause
the merger to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
5.19 REGISTRATION OF PARENT COMMON STOCK. Parent shall prepare and file a
registration statement covering the non-underwritten resale of the shares of
Parent Common Stock issued in the Merger (excluding such shares as are
resaleable without restriction under the Securities Act pursuant to any
exemption therefrom) and shall use its reasonable best efforts to cause such
registration statement to become effective not later than August 13, 2000 and to
remain effective until the first anniversary of the Closing Date. Any such
registration shall be subject to the normal terms and conditions used in
connection with resale prospectuses as may be
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required by any underwriters or under applicable rules and regulations of the
SEC, NASD or other regulatory authorities.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated by this Agreement shall have been timely obtained
(other than with respect to the receipt of Parent Common Stock by a shareholder
of the Company) or shall have expired or been terminated.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger shall be in effect; nor shall there be any action taken, or any
Law or Order enacted, entered, enforced or deemed applicable to the Merger or
the other transactions contemplated by the terms of this Agreement that would
prohibit the consummation of the Merger or which would permit consummation of
the Merger only if certain divestitures were made or if Parent were to agree to
limitations on its business activities or operations.
(c) TAX OPINIONS. Parent and the Company shall each have received
written opinions from their counsel, in form and substance reasonably
satisfactory to each of them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a)of the Internal Revenue Code.
The parties to this Agreement agree to make such reasonable representations as
requested by such counsel for the purpose of rendering such opinions.
(d) SHAREHOLDER APPROVAL. The Merger shall have been approved by the
written consent of holders of at least ninety-five percent (95%) of the Company
Capital Stock issued and outstanding on the record date set for determining
shareholders of the Company entitled to vote upon the Merger.
(e) OPINION OF ACCOUNTANTS. Parent and the Company shall each have
received letters, dated on or prior to the Closing Date, from KPMG LLP and Ernst
& Young LLP regarding those firms' concurrence with Parent management's and
Company management's conclusions, respectively, as to the appropriateness of
accounting for the Merger as a Pooling of Interests if the Merger is closed and
consummated in accordance with this Agreement.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) when made and (other than representations
and warranties which by their express terms are made solely as of a specified
earlier date) on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall be true
and correct in all material respects (if not qualified by materiality) and in
all respects (if qualified by materiality) on and as of such earlier date,
except where the failure to be true and correct could not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect on Parent or Merger Sub.
(b) PERFORMANCE. Parent and Merger Sub shall have performed and
complied with in all material respects each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Parent or
Merger Sub at or before the Closing.
(c) OFFICERS' CERTIFICATES. Parent and Merger Sub shall have delivered
to the Company certificates, dated the Closing Date and executed by their
respective President and Chief Executive Officers, substantially in the forms
set forth in EXHIBIT D-1 hereto, and certificates, dated the Closing Date and
executed by the Secretary of Parent and Merger Sub, substantially in the forms
set forth in EXHIBIT D-2 hereto.
(d) LEGAL OPINION. The Company shall have received a legal opinion
from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, legal counsel to Parent and Merger Sub, as
to the matters set forth on EXHIBIT E hereto.
(e) QUALIFICATION AS A PRIVATE PLACEMENT. The parties shall be
reasonably satisfied that the shares of Parent Common Stock to be issued in
connection with the Merger pursuant to SECTION 1.6(a) are issuable without
registration pursuant to Section 4(2) of the Securities Act and SEC rules and
regulations promulgated thereunder.
(f) PARENT AFFILIATE AGREEMENT. Each Parent Affiliate shall have
executed and delivered to the Company and Parent a Parent Affiliate Agreement in
the form attached hereto as EXHIBIT J which agreement shall be in full force and
effect.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) when made and (other than representations and
warranties which by their express terms are made solely as of a specified
earlier date) on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date; and any representation or
warranty made as of a specified date earlier than the Closing Date shall be true
and correct in all material respects (if not qualified by materiality) and in
all respects
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(if qualified by materiality) on and as of such earlier date, except where the
failure to be true and correct could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Company.
(b) PERFORMANCE. The Company shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date.
(c) OFFICERS' CERTIFICATES. The Company shall have delivered to Parent
a certificate, dated the Closing Date and executed by its President and Chief
Executive Officer of the Company, substantially in the form set forth in EXHIBIT
F-1 hereto, and a certificate, dated the Closing Date and executed by the
Secretary of the Company, substantially in the form set forth in EXHIBIT F-2
hereto.
(d) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Section 2.28 of the Disclosure Schedule (except
for such consents, approvals and waivers the failure of which to receive could
not reasonably be expected to have a Material Adverse Effect on the Surviving
Corporation).
(e) LEGAL OPINION. Parent shall have received a legal opinion from
Venture Law Group, legal counsel to the Company, as to the matters set forth on
EXHIBIT G hereto.
(f) NON-COMPETITION AGREEMENTS. Each of Xxxxxx Xxxxxxxx and Xxxxx
Xxxxxx shall have executed and delivered to Parent a Non-Competition Agreement
in the form attached hereto as EXHIBIT H-1 and each of Xxxx Xxxxxxx and Xxx
Xxxxx shall have executed and delivered to Parent a Non-Competition Agreement in
the form attached hereto as EXHIBIT H-2, and all of such Non-Competition
Agreements shall be in full force and effect.
(g) LIMITATION ON DISSENT. The holders of at least 95% of the
outstanding shares of Company Capital Stock shall have consented to the Merger
in writing or otherwise acted in such a way as to waive or terminate any
dissenter's rights they may have under the California Code.
(h) FIRPTA COMPLIANCE. The executed statement in the form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3) previously delivered by the Company
to Parent shall continue to be in full force and effect.
(i) LEGAL PROCEEDINGS. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(j) TERMINATION OF PENSION PLAN. The Company shall have terminated the
Company 401(k) Plan and no further contributions shall have been made to the
401(k) Plan. The
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Company shall have provided to Parent (i) executed resolutions by the Board of
Directors of the Company authorizing the termination and (ii) an executed
amendment to the 401(k) Plan sufficient to assure compliance with all applicable
requirements of the Internal Revenue Code and regulations thereunder so that the
tax-qualified status of the 401(k) Plan will be maintained at the time of
termination.
(k) AFFILIATE AND SHAREHOLDER AGREEMENTS. Each Company Affiliate shall
have executed and delivered to the Company and Parent a Company Affiliate
Agreement in the form attached hereto as EXHIBIT I, and such agreement shall be
in full force and effect.
(l) EMPLOYEES. The employees of the Company set forth on SCHEDULE
6.3(l) shall continue to be employed by the Company at the Closing (and shall
not have given any notice or other indication that they are not willing to be
employed by Parent or a Subsidiary of Parent (as Parent shall designate),
following the Merger.
(m) QUALIFICATION AS A PRIVATE PLACEMENT. Each of the shareholders of
the Company who is an "accredited investor" shall have delivered an executed
copy of the Shareholder Certificate, and Parent shall be reasonably satisfied
that the shares of Parent Common Stock to be issued in connection with the
Merger pursuant to SECTION 1.6(a) are issuable without registration pursuant to
Section 4(2) of the Securities Act and SEC rules and regulations promulgated
thereunder.
(n) CERTAIN WAIVERS. The holders of all Company Convertible Promissory
Notes which are not by their own terms convertible into Company Capital Stock
upon or prior to the consummation of the Merger shall have delivered to Parent
written waivers, in form reasonably satisfactory to Parent, waiving any
provisions of such notes requiring or purporting to require payment in cash of
the amounts due thereunder as a result of the Merger and accepting the
consideration provided by SECTION 1.6 of this Agreement in lieu of payment in
cash; and the holders of all outstanding shares of Company Preferred Stock
immediately prior to the Effective Time shall have executed and delivered
waivers to Parent and the Company, in form reasonably acceptable to Parent,
accepting the consideration provided by SECTION 1.6 of this Agreement in lieu of
any other consideration that might be claimed by any such holder pursuant to the
Company Restated Articles and unconditionally and irrevocably waiving and
releasing all right or claim that such holder might have or assert in respect of
such consideration pursuant to the provisions of Section 2(c) of the Company
Restated Articles relating to payment in cash and the provisions of Section
2(c)(iv) of the Company Restated Articles relating to the "Effect of
Noncompliance." Sufficient outstanding shares of Company Preferred Stock shall
have been converted into Company Common Stock such that a majority of the
outstanding Company Capital Stock shall be Company Common Stock.
(o) LOCK-UP AGREEMENTS. Each of holder Equity Equivalents who is a
party to a security issuance agreement that includes a lock-up provision shall
have entered into a lock-up agreement in the form attached hereto as EXHIBIT L.
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ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to SECTION 5.3 or otherwise) or a waiver by Parent or the
Company of any condition to Closing set forth in ARTICLE 6, each party shall
have the right to rely fully upon the representations, warranties, covenants and
agreements of the other party contained in this Agreement or in any instrument
delivered pursuant to this Agreement. Except for the Audit Representations,
which shall survive the Merger and continue until the Audit Expiration Date, the
representations and warranties of the Company in this Agreement, all covenants
and agreements of the Company which by their terms are to be performed on or
prior to the Closing Date, all representations and warranties of Parent and
Merger Sub, and all covenants and agreements of Parent and Merger Sub which by
their terms are to be performed on or prior to the Closing Date, contained in
this Agreement or in any certificate delivered pursuant to SECTION 6.2(c) or
SECTION 6.3(c) of this Agreement shall survive the Merger and continue until the
General Expiration Date.
7.2 ESCROW PROVISIONS.
(a) ESTABLISHMENT OF THE ESCROW FUND. As soon as practicable after the
Effective Time, the Escrow Amount, without any act of any shareholder, will be
deposited with the Depositary Agent (plus a proportionate share of any
additional shares of Parent Common Stock as may be issued upon any stock splits,
stock dividends or recapitalizations effected by Parent following the Effective
Time), such deposit to constitute the "ESCROW FUND" to be governed by the terms
set forth herein. Notwithstanding any other provision of this Agreement to the
contrary, it is agreed that such terms may be changed, with the consent of
Parent and the Shareholders' Agent (which consent shall not be unreasonably
withheld), as necessary from time to time to comply with then current
interpretations of the requirements of paragraph 47(g) of APB Opinion Xx. 00,
Xxxxxxxxxxxxxx 00 xx XXX 00 issued by the AICPA, and the interpretations of the
staff of the SEC to the extent such interpretations shall apply to the
transactions contemplated by this Agreement. The portion of the Escrow Amount
contributed on behalf of each shareholder of the Company shall be in proportion
to the aggregate number of shares of Parent Common Stock which such holder would
otherwise be entitled under SECTION 1.6.
(b) INDEMNIFICATION. Subject to the limitations set forth in this
Article VII, if the Merger is consummated, the Company's shareholders at the
Effective Time shall indemnify and hold harmless Parent and the Surviving
Corporation and their respective officers, directors, employees, agents,
Affiliates or Associates (the "INDEMNIFIED PERSONS"), directly or indirectly,
for any and all Losses (whether or not involving a Third Party Claim), incurred
or sustained by the Indemnified Persons, directly or indirectly, as a result of
any inaccuracy, breach or default in connection with any representation,
warranty, covenant or agreement of the Company contained in this Agreement, the
Company Disclosure Schedule, any Schedule to this Agreement or any Ancillary
Agreement, including (without limitation) any inaccuracy, breach or default in
connection with an Identified Risk.
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(c) RECOURSE TO THE ESCROW FUND. The Escrow Amount shall be available
as security for the indemnification obligations of the Company's shareholders.
The Escrow Amount shall serve as an absolute limitation on liability of the
Company, or the Company's officers, directors, employees, shareholders,
Affiliates or Associates for any Losses, provided, however, that this limitation
shall not apply to Losses that are related to an Identified Risk or the result
of fraud. Notwithstanding the foregoing, nothing in this agreement shall be
construed to limit the amount which may be recovered by the Indemnified Persons
from the Company shareholders through the indemnity provided by Section 7.2 or
through any other remedy as a result of Losses relating to an Identified Risk or
in the event of fraud. Recovery from the Escrow Fund as provided in this Article
7 shall be the Indemnified Persons' sole and exclusive remedy for Losses other
than Losses relating to an Identified Risk or fraud.
(i) No investigation made by or on behalf of Parent with respect to
the Company shall be deemed to affect Parent's reliance on the representations,
warranties, covenants and agreements made by the Company contained in this
Agreement and shall not be waiver of Parent's rights to indemnity as herein
provided for the breach or inaccuracy of, or failure to perform or comply with,
any of the Company's representations, warranties, covenants or agreements under
this Agreement. All representations and warranties set forth in this Agreement
shall be deemed to have been made again by the Company at and as of the Closing.
No performance or execution of this Agreement in whole or in part by any party
hereto, no course of dealing between or among the parties hereto or any delay or
failure on the part of any party in exercising any rights hereunder or at law in
equity, and no investigation by any party hereto shall operate as a waiver of
any rights of such party.
(ii) Subject to the limitations provided in this ARTICLE 7, the
shareholders of the Company shall have liabilities and obligations of Losses (as
defined herein) under this ARTICLE 7 only with respect to claims submitted or
notice of claims provided during the time period of survivability of the
specific representation, warranty, covenant or agreement as set forth below in
Section 7.2(d). Notwithstanding the expiration date of the representations,
warranties, covenants and agreements set forth herein, if Parent shall notify in
writing the Depositary Agent with respect to the submission of a claim during
the time period of survivability of such representation, warranty, covenant or
agreement in conformity with the terms of the Escrow Agreement, such liability
or obligation of Losses shall continue in full force and effect until those
claims timely made are finally resolved.
(iii) Notwithstanding the foregoing, Parent may not receive any
shares from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 7.2(f)(i) below) identifying Losses the
aggregate amount of which exceeds $100,000 has been delivered to the Depositary
Agent as provided in Section 7.2(c) below and such amount is determined pursuant
to this ARTICLE 7 to be payable, in which case Parent shall receive shares equal
in value to the full amount of Losses (including the first $100,000); provided,
however, that except in the case of Losses resulting from an Identified Risk or
from fraud, Parent shall not receive more than the number of shares of Parent
Common Stock placed in the Escrow Fund.
(d) ESCROW PERIOD; DISTRIBUTION OF ESCROW FUND UPON TERMINATION OF
ESCROW PERIOD. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at 5
p.m., Pacific Time, on the
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General Expiration Date (the period of time from the Effective Time through and
including the General Expiration Date is referred to herein as the "ESCROW
PERIOD"); and upon the General Expiration Date all shares of Parent Common Stock
remaining in the Escrow Fund shall promptly be distributed as set forth in the
last sentence of this SECTION 7.2(d). Parent shall promptly notify the
Depositary Agent of the Audit Expiration Date once such date is established.
Upon termination of the Escrow Period the Depositary Agent shall promptly
deliver to the shareholders of the Company the remaining portion of the Escrow
Fund not required to satisfy such claims. Notwithstanding any provision to the
contrary herein, no shares of Parent Common Stock in the Escrow Fund shall be
distributed to the Company Shareholders prior to the General Expiration Date.
Deliveries of shares of Parent Common Stock remaining in the Escrow Fund to the
Company Shareholders pursuant to this SECTION 7.2(d) shall be made ratably in
proportion to their respective contributions to the Escrow Fund and Parent shall
use all requisite commercially reasonable efforts to have such shares delivered
as promptly as possible after such resolution. Upon termination of the Escrow
Period, subject to Section 7.2(f) below, Parent and the Shareholders' Agent will
together notify the Depositary Agent in writing that the Escrow Fund may be
distributed and the allocation of such distribution. The Depositary Agent will
not have any liability in respect thereof, but shall be fully protected in
relying on such notice.
(e) PROTECTION OF ESCROW FUND.
(i) The Depositary Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other Equity Equivalents
securities issued or distributed by Parent ("NEW SHARES") in respect of Parent
Common Stock in the Escrow Fund which have not been released from the Escrow
Fund shall be added to the Escrow Fund. New Shares issued in respect of shares
of Parent Common Stock which have been released from the Escrow Fund shall not
be added to the Escrow Fund but shall be distributed to the record holders
thereof. Cash dividends on Parent Common Stock shall not be added to the Escrow
Fund but shall be distributed to the record holders of the Parent Common Stock
on the record date set for any such dividend.
(iii) Each shareholder shall have voting rights with respect to the
shares of Parent Common Stock contributed to the Escrow Fund by such shareholder
(and on any voting securities added to the Escrow Fund in respect of such shares
of Parent Common Stock). Notwithstanding the foregoing, the Depositary Agent
shall have no duty or obligation to monitor or take any action with respect to
the foregoing paragraph.
(f) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Depositary Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will pay or accrue a Loss,
directly or indirectly, as a result of any inaccuracy or breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any
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Ancillary Agreement, and (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 accrued, or the basis for such anticipated liability, the
nature of the misrepresentation, breach of warranty, agreement or covenant to
which such item is related and the number of shares of Parent Common Stock to be
delivered to Parent in respect of such Losses, the Depositary Agent shall,
subject to the provisions of SECTION 7.2(g) hereof, deliver to Parent out of the
Escrow Fund, as promptly as practicable, shares of Parent Common Stock held in
the Escrow Fund in an amount equal to such Losses. Notwithstanding the
foregoing, where the basis for an claim upon the Escrow Fund by Parent is that
Parent reasonably anticipates that it will pay or accrue a Loss, no payment will
be made from the Escrow Fund for such Loss unless and until such Loss is
actually paid or accrued.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
SECTION 7.2(f)(i), the shares of Parent Common Stock shall be valued at the
price per share of the Common Stock of Parent on the Closing Date.
(g) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Depositary Agent, a duplicate copy of such certificate shall
be delivered to the Shareholders' Agent and for a period of thirty (30) days
after such delivery, the Depositary Agent shall make no delivery to Parent of
any Parent Common Stock or other cash or property held in the Escrow Fund
pursuant to SECTION 7.2(f) hereof unless the Depositary Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Depositary
Agent shall make delivery of shares of Parent Common Stock from the Escrow Fund
in accordance with SECTION 7.2(f) hereof, provided that no such payment or
delivery may be made if the Shareholders' 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 Depositary Agent prior to the expiration of
such thirty (30) day period.
(h) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Shareholders' Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Shareholders' 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 Shareholders' 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 Depositary
Agent. The Depositary Agent shall be entitled to rely on any such memorandum and
distribute shares of Parent Common Stock from the Escrow Fund in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may demand arbitration of
the dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three (3) arbitrators, one (1) selected by Parent and one (1)
selected by the Shareholders' Agent, and the two (2) arbitrators selected by
Parent and the Shareholders' Agent 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 of information relating to any
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dispute while allowing the parties an opportunity, adequate as determined in the
sole judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators shall
rule upon motions to compel, limit or allow discovery as they shall deem
appropriate given the nature and extent of the disputed claim. The arbitrators
shall also have the authority to impose sanctions, including attorneys' fees and
other costs incurred by the parties, to the same extent as a court of law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to by a
party without substantial justification. The decision of a majority of the three
(3) arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in SECTION 7.2(f) hereof, the Depositary Agent
shall be entitled to act, and shall incur no liability in acting, in accordance
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions regarding the dispute 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 competent jurisdiction. Any such arbitration shall
be held in the county of Santa Clara, California under the commercial rules of
arbitration then in effect of the American Arbitration Association. For purposes
of this SECTION 7.2(h), 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 of any Losses
plus any amounts not in dispute; otherwise, the shareholders of the Company as
represented by the Shareholders' Agent shall be deemed to be the Non-Prevailing
Party. The Non-Prevailing Party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration and the
expenses, including reasonable attorneys' fees and costs, incurred by the other
party to the arbitration.
(i) SHAREHOLDERS' AGENT; POWER OF ATTORNEY.
(i) In the event that the Merger is approved by the shareholders of
the Company, effective upon such vote, and without further act of any
shareholder, Xxxxxx Xxxxx shall be appointed as agent and attorney-in-fact (the
"SHAREHOLDERS' AGENT") for each shareholder of the Company (except such
shareholders, if any, as shall have perfected their appraisal or dissenters'
rights under the California Code), for and on behalf of shareholders of the
Company, to give and receive notices and communications, to authorize delivery
to Parent of shares 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 the Shareholders'
Agent for the accomplishment of the foregoing. Such agency may be changed by the
shareholders of the Company from time to time upon not less than ten (10)
business days prior written notice to Parent and the Depositary Agent; PROVIDED,
HOWEVER, that the Shareholders' Agent may not be removed unless holders of a
two-thirds interest in the Escrow Fund agree to such removal and to the identity
of the substituted Shareholders' Agent. Any vacancy in the position of
Shareholders' Agent may be filled by approval of the holders of a majority in
interest
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of the Escrow Fund. No bond shall be required of the Shareholders' Agent, and
the Shareholders' Agent shall not receive compensation for his services. After
the Effective Time, Notices or communications to or from the Shareholders' Agent
shall constitute notice to or from each of the shareholders of the Company.
(ii) The Shareholders' Agent shall not be liable for any act done
or omitted hereunder as Shareholders' Agent while acting in good faith and in
the exercise of reasonable judgment.
(iii) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
(j) ACTIONS OF THE SHAREHOLDERS' AGENT. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all the
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such shareholders, and the Depositary Agent and Parent may rely upon any
such decision, act, consent or instruction of the Shareholders' Agent as being
the decision, act, consent or instruction of every such shareholder of the
Company. The Depositary 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 Shareholders' Agent.
(k) THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim (a "THIRD PARTY CLAIM") which Parent reasonably expects may
result in a demand against the Escrow Fund, Parent shall promptly notify the
Shareholders' Agent of such claim, and the Shareholders' Agent, as
representative for the shareholders of the Company, shall be entitled, at their
expense, to participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any Third Party Claim; PROVIDED, HOWEVER,
that if Parent settles any Third Party Claim without the Shareholders' Agent's
consent (which consent shall not be unreasonably withheld or delayed), Parent
may not make a claim against the Escrow Fund with respect to the amount of
Losses incurred by Parent in such settlement.
(l) DEPOSITARY AGENT'S DUTIES.
(i) The Depositary Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and with the
consent of the Depositary Agent, which consent shall not be unreasonable
withheld, as set forth in any additional written escrow instructions which the
Depositary Agent may receive after the date of this Agreement which are signed
by an officer of Parent and the Shareholders' 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 Depositary Agent shall not be liable for any act taken, suffered
or omitted hereunder as Depositary Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
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advice of counsel shall be conclusive evidence of such good faith.
(ii) The Depositary Agent is hereby expressly authorized to comply
with and obey Orders of any court of law or Governmental or Regulatory
Authority, notwithstanding any notices, warnings or other communications from
any party or any other person to the contrary. In case the Depositary Agent
obeys or complies with any such Order, the Depositary Agent shall be fully
protected and shall not be liable to any of the parties hereto or to any other
Person by reason of such compliance, notwithstanding any such Order being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction or proper authority.
(iii) The Depositary 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 Depositary 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 Depositary Agent.
(v) In performing any duties under the Agreement, the Depositary
Agent shall not be liable to any Person for any damages, losses, liabilities,
penalties, claims, settlements, judgments, costs or expenses, except for gross
negligence or willful misconduct on the part of the Depositary Agent (each as
may be finally determined by a court of competent jurisdiction). The Depositary
Agent shall not incur any such liability for any action taken, suffered or
omitted in reliance upon any instrument, including any written statement or
affidavit provided for in this Agreement that the Depositary Agent shall in good
faith believe to be genuine, nor will the Depositary Agent be liable or
responsible for forgeries, fraud, impersonations or determining the scope of any
representative authority. In addition, the Depositary Agent may consult with
legal counsel in connection with the Depositary Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by him/her in good faith in accordance with the advice of counsel. The
Depositary Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement. Anything to the contrary notwithstanding, in no event shall the
Depositary Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Depositary Agent has been advised of the likelihood
of such loss or damage. Except for liability resulting from willful misconduct
or gross negligence on the part of the Depositary Agent, any liability of the
Depositary Agent under this Agreement will be limited to the amount of fees paid
by the Parent to the Depositary Agent.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Depositary Agent will not be required to
determine the controversy or to take any action regarding it. The Depositary
Agent may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Depositary Agent's discretion, the Depositary Agent may
be required, despite what may be set forth elsewhere in this Agreement. In such
event, the Depositary Agent
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will not be liable for any damages. Furthermore, the Depositary Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Depositary Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all costs, expenses, charges and
reasonable attorney fees incurred by the Depositary Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Depositary Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) Parent, the Company, Merger Sub and their respective
successors and assigns agree jointly and severally to indemnify and hold the
Depositary Agent harmless against any and all Losses incurred by the Depositary
Agent in connection with its acceptance and the performance of the Depositary
Agent's duties under this Agreement, including any litigation arising from this
Agreement or involving its subject matter. The indemnity provided herein shall
survive the termination of this Agreement and the termination and expiration of
the Escrow Account. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Parent.
(viii) The Depositary Agent may resign at any time upon giving at
least 30 days written notice to the parties; PROVIDED, HOWEVER, that no such
resignation shall become effective until the appointment of a successor
depositary agent which shall be accomplished as follows: Parent and the
Shareholders' Agent shall use their commercially reasonable efforts to mutually
agree on a successor depositary agent within thirty (30) days after receiving
such notice. If the parties fail to agree upon a successor depositary agent
within such time, the Depositary Agent shall have the right to appoint a
successor depositary agent authorized to do business in the State of California
or to petition a court of competent jurisdiction to appoint a successor
Depositary agent. The successor depositary agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor depositary agent as if originally named as depositary agent. The
Depositary Agent shall be discharged from any further duties and liability under
this Agreement.
(m) FEES. All fees of the Depositary Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the fee schedule
that will be attached to this Agreement prior to the Closing as EXHIBIT K. In
the event that the conditions of this Agreement are not promptly fulfilled, or
if the Depositary Agent renders any service not provided for in this Agreement,
or if the parties request a substantial modification of its terms (which is
consented to by the Depositary Agent, such consent not to be unreasonably
withheld), or if any controversy arises, or if the Depositary Agent is made a
party to, or intervenes in, any Action or Proceeding pertaining to this escrow
or its subject matter, the Depositary Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs, attorney's fees, and
expenses occasioned by such default, delay, controversy or Action or Proceeding.
Parent agrees to pay these sums upon demand.
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in SECTION 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual written agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time
has not occurred before 5 p.m. (Pacific Time) on a date which is ten (10)
business days following the date hereof (PROVIDED, HOWEVER, that the right to
terminate this Agreement under this SECTION 8.1(b)(i) shall not be available to
any party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date); (ii) there shall be a final nonappealable order of a federal
or state court in effect preventing consummation of the Merger; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental or Regulatory Authority
that would make consummation of the Merger illegal.
8.2 EFFECT OF TERMINATION. In the event of a valid termination of this
Agreement as provided in SECTION 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or shareholders or
Affiliates or Associates; PROVIDED, HOWEVER, that each party shall remain liable
for any breaches of this Agreement prior to its termination; and PROVIDED
FURTHER that, the provisions of SECTIONS 5.4, 5.5, 8.2 AND ARTICLE 9 of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
IF TO PARENT OR MERGER SUB TO:
Kana Communications, Inc.
000 Xxx Xxxx
Xxxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer and
Attn: General Counsel
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with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx, LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxxxx, Esq.
IF TO THE COMPANY, TO:
NetDialog, Inc.
0000 Xxxxxx Xxxxx, #000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxx, Esq.
IF TO THE DEPOSITARY AGENT, TO:
ChaseMellon Shareholders Services, L.L.C.
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxx
IF TO THE SHAREHOLDERS' AGENT, TO:
Xxxxxx Xxxxx
BanAmerica Ventures
000 Xxxxx Xxxx
Xxxxx 000
Xxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this SECTION 9.1, be deemed given one
business day following delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided for in this SECTION 9.1, be deemed given one
business day following facsimile confirmation, (iii) if delivered by
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mail in the manner described above to the address as provided for in this
SECTION 9.1, be deemed given on the third Business Day following mailing and
(iv) if delivered by overnight courier to the address as provided in this
SECTION 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this SECTION
9.1). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving five (5)
days advance written notice specifying such change to the other parties hereto.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules hereto,
including the Company Disclosure Schedule and the Parent Disclosure Schedule,
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,
except for the Confidentiality Agreement, which shall continue in full force and
effect and shall survive any termination of this Agreement or the Closing in
accordance with its terms.
9.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from time
to time after the Closing, the parties shall execute and deliver to the other
party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under ARTICLE 7 or indemnification pursuant to SECTION 5.17 or upon the Company
Shareholders as provided under Section 3.12.
9.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
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9.7 HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance therefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California; provided,
however, that all provisions regarding the rights, duties and obligations of the
Depositary Agent shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
entirely within such State.
9.10 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Except where this Agreement specifically provides for arbitration, it is agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
ARTICLE 10
DEFINITIONS
10.1 DEFINITIONS.
(a) As used in this Agreement, the following defined terms shall have
the
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meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental Regulatory
Authority.
"AFFILIATE" means, as applied to any Person, (a) any other Person directly
or indirectly controlling, controlled by or under common control with, that
Person, or (b) any other Person that owns or controls (i) ten percent (10%) or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) ten percent (10%) or more of any class of equity securities (including
any equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"AGGREGATE COMMON NUMBER" has the meaning ascribed to it in SECTION 1.6.
"AGGREGATE SHARE NUMBER" has the meaning ascribed to it in SECTION 1.6.
"AGREEMENT" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and the
Disclosure Schedule and the certificates and instruments delivered in connection
herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" has the meaning ascribed to it in SECTION 2.3.
"APPROVAL" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"ASSETS AND PROPERTIES" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"ASSOCIATE" means, with respect to any Person, any corporation or other
business organization of which such Person is an officer or partner or is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a
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trustee or in a similar capacity and any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person.
"AUDIT EXPIRATION DATE" means the date of issuance of KPMG LLP's first
audit report for the combined operations of Parent and the Company which report
shall be issued in connection with the filing of the Parent annual report on
Form 10-K for fiscal 1999.
"AUDIT REPRESENTATIONS" means the representations and warranties of the
Company relevant to the Company's audit.
"BOOKS AND RECORDS" means all files, documents, instruments, papers, books
and records relating to the Business or Condition of the Company, including
financial statements, internal reports, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, stock transfer
ledgers, Contracts, Licenses, customer lists, computer files and programs
(including data processing files and records), retrieval programs, operating
data and plans and environmental studies and plans.
"BUSINESS COMBINATION" means, with respect to any Person, (i) any merger,
consolidation or other business combination to which such Person is a party,
(ii) any sale, dividend, split or other disposition of any capital stock or
other equity interests of such Person, (iii) any tender offer (including a self
tender), exchange offer, recapitalization, restructuring, liquidation,
dissolution or similar or extraordinary transaction, (iv) any sale, dividend or
other disposition of all or a material portion of the Assets and Properties of
such Person or (v) the entering into of any agreement or understanding, the
granting of any rights or options, or the acquiescence of the Company, with
respect to any of the foregoing.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
"BUSINESS OR CONDITION" means, with respect to Parent, the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of Parent and each of its Subsidiaries, taking Parent together
with such Subsidiaries as a whole, and, with respect to the Company, the
business, condition (financial or otherwise), results of operations, prospects
or Assets and Properties of the Company.
"CALIFORNIA AGREEMENT OF MERGER" has the meaning ascribed to it in SECTION
1.2.
"CALIFORNIA CODE" means the California Corporations Code and all amendments
and additions thereto.
"CERTIFICATES" has the meaning ascribed to it in SECTION 1.8(b).
"CLOSING" means the closing of the transaction contemplated by SECTION 1.2.
"CLOSING DATE" has the meaning ascribed to it in SECTION 1.2.
"CLOSING PRICE" has the meaning ascribed to it in SECTION 1.6(a)(ii).
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"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"COMMON STOCK EXCHANGE RATIO" has the meaning ascribed to it in SECTION
1.6.
"COMPANY" has the meaning ascribed to it in the preamble to this Agreement.
"COMPANY AFFILIATES" has the meaning ascribed to it in SECTION 5.10.
"COMPANY AUTHORIZATIONS" has the meaning ascribed to it in SECTION 2.9.
"COMPANY BALANCE SHEET" means the balance sheet included in the Company
Financial Statements as of the Company Balance Sheet Date.
"COMPANY BALANCE SHEET DATE" means October 31, 1999.
"COMPANY CAPITAL STOCK" means the Company Common Stock and Company
Preferred Stock.
"COMPANY COMMON STOCK" has the meaning ascribed to it in SECTION 2.2.
"COMPANY EMPLOYEE PLANS" has the meaning ascribed to it in SECTION 2.14(a).
"COMPANY DISCLOSURE SCHEDULE" means a document of even date herewith
delivered by or on behalf of the Company to Parent and Merger Sub prior to the
execution and delivery of this Agreement, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in ARTICLE 2 of this Agreement or otherwise.
"COMPANY FINANCIAL STATEMENTS" has the meaning ascribed to it in SECTION
2.4.
"COMPANY 401(k) PLAN" means the Company's 401(k) Plan.
"COMPANY OPTION" means any Option to purchase Company Capital Stock granted
pursuant to the Company Stock Plan.
"COMPANY PREFERRED STOCK" has the meaning ascribed to it in SECTION 2.2.
"COMPANY RESTATED ARTICLES" means the Amended and Restated Articles of
Incorporation of the Company filed with the Secretary of State of the State of
California on May 12, 1997, as amended on August 18, 1997, on December 10, 1997,
on February 9, 1999, on November 24, 1999 and on November 29, 1999.
"COMPANY RESTRICTED STOCK" means shares of Company Capital Stock which are
subject to a repurchase option by the Company.
"COMPANY SHAREHOLDERS" means the beneficial owners of all shares of Company
Capital Stock or Equity Equivalents immediately prior to the Effective Time.
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"COMPANY SHAREHOLDER ACTION" means the written consent of the Company
Shareholders holding at least 95% of the Company Capital Stock immediately prior
to the Effective Time, to the Merger, this Agreement and the other agreement and
transactions contemplated hereby and thereby.
"COMPANY STOCK PLAN" has the meaning ascribed to it in SECTION 1.6(c)(i).
"COMPANY CONVERTIBLE PROMISSORY NOTE" means each promissory note of the
Company which is convertible into or exchangeable for shares of Company Common
Stock, Company Preferred Stock or Company Equity Equivalents pursuant to the
terms thereof prior to or at the Effective Time of the Merger.
"COMPANY WARRANT" means each NetDialog Stock Purchase Warrant listed or
required to be listed in SECTION 2.2 OF THE DISCLOSURE SCHEDULE and each other
warrant to purchase Company Capital Stock (if any) listed or required to be
listed in SECTION 2.2 OF THE DISCLOSURE SCHEDULE.
"COMPETING PROPOSED TRANSACTION" has the meaning ascribed to it in SECTION
4.2.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to it in SECTION
2.11(f).
"CONFIDENTIALITY AGREEMENT" has the meaning ascribed to it in SECTION 5.4.
"CONTRACT" has the meaning ascribed to it in SECTION 2.26.
"DELAWARE CERTIFICATE OF MERGER" has the meaning ascribed to it in SECTION
1.2.
"DEPOSITARY AGENT" means ChaseMellon Shareholder Services, L.L.C. or such
other institution as may be reasonably acceptable to Parent and the Company (if
named prior to the Effective Time) or to Parent and the Shareholders' Agent (if
named after the Effective Time).
"DGCL" means the Delaware General Corporation Law.
"DISSENTING SHARES" has the meaning ascribed to it in SECTION 1.7(a).
"EFFECTIVE TIME" has the meaning ascribed to it in SECTION 1.2.
"ENVIRONMENT" means air, surface water, ground water, or land, including
land surface or subsurface, and any receptors such as persons, wildlife, fish,
biota or other natural resources.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
"EQUITY EQUIVALENTS" means securities (including Options to purchase any
shares of Company Capital Stock or Parent Common Stock, as applicable) which, by
their terms, are or
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may be exercisable, convertible or exchangeable for or into common stock,
preferred stock or other equity securities of the Company at the election of the
holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" has the meaning ascribed to it in SECTION 2.14(a).
"ESCROW AMOUNT" means ten percent (10%) of the Aggregate Share Number less
the number of shares of Company Common Stock issuable pursuant to Company
Options assumed by Parent hereunder, as such number may be adjusted according to
the provisions of Section 7.2(c) and the number of shares that are subject to a
repurchase right by the Company.
"ESCROW FUND" has the meaning ascribed to it in SECTION 7.2(a).
"ESCROW PERIOD" has the meaning ascribed to it in SECTION 7.2(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
"EXCHANGE AGENT" means ChaseMellon Shareholder Services, L.L.C.
"EXCHANGE RATIOS" means the Common Stock Exchange Ratio, the Preferred
Stock Exchange Ratio and the Note Exchange Ratio.
"GAAP" means generally accepted accounting principles in the United States,
as in effect from time to time.
"GENERAL EXPIRATION DATE" means the first anniversary of the Closing Date.
"GOOD FAITH CONSULTATION" with a Person's independent accountants, means
consultation with such accountants following disclosure in good faith to such
accountants of all facts requested by such accountants or which the specified
Person otherwise had reason to believe would be relevant to such accountants'
assessment.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"HAZARDOUS MATERIAL" means (a) any chemical, material, substance or waste
including, containing or constituting petroleum or petroleum products, solvents
(including chlorinated solvents), nuclear or radioactive materials, asbestos in
any form that is or could become friable, radon, lead-based paint, urea
formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemicals,
materials, substances or wastes which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar
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import under any Environmental Law; or (c) any other chemical, material,
substance or waste which is regulated by any Governmental or Regulatory
Authority or which could constitute a nuisance.
"INCOME TAX" means any income, alternative or add-on minimum tax, gross
income, gross receipts, franchise, profits, including estimated taxes relating
to any of the foregoing, or other similar tax or other like assessment or charge
of similar kind whatsoever, excluding any Other Tax, together with any interest
and any penalty, addition to tax or additional amount imposed by any Taxing
Authority responsible for the imposition of any such Tax (domestic or foreign).
"IDENTIFIED RISK" means those risks disclosed on SCHEDULE A.
"INDEBTEDNESS" of any Person means all obligations of such Person (a) for
borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"INFORMATION STATEMENT" has the meaning ascribed to it in SECTION 5.1(a).
"INTELLECTUAL PROPERTY" means all trademarks and trademark rights, trade
names and trade name rights, service marks and service xxxx rights, service
names and service name rights, patents and patent rights, utility models and
utility model rights, copyrights, mask work rights, brand names, trade dress,
product designs, product packaging, business and product names, logos, slogans,
rights of publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial models,
processes, designs, specifications, technology, methodologies, computer software
(including all source code and object code), firmware, development tools, flow
charts, annotations, all Web addresses, sites and domain names, all data bases
and data collections and all rights therein, any other confidential and
proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to xxx for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"INVESTMENT ASSETS" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by any party.
"INVESTORS' RIGHTS AGREEMENT" means the Fourth Amended and Restated
Investors' Rights Agreement dated as of August 13, 1999 by and among Parent and
the Investors set forth on Schedules A and B thereto.
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"IRS" means the United States Internal Revenue Service or any successor
entity.
"LAW" or "LAWS" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other liabilities of
a Person, whether absolute, accrued, contingent (or based upon any contingency),
known or unknown, fixed or otherwise, or whether due or to become due.
"LICENSE" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
"LOSS(ES)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (including lost profits or diminution in value), expenses,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with the investigation or defense of any Third Party
Claims, net of insurance proceeds received by Parent or the Company (without any
adverse effect on premiums paid by Parent or the Company) or proceeds received
by Parent by virtue of third party indemnification or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"MATERIAL" or "MATERIAL" means, with respect to any entity or group of
entities, any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business (as it is now conducted or presently proposed to
be conducted), prospects, operations or results of operations of such entity or
group of entities.
"MATERIAL ADVERSE EFFECT" means, with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, business
(as it is now conducted or presently proposed to be conducted), operations or
results of prospects, operations of such entity and its subsidiaries, taken as a
whole, PROVIDED that for purposes of SECTION 6.2(a) and SECTION 6.3(a), neither
of the following, in and of themselves, shall constitute a Material Adverse
Effect: (i) changes or effects which are primarily and directly caused by the
execution and delivery of this Agreement or the announcement of the transactions
contemplated hereby (it being understood that in any controversy concerning the
applicability of this clause (i) the party claiming the benefit of this clause
(i) shall have the burden of proof with respect to the elements of such clause),
and (ii) changes or effects which are primarily and directly caused by Parent's
refusal to consent to action requested to be taken by the Company which the
Company (at the time of such request) certified to Parent was necessary, in the
good faith judgment of the Company's Board of Directors, to avoid a Material
Adverse Effect on the Company.
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"MERGER" has the meaning ascribed to it in Recital A.
"MERGER SUB" has the meaning ascribed to it in the preamble to this
Agreement
"NASD" means the National Association of Securities Dealers, Inc.
"NEW SHARES" has the meaning ascribed to it in SECTION 7.2(e)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market referred to as the
Nasdaq National Market.
"NON-AUDIT REPRESENTATIONS" means all representations and warranties of the
Company contained in Article II hereof which are not Audit Representations.
"NON-COMPETITION AGREEMENT" has the meaning ascribed to it in SECTION
6.3(f).
"NOTE EXCHANGE RATIO" has the meaning ascribed to it in SECTION 1.6.
"NOTE SHARE NUMBER" has the meaning ascribed to it in SECTION 1.6.
"OFFICER'S CERTIFICATE" has the meaning ascribed to it in SECTION
7.2(f)(i).
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"ORDER" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"OTHER TAX" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"PARENT" has the meaning ascribed to it in the preamble to this Agreement.
"PARENT AFFILIATE" has the meaning ascribed to it in SECTION 5.11.
"PARENT COMMON STOCK" has the meaning ascribed to it in Recital C.
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"PARENT DISCLOSURE SCHEDULE: means descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by Parent in ARTICLE 3 of this
Agreement or otherwise.
"PARENT FINANCIAL STATEMENTS" has the meaning ascribed to it in SECTION
3.3.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"POOLING OF INTERESTS" shall mean pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16.
"PREFERRED SHARE NUMBER" has the meaning ascribed to it in SECTION 1.6.
"PREFERRED STOCK EXCHANGE RATIO" has the meaning ascribed to it in SECTION
1.6.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are owned or otherwise
controlled; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; and (v) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"REPRESENTATIVES" has the meaning ascribed to it in SECTION 4.2.
"RESTRICTED STOCK PURCHASE AGREEMENT" means a Restricted Stock Purchase
Agreement in one of the forms attached to the Company Stock Plan pursuant to
which the Company has sold Company Restricted Stock or as may otherwise been
entered into by the Company prior to the date of this Agreement.
"SEC" means the Securities and Exchange Commission or any successor entity.
"SEC DOCUMENTS" means, with respect to any Person, each report, schedule,
form, statement or other document filed with the SEC by such Person pursuant to
Section 13(a) of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHAREHOLDERS' AGENT" has the meaning ascribed to it in SECTION 7.2(i)(i).
"SHAREHOLDER CERTIFICATE" means the certificate of each Company Shareholder
containing representations and warranties to the Parent regarding their
investment qualifications and other matters relevant to determining whether the
issuance of shares of Parent Common
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Stock in consideration of the Merger is exempt from the registration
requirements of the Securities Act and applicable state securities laws.
"SOFTWARE" has the meaning ascribed to it in SECTION 2.32.
"SUBSIDIARY" means any Person in which the Company or Parent, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"SUPPORT AGREEMENT" has the meaning ascribed to it in Recital D.
"SURVIVING CORPORATION" has the meaning ascribed to it in SECTION 1.1.
"TAX," "TAXES" and "TAXABLE" mean, as the context requires, (i) any Income
Tax and/or Other Tax; (ii) any liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period; and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other person.
"TAX RETURNS" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or other document issued by, a
Taxing Authority in connection with any Tax, estimated Tax Returns and reports,
withholding Tax Returns and reports and information reports and Returns required
to be filed with respect to Taxes.
"TAXING AUTHORITY" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION 7.2(k).
"THIRD PARTY EXPENSES" has the meaning ascribed to it in SECTION 5.5.
"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" has the meaning ascribed to it
in SECTION 2.11(b).
"YEAR 2000 COMPLIANT" has the meaning ascribed to it in SECTION 2.32.
(b) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender, (ii) words using the singular or plural
number also include the plural or singular number, respectively, (iii) the terms
"HEREOF," "HEREIN," "HEREBY" and derivative or similar words refer to this
entire Agreement as a whole and not to any particular Article, Section or other
subdivision, (iv) the terms "ARTICLE" or "SECTION" or other subdivision refer to
the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "INCLUDE," "INCLUDES"
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and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. The term "PARTY" or "PARTIES"
when used herein refer to Parent and Merger Sub, on the one hand, and the
Company, on the other.
(c) When used herein, the phrase "TO THE KNOWLEDGE OF" any Person, "TO
THE BEST KNOWLEDGE OF" any Person, "KNOWN TO" any Person or any similar phrase,
means (i) with respect to any Person who is an individual, the actual knowledge
of such Person, and (ii) with respect to any other Person, the actual knowledge
of the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, in each case after due and diligent inquiry of such directors,
officers and other individuals.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company, and with
respect to SECTION 7.2 only, the Shareholders' Agent and the Depositary Agent,
have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
PARENT: KANA COMMUNICATIONS, INC.
By:
-------------------------------
Name:
President
COMPANY: NETDIALOG, INC.
By:
-------------------------------
Name:
President and Chief Executive Officer
MERGER SUB: KONG ACQUISITION CORP.
By:
-------------------------------
Name:
President
DEPOSITARY AGENT: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Depositary Agent
By:
-------------------------------
Its:
SHAREHOLDERS' AGENT:
By:
-------------------------------
Xxxxxx Xxxxx, as Shareholders' Agent
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