EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
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entered into as of December 17, 1999, by and among Verisign, Inc., a Delaware
corporation ("Parent"), Signio, Inc., a California corporation ("Company"), and
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BEHAD Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Newco").
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RECITALS
A. The parties intend that, on the terms and subject to the
conditions hereinafter set forth, Newco will merge with and into Company in a
reverse triangular merger (the "Merger"), with Company to be the surviving
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corporation of the Merger, all pursuant to the terms and conditions of this
Agreement, an Agreement of Merger substantially in the form of Exhibit A-1 (the
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"Agreement of Merger"), a Certificate of Merger substantially in the form of
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Exhibit A-2 (the "Certificate of Merger") and the applicable provisions of the
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laws of California and Delaware. Upon the effectiveness of the Merger, (i) all
the outstanding shares of common stock of Company, par value $0.0001 per share
("Company Common Stock"), and all the outstanding shares of preferred stock of
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Company, par value $0.0001 per share ("Company Preferred Stock"), will be
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converted into common stock of Parent, $0.001 par value per share ("Parent
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Common Stock") and (ii) all options to purchase Company Common Stock will be
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assumed and converted into options to purchase Parent Common Stock, in the
manner and on the basis determined herein and as provided in the Agreement of
Merger and Certificate of Merger.
B. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
Parent and the Representatives (as defined in Section 1.3.2) shall execute and
deliver an Escrow Agreement in substantially the form attached hereto as Exhibit
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B (the "Escrow Agreement"), to be effective upon consummation of the Merger,
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pursuant to which certain shares of Common Stock of Parent issued in the Merger
will be withheld by Parent and deposited in escrow as security for the
indemnification obligations provided for in Section 10.
C. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
Company and each of the shareholders of Company listed on Schedule 1
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(collectively, the "Principal Shareholders") shall execute and deliver a Support
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Agreement in substantially the form attached hereto as Exhibit C (the "Support
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Agreement") agreeing to vote in favor of this Agreement and the Merger.
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D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain employees of Company shall execute and deliver to Parent employment
agreements with Parent and Company (the "Employment Agreements"), to be
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effective upon the consummation of the Merger.
E. The Merger is intended to be treated as a "purchase" for
accounting purposes and a tax-free reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by virtue of the provisions of
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Section 368(a)(2)(E) of the Code.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. The Agreement of Merger will be filed with the
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Secretary of State of the State of California and the Certificate of Merger will
be filed with the Secretary of State of the State of Delaware as soon as
practicable after the closing of the transactions provided for herein (the
"Closing"). The effective time of the Merger (the "Effective Time") shall be
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the time of filing of the Agreement of Merger unless otherwise specified in the
Agreement of Merger. On the terms and subject to the conditions of this
Agreement, the Agreement of Merger and the Certificate of Merger, Newco will be
merged with and into Company (or Company will be merged with and into Newco in a
forward triangular merger or into Parent in a straight-in merger) in a statutory
merger pursuant to the Agreement of Merger and the Certificate of Merger and in
accordance with applicable provisions of Delaware and California laws as
follows:
1.1.1 Conversion of Company Shares. Each share of Company
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Common Stock that is issued and outstanding immediately prior to the Effective
Time, other than shares, if any, for which dissenters rights have been or may be
perfected in compliance with applicable law, will, by virtue of the Merger and
at the Effective Time, and without further action on the part of any holder
thereof, be converted into the Applicable Number (determined in accordance with
Section 1.1.4 hereof) of fully paid and nonassessable shares of Parent Common
Stock. Each share of Company Preferred Stock that is issued and outstanding
immediately prior to the Effective Time, other than shares, if any, for which
dissenters rights have been or may be perfected in compliance with applicable
law, will, by virtue of the Merger and at the Effective Time, and without
further action on the part of any holder thereof, be converted into the
Applicable Number (determined in accordance with Section 1.1.4 hereof) of fully
paid and nonassessable shares of Parent Common Stock. Any right of repurchase by
Company of any shares of Company Common Stock that exists immediately before the
Effective Time shall continue and become a right of Parent to repurchase on the
same terms and conditions (adjusted according to the Applicable Number) as the
shares of Parent Common Stock that are issued at the Effective Time upon
conversion of such shares of Company Common Stock. Company represents in Section
2.3(b) that such repurchase rights are and will be solely related to the vesting
of restricted Company Common Stock issued to Company employees.
1.1.2 Dissenting Shares. Notwithstanding anything to the
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contrary contained in this Agreement, any shares of Company Common Stock or
Company Preferred Stock that, as of the Effective Time, are or may become
"dissenting shares" within the meaning of Section 1300(b) of the California
Corporations Code shall not be converted into or represent the right to receive
Parent Common Stock in accordance with Section 1.1.1 (or cash in lieu of
fractional shares in accordance with Section 1.2), and the holder or holders of
such shares shall be entitled only to such rights as may be granted to such
holder or holders in Chapter 13 of the California General Corporation Law;
provided, however, that if the status of any such shares as
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"dissenting shares," shall not be perfected, or if any such shares lose their
status as "dissenting shares," then, as of the later of the Effective Time or
the time of the failure to perfect such status or the loss of such status, such
shares shall automatically be converted into and shall represent only the right
to receive (upon surrender of the certificate or certificates representing such
shares) Parent Common Stock in accordance with Section 1.1.1 (and cash in lieu
of fractional shares in accordance with Section 1.2).
1.1.3 Conversion of Company Options and Warrants.
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(a) Effective at the Effective Time, Parent will assume
all outstanding options to purchase Company Common Stock (the "Company
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Options"), and each of the Company Options will by its terms be converted into
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an option (a "Parent Option") to purchase that number of shares of Parent Common
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Stock which equals the number of shares of Company Common Stock that could be
purchased pursuant to the Company Option immediately prior to the Effective Time
multiplied by the Applicable Number (determined in accordance with Section 1.1.4
hereof), such number of shares being rounded down to the nearest whole share.
The exercise price per share of Parent Common Stock purchasable under each
Parent Option will be equal to the exercise price per share of Company Common
Stock under the corresponding Company Options divided by the Applicable Number,
such exercise price being rounded up to the nearest tenth of a cent. All of the
other terms and conditions of each Parent Option will be the same in all
material respects as the corresponding Company Option, including any right to
repurchase shares issued upon exercise of the Company Options. 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. No cash will be paid in lieu of
fractional shares rounded down pursuant to this Section 1.1.3(a).
(b) Effective as of the Effective Time, Parent will
assume all outstanding warrants to purchase Company Common Stock (the "Company
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Common Warrants"), and each of the Company Common Warrants will by its terms be
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converted into a warrant (a "Parent Warrant") to purchase that number of shares
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of Parent Common Stock which equals the number of shares of Company Common Stock
that could be purchased pursuant to the Company Warrant immediately prior to the
Effective Time multiplied by the Applicable Number (determined in accordance
with Section 1.1.4 hereof), such number of shares being rounded down to the
nearest whole share. The exercise price per share of Parent Common Stock
purchasable under each Parent Warrant will be equal to the exercise price per
share of Company Common Stock under the corresponding Company Common Warrants
divided by the Applicable Number, such exercise price being rounded up to the
nearest tenth of a cent. All of the other terms and conditions of each Parent
Warrant will be the same in all material respects as the corresponding Company
Common Warrant. No cash will be paid in lieu of fractional shares rounded down
pursuant to this Section 1.1.3(b).
1.1.4 Applicable Number. Unless there is an adjustment to the
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shares to be issued in the Merger pursuant to Section 1.1.5 below, the
"Applicable Number" shall be 0.139953.
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1.1.5 Adjustments for Capital Changes. If prior to the Merger,
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Parent recapitalizes either through a split-up of the outstanding shares of
Parent Common Stock into a greater number, or through a combination of such
outstanding shares into a lesser number, or reorganizes, reclassifies or
otherwise changes such outstanding shares into the same or a different number of
shares of other classes (other than through a split-up or combination of shares
provided for in the previous clause), or declares a dividend on its outstanding
shares payable in shares or securities convertible into shares or sets a record
date with respect to any of the foregoing that is before the Effective Time, the
calculation of the Applicable Number will be adjusted appropriately.
1.1.6 Conversion of Newco Shares. Each share of Newco Common
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Stock ("Newco Common Stock"), that is issued and outstanding immediately prior
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to the Effective Time will, by virtue of the Merger and without further action
on the part of the sole stockholder of Newco, be converted into and become one
share of Company Common Stock that is issued and outstanding immediately after
the Effective Time, and the shares of Company Common Stock into which the shares
of Newco Common Stock are so converted shall be the only shares of Company
Common Stock that are issued and outstanding immediately after the Effective
Time.
1.1.7 Forward Triangular or Straight In Merger. The parties
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agree that, upon Parent's request, they will amend these documents to cause
Company to merge with and into Newco or Parent; provided, however, that no such
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amendment shall increase the tax exposure of Company or any shareholder of
Company and that no such amendment will be made if it would result in any
material delay in the consummation of the Merger as a result of additional third
party consents being required or otherwise; and provided, further, that Company
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will be allowed to restate the Company Disclosure Letter (as defined in Section
2) as of the original date of the Agreement to take into account any changes
resulting from any such amendment.
1.2 Fractional Shares. No fractional shares of Parent Common Stock
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will be issued in connection with the Merger, but in lieu thereof, the holder of
any shares of Company Common Stock or Company Preferred Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
will receive from Parent, promptly after the Effective Time, an amount of cash
equal to the closing price of Parent Common Stock on the Nasdaq National Market
on the last trading day before the Effective Time multiplied by the fraction of
a share of Parent Common Stock to which such holder would otherwise be entitled.
1.3 Escrow Agreement.
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1.3.1 Parent will withhold from the shares of Parent Common
Stock that are issued in the Merger pursuant to Section 1.1.1 (subject to
Sections 1.1.2 and 1.2) and that would otherwise be delivered pursuant to
Section 6.2, 10% of the total number of shares of Parent Common Stock issued in
the Merger (the "Escrow Shares") and will deliver certificates representing such
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Escrow Shares to Chase Manhattan Bank and Trust Company, National Association or
a similar institution, as escrow agent (the "Escrow Agent"), together with
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related
stock transfer powers, to be held by the Escrow Agent as security for the
indemnification obligations under Section 10 and pursuant to the provisions of
the Escrow Agreement.
1.3.2 The shareholders of Company (the "Company Shareholders"),
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by their approval of the Merger and/or their tender pursuant to Section 6.2 of
certificates representing shares of Company Common Stock or Company Preferred
Stock, will be conclusively deemed to have consented to, approved and agreed to
be personally bound by: (a) the indemnification provisions of Section 10, (b)
the Escrow Agreement, (c) the appointment of Xxxxxxxx X. Xxxxxxx and Xxxxxx X.
Xxxxx as the representatives of the Company Shareholders (collectively, the
"Representatives") under the Escrow Agreement and as the attorney-in-fact and
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agents for and on behalf of the Shareholders as provided in the Escrow Agreement
and (d) the taking by the Representatives of any and all actions and the making
of any decisions required or permitted to be taken by the Representatives under
the Escrow Agreement, including, without limitation, the exercise of the power
to: (a) authorize delivery to Parent of Escrow Shares in satisfaction of
indemnity claims by Parent or any other Indemnified Person (as defined herein)
pursuant to Section 10 hereof and/or the Escrow Agreement; (b) agree to,
negotiate, enter into settlements and compromises of, demand arbitration of, and
comply with orders of courts and awards of arbitrators with respect to, such
claims; (c) arbitrate, resolve, settle or compromise any claim for indemnity
made pursuant to Section 10; and (d) take all actions necessary in the judgment
of the Representatives for the accomplishment of the foregoing. The
Representatives will have unlimited authority and power to act on behalf of the
Shareholders with respect to the Escrow Agreement and the disposition,
settlement or other handling of all claims governed by the Escrow Agreement, and
all rights or obligations arising under the Escrow Agreement so long as all
Company Shareholders are treated in the same manner. The Company Shareholders
will be bound by all actions taken by the Representatives in connection with the
Escrow Agreement, and Parent will be entitled to rely on any action or decision
of the Representatives. In performing the functions specified in this Agreement
and the Escrow Agreement, the Representatives will not be liable to any Company
Shareholders for any act or omission the Representatives made in good faith and
in the exercise of reasonable judgment. As provided in the Escrow Agreement, any
out-of-pocket costs and expenses reasonably incurred by the Representatives in
connection with actions taken pursuant to the terms of the Escrow Agreement, at
the Representatives' option, either (i) will be paid by the Company Shareholders
to the Representatives or (ii) if shares are available for distribution to the
Company Shareholders pursuant to the Escrow Agreement, at the request of the
Representatives, a portion of those shares will be sold by the Escrow Agent and
the proceeds paid to or at the direction of the Representatives, in either case
pro rata in proportion to the Company Shareholders' respective percentage
interests in the Escrow Shares. For the purposes of this Agreement and the
Escrow Agreement, Escrow Shares will be deemed to have a per share value equal
to the closing price per share of Parent Common Stock as quoted on the Nasdaq
National Market, and reported in The Wall Street Journal, for the trading day
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immediately preceding the date on which the Closing takes place (the "Closing
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Date") (such price shall be subject to adjustment to reflect any capital change
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of the type referred to in Section 1.1.5, whether occurring at or after the
Effective Time, and Parent shall promptly provide the Escrow Agent with written
notice of such capital change) as provided in the Escrow Agreement.
1.4 Effects of the Merger. At the Effective Time: (a) the separate
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existence of Newco will cease, Newco will be merged with and into Company and
Company will be the surviving corporation (the "Surviving Corporation"),
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pursuant to the terms of the Agreement of Merger and Certificate of Merger; (b)
the Articles of Incorporation and Bylaws of Company will continue unchanged to
be the Articles of Incorporation and Bylaws of the surviving corporation; (c)
each share of Company Common Stock and Company Preferred Stock outstanding
immediately prior to the Effective Time will be converted as provided in this
Section 1; (d) each share of Newco Common Stock outstanding immediately prior to
the Effective Time will be converted into one outstanding share of Company
Common Stock; and (e) the Merger will, at and after the Effective Time, have all
of the effects provided by applicable law. Promptly following the Effective
Time, the Surviving Corporation will cause to be filed with the Secretary of
State of California, Articles of Incorporation in the form determined by Parent.
After the Effective Time, Parent may cause the sole director of Newco
immediately prior to the Effective Time to become the sole director of the
Surviving Corporation and the officers of Newco to become the officers of the
Surviving Corporation.
1.5 Further Assurances. Company agrees that if, at any time after
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the Effective Time, Parent considers that any further deeds, assignments or
assurances are reasonably necessary or desirable to vest, perfect or confirm in
Parent title to any property or rights of Company as provided herein, Parent and
any of its officers are hereby authorized by Company to execute and deliver all
such proper deeds, assignments and assurances and do all other things necessary
or desirable to vest, perfect or confirm title to such property or rights in
Parent and otherwise to carry out the purposes of this Agreement, in the name of
Company or otherwise.
1.6 Tax-Free Reorganization. The parties intend to adopt this
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Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The shares of Parent Common
Stock issued in the Merger will be issued solely in exchange for the issued and
outstanding shares of Company Common Stock and Company Preferred Stock pursuant
to this Agreement, the Parent Options issued in the Merger will be issued solely
in exchange for the outstanding Company Options, the Parent Warrants issued in
the Merger will be issued solely in exchange for the outstanding Company Common
Warrants, and no other transaction other than the Merger represents, provides
for or is intended to be an adjustment to the consideration paid for the Company
Common Stock, Company Preferred Stock, Company Options or Company Common
Warrants. Except for cash paid in lieu of fractional shares, no consideration
that could constitute "other property" within the meaning of Section 356 of the
Code will be paid by Parent for shares of Company Common Stock, Company
Preferred Stock, Company Options or Company Common Warrants in the Merger. In
addition, Parent represents that it presently intends, and that at the Effective
Time it will intend, to continue Company's historic business or use a
significant portion of Company's business assets in a business.
1.7 Xxxx-Xxxxx-Xxxxxx Filings. Each of Parent and Company will
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promptly prepare and file the applicable notices (if any) required to be filed
by it under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), and comply promptly
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with any requests to it from the Federal Trade Commission or United States
Department of Justice for additional information.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent as follows, except as
set forth in the Company disclosure letter (the "Company Disclosure Letter")
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delivered by Company to Parent herewith, including inter alia items in the
Company Disclosure Letter referred to as "Items" below:
2.1 Organization and Good Standing. Company and each of its
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Subsidiaries (as defined in Section 2.4) is a corporation duly organized,
validly existing and in good standing under the laws of the state of California,
has the corporate power and authority to own, operate and lease its properties
and to carry on its business as now conducted and is qualified as a foreign
corporation in each jurisdiction (as listed on Item 2.1) in which a failure to
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be so qualified could reasonably be expected to have a Material Adverse Effect
(as defined below) on Company. For purposes of this Agreement, the term
"Material Adverse Effect" when used in connection with an entity means any
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change, event, violation, inaccuracy, circumstance or effect (each an "Effect")
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that materially adversely affects the parties' ability to consummate the
transactions contemplated by this Agreement or that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition, results of operations or prospects of such entity taken as a whole
with its subsidiaries, it being understood that none of the following shall be
deemed by itself or themselves, either alone or in combination, to constitute a
Material Adverse Effect: (a) Effects resulting from changes in general economic
or business conditions or economic conditions in the industry generally in which
such entity operates, (b) Effects resulting from changes after the date hereof
in laws or regulations applicable to such entity, (c) any differences between
the revenue or income of Company for 1999 as shown in the Company Financial
Statements (as defined in Section 2.7) or the New Audited Financial Statements
(as defined in Section 4.19) and the actual revenue or income, as applicable, of
Company for 1999, (d) any changes in the market price or trading volume of
Parent Common Stock, (e) Effects resulting from the announcement or pendency of
the Merger or (f) Effects resulting from any actions that Parent requires
Company to take or the failure to take any action with respect to which Company
requests Parent's consent pursuant to this Agreement and Parent unreasonably
withholds such consent.
2.2 Power, Authorization and Validity.
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2.2.1 Company has the corporate right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement and
under the Affiliate Agreements, the Confidential Disclosure Agreement between
Parent and the Company dated as of December 7 1999 (the "Confidential Disclosure
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Agreement") and any agreement in addition to those referred to above to which
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Company is or will be a party and that are required to be executed by Company as
a condition of Parent's obligations as provided in Section 8.1 (the Escrow
Agreement, Affiliate Agreements, Confidential Disclosure Agreement and any such
additional agreements are referred to as the "Company Ancillary Agreements").
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The Merger and the execution, delivery and performance of this Agreement and the
Parent Ancillary Agreements have been duly and validly approved and authorized
by the unanimous vote of the Company's Board of Directors.
2.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable Company to enter into and to perform its
obligations under this Agreement and the Company Ancillary Agreements, except
for (a) the filing of the Agreement of Merger and the Certificate of Merger with
the Secretaries of State of the States of California and Delaware, respectively,
the filing of such officers' certificates and other documents as are required to
effectuate the Merger under Delaware and California law and the filing of
appropriate documents with the relevant authorities of the states other than
California in which Company is qualified to do business, if any, (b) such
filings as may be required to comply with federal and state securities laws,
including the Permit Application (as defined in Section 4.6), (c) the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock and a majority of the outstanding shares of Company
Preferred Stock of this Agreement and the Merger ("Company Shareholder
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Approval"), and (d) the filings required by the HSR Act. The Company
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Shareholder Approval is the only vote of the holders of any class or series of
Company capital stock necessary to approve this Agreement or the Merger. As of
the date hereof, the Principal Shareholders who have executed Support Agreements
collectively own shares of Company Common Stock and Company Preferred Stock
representing, in the aggregate, voting power sufficient to effect the Company
Shareholder Approval.
2.2.3 Assuming the due authorization, execution and delivery
by Parent and, if applicable, Newco, this Agreement and the Company Ancillary
Agreements are, or when executed and delivered by Company and the other parties
thereto will be, valid and binding obligations of Company enforceable against
Company in accordance with their respective terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies; provided, however, that the
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Agreement of Merger, the Certificate of Merger and the Company Ancillary
Agreements will not be effective until the earlier of the Effective Time or the
date provided for therein.
2.3 Capitalization.
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(a) Authorized/Outstanding Capital Stock. As of the date
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hereof, the authorized capital stock of Company consists of 57,500,000 shares of
Company Common Stock, par value $0.0001 per share, 27,104,674 shares of
Preferred Stock, par value $0.0001 per share, of which 3,104,674 shares are
designated as Series A Preferred Stock and 24,000,000 shares are designated as
Series B Preferred Stock. As of the date hereof, there are issued and
outstanding: 14,015,059 shares of Company Common Stock; 3,064,674 shares of
Series A Preferred Stock, each of which is convertible into one share of Company
Common Stock; and 15,689,977 shares of Series B Preferred Stock, each of which
is convertible into one share of Company Common Stock. All issued and
outstanding shares of Company Common Stock and Company Preferred Stock have been
duly authorized and validly issued, are fully paid and nonassessable, are not
subject to any right of rescission and have been offered, issued, sold and
delivered by Company in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws. Listed on Item 2.3(a) are the names, number and type of
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shares held by each of the Company Shareholders as of the date hereof, to be
updated as of the Closing Date.
(b) Options/Rights. Item 2.3(b) sets forth a complete list, as
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of the date hereof (to be updated as of the Closing), of (i) all outstanding
warrants to purchase shares of Company Preferred Stock (the "Company Preferred
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Warrants") and all outstanding Company Common Warrants (the Company Common
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Warrants, together with Company Preferred Warrants, are referred to as the
"Company Warrants"), indicating for each Company Warrant, the name of the holder
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of the Company Warrant, the number of shares of Company Common Stock or Company
Preferred Stock issuable upon exercise of the Company Warrant, the exercise
price per share, and (ii) all outstanding Company Options, indicating for each
Company Option, the name of the holder of the Company Option, the number of
shares of Company Common Stock issuable upon exercise of the Company Option, the
exercise price per share, the extent to which the Company Option is vested and
the vesting schedule, if any). All Company Warrants are currently fully
exercisable. All Company Preferred Warrants (to the extent not exercised prior
to the Effective Time) will, by their terms, automatically terminate at the
Effective Time without any further action by Company or the holder of the
Company Preferred Warrant. Except as listed on Item 2.3(b), as of the date
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hereof (to be updated as of the Closing), there are no stock appreciation
rights, options, warrants, calls, commitments, conversion privileges or
preemptive or other rights or agreements outstanding to purchase or otherwise
acquire any of Company's authorized but unissued capital stock, other than
rights to convert Company Preferred Stock into Company Common Stock. Company has
no right to repurchase any shares of Company Common Stock (and will have no such
right as of the Effective Time) other than repurchase rights solely related to
the vesting of restricted Company Common Stock issued to Company employees and
described in Item 2.11(g). Except for such rights and except as listed in Item
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2.3(b), there are no options, warrants, calls, commitments, conversion
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privileges or preemptive or other rights or agreements to which Company is a
party involving the purchase or other acquisition of any shares of Company
Common Stock or Company Preferred Stock. There is no liability for dividends
accrued but unpaid. There are no voting agreements, registration rights, rights
of first refusal or other restrictions (other than the Support Agreement and
normal restrictions on transfer under applicable federal and state securities
laws) applicable to any of Company's outstanding securities.
(c) Claims to Company Stock. To Company's knowledge, no Company
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Shareholder or other person has claimed any interest in any additional shares of
capital stock of Company, or any options, warrants or other securities of
Company, except as set forth on Item 2.3(a) or Item 2.3(b).
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2.4 Subsidiaries and Guaranties. Company does not have any
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equity interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. Company is not a guarantor of any obligation
of a third party, whether or not such third party is related to or affiliated
with Company.
2.5 No Violation of Existing Agreements. Neither the execution
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and delivery of this Agreement or any Company Ancillary Agreement, nor the
consummation of the transactions provided for herein or therein, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach or violation of, (a) any provision of the Articles of
Incorporation or Bylaws of Company, as currently in effect, (b) any material
instrument or contract to which Company is a party or by which Company is bound
or (c) any federal, state, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to Company or any Subsidiary or their
respective assets or properties. The consummation of the Merger in and of
itself will not require the consent of any third party (except as set forth in
Item 2.5) and will not result in a termination, breach or violation of, or loss
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of rights under, any licenses, franchises, leases or agreements of Company
pursuant to the terms thereof.
2.6 Litigation. There is no action, proceeding or, to Company's
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knowledge, investigation pending or, to Company's knowledge, threatened against
Company before any court or administrative agency that, if determined adversely
to Company, may reasonably be expected to have a Material Adverse Effect on
Company. There is no basis for any person, firm, corporation or entity to
assert a claim against Company, or Parent or Newco as successor in interest to
Company, based upon: (a) ownership or rights to ownership of any shares of
Company Common Stock or Company Preferred Stock or other securities, (b) any
rights as a Company securities holder, including, without limitation, any
option, warrant or other right to acquire any Company securities, any preemptive
rights or any rights to notice or to vote, or (c) any rights under any agreement
between Company and any Company securities holder or former Company securities
holder in such holder's capacity as such. There is no action, suit, proceeding,
claim, arbitration or investigation pending as to which Company has received
notice of assertion against Company, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
2.7 Company Financial Statements. Company has delivered to Parent
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in Item 2.7 Company's audited balance sheets as of December 31, 1997 and 1998
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and its unaudited balance sheet as of November 30, 1999 (the "Balance Sheet
-------------
Date"), Company's audited statements of income and cash flows for the years
----
ended December 31, 1997 and 1998 and its unaudited statement of income for the
period from January 1, 1999 through the Balance Sheet Date (collectively, the
"Company Financial Statements"). The unaudited balance sheet and unaudited
----------------------------
statement of income is set forth in Schedule 2 hereto. The Company Financial
----------
Statements (a) are not contrary to the books and records of Company, (b) present
fairly and accurately the financial condition of Company at the respective dates
specified therein and the results of operations for the respective periods
specified therein and (c) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. The financial
information as of the Balance Sheet Date and for the 11 month period then ended
may not contain footnotes and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations of Company
for the unaudited interim period. Company has no material debt, liability or
obligation of a nature which would be required to be disclosed in a balance
sheet of Company in accordance with generally accepted accounting principles
applied on a consistent
basis, whether accrued, absolute, contingent or otherwise, and whether due or to
become due, that is not reflected, reserved against or disclosed in the Company
Financial Statements or on Item 2.7, except for those that may have been
--------
incurred after the Balance Sheet Date in the ordinary course of Company's
business, consistent with past practice.
2.8 Taxes. Company and each of its Subsidiaries has filed all
-----
federal, state, local and foreign tax and material information returns required
to be filed prior to the date hereof, has paid all taxes required to be paid in
respect of all periods prior to the date hereof for which returns have been
filed, has made all necessary estimated tax payments, and has no liability for
taxes in excess of the amount so paid, except to the extent adequate reserves
have been established in the Company Financial Statements. True, correct and
complete copies of all such tax and information returns have been provided or
made available by Company to Parent. Neither Company nor any of its Subsidiaries
is delinquent in the payment of any tax. No deficiencies for any tax have been
threatened, claimed, proposed or assessed which have not been settled or paid.
No tax return of Company or any Subsidiary has ever been or is being audited by
the Internal Revenue Service or any state taxing agency or authority. For the
purposes of this Section 2.8, the terms "tax" and "taxes" include all federal,
--- -----
state, local and foreign income, gains, franchise, excise, property, sales, use,
employment, license, payroll, occupation, recording, value added or transfer
taxes, governmental charges, fees, levies or assessments (whether payable
directly or by withholding), and, with respect to such taxes, any estimated tax,
interest and penalties or additions to tax and interest on such penalties and
additions to tax. Neither Company nor any Subsidiary has any current or deferred
federal income tax liabilities and will not as a result of the Merger become
liable for any income tax not adequately reserved against on the Company
Financial Statements. Company has not filed a consent pursuant to Section 341(f)
of the Code.
2.9 Title to Properties. Company has good and marketable title to all
-------------------
of its assets shown on the balance sheet as of the Balance Sheet Date included
in the Company Financial Statements, free and clear of all liens, charges or
encumbrances (other than liens for taxes not yet due and payable and liens
reflected as such on the unaudited balance sheet of Company as of the Balance
Sheet Date included in the Company Financial Statements). Except as set forth in
Item 2.9, there are no UCC financing statements of record with the State of
--------
California naming Company as debtor and Company does not own any property in any
other state. All leases of real or personal property to which Company is a party
are fully effective and afford Company peaceful and undisturbed possession of
the subject matter of the lease. To its knowledge, Company is not in violation
of any zoning, building, safety or environmental ordinance, regulation or
requirement or other law or regulation applicable to the operation of owned or
leased real properties, and Company has not received any notice of such
violation with which it has not complied or had waived.
2.10 Absence of Certain Changes. Since the Balance Sheet Date,
--------------------------
Company has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and, except as set forth in Item 2.10 or expressly permitted by the terms
---------
of this Agreement, since the Balance Sheet Date and (except as otherwise
indicated below) through the date of Closing, there has not been with respect to
Company:
(a) any Material Adverse Effect on Company;
(b) any contingent liability incurred by Company as
guarantor or surety with respect to the obligations of others which exceed in
the aggregate $50,000;
(c) any mortgage, encumbrance or lien placed on any of the
properties of Company;
(d) any obligation or liability incurred by Company, other
than any obligation or liability that is incurred in the ordinary course of
business, consistent with past practice, and that does not exceed $75,000
through the date of this Agreement;
(e) any purchase, license, sale or other disposition, or
any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the properties, assets or goodwill of Company other than
in the ordinary course of business and consistent with past practice;
(f) any damage, destruction or loss, whether or not covered
by insurance that would have or is reasonably likely to have a Material Adverse
Effect on Company;
(g) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of Company, any split, stock dividend, combination or recapitalization of
the capital stock of Company or any direct or indirect redemption, purchase or
other acquisition by Company of the capital stock of Company, other than
repurchases of unvested shares subject to a repurchase right in favor of Company
in connection with the termination of a relationship with any employee,
consultant, officer or director;
(h) any labor dispute or claim of unfair labor practices;
any change in the compensation payable or to become payable to any of Company's
officers, employees or agents earning compensation at an anticipated annual rate
in excess of $100,000; or any change in the compensation payable or to become
payable to any of Company's other officers, employees or agents other than
normal compensation increases in accordance with past practice and set forth on
Item 2.10(h);
------------
(i) any material and adverse change with respect to the
management, supervisory, development or other key personnel of Company;
(j) any payment or discharge of a lien or liability, which
lien or liability was not either (i) shown on the unaudited balance sheet of
Company as of the Balance Sheet Date included in the Company Financial
Statements or (ii) incurred in the ordinary course of business after the Balance
Sheet Date;
(k) any obligation or liability incurred by Company to any
of its officers, directors or shareholders, or any loans or advances made to any
of its officers, directors, shareholders or affiliates, except normal
compensation and expense allowances payable to officers or directors;
(l) any loss of one or more material Company customers or
such number of Company customers which together represent a material amount of
business;
(m) any amendment or change in the Articles of
Incorporation or Bylaws of Company;
(n) any issuance or sale of any debt or equity securities
(including but not limited to capital stock) of Company or of any options or
other rights to acquire from Company, directly or indirectly, any debt or equity
securities (including but not limited to capital stock) of Company, or any
acceleration or other alteration of the vesting of or any other modification of
any option or other security of Company, outstanding other than (i) the issuance
of Company Common Stock or Company Preferred Stock pursuant to the exercise of
options and warrants, or the conversion of Company Preferred Stock, outstanding
as of the date of this Agreement and included in Item 2.3(a) or (Item 2.3(b) and
----------- ------------
(ii) the issuance of additional Company Options to new hires in the ordinary
course of business consistent with past practices in amounts not to exceed
50,000 shares of Company Common Stock per new hire; or
(o) any execution, amendment, relinquishment, termination
or non-renewal by Company of, any material contract, lease, transaction or
legally binding commitment other than in the ordinary course of Company's
business or, to Company's knowledge, as of the date of this Agreement, any
written indication or assertion by the other party thereto of its desire to so
amend, relinquish, terminate or not renew any such contract, lease transaction
or legally binding commitment.
2.11 Agreements and Commitments. As of the date hereof, except
--------------------------
as set forth in Item 2.11 and delivered or made available by Company to Parent
---------
herewith, or as listed in Item 2.12, Item 2.15.3 or Item 2.15.4 as required by
--------- ----------- -----------
Section 2.12, Section 2.15.3 or Section 2.15.5, as the case may be, Company is
not a party or subject to any oral or written executory agreement, obligation or
binding commitment described below:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to Company in an amount
with respect to any single transaction of (i) $100,000 or more in the ordinary
course of business or (ii) $50,000 or more not in the ordinary course of
business;
(b) Any license agreement under which Company is licensor
(except for any nonexclusive software license granted by Company to end-user
customers where the form of the license, excluding standard immaterial
deviations, has been provided or made available to Parent's counsel) which
provides for the payment of $50,000 or more to Company;
or under which Company is licensee (except for software that is commercially
available at a price of less than $5,000 per central processing unit);
(c) Any agreement by Company to encumber, transfer or sell
any material rights in or with respect to any Company Intellectual Property (as
defined in Section 2.12 hereof) except in the ordinary course of business
consistent with past practice;
(d) Any agreement for the sale or lease of real or personal
property involving more than $25,000 per year;
(e) Any dealer, distributor, sales representative, original
equipment manufacturer, value-added remarketer or other agreement for the
distribution of Company's products (except for non-exclusive agreements where
the form of agreement, excluding immaterial deviations, has been provided or
made available to Parent's counsel);
(f) Any franchise agreement;
(g) Except as described in Item 2.11(g) any right or
------------
obligation of the Company to redeem or repurchase its capital stock;
(h) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the payment
of royalties to any other person;
(i) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness or any
advance to any employee of Company incurred or made in the ordinary course of
business, and except as disclosed in the Company Financial Statements;
(j) Any contract containing covenants purporting to limit
Company's freedom to compete in any line of business in any geographic area or
to sell products or services to a specific entity other than any limitation
otherwise disclosed and identified in Item 2.11 with respect to a license of
---------
technology;
(k) Any contract or binding commitment for the employment
of any officer, employee or consultant of Company or any other type of contract
or binding commitment with any officer, employee or consultant of Company that
is not immediately terminable by Company without cost or liability (excluding
any contract or binding commitment included in any Employee Plan);
(l) Any material agreement, contract or binding commitment
currently in force for hosting, data center or telecommunications services,
related to the provision of hosted versions of Company products or services;
(m) Any agreement, contract or binding commitment currently
in force to provide source code to any third party, either directly or through a
source escrow agent upon the occurrence of one or more events, for any product
or technology;
(n) Any contract or binding commitment in which Company has
granted or received most favored customer pricing provisions.
All agreements, obligations and commitments listed in Item
----
2.11, Item 2.12, Item 2.15.3 or Item 2.15.4 as required by Section 2.11, Section
---- --------- ----------- -----------
2.12, Section 2.15.3 or Section 2.15.4, as the case may be, are valid and in
full force and effect, and except as expressly noted, a true and complete copy
of each has been delivered or made available to Parent. Except as noted on Item
----
2.11, neither Company nor, to the knowledge of Company, any other party is in
----
material breach of or default under any material term of any such agreement,
obligation or commitment. Company has no liability for renegotiation of
government contracts or subcontracts which are material to Company, its
financial condition, business or prospects.
2.12 Intellectual Property.
---------------------
2.12.1 Company owns all right, title and interest in, or has
the right to use, all Intellectual Property Rights (defined below) used in or
reasonably necessary to the conduct of its business as presently conducted (such
Intellectual Property Rights are referred to as the ("Company IP Rights")). No
-----------------
other person or entity owns or has the right to use, sell, license, or otherwise
commercially exploit in any way any Company IP Rights owned by Company, without
the express agreement of Company. The execution, delivery and performance of
this Agreement and the consummation of the Merger and the other transactions
contemplated hereby will not constitute a material breach of or default under
any instrument, contract, license or other agreement governing any Company IP
Right (the "Company IP Rights Agreements"), will not cause the forfeiture or
----------------------------
termination or give rise to a right of forfeiture or termination, of any Company
IP Right or of any Company IP Rights Agreements or materially impair the right
of Company, Parent or the Surviving Corporation to use, sell, license or
otherwise commercially exploit in any manner any Company IP Right or portion
thereof. Except as identified in Item 2.11, there are no royalties, honoraria,
---------
fees or other payments payable by Company to any person by reason of the
ownership, use, license, sale or disposition of any of the Company IP Rights.
2.12.2 Company has taken commercially reasonable measures to
protect all Company IP Rights, and, except as set forth on Item 2.12, Company is
---------
not aware of any infringement of any Company IP Rights by any third party. Set
forth on Item 2.12 delivered to Parent herewith is a true and complete list of
---------
all copyright, mask work and trademark registrations and applications and all
patents and patent applications for Company IP Rights owned by Company. Each
registered Company IP Right is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such registered
Company IP Rights have been paid and all documents, recordations and
certificates in connection with such registered Company IP Rights have been
filed with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such registered Company IP Rights. Company has taken
commercially reasonable security precautions to protect its data and products
and services and all end-user data.
2.12.3 The manufacture, marketing, license, sale, furnishing
or intended use of any product or service currently licensed, utilized, sold,
provided or furnished by Company or currently under development by Company does
not breach any license or agreement between Company and any third party or
infringe, misappropriate or violate any Intellectual Property Right (as defined
below) of any other party. There is no pending or, to the knowledge of Company,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Company IP Right nor, to the knowledge of
Company, is there any basis for any such claim, nor has the Company received any
written notice asserting that any Company IP Right or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the rights of any
other party, nor, to the knowledge of Company, is there any basis for any such
assertion. To the knowledge of Company, no employee of Company is in violation
of any term of any employment contract, patent disclosure agreement, invention
assignment agreement, noncompetition agreement, non-solicitation agreement or
any other contract or agreement, or any restrictive covenant relating to the
right of any such employee to be employed thereby, or to use trade secrets or
proprietary information of others. To Company's knowledge, Company is not using
any confidential information or trade secrets of any former employer or of any
past or present employees.
2.12.4 As used herein, the term "Intellectual Property
---------------------
Rights" means, collectively, all worldwide industrial and intellectual property
------
rights, including, without limitation, patents, patent applications, patent
rights, trademarks, trademark registrations and applications therefor, trade
dress rights, trade names, URL's service marks, service xxxx registrations and
applications therefor, copyrights, copyright registrations and applications
therefor, moral and economic rights of authors and inventors, however
denominated throughout the world, rights of privacy and publicity, mask work
rights, mask work registrations and applications therefor, franchises, licenses,
inventions, trade secrets, know-how, databases, database architecture, data
collections, customer lists, supplier lists, proprietary processes and formulae,
software source and object code, algorithms, architectures, structures, screen
displays, layouts, inventions, development tools, designs, blueprints,
specifications, technical drawings and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
programmers' notes, memoranda and records. As used herein, "owned by Company"
excludes Intellectual Property Rights licensed by Company from third parties.
2.13 Compliance with Laws. Company has complied, or prior to the
--------------------
Closing Date will have complied, and is or will be at the Closing Date in
compliance, in all respects material to Company, with all applicable laws,
ordinances, regulations and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to Company or to the assets, properties and
business of Company, including, without limitation: (a) all applicable federal
and state securities laws and regulations, (b) all applicable federal, state and
local laws, ordinances and regulations, and all orders, writs, injunctions,
awards, judgments and decrees binding on or applicable to Company or its assets,
pertaining to (i) the sale, licensing, leasing, ownership or management of
Company's owned, leased or licensed real or personal property, products or
technical data, (ii) employment or employment practices, terms and conditions of
employment, or wages and hours or (iii) safety, health, fire prevention,
environmental protection (including toxic waste disposal and related matters
described in Section 2.21 hereof), building standards, zoning or other similar
matters, (c) the Export Administration Act and regulations promulgated
thereunder or other laws, regulations, rules, orders, writs, injunctions,
judgments or decrees applicable to the export or re-export of controlled
commodities or technical data binding on or applicable to Company or its assets,
(d) the Immigration Reform and Control Act and (e) all governmental regulations
related to the operation and use of the Internet applicable to Company. Company
has received all material permits and approvals from, and has made all material
filings government agencies or authorities, that are necessary to the conduct of
its business as presently conducted.
2.14 Certain Transactions and Agreements. No person who is an
-----------------------------------
officer or director of Company, or a member of any officer's or director's
immediate family, has any direct or indirect ownership interest in or any
employment or consulting agreement with any entity that competes with Company or
Parent (except with respect to any interest in less than 1% of the outstanding
voting shares of any corporation whose stock is publicly traded and, in the case
of any director who represents a venture capital or other investment firm or
bank, except for such firm's investments in its portfolio companies). No person
who is an officer or director of Company, or any member of any officer's or
director's immediate family, is directly or indirectly interested in any
contract or informal arrangement with Company, including, but not limited to,
any loan arrangements, except for compensation for services as an officer
(listed in Item 2.15.3), director or employee of Company and except for normal
------
travel or entertainment advances and the normal rights of a shareholder,
warrantholder or optionholder. None of such officers or directors or family
members has any interest in any (a) Company Intellectual Property or (b)
property (other than Company Intellectual Property) used in the business of
Company whether such property is real or personal, tangible or intangible.
2.15 Employees.
---------
2.15.1 Except as set forth in Item 2.15.1, (a) Company has
-----------
no employment contract or consulting agreement currently in effect (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions) and (b) all employees and
consultants of Company have executed Company's standard form of assignments of
copyright and other intellectual property rights to Company, which standard form
Company has furnished to Parent (the "Copyright/IP Agreement Form").
---------------------------
2.15.2 Company (a) has never been and is not now subject to
a union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (d) has no current labor dispute. Company has good
labor relations, and Company has no knowledge of any facts indicating that the
announcement or consummation of the transactions provided for herein will have
an adverse effect on its labor relations, and has no knowledge that any of its
key development or other employees (each of whom is listed on Item 2.15.2)
-----------
intends to leave its employ.
2.15.3 Item 2.15.3 delivered by Company to Parent herewith
-----------
contains a list of all pension, retirement, disability, medical, dental or other
health plans, life insurance or other death benefit plans, profit sharing,
deferred compensation agreements, stock, option, bonus or other incentive plans,
vacation, sick, holiday or other paid leave plans, severance plans or other
similar employee benefit plans maintained by Company or any trade or business
which is treated as a single employer with Company within the meaning of the
Code Section 414(b), (c), (m) or (o) (each an "ERISA Affiliate") (the "Employee
--------------- --------
Plans"), including without limitation all "employee benefit plans" as defined in
-----
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Company shall deliver to Parent no later than ten days after the date
-----
of this Agreement a true and complete copy of, to the extent applicable, (a) all
Employee Plans, (b) the most recent annual reports (Form 5500s), (c) each trust
agreement related to such Employee Plans, (d) the most recent summary plan
description for each Employee Plan for which a description is required, (e) the
most recent Internal Revenue Service determination letter issued with respect to
any Employee Plan, and (f) any material contract regarding the funding
arrangement for any Employee Plan. Except as set forth in Item 2.15.3, each of
-----------
the Employee Plans, and its operation and administration, is in compliance with
each of the respective Employee Plans' terms and all applicable, federal, state,
local and other governmental laws and ordinances, orders, rules and regulations,
including the requirements of ERISA and the Code, except to the extent that any
operational or administrative deviation from the terms of any such Employee Plan
which is a qualified plan within the meaning of Section 401(a) of the Code may
be corrected as set forth in Revenue Procedure 98-22. Except as set forth in
Item 2.15.3, all such Employee Plans that are "employee pension benefit plans"
-----------
(as defined in Section 3(2) of ERISA) which are intended to qualify under
Section 401(a) of the Code have received favorable determination opinion,
notification or advisory letters with respect to such plans that such plans
comply with the Tax Reform Act of 1986 or have remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified states of each such Employee Plan. In addition, Company has
never been a participant in any "prohibited transaction," within the meaning of
Section 406 of ERISA which was not otherwise exempt pursuant to Section 4975 or
Section 408 of ERISA (including, but not limited to, any individual exemption
granted under Section 408(a) of ERISA) with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which Company sponsors as
employer or in which Company participates as an employer. Except as set forth in
Item 2.15.3, no Employee Plans will be subject to any surrender fees or service
-----------
fees upon termination other than the normal and reasonable administrative fees
associated with the termination of benefit plans. All Employee Plans, to the
extent applicable, are in compliance, with (a) the continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA,
(b) the Americans with Disabilities Act of 1990, as amended, and (c) the Family
Medical Leave Act of 1993, as amended, and the regulations thereunder.
2.15.4 Except as set forth in Item 2.15.4, Company is not a
-----------
party to any (a) agreement with any employee of Company (i) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Company in the nature of any of the
transactions contemplated by this Agreement, the Agreement of Merger
or the Certificate of Merger, (ii) providing any term of employment or
compensation guarantee or (iii) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment, or (b) 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 materially increased, or
the vesting of benefits of which will be materially accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, the
Agreement of Merger or the Certificate of Merger 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, the Agreement of Merger and the Certificate of
Merger. Except as set forth on Item 2.15.4, Company is not obligated to make any
-----------
parachute payment, as defined in Section 280G(b)(2) of the Code, nor will any
parachute payment be deemed to have occurred as a result of the transactions
contemplated by this Agreement, the Articles of Merger or the Certificate of
Merger.
2.15.5 A list of all employees, officers and consultants of
Company and their current base and incentive compensation (excluding stock and
stock options) as of the date of this Agreement is set forth on Item 2.15.5.
-----------
2.15.6 All contributions required by Company under the terms
of any of the Employee Plans have been made or accrued on the Company Financial
Statements, and no further contributions will be due or will have accrued
thereunder as of the Closing Date.
2.16 No Brokers. Except as set forth in Item 2.16, Company is
---------- ---------
not obligated for the payment of fees or expenses of any investment banker,
broker or finder in connection with the origin, negotiation or execution of this
Agreement, the Agreement of Merger or the Certificate of Merger or in connection
with any transaction provided for herein or therein.
2.17 Disclosure. The Company Disclosure Letter, this Agreement
----------
and its exhibits and schedules, taken together, do not contain any untrue
statement of a material fact or, to Company's knowledge, omit to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which such statements were made,
not misleading.
2.18 Insurance. Company maintains, and at all times during the
---------
prior three years, maintained, fire and casualty, workers compensation or
general liability insurance (as listed on Item 2.18) which it believes to be
---------
reasonably prudent for similarly sized and similarly situated businesses.
2.19 Environmental Matters.
---------------------
2.19.1 During the period that Company has leased the
premises currently occupied by it and those premises occupied by it since the
date of its incorporation, to Company's best knowledge, there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on any such premises. Company has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on or from any
of
such premises, which may have occurred prior to Company having taken possession
of any of such premises. For purposes of this Agreement, the terms "disposal,"
--------
"release," and "threatened release" have the definitions assigned thereto by the
-------
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S) 9601 et seq., as amended ("CERCLA"). For the purposes of this Section
------
2.22, "Hazardous Materials" mean any hazardous or toxic substance, material or
-------------------
waste which is or becomes prior to the Closing Date regulated under, or defined
as a "hazardous substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous chemical" under (a)
CERCLA; (b) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; (c) the Hazardous Materials Transportation Act, 49 U.S.C.
-- ---
Section 1801, et seq.; (d) the Toxic Substances Control Act, 15 U.S.C. Section
-- ---
2601 et seq.; (e) the Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.; (f) regulations promulgated under any of the above
-- ---
statutes; or (g) any other applicable federal, state or local statute,
ordinance, rule or regulation that has a scope or purpose similar to those
identified above.
2.19.2 To Company's knowledge, during the time that Company
has leased the premises, none of the premises currently leased by Company or any
premises previously occupied by Company is in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions in such premises.
2.19.3 To Company's knowledge, during the time that Company
has leased the premises currently occupied by it or any premises previously
occupied by Company, neither Company nor any third party, has used, generated,
manufactured or stored in such premises or transported to or from such premises
any Hazardous Materials.
2.19.4 During the time that Company has leased the premises
currently occupied by it or any premises previously occupied by Company, there
has been no litigation, proceeding or administrative action brought or, to
Company's knowledge, threatened in writing against Company, or any settlement
reached by Company with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under any
of such premises.
2.19.5 To Company's knowledge, during the period that
Company has leased the premises currently occupied by it or any premises
previously occupied by Company, no Hazardous Materials have been transported
from such premises to any site or facility now listed or proposed for listing on
the National Priorities List, at 40 C.F.R. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.20 Year 2000 Compliance. All of the software and technology
--------------------
developed, licensed and/or marketed or distributed by (or on behalf of) Company
and the infrastructure used to host and deliver the products and services of
Company are Year 2000 Compliant (as defined below). To Company's knowledge, all
software owned or developed by a third party (other than software developed on
behalf of the Company) that is licensed or was sold to Company and all hardware
owned or developed by a third party that was leased or sold to Company is Year
2000
Compliant. Item 2.20 describes testing that Company has conducted, and any
---------
corrective action Company has taken, to determine whether all such software and
hardware referred to in the first two sentences of this Section 2.20 will be
adversely affected by, or fail to operate properly due to, the advent of the
year 2000 or dates thereafter, and Company has provided or made available to
Parent or its counsel copies of all written responses or assurances received by
Company from the parties who supply such software and hardware, that such
software and hardware, will not be adversely affected by, or fail to operate
properly due to, the advent of year 2000 or dates thereafter. "Year 2000
---------
Compliant" means, as applied to software or hardware, as the case may be, that:
---------
(a) such software or hardware will operate and correctly store, represent and
process (including sort) all dates up to and including the year 2020 (including
single and multi-century formulas and leap year calculations), such that errors
will not occur when the date being used is in the Year 2000, or in a year
preceding or following the Year 2000; (b) such software or hardware has been
developed and tested to support numeric and date transitions from the twentieth
century to the twenty-first century, and back (including without limitation all
calculations, aging, reporting, printing, displays, reversals, disaster and
vital records recoveries) without error, corruption or impact to current and/or
future operations; and (c) such software or hardware will function without error
or interruption related to any date information, specifically including errors
or interruptions from functions which may involve date information from more
than one century.
2.21 Warranties. Item 2.21 sets forth (a) Company's forms of
---------- ---------
standard warranties regarding the software products or service it provides to
its customers and (b) rights of Company's customers to obtain refunds with
respect to the software products and services Company provides to its customers.
Except as set forth in Item 2.21, Company has not provided to its customers any
---------
express warranties regarding the software products or services it provides to
its customers (including any warranties related to security precautions
regarding customer or end-user privacy or data integrity or related to Year-2000
Compliant issues) that differ materially from its standard forms of warranties.
2.22 Information Supplied. None of the information supplied or
--------------------
to be supplied by Company for inclusion in the Notice Materials and the
Information Statement (both as defined in Section 4.6), at the date such
information is supplied and at the time of the meeting of the Company
Shareholders (or a written consent of the Company Shareholders) to be held to
approve the Merger, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
2.23 Corporate Documents. Company has made available to Parent
-------------------
for examination all documents and information listed in the Company Disclosure
Letter or other exhibits called for by this Agreement, including, without
limitation, the following: (a) copies of Company's Articles of Incorporation
and Bylaws as currently in effect; (b) Company's minute book containing all
records of all proceedings, consents, actions and meetings of Company's
directors and shareholders; (c) Company's stock ledger, journal and other
records reflecting all stock issuances and transfers; and (d) all permits,
orders and consents issued by any regulatory
agency with respect to Company, or any securities of Company, and all
applications for such permits, orders and consents.
2.24 Books and Records. The books, records and accounts of
-----------------
Company (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable business practices on a basis
consistent with prior years and (c) accurately and fairly reflect in all
material respects the transactions and dispositions of the assets of Company.
3. REPRESENTATIONS AND WARRANTIES OF PARENT
Each of Parent and Newco, where applicable, hereby represents and
warrants to Company as follows:
3.1 Organization and Good Standing. Each of Parent and Newco is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted.
3.2 Power, Authorization and Validity.
---------------------------------
3.2.1 Each of Parent and Newco has the corporate right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement and under the Affiliate Agreements and the Confidential
Disclosure Agreement and any agreement in addition to those referred to above
agreements to which Parent or Newco is or will be a party and that are required
to be executed by Company or Newco as a condition of Company's obligations as
provided in Section 7.1 (the "Parent Ancillary Agreements"). The Merger and the
---------------------------
execution, delivery and performance of this Agreement and the Parent Ancillary
Agreements have been duly and validly approved and authorized by Parent's Board
of Directors and Newco's Board of Directors, as applicable, and by Parent as the
sole stockholder of Newco.
3.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable Parent to enter into, and to perform its
obligations under, this Agreement and the Parent Ancillary Agreements, except
for (a) the filing of the Agreement of Merger and the Certificate of Merger with
the California Secretary of State and the Delaware Secretary of State,
respectively, the filing of such officers' certificates and other documents as
are required to effect the Merger under Delaware and California law and the
filing of appropriate documents with the relevant authorities of other states in
which Parent is qualified to do business, if any, (b) such filings as may be
required to comply with federal and state securities laws, including the Permit
Application (as defined in Section 4.6) and (c) the filings required by the HSR
Act.
3.2.3 Assuming the due authorization, execution and delivery
by Company, this Agreement and the Parent Ancillary Agreements are, or when
executed by Parent and Newco (as applicable) and the other parties thereto will
be, valid and binding obligations of Parent and Newco, enforceable against
Parent and Newco in accordance with their respective terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law governing specific
performance, injunctive
relief and other equitable remedies; provided, however, that the Agreement of
-------- -------
Merger, the Certificate of Merger and the Parent Ancillary Agreements will not
be effective until the earlier of the Effective Time or the date provided for
therein.
3.3 No Violation of Existing Agreements. Neither the execution
-----------------------------------
nor delivery of this Agreement or any Parent Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach or violation of (a) any provision of the Certificate of
Incorporation or Bylaws of Parent or Newco, as currently in effect, (b) any
material instrument or contract to which Parent or Newco is a party or by which
Parent or Newco is bound or (c) any federal, state, local or foreign judgment,
writ, decree, order, statute or regulation applicable to Parent or Newco or its
assets or properties.
3.4 Disclosure. Parent has furnished Company with its annual
----------
report on Form 10-K for its fiscal year ended December 31, 1998, its proxy
statement for its annual stockholders meeting held on May 27, 1999 and all other
reports or documents required to be filed by Parent pursuant to Section 13(a) or
15(d) of the 1934 Act since the filing of the most recent annual report on Form
10-K (such documents, together with documents filed after the date of this
Agreement, being the "Parent Disclosure Package"). Parent has filed all such
-------------------------
reports and documents required to be filed by it since January 1, 1999. The
Parent Disclosure Package, this Agreement, the exhibits and schedules hereto,
and any certificates or documents to be delivered to Company pursuant to this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
3.5 Valid Issuance. The Parent Common Stock to be issued in the
--------------
Merger will, when issued in accordance with the provisions of this Agreement,
the Agreement of Merger and the Certificate of Merger, be validly issued, fully
paid and nonassessable.
3.6 Capitalization. As of the dates set forth in the Parent
--------------
Disclosure Package, the authorized capital stock of Parent and the numbers of
shares of issued and outstanding Parent Common Stock were as set forth in the
Parent Disclosure Package.
3.7 Parent Financial Statements. As of the dates set forth in
---------------------------
the Parent Disclosure Package, the financial statements of Parent included
therein (a) were in accordance with the books and records of Parent, (b) fairly
and accurately represented the financial condition of Parent at the respective
dates specified therein and the results of operations for the respective periods
specified therein and (c) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
3.8 Information Supplied. None of the information supplied or
--------------------
to be supplied by Parent for inclusion in the Notice Materials and the
Information Statement, at the date such information is supplied and at the time
of the meeting of the Company Shareholders to be held to approve the Merger,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
3.9 Litigation. There is no action, proceeding or to Parent's
----------
knowledge, investigation pending or, to Parent's knowledge, threatened against
Company before any court or administrative agency that, if determined adversely
to Parent, may reasonably be expected to have a Material Adverse Effect on
Parent. There is no action, suit, proceeding, claim, arbitration or
investigation pending as to which Parent has received notice of assertion
against Parent, which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay any of the transactions contemplated by this
Agreement.
4. COMPANY PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Company covenants to and agrees with Parent as follows:
4.1 Advice of Changes. Company will promptly advise Parent in
-----------------
writing, (a) of any event occurring subsequent to the date of this Agreement
that would render the representations and warranties of Company contained in
this Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect unless Company reasonably believes
such event will be cured within 30 days and (b) of any Material Adverse Effect
on Company. Company will, in addition, promptly advise Parent in writing of any
written indication or assertion by the other party thereto of its desire to
amend, relinquish, terminate or not renew any contract, lease transaction or
legally binding commitment.
4.2 Maintenance of Business. Company will use all commercially
-----------------------
reasonable efforts to maintain good relationships with all customers, suppliers
and employees. If Company becomes aware of a material deterioration in the
relationship with any customer, supplier or key employee, it will promptly bring
such information to the attention of Parent in writing.
4.3 Conduct of Business. Except as provided otherwise herein or
-------------------
as approved or recommended by Parent, Company will not, without the prior
written consent of the Chief Executive Officer or Chief Financial Officer of
Parent, not to be unreasonably withheld:
(a) incur any indebtedness for borrowed money individually
or in the aggregate in excess of $50,000;
(b) except for the expenditures identified in Item 4.3,
--------
enter into any transaction or make any commitment involving an expense of
Company in excess of $100,000 or capital expenditure by Company in excess of
$50,000;
(c) encumber or permit to be encumbered any of its assets
except in the ordinary course of its business consistent with past practice and
to an extent which is not material;
(d) dispose of any of its assets except in the ordinary
course of business consistent with past practice;
(e) except for the expenditures identified in Item 4.3,
--------
enter into any material lease or contract for the purchase or sale of any
property, real or personal, tangible or intangible, except in the ordinary
course of business consistent with past practice or, unless disclosed in advance
to Parent in writing, enter into any agreement of the type required to be
disclosed in Section 2.11 or 2.12;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained to the
date of this Agreement, subject only to ordinary wear and tear;
(g) except as set forth on Item 4.3(g), enter into any
-----------
employment agreement, consulting agreement or collective bargaining agreement,
other than employment letters in the ordinary course of business consistent with
past practice with new employees who are terminable "at will," or pay any bonus,
royalty, increased salary (except for increases in the ordinary course of
business consistent with past practice), severance or special remuneration to
any officer, employee or consultant (except pursuant to existing arrangements
heretofore disclosed in writing to Parent);
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock;
(j) amend or terminate any contract, agreement or license
to which it is a party of a nature required to be disclosed in Section 2.11 or
2.12 except those amended or terminated in the ordinary course of business,
consistent with past practice;
(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course of
business consistent with past practice, provided that such advances for travel
--------
and expenses are not material in amount and are documented by receipts for the
claimed amounts;
(l) guarantee or act as a surety for any obligation except
for the endorsement of checks and other negotiable instruments in the ordinary
course of business, consistent with past practice;
(m) waive or release any material right or claim except in
the ordinary course of business, consistent with past practice;
(n) accelerate or otherwise alter the vesting of or
otherwise modify any outstanding option or other security or issue or sell any
shares of its capital stock of any class or any other of its securities, or
issue or create any warrants, obligations, subscriptions, options, convertible
securities, stock appreciation rights or other commitments to issue shares of
capital stock other than the issuance of Company Common Stock and Company
Preferred Stock pursuant to the exercise of outstanding Company Options and
Company Warrants, or the conversion of Company Preferred Stock, outstanding as
of the date of this Agreement or, with Parent's prior consent, the issuance of
additional Company Options to new hires in the ordinary
course of business consistent with past practices in amounts not to exceed
50,000 shares of Company Common Stock per new hire;
(o) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other of
its securities;
(p) except for the Merger, merge, consolidate or reorganize
with, or acquire any entity;
(q) amend its Articles of Incorporation or Bylaws;
(r) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless copies of such
returns have been delivered to Parent for its review prior to filing;
(s) license any of Company's technology or any Company IP
Rights or enter into any agreement to provide services, except in the ordinary
course of business consistent with past practice;
(t) change any insurance coverage or issue any certificates
of insurance except in the ordinary course of business;
(u) terminate the employment of any key employee listed in
Item 2.10(i); or
------------
(v) agree to do any of the things described in the preceding
clauses 4.3(a) through 4.3(u).
4.4 Certain Agreements. Company will use all commercially
------------------
reasonable efforts to cause all present employees and consultants of Company who
have not previously executed agreements with Company in the form of the
Copyright/IP Agreement Form to execute such agreements.
4.5 Necessary Consents. Company will use all commercially
------------------
reasonable efforts to obtain such written consents and take such other actions
as may be necessary or appropriate for Company, in addition to those set forth
in Section 4.6, to facilitate and allow the consummation of the transactions
provided for herein and to facilitate and allow Parent to carry on Company's
business after the Closing Date.
4.6 Securities Compliance.
---------------------
4.6.1 Preparation of Permit Application, Hearing Request,
---------------------------------------------------
Hearing Notice and Information Statement. As promptly as practicable after the
----------------------------------------
date hereof, Parent and Company shall prepare and file with the California
Department of Corporations the documents required to qualify the offer and sale
of securities by Parent in connection with the Merger under a permit under
Section 25121 of the California Corporations Code and for the approval of the
terms and conditions of the issuance of securities in the Merger, and the
fairness of such terms and conditions, by the California Commissioner of
Corporations pursuant to a hearing under Section 25142 of the California
Corporations Code (a "Hearing"), including, but not limited to an application
-------
for such permit (the "Permit Application"), a request for such hearing (the
------------------
"Hearing Request"), a notice of such hearing (the "Hearing Notice") and all
---------------- --------------
required or appropriate associated documents (collectively, the "Notice
------
Materials"), in order to perfect the exemption from registration provided by
---------
Section 3(a)(10) of the Securities Act of 1933 (the "Securities Act"). Each of
--------------
Parent and Company shall use reasonable efforts to obtain such permit and
approval (the "Permit") as promptly as practicable. If Company reasonably
------
determines that distribution of an information statement or proxy statement is
necessary or appropriate, Company and Parent will prepare and Company will
distribute at the earliest practicable date such information statement or proxy
statement (the "Information Statement"), along with the Notice Materials, to the
---------------------
Company Shareholders in connection with their consideration and approval of this
Agreement, the Merger and related matters. Such Notice Materials and any such
Information Statement will contain information, and such approval will be
solicited, in compliance with applicable law. Each of Parent and Company will
promptly provide all information relating to Parent or Company, as applicable,
necessary for inclusion in the Notice Materials and Information Statement, if
any, to satisfy the requirements of all applicable state and federal securities
laws. Each of Parent and Company shall be solely responsible for any statement,
information or omission in the Notice Materials and Information Statement, if
any, relating to it or its affiliates based upon written information furnished
by it.
4.6.2 S-4 Registration Statement. If (a) the California
--------------------------
Department of Corporations has not scheduled a Hearing by February 1, 2000, (b)
the Hearing has not occurred by February 20, 2000 (or March 1, 2000, if any
Company Shareholders reside outside the United States), or (c) the Permit has
not been issued by February 28, 2000 (or March 9, 2000, if any Company
Shareholders reside outside the United States), then Company will assist Parent
and cooperate fully with Parent in connection with the Registration Statement on
Form S-4 to register the offer and sale of securities by Parent in connection
with the Merger and to solicit proxies for the Company Shareholder Approval (the
"S-4") which Parent will prepare and file with the Securities and Exchange
---
Commission (the "SEC") as provided in Section 5.5. Each of Parent and Company
---
shall use reasonable efforts to cause the S-4 to become effective as promptly as
practicable. The S-4, including the proxy statement/properties used in
connection therewith and all related materials will contain information, and all
related materials will contain information, and such proxies will be solicited,
in accordance with applicable law. Each of Parent and Company will promptly
provide all information relating to Parent or Company, as applicable, for
inclusion in the S-4 and such proxy statement/prospectus to satisfy the
requirements of all applicable state and federal securities laws. Each of
Parent and Company shall be solely responsible for any statement, information or
omission in the S-4 and such proxy statement/prospectus relating to it or its
affiliates based upon written information furnished by it.
4.7 Meeting of Company Shareholders.
-------------------------------
(a) Company will take all action necessary in accordance
with California law and Company's Articles of Incorporation and Bylaws to call,
notice, convene and
hold a meeting of the Company Shareholders to be held as promptly as practicable
and permissible under applicable law after compliance with the federal and state
securities laws as provided in Section 4.6, for the purpose of voting upon
approval of this Agreement and the Merger (the "Company Shareholders Meeting").
----------------------------
Subject to Section 4.7(c), Company will solicit from its shareholders proxies in
favor of the approval of this Agreement and the Merger, and will use its
commercially reasonable efforts to take all other action necessary or advisable
to cause the Company Shareholder Approval to be granted. Notwithstanding
anything to the contrary contained in this Agreement, Company may adjourn or
postpone the Company Shareholders Meeting if as of the time for which Company
Shareholders Meeting is originally scheduled there are insufficient shares of
Company Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Shareholders Meeting.
Company shall ensure that the Company Shareholders Meeting is called, noticed,
convened, held and conducted prior to and separate from any meeting of the
Company Shareholders at which any Acquisition Proposal (as defined in Section
4.8) or Acquisition Transaction (as defined in Section 4.8) is considered or
voted upon. Company will use its commercially reasonable efforts to ensure that
all proxies solicited by Company in connection with the Company Shareholders
Meeting are solicited in compliance with California law, Company's Articles of
Incorporation and Bylaws and all other applicable legal requirements. Company's
obligation to call, give notice of, convene, hold and conduct the Company
Shareholders Meeting in accordance with this Section 4.7(a) shall not be limited
to or otherwise affected by the commencement, disclosure, announcement or
submission to Company of any Acquisition Proposal (as defined in Section 4.8)
(including a Superior Offer (as defined in Section 4.7(c)), or by any
withdrawal, amendment or modification of the recommendation of the Board of
Directors of Company to the Company Shareholders to approve this Agreement and
the Merger.
(b) Subject to Section 4.7(c): (i) the Board of Directors of
Company shall recommend that the Company Shareholders vote in favor of and
approve this Agreement and the Merger at the Company Shareholders Meeting; (ii)
the Notice Materials and the Information Statement, if any (or, if Parent files
the S-4, the proxy statement/prospectus used in connection therewith), shall
include a statement to the effect that the Board of Directors of the Company has
recommended that the Company Shareholders vote in favor of and approve this
Agreement and the Merger at the Company Shareholders Meeting; and (iii) neither
the Board of Directors of Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to Parent, the recommendation of the Board of Directors of Company that
the Company Shareholders vote in favor of and approve this Agreement and the
Merger.
(c) Nothing in this Agreement shall prevent the Board of
Directors of Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer is made to Company
and is not withdrawn, (ii) Company shall have provided written notice to Parent
(a "Notice of Superior Offer") advising Parent that Company has received a
------------------------
Superior Offer, specifying all of the terms and conditions of such Superior
Offer and identifying the person or entity making such Superior Offer, (iii)
Parent shall not have, within five business days following Parent's receipt of
the Notice of Superior Offer, but in a ny event at least 24 hours prior to the
Company Shareholder Meeting, made an offer that
the Company Board by a majority vote determines in its good faith judgment
(after consultation with its financial adviser) to be at least as favorable to
the Company Shareholders as such Superior Offer (it being agreed that the Board
of Directors of Company shall convene a meeting to consider any such offer by
Parent promptly following the receipt thereof), (iv) the Board of Directors of
Company concludes in good faith, after consultation with its outside counsel,
that, in light of such Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation is required in order for the Board of
Directors of Company to comply with its fiduciary obligations to the Company
Shareholders under applicable law and (v) Company shall not have violated any of
the restrictions set forth in Section 4.8 or this Section 4.7. The Board of
Directors of Company shall provide Parent with at least one business day prior
notice (or such lesser prior notice as provided to the members of Company's
Board of Directors) of any meeting of Company's Board of Directors at which
Company's Board of Directors is reasonably expected to consider any Acquisition
Proposal (as defined in Section 4.8) to determine whether such Acquisition
Proposal is a Superior Offer. Nothing contained in this Section 4.7 shall limit
Company's obligation to hold and convene the Company Shareholders Meeting
(regardless of whether the recommendation of the Board of Directors of Company
shall have been withheld, withdrawn, amended or modified). For purposes of this
Agreement, "Superior Offer" shall mean an unsolicited, bona fide written offer
-------------- ---------
made by a third party to consummate any of the following transactions: (i) a
merger or consolidation involving Company pursuant to which the Company
Shareholders immediately preceding such transaction hold less than 50% of the
voting interests in the surviving or resulting entity of such transaction or
(ii) the acquisition by any person or group (including by way of a tender offer
or an exchange offer or a two step transaction involving a tender offer followed
with reasonable promptness by a cash-out merger involving Company), directly or
indirectly, of ownership of all of the then outstanding shares of capital stock
of Company, on terms that the Board of Directors of Company determines, in its
reasonable judgment (after consultation with its financial adviser) to be more
favorable to the Company Shareholders than the terms of the Merger; provided,
--------
however, that any such offer shall not be deemed to be a "Superior Offer" if any
-------
financing required to consummate the transaction contemplated by such offer is
not likely in the reasonable judgment of the Board of Directors of Company to be
obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit Company from
providing to the Company Shareholders a statement of Company's position with
respect to a tender offer required to be (and, to the extent such state
published or sent or given to such shareholders pursuant to Rule 14e-2(a) under
the Exchange Act (and Rule 14d-9 to the extent required pursuant to Rule 14d-
9(f).
4.8 No Solicitation.
---------------
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Section 9, Company and its
Subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as hereinafter defined); (ii) furnish
to any person
any non-public information with respect to any Acquisition Proposal; (iii)
participate or engage in any discussions or negotiations with any person with
respect to any Acquisition Proposal, except that Company may inform third
parties, in response to unsolicited inquiries, of the existence of these
provisions; (iv) except as permitted by Section 4.7(c), approve, endorse or
recommend any Acquisition Proposal; or (v) enter into any letter of intent or
similar document or any contract, agreement, agreement in principle or
commitment contemplating or otherwise relating to any Acquisition Transaction
(as hereinafter defined); provided, however, that prior to the approval of this
-------- -------
Agreement and the Merger at Company Stockholders' Meeting, this Section 4.8(a)
shall not prohibit Company from furnishing nonpublic information regarding
Company and its Subsidiaries to, or entering into discussions with, any person
or group who has submitted (and not withdrawn) to Company an unsolicited, bona
fide Acquisition Proposal that the Board of Directors of Company reasonably
concludes (after consultation with its financial adviser) may constitute, or may
be reasonably expected to lead to, a Superior Offer if (1) neither Company nor
any representative of Company or its Subsidiaries shall have violated any of the
restrictions set forth in this Section 4.8, (2) the Board of Directors of
Company concludes in good faith, after consultation with its outside legal
counsel, that such action is required in order for the Board of Directors of
Company to comply with its fiduciary obligations to Company's stockholders under
applicable law, (3) prior to furnishing any such nonpublic information to, or
entering into any such discussions with, such person or group, Company gives
Parent written notice of the identity of such person or group and all of the
material terms and conditions of such Acquisition Proposal and of Company's
intention to furnish nonpublic information to, or enter into discussions with,
such person or group, and Company receives from such person or group an executed
confidentiality agreement containing terms at least as restrictive with regard
to Company's confidential information as the non-disclosure agreement between
Company and Parent executed prior to this Agreement, (4) Company gives Parent at
least two business days advance notice of its intent to furnish such nonpublic
information or enter into such discussions, and (5) contemporaneously with
furnishing any such nonpublic information to such person or group, Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by Company to Parent). Company and
its Subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding two sentences
by any officer, director or employee of Company or any of its subsidiaries or
any investment banker, attorney or other advisor or representative of Company or
any of its subsidiaries shall be deemed to be a breach of this Section 4.8 by
Company.
For purposes of this Agreement, "Acquisition Proposal" shall mean any
--------------------
offer or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement, "Acquisition
-----------
Transaction" shall mean any transaction or series of related transactions other
-----------
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from Company by any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a 5% interest in the total outstanding voting securities of Company or
any of its Subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 5% or more of the total outstanding
voting securities of Company, or any of its Subsidiaries or any merger,
consolidation, business combination or similar transaction involving Company;
(B) any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 5% of the assets of Company; or (C) any liquidation
or dissolution of Company.
(b) In addition to the obligations of Company set forth in paragraph
(a) of this Section 4.8, Company shall promptly advise Parent orally and in
writing of any request for non-public information or any other inquiry which
Company reasonably believes could lead to an Acquisition Proposal or of any
Acquisition Proposal, the terms and conditions of such request, inquiry or
Acquisition Proposal, and the identity of the person or group making any such
request, inquiry or Acquisition Proposal. Company will keep Parent currently
informed in all respects of any changes in or developments with respect to any
such request, inquiry or Acquisition Proposal.
4.9 Regulatory Approvals. Company will execute and file or join
--------------------
in the execution and filing of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Parent may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Company will
use all reasonable efforts to obtain or assist Parent in obtaining all such
authorizations, approvals and consents. Without limiting the generality of the
foregoing, Company and Parent shall respond as promptly as practicable to (a)
any inquiries or requests received from the Federal Trade Commission or
Department of Justice for additional information or documentation, and (b) any
inquiries or requests received from any state attorney general or other
governmental body in connection with antitrust or related matters. Each of
Company and Parent shall (i) give the other party prompt notice of the
commencement of any material legal proceeding by or before any court or other
governmental body with respect to the Merger or any of the other transactions
contemplated by this Agreement, (ii) keep the other party informed as to the
status of any such legal proceeding, and (iii) except as may be prohibited by
any governmental body or by any legal requirement, permit the other party to be
present at each meeting or conference relating to any such legal proceeding and
to have access to and be consulted in connection with any document filed with or
provided to any governmental body in connection with any such legal proceeding.
4.10 Access to Information. Until the Closing Date and subject
---------------------
to the terms and conditions hereof relating to the confidentiality and use of
confidential and proprietary information, Company will provide Parent and its
agents with reasonable access, during regular business hours, to the files,
books, records and offices of Company, including, without limitation, any and
all information relating to Company taxes, commitments, contracts, leases,
licenses, real, personal and intangible property, and financial condition, and
specifically including, without limitation, access to Company source code
reasonably necessary for Parent to complete its diligence review of Company
products and technology. Company will cause its accountants to cooperate with
Parent and its agents in making available all financial information
reasonably requested, including, without limitation, the right to examine all
working papers pertaining to all financial statements prepared or audited by
such accountants.
4.11 Satisfaction of Conditions Precedent. Company will use all
------------------------------------
reasonable best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and Company will use all
commercially reasonable efforts to cause the transactions provided for in this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and to give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
provided for herein.
4.12 Blue Sky Laws. Company shall use reasonable efforts to assist Parent
-------------
to the extent necessary to comply with the securities and Blue Sky laws of all
jurisdictions applicable in connection with the Merger.
4.13 Notification of Employee Problems. Company will promptly notify
---------------------------------
Parent if any of Company's officers becomes aware that any of the key employees
listed in Item 2.15.2 intends to leave its employ.
4.14 Company Dissenting Shares. As promptly as practicable after the
-------------------------
Company Shareholder Meeting and prior to the Closing Date, Company shall furnish
Parent with the name and address of each Company Shareholder who did not vote in
favor of the Merger and the number of shares owned by such Company Shareholder.
4.15 Litigation. Company will notify Parent in writing promptly after
----------
learning of any material action, suit, proceeding or investigation by or before
any court, board or governmental agency, initiated by or against Company or
threatened against it.
4.16 Certain Employee Benefits. Company and its Subsidiaries shall take
-------------------------
such actions as are necessary to terminate such Employee Plans as are requested
by Parent to be terminated, provided that those Company and Subsidiary employees
who are eligible to participate in each such Employee Plan shall be provided the
opportunity to participate in a substantially comparable employee benefit plan
maintained by Parent and provided further that Parent requests such termination
no later than ten days prior to the Closing Date.
4.17 New Audited Financial Statements. Company will use all reasonable
--------------------------------
efforts to deliver to Parent, on or before January 24, 1999, Company's audited
balance sheet as of December 31, 1999 and Company's audited statements of income
and cash flow for the year ended December 31, 1999 (the "New Audited Financial
---------------------
Statements"). The New Audited Financial Statements will (a) be in accordance
----------
with the books and records of Company, (b) present fairly and accurately the
financial condition of Company at the respective dates specified therein and the
results of operations for the respective periods specified therein and (c) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis.
5. PARENT COVENANTS
In the case of Section 5.1 through 5.5 and Section 5.8 through 5.10,
during the period from the date of this Agreement until the Effective Time, and
in the case of Section 5.6 and 5.7 for an indefinite period (or for such
specific period provided for therein), Parent covenants to and agrees with
Company as follows:
5.1 Access to Information. Until the Closing Date and subject
---------------------
to the terms and conditions hereof relating to confidentiality and use of
confidential and proprietary information, Parent will provide Company and its
agents with reasonable access to its management and officers and material
information regarding Parent, including, without limitation, material
information relating to Parent's business, intellectual property and financial
condition. Parent will cause its accountants to cooperate with Company's
accountants in making available all financial information reasonably requested
to evaluate Parent's financial package.
5.2 Satisfaction of Conditions Precedent. Parent will use all
------------------------------------
reasonable best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 7, and Parent will use all commercially
reasonable efforts to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
5.3 Regulatory Approvals. Parent will execute and file or join
--------------------
in the execution and filing of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Company may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Parent will
use all commercially reasonable efforts to obtain all such authorizations,
approvals and consents. Without limiting the generality of the foregoing,
Company and Parent shall respond as promptly as practicable to (a) any inquiries
or requests received from the Federal Trade Commission or Department of Justice
for additional information or documentation, and (b) any inquiries or requests
received from any state attorney general or other governmental body in
connection with antitrust or related matters. Each of Company and Parent shall
(i) give the other party prompt notice of the commencement of any material legal
proceeding by or before any court or other governmental body with respect to the
Merger or any of the other transactions contemplated by this Agreement, (ii)
keep the other party informed as to the status of any such legal proceeding, and
(iii) except as may be prohibited by any governmental body or by any legal
requirement, permit the other party to be present at each meeting or conference
relating to any such legal proceeding and to have access to and be consulted in
connection with any document filed with or provided to any governmental body in
connection with any such legal proceeding.
5.4 Preparation of Permit Application, Hearing Request and
------------------------------------------------------
Hearing Notice. As promptly as practicable after the date hereof, Parent, with
--------------
Company's assistance, shall prepare and file with the California Commissioner of
Corporations the Notice Materials,
including the Permit Application, Hearing Request, Hearing Notice and
Information Statement, if any, in connection with the Merger. Parent, with
Company's assistance, shall use reasonable efforts to have the Permit issued as
promptly as practicable after such filing. Parent makes the covenants applicable
to it that are set forth in Section 4.6.1 with respect to the Permit, Permit
Application, Hearing Request, Hearing Notice and Information Statement, if any.
If (a) the California Department of Corporations has not scheduled a Hearing by
February 1, 2000, (b) the Hearing has not occurred by February 20, 2000 (or
March 1, 2000, if any Company Shareholders reside outside the United States), or
(c) the Permit has not been issued by February 28, 2000 (or March 9, 2000, if
any Company Shareholders reside outside the United States), then Parent shall
promptly prepare, with Company's assistance and cooperation, and file with the
SEC the S-4 and shall use reasonable efforts to cause the S-4 to become
effective as promptly as practicable. Parent makes the covenants applicable to
it that are set forth in Section 4.6.2 with respect to the S-4 and the proxy
statement/prospectus used in connection thereunder and all related materials.
5.5 Employee Benefit Plans. To the extent that individuals who
----------------------
are employed by Company or any Subsidiary immediately prior to the Effective
Time shall remain employees of Company or become employees of Parent following
the Effective Time (each such employee, an "Affected Employee"), Parent will use
-----------------
all commercially reasonable efforts, after consultation with its insurance
carriers, (a) to give Affected Employees full credit for purposes of eligibility
(including service and waiting period requirements), vesting, benefit accrual
and determination of the level of benefits under any employee benefit plans or
arrangements maintained by Parent, for such Affected Employees' service with
Company or any Subsidiary to the same extent recognized by either Company or a
Subsidiary for the comparable employee benefit program immediately prior to the
Effective Time and (b) to give Affected Employees full credit under Parent's
employee benefit program for insurance, deductibles, and copayments paid under
the employee benefit programs of Company. Parent shall provide for a minimum of
three months base salary as a severance payment for any Affected Employee who is
terminated other than for cause (the term "cause" to be defined to include
termination for performance reasons), after the Effective Time and prior to
December 31, 2000, provided that such employee executes a release on a form
--------
acceptable to Parent and, provided, further, that no severance payment shall be
-------- -------
made to any employee who has executed an Employment Agreement pursuant to this
Agreement. The Affected Employees shall be third party beneficiaries of the
immediately preceding sentence. This Section 5.5 will survive the consummation
of the Merger and will be binding on all successors and assigns of Parent and
Company.
5.6 Indemnification Of Directors And Officers; Directors &
------------------------------------------------------
Officers Insurance.
------------------
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Company pursuant to any indemnification agreements between Company and its
directors and officers as of or prior to the date hereof (or indemnification
agreements in Company's customary form for directors joining Company's Board of
Directors prior to the Effective Time) and any indemnification provisions under
Company's articles of incorporation or bylaws as in effect immediately prior to
the Effective Time. Parent will not permit the Surviving Corporation to merge or
consolidate with
any other entity unless the Surviving Corporation ensures that the surviving or
resulting entity assumes the obligations imposed by this Section 5.6.
(b) For six years after the Effective Time, Parent shall maintain in
effect the current level and scope of Company's directors and officers'
liability insurance covering those directors and officers who are currently
covered by the Company's insurance policies, and to the extent such directors
and officers are expressly "Named Insured" under Company's current insurance
policies with rights of enforcement against the insurance carriers, such
officers and directors shall expressly be "Named Insureds" under such insurance
of Parent with rights of enforcement against the insurance companies.
(c) Parent and Company jointly and severally agree to pay all
expenses, including attorney's fees, that may be incurred by any current or
former director or officer of Company in enforcing the obligations of Parent or
Company provided for in this Section 5.6.
(d) This Section 5.6 shall survive the consummation of the Merger and
is intended to benefit and may be enforced by any current or former director of
officer of Company, and shall be binding on all successors and assigns of Parent
and Company.
5.7 Advice of Changes. Parent will promptly advise Company in writing (a)
-----------------
of any event occurring subsequent to the date of this Agreement that would
render the representations and warranties of Parent contained in this Agreement,
if made on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect unless Parent reasonably believes such event
will be cured within 30 days and (b) of any Material Adverse Effect on Parent.
5.8 Necessary Consents. Parent will use all commercially
------------------
reasonable efforts to obtain such written consents and take such other actions
as may be necessary or appropriate for Parent, in addition to those set forth in
Section 4.6, to facilitate and allow the consummation of the transactions
provided for herein and to allow Parent to carry on Company's business after the
Effective Time.
5.9 Blue Sky Laws. Parent shall use all reasonable efforts to comply with
-------------
the securities and Blue Sky laws of all jurisdictions applicable in connection
with the Merger.
5.10 Loan. (a) If the Closing Date has not occurred and this Agreement has
----
not been terminated by February 1, 2000, then, during the period commencing on
February 1, 2000 and continuing until the first to occur of the Closing Date,
the close of business (Pacific Standard Time) on June 1, 2000 or the termination
of this Agreement (the "Loan Period"), Parent will loan to Company, if Company
-----------
requests, $1,000,000 on the first of each month during the Loan Period,
commencing on February 1 and ending and including June 1, 2000 (if the Loan
Period continues until the close of business (Pacific Standard Time) on June 1,
2000), so that the maximum aggregate amount of such loans will be $5,000,000 and
such loans being hereinafter referred to as the "Loans"). Such Loans will bear
interest at the rate of 10% per annum, payable on the Maturity Date or
conversion of the Loans, whichever occurs first. The Loans will be
evidenced by unsecured promissory notes in form and substance reasonably
acceptable to Parent, will be due and payable in full on December 31, 2000 (the
"Maturity Date"), except that, if this Agreement is terminated prior to the
-------------
Maturity Date while any principal or interest under any of the Loans remains
outstanding, (i) pursuant to Sections 9.1(a), (b), (f) or (g), then either
Parent or Company will have the right to convert all then unpaid principal and
accrued interest under the Loans into Series C Preferred Stock of Company; (ii)
pursuant to Section 9.1(d), then Company alone will have the right to convert
all then unpaid principal and accrued interest under the loans into Series C
Preferred Stock of Company; (iii) pursuant to Section 9.1(e), then Parent alone
will have the right to convert all then unpaid principal and accrued interest
under the loans into Series C Preferred Stock of Company; in each case in
accordance with the terms set forth in the Agreement of Terms for the Purchase
of Series C Preferred Stock of Signio, Inc. dated as of December 7, 1999, and
Company covenants that it shall take all necessary action to cause such Series C
Preferred Stock to be authorized and issued in accordance with such terms.
(b) In the event this Agreement is terminated by Parent pursuant to
Section 9.1(c) upon the occurrence of a Triggering Event (as defined herein),
then all unpaid principal and accrued interest under the Loans shall be
accelerated and shall be immediately due and payable by Company upon demand by
Parent. Company may not, without the prior written consent of Parent, pre-pay
any unpaid principal and accrued interest under the Loans. The right (if any)
of Parent or Company, as the case may be, to convert the Loans in accordance
with Section 5.10(a) shall expire 60 days after termination of this Agreement.
The party that seeks to convert the Loans shall give the other party 20 days
written notice prior to the desired date of conversion, which notice may be
given at any time during the aforementioned 60 day period.
(c) Immediately after the Closing and prior to the filing of the
Agreement of Merger and the Effective Time, the Loans will be converted into
shares of Company Common Stock at a conversion price of $3.33 per share and each
party hereto will take all steps necessary or advisable to effect such result.
Except with respect to Company's performance of its obligations under this
Section 5.10(c), the conversion referred to in this Section 5.10(c) shall be
disregarded and without effect for any and all matters relating to Section 10.2.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this Agreement as
-----------
provided in Section 9 below, the Closing of the transactions provided for herein
will take place at the offices of Fenwick & West LLP, Two Xxxx Xxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m., Pacific Time no later than the third
business day after all conditions to Closing have been satisfied or waived other
than those set forth in Sections 7.1, 7.2, 7.3, 8.1, 8.2 and 8.3, the
satisfaction (or not) of which shall be determined no later than such third
business day. Promptly after the Closing and the conversion of the Loans, the
Agreement of Merger and such officers' certificates or other documents as may be
required to effectuate the Merger will be filed in the office of the California
Secretary of State and the Certificate of Merger and such certificates of
approval or other documents as may be required to effectuate the Merger will be
filed in the office of the Delaware Secretary of State.
6.2 Exchange of Certificates.
------------------------
6.2.1 As of the Effective Time, all shares of Company Common
Stock and Company Preferred Stock that are outstanding immediately prior thereto
will, by virtue of the Merger and without further action, cease to exist, and
all such shares (other than dissenters' shares) will be converted into the right
to receive from Parent the number of shares of Parent Common Stock determined as
set forth in Section 1.1, subject to Section 1.2 hereof.
6.2.2 At and after the Effective Time, each certificate
representing outstanding shares of Company Common Stock and Company Preferred
Stock will represent the number of shares of Parent Common Stock into which such
shares of Company Common Stock and Company Preferred Stock have been converted,
and such shares of Parent Common Stock will be deemed registered in the name of
the holder of such certificate. As soon as practicable after the Effective
Time, Parent will mail or cause to be mailed to each holder of record of shares
of Company Common Stock or Company Preferred Stock (a) instructions for use in
effecting the surrender of the certificates for such shares (the "Company
-------
Certificates") to Parent for cancellation and (b) a letter of transmittal (which
------------
shall specify that delivery shall be effected, and risk of loss and title shall
pass, only upon delivery of the Company Certificates to Parent's transfer agent
accompanied by the specified documentation and shall be in such form and contain
such other provisions as Parent may reasonably specify). Each holder of any
such shares will then promptly surrender to the transfer agent for cancellation
all Company Certificates for such holder's shares of Company Common Stock and
Company Preferred Stock, accompanied by the completed and signed letter of
transmittal and any other appropriate documentation. If a Company Certificate
for any such shares or warrant has been lost, the holder of the shares or
warrant may furnish the transfer agent with an affidavit of lost certificate
and, if reasonably requested (in light of the circumstances) by Parent, a bond
in such amount as the transfer agent or Parent may reasonably request. Upon
surrender of a Company Certificate to the transfer agent for cancellation (or
upon delivery of such affidavit and any such bond) together with a duly executed
letter of transmittal and such other documents as may be reasonably required by
the transfer agent, the transfer agent will issue to such surrendering holder
certificate(s) for the number of shares of Parent Common Stock to which such
holder is entitled pursuant to Section 1.1, subject to Section 1.2, less the
shares of Parent Common Stock deposited into escrow pursuant to Section 1.3, and
Parent will distribute any cash payable under Section 1.2.
6.2.3 All shares of Parent Common Stock (and, if applicable,
cash in lieu of fractional shares) delivered upon the surrender of Company
Certificates in accordance with the terms hereof will be delivered to the
registered holder. After the Effective Time, there will be no further
registration of transfers of the shares of Company Common Stock and Company
Preferred Stock on the stock transfer books of Company. If, after the Effective
Time, Company Certificates are presented for transfer or for any other reason,
they will be canceled and exchanged and certificates therefor will be delivered
as provided in this Section 6.2.
6.2.4 Until Company Certificates representing Company Common
Stock and Company Preferred Stock outstanding prior to the Merger are
surrendered pursuant to Section 6.2.2 above, such certificates will be deemed,
for all purposes, to evidence ownership of
(a) the number of shares of Parent Common Stock into which the shares of Company
Common Stock and Company Preferred Stock will have been converted and (b) if
applicable, cash in lieu of fractional shares.
6.3 Assumption of Options and Company Common Warrants. Within a
-------------------------------------------------
reasonable time period, and in any event within 30 days, after the Effective
Time, Parent will notify in writing each holder of a Company Option or Company
Common Warrant, as applicable, of: (a) the assumption of such Company Option or
Company Common Warrant, as applicable, by Parent, (b) the conversion of such
Company Option or Company Warrant, as applicable, into a Parent Option or Parent
Warrant, as applicable, (c) the number of shares of Parent Common Stock that are
subject to such Parent Option or Company Common Warrant, as applicable, and (d)
the exercise price of such Parent Option or Parent Warrant, as applicable, as
determined pursuant to Section 1.1.3. Within ten business days following the
Closing Date, Parent shall file with the SEC a registration statement on Form S-
8 (or any successor form) or another appropriate form with respect to shares of
Parent Common Stock subject to Parent Options for which such form is available
and shall use all commercially reasonable efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
7. CONDITIONS TO OBLIGATIONS OF COMPANY
Company's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Company, but only in a writing signed on
behalf of Company by its Chief Executive Officer or Chief Financial Officer):
7.1 Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Parent contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except that, to the extent such representations and warranties address matters
only as of a particular date, such representations and warranties shall, to such
extent, be true and correct as of such particular date), except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material" set
forth therein) does not have and is not likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent; and Company shall have received
a certificate to such effect executed on behalf of Parent by its Chief Executive
Officer or Chief Financial Officer.
7.2 Covenants. Parent shall have performed and complied in all
---------
material respects with all of its covenants contained in Section 5 on or before
the Closing Date, and Company shall have received a certificate to such effect
executed on behalf of Parent by its Chief Executive Officer or Chief Financial
Officer.
7.3. Absence of Material Adverse Effect. Since September 30,
----------------------------------
1999, there shall not have been any Material Adverse Effect with respect to
Parent.
7.4 Compliance with Law. There shall be no order, decree, or
-------------------
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.5 Government Consents. There shall have been obtained at or
-------------------
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the Merger by
any governmental authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
7.6 Opinion of Parent's Counsel. Company shall have received
---------------------------
from Fenwick & West LLP, counsel to Parent, an opinion to the effect set forth
in Exhibit D hereto, subject to such qualifications and limitations as such firm
deems appropriate in its professional judgment.
7.7 Permit. The California Commissioner of Corporations shall
------
have issued the Permit or the issuance of the Parent Common Stock in connection
with the Merger shall have been registered pursuant to an S-4 declared effective
by the SEC.
7.8 Requisite Approvals. The principal terms of this Agreement
-------------------
and the Merger shall have been approved and adopted by the written consent or
vote of all the Company Shareholders, as required by applicable law and
Company's Articles of Incorporation and Bylaws.
7.9 Xxxx-Xxxxx-Xxxxxx Compliance. All applicable waiting
----------------------------
periods under the HSR Act shall have expired or early termination shall have
been granted by both the Federal Trade Commission and the United States
Department of Justice.
7.10 Tax Opinions. Parent and Company shall each have received
------------
written opinions from their respective tax counsel (Fenwick & West LLP and
Cooley Godward LLP respectively), in form and substance reasonably satisfactory
to them, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn; provided, however, that if the counsel to either Parent or Company
-------- -------
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
7.11 Nasdaq National Market. The shares of Parent Common Stock
----------------------
isuable pursuant to this Agreement shall have been authorized for trading on the
Nasdaq National Market.
8. CONDITIONS TO OBLIGATIONS OF PARENT
The obligations of Parent hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be
waived by Parent, but only in a writing signed on behalf of Parent by its Chief
Executive Officer or Chief Financial Officer):
8.1 Accuracy of Representations and Warranties. Each of the
------------------------------------------
representations and warranties of Company contained in this Agreement shall be
true and correct on and as of the date hereof and at and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (except that, to the extent such representations
and warranties address matters only as of a particular date, such
representations and warranties shall, to such extent, be true and correct as of
such particular date) except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to "materiality" or "material" set forth therein) does not have and is not
likely to have, individually or in the aggregate, a Material Adverse Effect on
Company; and Parent shall have received a certificate to such effect executed on
behalf of Company by its Chief Executive Officer or Chief Financial Officer. For
the purposes of this Section 8.1 (but not for the purposes of Section 10 or
otherwise), the New Audited Financial Statements will not be deemed to
constitute representations of Company.
8.2 Covenants. Company shall have performed and complied in all
---------
material respects with all of its covenants contained in Section 4 on or before
the Closing and Parent shall have received a certificate to such effect signed
on behalf of Company by its Chief Executive Officer or Chief Financial Officer.
8.3 Absence of Material Adverse Effect. Since the Balance Sheet
----------------------------------
Date, there shall have not been any Material Adverse Effect with respect to
Company.
8.4 Compliance with Law. There shall be no order, decree, or
-------------------
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
provided for in this Agreement.
8.5 Government Consents. There shall have been obtained at or
-------------------
prior to the Closing Date such permits or authorizations and there shall have
been taken such other action, as may be required to consummate the Merger by any
governmental authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
8.6 Opinion of Company's Counsel. Parent shall have received
----------------------------
from Xxxxxx Godward LLP, counsel to Company, an opinion to the effect set forth
in Exhibit E hereto, subject to such qualifications and limitations as such firm
---------
deems appropriate in its professional judgment.
8.7 Company Shareholder Approval. The principal terms of this
----------------------------
Agreement and the Merger shall have been approved and adopted by the written
consent or vote of the Company Shareholders, as required by applicable law and
Company's Articles of Incorporation and Bylaws and by Company's Board of
Directors.
8.8 Termination of Rights. Any registration rights, rights of
---------------------
first offer or refusal, or redemption rights of any Company Shareholder shall
have been terminated or waived as of the Closing.
8.9 Resignations. The directors of Company in office
------------
immediately prior to the Effective Time of the Merger shall have resigned as
directors of Company effective as of the Effective Time of the Merger.
8.10 Permit. The California Commissioner of Corporations shall
------
have issued the Permit or the issuance of the Parent Common Stock in connection
with the Merger shall have been registered pursuant to an S-4 declared effective
by the SEC.
8.11 Xxxx-Xxxxx-Xxxxxx Compliance. All applicable waiting
----------------------------
periods under the HSR Act shall have expired or early termination shall have
been granted by both the Federal Trade Commission and the United States
Department of Justice.
8.12 Dissenting Shares. The number of shares of Company Common
-----------------
Stock or Company Preferred Stock eligible to become dissenting shares shall not
constitute more than 5% of the total number of shares of Company Common Stock
(on an as-if converted to Company Common Stock basis) outstanding immediately
prior to the Effective Time.
8.13 New Audited Financial Statements. Parent shall have
--------------------------------
received from Company the New Audited Financial Statements.
8.14 Third Party Consents. All consents of third parties
--------------------
identified in Schedule 3 hereto shall have been obtained.
----------
8.15 No Termination of Employment Agreements. None of the
---------------------------------------
employees who entered into the Employment Agreements shall have terminated any
such agreement or taken any action that caused or will cause such termination.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, whether before or after approval of the Merger by
the shareholders of Company:
(a) by the mutual written consent of Parent and Company;
(b) unless otherwise specifically provided herein or agreed in
writing by Parent and Company, upon notice by either party, by either Parent or
Company if all the conditions to Closing have not been satisfied or waived on or
before April 30, 2000, or, if pursuant to Sections 4.6.2 and 5.4 Parent is
required to file the S-4 with the SEC, on or before June 15, 2000 (as
applicable, the "Final Date"), other than as a result of a material breach of
----------
this Agreement by the terminating party, or a material breach by any of the
affiliates of the terminating party of the applicable Affiliate Agreements;
(c) by Parent (at any time prior to the approval of this
Agreement and the Merger by the required vote of the stockholders of Company) if
a Triggering Event (as defined below) shall have occurred;
(d) by Company, if there has been a breach by Parent of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Parent, or if any representation of Parent will have become untrue,
in either case to an extent that would cause the conditions set forth in Section
7.1 or 7.2 not to be satisfied and which Parent fails to cure within a
reasonable time, not to exceed 30 days, after written notice thereof (except
that no cure period will be provided for a breach by Parent which by its nature
cannot be cured);
(e) by Parent, if there has been a breach by Company of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Company, or if any representation of Company will have become
untrue, in either case to an extent that would cause the conditions set forth in
Section 8.1 or 8.2 not to be satisfied and which Company fails to cure within a
reasonable time not to exceed 30 days after written notice thereof (except that
no cure period will be provided for a breach by Company which by its nature
cannot be cured);
(f) by either party, if a permanent injunction or other order by
any federal or state court which would make illegal or otherwise restrain or
prohibit the consummation of the Merger will have been issued and will have
become final and nonappealable;
(g) by either Company or Parent if the Company Shareholder
Approval by this Agreement shall not have been obtained by reason of the failure
to obtain the required vote at a meeting of the Company Shareholders duly
convened therefore or at any adjournment thereof; provided, however, that the
-------- -------
right to terminate this Agreement under this Section 9.1(g) shall not be
available to a party where the failure to obtain the Company Shareholder
Approval shall have been caused by the action or failure to act of such party
and such action or failure to act constitutes a material breach of this
Agreement.
For the purposes of this Agreement, a "Triggering Event" shall be
----------------
deemed to have occurred if: (i) the Board of Directors of Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its recommendation in favor of the
approval of this Agreement or the Merger; (ii) Company shall have failed to
include in the Notice Materials and Information Statement, if any (or, if Parent
files the S-4, the proxy statement/prospectus used in connection therewith) the
recommendation of the Board of Directors of Company in favor of the approval of
this Agreement and the Merger; (iii) the Board of Directors of Company fails to
reaffirm its recommendation in favor of the adoption and approval of this
Agreement and the Merger within five business days after Parent requests in
writing that such recommendation be reaffirmed at any time following the public
announcement of an Acquisition Proposal; (iv) the Board of Directors of Company
or any committee thereof shall have approved or publicly recommended any
Acquisition Proposal; (v) Company shall have entered into any letter of intent
or similar document or any agreement,
contract or commitment accepting any Acquisition Proposal; (vi) a tender or
exchange offer relating to securities of Company shall have been commenced by a
person or entity unaffiliated with Parent, and Company shall not have sent to
its shareholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within five business days after such tender or exchange offer is first published
sent or given, a statement disclosing that Company recommends rejection of such
tender or exchange offer; or (vii) Company shall have materially breached any
covenant provided for in Section 4.7 or 4.8.
9.2 Fees and Expenses.
-----------------
(a) General. Except as set forth in this Section 9.2, each party
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will bear its respective expenses and fees of its own accountants, attorneys,
investment bankers and other professionals incurred with respect to this
Agreement and the transactions contemplated hereby. If the Merger is
consummated, Parent will pay at or immediately following the Closing the
reasonable investment banking, accounting and attorneys' fees and expenses and
other fees and expenses incurred by Company in connection with the Merger
(including those fees and expenses specifically set forth in the Company
Disclosure Schedule). Company will not incur in connection with the Merger more
than $900,000 in such fees and expenses unless any such fees or expenses
incurred by Company in excess of the applicable amount set forth for above are
paid by the Company Shareholders on or before the Closing.
(b) Company Payments.
----------------
(i) In the event that this Agreement is terminated by Parent
pursuant to Section 9.1(c) Company shall promptly, but in no event later
than two days after the date of such termination, pay Parent in immediately
available funds a fee equal to $15 million (the "Termination Fee") plus an
---------------
amount equal to Parent's reasonable investment banking, accounting and
attorneys' fees and expenses and other fees and expenses incurred by Parent
with respect to this Agreement and the transactions contemplated hereby
("Parent's Expenses");
-----------------
(ii) In the event that this Agreement is terminated by Parent
pursuant to Section 9.1(b) (at a time when Company is in material breach of
any of its obligations under this Agreement and Parent is not in material
breach of any of its obligations under this Agreement) or Section 9.1(e),
or by either Parent or Company pursuant to Section 9.1(g), and within 12
months following the termination of this Agreement a Competing Transaction
(as defined below) is consummated or Company enters into an agreement
providing for a Competing Transaction, then Company shall, within two days
after the consummation of a Competing Transaction, pay Parent in
immediately available funds an amount equal to the Termination Fee plus
Parent's Expenses.
(iii) Company acknowledges that the agreements contained in this
Section 9.2(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter
into this Agreement; accordingly, if Company fails to pay in a timely
manner the amounts due pursuant to this Section 9.2(b), and, in order to
obtain such payment, Parent makes a claim that results in
a judgment against Company for the amounts set forth in this Section
9.2(b), Company shall pay to Parent its reasonable costs and expenses
(including reasonable attorneys' fees and expenses) in connection with such
suit, together with interest on the amounts set forth in this Section
9.2(b) at the prime rate of The Chase Manhattan Bank in effect on the date
such payment was required to be made. Payment of the fees described in this
Section 9.2(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement.
(c) In the event that Company shall terminate this Agreement pursuant
to Section 9.1(d), then Parent shall immediately pay Company in immediately
available funds (i) an amount equal to the Termination Fee plus (ii) an amount
equal to Company's reasonable investment banking, accounting and attorneys' fees
and expenses and other fees and expenses incurred by Company with respect to
this Agreement and the transactions contemplated hereby (the "Company
-------
Expenses"), except that the amount of the Company Expenses to be paid by Parent
shall not be in excess of the amount set forth in Section 9.2(a). The payment
provided for in this Section 9.2(c) shall be treated as liquidated damages and
shall be in lieu of any other payments for damages incurred by Company or its
shareholders for any non-willful breach of this Agreement by Parent.
(d) For the purposes of this Section 9.2, a "Competing Transaction"
---------------------
shall mean any of the following involving Parent or Company (as the case may be)
other than the Merger: (a) any merger, consolidation, share exchange, business
combination or other similar transaction in which a majority of Company's voting
stock is transferred to any third party; (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 50% or more of the assets of
such party and its subsidiaries, taken as a whole in a single transaction or
series of transactions; (c) any license, joint venture or other arrangement
pursuant to which Company provides or permits exclusive access to all or a
majority of its intellectual property (on a value basis) to a third party; (d)
any tender offer or exchange offer for 50% or more of the outstanding voting
securities of such party or the filing of a registration statement under the
Securities Act in connection therewith; or (e) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act) having
been formed that beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the outstanding voting securities of such party
(excluding the current beneficial ownership of Company's outstanding voting
securities by the current Company Shareholders).
9.3 Notice of Termination and Effect of Termination. Any
-----------------------------------------------
termination of this Agreement under Section 9.1 above will be effective
immediately upon the delivery of written notice by the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 9.1, this Agreement shall be of no further force or effect,
except (a) as set forth in this Section 9.3, Section 5.10(a), Section 5.10(b),
Section 9.2 and Article 11, each of which shall survive the termination of this
Agreement, and (b) nothing herein shall relieve any party from liability for any
willful breach of this Agreement. No termination of this Agreement shall affect
the obligations of the parties pursuant to any agreement to maintain
the confidentiality of information regarding the other party, all of which
obligations shall survive termination of this Agreement in accordance with their
terms.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS.
10.1 Survival of Representations. After the Closing, all
---------------------------
representations and warranties of Company and Parent contained in this Agreement
will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of Parent or Company, as applicable, until
that date (the "Escrow Release Date") which is the earlier of (a) the
-------------------
termination of this Agreement or (b) the first anniversary of the Closing Date.
After the Closing, those covenants contained in this Agreement which by their
terms are to be performed after the Closing will continue until fully performed.
10.2 Agreement to Indemnify. From and after the Effective Time,
----------------------
Parent and the Surviving Corporation and their respective officers, directors,
agents, and employees, and each person who controls or may control Parent or the
Surviving Corporation within the meaning of the Securities Act and who suffers
Damages (as defined below) in the capacity as such controlling person (each of
Parent, the Surviving Corporation and each such officer, director, agent,
employee and controlling person is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") will be
------------------ -------------------
indemnified and held harmless from and against any and all claims, demands,
suits, actions, causes of actions, losses, costs, demonstrable damages,
liabilities and expenses including, without limitation, reasonable attorneys'
fees, other professionals' and experts' reasonable fees and court or arbitration
costs (hereinafter collectively referred to as "Damages") incurred and arising
-------
out of any inaccuracy, misrepresentation, breach of, or default in, any of the
representations (except for the representation in Section 2.10(i)), warranties
or covenants given or made by Company in this Agreement or any certificate
delivered pursuant to Section 8.1 or 8.2 hereof by or on behalf of the Company
pursuant hereto (if such inaccuracy, misrepresentation, breach or default
existed at the Closing Date) in accordance with the provisions of this Article
10 and the Escrow Agreement. Any claim of indemnity made by an Indemnified
Person under this Section 10.2 must be asserted pursuant to Sections 4 and 5 of
the Escrow Agreement. As used herein, the term "Damages" will not include any
-------
overhead costs of Parent personnel and the amount of Damages incurred by any
Indemnified Person will be reduced by the amount of any insurance proceeds
actually received by such Indemnified Person on account of such Damages and the
amount of any direct tax savings actually recognized by such Indemnified Person
that are directly attributable to such Damages, but will include any reasonable
costs or expenses incurred by such Indemnified Person to recover such insurance
proceeds or to obtain such tax savings. The Indemnified Persons will use
reasonable efforts to mitigate their Damages.
10.3 Limitation. Notwithstanding anything herein to the
----------
contrary, in seeking indemnification for Damages under Section 10.2, the
Indemnified Persons will exercise their remedies only with respect to the
Escrow Shares and any other assets deposited in escrow
pursuant to the Escrow Agreement. Except for knowing or willful fraud (a) no
Company Shareholder will have any liability to an Indemnified Person under this
Agreement except to the extent of such Company Shareholder's portion of the
Escrow Shares and any other assets deposited under the Escrow Agreement and (b)
the remedies set forth in this Section 10.3 will be the exclusive remedies of
Parent and the other Indemnified Persons under this Agreement against any
Company Shareholder for any inaccuracy, misrepresentation, breach of, or default
in, any of the representations, warranties or covenants given or made by Company
in this Agreement or in any certificate delivered pursuant to Section 8.1 or 8.2
hereof by or on behalf of the Company pursuant hereto. No indemnified Person
will be entitled to recover punitive damages pursuant to this Section 10.2
unless (and only to the extent that) the Damages suffered by the Indemnified
Person under Section 10.2 include liability incurred by such Indemnified Person
to any third party for punitive damages. The indemnification provided for in
Section 10.2, and the limitation of liability provided for in the immediately
preceding sentence, shall not apply to any breach of any covenants or
representations made by a Company Shareholder in an Affiliate Agreement or in
the Support Agreement. In addition, the indemnification provided for in Section
10.2 shall not apply unless and until the aggregate Damages for which one or
more Indemnified Persons seeks or has sought indemnification hereunder exceeds a
cumulative aggregate of $1,000,000, in which event Company shall, subject to the
foregoing limitations, be liable to indemnify the Indemnified Persons for all
Damages. The limitations on the indemnification obligations set forth in this
Section 11.3 shall not be applicable to Damages resulting from knowing or
---
willful fraud.
10.4 Notice. Promptly after Parent becomes aware of the existence of
------
any potential claim by an Indemnified Person for indemnity under Section 10.2,
Parent will notify the Representatives of such potential claim in accordance
with the Escrow Agreement. Failure of Parent to give such notice will not affect
any rights or remedies of an Indemnified Party hereunder with respect to
indemnification for Damages except to the extent the Company Shareholders are
materially prejudiced thereby. Prior to the settlement of any claim for which
Parent seeks indemnity under Section 10.2, Parent will provide the
Representatives with the terms of the proposed settlement and a reasonable
opportunity to comment on such terms in accordance with the Escrow Agreement.
11. MISCELLANEOUS
11.1 Governing Law. The internal laws of the State of Delaware
-------------
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
11.2 Assignment; Binding Upon Successors and Assigns. Neither
-----------------------------------------------
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.3 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and 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 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 the void or unenforceable
provision.
11.4 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be an original as regards any party whose name appears
thereon and all of which together will constitute one and the same instrument.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, bear the signatures of both parties reflected
hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein, any
--------------
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
11.6 Amendment and Waivers. Any term or provision of this
---------------------
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time prior to the Effective Time and before or after the Company Shareholder
Approval.
11.7 No Waiver. The failure of any party to enforce any of the
---------
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by a party of any
breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
The waiver by any party of the right to enforce any of the provisions hereof on
any occasion will not be construed to be a waiver of the right of such party to
enforce such provision on any other occasion.
11.8 Notices. Any notice or other communication required or
-------
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
(i) If to Parent:
Verisign, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Manager Strategic Development
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
(b) If to Company:
Signio, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
Attention: Xxxx XxXxxxxxxx,
Vice President of Business Development and Sales
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Cooley Godward LLP
0 Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.8.
11.9 Construction of Agreement. A reference to an article,
-------------------------
section or exhibit will mean an article or section in, or an exhibit to, this
Agreement, unless otherwise explicitly set forth. The titles and headings in
this Agreement are for reference purposes only and will not in any manner
limit the construction of this Agreement. For the purposes of such
construction, this Agreement will be considered as a whole.
11.10 No Joint Venture. Nothing contained in this Agreement will be
----------------
deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other, and the parties'
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
11.11 Further Assurances. Each party agrees to cooperate fully with
------------------
the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.12 Absence of Third Party Beneficiary Rights. Except as otherwise
-----------------------------------------
provided herein, no provisions of this Agreement are intended, nor will be
interpreted, to provide or create any third party beneficiary rights or any
other rights of any kind in any client, customer, affiliate, partner or employee
of any party hereto or any other person or entity, unless specifically provided
otherwise herein, and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
11.13 Public Announcement. Parent and Company will issue a press
-------------------
release approved by both parties announcing the Merger as soon as practicable
following the execution of this Agreement. Each of Parent and Company may issue
such press releases, and make such other disclosures regarding the Merger, as it
determines to be required or appropriate under applicable securities laws (or,
in the case of Parent, Nasdaq Stock Market rules) after reasonable consultation,
where possible, with the other. Company will not make any other public
announcement or disclosure of the transactions contemplated by this Agreement.
Each of Parent and Company will take all reasonable precautions to prevent any
trading in the securities of Parent by officers, directors, employees and agents
of Parent or Company, respectively, having knowledge of any material information
regarding Parent provided hereunder, including, without limitation, the
existence of the transactions contemplated by this Agreement until the
information in question has been publicly disclosed.
11.14 Time is of the Essence. The parties hereto acknowledge and
----------------------
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement.
11.15 Additional Disclosure Issues. The parties hereto acknowledge
----------------------------
and agree that no Effect arising out of the facts stated in Section 2.13 of the
Company Disclosure Letter shall be deemed to have caused, or to cause after the
date hereof, a Material Adverse Effect on Company. The disclosure in the
aforementioned Section 2.13 of the Company Disclosure Letter shall not limit or
in any way affect Parent's indemnification rights under Article 10 of this
Agreement.
11.16 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto, the Company Disclosure Letter and any Parent disclosure letter and the
Confidential Disclosure Agreement constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance or usage of trade inconsistent
with any of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
VERISIGN, INC. SIGNIO, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx By: /s/ Xxxxxxxx Xxxxxxx
-------------------------------- -----------------------------------
Xxxxxxxx X. Xxxxxxx, President Xxxxxxxx Xxxxxxx, Chief Executive
and Chief Executive Officer Officer
BEHAD ACQUISITION CORP.
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------
Its: President
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[SIGNATURE PAGE TO AGREEMENT AND
PLAN OF REORGANIZATION]
