Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
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entered into as of June 22, 1999, among Critical Path, Inc., a California
corporation ("Parent"), Apollo Acquisition Corp., a California corporation and a
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wholly-owned subsidiary of Parent ("Merger Sub"), and Amplitude Software Corp.,
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a California corporation (the "Company").
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RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of the
Company with and into Merger Sub (the "Merger") and, in furtherance thereof,
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have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
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options and other rights to acquire or receive shares of Company Capital Stock
shall be converted into the shares of or right to receive shares of Common Stock
of Parent ("Parent Common Stock").
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C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of the Company are entering into Voting Agreements in substantially
the form attached hereto as Exhibit A (the "Voting Agreement").
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D. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
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F. The parties intend for the Merger to be accounted for financial
accounting purposes as a purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law (the "CGCL"),
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the Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation".
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
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to Section 8.1, the closing of the Merger (the "Closing") will take place as
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promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx,
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
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Date". On the Closing Date, the parties hereto shall cause the Merger to be
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consummated by filing an Agreement of Merger with the California Secretary of
State (the "Agreement of Merger"), in accordance with the relevant provisions of
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applicable law. The date and time the Merger becomes effective in accordance
with the provisions of the CGCL is the "Effective Time".
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1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Articles of Incorporation of Merger Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
(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.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
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prior to the Effective Time shall be the initial director(s) 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 initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Maximum Shares to Be Issued; Effect on Capital Stock. No adjustment
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shall be made in the number of shares of Parent Common Stock issued in the
Merger as a result of any cash proceeds received by the Company from the date
hereof to the Closing Date pursuant to the exercise of options to acquire
Company Capital Stock. Subject to the terms and conditions of this Agreement,
as of the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub, the Company or the holder of any shares of the Company
Capital Stock, the following shall occur:
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(a) Conversion of Company Common Stock. Each share of Common Stock of
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the Company ("Company Common Stock") issued and outstanding immediately prior to
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the Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a)) will be canceled and extinguished and be
converted automatically into:
(i) that number of shares of Parent Common Stock as is equal to
the Stock Ratio to Common Holders (as defined in paragraph (h) below), and
(ii) cash equal to the Cash Rate to Common Holders (as defined
in paragraph (h) below).
(b) Conversion of Company Preferred Stock. Each share of Series A
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Preferred Stock of the Company ("Series A Preferred"), Series B Preferred Stock
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of the Company ("Series B Preferred"), Series B-1 Preferred Stock of the Company
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("Series B-1 Preferred"), Series C Preferred Stock of the Company ("Series C
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Preferred") and Series D Preferred Stock of the Company ("Series D Preferred"
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and together with the Series A Preferred, the Series B Preferred, the Series B-1
Preferred and the Series C Preferred, the "Company Preferred") issued and
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outstanding immediately prior to the Effective Time (other than any shares of
Company Preferred that are converted into shares of Company Common Stock
immediately prior to the Effective Time, any shares of Company Preferred to be
canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a)) will be canceled and extinguished and be
converted automatically into:
(1) that number of shares of Parent Common Stock as is equal to
the quotient obtained by dividing (x) the Liquidation Preference of such Series
of Company Preferred Stock, as specified in the Company's Articles of
Incorporation immediately prior to the Effective Time by (y) the Actual Parent
Stock Price (as defined in paragraph (h) below);
(2) that number of shares of Parent Common Stock as is equal to
the product obtained by multiplying (x) the Stock Ratio to Common Holders (as
defined in paragraph (h) below) by (y) the number of shares of Company Common
Stock into which such share of Company Preferred would convert pursuant to an
automatic conversion as described in the Company's Articles of Incorporation
immediately prior to the Effective Time; and
(3) cash equal to the product obtained by multiplying (x) the
Cash Rate to Common Holders (as defined in paragraph (h) below) by (y) the
number of shares of Company Common Stock into which such share of Company
Preferred would convert pursuant to an automatic conversion as described in the
Company's Articles of Incorporation immediately prior to the Effective Time.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
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of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
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(d) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock then outstanding under the Company's 1996 Stock Plan (the
"Option Plan"), or otherwise, shall be assumed by Parent in accordance with
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provisions described below.
(i) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Option") under the Option Plan
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or otherwise, whether vested or unvested, shall be, in connection with the
Merger, assumed by Parent. Each Company Option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except 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 Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Stock Ratio to Option Holders (as defined in paragraph (h) below), 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 Common Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Stock Ratio to Option Holders, rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(iii) Promptly following the Effective Time, Parent will issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(e) Capital Stock of Merger Sub. Each share of Common Stock of Merger
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Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(f) Adjustments to Exchange Ratio. The Stock Ratio to Common Holders,
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the Stock Ratio to Option Holders and the number of shares of Parent Common
Stock issuable pursuant to Section 1.6(b)(1) shall be adjusted to reflect fully
the effect of any stock split, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Capital Stock occurring or with a
record date after the date hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of Parent Common Stock
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will be issued, 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
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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 (i)
such fraction, multiplied by (ii) the Actual Parent Stock Price.
(h) Definitions.
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(i) Actual Parent Stock Price. The "Actual Parent Stock
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Price" shall mean the average closing price of a share of Parent Common Stock
for the ten (10) consecutive trading days ending on the second trading day
immediately prior to the Closing Date, as reported on the Nasdaq National
Market.
(ii) Collared Parent Stock Price. The "Collared Parent Stock
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Price" shall mean the Actual Parent Stock Price; provided, however, that (A) if
the Actual Parent Stock Price as calculated above is less than $30, then the
Collared Parent Stock Price shall be $30; and (B) if the Actual Parent Stock
Price as calculated above is greater than $80, then the Collared Parent Stock
Price shall be $80.
(iii) Liquidation Preference Set-Aside. The "Liquidation
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Preference Set-Aside" shall mean the sum obtained by adding, for each of the
Company's Preferred Stock Series A, B, B-1, C, and D, the product obtained by
multiplying (x) the number of shares of such Series of Company Preferred Stock
outstanding immediately prior to the Effective Time by (y) the Liquidation
Preference of such Series of Company Preferred Stock, as specified in the
Company's Articles of Incorporation.
(iv) Adviser Fees Set-Aside. The "Adviser Fees Set-Aside"
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shall mean the amount by which the fees payable to the Company's financial
advisors at the closing in connection with the Merger exceeds $2,715,000.
(v) Cash Consideration Value. The "Cash Consideration Value"
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shall mean $45,000,000.
(vi) Stock Consideration Value. The "Stock Consideration
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Value" shall mean the difference obtained by subtracting (A) the sum obtained by
adding (w) the Adviser Fees Set-Aside and (x) the Liquidation Preference Set-
Aside from (B) the product obtained by multiplying (y) $170,000,000 by (z) the
quotient obtained by dividing (1) the Actual Parent Stock Price by (2) the
Collared Parent Stock Price.
(vii) Consideration Value for Common Equivalents. The
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"Consideration Value for Common Equivalents" shall mean the sum obtained by
adding (x) the Cash Consideration Value and (y) the Stock Consideration Value.
(viii) Outstanding Total Amount. The "Outstanding Total Amount"
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shall mean the sum obtained by adding (x) the Outstanding Common Amount, (y) the
Outstanding Option Amount, and (z) the Outstanding Dissent-Eligible Amount.
(ix) Outstanding Dissent-Eligible Amount. The "Outstanding
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Dissent-Eligible Amount" shall mean the amount by which (A) the aggregate number
of shares of Company Common Stock and Company Preferred Stock (counting each
share of Company Preferred Stock as that number of shares of Company Common
Stock into which such share of Company Preferred Stock would convert pursuant to
an automatic conversion as described in the Company's Articles of Incorporation
immediately prior to the
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Effective Time) which are eligible under CGCL to exercise dissenter's rights
exceeds (B) the product obtained by multiplying (x) one-tenth (0.1) by (y) the
number of shares of Company Common Stock and Company Preferred Stock (counting
each share of Company Preferred Stock as that number of shares of Company Common
Stock into which such share of Company Preferred Stock would convert pursuant to
an automatic conversion as described in the Company's Articles of Incorporation
immediately prior to the Effective Time) outstanding immediately prior to the
Effective Time.
(x) Outstanding Common Amount. The "Outstanding Common
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Amount" shall mean the difference obtained by subtracting (x) the Outstanding
Dissent-Eligible Amount from (y) the number of shares of Company Common Stock
and Company Preferred Stock (counting each share of Company Preferred Stock as
that number of shares of Company Common Stock into which such share of Company
Preferred Stock would convert pursuant to an automatic conversion as described
in the Company's Articles of Incorporation immediately prior to the Effective
Time) outstanding immediately prior to the Effective Time.
(xi) Outstanding Option Amount. The "Outstanding Option
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Amount" the exercise of all outstanding options to acquire shares of Company
Common Stock immediately prior to the Effective Time.
(xii) Cash Consideration for Dissent-Eligible Holders. The
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"Cash Consideration for Dissent-Eligible Holders" shall mean the product
obtained by multiplying (x) the Consideration Value for Common Equivalents by
(y) the quotient obtained by dividing (A) the Outstanding Dissent-Eligible
Amount by (B) the Outstanding Total Amount.
(xiii) Stock Consideration for Option Holders. The "Stock (x)
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the Consideration Value for Common Equivalents by (y) the quotient obtained by
dividing (A) the Outstanding Option Amount by (B) the Outstanding Total Amount.
(xiv) Cash Consideration for Common Holders. The "Cash
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Consideration for Common Holders" shall mean the difference obtained by
subtracting (x) the Cash Consideration for Dissent-Eligible Holders from (y) the
Cash Consideration Value.
(xv) Stock Consideration for Common Holders. The "Stock
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Consideration for Common Holders" shall mean the difference obtained by
subtracting (x) the Stock Consideration for Option Holders from (y) the Stock
Consideration Value.
(xvi) Cash Rate to Common Holders. The "Cash Rate to Common
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Holders" shall mean the quotient obtained by dividing (x) Cash Consideration for
Common Holders by (y) the Outstanding Common Amount.
(xvii) Stock Ratio to Option Holders. The "Stock Ratio to Option
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Holders" shall mean the quotient obtained by dividing (x) Stock Consideration
for Option Holders by (y) the product obtained by multiplying (A) the
Outstanding Option Amount by (B) the Actual Parent Stock Price.
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(xviii) Stock Ratio to Common Holders. The "Stock Ratio to
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Common Holders" shall mean the quotient obtained by dividing (x) Stock
Consideration for Common Holders by (y) the product obtained by multiplying (A)
the Outstanding Common Amount by (B) the Actual Parent Stock Price.
(xix) Escrow Amount. The "Escrow Amount" shall be a number of
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shares of Parent Common Stock obtained by dividing (A) ten percent of the
Consideration Value for Common Equivalents by (B) the Actual Parent Stock Price.
1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal or dissenters' rights for such shares in accordance with the
CGCL and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
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converted into or represent Parent Common Stock pursuant to Section 1.6, but the
holder thereof shall only be entitled to such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Capital Stock who demands appraisal of such shares under the
CGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only Parent Common Stock and cash, including cash
for fractional shares, as provided in Section 1.6, without interest thereon.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to the CGCL and received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the CGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal of capital stock of the
Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate a bank or trust company reasonably acceptable to the Company to act as
exchange agent (the "Exchange Agent") in the Merger.
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(b) Parent to Provide Common Stock and Cash. Promptly after the
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Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, the aggregate number of shares of Parent
Common Stock issuable pursuant to Sections 1.6 in exchange for outstanding
shares of Company Capital Stock; provided 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 out of the aggregate
number of shares of Parent Common Stock otherwise issuable pursuant to Section
1.6. The portion of the Escrow Amount contributed on behalf of each holder of
Company Capital Stock (other than holders of Dissenting Shares on whose behalf
no shares will be deposited into the escrow
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account) shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under
Sections 1.6(a), 1.6(b)(2), and 1.6(b)(3) by virtue of ownership of outstanding
shares of Company Capital Stock. Promptly after the Effective Time, Parent shall
make available to the Exchange Agent for exchange in accordance with this
Article I, the aggregate amount of cash issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company Capital Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent
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shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
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represented outstanding shares of Company Capital Stock whose shares were
converted into shares of Parent Common Stock and cash pursuant to Section 1.6,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for cash and certificates representing shares of Parent Common Stock. 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 cash and a certificate representing the number of
whole shares of Parent Common Stock (less the number of shares of Parent Common
Stock, if any, to be deposited in the Escrow Fund (as defined in Section 7.5
below) on such holder's behalf pursuant to Section 7.5 hereof), plus cash in
lieu of fractional shares in accordance with Section 1.6, to which such holder
is entitled pursuant to Section 1.6, and the Certificate so surrendered shall
forthwith be canceled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VII hereof, Parent
shall cause to be distributed to the Escrow Agent a certificate or certificates
representing that number of shares of Parent Common Stock equal to the Escrow
Amount which shall be registered in the name of the Escrow Agent.
Notwithstanding the provisions contained in Section 1.6(g), any fractional share
that would otherwise result from the issuance of a certificate representing the
shares of Parent Common Stock to be deposited into escrow pursuant to Article
VII hereof shall be rounded down to the nearest whole share and any fraction of
a share that would otherwise result from the issuance of a certificate
representing the remaining shares of Parent Common Stock which each such
shareholder would otherwise be entitled to receive under Section 1 by virtue of
ownership of outstanding shares of Company Common Stock shall be rounded up to
the nearest whole share. Such shares shall be owned beneficially and of record
by the holders on whose behalf such shares were deposited in the Escrow Fund and
shall be available to compensate Parent as provided in Article VII. Until so
surrendered, 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, other than the payment of dividends,
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
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6. Parent shall use its reasonable efforts
to cause the Exchange Agent to issue to each Company shareholder (each a
"Shareholder") the Parent Common Stock and to pay the cash payable pursuant to
Section 1.6 within 5 business days after the Exchange Agent receives all
documents necessary to effect such exchange, properly completed, guaranteed and
presented for transfer, from each such Shareholder.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date
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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 paid
with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
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Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange 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.
(f) No Liability. Notwithstanding anything to the contrary in this
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Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
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Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
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certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
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hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
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(ii) be accounted for financial reporting purposes as a purchase. The parties
to this Agreement hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Sections
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1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. No party to
this Agreement shall take any action inconsistent with such treatment.
1.12 Taking of Necessary Action; Further Action. If, at any time after
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the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS OF THE COMPANY
The Company hereby makes the following representations to Parent and Merger
Sub, subject to such exceptions as are specifically disclosed in the disclosure
schedules (referencing the appropriate section number) supplied by the Company
to Parent (the "Company Schedules") and dated as of the date hereof. Any
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information disclosed on the Company Schedules under any section number set
forth therein shall be deemed to be disclosed and incorporated into any other
section under the Company Schedules where such disclosure would on its face
reasonably be deemed to apply.
2.1 Organization of the Company. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a material adverse effect on
the business, assets (including intangible assets), financial condition or
results of operations of the Company; provided, however, that in no event shall
any of the following constitute a Material Adverse Effect: (i) any effects,
changes, events, circumstances or conditions (including, without limitation,
litigation, delays in customer orders, a reduction in sales, a disruption in
business relationships or a loss of employees) resulting from the announcement
or pendency of any of the transactions contemplated by this Agreement; and (ii)
any effects, changes, events, circumstances or conditions taken by the Company
that were necessary for the Company to comply with the terms of this Agreement
(hereinafter a material adverse effect on the business, assets (including
intangible assets), financial condition or results of operations of the Company,
as modified by the proviso contained in this sentence is referred to as a
"Material Adverse Effect"). The Company has delivered a true, correct and
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complete copy of its Articles of Incorporation and Bylaws, each as amended to
date, to Parent.
2.2 Company Capital Structure.
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(a) The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, of which 4,802,394 shares are issued and outstanding,
and 21,550,772 shares of Company Preferred Stock. The authorized Company
Preferred Stock consists of 2,500,000 shares of Series A Preferred, all of which
are issued and outstanding as of the date of this Agreement, 5,327,693 shares of
Series B Preferred, all of which are issued and outstanding as of the date of
this Agreement, 1,573,029 shares
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of Series B-1 Preferred, all of which are issued and outstanding as of the date
of this Agreement, 5,150,000 shares of Series C Preferred, of which 5,056,108
shares are issued and outstanding as of the date of this Agreement and 7,000,000
shares of Series D Preferred Stock, of which 6,727,614 shares are issued and
outstanding as of the date of this Agreement. The Company Capital Stock is held
by the persons in the amounts set forth on Schedule 2.2(a). All outstanding
shares of Company Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive rights 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.
(b) The Company has reserved 4,500,000 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
3,460,964 shares are subject to outstanding, unexercised options as of the date
of this Agreement and 248,643 shares remain available for future grant as of the
date of this Agreement. Schedule 2.2(b) sets forth for each Company Option
outstanding as of the date of this Agreement the name of the holder of such
option, the domicile address of such holder, the number of shares of Common
Stock subject to such option, the exercise price of such option and the vesting
schedule for such option, including the extent vested to date and whether the
exercisability of such option will be accelerated and become exercisable by the
transactions contemplated by this Agreement. Except for the Company Options
described in Schedule 2.2(b), as of the date of this Agreement there are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is bound
obligating the Company to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company. Except for the Company Options described in
Schedule 2.2(b), as of the date of this Agreement, there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. The holders of Company Options have been or will be given, or
shall have properly waived, any required notice prior to the Merger and all such
rights will be terminated at or prior to the Effective Time. As a result of the
Merger, Parent will be the record and sole beneficial owner of all Company
Capital Stock and rights to acquire or receive Company Capital Stock.
2.3 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the approval of the Merger and this
---------
Agreement by the Shareholders, the Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The vote required of the Shareholders to duly approve the
Merger and this Agreement is a majority of the outstanding shares of Company
Common Stock and a majority of the outstanding shares of Company Preferred.
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 Shareholders. The Company's Board of Directors has unanimously
approved the Merger and this Agreement. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
Except as set
-11-
forth on Schedule 2.4, subject only to the approval of the Merger and this
Agreement by the Shareholders, the execution and delivery of this Agreement by
the Company does not, and, as of the Effective Time, the performance by the
Company of its obligations under this Agreement will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the Articles of Incorporation or Bylaws of the
--------
Company or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
-------------------
third party (so as not to trigger any Conflict), is required at or prior to the
Effective Time by or with respect to the Company in connection with the
Company's execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Agreement of
Merger with the California Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws, (iii)
expiration or early termination of the applicable waiting period under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and
-------
(iv) such other consents, waivers, authorizations, filings, approvals and
registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
----------------------------
audited balance sheet as of December 31, 1998 (the "Balance Sheet") and the
-------------
related audited statements of operations and cash flows for the twelve-month
period then ended and the Company's unaudited balance sheet dated as of March
31, 1999 and the unaudited statements of operations and cash flows for the
three-month period ended March 31, 1999 (collectively, the "Company
-------
Financials"). The Company Financials have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
----
throughout the periods indicated and consistent with each other. The Company
Financials present fairly the financial condition and operating results of the
Company as of the dates and during the periods indicated therein, subject, in
the case of the unaudited financial statements, to the absence of footnotes
normal year-end adjustments, which will not be material in amount or
significance.
2.6 No Undisclosed Liabilities. Other than (i) as set forth on the
--------------------------
Balance Sheet or (ii) as has arisen in the ordinary course of the Company's
business since December 31, 1998, consistent with past practices, the Company
does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles) which either individually or in the aggregate exceeds $125,000 (it
being understood that the representations contained in this Section 2.6 are not
intended to expand the scope of any representation (including the representation
contained in Section 2.11(m)) contained elsewhere in this Agreement).
2.7 No Changes. From March 31, 1999 to the date of this Agreement, there
----------
has not been, occurred or arisen any:
-12-
(a) transaction by the Company except in the ordinary course of
business and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company of $100,000 in
any individual case or $500,000 in the aggregate;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(i) sale, lease, license or other disposition of any of the assets or
properties of the Company, except in the ordinary course of business and
consistent with past practices;
(j) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(k) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices and except for advances under the Company's existing revolving credit
agreement (which agreement has not been amended since December 31, 1998);
(l) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company;
(m) commencement or notice or to the Company's knowledge threat of
commencement of any lawsuit or proceeding against or investigation of the
Company or its affairs;
(n) notice of any claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.11 below) or of infringement by
the Company of any third party's Intellectual Property rights;
-13-
(o) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities, except for options granted in the ordinary course
of business and Company Common Stock issued upon the exercise of options;
(p) change in pricing or royalties charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(q) event or condition of any character that has or would be
reasonably expected to have a Material Adverse Effect on the Company; or
(r) agreement by the Company or any officer or employees thereof to do
any of the things described in the preceding clauses (a) through (r) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties and impositions,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company as of the Effective Time will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have
paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) To the Company's knowledge, there is no Tax deficiency
outstanding, proposed or assessed against the Company, nor has the Company
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) To the Company's knowledge, no audit or other
examination of any Return of the Company is in progress as of the date of this
Agreement, nor has the Company been notified as of or prior to the date of this
Agreement of any request for such an audit or other examination.
-14-
(v) The Company has no knowledge of any basis for the
assertion of any liabilities for unpaid federal, state, local or foreign Taxes
which have not been accrued or reserved against on the Balance Sheet whether
asserted or unasserted, contingent or otherwise attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("Liens") on the assets of the Company relating to or
-----
attributable to Taxes.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement to which the Company is a party,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
2.9 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has had
or reasonably could be expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
-15-
2.10 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company owns no real property, nor has it ever owned any real
property. Schedule 2.10(a) sets forth a list of all real property currently, or
at any time in the past, leased by the Company, the name of the lessor and the
date of the lease and each amendment thereto and, with respect to any current
lease, the aggregate annual rental and/or other fees payable under any such
lease. All such current leases are in full force and effect and enforceable by
the Company and there is not, under any of such leases, any existing default by
the Company (or to the Company's knowledge, by the other party to such lease) or
event of default (or event which with notice or lapse of time, or both, would
constitute such a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials and except for liens for Taxes not
yet due and payable, municipal and zoning ordinances, easements for public
utilities and such imperfections of title and encumbrances, if any, which are
not material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
2.11 Intellectual Property.
---------------------
(a) For the purposes of this Section 2.11, the following terms have
the following definitions:
"Intellectual Property" shall mean any or all of the following and all
---------------------
rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and utility models and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries ("Patents); (ii) all inventions
-------
(whether patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology, technical data and
customer lists, and all documentation embodying or evidencing any of the
foregoing; (iii) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout the world
("Copyrights"); (iv) all mask works, mask work registrations and
----------
applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology ("Maskworks"); (v)
---------
all industrial designs and any registrations and applications therefor
throughout the world; (vi) all trade names, logos, common law trademarks
and service marks, trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith throughout the
world ("Trademarks"); (vii) all databases and data collections and all
----------
rights therein throughout the world; and (viii) all computer software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded; (ix)
all World Wide Web addresses, sites and domain names; and (x) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in the
world.
-16-
"Business" means the business of the Company, including the manufacture,
--------
use, licensing, distribution and sale of any products or technology or the
provision of any services by the Company, as currently conducted, as
conducted since the inception of the Company.
"Company Intellectual Property" shall mean any Intellectual Property that
-----------------------------
is owned by or licensed to the Company.
"Registered Intellectual Property" shall mean all United States,
--------------------------------
international and foreign: (i) Patents, including applications therefor;
(ii) registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related
to Trademarks; (iii) Copyrights registrations and applications to register
Copyrights; (iv) Mask Work registrations and applications to register Mask
Works; and (v) any other Company Intellectual Property owned by the Company
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 at any time.
(b) Schedule 2.11(b) lists all Registered Intellectual Property in
----------------
whole or in part owned by or filed in the name of the Company (the "Company
-------
Registered Intellectual Property").
--------------------------------
(c) Each item of Company Intellectual Property owned by the Company,
including all Company Registered Intellectual Property listed on Schedule
2.11(b), is free and clear of any encumbrance, including any lien or security
interest other than (i) Liens for Taxes not yet due and payable and (ii) end-
user licenses granted by the Company pursuant to its standard form of end-user
license, a copy of which is attached to Schedule 2.11(c) (it being understood
----------------
that nothing in this subsection shall be deemed to constitute a representation
or warranty as to any matter covered by subsection "(m)" or any other subsection
of Section 2.11).
(d) The Company owns exclusively, and has good title to, all
copyrighted works that are software products of the Company or other works of
authorship that the Company otherwise purports to own, except for those items
owned by third parties or material portions of freeware set forth on Schedule
--------
2.11(d) and except for immaterial portions of freeware (which are not required
-------
to be listed on Schedule 2.11(d)) (it being understood that nothing in this
subsection shall be deemed to constitute a representation or warranty as to any
matter covered by subsection "(m)" or any other subsection of Section 2.11).
(e) Except for end-user licenses granted by the Company pursuant to
its standard form of end-user license, the Company has not transferred ownership
of, or granted any license of or right to use, any Intellectual Property that
is, or was, Company Intellectual Property, to any other person.
(f) The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of the Business as currently
conducted including (i) the making, using, selling, marketing, or importing of
any product or device, (ii) the practice of any process, (iii) the offering or
performance of any service, or (iv) the copying, display, performance,
distribution, creation of derivative works of, or the exploitation of any device
or work (it being understood that nothing in this subsection shall be deemed to
constitute a representation or warranty as to any matter covered by subsection
"(m)" or any other subsection of Section 2.11).
-17-
(g) The contracts, licenses and agreements listed on Schedule 2.11(g)
----------------
include all material contracts, licenses and agreements (other than object code
end-user licenses available to the general public) pursuant to which any Person,
including any Affiliate of Company, has licensed any Intellectual Property to
the Company.
(h) The contracts, licenses and agreements listed on Schedule 2.11(h)
----------------
include all material contracts, licenses and agreements pursuant to which the
Company has licensed or transferred to any third person or any Affiliate of the
Company any material Company Intellectual Property other than end-user licenses
granted by the Company pursuant to its standard form of end-user license.
(i) The consummation of the transactions contemplated by this
Agreement will not cause or obligate the Company (i) to grant to any third party
any rights or licenses with respect to any Intellectual Property of the Company,
or (ii) pay any royalties or other amounts in excess of those being paid by the
Company prior to the Closing.
(j) Schedule 2.11(j) lists all agreements, licenses and contracts
----------------
pursuant to which Company has agreed to indemnify, hold harmless, or otherwise
agree to be liable for any losses cost or damages of, a third party with respect
to any Intellectual Property or product or service of Company.
(k) As of the Closing Date, all material Company Intellectual
Property, including any item thereof, will be fully, transferable, alienable or
licensable by, the Company without restriction and without payment of any kind
to any third party.
(l) The consummation of the transactions contemplated by this
Agreement will not result in the loss of, or otherwise adversely affect, any
ownership rights of Company in any Company Intellectual Property or result in
the breach or termination of any license, contract or agreement to which Company
is a party respecting any material Company Intellectual Property.
(m) To the Company's knowledge, the operation of the Business,
including (i) the making, using, selling, marketing, or importing of any product
or device, (ii) the practice of any process, (iii) the offering or performance
of any service, or (iv) the copying, distribution, performance, display,
creation of derivative works of, or the exploitation of any device or work, does
not infringe or misappropriate the Intellectual Property of any person, violate
the rights of any person, or constitute unfair competition or trade practices
under the laws of any jurisdiction, and the Company has not received written
notice from any person claiming that such operation or any act, product,
technology or service of the Business infringes or misappropriates the
Intellectual Property of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the Company aware of any
factual basis therefor). To the Company's knowledge, the (i) making, using,
selling, marketing, or importing of any product or device currently under
development by the Company, (ii) practice of any process currently under
development by the Company, (iii) offering or performance of any service
currently under development by the Company, or (iv) copying, distribution,
performance, display, creation of derivative works of, or the exploitation of
any device or work currently under development by the Company, does not, and
will not when done in connection with the Business as conducted in substantially
the same manner following the Closing by Buyer, infringe or misappropriate the
Intellectual Property of any person, violate the rights of any person, or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not
-18-
received written notice from any person claiming that such operation or any act,
product, technology or service misappropriates the Intellectual Property of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction (nor is the Company aware of any basis therefor). The foregoing
sentence shall not apply to any product, device, process, service or work that
was developed by the Company after the date of this Agreement. Without limiting
the foregoing, the Company has not misappropriated the trade secrets of, or, to
the Company's knowledge, infringed the Copyright or Maskwork of any third party.
(n) There are no contracts, licenses or agreements between the Company
and any other person with respect to Company Intellectual Property under which
there is any litigation or other legal proceeding known to the Company regarding
the scope of such agreement, or performance under such contract, license or
agreement including with respect to any payments to be made or received by the
Company thereunder.
(o) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property owned by the Company.
(p) No Company Intellectual Property owned by the Company and, to the
Company's knowledge without investigation, no product, technology or service of
the Business, is subject to any proceeding or outstanding decree, order,
judgment, or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(q) Schedule 2.11(q) lists all action, including the payment of any
----------------
fees and response to Patent Office actions, that must, or should be performed
by, or on behalf of, the Company in the ninety-day period following the Closing
Date, with respect to any application for, perfection of, preservation of, or
continuation of any Patent rights of Company with respect to any Company
Intellectual Property.
(r) The Company has not claimed small business status, or other
particular status in the application for any Registered Company Intellectual
Property which claim of status was not at the time made, or which has since
become inaccurate or false or that will no longer be true and accurate as a
result of the Closing.
(s) Except for those items owned by third parties or material portions
of freeware set forth on Schedule 2.11(s) and except for immaterial portions of
----------------
freeware (which are not required to be listed on Schedule 2.11(s), all software
products of the Company were written and created solely by either (i) employees
of the Company acting within the scope of their employment or (ii) by third
parties who have validly assigned all of their rights, including Intellectual
Property rights in such products to the Company, and no third party owns any
Intellectual Property rights to such software products.
(t) The Company has no knowledge of any facts or circumstances that
would render any Company Intellectual Property owned by the Company invalid or
unenforceable. Without limiting the foregoing, Company knows of no information,
materials, facts, or circumstances, including any information or fact that would
constitute prior art, that would render any of the Company Registered
Intellectual Property invalid or unenforceable, or would adversely effect any
pending application for any Company Registered Intellectual Property and the
Company has not misrepresented, or failed to disclose, and is not aware of any
-19-
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Register Intellectual Property that would constitute
fraud or a material misrepresentation with respect to such application or that
would otherwise effect the validity or enforceability of any Company Registered
Intellectual Property.
(u) The Company has taken all steps reasonable and customary under the
circumstances to protect the confidentiality and trade secret status of any
material confidential information of the Company and knows of no instance in
which a third party has had access to the material confidential information of
the Company for which it could be claimed that the Company has failed to protect
the confidentiality of any material Confidential Information of the Company.
(v) All employees of the Company who have contributed to the
development of the Company Intellectual Property owned by the Company have
entered into valid and binding agreements with the company sufficient to vest
title in the Company of all Intellectual Property created by such employee in
the scope of his or her employment with the Company.
2.12 Agreements, Contracts and Commitments. As of the date of this
-------------------------------------
Agreement, the Company is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or similar post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement with a
firm or other organization,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property involving annual payments by
the Company in any individual case in excess of $50,000,
(viii) other than pursuant to the Company's standard end-user
license agreement (which is attached to the disclosure schedule), any agreement
pursuant to which the Company is obligated to provide indemnification or
guaranty the indebtedness or liabilities of third parties,
-20-
(ix) any agreement containing any covenant limiting the freedom
of the Company to engage in any line of business or to compete with any person,
(x) any agreement relating to capital expenditures and
involving payments required to be made by the Company after the date of this
Agreement in excess of $100,000,
(xi) any agreement relating to the disposition or acquisition
by the Company after the date of this Agreement of assets or any interest in any
business enterprise outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by or extension of credit by or to the Company, including guaranties
referred to in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials (not including in-license of technology) involving $50,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement
which cannot be canceled without penalty upon notice of sixty (60) days or less,
(xvi) any agreement pursuant to which the Company has granted or
may grant in the future, to any party a source-code license or option or other
right to use or acquire source-code, or
(xvii) any other agreement that involves payments by the Company
of $100,000 or more; or
(xviii) any other agreement that is not cancelable without penalty
of $25,000 or more within thirty (30) days.
The Company is not in breach, violation or default under, and the Company
has not between December 31, 1998 and the date of this Agreement received any
written notice that it has breached, violated or defaulted under, any of the
terms or conditions of any agreement, contract or commitment required to be set
forth on Schedule 2.12 or Schedule 2.11 (any such agreement, contract or
commitment, a "Contract") (except for notices relating to breaches, violations
--------
or defaults that have been cured or corrected in all material respects). Each
Contract is in full force and effect and is not subject to any default
thereunder of which the Company has knowledge by any party obligated to the
Company pursuant thereto. Schedule 2.12(c) identifies each Contract that
requires a consent, waiver or approval to preserve all rights of, and benefits
to, the Surviving Corporation under such Contract as a result of entering into
this Agreement or effecting the Merger or the other transactions contemplated by
this Agreement (each a "Required Consent").
----------------
2.13 Interested Party Transactions. To the Company's knowledge, no
-----------------------------
officer or director of the Company (nor any ancestor, sibling, descendant or
spouse of any of such persons, or any trust, partnership or corporation in which
any of such persons has or has had an economic interest), has or has had,
directly or
-21-
indirectly, (i) an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells, or
proposes to furnish or sell, (ii) an economic interest in any entity that
purchases from, or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Schedule
2.12(a) or Schedule 2.11; provided, that (x) ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation
shall not be deemed an "economic interest in any entity" for purposes of this
Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 Litigation. There is no action, suit or proceeding of any nature
----------
pending or to the Company's knowledge threatened against the Company, its
properties or any of its officers or directors, in their respective capacities
as such. To the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors by or before any governmental entity. No governmental entity has at
any time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company 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 material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company provided to counsel
------------
for Parent are the only minute books of the Company and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
shareholders or actions by written consent since the time of incorporation of
the Company.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not: (i) operated any
------------------
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased; or (ii)
released any amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, the Federal Water
Pollution Control Act, as amended, the Clean Air Act, as amended, and the
regulations promulgated pursuant to said laws, (a "Hazardous Material"). No
------------------
Hazardous Materials are present, as a result of the deliberate actions or
omissions of the
-22-
Company, or, to the Company's knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has at
any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
------------------------------
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activities of the Company. The Company is
not aware of any fact or circumstance which would reasonably be likely to
involve the Company in any environmental litigation or impose upon the Company
any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has not
------------------------------------------------
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Schedule 2.19 sets
forth the principal terms and conditions of any agreement, written or oral, with
respect to such fees. Schedule 2.19 sets forth the Company's reasonable
estimate as of the date of this Agreement of all Third Party Expenses (as
defined in Section 5.4) expected to be incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.20(a)(i) below (such definition shall only apply to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
---------
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended;
-23-
(iii) "Company Employee Plan" shall refer to any plan, program,
---------------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any "Employee" (as defined below), and pursuant to
which the Company or any Affiliate has or would reasonably be expected to have
any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
------------------
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee Plan
------------
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete list
--------
of each Company Employee Plan and each Employee Agreement in existence on or
prior to the date of this Agreement, together with a schedule of all
liabilities, whether or not accrued, under each such Company Employee Plan or
Employee Agreement except for liabilities under consulting contracts previously
supplied to Parent. The Company does not have any plan or commitment, whether
legally binding or not, to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to enter into any Company Employee Plan or Employee Agreement, nor does it have
any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
-24-
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
---
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in all
------------------------
material respects all obligations required to be performed by it under each
Company Employee Plan and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Employee Plan; (iii) there are
no actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; and
(iv) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to the Company, Parent or any of its Affiliates (other than ordinary
administration expenses and other liabilities typically incurred in a
termination event); (v) there are no inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is subject
to any penalty or tax with respect to any Company Employee Plan under Section
402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or
-------------------
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
------------------------------
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) Effect of Transaction.
---------------------
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan as in effect prior to the
Closing that will or could reasonably be expected to result in any payment
(whether of severance pay
-25-
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(ii) No payment or benefit which will or may be made by the
Company or Parent or any of their respective affiliates in connection with the
Merger with respect to any Employee will be characterized as an "excess
parachute payment", within the meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all
------------------
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund 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).
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the knowledge of the Company, threatened. The Company is not
involved in or, to the knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in liability to the Company.
The Company has not engaged in any unfair labor practices within the meaning of
the National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a liability to the Company. The Company is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company.
(k) Schedule 2.20 sets forth as of the date of this Agreement, the
salary or other compensation payable or to become payable by the Company to any
of its officers, directors or employees or the commitment or obligation of any
kind for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
2.2 Year 2000 Compliance. All computer-related products and services of
--------------------
the Company and each of its subsidiaries fully comply with the Year 2000
Qualification Requirements. "Year 2000 Qualification Requirements" means that
all computer-related products of the Company and each of its subsidiaries (i)
have been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) with the
exception of those items set forth on Schedule 2.21, have been designed to
-------------
ensure date and time entry recognition, calculations that accommodate same
century and multi-century formulas and date values, leap year recognition and
calculations, and date data interface values that reflect the century, (iii)
with the exception of those items set forth on Schedule 2.21, accurately manage
-------------
and manipulate data involving dates and times, including single century formulas
and multi-century formulas, and will not cause
-26-
an abnormal ending scenario within the application or generate incorrect values
or invalid results involving such dates, (iv) with the exception of those items
set forth on Schedule 2.21, accurately process any date rollover, and (v) with
-------------
the exception of those items set forth on Schedule 2.21, accept and respond to
-------------
two-digit year date input in a manner that resolves any ambiguities as to the
century. No representation is made, however, with respect to any failure of the
Company's products or services to meet the Year 2000 Qualification Requirements
due to (a) mistakes made by the user in inputting the date or date data, (b) use
of the Company's products or services on any operating system or hardware
platform other than the platforms that such products or services were designed
to run on, (c) any errors or other defects in the operating system or hardware
platform, or other software or hardware products, used with the Company's
products or services, or (d) use of the Company's products or services for any
purpose other than the purposes for which such products or services are intended
to be used as reflected in the user manuals provided by the Company along with
such products and services. "Constituent Component" means all software
(including operating systems, programs, packages and utilities), firmware,
hardware, networking components, and peripherals provided as part of the
configuration. To the Company's knowledge, all of the Company's internal
computer systems and each Constituent Component (as defined above) of those
systems fully comply with the Year 2000 System Qualification Requirements. "Year
2000 System Qualification Requirements" means that the internal computer systems
and each Constituent Component (as defined above) of those systems have been
reviewed to confirm that they store, process (including sorting and performing
mathematical operations, calculations and computations), input and output data
containing date and information correctly regardless of whether the date
contains dates and times before, on or after January 1, 2000.
2.2 Representations Complete. To the Company's knowledge, none of the
------------------------
representations or warranties made by the Company (as modified by the Company
Schedules), nor any statement made in any Schedule or certificate furnished by
the Company pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
California. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by
-27-
all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Parent and Merger Sub does not, and, as of the Effective Time, the
performance by Parent and Merger Sub of their obligations under this Agreement
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
--------
of Incorporation or Bylaws of Parent or Merger Sub or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Conflict), is required at or prior to the
Effective Time by or with respect to the Parent and Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the California Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) expiration or early termination of the applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iv) receipt of the California Permit (as defined
-------
in Section 5.1 below).
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 150,000,000 shares of
Common Stock, of which 38,124,532 shares were issued and outstanding as of June
7, 1999, and 5,000,000 shares of Preferred Stock, none of which is issued or
outstanding as of June 7, 1999. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, 1,000 shares of which, as of the date
hereof, are issued and outstanding and are held by Parent. All such shares have
been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof.
(b) Parent has reserved 12,288,741 shares of Common Stock for issuance
to employees and consultants pursuant to the 1998 Stock Option Plan ("Parent
------
Option Plan"), of which 9,728,283 shares are subject to outstanding, unexercised
-----------
options as of March 31, 1999. Parent has issued warrants that may be exercised
for 2,782,288 shares of Parent Common Stock as of March 31, 1999. Except for
the Parent Options and warrants described in Schedule 3.3(b), as of March 31,
1999, there were no options, warrants, calls, rights, commitments or agreements
of any character, written or oral, to which Parent is a party or by which it is
bound obligating the Parent to grant, extend, accelerate the vesting of, change
the price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement.
(c) The shares of Parent Common Stock to be issued pursuant to the
Merger will, when issued in accordance with the terms of this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
------------------------------------------
made available to the Company true and complete copies of all reports or
registration statements filed by it with the U.S.
-28-
Securities and Exchange Commission (the "SEC")for all periods subsequent to
---
March 31, 1998, all in the form so filed (all of the foregoing being
collectively referred to as the "SEC Documents"). As of their respective filing
-------------
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
except to the extent corrected by a subsequently filed document with the SEC.
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 applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto) and present fairly the
consolidated financial position of Parent at the dates thereof and of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal audit adjustments).
3.5 Merger Sub. Merger Sub has been formed solely for the purpose of
----------
executing and delivering this Agreement and consummating the transactions
contemplated hereby. Since the date of its incorporation, Merger Sub has
neither engaged in or transacted any business or activity of any nature
whatsoever other than activities related to its corporate organization and the
execution and delivery of this Agreement. Merger Sub has no assets or
properties or debts, liabilities or obligations of any kind whatsoever, and
other than this Agreement, is not a party to any contract, agreement or
undertaking of any nature. The authorized capital stock of Merger Sub consists
of 1,000 shares of Merger Sub Common Stock, of which 1,000 shares are issued and
outstanding. All of the issued and outstanding shares of Merger Sub Common
Stock are owned of record and beneficially by Parent, free and clear of any
encumbrance.
ARTICLE IV
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 (i) the termination of
this Agreement and (ii) the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing, which consent shall not
be unreasonably withheld or delayed, except as contemplated by this Agreement)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to use all reasonable
efforts consistent with past practice to pay its debts and Taxes when due and to
pay or perform other obligations when due, and, to the extent consistent with
such business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. The
Company shall use all reasonable efforts to promptly notify Parent of any event
or occurrence or emergency not in the ordinary course of its business, and any
material event involving the Company or its business. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement and the Effective Time, except as expressly contemplated by
this Agreement or disclosed in Schedule 4.1, the
-29-
Company shall not, without the prior written consent of Parent during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Effective Time (which consent shall not be
unreasonably withheld or delayed):
(a) Transfer to any person or entity any rights to the Company
Intellectual Property (other than pursuant to end-user licenses granted by the
Company pursuant to its standard form of end-user license or end-user licenses
granted by the Company consistent with past practice);
(b) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company;
(c) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, in a manner that would
result in material liability to the Company, any of the agreements set forth or
described in the Company Schedules;
(d) Commence any litigation;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor) other than
repurchases made in accordance with agreements referred to on the Company
Schedules;
(f) Other than (1) repurchases made in accordance with agreements
referred to on the Company Schedules, (2) the granting of stock options in the
ordinary course of business, consistent with past practice, or (3) the issuance
of shares of Company Capital Stock upon exercise or conversion of presently
outstanding Company Options, Company Options granted in the future in accordance
with this Section 4.1, or currently outstanding shares of Company Preferred
Stock, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of its capital stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(g) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
(i) Acquire or agree to acquire any assets in an amount in excess of
$25,000 in the case of a single transaction or in excess of $125,000 in the
aggregate in any 30-day period;
(j) Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the ordinary course of business;
-30-
(k) Except pursuant to its existing credit agreements with Silicon
Valley Bank, incur any indebtedness for borrowed money or guarantee any such
indebtedness outside the ordinary course of business or issue or sell any debt
securities of the Company or guarantee any debt securities of others;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to standard
written agreements previously disclosed to Parent on the Company Disclosure
Schedules;
(m) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees or, except in the ordinary course of business consistent with
past practices, extend employment offers;
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of $25,000 (in
any one case) or $125,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of:
(A) liabilities reflected or reserved against in the Company Financial
Statements (or the notes thereto), (B) liabilities that arose or arise in the
ordinary course of business consistent with past practice since March 31, 1999,
(C) expenses consistent with the provisions of this Agreement incurred in
connection with any transaction contemplated and permitted hereby, or (D)
liabilities or obligations that are identified in the agreements referred to in
the Company Schedules, provided that the Company give prior notice to Parent of
any payment under this Section 4.1(o)(D);
(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Enter into any strategic alliance, development or joint marketing
agreement; or
(r) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (q) above, or any other action that would
prevent the Company from performing or cause the Company not to perform its
covenants hereunder.
4.2 No Solicitation. Until the earlier of (i) the Effective Time and (ii)
---------------
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, the Company will not (nor will the Company permit any of the
Company's officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, conduct discussions with or engage
in negotiations with any person, relating to the possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) or any material portion of its capital stock or assets, (b)
provide information with respect to it to any person, other than Parent,
relating to the possible acquisition of the Company (whether by way of merger,
purchase of
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xxxxxxx xxxxx, xxxxxxxx of assets or otherwise) or any material portion of its
capital stock or assets, (c) enter into an agreement with any person, other than
Parent, providing for the acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) or any material portion of its capital stock or assets by any
person, other than by Parent. In addition to the foregoing, if the Company
receives prior to the Effective Time or the termination of this Agreement any
offer or proposal relating to any of the above, the Company shall immediately
notify Parent thereof, including information as to the identity of the offeror
or the party making any such offer or proposal and the specific terms of such
offer or proposal, as the case may be, and such other information related
thereto as Parent may reasonably request.
4.3 Conduct of Business by Parent. Until the earlier of (i) the
-----------------------------
Effective Time and (ii) the date of termination of this Agreement pursuant to
the provisions of Section 8.1 hereof, Parent will not take any action that would
materially delay the consummation of the transactions contemplated by this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 California Permit; Shareholder Meeting.
--------------------------------------
(i) As promptly as practicable (and in any event within ten business
days) after the execution of this Agreement, Parent shall prepare the necessary
documents and Parent shall apply to obtain a permit (a "California Permit") from
-----------------
the California Commissioner of Corporations (after a hearing before such
Department) pursuant to Section 25121 of the California Corporate Securities Law
of 1968, so that the issuance of the Parent Common Stock in the Merger shall be
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), by virtue of the exemption from registration contained in
---------------
Section 3(a)(10) thereof. The Company shall cooperate with, and provide
information to, Parent in connection with Parent's application for the
California Permit. The Company and Parent will respond to any comments from the
California Commissioner of Corporations and use their reasonable best efforts to
have the California Permit granted as soon as practicable after such filing. As
promptly as practicable after the date of this Agreement, Parent shall prepare
and make such filings as are required under applicable Blue Sky laws relating to
the transactions contemplated by this Agreement. None of the information
supplied by the Company to Parent in connection with the California Permit
application or any other document prepared to comply with federal or state
securities laws shall contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading
(ii) As promptly as practicable after the receipt of a California
Permit, the Company shall submit this Agreement and the transactions
contemplated hereby, including without limitation the Merger, to the Company
shareholders for approval and adoption as provided by the CGCL and the Company's
Articles of Incorporation and Bylaws. The information submitted to the
Shareholders shall be subject to review and approval by Parent and shall include
information regarding the Company, the terms of
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the Merger and this Agreement and the unanimous recommendation of the Board of
Directors of the Company in favor of the Merger, this Agreement and the
transactions contemplated hereby.
(iii) If for any reason the California Permit is not issued or if the
exemption provided by Section 3(a)(10) of the Securities Act is not available
with respect to the issuance of the Parent Common Stock in connection with the
Merger, then Parent shall as soon as practicable, prepare and file with the SEC
a Form S-4 Registration Statement (the "Form S-4 Registration Statement") with
respect to the issuance of the Parent Common Stock in connection with the
Merger. Each of the Company and Parent shall use all reasonable efforts to have
the Form S-4 Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. The Company will use its
reasonable efforts to cause the proxy statement included in the Form S-4
Registration Statement to be mailed to the Shareholders as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act, and to call and hold a meeting of the Shareholders to
vote on a proposal to adopt and approve this Agreement and the transactions
contemplated hereby, including without limitation the Merger.
5.2 Access to Information. Subject to any applicable contractual
---------------------
confidentiality obligations (which the Company shall use its reasonable efforts
to cause to be waived) each party shall afford the others and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.3 Confidentiality. Each of the parties hereto hereby agrees to and
---------------
reaffirms the terms and provisions of the Mutual Confidential Disclosure
Agreement between Parent and the Company dated as of March 5, 1999.
5.4 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, 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 (it being understood
that (a) Third Party Expenses of the Company will include, without limitation,
all fees and expenses payable to Broadview International LLC and Xxxxxx Godward
LLP in connection with their representation of the Company with respect to the
Merger, and (b) if the Closing occurs, the Third Party Expenses referred to in
paragraph (a) of this sentence will be paid by Parent or the Surviving
Corporation, and not by the Shareholders).
5.5 Public Disclosure. Upon execution and delivery of this Agreement by
-----------------
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Merger. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
Dealers, Inc., prior to the Effective Time,
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no disclosure (whether or not in response to an inquiry) of the subject matter
of this Agreement shall be made by any party hereto unless approved by Parent
and the Company prior to release, provided that such approval shall not be
unreasonably withheld.
5.6 Consents. The Company shall use its reasonable efforts to obtain the
--------
consents, waivers and approvals under any of the Contracts identified on
Schedule 2.12 as may be required in connection with the Merger.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
-----------------
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates material to Parent,
in Parent's reasonable judgement, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and capital stock.
5.9 Notification of Certain Matters. The Company shall use all
-------------------------------
reasonable efforts to 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 and Parent or Merger Sub, respectively, contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time
except as contemplated by this Agreement (including the Company Schedules) and
(ii) any failure of the Company or Parent, as the case may be, to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.9 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
5.10 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.11 Form S-8. Parent shall file within 15 business days after the Closing
--------
a registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options promptly after the Closing
Date.
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5.12 NMS Listing. Parent shall cause to be listed on the Nasdaq National
-----------
Market the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.13 Cooperation With Financial Statements. The Company will use its best
-------------------------------------
efforts to cause the Company's management and its independent auditors to
facilitate on a timely basis (i) the preparation of historical and pro forma
financial statements as required by Parent to comply with applicable SEC
regulations, and (ii) the review of the Company's 1997 and 1998 audit work
papers, including the examination of selected interim financial statements and
data.
5.14 Employee Benefits.
-----------------
(a) Parent shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Parent, or alternative benefits programs substantially comparable to those
applicable to employees of Parent on similar terms, as soon as practicable after
the Effective Time. Without limiting the generality of the foregoing, (i) to
the extent that any employee of the Company becomes eligible to participate in
any employee benefit plan of Parent after the Effective Time, Parent, the
Surviving Corporation and their subsidiaries shall credit such employee's
service with the Company, to the same extent as such service was credited under
the similar employee benefit plans of the Company immediately prior to the
Effective Time, for purposes of determining eligibility to participate in and
vesting under, and for purposes of calculating benefits under, such employee
benefit plan of Parent, and (ii) to the extent permitted by such employee
benefit plan of Parent and applicable law, Parent, the Surviving Corporation and
its subsidiaries shall waive any pre-existing condition limitations, waiting
periods or similar limitations under such employee benefit plan of Parent and
shall provide each such employee with credit for any co-payments previously made
and any deductibles previously satisfied.
(b) Parent shall reserve the sum set forth on Schedule 5.14 in cash,
which sum shall be (i) allocated among those employees of the Company as
determined by the Company (and agreed to by Parent) prior to the Closing (the
"Participating Employees"), and (ii) paid to each such Participating Employee in
accordance with the terms set forth in Schedule 5.14.
(c) Parent shall cause the Surviving Corporation to pay commercially
reasonable severance costs to those employees of the Company whose employment
with the Surviving Corporation is terminated (other than for Cause, as defined
in Schedule 5.14) within one year after the Closing.
5.15 Indemnification of Directors and Officers.
-----------------------------------------
(a) For a period of three years from the Closing Date, Parent shall,
and shall cause the Surviving Corporation to, fulfill and honor in all respects
all rights to indemnification existing in favor of the current directors and
officers of the Company, as provided in the Company's Articles of Incorporation
and Bylaws (as in effect as of the date of this Agreement) and as provided in
any indemnification agreements between the Company and such directors and
officers (as in effect as of the date of this Agreement) and as otherwise
existing in favor of such directors and officers.
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(b) For three years after the Effective Time, Parent shall maintain
in effect the current level and scope of directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy; provided, however, that in
no event shall Parent be required to expend in any one year an amount in excess
of 150% of the annual premium currently paid by the Company for such insurance,
and, provided further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) Section 5.15 shall survive the consummation of the transactions
contemplated hereby, is intended to benefit and may be enforced by the directors
and officers of the Company, and shall be binding on all successors and assigns
of the Parent and the Company.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the shareholders of the Company by the requisite
vote under applicable law and the Company's Articles of Incorporation.
(b) No Injunctions or Restraints; Illegality; HSR Act. No temporary
-------------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect. All
waiting periods under the HSR Act shall have expired or been terminated early.
(c) Tax Opinions. Parent and the Company shall each have received
------------
written opinions from their respective tax counsel to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code; provided, however, that if the counsel to either Parent or the Company
-------- -------
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make reasonable
Tax representations (including those substantially in the form of the
representations contained in the tax representations letters attached as Exhibit
E) as requested by such counsel for the purpose of rendering such opinions.
(d) Nasdaq Listing. The shares of Parent Common Stock issuable to
--------------
shareholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq Stock Market upon official notice of
issuance.
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(e) California Permit. The California Commissioner of Corporations
-----------------
shall have issued the California Permit and the exemption provided by Section
3(a)(10) of the Securities Act shall be available with respect to the issuance
of the Parent Common Stock in the Merger, or the Form S-4 Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act, and no stop order shall have been issued by the SEC with respect to the
Form S-4 Registration Statement.
6.2 Additional Conditions to Obligations of the Company. The obligations
---------------------------------------------------
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations. The representations of Parent and Merger Sub
---------------
contained in this Agreement shall have been true and correct in all respects as
of the date of this Agreement except for such breaches as would not, either
individually or in the aggregate, result in a material liability to Parent. The
Company shall have received a certificate with respect to the foregoing signed
on behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed on
behalf of the Parent by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal opinion
-------------
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel to
Parent, in substantially the form attached hereto as Exhibit C.
---------
(d) Stock Price. The average closing price per share of Parent Common
-----------
Stock for the ten (10) consecutive trading days ending on the second trading day
immediately prior to the date on which all of the conditions to the Closing set
forth in Article VI are satisfied or properly waived (other than this Section
6.2(d)), as reported on the Nasdaq National Market shall not be equal to or less
than $22.00.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
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. The representations and warranties
------------------------------
of the Company contained in this Agreement shall have been true and correct in
all respects as of the date of this Agreement except for such breaches as would
not, either individually or in the aggregate, result in a material liability to
Company. Parent shall have received a certificate with respect to the foregoing
signed on behalf of the Company by a duly authorized officer of the Company.
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(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Parent and Merger Sub
shall have received a certificate to such effect signed on behalf of the Company
by a duly authorized officer of the Company.
(c) Legal Opinion. Parent shall have received a legal opinion from
-------------
Xxxxxx Godward LLP, legal counsel to the Company, in substantially the form
attached hereto as Exhibit D.
---------
(d) Escrow Agreement. The Shareholders' Representatives (as defined
----------------
in the Escrow Agreement) shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit F (the "Escrow Agreement").
---------- ----------------
(e) Resignation of Directors and Officers. All directors and officers
-------------------------------------
of the Company shall have resigned their respective offices as directors and
officers of the Company effective as of the Effective Time.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules), and all
of Parent's and Merger Sub's representations and warranties in this Agreement
and in any instrument delivered pursuant to this Agreement, shall survive the
Merger and continue until 5:00 p.m., California time, on the first anniversary
of the Closing Date.
7.2 Obligation of the Company to Indemnify, Reimburse, etc. Subject to
------------------------------------------------------
the provisions of Section 7.4 hereof, the Company, its successors and assigns,
jointly and severally, shall indemnify, reimburse, defend, protect and hold
harmless Parent and Merger Sub and each of their successors and assigns and each
of their respective directors, officers, employees, affiliates, agents, and
their respective successors and assigns (each a "Parent Indemnitee") from and
against any claims, losses, liabilities, damages, causes of action, costs and
expenses (including reasonable attorney's, accountant's, consultant's and
expert's fees and expenses) (collectively "Losses") resulting from, imposed
upon, incurred or suffered by any of them, directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of (i)
any representation contained in this Agreement as if such representation was
made as of the date of this Agreement or such other date prior to the date of
this Agreement as is indicated in such representation and at no other point in
time (as modified by the Company Schedules) or (ii) any warranty, covenant or
agreement of the Company contained in this Agreement.
7.3 Obligation of Parent to Indemnify, Reimburse, etc. Subject to the
-------------------------------------------------
provisions of Section 7.4 hereof, Parent and Merger Sub and their respective
successors and assigns, jointly and severally, shall
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indemnify, reimburse, defend, protect and hold harmless the Shareholders and
their successors and assigns and each of their directors, officers, employees,
affiliates, agents, and their respective successors and assigns (each a
"Shareholder Indemnitee") from and against any Losses resulting from, imposed
upon, incurred or suffered by any of them, directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty, but not any covenant or agreement, of Parent
contained in this Agreement.
7.4 Limits on Indemnification, Reimbursement, etc.
----------------------------------------------
(a) Absent fraud or willful misconduct of any party (for which there
shall be no limitation of liability of any party), no Parent Indemnitee and no
Shareholder Indemnittee shall have any right to seek or obtain indemnification,
reimbursement or defense under this Agreement or the Escrow Agreement until
Losses which would otherwise be indemnifiable hereunder, and have been incurred
by such party and other indemnitees associated with or related to such party,
exceed $500,000, after which such party or parties to be indemnified hereunder
shall be entitled to receive indemnification for all Losses in excess of
$500,000. In addition (absent fraud or willful misconduct), neither Parent nor
any Shareholder shall have any liability under Article VII unless the Losses
incurred by a Parent Indemnitee or a Shareholder Indemnitee, as the case may be,
in connection with a claim for indemnification or reimbursement exceed $25,000,
and the Losses related thereto shall be disregarded for purposes of determining
whether the $500,000 deductible set forth in this Section 7.4(a) has been met.
(b) Absent fraud or willful misconduct of the Company, from and after
the Closing, recourse of the Parent Indemnitees to the Escrow Amount in the
Escrow Fund shall be the sole and exclusive remedy of the Parent Indemnitees for
Losses relating directly or indirectly, based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation, warranty
(as modified by the Company Schedules), covenant or agreement of the Company,
contained in this Agreement.
(c) Absent fraud or willful misconduct, no party hereto shall be
entitled to recover punitive damages with respect to any breach of any
representation or warranty or non-performance of any obligation under this
Agreement (or otherwise relating to the transactions contemplated hereby), and
under no circumstances shall such damages be considered Losses under this
Article VII.
(d) To the extent that any indemnifying party makes or is required to
make any indemnification or reimbursement payment to any indemnified party, the
indemnifying party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the indemnified party may have against any
other person with respect to any Losses, circumstances or matters to which such
indemnification or reimbursement payment is directly or indirectly related.
Each indemnified party shall permit the indemnifying party to use the name of
the indemnified party in any transaction or in any proceeding or other matter
involving any of such rights or remedies; and the indemnified party shall take
such actions as the indemnifying party may reasonably request for the purpose of
enabling the indemnifying party to perfect or exercise the indemnifying party's
right of subrogation hereunder.
(e) Notwithstanding anything to the contrary contained in this
Agreement (i) the Parent Indemnitees and Shareholder Indemnitees, as the case
may be, shall seek recovery from their
-39-
insurance providers with respect to any Losses for which indemnity or
reimbursement may be sought under Article VII and for which insurance may be
available, and no part of the Escrow Fund shall be released from escrow to a
Parent Indemnitee or Shareholder Indemnitee, as the case may be, until it shall
be finally determined whether such Parent Indemnitee or Shareholder Indemnitee,
as the case may be, may recover from such insurance provider; provided however,
that nothing in this Section 7.4(e) shall preclude a Parent Indemnitee or
Shareholder Indemnitee, as the case may be, from asserting a claim under Article
VII before it shall be finally determined whether such Parent Indemnitee or
Shareholder Indemnitee, as the case may be, may recover from its respective
insurance provider.
7.5 Escrow Arrangements. Concurrent with the Effective Time, the Escrow
-------------------
Amount shall be placed in an escrow fund (the "Escrow Fund"), to be governed by
the terms of the Escrow Agreement. The Escrow Fund shall be available to
compensate Parent and its affiliates for losses for which Parent or its
affiliates are entitled to indemnification under Article VII. The terms and
conditions of the Escrow Fund shall be set forth more fully in the Escrow
Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger
-----------
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred by October 15, 1999 (provided that the right to terminate this
Agreement under this clause 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);
provided, however, that if Parent shall file the Form S-4 Registration Statement
in accordance with Section 5.1(iii), then the reference to October 15, 1999 in
this sentence shall be replaced with January 15, 2000; (ii) there shall be a
final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company which is material to the Company or (ii) compel Parent or the Company to
dispose of or hold separate, as a result of the Merger, any portion of the
business or assets of the Company or Parent which is material to the Company or
Parent as the case may be.
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b),
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as the case may be, would not then be satisfied; provided, however, that if such
breach is curable by the Company within thirty (30) days through the exercise of
its reasonable best efforts, then for so long as the Company continues to
exercise such reasonable best efforts Parent may not terminate this Agreement
under this Section 8.1(d) unless such breach is not cured within thirty (30)
days (but no cure period shall be required for a breach which by its nature
cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Parent or Merger Sub within
thirty (30) days through the exercise of its reasonable best efforts, then for
so long as Parent or Merger Sub continues to exercise such reasonable best
efforts the Company may not terminate this Agreement under this Section 8.1(e)
unless such breach is not cured within thirty (30) days (but no cure period
shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void and,
except as set forth in this Section 8.2, there shall be no liability or
obligation on the part of Parent, Merger Sub or the Company, or their respective
officers, directors or shareholders, provided that each party shall remain
liable for any willful breaches of this Agreement prior to its termination; and
provided further that, the provisions of Sections 5.3 and 5.4 and Article IX of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
---------
the shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
-----------------
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
-41-
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given (a) on the date of delivery, if delivered
personally or (b) two business days after sent, if sent by commercial delivery
service, or mailed by registered or certified mail (return receipt requested)
or, (c) on the date of delivery, if sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Critical Path, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
(b) if to the Company, to:
Amplitude Software Corporation
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Godward LLP
5 Palo Alto Square
Palo Alto, California
Attention: Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. As used in this Agreement, the phrase "to the best of
[a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware,"
and similar phrases shall mean the actual knowledge of the officers and
directors of such party, after careful consideration of the matters set forth in
the representation that is so qualified and a reasonably diligent review of all
files, documents, agreements and other materials in such person's possession or
subject to his or her control. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person (other than the Shareholder Indemnittees and those persons referred
to in Sections 5.14 and 5.15) any rights or remedies hereunder; and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Merger Sub may assign their
respective rights and delegate their respective obligations hereunder to their
respective affiliates as long as such assignment or delegation does not
adversely affect the rights of the Shareholders.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
-43-
9.6 No Implied Representations. Parent and the Company acknowledge that,
--------------------------
except as expressly provided in Articles II and III, and except as expressly
provided in any document delivered by a party hereto to any other party hereto
in connection with the transactions contemplated hereby, none of the parties
(and no other person) has made or is making any representations or warranties
whatsoever, implied or otherwise.
9.7 Other Remedies. Except as otherwise provided herein (including in
--------------
Section 7.4), any and all remedies herein expressly conferred upon a party will
be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Share Legends. All certificates representing any of the shares of
-------------
Parent Common Stock to be issued pursuant to this Agreement shall have endorsed
thereon any legend required by Federal or state securities laws.
(Remainder of page intentionally left blank)
-44-
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
AMPLITUDE SOFTWARE CORP. CRITICAL PATH, INC.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------- ----------------------
Xxxxxxx Xxxxxxx Xxxxx X. Xxxxxxxx
President and Chief Executive Officer Executive Vice President
and Chief Financial Officer
APOLLO ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Chief Financial Officer and Secretary
***REORGANIZATION AGREEMENT***
INDEX OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A Form of Voting Agreement
Exhibit B Form of Legal Opinion of Counsel to Parent
Exhibit C Form of Legal Opinion of Counsel to the Company
Exhibit D Form of Escrow Agreement
INDEX OF SCHEDULES
Schedule Description
-------- -----------
2.2(a) Shareholder List
2.2(b) Option List
2.4 (Non Contravention; Conflicts)
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(b) Registered Intellectual Property
2.11(c) Intellectual Property Encumbrance
2.11(e) Intellectual Property Licensed by Company
2.11(g) Intellectual Property Licensed to Company
2.11(h) Intellectual Property Licensed to Company
2.11(i) Intellectual Property Licensed by Company
2.11(k) Indemnification Regarding Intellectual Property
2.11(l) Transferability of Intellectual Property
2.11(m) Transferability of Intellectual Property
2.11(q) Intellectual Property Proceedings
2.11(r) Pending Intellectual Property Rights
2.12(a) Agreements, Contracts and Commitments
2.12(b) (Contracts - Breach or Default)
2.12(c) (Contracts - Notice or Consent)
2.13 Interested Party Transactions
2.15 Litigation
2.19 Brokers/Finders Fees; Third-Party Expenses
2.20(b) (Company Employee Plans)
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(h)(i) Effect of Merger on Employee Plans
2.20(h)(ii) Excess Parachute Payments
2.20(j) Labor
2.21 Change of Control; Non-Compete Payments (to Employees)
4.1 Conduct of the Business
5.14 (Participants in Management Bonus)
6.3(f) List of Offer Letter Acceptances
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