EXHIBIT 2.03
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
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into as of December 22, 1997, by and among Asymetrix Learning Systems, Inc., a
Washington corporation ("Asymetrix"), Asymetrix Acquisition Corp., a Texas
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corporation and a wholly-owned subsidiary of Asymetrix ("Merger Sub"),
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Communication Strategies, Incorporated, a Texas corporation ("CSI"), and Xxxxxxx
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Xxxx and Xxxxx Xxxx (each of whom is a stockholder of CSI, and are collectively
referred to herein as the "Principals" and each individual referred to as a
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"Principal").
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RECITALS
The parties intend that, subject to the terms and conditions of this
Agreement:
Merger Sub will merge with and into CSI in a statutory merger, with
CSI to be the corporation surviving the Merger (as defined below), all pursuant
to the terms and conditions of this Agreement and a Plan of Merger in the form
of Exhibit A attached hereto (the "Certificate of Merger") and the applicable
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provisions of the law of the State of Texas and the State of Delaware.
Upon the effectiveness of the Merger, all of the outstanding capital
stock of CSI will be converted into shares of Asymetrix Common Stock, as
provided in this Agreement and the Certificate of Merger. The Merger is
intended to be treated as 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 Section 368(a)(2)(E) of the Code and will
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be treated as a "purchase" for accounting purposes.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the meanings set forth below:
1.1 "Asymetrix Common Stock" means the Common Stock of Asymetrix,
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$0.01 par value per share.
1.2 "Asymetrix Options" means options exercisable for Asymetrix
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Common Stock to be granted to employees of CSI as provided in Section 11.3.
1.3 "CSI Common Stock" means the Common Stock of CSI, $1.00 par value
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per share.
1.4 "Effective Time" means the time and date on which the Articles of
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Merger has been filed with the Texas Secretary of State, and the Merger becomes
effective under Texas law.
1.5 "Merger" means the statutory merger of Merger Sub with and into
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CSI in a reverse triangular merger pursuant to this Agreement and the Plan of
Merger.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Section 1 have the meanings assigned to such terms in this
Agreement.
2. PLAN OF REORGANIZATION
2.1 The Merger. At the Effective Time, Merger Sub will be merged
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with and into CSI pursuant to this Agreement and the Plan of Merger and in
accordance with applicable provisions of the laws of the State of Texas. Each
share of CSI Common Stock issued and outstanding immediately prior to the
Effective Time 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 such
number of shares (the "Applicable Fraction") of Asymetrix Common Stock as is
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equal to 733,591 shares divided by the total number of shares of CSI Common
Stock issued and outstanding immediately prior to the Effective Time.
2.2 Adjustments for Capital Changes. If, prior to the Effective
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Time, Asymetrix or CSI recapitalizes through a split-up of its outstanding
shares into a greater number, or a combination of its outstanding shares into a
lesser number, reorganizes, reclassifies or otherwise changes its 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,
securities convertible into shares or other property, then the Applicable
Fraction will be adjusted appropriately.
2.3 Fractional Shares. No fractional shares of Asymetrix Common
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Stock will be issued in connection with the Merger, but in lieu thereof, the
holders of CSI Common Stock who would otherwise be entitled to receive a
fraction of a share of Asymetrix Common Stock will receive an additional share
of Asymetrix Common Stock.
2.4 Options; Other Securities. No shares of Asymetrix Common Stock
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(or any other securities of Asymetrix) shall be issued or issuable with respect
to options to purchase CSI Common Stock or with respect to any other equity
securities of CSI (including warrants), other than CSI Common Stock and all such
options or other equity securities shall be canceled at the Effective Time.
2.5 Effects of the Merger. At the Effective Time: (a) the separate
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existence of the Merger Sub will cease and Merger Sub will be merged with and
into CSI, and CSI will be the surviving corporation of the Merger, pursuant to
the terms of the Certificate of Merger; (b) the Articles of Incorporation and
Bylaws of CSI will continue unchanged to be the Articles of Incorporation and
Bylaws of the surviving corporation of the Merger; (c) each share of capital
stock of Merger Sub outstanding immediately prior to the Effective Time will
continue to be an identical outstanding share of the respective surviving
corporation; (d) the directors and officers of Asymetrix shall become the
directors and officers of the surviving corporation; (e) each share of CSI
Common Stock outstanding immediately prior to the Effective Time will be
converted into the right to receive that number of shares of Asymetrix Common
Stock as provided in Section 2.1; and (f) the Merger will, from and after the
Effective Time, have all of the effects provided by applicable law.
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2.6 Further Assurances. Each of CSI and the Principals agree that
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if, at any time after the Effective Time, Asymetrix considers or is advised that
any further deeds, assignments or assurances are reasonably necessary or
desirable to vest, perfect or confirm in Asymetrix title to any property or
rights of CSI, Asymetrix and its officers and directors may 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 Asymetrix and otherwise carry out the purpose of this Agreement, in
the name of CSI or otherwise.
2.7 Securities Law Compliance. Asymetrix will issue the shares of
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Asymetrix Common Stock in the Merger pursuant to the "private placement"
exemption from registration under Section 4(2) of, and Rule 506 of Regulation D
promulgated under, the Securities Act of 1933, as amended (the "Securities
Act"), and the shares received by the Principals in the Merger will therefore be
restricted securities within the meaning of Rule 144 of the Securities Act, and
certificates evidencing such shares will bear a restrictive legend evidencing
that fact. Asymetrix shall also take any action that is required to be taken
under any applicable state securities or Blue Sky laws in connection with the
issuance of Asymetrix Common Stock in the Merger. CSI and the Principals shall
furnish to Asymetrix all information known to CSI or the Principals (or
reasonably ascertainable by CSI or the Principals) concerning each of CSI and
the Principals, as may be reasonably requested in connection with any action
contemplated by this Section.
2.8 Purchase Accounting. The parties intend that the Merger be
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treated as a purchase for accounting purposes.
2.9 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. The parties
believe that the value of the Asymetrix Common Stock to be received in the
Merger is equal, in each instance, to the value of the CSI Common Stock, to be
surrendered in exchange therefor. The Asymetrix Common Stock issued in the
Merger will be issued solely in exchange for CSI Common Stock and no other
transaction other than the Merger represents, provides for or is intended to be
an adjustment to the consideration paid for the CSI Common Stock. Unless advised
by tax counsel that doing so is required under applicable law, the parties shall
not take a position on any tax returns inconsistent with this Section 2.9. In
addition, Asymetrix represents now, and as of the Effective Time, that it
presently intends to continue CSI's historic business or use a significant
portion of CSI's business assets in a business. At the Effective Time, officers
of each of Asymetrix and CSI shall execute and deliver officers' certificates in
the forms of Exhibits 2.9A and 2.9B attached hereto. The provisions and
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representations contained or referred to in this Section 2.9 shall survive until
the expiration of the applicable statute of limitations.
3. REPRESENTATIONS AND WARRANTIES OF CSI AND PRINCIPALS
Each of the Principals and CSI, jointly and severally, hereby
represents and warrants as follows, except as set forth in the CSI Schedule of
Exceptions (in numbered paragraphs that correspond to the Section numbers below)
simultaneously delivered to Asymetrix with the execution of this Agreement:
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3.1 Organization, Good Standing and Qualification. CSI is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, 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, and is qualified as a foreign corporation in the
jurisdictions listed in Schedule 3.1 of the CSI Schedule of Exceptions. CSI is
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qualified as a foreign corporation in each jurisdiction in which a failure to be
so qualified could reasonably be expected to have a material adverse effect on
the business, operations, financial condition or prospects of CSI (for purposes
of this Section 3 and Section 5, a "Material Adverse Effect").
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3.2 Power, Authorization and Validity.
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3.2.1 CSI and each Principal has the corporate or other right,
power, legal capacity and authority to enter into and perform his, her or its
obligations under this Agreement and all agreements to which CSI or such
Principal is or will be a party that are required to be executed at the Closing
(defined below) pursuant to this Agreement (the "CSI Ancillary Agreements"). The
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execution, delivery and performance of this Agreement and the CSI Ancillary
Agreements to which CSI is a party have been duly and validly approved and
authorized by the Board of Directors of CSI. The Merger has been approved by all
of the stockholders of CSI.
3.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable CSI and the Principals to enter into, and to
perform his, her or its obligations under, this Agreement and the CSI Ancillary
Agreements, except for (a) the filing of the Certificate of Merger with the
Texas Secretary of State, and the filing of appropriate documents with the
relevant authorities of other states in which CSI is qualified to do business,
if any, and (b) such filings as may be required to comply with federal and state
securities laws.
3.2.3 This Agreement and the CSI Ancillary Agreements are, or
when executed by CSI and/or the Principals, as applicable, will be, valid and
binding obligations of CSI and/or the Principals, as applicable, enforceable 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 Certificate of Merger
will not be effective until the Effective Time.
3.3 Capitalization. As of the date hereof, the authorized capital
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stock of CSI consists of 10,000 shares of CSI Common Stock, of which 1,000
shares are issued and outstanding. All issued and outstanding shares of CSI
Common 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 CSI, in compliance with all registration
or qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws. Schedule 3.3 of the CSI Schedule of
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Exceptions sets forth a true, correct and complete list of all holders of CSI
Common Stock. There are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any of CSI's authorized but unissued capital stock or any
securities convertible into or
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exchangeable for shares of CSI capital stock or obligating CSI to grant, extend,
or enter into any such option, warrant, call, commitment, conversion privilege
or other right or agreement, and there is no liability for dividends accrued but
unpaid. There are no voting agreements, rights of first refusal or other
restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of CSI's outstanding
securities. CSI is not under any obligation to register under the Securities Act
any of its presently outstanding securities or any securities that may be
subsequently issued. All holders of CSI Common Stock reside in the State of
Texas.
3.4 Subsidiaries. CSI does not presently own or control, directly or
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indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity.
3.5 No Violation of Existing Agreements. Neither the execution and
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delivery of this Agreement or any CSI 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, or cause an acceleration or amendment of any obligation under, (a)
any provision of the Articles of Incorporation or Bylaws of CSI, as currently in
effect, (b) any Material Agreement (as defined in Section 3.11) to which CSI is
a party or by which CSI or the Principals or his, her or its assets or
properties are bound, or (c) to the knowledge of CSI and the Principals, any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to CSI or the Principals, or their respective assets or
properties, in each case, such that the conflict, termination, breach,
acceleration or amendment would have a Material Adverse Effect.
3.6 Litigation. There is no action, proceeding, claim or
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investigation pending against CSI or any Principal before any federal, state,
municipal, foreign or other court or administrative agency, department, board or
instrumentality that, if concluded adversely to CSI or a Principal, would have a
Material Adverse Effect, and, to the best of CSI's and the Principals'
knowledge, no such action, proceeding, claim or investigation has been
threatened. There is, to the best of CSI's and the Principals' knowledge, no
reasonable basis for any stockholder or former stockholder of CSI, or any other
person, firm, corporation or entity, to assert a claim against CSI, any
Principal or Asymetrix based upon: (a) ownership or rights to ownership of any
shares of CSI Common Stock, (b) any rights as or to become a holder of
securities of CSI, including any option or preemptive rights or rights to notice
or to vote, or (c) any rights under any agreement among CSI and any of its
stockholders or former stockholders or option holders or former option holders.
3.7 Taxes. For purposes of this Section 3.7, the terms "tax" and
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"taxes" include all federal, state, local and foreign income, gains, franchise,
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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 taxes, interest, penalties, additions to tax and
interest on any such penalties and additions to tax. For purposes of this
Section 3.7, the terms "Return" and "Returns" include all federal, state, local
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and foreign tax returns, estimates, information statements and reports required
to be filed by CSI with respect to its income, assets or operations.
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3.7.1 CSI has or will have filed all Returns for tax periods ending
before the Effective Time, other than where a failure to file a return did not
or would not have a Material Adverse Effect. All such Returns that have been
filed were (as filed or after timely amendment) true, correct and complete in
all material respects. CSI and the Principals have provided or made available to
Asymetrix copies of all material Returns actually filed by CSI during the three-
year period ending on the date hereof.
3.7.2 CSI has paid or deposited in full all taxes due and owing or
shown to be due on the Returns filed by CSI (including required estimated tax
payments with respect thereto), except where a failure to pay a tax in full did
not or would not have a Material Adverse Effect. CSI has established a proper
and adequate accrual or reserve on the CSI Financial Statements (as defined in
below) for all taxes not yet due and owing, whether or not shown or required to
be shown on any Return, except where a failure to establish such an accrual or
reserve did not or would not have a Material Adverse Effect.
3.7.3 Neither CSI nor any of the Principals is aware of any pending
or threatened claim or assessment in writing with respect to any deficiencies
for any tax against CSI by any taxing authority. CSI has not executed any
waiver of any statute of limitations relating to taxes or any extension of the
period for the assessment or collection of any tax (other than extensions which
have expired by the Effective Time). Neither CSI nor any of the Principals has
received any written notification, or is otherwise aware, that any material
issues are currently under audit, examination or review by any taxing authority
regarding CSI.
3.7.4 There are no material liens, pledges, charges, claims, security
interests or other encumbrances covering the assets of CSI or the Principals and
relating or attributable to taxes, other than for taxes not yet due and payable
and others that do not have a Material Adverse Effect.
3.7.5 There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any current or
former employee of CSI that, individually or collectively, could give rise to
the payment of any amount with respect to which a deduction would be disallowed
under Sections 280G or 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
3.7.6 CSI is not party to a tax sharing or tax allocation agreement,
and CSI does not owe any amount under any such agreement.
3.7.7 CSI is not or has not at any time been a "United States real
property holding corporation" within the meaning of Section 897(c) of the Code.
3.7.8 CSI has not filed any consent agreement under Section 341(f) of
the Code or has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as defined in Section 341(f)(4) of the
Code) owned by CSI.
3.7.9 None of CSI's assets constitute "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
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3.8 Financial Statements. CSI has delivered to Asymetrix as Schedule
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3.8 of the CSI Schedule of Exceptions CSI's (a) balance sheet as of December 31,
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1996 (the "1996 Balance Sheet") and income statement and statement of cash flows
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for the 12 month period then ended (collectively, the "1996 Financial
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Statements"), and (b) balance sheet as of September 30, 1997 (the "September 30
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Balance Sheet") and income statement for the nine month period then ended
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(collectively, the "CSI September Financial Statements") (the 1996 Financial
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Statements and the CSI September Financial Statements are collectively referred
to herein as the "CSI Financial Statements"). The CSI Financial Statements (a)
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are in accordance with the books and records of CSI, (b) fairly present the
financial condition of CSI at the dates therein indicated and the results of
operations for the periods therein specified, and (c) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, subject, in the case of the CSI September Financial Statements, to normal
recurring year-end adjustments and the absence of any notes thereto. CSI does
not have any debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is not
reflected or reserved against or disclosed in the CSI Financial Statements,
except for those that may have been incurred after the date of the CSI Financial
Statements in the ordinary course of its business, consistent with past practice
and that are not material in amount either individually or collectively.
3.9 Title to Properties. CSI has good and marketable title to all of
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its tangible assets as shown on the September 30 Balance Sheets, free and clear
of all liens, charges, restrictions or encumbrances, other than for taxes not
yet due and payable and others that do not have a Material Adverse Effect. All
machinery and equipment included in such properties is in good condition and
repair, normal wear and tear excepted, and all leases of real or personal
property to which CSI is a party are fully effective. To the knowledge of CSI
and each of the Principals, CSI 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 properties (the
violation of which would have a Material Adverse Effect), or has received any
notice of such violation with which it has not complied or had waived.
3.10 Absence of Certain Changes. Except as set forth on Schedule
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3.10, since September 30, 1997, other than actions required by this Agreement
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(including, without limitation, the incurrence of legal and accounting fees and
expenses in connection therewith), there has not been with respect to CSI:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of CSI which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had or, to the knowledge of CSI and the Principals, will
have a Material Adverse Effect;
(b) any contingent liability incurred by CSI as guarantor, surety
or otherwise with respect to the obligations of others, which contingent
liability is in excess of $10,000 individually or $25,000 in the aggregate;
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(c) any mortgage, encumbrance or lien placed on any of the properties
of CSI, which mortgage, encumbrance or lien is in excess of $10,000 individually
or $25,000 in the aggregate;
(d) any obligation or liability incurred thereby other than
obligations and liabilities incurred in the ordinary course of business, which
obligation or liability is in excess of $10,000 individually or $25,000 in the
aggregate;
(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, other than in the
ordinary course, of any of the properties or assets of CSI, which purchase,
sale, other disposition or other arrangement is in excess of $10,000
individually or $25,000 in the aggregate;
(f) any damage, destruction or loss, whether or not covered by
insurance, which has a Material Adverse Effect;
(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 CSI,
any split, combination or recapitalization of the capital stock of CSI or any
direct or indirect redemption, purchase or other acquisition of the capital
stock of CSI;
(h) any labor dispute or claim of unfair labor practices or, other
than changes in the ordinary course of business, consistent with past practice,
any change in the compensation payable or to become payable to CSI's officers,
employees or agents, any bonus payment or arrangement made to or with any of
such officers, employees or agents or any employee terminations or resignations;
(i) any declaration or payment of an extraordinary dividend, within
the meaning of Section 1059(c) of the Code;
(j) any payment or discharge of a lien or liability thereof which lien
was not either shown on the September 30 Balance Sheets or incurred in the
ordinary course of business thereafter; or
(k) any material transaction with any of its officers, directors,
employees or stockholders or any entity controlled by any of such individuals.
3.11 Material Agreements, Contracts and Commitments. Except as set forth on
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Schedule 3.11 of the CSI Schedule of Exceptions and other than this Agreement
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and the CSI Ancillary Agreements, neither CSI nor any Principal is on the date
hereof a party or subject to any oral or written contracts, obligations,
commitments, plans, leases, instruments, arrangements or licenses which are
material to the business of CSI (each a "Material Agreement"), including, but
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not limited to any:
(a) Contract, commitment, letter contract or purchase order providing
for payments by or to CSI in an aggregate amount of (1) $50,000 or more in the
ordinary course of
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business to any one vendor or customer; or (2) $25,000 or more not in the
ordinary course of business to any one vendor or customer;
(b) License agreement as licensor or licensee, including site licenses
for products with initial year fees in excess of $50,000 and each agreement that
provides for either the delivery of source code to the licensee or escrow of
such source code for the benefit of such licensee and including any CSI IP
Rights Agreement (as defined in Section 3.12);
(c) Consulting, development or similar agreement under which CSI
currently provides or will provide any training, documentation, personnel
placements, advice, consulting services or other products or services to a
customer of CSI (collectively, the "Current Service Agreements");
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(d) Contract for the current or future sale, provision or manufacture
of products (including computer software), material or supplies from CSI or in
which CSI has granted or received distribution rights, most favored customer
pricing provisions or exclusive marketing rights relating to any product or
services, group of products or services or territory (collectively, "Current
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Sales Agreements," together with the Current Service Agreements, the "Customer
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Agreements");
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(e) Contract providing for the development of software by or for CSI,
or license of software to CSI, which software is used or incorporated in any
products distributed or services provided by CSI or is contemplated to be used
or incorporated in any products to be distributed or services to be provided by
CSI (other than software generally available to the public at a per copy license
fee of less than $1,000 per copy);
(f) Contract or commitment for the employment of any officer, employee
or consultant of CSI or any other type of contract or understanding with any
officer, employee or consultant of CSI which is not immediately terminable by
CSI without cost or other liability;
(g) Agreement for the lease of real or personal property involving
payments by or to CSI in an aggregate amount of $25,000 or more;
(h) Joint venture contract or arrangement or any other agreement that
involves a sharing of profits with other persons;
(i) Written dealer, distributor, sales representative, original
equipment manufacturer, value added remarketer or other agreement for the
ongoing distribution of any products or services of CSI;
(j) Instrument evidencing or related in any way to 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 incurred in the ordinary course of business, and except as
disclosed in the CSI Financial Statements;
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(k) Contract containing covenants purporting to limit CSI's freedom to
compete in any line of business in any geographic area; or
(l) Stock redemption or purchase agreement yet to be performed.
All Material Agreements constitute valid and enforceable obligations
of the parties thereto (except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the enforceability of provisions requiring
indemnification in connection with the offering, issuance or sale of
securities), and are and will, immediately after the Effective Time, be in full
force and effect. Neither CSI nor the Principals is, nor, to the best knowledge
of CSI and the Principals, is any other party thereto, in breach or default in
any material respect under the terms of any such Material Agreement. A copy of
each Material Agreement has been delivered or made available to Asymetrix's
counsel. Neither CSI nor the Principals is a party to any contract, agreement
or arrangement which has had, or could reasonably be expected to have, a
Material Adverse Effect. CSI has no material liability for renegotiation of
government contracts or subcontracts, if any.
3.12 Intellectual Property. CSI owns all right, title or interest in, or
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has the rights to use, sell or license, all Intellectual Property Rights (as
defined below) necessary or required for the conduct of, or used in, its
business as presently conducted (such Intellectual Property Rights being
hereinafter collectively referred to as the "CSI IP Rights") and such rights to
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use, sell or license are reasonably sufficient for the conduct of its business
as presently conducted. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any CSI IP Right or materially impair the right of CSI to use,
sell or license any CSI IP Right or portion thereof. There are no royalties,
honoraria, fees or other payments payable by CSI to any person by reason of the
ownership, use, license, sale or disposition of any CSI IP Rights. Except for
matters which would not have a Material Adverse Effect, neither the manufacture,
marketing, license, sale or intended use of any product currently licensed or
sold by CSI (whether on a stand-alone basis or as part of services offered by
CSI) or currently under development by CSI violates any license or agreement
between CSI and any third party or infringes any Intellectual Property Right of
any other party; and, except for matters which would not have a Material Adverse
Effect, there is no pending or, to the best knowledge of CSI and the Principals,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any CSI IP Right; nor, to the best knowledge of
CSI and the Principals without any independent investigation thereof, is there
any basis for any such claim; nor has CSI received any notice asserting that any
CSI 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 best knowledge
of CSI and the Principals, is there any basis for any such assertion. CSI has
taken all steps that it believes are reasonable and practicable to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in, all
material CSI IP Rights. CSI is not using any Intellectual Property Rights of any
past or present officers, employees or consultants. Schedule 3.12 of the CSI
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Schedule of Exceptions contains a list of all applications, registrations,
filings and other formal actions made or taken pursuant to federal, state and
foreign laws by CSI to
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perfect or protect its interest in CSI IP Rights, including, without limitation,
all patents, patent applications, copyrights, copyright registrations,
trademarks, trademark applications and service marks and all CSI IP Rights
Agreements (except for object code end-user licenses granted to end-users in the
ordinary course of business that permit use of software products without a right
to modify, distribute or sublicense the same). As used herein, the term
"Intellectual Property Rights" shall mean all intellectual property rights in
----------------------------
any jurisdiction in the world, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyright, copyright registrations,
licenses, know-how, trade secrets, customer lists, proprietary processes,
formulae and other rights to Software. The term "Software" shall mean all source
--------
and object code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records. The term "CSI IP Rights Agreement" shall mean any
-----------------------
instrument or agreement governing any CSI IP Right.
3.13 Compliance with Laws. CSI has complied, or prior to the Closing
--------------------
Date will have complied, and is or will be at the Closing Date in full
compliance, in all material respects, with all applicable laws, ordinances and
regulations, and rules, and all orders, writs, injunctions, awards, judgments
and decrees, applicable to it or to its assets, properties, and business (the
violation of which would have a Material Adverse Effect), 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,
pertaining to (i) the sale, licensing, leasing, ownership or management of CSI's
owned, leased or licensed real or personal property, products and technical
data, and (ii) employment and employment practices, terms and conditions of
employment, and wages and hours, (c) the Export Administration Act and
regulations promulgated thereunder and all other laws, regulations, rules,
orders, writs, injunctions, judgments and decrees applicable to the export or
re-export of controlled commodities or technical data and (d) the Immigration
Reform and Control Act; provided, however, that this Section 3.13 shall not be
deemed to apply to any matters within the general scope of any other
representation in this Section 3. CSI has received all permits and approvals
from, and has made all filings with, third parties, including government
agencies and authorities, that are necessary in connection with its present
business and which, if not received or filed, would have a Material Adverse
Effect. There are no legal or administrative proceedings or investigations
pending or threatened, that, if enacted or determined adversely to CSI or any
Principal, would result in any Material Adverse Effect.
3.14 Certain Transactions and Agreements. None of the executive
-----------------------------------
officers, directors or affiliates (as that term is defined in Rule 405 under the
Securities Act) of CSI (each, a "Insider") nor any member of their immediate
-------
families is or has been directly or indirectly interested in any contract or
informal arrangement with CSI within the last three years, except for
compensation as an officer, director or employee of CSI. None of the Insiders
nor any member of their immediate families has any interest in any property,
real or personal, tangible or intangible, including inventions, patents,
copyrights, trademarks or trade names or trade secrets, used in or pertaining to
the business of CSI, except for the normal rights of a stockholder.
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3.15 Employees, ERISA and Other Compliance.
-------------------------------------
3.15.1 CSI has no employment contracts or consulting agreements
currently in effect that are not terminable at will (other than agreements with
the sole purpose of providing for the confidentiality of proprietary information
or assignment of inventions).
3.15.2 CSI (i) has never been and is not now subject to a union
organizing effort, (ii) is not subject to any collective bargaining agreement
with respect to any of its employees, (iii) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, or (iv) has no current labor dispute. CSI and the
Principals have no knowledge that a material number of employees intend to leave
the employ of CSI or that any employees intend to leave the employ of CSI and
which departures would prevent CSI from fully performing on schedule any
Customer Agreement.
3.15.3 Schedule 3.15.3 of the CSI Schedule of Exceptions
---------------
identifies each "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but
-----
excluding workers' compensation, unemployment compensation and other government-
mandated programs currently or previously maintained, contributed to or entered
into by CSI under which CSI or any ERISA Affiliate (as defined below) thereof
has any present or future obligation or liability (collectively, the "CSI
---
Employee Plans"). For purposes of this Section 3.15.3, "ERISA Affiliate" shall
-------------- ---------------
mean any entity which is a member of (A) a "controlled group of corporations,"
as defined in Section 414(b) of the Code, (B) a group of entities under "common
control," as defined in Section 414(c) of the Code, or (C) an "affiliated
service group," as defined in Section 414(m) of the Code, or treasury
regulations promulgated under Section 414(o) of the Code, any of which includes
CSI. Copies of all CSI Employee Plans (and, if applicable, related trust
agreements) and all amendments thereto and summary plan descriptions thereof
(including summary plan descriptions) have been delivered or made available to
Asymetrix or its counsel, together with the three most recent annual reports
(Form 5500, including, if applicable, Schedule B thereto) prepared in connection
with any such CSI Employee Plan. All CSI Employee Plans which individually or
collectively would constitute an "employee pension benefit plan," as defined in
Section 3(2) of ERISA (collectively, the "CSI Pension Plans"), are identified as
-----------------
such in Schedule 3.15.3 of the CSI Schedule of Exceptions. As of the date
---------------
hereof, all contributions due and previously required to be made on or before
the date hereof from CSI with respect to any of the CSI Employee Plans have been
made as required under ERISA or have been accrued on the CSI Financial
Statements. To the knowledge of CSI and the Principals, each CSI Employee Plan
has been maintained substantially in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including, without limitation, ERISA and the Code, which are applicable to such
CSI Employee Plans.
3.15.4 No "prohibited transaction," as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any CSI
Employee Plan which is covered by Title I of ERISA which would result in a
material liability to CSI taken as a whole, excluding transactions effected
pursuant to a statutory or administrative exemption. Nothing done or omitted to
be done and no transaction or holding of any asset under or in connection with
any
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CSI Employee Plan has made or will make CSI or any officer or director of CSI
subject to any material liability under Title I of ERISA or liable for any
material tax (as defined in Section 2.7) or penalty pursuant to Sections 4972,
4975, 4976 or 4979 of the Code or Section 502 of ERISA.
3.15.5 Any CSI Pension Plan which is intended to be qualified
under Section 401(a) of the Code (a "CSI 401(a) Plan") has received a favorable
---------------
determination from the Internal Revenue Service as to its qualifications, and
CSI and the Principals are not aware of any reason why such determination may
not be relied upon by such plan. CSI and the Principals have delivered or made
available to Asymetrix or its counsel a true, correct and complete copy of the
most recent Internal Revenue Service determination letter with respect to each
CSI 401(a) Plan.
3.15.6 Schedule 3.15.6 of the CSI Schedule of Exceptions lists
---------------
each employment, severance or other similar contract (written or oral),
arrangement or policy and each plan or arrangement providing for insurance
coverage (including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation, profit-
sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors, but
excluding workers' compensation, unemployment compensation and other government-
mandated programs currently or previously maintained, which (A) is not a CSI
Employee Plan, (B) is entered into, maintained or contributed to, as the case
may be, by CSI and (C) covers any employee or former employee of CSI. Such
contracts, plans and arrangements as are described in this Section 3.15.6 are
herein referred to collectively as the "CSI Benefit Arrangements." Each CSI
------------------------
Benefit Arrangement has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such CSI Benefit Arrangement. CSI has
delivered or made available to Asymetrix or its counsel a complete and correct
copy or description of each CSI Benefit Arrangement.
3.15.7 CSI has timely provided to individuals entitled
thereto all required notices and coverage pursuant to Section 4980B of the Code
and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any "qualifying event" (as defined in Section
-----
4980B(f)(3) of the Code) under any CSI Employee Plan occurring prior to and
including the Closing Date, and no material Tax payable on account of Section
4980B of the Code has been incurred with respect to any current or former
employees (or their beneficiaries) of CSI.
3.15.8 No benefit payable or which may become payable by CSI
pursuant to any CSI Employee Plan or any CSI Benefit Arrangement or as a result
of or arising under this Agreement shall constitute an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code.
-13-
3.15.9 To the knowledge of CSI and the Principals and except
for matters which would not have a Material Adverse Effect, no employee of CSI
is in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any other contract or written agreement,
or any restrictive covenant contained in any such agreement relating to the
right of any such employee to be employed thereby, or to use trade secrets or
proprietary information of others, and the employment of such employees does not
subject CSI to any material liability.
3.15.10 A list of all employees, officers and consultants of
CSI and their current compensation, bonus plans, commission plans, vacation
rights and severance rights is set forth on Schedule 3.15.10 of the CSI Schedule
----------------
of Exceptions. CSI is currently paying all amounts that are currently required
to be paid to such parties shown in such Schedule.
3.15.11 CSI is not a party to any (a) agreement with any
executive officer or other key employee of CSI (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving CSI in the nature of any of the transactions
contemplated by this Agreement and 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 and 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 and the Certificate of Merger. CSI is not obligated to make any
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code), nor
will any excess parachute payment be deemed to have occurred as a result of or
arising out of the Merger.
3.16 Corporate Documents. CSI has made available to Asymetrix for
-------------------
examination all documents and information listed in the CSI Schedule of
Exceptions or other exhibits called for by this Agreement or which have been
requested by Asymetrix's counsel, including, without limitation, the following:
(a) copies of the Articles of Incorporation and Bylaws of CSI as currently in
effect; (b) the Minute Book containing all records of all proceedings, consents,
actions and meetings of the stockholders, the board of directors and any
committees thereof of CSI; (c) the stock ledger and journal reflecting all stock
issuances and transfers of CSI; (d) all material permits, orders, and consents
issued by any regulatory agency with respect to CSI, or any securities of CSI,
and all applications for such permits, orders, and consents; and (e) copies or
forms of all stock purchase agreements, warrants, option plans, grants and
exercise agreements and, where forms of agreements are provided rather than
copies of the signed documents, a true and complete list showing the names of
the security holder, numbers of shares, exercise or purchase prices, grant
dates, vesting dates, exercise dates, expiration dates and all other relevant
data necessary for Asymetrix to issue the Asymetrix Common Stock.
-14-
3.17 No Brokers. Neither CSI nor any of the Principals is 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 or the
CSI Ancillary Agreements or in connection with any transaction contemplated
hereby or thereby. Except as otherwise provided in this Agreement, CSI and each
Principal will pay only its own expenses, if any, incurred in connection with
this Agreement and the transactions contemplated herein.
3.18 Disclosure. To the knowledge of CSI and the Principals, neither
----------
this Agreement, its exhibits and schedules, nor any of the certificates or
documents to be delivered by CSI or the Principals to Asymetrix under this
Agreement, taken together, contains any untrue statement of a material fact or
omits 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.
3.19 Insurance. CSI maintains and at all times during the prior three
---------
years has maintained fire and casualty, general liability, business interruption
and product liability insurance which it believes to be reasonably prudent for
similarly sized and similarly situated businesses. A list of all such insurance
is set forth on Schedule 3.19 of the CSI Schedule of Exceptions.
-------------
3.20 Environmental Matters.
---------------------
3.20.1 During the period that CSI has leased or owned its
properties or owned or operated any facilities, there have been no disposals or
releases of Hazardous Materials (as defined below) by CSI, or to CSI's and the
Principals' knowledge, by others, on, from or under such properties or
facilities, the liability for which would have a Material Adverse Effect. CSI
and the Principals have no knowledge of any presence, generation, manufacturing,
disposals or releases of Hazardous Materials on, from or under any of such
properties or facilities, which may have occurred prior to CSI having taken
possession of any of such properties or facilities, the liability for which
would have a Material Adverse Effect. For the purposes of this Agreement, the
terms "disposal" and "release" shall 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 Agreement, "Hazardous Materials" shall 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 (i) CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. (S) 1801 et seq.; (iii) the Toxic Substance Control
Act, 15 U.S.C. (S) 2601 et seq.; (iv) the Occupational Safety and Health Act of
1970, 29 U.S.C. (S) 651 et seq.; (v) any applicable federal, state or local
statute or ordinance that has a scope or purpose similar to those identified
above; or (vi) regulations promulgated under any of the laws or statutes
identified above.
3.20.2 None of the properties or facilities of CSI is in
material violation of any federal, state or local law, ordinance, regulation or
order relating to industrial hygiene or to the environmental conditions on,
under or about such properties or facilities, including, but not
-15-
limited to, soil and ground water condition. During the time that CSI has owned
or leased its properties and facilities, neither CSI nor, to CSI's and the
Principals' knowledge, any third party, has used, generated, manufactured or
stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials except in substantial
accordance with applicable environmental laws.
3.20.3 During the time that CSI has owned or leased its
respective properties and facilities, there has been no litigation brought or,
to the knowledge of CSI and the Principals, threatened against CSI by, or any
settlement reached by CSI with, any party or parties alleging the presence,
disposal, release or threatened release of any Hazardous Materials on, from or
under any of such properties or facilities.
3.21 Books and Records. The books, records and accounts of CSI (a)
-----------------
are in all material respects true, complete and correct, (b) have been
maintained in accordance with good business practices on a basis consistent with
prior years, (c) are stated in reasonable detail and accurately and fairly
reflect the material transactions and dispositions of the assets of CSI, and (d)
accurately and fairly reflect the basis for the CSI Financial Statements.
3.22 Certain Dispositions After Effective Time. None of the
-----------------------------------------
Principals has any present plan or intention, or any binding commitment, to
dispose, after the Effective Time, of an amount of Asymetrix Common Stock that
would cause the Principals, in the aggregate, to have disposed of such stock in
an amount equal in value to 50% or more of the value of CSI Common Stock
outstanding immediately prior to the Effective Time.
4. REPRESENTATIONS AND WARRANTIES OF ASYMETRIX AND MERGER SUB
Asymetrix and Merger Sub hereby jointly and severally represent and
warrant as follows, except as set forth on the Asymetrix Schedule of Exceptions
(in numbered paragraphs that correspond to the Section numbers below)
simultaneously delivered to CSI and the Principals with the execution of this
Agreement:
4.1 Organization, Good Standing and Qualification. Asymetrix is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington 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. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has the corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted and as proposed to be conducted.
Merger Sub was formed in December 1997 and has conducted no business or
operations prior to the date hereof. Asymetrix is qualified to do business as a
foreign corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a material adverse effect on the business,
operations, financial condition or prospects of Asymetrix and its subsidiaries
taken as a whole (for purposes of this Section 4 and 6, a "Material Adverse
----------------
Effect").
------
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4.2 Power, Authorization and Validity.
---------------------------------
4.2.1 Each of Asymetrix and Merger Sub has the corporate right,
power, legal capacity and authority to enter into and perform its respective
obligations under this Agreement, and all agreements to which Asymetrix and
Merger Sub are or will be a party that are required to be executed pursuant to
this Agreement (the "Asymetrix Ancillary Agreements"). The execution, delivery
------------------------------
and performance of this Agreement and the Asymetrix Ancillary Agreements have
been duly and validly approved and authorized by all necessary corporate action
on the part of each of Asymetrix and Merger Sub.
4.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable each of Asymetrix and Merger Sub to enter
into, and to perform its respective obligations under, this Agreement and the
Asymetrix Ancillary Agreements, except for (a) the filing of the Articles of
Merger with the Texas Secretary of State, and the filing of appropriate
documents with the relevant authorities of other states in which Asymetrix is
qualified to do business, if any, and (b) such filings as may be required to
comply with federal and state securities laws.
4.2.3 This Agreement and the Asymetrix Ancillary Agreements
are, or when executed by Asymetrix and Merger Sub will be, valid and binding
obligations of each of Asymetrix and Merger Sub enforceable 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,
(b) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (c) the enforceability of provisions requiring
indemnification in connection with the offering, issuance or sale of securities;
provided, however, that the Certificate of Merger will not be effective until
the Effective Time.
4.3 Capitalization. The capitalization of Asymetrix and Merger Sub
--------------
consist of the following:
4.3.1 Asymetrix Capital Stock. A total of 5,000,000 authorized
-----------------------
shares of Class B Stock, $0.01 par value per share (the "Class B Stock"), of
-------------
which 50,000 shares are designated as Series 1 Class B Stock (the "Series 1
--------
Stock"), and of which 37,500 shares are outstanding, and 388,395 are designated
-----
as Series A Preferred Stock (the "Series A Stock"), all of which are
--------------
outstanding, 388,395 are designated as Series B Preferred Stock (the "Series B
--------
Stock"), none of which are outstanding, 2,500,000 are designated as Series 4
-----
Class B Stock (the "Series 4 Stock") of which 2,372,851 shares are outstanding
--------------
and 1,512,500 shares are designated as Series 5 Class B Stock (the "Series 5
--------
Stock") of which 1,512,500 shares are outstanding. A total of 40,000,000
-----
authorized shares of Asymetrix Common Stock, of which 8,334,137 shares are
outstanding as of December 15, 1997. The rights, preferences and privileges of
the Class B Stock, including the Series 1 Stock, the Series A Stock, the Series
B Stock, the Series 4 Stock and the Series 5 Stock, and the Asymetrix Common
Stock, are as stated in Asymetrix's Articles of Incorporation, as amended, and
as provided by law. All issued and outstanding shares of Asymetrix capital
stock have been duly authorized and validly issued, are fully paid and
nonassessable, and have been offered, issued, sold and delivered by Asymetrix in
compliance with all registration or
-17-
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws.
4.3.2 Asymetrix Options, Warrants, Reserved Shares. Except
--------------------------------------------
for: (i) conversion privileges of the Series A Stock, the Series 1 Stock, the
Series 4 Stock and the Series 5 Stock, (ii) options to purchase 4,307,353 shares
of Asymetrix Common Stock (as of December 15, 1997) and a like number of shares
of Asymetrix Common Stock reserved for issuance upon the exercise thereof, (iii)
813,115 additional shares of Asymetrix Common Stock (as of December 15, 1997)
reserved for future issuance under the Asymetrix's 1995 Combined Incentive and
Nonqualified Stock Option Plan (the "Asymetrix Option Plan"), (iv) an option to
---------------------
purchase 19,431 shares of Series 4 Stock, and (v) the proposed issuance of up to
50,000 shares of Series 1 Stock (of which shares, 37,500 are validly issued,
outstanding, fully paid and nonassessable) to certain of Asymetrix's vendors,
there are not outstanding any options, warrants, calls, commitments, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from Asymetrix of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any shares of
Asymetrix's capital stock or obligating Asymetrix to grant, extend, or enter
into any such option, warrant, call, commitment, conversion privilege or other
right or agreement, and there is no liability for dividends accrued but unpaid.
Apart from the exceptions noted in this Section 4.3.2, and except for (i) rights
of first refusal and rights of repurchase held by Asymetrix to repurchase shares
of Asymetrix Common Stock issued under Stock Issuance and Restriction Agreements
relating to the issuance of 8,100 shares of Common Stock and to 37,500 shares of
Series 1 Stock (the "Stock Issuance and Restriction Agreements"), (ii) rights of
-----------------------------------------
first refusal and repurchase rights held by Asymetrix to purchase shares of its
capital stock issued under the Asymetrix Option Plan, (iii) the rights granted
in that certain Stock Issuance and Restriction Agreements dated as of September
27, 1996 by and between Asymetrix and EnCompass Group, Inc. (iv) the rights
granted in that certain Amended and Restated Investor's Rights Agreement dated
as of December 20, 1996 by and among Asymetrix, SOFTVEN No. 2 Investment
Enterprise Partnership and former shareholder Multimedia Asia Pacific Pty Ltd
(the "Investor's Rights Agreement"), (v) the rights granted in that certain
---------------------------
Acquisition Agreement, dated as of July 17, 1997 by and among the Company, Xxxxx
Computing, Inc., Asymocha Merger Corporation and Xxxx Xxxxx, (vi) a Voting
Agreement and Registration Rights Agreement dated as of September 11, 1997
entered into in connection with the acquisition of Aimtech Corporation and (vii)
a Voting and Co-Sale Agreement and Registration Rights Agreement dated as of
September 30, 1997 among the Company, Xxxxxx Xxxxx, Xxxxx Xxxxx and Xxxx Xxxxxx,
there are no voting agreements, rights of first refusal or other restrictions
(other than normal restrictions on transfer under applicable federal and state
securities laws) or registration rights applicable to any of Asymetrix's
outstanding securities.
4.3.3 Merger Sub. A total of one authorized share of Common
----------
Stock, $0.01 par value per share for Merger Sub, which is validly issued,
outstanding, fully paid and nonassessable. There are not outstanding any
options, warrants, rights (including conversion of preemptive rights) or
agreements for the purchase or acquisition from Merger Sub of any shares of its
capital stock or any securities convertible into or ultimately exchangeable or
exercisable for any shares of Merger Sub's capital stock.
-18-
4.4 Subsidiaries. Asymetrix does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, association, or other entity, other than Xxxxx Computing,
Inc., Aimtech Corporation, SuperCede, Inc., Infomodelers, Inc., Xxxxx
Interactive Incorporated, Top Shelf Multimedia, Inc., Acorn Associates
Incorporated, sales subsidiaries located in France, Germany and the United
Kingdom and Merger Sub. Merger Sub does not presently own or control, directly
or indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity.
4.5 No Violation of Existing Agreements. Neither the execution and
-----------------------------------
delivery of this Agreement or any Asymetrix 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, impairment or violation of, or cause an acceleration or
amendment of any obligation under, (a) any provision of the Articles of
Incorporation or Bylaws of Asymetrix and Merger Sub, as currently in effect, (b)
in any material respect, any material instrument or contract to which Asymetrix
and Merger Sub is a party or by which any of their assets or properties are
bound, or (c) any federal, state, local or foreign judgment, writ, decree,
order, statute, rule or regulation applicable to Asymetrix and Merger Sub or
their assets or properties, in each case, such that the conflict, termination,
breach, acceleration or amendment would have a Material Adverse Effect.
4.6 Litigation. There is no action, proceeding, claim or
----------
investigation pending against Asymetrix before any federal, state, municipal,
foreign or other court or administrative agency, department, board or
instrumentality that, if concluded adversely to Asymetrix, would have a Material
Adverse Effect, and, to the best of Asymetrix's knowledge, no such action,
proceeding, claim or investigation has been threatened. There is, to the best
of Asymetrix's knowledge, no reasonable basis for any shareholder or former
shareholder of Asymetrix, or any other person, firm, corporation or entity, to
assert a claim against Asymetrix based upon: (a) ownership or rights to
ownership of any shares of Asymetrix capital stock, (b) any rights as or to
become a holder of securities of Asymetrix, including any option or preemptive
rights or rights to notice or to vote, or (c) any rights under any agreement
among Asymetrix and any of its shareholders or former shareholders or option
holders or former option holders.
4.7 Taxes. Asymetrix has timely filed all tax returns and reports
-----
required by law, other than where a failure to file a return did not or would
not have a Material Adverse Effect, and has never been audited by any state or
federal taxing authority. All tax returns and reports of Asymetrix are true and
correct in all material respects. Asymetrix has paid all taxes and other
assessments due, except those, if any, currently being contested by it in good
faith (for which it has established a proper reserve). Asymetrix is not aware
of any pending or threatened claim or assessment with respect to any
deficiencies for any tax in writing against Asymetrix by any taxing authority.
Asymetrix has not executed any waiver of any statute of limitations relating to
taxes or any extension of the period for the assessment or collection of any tax
(other than extensions which have expired by the Effective Time). Asymetrix has
not received any written notification, and is not otherwise aware, that any
material issues are currently under audit, examination or review by any taxing
authority regarding Asymetrix. There are no material liens, pledges, charges,
claims, security interests or other encumbrances covering the assets of
-19-
Asymetrix and relating or attributable to taxes, other than for taxes not yet
due and payable and others that do no have a Material Adverse Effect. Asymetrix
is not a party to a tax sharing or tax allocation agreement, and Asymetrix does
not owe any amount under any such agreement.
4.8 Financial Statements. Asymetrix has delivered to CSI and the
--------------------
Principals as Schedule 4.8 of the Asymetrix Schedule of Exceptions Asymetrix's
------------
(a) audited balance sheet as of December 31, 1996 (the "Asymetrix 1996 Balance
----------------------
Sheet") and income statement and statement of cash flows for the 12 month period
-----
then ended (collectively, the "Asymetrix 1996 Financial Statements"), and (b)
-----------------------------------
balance sheet as of September 30, 1997 (the "Asymetrix September 30 Balance
------------------------------
Sheet") and income statement for the nine month period then ended (collectively,
-----
the "Asymetrix September Financial Statements") (the Asymetrix 1996 Financial
----------------------------------------
Statements and Asymetrix September Financial Statements are collectively
referred to herein as the "Asymetrix Financial Statements"). The Asymetrix
------------------------------
Financial Statements (a) are in accordance with the books and records of
Asymetrix, (b) fairly present the financial condition of Asymetrix at the dates
therein indicated and the results of operations for the periods therein
specified, and (c) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, subject, in the case of the
Asymetrix September Financial Statements, to normal recurring year-end
adjustments and the absence of any notes thereto. Asymetrix has no debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected or reserved
against or disclosed in the Asymetrix Financial Statements, except for those
that may have been incurred after the date of the Asymetrix Financial Statements
in the ordinary course of its business, consistent with past practice and that
are not material in amount either individually or collectively.
4.9 Title to Properties.
-------------------
4.9.1 Asymetrix has good and marketable title to all of its
tangible assets as shown on the Asymetrix September 30 Balance Sheet, free and
clear of all liens, charges, restrictions or encumbrances, other than for taxes
not yet due and payable and others that do not have a Material Adverse Effect.
With respect to the property and assets it leases, Asymetrix is in material
compliance with such leases.
4.9.2 Merger Sub has been newly formed for the sole and express
purpose of participating in the Merger and has at no time engaged in any
activities or owned any assets except as necessary for such purpose.
4.10 Absence of Certain Changes. Since the September 30, 1997, other
--------------------------
than actions required by this Agreement (including, without limitation, the
incurrence of legal and accounting fees and expenses in connection therewith),
there has not been with respect to Asymetrix and Merger Sub.
(a) any change in its financial condition, properties, assets,
liabilities, business or operations from that reflected in the Asymetrix
Financial Statements, other than those that do not have a Material Adverse
Effect;
-20-
(b) any contingent liability incurred by it as guarantor, surety or
otherwise with respect to the obligations of others, which contingent liability
is in excess of $50,000 individually or in excess of $100,000 in the aggregate;
(c) any mortgage, encumbrance or lien placed on any of its
properties, which mortgage, encumbrance or lien is in excess of $100,000
individually or in excess of $250,000 in the aggregate;
(d) any obligation or liability incurred by it other than
obligations and liabilities incurred in the ordinary course of business, which
obligation or liability is in excess of $100,000 individually or in excess of
$250,000 in the aggregate;
(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of its
properties or assets, which purchase, sale, other disposition or other
arrangement is in excess of $100,000 individually or $250,000 in the aggregate;
(f) any damage, destruction or loss, whether or not covered by
insurance, which has a Material Adverse Effect;
(g) any declaration, setting aside or payment of any dividend on, or
the making of any distribution in respect of, its capital stock, or any split,
combination or recapitalization of its capital stock or any direct or indirect
redemption, purchase or other acquisition of its capital stock, including,
without limitation, any extraordinary dividend within the meaning of Section
1059(c) of the Code;
(h) any labor dispute or claim of unfair labor practices;
(i) any payment or discharge of a lien or liability thereof which
lien was not either shown on the Asymetrix September 30 Balance Sheet or
incurred in the ordinary course of business thereafter; or
(j) entered into any material transactions with any of its officers,
directors, employees or stockholders or any entity controlled by any of such
individuals.
4.11 Material Agreements, Contracts and Commitments. All oral or written
----------------------------------------------
contracts, obligations, commitments, plans, leases, instruments, arrangements or
licenses which are material to the business of Asymetrix and its subsidiaries
taken as a whole (for purposes of this Section 4.11, a "Material Agreement")
------------------
constitute valid and enforceable obligations of the parties thereto (except as
to the effect, if any, of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies, and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities); and are in full force and effect.
Asymetrix is not, nor, to the best knowledge of Asymetrix, is any other party
thereto, in breach or default in any material respect under the terms of any
such Material Agreement. A copy of each Material Agreement has been delivered or
made available to counsel
-21-
for CSI and the Principals. Asymetrix is not a party to any contract or
arrangement which, in the absence of a breach by the other party or parties
thereto, has had or could reasonably be expected to have a Material Adverse
Effect. Asymetrix does not have any material liability for renegotiation of
government contracts or subcontracts, if any.
4.12 Status of Proprietary Assets. Asymetrix owns all right, title or
----------------------------
interest in, or has the rights to use, sell or license, all Intellectual
Property Rights necessary or required for the conduct of, or used in, its
business as presently conducted (such Intellectual Property Rights being
hereinafter collectively referred to as the "Asymetrix IP Rights") and such
-------------------
rights to use, sell or license are reasonably sufficient for the conduct of its
business as presently conducted. Except for matters which would not have a
Material Adverse Effect, neither the manufacture, marketing, license, sale or
intended use of any product currently licensed or sold by Asymetrix or currently
under development by Asymetrix violates any license or agreement between
Asymetrix and any third party or infringes any Intellectual Property Right of
any other party; and, except for matters which would not have a Material Adverse
Effect, there is no pending or, to the best knowledge of Asymetrix, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Asymetrix IP Right; nor, to the best knowledge of
Asymetrix without any independent investigation thereof, is there any basis for
any such claim; nor has Asymetrix received any notice asserting that any
Asymetrix 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 best
knowledge of Asymetrix, is there any basis for any such assertion.
4.13 Compliance with Laws. Asymetrix and Merger Sub have complied, or
--------------------
prior to the Closing Date will have complied, andare or will be at the Closing
Date in full compliance, in all material respects, with all applicable laws,
ordinances and regulations, and rules, and all orders, writs, injunctions,
awards, judgments and decrees, applicable to it or to its assets, properties,
and business (the violation of which would have a Material Adverse Effect),
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, pertaining to (i) the sale, licensing, leasing, ownership
or management of Asymetrix's owned, leased or licensed real or personal
property, products and technical data, and (ii) employment and employment
practices, terms and conditions of employment, and wages and hours, (c) the
Export Administration Act and regulations promulgated thereunder and all other
laws, regulations, rules, orders, writs, injunctions, judgments and decrees
applicable to the export or re-export of controlled commodities or technical
data and (d) the Immigration Reform and Control Act. Asymetrix has received all
permits and approvals from, and has made all filings with, third parties,
including government agencies and authorities, that are necessary in connection
with its present business and which, if not received or filed, would have a
Material Adverse Effect. There are no legal or administrative proceedings or
investigations pending or threatened, that, if enacted or determined adversely
to Asymetrix, would result in any Material Adverse Effect.
4.14 Certain Transactions and Agreements. None of the executive officers,
-----------------------------------
directors or affiliates (other than SOFTVEN No. 2 Investment Enterprises
Partnership, or its designated director, the designated director of the former
stockholders of Aimtech corporation or Xxxxx
-22-
Xxxxx) of Asymetrix (each, an "Asymetrix Insider") nor any member of their
-----------------
immediate families is or has been directly or indirectly interested in any
contract or informal arrangement with Asymetrix within the last twelve (12)
months, except for compensation as an officer, director or employee of
Asymetrix. None of the Asymetrix Insiders nor any member of their immediate
families has any interest in any property, real or personal, tangible or
intangible, including inventions, patents, copyrights, trademarks or trade names
or trade secrets, used in or pertaining to the business of Asymetrix, except for
the normal rights of a shareholder.
4.15 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Asymetrix or
Merger Sub is required in connection with the consummation of the transactions
contemplated by this Agreement, except for such qualifications or filings under
------ ---
the Securities Act and the regulations thereunder and all other applicable
securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications and filings will, in the
case of qualifications, be effective on the Closing and will, in the case of
filings, be made within the time prescribed by law.
4.16 ERISA and Labor Issues.
----------------------
4.16.1 Asymetrix does not have any Employee Pension Benefit Plan as
defined in Section 3 of ERISA.
4.16.2 To the knowledge of Asymetrix and except for matters which
would not have a Material Adverse Effect, Asymetrix is in compliance in all
material respects with all applicable laws, agreements and contracts relating to
employment, employment practices, wages, employee benefit plans as defined in
Section 3(3) of ERISA, hours, and terms and conditions of employment, including,
but not limited to, employee compensation matters, ERISA and the Code.
4.16.3 To the knowledge of Asymetrix and except for matters which
would not have a Material Adverse Effect, no employee of Asymetrix is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other contract or written agreement, or any
restrictive covenant contained in any such agreement relating to the right of
any such employee to be employed thereby, or to use trade secrets or proprietary
information of others, and the employment of such employees does not subject
Asymetrix to any material liability.
4.16.4 Asymetrix is not bound by or subject to any contract,
commitment or arrangement with any labor union, employees association or similar
organization, and to Asymetrix's best knowledge, no labor union, employees
association or similar organization has requested, sought or attempted to
represent any employees, representatives or agents of Asymetrix. There is no
strike or other labor dispute involving Asymetrix pending nor, to Asymetrix's
best knowledge, threatened, nor is Asymetrix aware of any labor organization
activity involving its employees.
-23-
4.17 Corporate Documents. Asymetrix has made available to CSI and the
-------------------
Principals for examination all documents and information listed in the Asymetrix
Schedule of Exceptions or other exhibits called for by this Agreement or which
have been requested by CSI and the Principals' counsel, including, without
limitation, the following: (a) copies of Asymetrix's and its subsidiaries'
Articles or Certificate of Incorporation and Bylaws as currently in effect; (b)
Asymetrix's Minute Book containing all records that Asymetrix has of all
proceedings, consents, actions and meetings of the stockholders, the board of
directors and any committees thereof; (c) Asymetrix's and its subsidiaries'
stock ledger or stockholder lists and journal reflecting stock issuances and
transfers; (d) all material permits, orders, and consents issued by any
regulatory agency with respect to Asymetrix, or any securities of Asymetrix, and
all applications for such permits, orders, and consents; and (e) copies or forms
of all stock purchase agreements, warrants, option plans, grants and exercise
agreements and, where forms of agreements are provided rather than copies of the
signed documents, a true and complete list showing the names of the security
holder, numbers of shares, exercise or purchase prices, grant dates, vesting
dates, exercise dates, expiration dates and all other relevant data necessary
for Asymetrix to issue the Asymetrix Common Stock.
4.18 No Brokers. Neither Asymetrix nor Merger Sub is 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 or the
Asymetrix Ancillary Agreements or in connection with any transaction
contemplated hereby or thereby.
4.19 Disclosure. To the best knowledge of Asymetrix and Merger Sub,
----------
neither this Agreement, its exhibits and schedules, nor any of the certificates
or documents to be delivered by Asymetrix or Merger Sub to CSI and the
Principals under this Agreement, taken together, contains any untrue statement
of a material fact or omits 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.
4.20 Insurance. Asymetrix maintains and at all times during the prior
---------
three years has maintained fire and casualty, general liability, business
interruption and product liability insurance which it believes to be reasonably
prudent for similarly sized and similarly situated businesses.
4.21 Environmental Matters.
---------------------
4.22.1 During the period that Asymetrix has leased or owned its
properties or owned or operated any facilities, there have been no disposals or
releases of Hazardous Materials (as defined below) by Asymetrix, or to
Asymetrix's knowledge, by others, on, from or under such properties or
facilities, the liability for which would have a Material Adverse Effect.
Asymetrix has no knowledge of any presence, generation, manufacturing, disposals
or releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to Asymetrix having taken possession
of any of such properties or facilities, the liability for which would have a
Material Adverse Effect
-24-
4.22.2 None of the properties or facilities of Asymetrix is in
material violation of any federal, state or local law, ordinance, regulation or
order relating to industrial hygiene or to the environmental conditions on,
under or about such properties or facilities, including, but not limited to,
soil and ground water condition. During the time that Asymetrix has owned or
leased its properties and facilities, neither Asymetrix nor, to Asymetrix's
knowledge, any third party, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials except in substantial
accordance with applicable environmental laws.
4.22.3 During the time that Asymetrix has owned or leased its
properties and facilities, there has been no litigation brought or, to the
knowledge of Asymetrix, threatened against Asymetrix by, or any settlement
reached by Asymetrix with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under any
of such properties or facilities.
4.23 Real Property Holding Corporation Status. Asymetrix and each Merger
----------------------------------------
Sub is not and has at no time been a "United States real property holding
corporation" within the meaning of Section 897(c) of the Code.
4.24 Shares Issued in Merger. The Asymetrix Common Stock to be issued to
-----------------------
the stockholders of CSI in the Merger, when issued by Asymetrix pursuant to the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all liens, claims, pledges, options, adverse
claims, assessments or charges of any nature whatsoever, and will have been
issued materially in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws.
4.25 Books and Records. The books, records and accounts of Asymetrix (a)
-----------------
are in all material respects true, complete and correct, (b) have been
maintained in accordance with good business practices on a basis consistent with
prior years, (c) are stated in reasonable detail and accurately and fairly
reflect the material transactions and dispositions of the assets of Asymetrix,
and (d) accurately and fairly reflect the basis for the Asymetrix Financial
Statements.
4.26 Certain Dispositions. Asymetrix has no present plan or intention, or
--------------------
any binding commitment, to dispose, subsequent to the Effective Time, of a
quantity of Common Stock of CSI that would cause Asymetrix to lose "control" of
Merger Sub within the meaning of Section 368(c) of the Code.
4.27 Control of Merger Sub. At all times prior to and as of the Effective
---------------------
Time, Asymetrix will be in "control" of Merger Sub, as such term is defined in
Section 368(c) of the Code.
-25-
5. CSI PRECLOSING COVENANTS
During the period from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 10
hereof, each of CSI and the Principals covenants and agrees as follows:
5.1 Advice of Changes. CSI will, and the Principals will cause CSI to,
-----------------
promptly advise Asymetrix in writing (a) of any event occurring subsequent to
the date of this Agreement that would render any representation or warranty of
CSI or the Principals 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
and (b) of any change in the business, results of operations or financial
condition of CSI that could reasonably be expected to have a Material Adverse
Effect.
5.2 Conduct of Business. CSI will, and the Principals will cause CSI to,
-------------------
continue to conduct its business and use commercially reasonable efforts to
maintain its business relationships in the ordinary and usual course and will
not, and each of the Principals will cause CSI not to, without the prior written
consent of Asymetrix (other than actions required by this Agreement, as required
by law or in connection with the performance of agreements disclosed in the CSI
Schedule of Exceptions):
(a) borrow any money;
(b) enter into any transaction not in the ordinary course of business
or which involves an expense or capital commitment by CSI in excess of $25,000,
or which obligates CSI for a period exceeding six months;
(c) encumber or permit to be encumbered any of its assets or grant
liens therein;
(d) dispose of any portion of any of the assets of CSI with a value
exceeding $10,000 (other than in the ordinary course of business);
(e) enter into any lease or contract for the purchase or sale of any
property, real or personal, except in the ordinary course of business consistent
with past practice;
(f) fail to maintain any of the equipment and other assets of CSI in
good working condition and repair according to the standards CSI has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, royalty, increased salary or special remuneration
to any officer, employee or consultant or agree to same or enter into any new
employment, severance, "golden parachute" or consulting agreement with any such
person;
(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;
-26-
(j) amend or terminate any contract, agreement or license to which
CSI is a party except those amended or terminated in the ordinary course of
business consistent with past practice, and which are not material in amount or
effect;
(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;
(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) 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;
(o) merge, consolidate or reorganize with, or acquire any entity;
(p) amend its Certificate of Incorporation or Bylaws;
(q) issue or sell any shares of its capital stock of any class;
(r) license any of its technology or intellectual property except in
the ordinary course of business consistent with past practice;
(s) agree to any audit assessment by any tax authority (unless the
amount thereof is not material or has been adequately accrued or reserved on the
CSI Financial Statements) or file any federal or state income or franchise tax
return unless (i) the amount payable with respect thereto is not material or has
been adequately accrued or reserved on the CSI Financial Statements or (ii)
copies of such returns have been delivered to Asymetrix for its review and
approved by Asymetrix prior to filing;
(t) change any insurance coverage or issue any certificates of
insurance except as is routinely done in the ordinary course of business of CSI;
(u) hire any employee or consultant;
(v) adopt or amend any employee benefit plan;
(w) enter into any contracts for the sale of advertising in an amount
exceeding $10,000 or for longer than 30 days; or
(x) agree to do any of the things described in the preceding clauses
5.2(a) through (w).
-27-
5.3 Regulatory Approvals. CSI will, and the Principals will cause CSI to,
--------------------
execute and file, or join in the execution and filing, of any application or
other document that may be required to be filed by it in order to obtain the
authorization, approval or consent of any governmental body (federal, state,
local or foreign) which may be reasonably required, in connection with the
consummation of the transactions contemplated by this Agreement. CSI will, and
the Principals will cause CSI to, use its best efforts to obtain all such
authorizations, approvals and consents.
5.4 Necessary Consents. CSI will, and the Principals shall cause CSI to,
------------------
use commercially reasonable efforts to obtain such written consents and take
such other actions as may be necessary or appropriate in addition to those set
forth in Section 5.3 (including, without limitation those consents set forth on
Schedule 9.6) to allow the consummation of the transactions contemplated hereby
and to allow Asymetrix to carry on CSI's business after the Closing.
5.5 Litigation. CSI and the Principals will notify Asymetrix in writing
----------
promptly after learning of any actions, suits, proceedings or investigations by
or before any court, board or governmental agency, initiated by or against CSI,
or known by CSI or the Principals to be threatened against CSI.
5.6 No Other Negotiations. Unless required to do so by applicable law,
---------------------
from the date hereof until the earlier of the termination of this Agreement or
consummation of the Merger, CSI will not, and the Principals will not permit CSI
to, and will not authorize any officer or director of CSI or any other person on
its behalf to, directly or indirectly, solicit, encourage, negotiate or accept
any offer from any party concerning the possible disposition of all or any
substantial portion of CSI's business, assets or capital stock by merger, sale
or any other means or any other transaction that would involve a change in
control of CSI, or any transaction in which CSI contemplates issuing equity or
debt securities. CSI and the Principals will promptly notify Asymetrix in
writing of any third party inquiries or proposals.
5.7 Access to Information. Until the Closing, each of CSI and the
---------------------
Principals will allow Asymetrix and its agents reasonable access to the files,
books, records and offices of CSI, including, without limitation, any and all
information relating to CSI's taxes, commitments, contracts, leases, licenses,
and real, personal and intangible property (including its intellectual property)
and financial condition. CSI will and the Principals will cause CSI's
accountants to cooperate with Asymetrix 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.
5.8 Satisfaction of Conditions Precedent. CSI and each of the Principals
------------------------------------
will use its or his or her commercially reasonable efforts to satisfy or cause
to be satisfied all the conditions precedent which are set forth in Section 9,
and each such person will use its or his commercially reasonable efforts to
cause the transactions contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties (including without limitation, those third
parties described in Section 9.6) and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably
-28-
required on their part in order to effect the transactions contemplated hereby.
CSI and the Principals will promptly notify Asymetrix in writing of any failure
or inability to comply fully with this Section.
5.9 Blue Sky Laws. CSI and the Principals will cooperate with Asymetrix in
-------------
connection with Asymetrix's efforts to comply with the securities and Blue Sky
laws of all jurisdictions which are applicable in connection with the Merger.
6. ASYMETRIX PRECLOSING COVENANTS
During the period from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 10
hereof, Asymetrix and Merger Sub covenant and agree as follows:
6.1 Advice of Changes; Conduct of Business. Asymetrix and Merger Sub will
--------------------------------------
promptly advise CSI in writing (a) of any event occurring subsequent to the date
of this Agreement that would render any representation or warranty of Asymetrix
or Merger Sub 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; or (b)
of any material adverse change in the business, results of operations or
financial condition of Asymetrix. Asymetrix will use commercially reasonable
efforts to continue to conduct its business and maintain its business
relationships in the ordinary and usual course and will not, without the prior
written consent of CSI (other than action required by this Agreement, as
required by law or in connection with the performance of agreements,
arrangements or pending transactions disclosed in the Asymetrix Schedule of
Exceptions);
(a) enter into any material transaction not in the ordinary course of
business other than as otherwise permitted elsewhere in this Section 6.1;
(b) declare, set aside or pay any material cash or stock dividend or
other material distribution in respect of capital stock, or redeem or otherwise
acquire any material portion of its capital stock other than in connection with
a possible reverse stock split or share combination;
(c) dispose of (including by license), whether to a third party, a
partially or wholly-owned subsidiary or otherwise, any substantial portion of
its assets (other than in the ordinary course of business);
(d) encumber or permit to be encumbered in any material respect a
substantial portion of its assets or grant liens thereon;
(e) issue or sell a material number of shares of its capital stock of
any class (except upon the exercise of an option to purchase Asymetrix held by
Asymetrix employees or upon conversion of outstanding Class B Stock) or any
other of its securities, or issue or create any material warrants, obligations,
subscriptions, options, convertible securities or other
-29-
commitments to issue shares of capital stock other than employee stock options
or in connection with an acquisition of another entity or an underwritten public
offering of its capital stock; or
(f) except in connection with a possible reincorporation in Delaware,
merge, consolidate or reorganize with any entity if Asymetrix does not survive
such merger, consolidation or reorganization.
6.2 Regulatory Approvals. Asymetrix and Merger Sub 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, in connection with the consummation of the transactions contemplated
by this Agreement. Asymetrix will use its best efforts to obtain all such
authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. Each of Asymetrix and Merger Sub
------------------------------------
will use its commercially reasonable efforts to satisfy or cause to be satisfied
all the conditions precedent which are set forth in Section 8, and each of
Asymetrix and Merger Sub will use its commercially reasonable efforts to cause
the transactions contemplated by 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 contemplated hereby.
6.4 Blue Sky Laws. Asymetrix shall take such steps as may be necessary to
-------------
comply with the securities and Blue Sky laws of all jurisdictions which are
applicable in connection with the Merger.
6.5 Access to Information. Until the Closing, Asymetrix will allow CSI and
---------------------
their respective agents reasonable access to the files, books, records and
offices of Asymetrix, including, without limitation, any and all information
relating to Asymetrix's taxes, commitments, contracts, leases, licenses, and
real, personal and intangible property (including its intellectual property) and
financial condition. Asymetrix will cause its accountants to cooperate with CSI
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.
7. CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as provided in
-----------
Section 10 below, the Closing will take place at the offices of Asymetrix in
Bellevue, Washington on or before December 31, 1997, or, if all conditions to
closing have not been satisfied or waived by such date, such other place, time
and date as CSI and Asymetrix may mutually select (the "Closing Date").
------------
Concurrently with the Closing, the Articles of Merger will be filed in the
office of the Texas Secretary of State.
-30-
7.2 Exchange of Certificates.
------------------------
7.2.1 As of the Effective Time, all shares of CSI Common Stock that
are outstanding immediately prior thereto will, by virtue of the Merger and
without further action, cease to exist and will be converted into the right to
receive from Asymetrix the number of shares of Asymetrix Common Stock determined
as set forth in Section 2.1, subject to Section 2.2.
7.2.2 As soon as practicable after the Effective Time, each holder of
shares of CSI Common Stock will surrender the certificate(s) for such shares
(the "Certificates"), duly endorsed as requested by Asymetrix, to Asymetrix for
------------
cancellation. Promptly after the Effective Time and receipt of such
Certificates, Asymetrix will issue to each tendering holder a certificate for
the number of shares of Asymetrix Common Stock to which such holder is entitled
pursuant to Section 2.1.
7.2.3 No dividends or distributions payable to holders of record of
Asymetrix Common Stock after the Effective Time will be paid to the holder of
any unsurrendered Certificate(s) until the holder of the Certificate(s)
surrenders such Certificate(s), or if such certificates are lost, stolen or
destroyed, provides an indemnity reasonably acceptable to Asymetrix. Subject to
the effect, if any, of applicable escheat and other laws, following surrender of
any Certificate, there will be delivered to the person entitled thereto, without
interest, the amount of any dividends and distributions therefor paid with
respect to Asymetrix Common Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
7.2.4 All Asymetrix Common Stock delivered upon the surrender of CSI
Common Stock in accordance with the terms hereof will be deemed to have been
delivered in full satisfaction of all rights pertaining to such CSI Common
Stock. There will be no further registration of transfers on the stock transfer
books of CSI or the transfer agent of such CSI Common Stock . If, after the
Effective Time, Certificates are presented for any reason, they will be canceled
and exchanged as provided in this Section.
7.2.5 Until certificates representing CSI Common Stock outstanding
prior to the Merger are surrendered pursuant to Section 7.2.2 above, such
certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of Asymetrix Common Stock into which CSI Common Stock will have
been converted pursuant to Sections 2.1 hereof.
7.2.6 Certificates which are not presented to Asymetrix within three
years after the Closing shall be canceled and the holder thereof will no longer
be entitled to receive any Asymetrix securities in consideration thereof.
8. CONDITIONS TO OBLIGATIONS OF CSI AND THE PRINCIPALS
CSI's and the Principals' 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
-31-
which may be waived by CSI and the Principals, but only in a writing signed by
CSI and the Principals):
8.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Asymetrix and Merger Sub set forth in Section 4 that are not
made as of a specific date shall be true and accurate in all material respects
on and as of the date of this Agreement.
8.2 Covenants. Each of Asymetrix and Merger Sub shall have performed
---------
and complied in all material respects with all of its covenants contained in
Section 6 on or before the Closing, and CSI shall receive a certificate to such
effect signed by Asymetrix's Chief Executive Officer and Chief Financial
Officer.
8.3 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.
8.4 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
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to, requirements under
applicable federal and state securities laws.
8.5 Opinion of Asymetrix's Counsel. CSI shall have received an
------------------------------
opinion, as to matters described in Exhibit 8.5, from the General Counsel of
-----------
Asymetrix.
8.6 Registration Rights Agreement. Asymetrix shall have executed and
-----------------------------
delivered a registration rights agreement substantially in the form of Exhibit
-------
8.6.
---
8.7 Put Option Agreement. Asymetrix shall have executed and
--------------------
delivered a put option agreement in the form of Exhibit 8.7.
-----------
8.8 Employment Agreements. Asymetrix shall have executed and
---------------------
delivered (i) an employment agreement with Xxxxxxx Xxxx in the form of Exhibit
-------
8.8A (the "Xxxxxxx Xxxx Employment Agreement"), (ii) an employment agreement
---- ---------------------------------
with Xxxxx Xxxx in the form of Exhibit 8.8B (the "Xxxxx Xxxx Employment
------------ ---------------------
Agreement").
---------
9. CONDITIONS TO OBLIGATIONS OF ASYMETRIX AND MERGER SUB
The obligations of Asymetrix and Merger Sub 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 Asymetrix, but
only in a writing signed by Asymetrix):
9.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of CSI and the Principals set forth in Section 3 that are not
made as of a specific date shall be true and accurate in all material respects
on and as of the date of this Agreement.
-32-
9.2 Covenants. CSI and the Principals shall have performed and
---------
complied in all material respects with all of its covenants contained in Section
5 on or before the Closing, and Asymetrix shall receive certificates to such
effect executed by the Chief Executive Officer and Chief Financial Officer of
CSI and by the Principals.
9.3 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.
9.4 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
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to, requirements under
applicable federal and state securities laws.
9.5 Opinion of Counsel. Asymetrix shall have received from counsel
------------------
to CSI and the Principals, an opinion as to the matters described in Exhibit
-------
9.5.
---
9.6 Consents. CSI shall have received duly executed copies of all
--------
material third party consents, approvals, assignments, waivers, authorizations
or other certificates contemplated by this Agreement or CSI Schedule of
Exceptions or reasonably deemed necessary by Asymetrix's counsel to provide for
the continuation in full force and effect of any and all material contracts and
leases of CSI (including without limitation, the consents as to Material
Contracts hereto and the Customer Agreements) and for CSI and the Principals to
consummate the transactions contemplated hereby in form and substance reasonably
satisfactory to Asymetrix, except for such consents and approvals thereof as
Asymetrix and CSI and the Principals shall have agreed shall not be obtained.
9.7 No Litigation. No litigation or proceeding shall be overtly
-------------
threatened or pending to enjoin or prevent the consummation of any of the
transactions contemplated by this Agreement, or which could be reasonably
expected to have a Material Adverse Effect.
9.8 Requisite Approvals. The principal terms of this Agreement and
-------------------
the Certificate of Merger shall have been approved and adopted by the holders of
all of the CSI Common Stock outstanding, and by a majority of the Board of
Directors of CSI.
9.9 Resignation of Directors. The directors of CSI in office
------------------------
immediately prior to the Effective Time shall have resigned as directors of CSI
effective as of the Effective Time.
9.10 Investment Representation Letter. Asymetrix shall have received
--------------------------------
from all of the holders of CSI Common Stock an executed Investment
Representation Letter substantially in the form of Exhibit 9.10 hereto.
------------
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9.11 Employment Agreements. Asymetrix shall have received the
---------------------
Xxxxxxx Xxxx Employment Agreement executed by Xxxxxxx Xxxx, the Xxxxx Xxxx
Employment Agreement executed by Xxxxx Xxxx.
9.12 Employees. CSI shall have still employed, without any currently
---------
expressed intent to resign, the number of employees with the job
responsibilities as indicated on Schedule 9.13.
-------------
9.13 Material Agreements. All of the Material Agreements shall be in
-------------------
full force and effect and will not be subject to termination as a result of the
consummation of the Merger.
9.14 Absence of Material Adverse Changes. There shall not have been
-----------------------------------
any material adverse change in the financial conditions, properties, assets,
liabilities, business, prospectus or results of operations of CSI.
10. TERMINATION OF AGREEMENT
10.1 Termination of Agreement. Asymetrix on the one hand and CSI and
------------------------
the Principals on the other may terminate this Agreement prior to the Effective
Time (whether before or after stockholder approval has been obtained) solely as
provided below:
10.1.1 Asymetrix may terminate this Agreement by giving written
notice to CSI and the Principals in the event CSI or the Principals is in
breach, and CSI and the Principals may terminate this Agreement by giving
written notice to Asymetrix in the event Asymetrix is in breach, of any material
representation, warranty, or covenant contained in this Agreement, and such
breach is not remedied within 10 days of delivery of written notice thereof;
10.1.2 Asymetrix may terminate this Agreement by giving written
notice to CSI and the Principals if the Closing shall not have occurred on or
before December 31, 1997 by reason of the failure of any condition precedent
under Section 9 hereof (unless the failure results primarily for a breach by
Asymetrix of any representation, warranty or covenant contained in this
Agreement); or
10.1.3 CSI and the Principals may terminate this Agreement by giving
written notice to Asymetrix if the Closing shall not have occurred on or before
December 31, 1997 by reason of the failure of any condition precedent under
Section 8 hereof (unless the failure results primarily from a breach by CSI or
the Principals of any representation, warranty or covenant contained in this
Agreement made by him or it).
10.2 No Liability. Any termination of this Agreement pursuant to
------------
this Section 10 will be without further obligation or liability upon any party
in favor of the other party hereto other than the obligations provided in
Sections 11.2, 12.8 and 12.16 and in the Letter of Intent between Asymetrix and
CSI dated December 10, 1997, other than any liability of any party for breaches
of this Agreement, which will survive termination of this Agreement. CSI and the
Principals on the one hand and Asymetrix on the other will use their best
efforts to cause the Merger to be consummated.
-34-
11. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS
11.1 Survival of Representations. All representations, warranties and
---------------------------
covenants of CSI, the Principals and Asymetrix contained in this Agreement will
survive the Effective Time and remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the parties to this
Agreement, until the earlier of (a) the termination of this Agreement or (b)
three (3) years after the Closing Date, whereupon such representations,
warranties and covenants will expire (except for covenants that by their terms
survive for a longer period); provided, however, that representations,
warranties and covenants involving intentional fraud or willful misconduct shall
survive the Closing without the limitations of subsections (a) or (b) above.
The period of such survival shall be referred to herein as the "Survival
--------
Period."
------
11.2 Agreement to Indemnify.
----------------------
11.2.1 Subject to the limitations set forth in this Section 11, the
Principals (during the time period specified below) indemnify Asymetrix and the
surviving corporations of the Merger (the "Asymetrix Indemnified Persons") in
-----------------------------
respect of, and hold the Asymetrix Indemnified Persons harmless against, any and
all claims, demands, actions, causes of actions, losses, costs, damages,
liabilities and expenses including, without limitation, reasonable legal fees
(hereinafter referred to as "Damages"):
-------
(a) arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties and covenants
given or made by CSI or the Principals in this Agreement (including any Schedule
or Exhibit hereto) which indemnity shall survive for the time period specified
in Section 11.1;
(b) resulting from any failure of any of the Principals to
have good, valid and marketable title to the issued and outstanding CSI Common
Stock held by such stockholders, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature whatsoever, which
indemnity shall survive for a three year period; or
(c) arising out of, related to, in connection with or
otherwise resulting from any Prior Agreement whatsoever, which indemnity shall
survive for a three year period. For purposes of the foregoing, "Prior
-------------------------------------
Agreements" means (i) all consulting, development or similar agreement under
-----------------
which CSI has provided any training, documentation, placements, advice,
consulting services or other products and services to a customer of CSI (which
agreements are not Current Service Agreements), and (ii) all contracts for the
sale, provision or manufacture of products (including computer software),
material or supplies (which agreements are not Current Sales Agreements).
The Principals' maximum aggregate liability under paragraphs (a), (b)
and (c) of this subsection 11.2.1 shall be $3,000,000 (the "Cap"), provided,
---
however, that any indemnification obligations arising under this subsection
11.2.1 which result from intentional fraud or willful miscount shall be excluded
from the calculation of the Cap and the Cap shall not
-35-
otherwise apply to any indemnification obligations arising under this subsection
11.2.1 which result from intentional fraud or willful misconduct.
11.2.2 The indemnification provided for in paragraphs (a), (b) and
(c) of subsection 11.2.1 shall not apply unless and until the aggregate Damages
for which one or more Asymetrix Indemnified Persons seeks indemnification under
such paragraphs (a), (b) and (c), exclusive of legal fees, exceeds $150,000 (the
"Basket") and then only to the extent that aggregate Damages exceed the Basket.
------
Asymetrix will use its best efforts to obtain recoveries under all applicable
insurance policies for all Damages. Except for intentional fraud or willful
misconduct, the remedies set forth in this Section shall be the exclusive
remedies of the Asymetrix Indemnified Persons against any of the Principals.
11.2.3 Subject to the limitations set forth in this Section 11,
Asymetrix will indemnify and hold harmless the Principals (collectively, the
"CSI Indemnified Persons") from and against any and all Damages:
------------------------
(a) arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants given or
made by Asymetrix in this Agreement or in any certificate, document or
instrument delivered by or on behalf of Asymetrix pursuant hereto; or
(b) resulting from any failure on the part of Asymetrix to issue to
the Principals good, valid and marketable title to the Asymetrix Common Stock as
provided in this Agreement, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature whatsoever.
Asymetrix's maximum aggregate liability under paragraphs (a) and
(b) of this subsection 11.2.3 shall be $3,000,000.
11.2.4 Any Asymetrix Indemnified Person or any CSI Indemnified Person
seeking indemnification hereunder shall give prompt written notification to the
Principals (in the case of indemnification sought by the Asymetrix Indemnified
Person) or to Asymetrix (in the case of indemnification sought by a CSI
Indemnified Person) (as applicable, the "Indemnification Representative") of the
------------------------------
commencement of any action, suit or proceeding relating to a third party claim
for which indemnification pursuant to this Section 11 may be sought; provided,
however, that no delay on the part of the Indemnified Person in providing such
notice shall relieve the Principals or Asymetrix, as the case may be, of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnification Representative may, upon
written notice thereof to the Indemnified Person, assume control of the defense
of such action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Person, provided that the Indemnification Representative
acknowledges in writing to the Indemnified Person that any damages, fines, costs
or other liabilities that may be assessed against the Indemnified Person in
connection with such action, suit or proceeding constitute Damages for which the
Indemnified Person shall be entitled to indemnification pursuant to this Section
11. If the Indemnification Representative does not so assume control of such
defense, the Indemnified Person shall control
-36-
such defense. The party not controlling such defense may participate therein at
its own expense; provided that if the Indemnification Representative assumes
control of such defense and the Indemnified Person reasonably concludes that the
indemnifying parties and the Indemnified Person have conflicting interests or
different defenses available with respect to such action, suit or proceeding,
the reasonable fees and expenses of counsel to the Indemnified Person shall be
considered "Damage" for purposes of this Agreement. The party controlling such
defense shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. The Indemnified
Person shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnification Representative.
11.2.5 Treatment of Indemnity Payments. Any payment made to an
-------------------------------
Indemnified Person pursuant to this Section 11 shall be treated as a reduction
in the merger consideration.
11.3 Employee Stock Options. Asymetrix shall take all action necessary to
----------------------
reserve for issuance under the Asymetrix Option Plan, and as soon as reasonably
practicable following the Closing, grant Asymetrix Options to purchase the
number of shares of Asymetrix Common Stock as set forth on Schedule 11.3 to
-------------
employees of CSI who become Asymetrix employees, with the vesting schedule for
awards as set forth on such Schedule. The recipients of options and the number
of options received by each such recipient with respect to the options
designated "as specified by CSI management" shall be determined in the sole
discretion of the Principals.
12. MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of Washington
-------------
(irrespective of its conflict 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.
12.2 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 and any attempt to do so will be void. This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent 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 void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature 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, will bear the
-37-
signatures of all parties reflected hereon as signatories. Facsimile copies of
such counterparts are acceptable.
12.5 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.
12.6 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. The Agreement may be amended by the parties hereto at any time before
or after approval of the stockholders of CSI but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the stockholders of CSI obtaining such further approval.
12.7 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.
12.8 Expenses. Each party will bear its respective expenses and fees of
--------
its own accountants, attorneys and other professionals incurred with respect to
this Agreement and the transactions contemplated hereby.
12.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit, reasonable attorneys' fees to be fixed by the
court (including without limitation, costs, expenses and fees on any appeal).
The prevailing party will be entitled to recover its costs of suit, regardless
of whether such suit proceeds to final judgment.
12.10 Notices. Any notice or other communication required or permitted to
-------
be given under this Agreement will be in writing, will be delivered personally,
by registered or certified mail, postage prepaid, by confirmed facsimile or by
nationally recognized courier service, and will be deemed given upon delivery,
if delivered personally, or five days after deposit in the mails, if mailed, or
upon receipt if delivered by confirmed facsimile or by nationally recognized
courier service, to the following addresses:
(i) If to Asymetrix:
---------------
Asymetrix Learning Systems, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
-38-
With a copy to:
--------------
Xxxx X. Xxxxxxx, Esq.
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(ii) If to CSI or the Principals:
---------------------------
0000 Xxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
With a copy to:
--------------
Xxxxxxx & Xxxxx LLP
0000 Xxxxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxx, Esq.
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.10.
12.11 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
12.12 No Joint Venture. Nothing contained in this Agreement will be
----------------
deemed or construed as creating a joint venture or partnership between any of
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 their 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.
12.13 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the
-39-
transactions described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
12.14 Absence of Third Party Beneficiary Rights. 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, stockholder, partner or 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.
12.15 Public Announcement. Upon execution of the Agreement by all
-------------------
parties, and until the consummation of the Merger, all press releases and other
public communications shall be made by the parties only with the mutual consent
of the Principals, CSI and Asymetrix.
12.16 Confidentiality. Asymetrix, CSI and the Principals each recognize
---------------
that they have received and will receive confidential information concerning the
other during the course of the negotiations and preparations for the Merger.
Accordingly, each party agrees (a) to use its respective best efforts to prevent
the unauthorized disclosure of any confidential information concerning the other
that was or is disclosed during the course of such negotiations and
preparations, and is clearly designated in writing as confidential at the time
of disclosure, and (b) to not make use of or permit to be used any such
confidential information other than for the purpose of effectuating the Merger
and related transactions. The obligations of this Section will not apply to
information that (i) is or becomes part of the public domain, (ii) is disclosed
by the disclosing party to third parties without restrictions on disclosure,
(iii) is received by the receiving party from a third party without breach of a
nondisclosure obligation to the other party or (iv) is required to be disclosed
by law. If this Agreement is terminated, all copies of documents containing
confidential information shall be returned by the receiving party to the
disclosing party. Notwithstanding Section 12.17, this provision does not
supersede or replace any other confidentiality or non-disclosure agreement
between the parties, all of which shall remain in full force an effect in
accordance with their terms.
12.17 Entire Agreement. This Agreement and the exhibits hereto 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. The express terms hereof control and supersede any course
of performance or usage of the trade inconsistent with any of the terms hereof.
-40-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"Asymetrix" "CSI"
Asymetrix Learning Systems, Inc. Communication Strategies, Incorporated
By: /s/ X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxx
------------------------------ ---------------------------------
Name: X. Xxxxxxxxx Name: Xxxxxxx X. Xxxx
---------------------------- -------------------------------
Its: CEO Its: President
----------------------------- --------------------------------
"Merger Sub" "Principals"
Asymetrix Acquisition Corp.
By: /s/ X. Xxxxxxxxx /s/ Xxxxxxx X. Xxxx
------------------------------ ------------------------------------
Xxxxxxx Xxxx
Name: X. Xxxxxxxxx
---------------------------- /s/ Xxxxx Xxxx
Its: President ------------------------------------
----------------------------- Xxxxx Xxxx
[SIGNATURE PAGE FOR AGREEMENT AND PLAN OF REORGANIZATION]
-41-
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Certificate of Merger
Exhibit 2.9A Asymetrix Officers' Certificate
Exhibit 2.9B CSI Officers' Certificate
Exhibit 3.0 CSI Schedule of Exceptions
Exhibit 4.0 Asymetrix Schedule of Exceptions
Exhibit 8.5 Form of Opinion of General Counsel of Asymetrix
Exhibit 8.6 Registration Rights Agreement
Exhibit 8.7 Put Option Agreement
Exhibit 8.8A Xxxxxxx Xxxx Employment Agreement
Exhibit 8.8B Xxxxx Xxxx Employment Agreement
Exhibit 9.5 Form of Opinion of Counsel to CSI and Principals
Exhibit 9.10 Investment Representation Letter
Schedule 9.12 CSI Employees
Schedule 11.3 Stock Options
-42-
Schedule 11.3
Asymetrix Option Grants
-----------------------
Exercise
Grantee Number of Shares Price Vesting
------- ---------------- -------- -------
Xxxxxxx Xxxx 15,000 5.75 standard Asymetrix vesting schedule*
Xxxxx Xxxx 15,000 5.75 standard Asymetrix vesting schedule*
Xxxxx Xxxxx 21,300 5.75 immediately exercisable
Xxxxx Xxxxx 25,000 8.75 standard Asymetrix vesting schedule*
as specified by CSI 33,333 5.75 immediately exercisable
management
as specified by CSI 125,000 11.75 standard Asymetrix vesting schedule*
management
*Vesting beginning on the Closing Date
Form of Opinion of General Counsel of Asymetrix
1. Asymetrix was incorporated, exists and is good standing under the
laws of the State of Washington. For purposes of rendering the opinion set
forth in this Section 1 I have relied solely on the Certificate of
Existence/Authorization from the Washington Secretary of State described in
Attachment 1.
2. Asymetrix has the corporate right, power and authority to execute
and deliver the Reorganization Agreement and each Asymetrix Ancillary Agreement
to which it is a party and to carry out the transactions contemplated
thereunder.
3. The Reorganization Agreement and each Asymetrix Ancillary
Agreement to which Asymetrix is a party have been duly authorized, executed and
delivered by Asymetrix, and constitute the enforceable obligations of Asymetrix.
4. To my knowledge, no consents, permits, licenses or authorizations
by, or registrations or filings with, the State of Washington are required to be
obtained by Asymetrix for the execution, delivery or performance by Asymetrix of
the Reorganization Agreement or the Asymetrix Ancillary Agreements to which it
is a party, except such as have been obtained or made, except for the filing of
a Form D with respect to the issuance of the Asymetrix Merger Stock in the
Mergers and except for filings made under applicable securities laws.
5. The authorized capital stock of Asymetrix consists of 40,000,000
shares of Asymetrix Common Stock, $0.01 par value, 8,335,118 of which are
outstanding, and 5,000,000 shares of Class B Stock, $0.01 par value, of which
50,000 shares are designated as Series 1 Class B Stock, 37,500 shares of which
are outstanding, of which 388,395 shares are designated as Series A Stock, all
of which are outstanding, of which 388,395 shares are designated as Series B
Stock, all of which are outstanding, of which 2,500,000 shares are designated as
Series 4 Class B Stock, 2,383,894 shares of which are outstanding, and of which
1,512,500 shares are designated as Series 5 Class B Stock, none of which are
outstanding.
6. The shares of Asymetrix Common Stock that are issuable upon, and
in exchange for, the outstanding shares of Common Stock of CSI in the Mergers,
when so issued in accordance with the terms and conditions of the Reorganization
Agreement, will be duly and validly issued, fully paid and non-assessable.
7. Neither the execution nor the delivery by Asymetrix of the
Reorganization Agreement or any Asymetrix Ancillary Agreement to which it is a
party, nor the consummation of the transactions provided for therein, are in
conflict with any provision of: (a) the Articles of Incorporation or Bylaws of
Asymetrix, as applicable, as currently in effect or (b) to my knowledge, any
judgment, order or decree of any court or arbitrator to which Asymetrix is a
party or is subject.
PUT OPTION AGREEMENT
This Put Option Agreement (this "Agreement") is made as of December 22,
---------
1997 (the "Effective Date"), between Asymetix Learning Systems, Inc., a
--------------
Washington corporation ("Asymetrix"), and each of Xxxxxxx Xxxx and Xxxxx Xxxx
---------
(collectively the "Optionees" and each individually an "Optionee").
--------- --------
RECITALS
A. On the date hereof, pursuant to that certain Agreement and Plan of
Reorganization dated of even date herewith (the "Reorganization Agreement") by
------------------------
and among Asymetrix, Asymetrix Acquisition Corp., a Texas corporation and
wholly-owned subsidiary of Asymetrix, Communication Strategies, Inc., a Texas
corporation, and Xxxxxxx Xxxx and Xxxxx Xxxx, Asymetrix has issued 733,591
shares of Common Stock of Asymetrix, $0.01 par value ("Common Stock").
------------
B. Asymetrix has agreed to grant each Optionee an option to require
Asymetrix to repurchase a portion of such Optionee's Common Stock upon the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. PUT OPTION.
1.1 Grant of Put Option; Exercise Price. Subject to the terms and
-----------------------------------
conditions herein set forth, each Optionee is hereby granted the right (the "Put
---
Option") to require Asymetrix to repurchase up to an aggregate of the number of
------
shares of such Optionee's Common Stock set forth next to the name of the
Optionee on Exhibit A (the "Option Shares") at an exercise price equal to $11.75
--------- -------------
per share (the "Put Exercise Price"), without interest, upon exercise of such
------------------
Put Option, payable by Asymetrix in cash, wire transfers, cancellation of
indebtedness or a combination of the foregoing. The number of Option Shares and
the per share Put Exercise Price shall be subject to adjustment as provided in
Section 2.
1.2 Exercise of Put Option.
----------------------
(a) The Put Option shall be exercisable if and only if Asymetrix
fails to close the initial public offering of Common Stock of Asymetrix at an
aggregate offering price to the public of not less than $10,000,000 pursuant to
an effective registration statement filed under the Securities Act of 1933, as
amended, on or prior to June 30, 1998.
-1-
(b) The Put Option shall be exercisable by an Optionee only by
delivery to Asymetrix of a completed and fully executed Put Option Subscription
Form (in the form attached hereto as Exhibit B
---------
(c) The closing of the repurchase shall take place at the offices
of Asymetrix (or such other location as the parties shall mutually agree) on
such date as the parties shall mutually agree that is no later than the 30/th/
days after the date notice is given pursuant to the Put Option Subscription
Form; provided, however, that if the parties cannot agree regarding the date of
closing, the closing shall occur on such 30th day (or if such 30/th/ day is a
Saturday , Sunday or legal holiday the closing shall take place on the next day
that is not a Saturday , Sunday or legal holiday). At the closing, the
exercising Optionee shall deliver to Asymetrix and a certificate representing
the Option Shares for cancellation, duly endorsed in blank by such Optionee, or
having attached thereto an assignment separate from certificate (in the form
attached hereto as Exhibit C) duly executed by such Optionee, and upon receipt
---------
thereof Asymetrix shall effect payment to the Optionee. The Put Option shall be
deemed to have been exercised immediately prior to the close of business on the
date of surrender of the Put Option Subscription Form for exercise as provided
in Section1.2(b). To the extent that the certificates surrendered by an Optionee
represent a greater number of shares than the Option Shares with respect to
which the Put Option was exercised, Asymetrix shall issue to such Optionee a
certificate representing the shares represented by the original certificate that
were not Option Shares with respect to which the Put Option was exercised.
1.3 No Assignment. This Put Option shall not be assignable or
-------------
transferable by the Optionees, except by testamentary bequest or otherwise in
connection with the Optionees' estate planning. Except as provided herein,
Optionees may not sell, assign, transfer, hypothecate, pledge or otherwise
encumber, in any manner, the Put Option or their rights under this Agreement.
Any attempt to sell, assign, transfer, hypothecate, pledge or otherwise encumber
this Agreement or any interest therein and any levy of execution, attachment, or
similar process on such securities or property shall be null and void. Subject
to the foregoing, this Agreement shall be binding on and inure to the benefit of
the heirs, executors, and personal representatives of the Optionees.
1.4 Termination. The Put Option shall terminate in full with respect
-----------
to any Optionee, to the extent not previously exercised, upon the earlier of (i)
the date such Optionee (or a transferee pursuant to Section 1.3) no longer holds
any shares of Asymetrix Common Stock, (ii) the closing of the initial public
offering of Common Stock of Asymetrix at an aggregate offering price to the
public of not less than $10,000,000 pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, or (iii) failure
to deliver to Asymetrix the fully executed Put Option Subscription Form by July
31, 1998.
1.5 Rescission Right on Merger if Put Option not Honored.
----------------------------------------------------
(a) If (i) the Put Option becomes exercisable in accordance with
this Agreement, (ii) all Optionees exercise the Put Option with respect to all
of such Optionees'
-2-
Option Shares and (iii) Asymetrix fails for any reason to repurchase such Option
Shares in accordance with this Agreement, then the Optionees shall have the
right to rescind the merger transactions accomplished pursuant to the
Reorganization Agreement (the "Rescission"). The parties intend that the
Rescission will be accomplished in a tax-free share exchange, merger or other
similar transaction pursuant to which Asymetrix would receive all of the shares
of Asymetrix Common Stock held by the Optionees and the Optionees would receive
all of the shares of CSI Common Stock held by Asymetrix. At the time of the
Rescission, all unexercised options to purchase shares of Asymetrix Common Stock
held by employees of CSI shall terminate. Following the Rescission, CSI will
have no liability for the business or conduct of Asymetrix occurring before or
after the Rescission and Asymetrix will have no liability for the business or
conduct of CSI occurring before or after the Rescission. Nothing contained
herein shall relieve Asymetrix of its obligation to repurchase the Option Shares
upon proper exercise of the Put Option.
(b) To enable the Rescission to be accomplished in an efficient
manner, Asymetrix agrees that, until termination of the Put Option pursuant to
Section 1.4, (i) Asymetrix will continue to maintain CSI as a separate
corporate entity and shall continue to conduct the business of CSI as a separate
business unit, (ii) all contracts for work to be performed by CSI shall be
executed in the name of CSI, (iii) except as otherwise contemplated by the
Reorganization Agreement, no assets of CSI, including new receivables, will be
distributed from CSI without the prior consent of the Optionees, and (iv)
Asymetrix will not sell, transfer, encumber or otherwise assign any interest in
the CSI Common Stock.
(c) The parties acknowledge that the foregoing is a statement of
their intentions, and that all of the details of the Rescission and the conduct
of CSI's business prior to the termination of the Put Option cannot be specified
with particularity. Accordingly, prior to the termination of the Put Option,
each party will act in good faith in a manner consistent with intentions set
forth in this Section 1.5, and each will cooperate with the other and use all
commercially reasonable efforts to maintain CSI as a separate business unit and
to effectuate the Rescission in accordance with this Section 1.5.
2. CHANGE IN CAPITAL STRUCTURE.
The number and type of shares transferable by an Optionee upon exercise of
the Put Option and the per share Put Exercise Price shall be equitably adjusted
in the event of any stock split, combination, stock dividend or
recapitalization, or conversion or exchange for other securities or property as
a result of a merger, sale, liquidation or reorganization of Asymetrix, or other
similar change in capital structure of Asymetrix. Nothing in this Section, or
elsewhere in this Agreement, however, shall have the effect of altering the
aggregate Put Exercise Price payable to an Optionee upon exercise of the Put
Option.
3. SECURITIES LAWS.
The Optionees will fully cooperate with Asymetrix in obtaining the benefit
of such exemptions from state and federal securities laws as Asymetrix or its
counsel shall determine are
-3-
appropriate in order to effectuate the repurchase of the Option Shares pursuant
to the exercise of the Put Option.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE.
4.1 Ownership of Option Shares; No Conflicts. Each of Optionees
----------------------------------------
represents and warrants as of this date, and covenants for the period beginning
on this date and ending on the termination of this Agreement pursuant to Section
1.4, that (i) the Optionee has and will have the right to enter into this
Agreement, to transfer to Asymetrix all or any part of such Optionee's Option
Shares free and clear of any lien, claim, encumbrance or restriction of any type
or nature whatsoever (other than restrictions on resale that may arise under
applicable federal and state securities laws); (ii) such Optionee's Option
Shares are not and will not be subject to any right of first refusal, right of
repurchase or any similar right granted to, or retained by, any shareholder of
Asymetrix or any other person; and (iii) there is no provision of any existing
agreement, and the Optionee will not enter into an agreement, by which the
Optionee is or would be bound (or to which the Optionee is or would become
subject) that conflicts or would conflict with this Agreement or the performance
of the Optionee's obligations under this Agreement.
4.2 Further Assurances. Upon the reasonable request of Asymetrix,
------------------
the Optionee will prepare, execute and deliver any further instruments and do
any further acts that may be necessary to carry out more effectively the purpose
of this Agreement.
4A. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASYMETRIX.
4A.1 Authorization. Asymetrix has the corporate right, power, legal
-------------
capacity and authority to enter into and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement has been
duly and validly approved and authorized by all necessary corporate action on
the part of Asymetrix.
4A.2 Solvency. As of the date hereof, Asymetrix's repurchase of all
--------
of the Option Shares from the Optionees and the payment to the Optionees of the
aggregate Option Exercise Price would not cause Asymetrix to become insolvent.
5. GENERAL PROVISIONS
5.1 Amendment of Rights. Any provision of this Agreement may be
-------------------
amended only with the written consent of the Company and the Optionees. Any
amendment or waiver effected in accordance with this Section 5.1 shall be
binding upon each Optionee, any permitted successor or assignee of the Optionees
and the Company
5.2 Governing Law. The internal laws of the State of Washington
-------------
(irrespective of its conflict 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
-4-
parties hereto. The parties agree that the venue of any action to enforce this
Agreement shall be in the state or federal courts located in King County,
Washington.
5.3 Severability. If any provision of this Agreement, or the
------------
application thereof, will for any reason and to any extent 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
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
5.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature 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, will bear the signatures of
all parties reflected hereon as signatories. Facsimile copies of such
counterparts are acceptable.
5.5 Notices. Any notice or other communication required or permitted
-------
to be given under this Agreement will be in writing, will be delivered
personally, by registered or certified mail, postage prepaid, by confirmed
facsimile or by nationally recognized courier service, and will be deemed given
upon delivery, if delivered personally, or five days after deposit in the mails,
if mailed, or upon receipt if delivered by confirmed facsimile or nationally
recognized courier service to the following addresses:
(i) If to Asymetrix:
---------------
Asymetrix Learning Systems, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
With a copy to:
--------------
Xxxx X. Xxxxxxx, Esq.
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(ii) If to Shareholders:
------------------
To the addresses set forth on Exhibit A hereto
---------
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 5.5.
-5-
5.6 Absence of Third Party Beneficiary Rights. 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, stockholder, partner or 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.
5.7 Entire Agreement. This Agreement and the exhibits hereto
----------------
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. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof.
IN WITNESS WHEREOF, the undersigned have executed this Put Option Agreement
the day and year first above written.
ASYMETRIX LEARNING SYSTEMS, INC. OPTIONEES
Signature:
-------------------------- ---------------------------
Xxxxxxx Xxxx
Name:
-------------------------------
Title:
------------------------------ ---------------------------
Xxxxx Xxxx
[SIGNATURE PAGE TO PUT OPTION AGREEMENT]
-6-
EXHIBIT A
---------
LIST OF SHAREHOLDERS
Number of Shares of
Asymetrix Common Stock Held
Name and Address ---------------------------
----------------
Total Shares Option Shares
------------ -------------
Xxxxxxx Xxxx 550,194 191,490
0000 Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Xxxxx Xxxx 183,398 63,830
0000 Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
-7-
EXHIBIT B
---------
PUT OPTION SUBSCRIPTION FORM
(To be signed only upon exercise of Put Option)
To: Asymetrix Learning Systems, Inc.
The undersigned (the "Optionee"), hereby irrevocably elects to exercise the
--------
right represented by that Put Option to sell to Asymetrix Learning Systems,
Inc., a Washington corporation ("Asymetrix"), _______ shares of Common Stock of
---------
Asymetrix at an aggregate exercise price of $______ for such shares.
------------------------------------
Signature
------------------------------------
Printed Name
------------------------------------
Date
-8-
EXHIBIT C
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, __________________, hereby sell, assign and transfer
unto Asymetrix Learning Systems, Inc., a Washington corporation (the "Company"),
________ shares of Common Stock of the Company, standing in my name on the books
of the Company represented by Certificate(s) No(s). _____ herewith and do hereby
irrevocably constitute and appoint _______________ to transfer said stock on the
books of the Company with full power of substitution in the premises.
------------------------------------
Signature
------------------------------------
Printed Name
------------------------------------
Date
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Put Option Agreement dated December __, 1997, and shall not be
used in any manner except as provided in such Agreement.
-9-
December 22, 1997
Asymetrix Learning Systems, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Re: Agreement and Plan of Reorganization entered into as of December 22,
1997, by and among Asymetrix Learning Systems, Inc., CSI Acquisition
Corp., Communication Strategies, Incorporated, and Xxxxxxx X. Xxxx and
Xxxxx X. Xxxx
Ladies and Gentlemen:
This firm has acted as counsel to Communication Strategies, Incorporated, a
Texas corporation ("CSI"), and its stockholders, Xxxxxxx X. Xxxx and Xxxxx X.
Xxxx (Xxxxxxx X. Xxxx and Xxxxx X. Xxxx are collectively referred to herein as
the "Principals") (CSI and the Principals are collectively referred to herein as
the "Sellers"), solely in connection with an Agreement and Plan of
Reorganization entered into as of December 22, 1997, by and among Asymetrix
Learning Systems, Inc., a Washington corporation ("Asymetrix"), Asymetrix
Acquisition Corp., a Texas corporation and a wholly-owned subsidiary of
Asymetrix ("Merger Sub"), CSI, and the Principals (the "Agreement"). This
opinion is delivered to you pursuant to Section 9.5 of the Agreement.
Capitalized terms used but not otherwise defined herein shall have the
definitions assigned to such terms in the Agreement, unless the context requires
otherwise.
In connection with this opinion, we have examined such matters of law and
such certificates, documents, and records of public officials and of officials
of CSI as we have deemed necessary for purposes of rendering this opinion,
including, but not limited to, the following: the Articles of Merger, the
Certificate of Merger, the Registration Rights Agreement in the form of Exhibit
8.6 to the Agreement, and the Put Option Agreement in the form of Exhibit 8.7 to
the Agreement (collectively, the "Transaction Documents").
In rendering this opinion, we have made the following assumptions:
(a) All documents submitted to or reviewed by us are accurate and complete
and, if not originals, are true and correct copies of the originals. The
signatures on each of such documents by the parties thereto are genuine. Each
individual who signed such documents had the legal capacity to do so. All
persons who signed such documents on behalf of a corporation were duly
authorized to do so, provided that this assumption does not apply to the Sellers
with respect to the Transaction Documents.
Asymetrix Learning Systems, Inc.
December 22, 1997
Page 2
(b) Asymetrix and Merger Sub each has the corporate power and authority to
execute and deliver the Transaction Documents and to perform its respective
obligations under the Transaction Documents.
(c) The execution by each of Asymetrix and Merger Sub of the Transaction
Documents has been duly authorized by all requisite corporate action, and each
of the Transaction Documents has been duly executed and delivered by each of
Asymetrix and Merger Sub.
(d) Each of Transaction Documents constitutes the binding obligation of
each of Asymetrix and Merger Sub, enforceable against each of Asymetrix and
Merger Sub in accordance with its terms.
Based upon the foregoing and subject to the limitations and qualifications
set forth herein, we are of the opinion that:
1. CSI was incorporated, exists, and is in good standing under the laws of
the State of Texas. For purposes of rendering the opinions set forth in this
paragraph 1, we have relied solely upon certificates of the Secretary of State
of the State of Texas and the Comptroller of Public Accounts of the State of
Texas, each dated December 19, 1997.
2. CSI has the corporate power and authority to execute and deliver the
Transaction Documents to which CSI is a party and to carry out the transactions
contemplated under the Transaction Documents.
3. Each of the Transaction Documents has been authorized, executed, and
delivered by each Seller that is a party thereto, and constitutes the
enforceable obligation of each Seller that is a party thereto.
4. The execution and delivery of each of the Transaction Documents by each
Seller that is a party thereto does not, and the performance of such Transaction
Document by such Seller will not, violate any statute or regulation by which
such Seller is bound, or the Certificate of Incorporation or Bylaws of CSI.
5. To our knowledge, the execution and delivery of each of the Transaction
Documents by each Seller that is a party thereto does not, and the performance
by such Seller of such Transaction Document will not, require the consent or
approval of any person that has not been obtained.
6. To our knowledge, no registration or filing with, or consent, permit,
license, or authorization of, any government or agency thereof is required as a
result of the execution, delivery, or performance of the Transaction Documents
except for those matters that have been registered or filed and except for those
consents, permits, licenses, or authorizations that have been obtained.
Asymetrix Learning Systems, Inc.
December 22, 1997
Page 3
7. The authorized capital stock of CSI consists of 10,000 shares of common
stock, par value $1.00 per share. Of such common stock, 1,000 shares are issued
and outstanding. To our knowledge, all such outstanding shares are fully paid
and nonassessable. To our knowledge, there are no agreements, subscriptions,
warrants, calls, or options to which CSI is a party that bind it to issue or
sell any capital stock or any securities convertible into or exchangeable for
any capital stock. Of such shares, the Principals collectively hold 1,000
shares which are, to our knowledge, free and clear of all claims, liens,
pledges, or encumbrances. For purposes of rendering the opinions set forth in
the first two sentences of this paragraph 7, we have relied solely upon an
officer's certificate of CSI, dated December 22, 1997, a copy of which is
attached to this opinion as Exhibit A.
---------
This opinion is further limited and qualified in all respects as follows:
1. This opinion is specifically limited to matters of the existing laws of
the State of Texas and of the United States of America. We express no opinion
as to the applicability of the laws of any other particular jurisdiction to the
transactions described in this opinion.
2. The opinions expressed herein are limited to the extent that (i)
general equitable principles limit the availability of equitable remedies,
including, but not limited to, the remedies of specific performance, injunctive
relief, the appointment of a receiver, and rights of acceleration and (ii) the
enforceability of the Credit Documents is limited by applicable bankruptcy,
insolvency, fraudulent conveyance, and other debtor relief laws of general
applicability; by the rights of the United States under federal tax lien laws,
including, without limitation, the Federal Tax Lien Act of 1966, as amended; and
by the rights under state commercial law of holders of security interests in
goods that become fixtures. We express no opinion as to the availability of
certain provisions or remedies set forth in the Credit Documents, if any,
relating to (i) self-help remedies, (ii) provisions that purport to establish
evidentiary standards for suits or proceedings, (iii) provisions relating to
waivers, or (iv) the perfection or priority of any security interest.
3. This opinion is limited to the legal matters stated herein, and no
opinion is implied or may be inferred beyond the legal matters expressly stated
herein. Without limiting the foregoing, in rendering the opinions expressed
herein, we express no opinion regarding the applicability or effect of or
compliance with any federal and state securities laws and regulations; Federal
Reserve Board margin regulations; pension and employee benefit laws and
regulations; federal and state antitrust and unfair competition laws and
regulations, federal and state laws and regulations concerning filing
requirements (other than requirements applicable to charter-related documents);
compliance with fiduciary duty requirements; the statutes, administrative
decisions and rules and regulations of county, municipal and special political
subdivisions (whether state-level, regional or otherwise); federal and state
tax laws and regulations; federal and state laws and regulations concerning the
creation, attachment, perfection, priority or enforcement of a lien or security
interest in real or personal property; fraudulent transfer laws; federal and
state
Asymetrix Learning Systems, Inc.
December 22, 1997
Page 4
environmental laws and regulations; and federal and state land use and
subdivision laws and regulations.
4. We express no opinion as to the enforceability of any provision in the
Transaction Documents allowing Asymetrix, Merger Sub, or both to exercise any
rights thereunder without notice to the Sellers.
5. We note that some of the Transaction Documents provide that they are to
be governed by and interpreted in accordance with the law of the State of
Washington. For purposes of rendering this opinion only, we have nonetheless
assumed that such Transaction Documents will be governed by and interpreted in
accordance with the law of the State of Texas, notwithstanding such choice of
law provision. We have not undertaken to compare the law of the State of
Washington to that of the State of Texas and we express no opinion whatsoever
with respect to the law of the State of Washington. Furthermore, we express no
opinion whatsoever as to any choice of law or as to any internal substantive
rules of law that any court or tribunal may apply to the Transaction Documents
or the transactions referred to therein, and we express no opinion whatsoever as
to the applicability of the law of any particular jurisdiction to the
Transaction Documents or the transactions referred to therein.
As used herein, the phrases "to our knowledge" or "known to us" or any
similar phrase means that the knowledge of this firm is limited to the present
personal recollection of our attorneys who have prepared this opinion and who
have had actual involvement in the transaction that is the subject of this
opinion; and, further, you cannot rely on such attorneys having made any
independent verification of, or inquiry with respect to, the facts relevant to
this opinion, whether in the general course of our representation of the Sellers
or for purposes of rendering this opinion to you.
This opinion is intended solely for your benefit. It is not to be quoted
in whole or in part, disclosed, made available to or relied upon by any other
person, firm or entity without our express prior written consent.
This opinion is based upon our knowledge of the law and the facts as of the
date hereof. We assume no duty to update or supplement this opinion to reflect
any facts or circumstances that may hereafter come to our attention or to
reflect any changes in any law that may hereafter occur or become effective.
Respectfully submitted,
XXXXXXX & STONE, L.L.P.
December 22, 1997
Asymetrix Learning Systems, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
INVESTMENT REPRESENTATION LETTER
The undersigned holder ("Shareholder") of Common Stock (the "CSI Common
Stock") of Communication Strategies Incorporated, a Texas corporation ("CSI"),
is acquiring shares of Common Stock of Asymetrix Learning Systems, Inc., a
Washington corporation ("Asymetrix") pursuant to that certain Agreement and Plan
of Reorganization (the "Plan") dated as of December 22, 1997 by and among
Asymetrix, Asymetrix Acquisition Corp., a Texas corporation and a wholly-owned
subsidiary of Asymetrix ("Merger Sub"), CSI, and Xxxxxxx Xxxx and Xxxxx Xxxx,
pursuant to which Merger Sub will merge with and into CSI in a reverse
triangular merger, with CSI to be the surviving corporation of the merger (the
"Merger"), and all of the outstanding Common Stock of CSI will be converted into
shares of Asymetrix Common Stock (the "Restricted Securities") pursuant to a
private placement effected pursuant to Section 4(2) of the U.S. Securities Act
of 1933, as amended (the "Securities Act") and/or Regulation D promulgated
thereunder. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings given to such terms in the Plan.
In connection with the Merger, Shareholder hereby represents and warrants
to Asymetrix as follows:
(1) Status of Shareholder. Shareholder is an "accredited investor" within
---------------------
the meaning of Regulation D promulgated under the Securities Act. Shareholder
has the knowledge and experience in financial and business matters necessary to
evaluate and make an informed decision regarding the exchange of Shareholder's
shares of CSI Common Stock for the Restricted Securities and to make the
investment in the Restricted Securities pursuant to the Merger. Shareholder has
the capacity to protect its own interests in connection with the Mergers.
(2) Plan. Shareholder acknowledges that Shareholder has received, read and
----
understood the Plan.
(3) Access to Other Information. Shareholder acknowledges that Asymetrix
---------------------------
has made available to Shareholder the opportunity to examine such additional
documents and to ask questions of, and receive answers from, Asymetrix and its
management concerning, among other things, Asymetrix, its business, financial
condition, management, activities and any other
information which Shareholder considers relevant, important or material in
making the decision to participate in the Mergers and to invest in the
Restricted Securities.
(4) Risks of Investment. Shareholder acknowledges that the Restricted
-------------------
Securities involve a degree of risk and is aware of the lack of liquidity of the
Restricted Securities. Shareholder appreciates the financial hazards involved
in making the investment and understands the tax consequences of investing in
the Restricted Securities. Shareholder has not relied on Asymetrix or its
counsel for any advice regarding the tax consequences of the Mergers and/or
Shareholder's investment in the Restricted Securities.
(5) Investment Intent. Shareholder is acquiring the Restricted Securities
-----------------
in the Mergers for investment purposes for Shareholder's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act. Shareholder has no present intention
of disposing of the Restricted Securities and no one other than the
beneficiaries of Shareholder has any beneficial interest in the Restricted
Securities.
(6) Restricted Securities; Registration Rights. Shareholder acknowledges
------------------------------------------
and understands that the terms of the Mergers have not been reviewed by the
Securities and Exchange Commission (the "SEC") or by any state securities
authorities, that the Restricted Securities to be received by Shareholder
pursuant to the Mergers have not been registered under the Securities Act and
constitute "restricted securities" within the meaning of Rule 144 promulgated
under the Securities Act ("Rule 144"), and have been issued in reliance on the
exemptions for non-public offerings provided by Section 4(2) of the Securities
Act and/or Regulation D promulgated thereunder, which exemptions depend upon,
among other things, the representations made and information furnished by
Shareholder herein, including but not limited to the bona fide nature of
Shareholder's investment intent as expressed above. Shareholder and Asymetrix
acknowledge that Shareholder has certain "piggyback" registration rights to
cause Asymetrix to include such Restricted Securities in a registration
statement under the Securities Act, if any such registration statement is filed
by Asymetrix and subject to the limitations set forth in the Registration Rights
Agreement being entered into by and among the Aimtech Shareholders and Asymetrix
pursuant to the Plan and that Asymetrix is not otherwise obligated to register
the Restricted Securities to be issued to Shareholder.
(7) Rule 144. Shareholder acknowledges that, absent such registration of
--------
the Restricted Securities, Shareholder will not be able to publicly sell the
Restricted Securities until one year after the Effective Time of the Merger.
After that date, Shareholder may sell the Restricted Securities in compliance
with Rule 144. Shareholder is familiar with the provisions of Rule 144 which
permit limited public resales of "restricted securities," subject to the
satisfaction of certain conditions regarding the restrictions on the transfer of
the Restricted Securities imposed by Rule 144. Shareholder understands that in
the event all of the applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act or some other exemption from the
registration requirements of the Securities Act will be required in order to
enable Shareholder to dispose of the Restricted Securities, and that Shareholder
may be required to hold the Restricted Securities for a significant period of
time prior to reselling them. Shareholder acknowledges that if it is or becomes
an "affiliate" of Asymetrix, then certain restrictions, including volume limits,
imposed by Rule 144 will continue to apply to Shareholder
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beyond the second anniversary of the date on which Shareholder acquires the
Restricted Securities.
(8) Procedures for Transfer. Shareholder will not sell, transfer,
-----------------------
exchange, pledge or otherwise dispose of, or make any offer or agreement
relating to any of the foregoing with respect to, any Restricted Securities, or
any option, right or other interest with respect to any Restricted Securities,
unless: (i) such transaction is permitted pursuant to Rule 144; (ii) counsel
representing Shareholder shall have advised Asymetrix in a written opinion
letter reasonably satisfactory to Asymetrix and Asymetrix's legal counsel, and
upon which Asymetrix and its legal counsel may reasonably rely, that no
registration under the Securities Act would be required in connection with the
proposed sale, transfer or other disposition of Restricted Securities; or (iii)
a registration statement under the Securities Act covering the Restricted
Securities proposed to be sold, transferred or otherwise disposed of, describing
the manner and terms of the proposed sale, transfer or other disposition, and
containing a current prospectus, shall have been filed with the SEC and be
effective under the Securities Act.
(9) Legends. Shareholder also understands and agrees that there will be
-------
placed on the certificates evidencing the ownership of the Restricted
Securities, the following legend (in addition to any legends required by
applicable state laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT UNDER THE SECURITIES ACT (AND CURRENT PROSPECTUS)
IS IN EFFECT AS TO THE SECURITIES, (2) AN EXEMPTION THEREFROM IS AVAILABLE,
OR (3) THE SECURITIES ARE SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(10) Stop Transfer Instructions; No Requirement to Transfer. Shareholder
------------------------------------------------------
agrees that, in order to ensure compliance with the restrictions referred to
herein, Asymetrix may issue appropriate "stop transfer" instructions to its
transfer agent, if any. Asymetrix shall not be required (i) to transfer or have
transferred on its books any Restricted Securities that have been sold or
otherwise transferred in violation of any of the provisions of this letter or
the Plan or (ii) to treat as owner of such Restricted Securities or to accord
the right to vote or pay dividends to any purchaser or other transferee to whom
such Restricted Securities shall have been so transferred in violation of any
provision of this letter or the Plan.
(11) Ability to Bear Economic Risk. Shareholder represents that it (i) is
-----------------------------
able to bear the economic risk of its investment in the Restricted Securities,
(ii) is able to hold the Restricted Securities for an indefinite period of time,
(iii) can afford a complete loss of its investment in the Restricted Securities
and (iv) has adequate means of providing for its current needs and possible
contingencies and has no need for liquidity in this investment.
3
(12) No Public Solicitation. Shareholder represents that at no time was
----------------------
such Shareholder presented with or solicited by any general mailing, leaflet,
public promotional meeting, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or general solicitation
in connection with the Mergers.
Sincerely,
----------------------------------
Name of Shareholder
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[SIGNATURE PAGE TO INVESTMENT REPRESENTATION LETTER]
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