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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
FLEXIINTERNATIONAL SOFTWARE, INC., PRINCESS ACQUISITION
CORPORATION
AND
THE DODGE GROUP, INC.
June 24, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I - THE MERGER..................................................... 1
1.1 The Merger..................................................... 1
1.2 The Closing.................................................... 1
1.3 Actions at the Closing......................................... 1
1.4 Additional Action.............................................. 2
1.5 Conversion of Shares........................................... 2
1.6 Dissenting Shares.............................................. 4
1.7 Exchange of Shares............................................. 5
1.8 Dividends...................................................... 6
1.9 Fractional Shares/Other Consideration.......................... 6
1.10 Escrow......................................................... 7
1.11 Options and Warrants........................................... 7
1.12 Certificate of Incorporation................................... 9
1.13 By-laws........................................................ 9
1.14 Directors and Officers......................................... 9
1.15 No Further Rights.............................................. 9
1.16 Closing of Transfer Books...................................... 9
1.17 Repayment of Bridge Notes...................................... 10
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY................................................. 10
2.1 Organization, Qualification and Corporate Power................ 10
2.2 Capitalization................................................. 11
2.3 Authorization of Transaction................................... 11
2.4 Noncontravention............................................... 12
2.5 Subsidiaries................................................... 13
2.6 Financial Statements........................................... 13
2.7 Absence of Certain Changes..................................... 14
2.8 Undisclosed Liabilities........................................ 15
2.9 Tax Matters.................................................... 16
2.10 Assets......................................................... 17
2.11 Owned Real Property............................................ 18
2.12 Intellectual Property.......................................... 18
2.13 Real Property Leases........................................... 20
2.14 Contracts...................................................... 21
2.15 Accounts Receivable............................................ 22
2.16 Powers of Attorney............................................. 22
2.17 Insurance...................................................... 22
2.18 Litigation..................................................... 23
2.19 Product Warranty............................................... 23
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PAGE
2.20 Employees and Consultants...................................... 24
2.21 Employee Benefits.............................................. 24
2.22 Environmental Matters.......................................... 27
2.23 Legal Compliance............................................... 28
2.24 Permits........................................................ 28
2.25 Certain Business Relationships With Affiliates................. 29
2.26 Brokers' Fees.................................................. 29
2.27 Books and Records.............................................. 29
2.28 Customers...................................................... 29
2.29 Company Action................................................. 29
2.30 Disclosure..................................................... 30
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY.................................. 30
3.1 Organization................................................... 30
3.2 Capitalization................................................. 31
3.3 Authorization of Transaction................................... 31
3.4 Noncontravention............................................... 31
3.5 Reports and Financial Statements............................... 32
3.6 Absence of Material Adverse Changes............................ 32
3.7 Brokers' Fees.................................................. 33
3.8 Disclosure..................................................... 33
ARTICLE IV - CONDITIONS TO CONSUMMATION OF MERGER.......................... 33
4.1 Conditions to Each Party's Obligations......................... 33
4.2 Conditions to Obligations of the Buyer and the
Transitory Subsidiary.......................................... 33
4.3 Conditions to Obligations of the Company....................... 35
ARTICLE V - INDEMNIFICATION................................................ 35
5.1 Indemnification................................................ 35
5.2 Method of Asserting Claims..................................... 36
5.3 Survival....................................................... 37
5.4 Limitations.................................................... 37
ARTICLE VI - REGISTRATION RIGHTS........................................... 38
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PAGE
6.1 Registration of Shares......................................... 38
6.2 Incidental Registration........................................ 38
6.3 Limitations on Registration Rights............................. 40
6.4 Registration Procedures........................................ 40
6.5 Requirements of Company Stockholders........................... 41
6.6 Indemnification................................................ 42
6.7 Assignment of Rights........................................... 42
ARTICLE VII - DEFINITIONS.................................................. 43
ARTICLE VIII - MISCELLANEOUS............................................... 45
8.1 Press Releases and Announcements............................... 45
8.2 No Third Party Beneficiaries................................... 45
8.3 Entire Agreement............................................... 45
8.4 Succession and Assignment...................................... 45
8.5 Counterparts................................................... 45
8.6 Headings....................................................... 45
8.7 Notices........................................................ 45
8.8 Governing Law.................................................. 46
8.9 Amendments and Waivers......................................... 46
8.10 Severability................................................... 47
8.11 Expenses....................................................... 47
8.12 Specific Performance........................................... 47
8.13 Submission to Jurisdiction..................................... 48
8.14 Construction................................................... 48
8.15 Incorporation of Exhibits and Schedules........................ 48
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of June 24, 1998 by and among
FlexiInternational Software, Inc., a Delaware corporation (the "Buyer"),
Princess Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of the Buyer (the "Transitory Subsidiary"), and The Dodge Group,
Inc., a Delaware corporation (the "Company"). The Buyer, the Transitory
Subsidiary and the Company are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Transitory
Subsidiary into the Company. In such merger, the stockholders of the Company
will receive capital stock of the Buyer in exchange for their capital stock of
the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and
conditions of this Agreement, the Transitory Subsidiary shall merge with and
into the Company (with such merger referred to herein as the "Merger") at the
Effective Time (as defined below). From and after the Effective Time, the
separate corporate existence of the Transitory Subsidiary shall cease and the
Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time at which the
Company and the Transitory Subsidiary file the certificate of merger or other
appropriate documents prepared and executed in accordance with the relevant
provisions of the Delaware General Corporation Law (the "Certificate of Merger")
with the Secretary of State of the State of Delaware. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law.
1.2 THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxx and Xxxx LLP in Boston, Massachusetts, commencing at 9:00 a.m. local
time on June 24, 1998 or such other date, time and place as the Buyer and the
Company shall mutually agree (the "Closing Date").
1.3 ACTIONS AT THE CLOSING. At the Closing, (a) the
Company shall deliver to the Buyer and the Transitory Subsidiary the various
certificates, instruments and documents referred to in Section 4.2, (b) the
Buyer and the Transitory Subsidiary shall deliver to the Company the various
certificates, instruments and documents referred to in Section 4.3, (c) the
Company and the Transitory Subsidiary shall file with the Secretary of State of
the State of Delaware
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the Certificate of Merger, (d) the Buyer shall deliver a certificate for the
Initial Shares (as defined below) to a bank trust company or other entity
reasonably satisfactory to the Company appointed by the Buyer to act as the
exchange agent (the "Exchange Agent") in accordance with Section 1.7, (e) the
Buyer, the Indemnification Representatives (as defined therein) and the Escrow
Agent (as defined therein) shall execute and deliver the Escrow Agreement
attached hereto as EXHIBIT A (the "Escrow Agreement") and the Buyer shall
deliver to the Escrow Agent a certificate for the Escrow Shares (as defined
below) being placed in escrow on the Closing Date pursuant to Section 1.10, (f)
the Initial Bridge Note Holders and the Subsequent Bridge Note Holders (each as
defined below) shall deliver to the Buyer for cancellation the Initial Bridge
Notes and the Subsequent Bridge Notes (each as defined below), respectively,
pursuant to Section 1.17, and (h) the Buyer shall issue to the Initial Bridge
Note Holders the Note Repayment Shares (as defined below) in full payment of the
Initial Bridge Notes, and the Buyer shall issue to the Subsequent Bridge Note
Holders the Note Repayment Price (as defined below) in full payment of the
Subsequent Bridge Notes, each in accordance with Section 1.17.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at
any time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or the
Transitory Subsidiary, in order to consummate the transactions contemplated by
this Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of any Party or the
holder of any of the following securities:
(a) Each share of capital stock of the Company shall be
converted as follows:
(1) Each share of common stock, $0.01 par value
per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than Company Common Stock owned
beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares (as
defined below) and Company Common Stock held in the Company's treasury) shall be
converted into and represent the right to receive $.00001.
(2) Each share of Series A-1 Convertible
Preferred Stock, $.01 par value per share, of the Company ("Series A-1
Preferred") issued and outstanding immediately prior to the Effective Time
(other than Series A-1 Preferred owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares and Series A-1 Preferred held in the
Company's treasury) shall be converted into and represent the right to receive
$.00001.
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(3) Each share of Series A-2 Convertible
Preferred Stock, $.01 par value per share, of the Company ("Series A-2
Preferred") issued and outstanding immediately prior to the Effective Time
(other than Series A-2 Preferred owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares and Series A-2 Preferred held in the
Company's treasury) shall be converted into and represent the right to receive
$.00001.
(4) Each share of Series B Convertible Preferred
Stock, $.01 par value per share, of the Company ("Series B Preferred") issued
and outstanding immediately prior to the Effective Time (other than Series B
Preferred owned beneficially by the Buyer or the Transitory Subsidiary,
Dissenting Shares and Series B Preferred held in the Company's treasury) shall
be converted into and represent the right to receive $.00001.
(5) Each share of Series C Convertible Preferred
Stock, $.01 par value per share, of the Company ("Series C Preferred") issued
and outstanding immediately prior to the Effective Time (other than Series C
Preferred owned beneficially by the Buyer or the Transitory Subsidiary,
Dissenting Shares (as defined below) and Series C Preferred held in the
Company's treasury) shall be converted into and represent the right to receive
$.00001.
(6) Each share of Series D Convertible Preferred
Stock, $.01 par value per share, of the Company ("Series D Preferred") issued
and outstanding immediately prior to the Effective Time (other than Series D
Preferred owned beneficially by the Buyer or the Transitory Subsidiary,
Dissenting Shares and Series D Preferred held in the Company's treasury) shall
be converted into and represent the right to receive $.00001.
(7) Each share of Series E Convertible Preferred
Stock, $.01 par value per share, of the Company ("Series E Preferred" and
together with the Series X- 0 Xxxxxxxxx, Series A-2 Preferred, Series B
Preferred, Series C Preferred and Series D Preferred, the "Company Preferred
Stock") issued and outstanding immediately prior to the Effective Time (other
than Series E Preferred owned beneficially by the Buyer or the Transitory
Subsidiary, Dissenting Shares and Series E Preferred held in the Company's
treasury) shall be converted into and represent the right to receive (subject to
the provisions of Section 1.10) such number of shares of Common Stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock") as is equal to the Series E
Conversion Ratio. The "Series E Conversion Ratio" shall be equal to a fraction,
the numerator of which shall be 591,781 and the denominator of which shall be
the number of shares of outstanding Series E Preferred immediately prior to the
Effective Time (other than Series E Preferred owned beneficially by the Buyer or
the Transitory Subsidiary and Series E Preferred held in the Company's
treasury).
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Stockholders of record of the Company ("Company Stockholders") shall be entitled
to receive immediately 85.41% of the shares of Buyer Common Stock into which
their Company Shares (as defined below) were converted pursuant to this Section
1.5(a) (the "Initial Shares"); the remaining 14.59% of the shares of Buyer
Common Stock into which Company Shares were converted pursuant to this Section
1.5(a) (the "Escrow Shares") shall be deposited in escrow pursuant to Section
1.10 and shall be held and disposed of in accordance with the terms of the
Escrow Agreement. The Company Common Stock and the Company Preferred Stock shall
together be referred to herein as the "Company Shares." The Initial Shares and
the Escrow Shares shall together be referred to herein as the "Merger Shares."
(b) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
(c) Each share of common stock, $0.01 par value per
share, of the Transitory Subsidiary issued and outstanding immediately prior to
the Effective Time shall be converted into and thereafter evidence 70,000 shares
of common stock, $0.01 par value per share, of the Surviving Corporation.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares"
means Company Shares held as of the Effective Time by a Company Stockholder who
has not voted such Company Shares in favor of the adoption of this Agreement and
the Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the Delaware General Corporation
Law. Dissenting Shares shall not be converted into or represent the right to
receive Merger Shares, unless such Company Stockholder shall have forfeited his
right to appraisal under the Delaware General Corporation Law or withdrawn, with
the consent of the Company, his demand for appraisal. If such Company
Stockholder has so forfeited or withdrawn his right to appraisal of Dissenting
Shares, then (i) as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Shares issuable in respect of such
Company Shares pursuant to Section 1.5(a), and (ii) promptly following the
occurrence of such event, the Buyer shall deliver to the Exchange Agent a
certificate representing 85.41% of the Merger Shares to which such holder is
entitled pursuant to Section 1.5(a) (which shares shall be considered Initial
Shares for all purposes of this Agreement) and shall deliver to the Escrow Agent
a certificate representing the remaining 14.59% of the Merger Shares to which
such holder is entitled pursuant to Section 1.5(a) (which shares shall be
considered Escrow Shares for all purposes of this Agreement).
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(b) The Company shall give the Buyer (i) prompt notice of
any written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation Law. The
Company shall not, except with the prior written consent of the Buyer, make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 EXCHANGE OF SHARES
(a) Prior to the Effective Time, the Buyer shall appoint
the Exchange Agent to effect the exchange for the Initial Shares or cash
consideration of certificates ("Certificates") that, immediately prior to the
Effective Time, represented Company Shares converted into Merger Shares or the
right to receive cash consideration pursuant to Section 1.5(a), as the case may
be, (including any Company Shares referred to in the last sentence of Section
1.6(a)). On the Closing Date, the Buyer shall deliver to the Exchange Agent, in
trust for the benefit of holders of Certificates, a stock certificate (issued in
the name of the Exchange Agent or its nominee) representing the Initial Shares
and a check for the aggregate amount of such cash consideration, as described in
Section 1.5(a). As soon as practicable after the Effective Time, the Buyer shall
cause the Exchange Agent to send a notice and a transmittal form to each holder
of a Certificate (other than those surrendered and paid for at the Closing)
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such Certificate in exchange for the Initial
Shares or cash consideration issuable pursuant to Section 1.5(a). Each holder of
a Certificate, upon proper surrender thereof to the Exchange Agent in accordance
with the instructions in such notice, shall be entitled to receive in exchange
therefor (subject to any taxes required to be withheld) the Initial Shares or
cash consideration issuable pursuant to Section 1.5(a). Until properly
surrendered, each such Certificate shall be deemed for all purposes to evidence
only the right to receive the Initial Shares or cash consideration issuable
pursuant to Section 1.5(a). Holders of Certificates shall not be entitled to
receive certificates for the Initial Shares or cash consideration to which they
would otherwise be entitled until such Certificates are properly surrendered.
(b) If any Initial Shares are to be issued in the name of
a person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance of such
Initial Shares that (i) the Certificate so surrendered shall be transferable,
and shall be properly assigned, endorsed or accompanied by appropriate stock
powers, (ii) such transfer shall otherwise be proper and (iii) the person
requesting such transfer shall pay to the Exchange Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or
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are not required to be paid. Notwithstanding the foregoing, neither the Exchange
Agent nor any Party shall be liable to a holder of Company Shares for any
Initial Shares or cash consideration issuable to such holder pursuant to Section
1.5(a) that are delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Buyer shall issue
in exchange for such lost, stolen or destroyed Certificate the Initial Shares or
cash consideration issuable in exchange therefor pursuant to Section 1.5(a). The
Board of Directors of the Buyer may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Buyer a bond in such sum as it may direct as
indemnity against any claim that may be made against the Buyer with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Promptly following the date which is six months after
the Closing Date, the Exchange Agent shall return to the Buyer all Initial
Shares and cash consideration in its possession, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Buyer and, subject to applicable abandoned property, escheat
and similar laws, receive in exchange therefor the Initial Shares or cash
consideration issuable with respect thereto pursuant to Section 1.5(a).
1.8 DIVIDENDS. No dividends or other distributions that
are payable to the holders of record of Buyer Common Stock as of a date on or
after the Closing Date shall be paid to former Company Stockholders entitled by
reason of the Merger to receive Initial Shares until such holders surrender
their Certificates in accordance with Section 1.7. Upon such surrender, the
Buyer shall pay or deliver to the persons in whose name the certificates
representing such Initial Shares are issued any dividends or other distributions
that are payable to the holders of record of Buyer Common Stock as of a date on
or after the Closing Date and which were paid or delivered between the Effective
Time and the time of such surrender; provided that no such person shall be
entitled to receive any interest on such dividends or other distributions.
1.9 FRACTIONAL SHARES/OTHER CONSIDERATION.
(a) No certificates or script representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Initial Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional
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Initial Shares that would otherwise be issued, each former Company Stockholder
that would have been entitled to receive a fractional Initial Share shall, upon
proper surrender of such person's Certificates, receive such whole number of
Initial Shares as is equal to the precise number of Initial Shares to which such
person would be entitled, rounded up or down to the nearest whole number (with a
fractional interest equal to .5 rounded up to the nearest whole number).
(b) No fraction of a cent shall be issued to any Company
Stockholder upon the surrender or exchange of a Certificate which, prior to the
Effective Time, represented shares of Company Common Stock, Series A-1
Preferred, Series A-2 Preferred, Series B Preferred, Series C Preferred or
Series D Preferred, but rather, any consideration otherwise payable upon
surrender for exchange of such Certificate shall be rounded up to the nearest
whole cent.
1.10 ESCROW.
(a) On the Closing Date, the Buyer shall deliver to the
Escrow Agent a certificate (issued in the name of the Escrow Agent or its
nominee) representing the Escrow Shares, as described in Section 1.5(a), for the
purpose of securing the indemnification obligations of the Company Stockholders
set forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow Shares
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes and in accordance with the
terms of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of
the Merger by the Company Stockholders shall constitute approval of the Escrow
Agreement and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares in escrow and the appointment of
the Indemnification Representatives.
1.11 OPTIONS AND WARRANTS.
(a) As of the Effective Time, all options to purchase
Company Shares issued by the Company pursuant to its stock option plans or
otherwise ("Options") shall be assumed by the Buyer. Immediately after the
Effective Time, each Option outstanding immediately prior to the Effective Time
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Option at the Effective Time, the
consideration (with each such unit of consideration issuable with respect to one
Company Share being referred to herein as a "Unit") which would have been
issuable with respect to the number of Company Shares subject to the unexercised
portion of such Option had such Company Shares been outstanding at the Effective
Time. The exercise price per Unit of each such assumed
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Option shall be equal to the exercise price of such Option immediately prior to
the Effective Time.
(b) As soon as practicable after the Effective Time, the
Buyer or the Surviving Corporation shall deliver to the holders of Options
appropriate notices setting forth such holders' rights pursuant to such Options,
as amended by this Section 1.11, and the agreements evidencing such Options
shall continue in effect on the same terms and conditions (subject to the
amendments provided for in this Section 1.11 and such notice).
(c) On the Closing Date, the Buyer shall grant incentive
stock options to purchase an aggregate of 50,000 shares of Buyer Common Stock
(the "New Employee Options") pursuant to the 1997 Stock Incentive Plan of the
Buyer (the "Buyer Option Plan") to the individuals listed in Schedule 1.11(c)
attached hereto. The Buyer shall grant each individual listed on Schedule
1.11(c) a New Employee Option to purchase the number of shares of Buyer Common
Stock set forth opposite such individual's name on Schedule 1.11(c) at a per
share exercise price equal to the last reported sale price of the Buyer Common
Stock on the Nasdaq National Market on the Closing Date (the "New Option
Exercise Price"). Each New Employee Option shall vest in five equal annual
installments commencing on the first anniversary of the Closing Date and shall
otherwise be governed by the terms of the Buyer Option Plan.
(d) On the Closing Date, the Buyer shall grant incentive
stock options to purchase an aggregate of 50,000 shares of Buyer Common Stock
(the "New Performance Options") pursuant to the Buyer Option Plan to the
individuals listed on Schedule 1.11(d) attached hereto. The Buyer shall grant
each individual listed on Schedule 1.11(d) a New Performance Option to purchase
the number of shares of Buyer Common Stock set forth opposite such individual's
name on Schedule 1.11(d) at a per share exercise price equal to the New Option
Exercise Price. Each New Performance Option shall vest in full on the eight year
anniversary of the Closing Date, provided, however, that each New Performance
Option will provide that, if the Company's total international revenues for the
fiscal year ending December 31, 1998, determined in accordance with GAAP (as
defined below) applied on a consistent basis, is equal to or exceeds a target
level to be determined by the Buyer and the officers of the UK Subsidiary
following the Closing, the vesting of each New Performance Option shall
accelerate such that each New Performance Option shall vest in three equal
annual installments commencing on the first anniversary of the Closing Date.
Each New Performance Option shall otherwise be governed by the terms of the
Buyer Option Plan.
(e) On the Closing Date, the Buyer shall grant
non-qualified stock options to purchase an aggregate of 50,000 shares of Buyer
Common Stock (the "Management Options") pursuant to the Buyer Option Plan to the
individuals listed
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on Schedule 1.11(e) attached hereto. The Buyer shall grant each individual
listed on Schedule 1.11(e) a Management Option to purchase the number of shares
of Buyer Common Stock set forth opposite such individual's name on Schedule
1.11(e) at a per share exercise price of $.01. Each Management Option shall vest
in full on the nine month anniversary of Closing Date and shall otherwise be
governed by the terms of the Buyer Option Plan.
(f) The Company shall cause the termination, as of the
Effective Time, of any outstanding warrants to purchase Company Shares (the
"Warrants") which remain unexercised.
(g) The Company shall obtain, prior to the Closing, the
consent from each holder of a Warrant to the termination of such Warrant
pursuant to this Section 1.11 (unless such consent is not required under the
terms of the applicable Warrant).
1.12 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the Certificate
of Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to the name of the Company and the number of shares of common stock that the
corporation shall be authorized to issue shall be changed to 7,000,000.
1.13 BY-LAWS. The By-laws of the Surviving Corporation
shall be the same as the By-laws of the Transitory Subsidiary immediately prior
to the Effective Time, except that the name of the corporation set forth therein
shall be changed to the name of the Company.
1.14 DIRECTORS AND OFFICERS. The directors of the
Transitory Subsidiary shall become the directors of the Surviving Corporation as
of the Effective Time. The officers of the Transitory Subsidiary shall become
the officers of the Surviving Corporation as of the Effective Time.
1.15 NO FURTHER RIGHTS. From and after the Effective Time,
no Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.16 CLOSING OF TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent, they shall be
cancelled and exchanged for Initial Shares in accordance with Section 1.5(a),
subject to Section 1.10 and to applicable law in the case of Dissenting Shares.
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1.17 PAYMENT OF BRIDGE NOTES.
(a) Immediately following the Effective Time, (i) the
Buyer shall issue to the holders (the "Initial Bridge Note Holders") of the
Series A 7% Demand Notes of the Company in an aggregate principal amount of
$1,000,000 issued by the Company in February and March 1997 (the "First Initial
Bridge Notes") and the Series B 10% Demand Notes of the Company in an aggregate
principal amount of $750,000 issued by the Company in February 1998 (together
with the First Initial Bridge Notes, the "Initial Bridge Notes"), in full
payment of such Initial Bridge Notes, certificates representing an aggregate of
271,719 shares of Buyer Common Stock (the "Note Repayment Shares") in the
denominations specified on Schedule 1.17(a) attached hereto, and (ii) the
Initial Bridge Note Holders shall deliver the Initial Bridge Notes to the Buyer
for cancellation.
(b) Immediately following the Effective Time, (i) the
Buyer shall pay to the holders (the "Subsequent Bridge Note Holders") of the 12%
Demand Notes of the Company in an aggregate principal amount of $750,000 issued
by the Company on June 4, 1998 (the "Subsequent Bridge Notes"), in full payment
of such Subsequent Bridge Notes, an aggregate of $753,999.99 (the "Note
Repayment Price") in the denominations specified on Schedule 1.17(b) attached
hereto, and (ii) the Subsequent Bridge Note Holders shall deliver the Subsequent
Bridge Notes to the Buyer for cancellation.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The Disclosure
Schedule shall be initialed by the Parties and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify only the corresponding paragraph in this Article II.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the state of its incorporation. The Company
is duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the assets, business, financial
condition or results of operation of the Company and its Subsidiaries, taken as
a whole. The Company has all requisite corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Company has furnished to
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the Buyer true and complete copies of its Restated Certificate of Incorporation
and By-laws, each as amended and as in effect on the date hereof. The Company is
not in default under or in violation of any provision of its Restated
Certificate of Incorporation or By-laws.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 28,000,000 shares of Company Common Stock, of which
598,291 shares are issued and outstanding and no shares are held in the treasury
of the Company, (ii) 16,817,181 shares of Company Preferred Stock, of which (A)
143,750 shares have been designated as Series A-1 Preferred, all of which shares
are issued and outstanding and none of which shares are held in the treasury of
the Company, (B) 143,750 shares have been designated as Series A-2 Preferred,
all of which shares are issued and outstanding and none of which shares are held
in the treasury of the Company, (C) 560,897 shares have been designated as
Series B Preferred, all of which shares are issued and outstanding and none of
which shares are held in the treasury of the Company, (D) 6,249,997 shares have
been designated as Series C Preferred, all of which shares are issued and
outstanding and none of which shares are held in the treasury of the Company,
(E) 2,500,000 shares have been designated as Series D Preferred, all of which
shares are issued and outstanding and none of which shares are held in the
treasury of the Company and (F) 7,218,787 shares have been designated as Series
E Preferred, of which 7,172,414 shares are issued and outstanding and none of
which shares are held in the treasury of the Company. Section 2.2 of the
Disclosure Schedule sets forth a complete and accurate list of (i) all
stockholders of the Company, indicating the number of Company Shares held by
each stockholder, and (ii) all holders of Options and Warrants, indicating the
number of Company Shares subject to each Option and Warrant. All of the issued
and outstanding Company Shares are, and all Company Shares that may be issued
upon exercise of Options and Warrants will be, duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. There are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which the Company is a party or which are binding upon the Company providing
for the issuance, disposition or acquisition of any of its capital stock, other
than the Options and Warrants listed in Section 2.2 of the Disclosure Schedule.
There are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company. The Company is not a party to any
agreements, voting trusts, proxies or understandings with respect to the voting,
or registration under the Securities Act, of any Company Shares, and the Company
is not aware of any such agreements, voting trusts, proxies or understandings
among the Company Stockholders.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement and the performance by the Company of this Agreement and the
consummation by the
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16
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company,
including the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by each of (i) the outstanding Company Shares
entitled to vote on this Agreement and the Merger voting together as a class and
(ii) the Company Preferred Stock, other than the Series A-1 Preferred and the
Series A-2 Preferred, voting together as a class (collectively, the "Requisite
Stockholder Approval"). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
2.4 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act and any applicable state
securities laws, and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the charter or By-laws of the Company, (b) require on the part of
the Company or any corporation with respect to which the Company, directly or
indirectly, has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors (a "Subsidiary") any filing with, or any
permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"), (c) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, (d) result in
the imposition of any Security Interest upon any assets of the Company or any
Subsidiary or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any Subsidiary or any of their properties
or assets. For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge, or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount) ("Ordinary Course of Business") of the Company and not
material to the Company.
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2.5 SUBSIDIARIES. Section 2.5 of the Disclosure Schedule
sets forth for each Subsidiary, including The Dodge Group, Limited (the "UK
Subsidiary") (a) its name, any changes of name since its date of incorporation
and jurisdiction of incorporation, (b) the number of shares of authorized
capital stock of each class of its capital stock, (c) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof and the number of shares held by each such holder, (d) the number of
shares of its capital stock held in treasury (if any), (e) its directors and
officers and (f) with respect to the UK Subsidiary, its registered office and
registered number. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the assets,
business, financial condition or results of operation of the Company and its
Subsidiaries, taken as a whole. Each Subsidiary has all requisite corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Company has delivered to the
Buyer correct and complete copies of the charter and By-laws of each Subsidiary,
as amended to date, and, in the case of the UK Subsidiary, the Memorandum and
Articles of Association, Certificate of Incorporation or Change of Name, each as
amended to date. No Subsidiary is in default under or in violation of any
provision of its charter or By-laws. All of the issued and outstanding shares of
capital stock of each Subsidiary are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. All shares of each Subsidiary
that are held of record or owned beneficially by either the Company or any
Subsidiary are held or owned free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company or any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary.
There are no out-standing stock appreciation, phantom stock or similar rights
with respect to any Subsidiary. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary. The Company does not control directly or indirectly or have any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association which is not a Subsidiary.
2.6 FINANCIAL STATEMENTS. The Company has provided to the
Buyer (a) the audited consolidated balance sheets and statements of income,
changes in stockholders' equity and cash flows for each of the last three fiscal
years for the Company and the Subsidiaries; and (b) the unaudited consolidated
balance sheet and statement of income as of and for the quarter ended as of
March 31, 1998 (the "Most Recent Fiscal Quarter End"). Such consolidated
financial statements (collectively, the
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"Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods covered thereby, fairly present the financial condition,
results of operations and cash flows of the Company and the Subsidiaries as of
the respective dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the Subsidiaries;
PROVIDED, HOWEVER, that the Financial Statements referred to in clause (b) above
are subject to normal recurring year-end adjustments (which will not be
material) and do not include footnotes.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent
Fiscal Quarter End, (a) there has not been any material adverse change in the
assets, business, financial condition or results of operations of the Company or
any Subsidiary, nor has there occurred any event or development which could
reasonably be foreseen to result in such a material adverse change in the
future, and (b) neither the Company nor any Subsidiary has taken any of the
following actions:
(1) issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any stock
of any class or any other securities or any rights, warrants or options to
acquire any such stock or other securities (except pursuant to the conversion or
exercise of convertible securities, Options or Warrants outstanding on the Most
Recent Fiscal Quarter End), or amend any of the terms of any such convertible
securities, Options or Warrants;
(2) split, combine or reclassify any shares of
its capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(3) create, incur or assume any debt not
currently outstanding (including obligations in respect of capital leases);
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person or
entity; or make any loans, advances or capital contributions to, or investments
in, any other person or entity;
(4) enter into, adopt or amend any Employee
Benefit Plan (as defined below) or any employment or severance agreement or
arrangement of the type described in Section 2.22(j) or (except for normal
increases in the Ordinary Course of Business) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
benefit not required by the terms in effect on the Most Recent Fiscal Quarter
End of any existing Employee Benefit Plan (as defined below);
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(5) acquire, sell, lease, encumber or dispose of
any assets or property (including without limitation any shares or other equity
interests in or securities of any Subsidiary or any corporation, partnership,
association or other business organization or division thereof), other than
purchases and sales of assets in the Ordinary Course of Business;
(6) amend its charter, By-laws or Memorandum or
Articles of Association;
(7) change in any material respect its
accounting methods, principles or practices, except insofar as may be required
by a generally applicable change in GAAP;
(8) discharge or satisfy any Security Interest
or pay any obligation or liability other than in the Ordinary Course of
Business;
(9) mortgage or pledge any of its property or
assets or subject any such assets to any Security Interest;
(10) sell, assign, transfer or license any
Intellectual Property (as defined below), other than in the Ordinary Course of
Business;
(11) enter into, amend, terminate, take or omit
to take any action that would constitute a violation of or default under, or
waive any rights under, any material contract or agreement;
(12) make or commit to make any capital
expenditure in excess of $20,000 per item;
(13) take any action or fail to take any action
permitted by this Agreement with the knowledge that such action or failure to
take action would result in (i) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue in any material respect or
(ii) any of the conditions to the Merger set forth in Article IV not being
satisfied; or
(14) agree in writing or otherwise to take any of
the foregoing actions.
2.8 UNDISCLOSED LIABILITIES. None of the Company and its
Subsidiaries has any liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or to become
due), except for (a) liabilities shown on the balance sheet referred to in
clause (b) of Section 2.6 (the "Most Recent Balance Sheet"), (b) liabilities
which have arisen since the Most Recent Fiscal Quarter End in the Ordinary
Course of Business and which
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are similar in nature and amount to the liabilities which arose during the
comparable period of time in the immediately preceding fiscal period and (c)
contractual liabilities incurred in the Ordinary Course of Business which are
not required by GAAP to be reflected on a balance sheet.
2.9 TAX MATTERS.
(a) Each of the Company and the Subsidiaries has filed
all Tax Returns (as defined below) that it was required to file and all such Tax
Returns were correct and complete in all material respects. Each of the Company
and the Subsidiaries has paid all Taxes (as defined below) that are shown to be
due on any such Tax Returns. The unpaid Taxes of the Company and the
Subsidiaries for tax periods through the date of the Most Recent Balance Sheet
do not exceed the accruals and reserves for Taxes set forth on the Most Recent
Balance Sheet. Neither the Company nor any Subsidiary has any actual or
potential liability for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities that included
the Company or any Subsidiary during a prior period) other than the Company and
the Subsidiaries. All Taxes that the Company or any Subsidiary is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity, except
for any Taxes identified in Section 2.9(a) of the Disclosure Schedule, which
Taxes have been duly withheld or collected but are being contested by the
Company or any Subsidiary in good faith. For purposes of this Agreement, "Taxes"
means all taxes, charges, fees, imposts, rates, dues, levies or other similar
assessments or liabilities, including without limitation income, corporation,
chargeable gains, pay as you earn, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, customs, import, sales,
use, stamp, stamp duty reserve, transfer, capital transfer, inheritance,
withholding, employment, national insurance contribution, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments,
demands or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof. For purposes of this
Agreement, "Tax Returns" means all reports, returns, declarations, statements or
other information required to be supplied to a taxing authority in connection
with Taxes.
(b) The Company has delivered to the Buyer correct and
complete copies of all U.S. federal income and United Kingdom Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by any of the Company or any Subsidiary since December 31, 1994. The U.S.
federal income Tax Returns of the Company have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through 1996. No examination or audit of any Tax Returns of the
Company or any Subsidiary by any
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Governmental Entity is currently in progress or, to the knowledge of the Company
and the Subsidiaries, threatened or contemplated. Neither the Company nor any
Subsidiary has waived any statute of limitations with respect to Taxes or agreed
to an extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any Subsidiary is a
"consenting corporation" within the meaning of Section 341(f) of the Internal
Revenue Code of 1986 (as amended, the "Code") and none of the assets of the
Company or the Subsidiaries are subject to an election under Section 341(f) of
the Code. Neither the Company nor any Subsidiary has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
Neither the Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement.
(d) Neither the Company nor any Subsidiary is or has ever
been a member of an "affiliated group" of corporations (within the meaning of
Section 1504 of the Code), other than a group of which only the Company and the
Subsidiaries are members. Neither the Company nor any Subsidiary has made an
election under Treasury Reg. Section 1.1502-20(g). Neither the Company nor any
Subsidiary is or has been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
(e) The UK Subsidiary has, within the requisite time
limits, duly filed all Tax Returns, given all notices, and supplied all other
information required to be supplied to the Inland Revenue HM Commissioners of
Custom and Excise and/or any other competent fiscal authority in any part of the
world and all such information returns and notices were when given or supplied
and are now accurate in all material respects and made on a proper basis and are
not, so far as the Company and the UK Subsidiary are aware, likely to be the
subject of any dispute with any of the relevant authorities concerned. The UK
Subsidiary has not entered into or been a party to any scheme or arrangement
designed partly or wholly for the purposes of avoiding or deferring taxation,
and no scheme or transaction of any nature has been carried out by or proposed
in relation to the UK Subsidiary which has given rise or could give rise to a
charge of taxation under Part XVII of the Income and Corporation Taxes Xxx 0000.
2.10 ASSETS. Each of the Company and the Subsidiaries owns
or leases all tangible assets necessary for the conduct of its businesses as
presently conducted. Each such tangible asset is free from material defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear). No asset of
the Company (tangible or intangible) is subject to any Security Interest.
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2.11 OWNED REAL PROPERTY. Neither the Company nor any
Subsidiary owns or at any time has owned any real property.
2.12 INTELLECTUAL PROPERTY. Each of the Company and the
Subsidiaries owns, licenses or otherwise has such rights to use, sell or license
of all intellectual property rights, including without limitation all patents,
patent applications, patent rights, trademarks, trademark applications, trade
names, service marks, service xxxx applications, copyrights, copyright
registrations, computer programs, content and other computer software (including
CD-ROMs) in source code and/or object code forms, technology, know-how, trade
secrets, proprietary processes and formulae (collectively, "Intellectual
Property") used in the conduct of the business of the Company or such Subsidiary
as currently conducted. Set forth in Section 2.12 of the Disclosure Schedule is
a true and complete listing of (i) all software programs currently marketed or
used by the Company or any Subsidiary, whether owned by the Company or such
Subsidiary, or licensed from others, indicating which are owned by the Company
or any Subsidiary and, for any that are licensed from others, the identity of
the licensor, (ii) all registered trademarks and pending applications for
trademark registrations of the Company or any Subsidiary, (iii) trademarks that
are used in conjunction with software products currently marketed by the Company
or any Subsidiary and are licensed from third parties, indicating the identity
of the licensor, (iv) registered copyrights and pending applications for
copyright registration of the Company or any Subsidiary and (v) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations. The Company has delivered or made available
to the Buyer correct and complete copies of all such patents, registrations and
applications and all licenses and agreements (as amended to date) related to the
foregoing which are currently in effect and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership, of, and any claims or disputes relating to, each such item. The
rights of the Company and the Subsidiaries to all such Intellectual Property are
in full force. Except as set forth in Section 2.12 of the Disclosure Schedule:
(a) the Company or the respective Subsidiary has the
rights to bring actions for the infringement of its rights to the Intellectual
Property necessary to protect such rights in the Intellectual Property and the
consummation of the transactions contemplated hereby will not (i) give rise to
any right of termination, amendment, renegotiation, cancellation or acceleration
with respect to any license or other agreement to use, sell or license such
Intellectual Property or (ii) in any way impair any currently existing right of
the Company or such Subsidiary, to use, sell or license or to bring any action
for the infringement of any of the rights of the Company or such Subsidiary, to
the Intellectual Property or any portion thereof;
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(b) none of the former or present employees, officers or
directors of, or consultants to, the Company or any Subsidiary holds any right,
title or interest, directly or indirectly, in whole or in part, in or to any
Intellectual Property owned by the Company or any Subsidiary; neither the
Company nor any Subsidiary licenses from any present or, to the Company's or any
Subsidiary's knowledge, former employee, officer, director of, or consultant to,
the Company or any Subsidiary any Intellectual Property which is necessary for
the business of the Company or any Subsidiary as presently conducted; neither
the Company nor any Subsidiary is a party to any employment contract, patent
disclosure agreement or any other contract or agreement with any employee or
consultant of the Company or any Subsidiary relating to any Intellectual
Property other than confidentiality and assignment of inventions agreements
disclosed pursuant to Section 2.21 below;
(c) each material license and other material agreement
with respect to the use of any Intellectual Property currently used in the
Company's or any Subsidiary's business is a valid, legally binding obligation of
the Company or such Subsidiary and, to the best knowledge of the Company and
such Subsidiary, all other parties thereto, enforceable in accordance with its
terms, and except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally,
and neither the Company nor such Subsidiary is in breach, violation or default
thereof (and, to the knowledge of the Company and such Subsidiary, no event has
occurred which with the giving of notice or the passage of time or both would
constitute such a breach, violation or default of give rise to any right or
termination, amendment, renegotiation, cancellation or acceleration under any
such license or agreement), and the Company and such Subsidiary has no reason to
believe that any other party to any such license or other agreement is in
breach, violation or default thereof;
(d) the manufacture, marketing, use, sale or licensure of
any Intellectual Property in the manner currently used, sold or licensed by the
Company or any Subsidiary does not violate any license or agreement between the
Company or such Subsidiary and any third party or, to the knowledge of the
Company and such Subsidiary, infringe on the rights of any person, nor has such
an infringement been alleged within three years preceding the date of this
Agreement (other than such as have been resolved); there is not any pending or,
to the knowledge of the Company and such Subsidiary, threatened claim or
litigation challenging or questioning the validity, ownership or right to use,
sell, license or dispose of any Intellectual Property in the manner in which
currently used, sold, licensed or disposed of by the Company or such Subsidiary,
nor is there a valid basis for any such claim or litigation, nor has the Company
or any Subsidiary received any notice asserting that the proposed use, sale,
license or disposition by the Company or any Subsidiary of any of the
Intellectual Property of the Company or any Subsidiary conflicts or will
conflict with the rights of any other party, nor is there a valid basis for any
such assertion; and
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neither the Company nor any Subsidiary has asserted any claim of infringement,
misappropriation or misuse within the past three years; and
(e) Neither the Company nor any Subsidiary has agreed to
indemnify any person or entity for or against any infringement, misappropriation
or other conflict with respect to any item of Intellectual Property.
(f) Neither the Company nor any Subsidiary has deposited
in an escrow account for the benefit of, or delivered to, any third party the
source code for any of its software, and, neither the Company nor any Subsidiary
is obligated to do so.
(g) All of the software developed by the Company or its
Subsidiaries for sale or license to third parties and, to the Company's
knowledge, all of the software used by the Company or its Subsidiaries is "year
2000 compliant" in that such software (x) is designed to be used prior to,
during and after the calendar year 2000 A.D. and (y) will operate during all
times without error relating to date (provided that source data from any feeder
systems contain complete and accurate century data).
2.13 REAL PROPERTY LEASES. Section 2.13 of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
the Company or any Subsidiary and lists the term of such lease, any extension
and expansion options, and the rent payable thereunder. The Company has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) listed in Section 2.13 of the Disclosure Schedule. With
respect to each lease and sublease listed in Section 2.13 of the Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable and is in full force and effect;
(b) the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect prior to the
Closing;
(c) neither the Company nor any Subsidiary and, to the
Company's knowledge, no other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(d) there are no material disputes, oral agreements,
forbearance or forfeiture programs in effect as to the lease or sublease;
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(e) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities; and
(g) no construction, alteration or other leasehold
improvements work with respect to any facility leased or subleased by the
Company or any Subsidiary remains to be paid or performed by the Company or any
Subsidiary.
2.14 CONTRACTS. Section 2.14 of the Disclosure Schedule
lists the following written arrangements (including without limitation written
agreements) to which the Company or any Subsidiary is a party and which is
currently in effect:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $20,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
products or other personal property or for the furnishing or receipt of services
(i) which calls for performance over a period of more than one year, (ii) which
involves more than the sum of $20,000, or (iii) in which the Company or any
Subsidiary has granted manufacturing rights, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
(c) any written arrangement establishing a partnership or
joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $20,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible or intangible;
(e) any written arrangement concerning confidentiality,
nonsolicitation or noncompetition (other than the Company's standard form of
confidentiality, nonsolicitation and noncompetition agreement with its
employees, a copy of which has been delivered to the Buyer);
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(f) any written arrangement involving any of the Company
Stockholders or their affiliates ("Affiliates"), as defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(g) any other written arrangement (or group of related
written arrangements) either involving more than $20,000 or not entered into in
the Ordinary Course of Business.
The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.14 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid, binding and enforceable and is in full
force and effect; (ii) the written arrangement will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
and (iii) no party is in breach or default in any material respect, and no event
has occurred which with notice or lapse of time would constitute such a breach
or default or permit termination, modification, or acceleration, under the
written arrangement. Neither the Company nor any Subsidiary is a party to any
oral contract, agreement or other arrangement which, if reduced to written form,
would be required to be listed in Section 2.14 of the Disclosure Schedule under
the terms of this Section 2.14.
2.15 ACCOUNTS RECEIVABLE. All accounts receivable of the
Company and the Subsidiaries reflected on the Most Recent Balance Sheet are
valid receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. All accounts receivable reflected in the financial or accounting records
of the Company that have arisen since the Most Recent Fiscal Quarter End are
valid receivables subject to no setoffs or counterclaims and are collectible,
net of a reserve for bad debts in an amount proportionate to the reserve shown
on the Most Recent Balance Sheet.
2.16 POWERS OF ATTORNEY. There are no outstanding powers
of attorney executed on behalf of the Company or any Subsidiary.
2.17 INSURANCE. Section 2.17 of the Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company or any
Subsidiary has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past three years:
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(a) the name of the insurer, the name of the policyholder
and the name of each covered insured;
(b) the policy number and the period of coverage;
(c) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(d) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
(i) Each such insurance policy is enforceable and in full force and effect; (ii)
such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing; (iii) neither the Company nor any Subsidiary is in
breach or default in any material respect (including with respect to the payment
of premiums or the giving of notices) under such policy, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration, under such
policy; and (iv) neither the Company nor any Subsidiary has received any notice
from the insurer disclaiming coverage or reserving rights with respect to a
particular claim or such policy in general. The Company and the Subsidiaries,
taken as a whole, have not incurred more than $20,000 of losses, damages,
expenses and liabilities covered by such insurance policies for which they have
not properly asserted claims under such policies.
2.18 LITIGATION. Section 2.18 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any unsatisfied judgment,
order, decree, stipulation or injunction and (b) any claim, complaint, action,
suit, proceeding, demand, hearing or investigation of or in any Governmental
Entity or before any arbitrator to which the Company or any Subsidiary is a
party or, to the knowledge of the Company, is threatened to be made a party.
None of the complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2.18 of the Disclosure Schedule could have a
material adverse effect on the assets, business, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole.
2.19 PRODUCT WARRANTY. No product manufactured, sold,
leased, licensed or delivered by the Company or any Subsidiary is subject to any
guaranty, warranty, right of return or other indemnity beyond the applicable
standard terms and conditions of sale or lease, which are set forth in Section
2.19 of the Disclosure Schedule. Section 2.19 of the Disclosure Schedule sets
forth the aggregate expenses incurred by the Company and the Subsidiaries in
fulfilling their obligations under their guaranty, warranty, right of return and
indemnity provisions during each of the fiscal years and the interim period
covered by the Financial Statements; and neither
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the Company nor any Subsidiary knows of any reason why such expenses relating to
products marketed, sold or licensed by the Company (in the form in which such
products have been marketed, sold or licensed at or before the Effective Time)
should significantly increase as a percentage of sales in the future.
2.20 EMPLOYEES AND CONSULTANTS. Section 2.20 of the
Disclosure Schedule contains a list of all employees of, and consultants to, the
Company and each Subsidiary, along with the position and the annual rate of
compensation of each such person and, in the case of employees of the UK
Subsidiary, the notice period and date of commencement of continuous employment
for the purposes of the Employment Rights Act of 1996. Each such employee or
consultant has entered into a confidentiality/assignment of inventions agreement
with the Company or a Subsidiary, a copy of which has previously been delivered
to the Buyer. To the knowledge of the Company, no key employee, group of
employees or key consultant has any plans to terminate employment with the
Company or any Subsidiary. Neither the Company nor any Subsidiary is a party to
or bound by any collective bargaining agreement or represented by any labor
union, works council, staff association or other body representing employees,
nor has any of them experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has no knowledge
of any organizational effort made or threatened, either currently or within the
past two years, by or on behalf of any labor union with respect to employees of
the Company or any Subsidiary. There are no outstanding negotiations relating to
wages, salaries, bonuses or employee benefits of any kind between the Company or
any Subsidiary and any employee. The contract of employment of each employee of
the UK Subsidiary may be terminated by the UK Subsidiary without damages or
compensation (other than that payable by statute or under case law) by giving at
any time the minimum period of notice applicable to that contract which is
specified in the Employment Rights Xxx 0000 or as specified in the applicable
employment agreement as set forth on Schedule 2.20.
2.21 EMPLOYEE BENEFITS.
(a) Section 2.21(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company, any Subsidiary, or any ERISA
Affiliate (as defined below). For purposes of this Agreement, "Employee Benefit
Plan" means any "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement involving direct or
indirect compensation, including without limitation insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement
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compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the Company or a
Subsidiary. Complete and accurate copies of (i) all Employee Benefit Plans which
have been reduced to writing, (ii) written summaries of all unwritten Employee
Benefit Plans, (iii) all related trust agreements, insurance contracts and
summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500,
5500C or 5500R for the last three plan years for each Employee Benefit Plan,
have been delivered to the Buyer. Each Employee Benefit Plan has been
administered in all material respects in accordance with its terms and each of
the Company, the Subsidiaries and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. The Company and all Employee Benefit
Plans are in compliance in all material respects with the currently applicable
provisions of ERISA and the Code and the regulations thereunder.
(b) There are no investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or claims
to benefits under any Employee Benefit Plan that could give rise to any material
liability.
(c) All the Employee Benefit Plans that are intended to
be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and revocation has
not been threatened, and no such Employee Benefit Plan has been amended since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(e) At no time has the Company, any Subsidiary or any
ERISA Affiliate been obligated to contribute to any "multi-employer plan" (as
defined in Section 4001(a)(3) of ERISA).
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(f) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any employee
of the Company or any Subsidiary (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code and insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition
exists with respect to any Employee Benefit Plan maintained by the Company, any
Subsidiary or any ERISA Affiliate that would subject the Company, any Subsidiary
or any ERISA Affiliate to any material fine, penalty, tax or liability of any
kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated
with, or related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company from amending or
terminating any such Employee Benefit Plan.
(j) Section 2.21(j) of the Disclosure Schedule discloses
each: (i) agreement with any director, executive officer or other key employee
of the Company or any Subsidiary (A) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving the Company or any Subsidiary of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from the Company or any Subsidiary that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the Company or any Subsidiary, including without limitation any
stock option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan, or any Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
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(k) There are no claims against the Company or any
Subsidiary under the Transfer of Undertakings (Protection of Employment)
regulations 1981 or the Acquired Rights Directive.
2.22 ENVIRONMENTAL MATTERS.
(a) Each of the Company and the Subsidiaries has complied
in all material respects with all applicable Environmental Laws (as defined
below). There is no pending or, to the knowledge of the Company and the
Subsidiaries, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law involving the Company or any Subsidiary. For purposes of this Agreement,
"Environmental Law" means any federal, state, or local or foreign law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the federal Comprehensive
Environmental Compensation, Liability and Response Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company or a Subsidiary. With respect to any such releases of
Materials of Environmental Concern, the Company or such Subsidiary has given all
required notices to Governmental Entities (copies of which have been provided to
the Buyer). Neither the Company nor any Subsidiary is aware of any releases of
Materials of Environmental Concern at parcels of real property or facilities
other than those owned, operated or controlled by the Company or a Subsidiary
that could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Company or a Subsidiary. For
purposes of this Agreement,
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"Materials of Environmental Concern" means any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the federal
Resources Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products, or any other material subject to regulation under any
Environmental Law.
(c) Set forth in Section 2.22(c) of the Disclosure
Schedule is a list of all environmental reports, investigations and audits
relating to premises currently or previously owned or operated by the Company or
a Subsidiary (whether conducted by or on behalf of the Company or a Subsidiary
or a third party, and whether done at the initiative of the Company or a
Subsidiary or directed by a Governmental Entity or other third party) which the
Company has possession of or access to. Complete and accurate copies of each
such report, or the results of each such investigation or audit, have been
provided to the Buyer.
2.23 LEGAL COMPLIANCE. Each of the Company and the
Subsidiaries, and the conduct and operations of their respective businesses, are
in compliance with each law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity, which
(a) affects or relates to this Agreement or the transactions contemplated hereby
or (b) is applicable to the Company or such Subsidiary or business, except for
any violation of or default under a law referred to in clause (b) above which
reasonably may be expected not to have a material adverse effect on the assets,
business, financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole. The UK Subsidiary has complied with the
provisions of the Companies Act and all returns, particulars, resolutions and
other documents required under any legislation to be delivered on behalf of the
UK Subsidiary to the Registrar of Companies have been properly made and
delivered on or before the applicable due date, except for any violation of or
default under a law which reasonably may be expected not to have a material
adverse effect on the assets, business, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole.
2.24 PERMITS. Section 2.24 of the Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including without limitation those
issued or required under Environmental Laws and those relating to the occupancy
or use of owned or leased real property) ("Permits") issued to or held by the
Company or any Subsidiary. Such listed Permits are the only Permits that are
required for the Company and the Subsidiaries to conduct their respective
businesses as presently conducted, except for those the absence of which would
not have any material adverse effect on the assets, business, financial
condition or results of operations of the Company and the Subsidiaries, taken as
a whole. Each such Permit is in full force and effect and, to the best of the
knowledge of the Company, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
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renewable upon expiration. Each such Permit will continue in full force and
effect following the Closing.
2.25 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No
Affiliate of the Company or of any Subsidiary (a) owns any property or right,
tangible or intangible, which is used in the business of the Company or any
Subsidiary, (b) has any claim or cause of action against the Company or any
Subsidiary, or (c) owes any money to the Company or any Subsidiary. Section 2.25
of the Disclosure Schedule describes any transactions or relationships between
the Company and any Affiliate thereof which are reflected in the statements of
operations of the Company included in the Financial Statements.
2.26 BROKERS' FEES. Neither the Company nor any Subsidiary
has any liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
2.27 BOOKS AND RECORDS. The minute books and other similar
records of the Company and each Subsidiary contain true and complete records of
all actions taken at any meetings of the Company's or such Subsidiary's
stockholders, Board of Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such meeting. The books and
records of the Company and each Subsidiary accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company or such Subsidiary.
2.28 CUSTOMERS. To the best knowledge of the Company, no
unfilled customer order or commitment obligating the Company or any Subsidiary
to process, manufacture or deliver products or perform services will result in a
loss to the Company or any Subsidiary upon completion of performance. No
material customer of the Company or any Subsidiary has indicated within the past
year that it will (i) stop licensing technology or products from them or (ii)
materially decrease the rate or amount of services purchased from them. Section
2.28 of the Disclosure Schedule sets forth a list of each customer that
accounted for more than 1% of the consolidated revenues of the Company during
the last full fiscal year or the interim period through the Most Recent Fiscal
Quarter End and the amount of revenues accounted for by such customer during
each such period.
2.29 COMPANY ACTION.
(a) The Board of Directors of the Company, at a meeting
duly called and held, has by the unanimous vote of all directors present (i)
determined that the Merger is fair and in the best interests of the Company and
its stockholders, (ii) adopted this Agreement in accordance with the provisions
of the Delaware General Corporation Law and approved the transactions
contemplated by this Agreement, and (iii) directed that this Agreement and the
Merger be submitted to the
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Company Stockholders for their adoption and approval and resolved to recommend
that Company Stockholders vote in favor of the adoption of this Agreement and
the approval of the Merger.
(b) The holders of shares of the Series E Preferred
representing not less than 95% of the votes represented by the outstanding
shares of Series E Preferred entitled to vote on this Agreement, voting
separately as a class, have, by written action, (i) adopted this Agreement and
approved the Merger and (ii) elected under Section B(2)(c) of Article FOURTH of
the Company's Restated Certificate of Incorporation to have the Merger be deemed
to be a liquidation for the purposes of the distribution of the Merger Shares.
The holders of each class or series of Company Shares other than the Series E
Preferred representing not less than a majority of the votes represented by the
outstanding shares of each such class or series entitled to vote on this
Agreement, voting separately as a class or series, have, by written action,
adopted this Agreement and approved the Merger.
(c) Each of the Initial Bridge Note Holders and the
Subsequent Bridge Note Holders have agreed to the provisions of Section 1.17 of
this Agreement.
2.30 DISCLOSURE. No representation or warranty by the
Company contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of the Company pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants
to the Company as follows:
3.1 ORGANIZATION. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Each of the Buyer and
the Transitory Subsidiary are duly qualified to conduct business and are in
corporate and tax good standing under the laws of each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the assets,
business, financial condition or results of operations of the Buyer and the
Transitory Subsidiary, taken as a whole.
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3.2 CAPITALIZATION. The authorized capital stock of the
Buyer consists of 50,000,000 shares of Buyer Common Stock, of which 16,506,753
shares were issued and outstanding and no shares were held in the treasury of
the Buyer as of March 31, 1998. All of the issued and outstanding shares of
Buyer Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the Merger Shares will
be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. As of June
12, 1998, no shares of Buyer Common Stock were issuable pursuant to outstanding
or authorized options or warrants other than (i) 831,005 shares of Buyer Common
Stock issuable pursuant to the 1992 Stock Option Plan of the Buyer, of which
29,175 shares had been issued, options for an aggregate of 801,830 shares were
outstanding as of such date, (ii) 1,875,000 shares of Buyer Common Stock
issuable pursuant to the 1997 Stock Incentive Plan of the Buyer, of which no
shares had been issued and options for an aggregate of 195,275 shares were
outstanding as of such date, (iii) 150,000 shares of Buyer Common Stock issuable
pursuant to the 1997 Director Stock Option Plan of the Buyer, of which no shares
had been issued and options for an aggregate of 45,000 shares were outstanding
as of such date, (iv) 300,000 shares of Buyer Common Stock issuable pursuant to
the 1997 Employee Stock Purchase Plan of the Buyer, of which no shares had been
issued as of such date, and (v) warrants to purchase an aggregate of 93,773
shares of Buyer Common Stock.
3.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and
the Transitory Subsidiary has all requisite power and authority to execute and
deliver this Agreement and (in the case of the Buyer) the Escrow Agreement and
to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement and (in the case of the Buyer) the Escrow Agreement by the
Buyer and the Transitory Subsidiary and the performance of this Agreement and
(in the case of the Buyer) the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby by the Buyer and the Transitory
Subsidiary have been duly and validly authorized by all necessary corporate
action on the part of the Buyer and Transitory Subsidiary. This Agreement has
been duly and validly executed and delivered by the Buyer and the Transitory
Subsidiary and constitutes a valid and binding obligation of the Buyer and the
Transitory Subsidiary, enforceable against them in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act and any applicable state
securities laws, the Exchange Act, and the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, neither the execution and
delivery of this Agreement or (in the case of the Buyer) the Escrow Agreement by
the Buyer or the Transitory Subsidiary, nor the consummation by the Buyer or the
Transitory Subsidiary of the transactions contemplated hereby or thereby, will
(a) conflict or violate any provision of the charter or By-laws of the Buyer or
the Transitory Subsidiary, (b) require on the
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part of the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer or Transitory Subsidiary is a party or by which either is bound
or to which any of their assets are subject, or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or the
Transitory Subsidiary or any of their properties or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has
previously furnished to the Company complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as filed with the Securities and Exchange Commission ("SEC"),
and (b) all other reports filed by the Buyer under Section 13 of the Exchange
Act with the SEC since December 31, 1997 (such reports are collectively referred
to herein as the "Buyer Reports"). The Buyer Reports constitute all of the
documents required to be filed by the Buyer under Section 13 of the Exchange Act
with the SEC since December 31, 1997. As of their respective dates, the Buyer
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Buyer Reports comply as to form in all material respects
with the requirements of the Exchange Act and the published rules and
regulations of the SEC with respect thereto, and the audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Buyer.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGES. Since March 31,
1998, there has not been any material adverse change in the assets, business,
financial condition or results of operations of the Buyer, nor has there
occurred any event or development which could reasonably be foreseen to result
in such a material adverse change in the future.
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3.7 BROKERS' FEES. Neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
3.8 DISCLOSURE. No representation or warranty by the
Buyer contained in this Agreement, and no statement contained in the any
document, certificate or other instrument delivered to or to be delivered by or
on behalf of the Buyer pursuant to this Agreement, contains or will contain any
untrue statement of a material fact or omit or will omit to state any material
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
ARTICLE IV
CONDITIONS TO CONSUMMATION OF MERGER
4.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
respective obligations of each Party to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the
Requisite Stockholder Approval;
(b) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) materially affect adversely the right of the Buyer to own,
operate or control any of the assets and operations of the Surviving Corporation
and the Subsidiaries following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect; and
(c) the Merger Shares shall have been authorized for
listing on the Nasdaq National Market upon official notice of issuance.
4.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE
TRANSITORY SUBSIDIARY. The obligation of each of the Buyer and the Transitory
Subsidiary to consummate the Merger is subject to the satisfaction of the
following additional conditions:
(a) the holders of shares of the Series E Preferred
representing not less than 95% of the votes represented by the outstanding
shares of Series E Preferred entitled to vote on this Agreement, voting
separately as a class, shall have, by written
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action, (i) adopted this Agreement and approved the Merger and (ii) elected
under Section B(2)(c) of Article FOURTH of the Company's Restated Certificate of
Incorporation to have the Merger be deemed to be a liquidation for the purposes
of the distribution of the Merger Shares; and the holders of each class or
series of Company Shares other than the Series E Preferred representing not less
than a majority of the votes represented by the outstanding shares of each such
class or series entitled to vote on this Agreement, voting separately as a class
or series, shall have, by written action, adopted this Agreement and approved
the Merger;
(b) the Company and the Subsidiaries shall have obtained
at their expense all of the waivers, permits, consents, approvals or other
authorizations from third parties and Governmental Entities, and effected all
such registrations, filings and notices with or to third parties and
Governmental Entities, as may be required by or with respect to the Company or
any Subsidiary in connection with the transactions contemplated by this
Agreement (including without limitation those listed in Section 2.4 and Section
2.24 of the Disclosure Schedule);
(c) the Buyer and the Transitory Subsidiary shall have
received from counsel to the Company an opinion with respect to the matters set
forth in EXHIBIT B attached hereto, addressed to the Buyer and the Transitory
Subsidiary and dated as of the Closing Date;
(d) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective Time, of each director
and officer of the Company and the Subsidiaries specified by the Buyer;
(e) all actions to be taken by the Company in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer and the Transitory Subsidiary;
(f) the Buyer shall be reasonably satisfied that each
Company Stockholder receiving Merger Shares and each Initial Bridge Note Holder
who is a "U.S. person" (as defined in Regulation S promulgated under the
Securities Act ("Regulation S")) is an "Accredited Investor" as such term is
defined under Rule 501(a) promulgated under the Securities Act;
(g) the Buyer shall have received a representation letter
in the form of EXHIBIT C attached hereto from each Company Stockholder receiving
Merger Shares and each Initial Bridge Note Holder who is not a U.S. person (as
defined in Regulation S);
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(h) each of the Initial Bridge Note Holders and the
Subsequent Bridge Note Holders shall have agreed in writing to the provisions of
Section 1.17 of this Agreement, and the Company shall have received the Initial
Bridge Notes and the Subsequent Bridge Notes for cancellation; and
(i) each of Xxxxxx Xxxx and Xxxx Xxxxx shall have agreed
in writing that all Options held by them shall terminate as of the Effective
Time.
4.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the Merger is subject to the
satisfaction of the following additional conditions:
(a) the Company shall have received from counsel to the
Buyer and the Transitory Subsidiary an opinion with respect to the matters set
forth in EXHIBIT D attached hereto, addressed to the Company and dated as of the
Closing Date; and
(b) all actions to be taken by the Buyer and the
Transitory Subsidiary in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Company.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION. The Company Stockholders shall
indemnify the Surviving Corporation and the Buyer (the "Indemnified Persons") in
respect of, and hold the Indemnified Persons harmless against, any and all
debts, obligations and other liabilities (whether absolute, accrued, contingent,
fixed or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, reasonable fees and
expenses of attorneys, accountants, financial advisors and other experts, and
other expenses of litigation) incurred or suffered by the Indemnified Persons or
any Affiliate thereof ("Damages"):
(a) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company contained in this Agreement; or
(b) resulting from any claim by a stockholder or former
stockholder of the Company, or any other person, firm, corporation or entity,
seeking to assert, or
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based upon: (i) ownership or rights to ownership of any shares of stock of the
Company; (ii) any rights of a stockholder (other than the right to receive the
Merger Shares pursuant to this Agreement or appraisal rights under the
applicable provisions of the Delaware General Corporation Law), including any
option, preemptive rights or rights to notice or to vote; (iii) any rights under
the Certificate of Incorporation or By-laws of the Company; or (iv) any claim
that his, her or its shares were wrongfully repurchased by the Company.
5.2 METHOD OF ASSERTING CLAIMS.
(a) All claims for indemnification by an Indemnified
Person pursuant to this Article V shall be made in accordance with the
provisions of the Escrow Agreement, except for third party claims, which shall
be made in accordance with the provisions of this Article V and the Escrow
Agreement.
(b) If a licensor, licensee or customer of the Company
asserts that an Indemnified Person is liable to such third party for a monetary
or other obligation which may constitute or result in Damages for which such
Indemnified Person may be entitled to indemnification pursuant to this Article
V, and such Indemnified Person reasonably determines that it has a valid
business reason to fulfill such obligation, then (i) such Indemnified Person
shall be entitled to satisfy such obligation, without consent from the
Indemnification Representatives, provided that the Indemnified Person provides
prior written notice to the Indemnification Representatives, (ii) such
Indemnified Person may make a claim for indemnification pursuant to this Article
V in accordance with the provisions of the Escrow Agreement, and (iii) such
Indemnified Person shall be reimbursed, in accordance with the provisions of the
Escrow Agreement, for any such Damages for which it is entitled to
indemnification pursuant to this Article V (subject to the right of the
Indemnification Representatives to dispute the Indemnified Person's entitlement
to indemnification under the terms of this Article V).
(c) The Indemnified Person shall give prompt written
notification to the Indemnification Representatives of the commencement of any
action, suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article V may be sought; provided, however,
that no delay on the part of the Indemnified Person in notifying the
Indemnification Representatives shall relieve the Company Stockholders 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 Representatives 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 the Indemnification Representatives acknowledge 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
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proceeding constitute Damages for which the Indemnified Person shall be entitled
to indemnification pursuant to this Article V. If the Indemnification
Representatives do not so assume control of such defense, the Indemnified Person
shall control such defense. The party not controlling such defense may
participate therein at its own expense; provided that if the Indemnification
Representatives assume control of such defense and the Indemnified Person is
advised by counsel in writing 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 "Damages" 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 Representatives, which shall not be unreasonably withheld. The
Indemnification Representatives shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of the Indemnified
Person, which shall not be unreasonably withheld.
5.3 SURVIVAL. The representations and warranties of the
Company set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until twelve
months after the Closing Date and shall not be affected by any examination made
for or on behalf of the Buyer or the knowledge of any of the Buyer's officers,
directors, stockholders, employees or agents. If a notice is given in accordance
with the Escrow Agreement before expiration of such period, then
(notwithstanding the expiration of such time period) the representation or
warranty applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim.
5.4 LIMITATIONS. Notwithstanding anything to the contrary
herein, (a) the sole and exclusive remedy of the Indemnified Persons for Damages
under this Article V shall be the recovery of the Escrow Shares in accordance
with the terms of the Escrow Agreement, and (b) the Indemnified Persons shall
not be entitled to any recovery under this Article V for any Damages unless and
until the aggregate Damages exceed $100,000 (at which point the Company
Stockholders shall become liable for the aggregate Damages (subject to clause
(a) above), and not just amounts in excess of $100,000). Except with respect to
claims based on fraud, the rights of the Indemnified Persons under this Article
V shall be the exclusive remedy of the Indemnified Persons with respect to
claims resulting from or relating to any misrepresentation, breach of warranty
or failure to perform any covenant or agreement of the Company contained in this
Agreement (provided that nothing contained in this Agreement shall limit or
restrict any right or remedy the Buyer or the Surviving Corporation may have
under any Environmental Law). No Company Stockholder shall have any right of
indemnification or contribution against the
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Company with respect to any breach by the Company of any of its representations,
warranties, covenants or agreements, and each Company Stockholder hereby
specifically waives any rights thereto.
ARTICLE VI
REGISTRATION RIGHTS
6.1 REGISTRATION OF SHARES. Within 10 days after the
Buyer becomes eligible to file a Registration Statement on Form S-3 (or any
successor form relating to secondary offerings), the Buyer shall prepare and
file with the SEC, a registration statement on Form S-3 covering the resale to
the public by the Company Stockholders of the Merger Shares and by the Initial
Bridge Note Holders of the Note Repayment Shares (the "Resale Registration
Statement"). The Buyer shall use its best efforts to cause the Resale
Registration Statement to be declared effective by the SEC as soon as
practicable after filing with the SEC. The Buyer shall cause the Resale
Registration Statement to remain effective until the date twelve months after
the effective date of such Resale Registration Statement (subject to extension
for any period during which the Buyer has suspended the Resale Registration
Statement pursuant to Section 6.3(a)) or such earlier time as all of the Merger
Shares and all of the Note Repayment Shares covered by the Resale Registration
Statement have been sold pursuant thereto.
6.2 INCIDENTAL REGISTRATION.
(a) Whenever the Buyer proposes to file a registration
statement with the SEC for a public offering and sale of securities of the Buyer
(other than the Resale Registration Statement or a registration statement on
Form S-8 or Form S-4, or their successors, or any other form for a similar
limited purpose, or any registration statement covering only securities proposed
to be issued in exchange for securities or assets of another corporation) at any
time on or before the filing of the Resale Registration Statement pursuant to
Section 6.1, it will, prior to such filing, give written notice to all Company
Stockholders and Initial Bridge Note Holders of its intention to do so. Upon the
written request of a Company Stockholder or Initial Bridge Note Holder given
within 20 days after the Buyer provides such notice (which request shall state
the intended method of disposition of such Merger Shares and Note Repayment
Shares ), the Buyer shall use its best efforts to cause all Merger Shares and
Note Repayment Shares which the Buyer has been requested by such Company
Stockholder(s) or Initial Bridge Note Holder(s) to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Company Stockholder(s) or Initial Bridge Note Holder(s);
provided that the Buyer shall have the right to postpone or withdraw any
registration effected
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pursuant to this Section 6.2 without obligation to any Company Stockholder or
Initial Bridge Note Holder.
(b) If the registration for which the Buyer gives notice
pursuant to Section 6.2(a) is a registered public offering involving an
underwriting, the Buyer shall so advise the Company Stockholders and Initial
Bridge Note Holders as a part of the written notice given pursuant to Section
6.2(a). In such event, the right of any Company Stockholder or Initial Bridge
Note Holder to include its Merger Shares or Note Repayment Shares in such
registration pursuant to Section 6.2(a) shall be conditioned upon such Company
Stockholder's or Initial Bridge Note Holder's participation in such underwriting
on the terms set forth herein. All Company Stockholders and Initial Bridge Note
Holders proposing to distribute their securities through such underwriting shall
(together with the Buyer, other Company Stockholders and Initial Bridge Note
Holders, other stockholders of the Buyer and any officers or directors
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for the underwriting by the Buyer. Notwithstanding any other provision
of this Section 6.2, if the managing underwriter determines that the inclusion
of all shares of Buyer Common Stock requested to be registered would adversely
affect the offering, the Buyer may limit the number of shares of Buyer Common
Stock to be included in the registration and underwriting. The Buyer shall so
advise all holders of shares of Buyer Common Stock requesting registration, and
the number of shares that are entitled to be included in the registration and
underwriting shall be allocated in the following manner. The securities of the
Buyer held by officers and directors of the Buyer (other than Merger Shares and
Note Repayment Shares) shall be excluded from such registration and underwriting
to the extent deemed advisable by the managing underwriter, and, if a further
limitation on the number of shares is required, the number of shares that may be
included in such registration and underwriting shall be allocated among all
Company Stockholders, Initial Bridge Note Holders and other stockholders of the
Buyer and requesting registration in proportion, as nearly as practicable, to
the respective number of shares of Common Stock (including Merger Shares and
Note Repayment Shares) which they held at the time the Buyer gives the notice
specified in Section 6.2(a). If any Company Stockholder, Initial Bridge Note
Holder or other stockholder of the Buyer would thus be entitled to include more
securities than such holder requested to be registered, the excess shall be
allocated among other requesting Company Stockholders, Initial Bridge Note
Holders and other stockholders of the Buyer pro rata in the manner described in
the preceding sentence. If any Company Stockholder, Initial Bridge Note Holder,
other stockholder of the Buyer or any officer or director disapproves of the
terms of any such underwriting, such person may elect to withdraw therefrom by
written notice to the Buyer, and any shares of Buyer Common Stock (including any
Merger Shares or Note Repayment Shares) excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
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6.3 LIMITATIONS ON REGISTRATION RIGHTS.
(a) The Buyer may, by written notice to the Company
Stockholders and the Initial Bridge Note Holders, (i) delay the filing or
effectiveness of the Resale Registration Statement or any other registration
statement under the Securities Act relating to the Merger Shares or the Note
Repayment Shares (each, including the Resale Registration Statement, a
"Registration Statement") (ii) suspend any Registration Statement after
effectiveness and require that the Company Stockholders and Initial Bridge Note
Holders immediately cease sales of shares pursuant to such Registration
Statement, in the event that (A) the Buyer files a registration statement (other
than a registration statement on Form S-8 or its successor form) with the SEC
for a public offering of its securities, (B) the Buyer is engaged in any
activity or transaction or preparations or negotiations for any activity or
transaction that the Buyer desires to keep confidential for business reasons, if
the Buyer determines in good faith that the public disclosure requirements
imposed on the Buyer under the Securities Act in connection with any
Registration Statement would require disclosure of such activity, transaction,
preparations or negotiations or (C) with respect to the Resale Registration
Statement, the Buyer becomes ineligible for use of a Form S-3 (as presently in
effect) for any reason other than the late filing of any report required to be
filed by the Buyer with the SEC in accordance with the Exchange Act. The Buyer
hereby agrees that, until such time as the Resale Registration Statement has
been declared effective by the SEC, the Buyer will timely file all reports
required to be filed by it with the SEC pursuant to the Exchange Act and the
rules and regulations promulgated thereunder.
(b) If the Buyer delays or suspends a Registration
Statement or requires the Company Stockholders and the Initial Bridge Note
Holders to cease sales of shares pursuant to paragraph (a) above, the Buyer
shall, as promptly as practicable following the termination of the circumstance
which entitled the Buyer to do so, take such actions as may be necessary to file
or reinstate the effectiveness of such Registration Statement and/or give
written notice to all Company Stockholders and the Initial Bridge Note Holders
authorizing them to resume sales pursuant to such Registration Statement. If as
a result thereof the prospectus included in such Registration Statement has been
amended to comply with the requirements of the Securities Act, the Buyer shall
enclose such revised prospectus with the notice to Company Stockholders and the
Initial Bridge Note Holders given pursuant to this paragraph (b), and the
Company Stockholders and the Initial Bridge Note Holders shall make no offers or
sales of shares pursuant to such Registration Statement other than by means of
such revised prospectus.
6.4 REGISTRATION PROCEDURES.
(a) In connection with the filing by the Buyer of a
Registration Statement, the Buyer shall furnish to each Company Stockholder and
each Initial
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Bridge Note Holder a copy of the prospectus in conformity with the requirements
of the Securities Act.
(b) The Buyer shall use its best efforts to register or
qualify the Merger Shares and the Note Repayment Shares covered by a
Registration Statement under the securities laws of such states as the Company
Stockholders and the Initial Bridge Note Holders shall reasonably request;
PROVIDED, HOWEVER, that the Buyer shall not be required in connection with this
paragraph (b) to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final
prospectuses to the Company Stockholders and the Initial Bridge Note Holders and
after having done so the prospectus is amended to comply with the requirements
of the Securities Act, the Buyer shall promptly notify the Company Stockholders
and the Initial Bridge Note Holders and, if reasonably requested by the Buyer,
the Company Stockholders and the Initial Bridge Note Holders shall immediately
cease making offers or sales of shares under the applicable Registration
Statement and return all prospectuses to the Buyer. The Buyer shall promptly
provide the Company Stockholders and the Initial Bridge Note Holders with
revised prospectuses and, following receipt of the revised prospectuses, the
Company Stockholders and the Initial Bridge Note Holders shall be free to resume
making offers and sales under such Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in
complying with its obligations under this Article VI, including all registration
and filing fees, exchange listing fees, fees and expenses of counsel for the
Buyer, and fees and expenses of accountants for the Buyer, but excluding (i) any
brokerage fees, selling commissions or underwriting discounts incurred by the
Company Stockholders or the Initial Bridge Note Holders in connection with sales
under a Registration Statement and (ii) the fees and expenses of any counsel
retained by Company Stockholders or the Initial Bridge Note Holders.
6.5 REQUIREMENTS OF COMPANY STOCKHOLDERS AND INITIAL
BRIDGE NOTE HOLDERS. The Buyer shall not be required to include any Merger
Shares or Note Repayment Shares in a Registration Statement unless:
(a) the Company Stockholder or Initial Bridge Note Holder
owning such shares furnishes to the Buyer in writing such information regarding
such Company Stockholder or Initial Bridge Note Holder and the proposed sale of
Merger Shares or Note Repayment Shares by such Company Stockholder or Initial
bridge Note Holder as the Buyer may reasonably request in writing in connection
with the Registration Statement or as shall be required in connection therewith
by the SEC or any state securities law authorities;
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(b) such Company Stockholder or Initial Bridge Note
Holder shall have provided to the Buyer its written agreement:
(1) to indemnify the Buyer and each of its
directors and officers against, and hold the Buyer and each of its directors and
officers harmless from, any losses, claims, damages, expenses or liabilities
(including reasonable attorneys' fees) to which the Buyer or such directors and
officers may become subject by reason of any statement or omission in such
Registration Statement made in reliance upon, or in conformity with, a written
statement by such Company Stockholder or Initial Bridge Note Holder furnished
pursuant to this Section 6.5; and
(2) to report to the Buyer sales made pursuant
to such Registration Statement .
6.6 INDEMNIFICATION. The Buyer agrees to indemnify and
hold harmless each Company Stockholder and each Initial Bridge Note Holder whose
shares are included in a Registration Statement and each of its directors,
officers and partners against any losses, claims, damages, expenses or
liabilities (including reasonable attorneys' fees) to which such Company
Stockholder or Initial Bridge Note Holder or such directors, officers or
partners may become subject by reason of any untrue statement of a material fact
contained in such Registration Statement or any omission to state therein a fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, expenses or
liabilities arise out of or are based upon information furnished to the Buyer by
or on behalf of a Company Stockholder or Initial Bridge Note Holder for use in
such Registration Statement. The Buyer shall have the right to assume the
defense and settlement of any claim or suit for which the Buyer may be
responsible for indemnification under this Section 6.6.
6.7 ASSIGNMENT OF RIGHTS. A Company Stockholder or
Initial Bridge Note Holder may not assign any of its rights under this Article
VI except in connection with the transfer of some or all of his or her Merger
Shares or Note Repayment Shares, respectively, to a child or spouse, or trust
for their benefit, PROVIDED each such transferee agrees in a written instrument
delivered to the Buyer to be bound by the provisions of this Article VI. Any
Registration Statement shall, however, contemplate the distribution of Merger
Shares and Note Repayment Shares by a Company Stockholder or Initial Bridge Note
Holder, respectively, to its general or limited partners and provide for the
sale of such Merger Shares or Initial Bridge Note Shares by such general or
limited partners during the period for which such Registration Statement shall
remain effective, provided that such general or limited partners shall agree in
writing to be bound by the provisions of this Article VI.
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ARTICLE VII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
Affiliate 2.14(f)
Buyer Introduction
Buyer Common Stock 1.5(a)(7)
Buyer Option Plan 1.11(d)
Buyer Reports 3.5
CERCLA 2.22(a)
Certificate of Merger 1.1
Certificates 1.7(a)
Closing 1.2
Closing Date 1.2
Code 2.9(c)
Company Introduction
Company Common Stock 1.5(a)(1)
Company Preferred Stock 1.5(a)(7)
Company Shares 1.5(a)
Company Stockholder 1.5(a)
Damages 5.1
Disclosure Schedule Article II
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.21(a)
Environmental Law 2.22(a)
ERISA 2.21(a)
ERISA Affiliate 2.21(a)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Shares 1.5(a)
Exchange Act 2.14(f)
Exchange Agent 1.3
Financial Statements 2.6
First Initial Bridge Notes 1.17(a)
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3
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Indemnified Persons 5.1
Initial Bridge Note Holders 1.17(a)
Initial Bridge Notes 1.17(a)
Initial Shares 1.5(a)
Intellectual Property 2.12
Management Options 1.11(e)
Materials of Environmental Concern 2.22(b)
Merger 1.1
Merger Shares 1.5(a)
Most Recent Balance Sheet 2.8
Most Recent Fiscal Quarter End 2.6
New Employee Options 1.11(d)
New Option Exercise Price 1.11(d)
New Performance Options 1.11(e)
Note Repayment Price 1.17(b)
Note Repayment Shares 1.17(a)
Options 1.11(a)
Ordinary Course of Business 2.4
Party Introduction
Permit 2.24
Regulation S 4.2(g)
Registration Statement 6.3(a)
Requisite Stockholder Approval 2.3
Resale Registration Statement 6.1
SEC 3.5
Securities Act 1.11(c)
Security Interest 2.4
Series A-1 Preferred 1.5(a)(2)
Series A-2 Preferred 1.5(a)(3)
Series B Preferred 1.5(a)(4)
Series C Preferred 1.5(a)(5)
Series D Preferred 1.5(a)(6)
Series E Conversion Ratio 1.5(a)(7)
Series E Preferred 1.5(a)(7)
Subsequent Bridge Note Holders 1.17(b)
Subsequent Bridge Notes 1.17(b)
Subsidiary 2.4
Surviving Corporation 1.1
Taxes 2.9(a)
Tax Returns 2.9(a)
Transitory Subsidiary Introduction
UK Subsidiary 2.5
Warrants 1.11(f)
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ARTICLE VIII
MISCELLANEOUS
8.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall
issue any press release or public disclosure relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
PROVIDED, HOWEVER, that the Buyer may make any public disclosure it believes in
good faith is required by law or regulation (in which case the Buyer shall
advise the other Parties and provide them with a copy of the proposed disclosure
prior to making the disclosure).
8.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns; PROVIDED, HOWEVER, that (a)
the provisions in Article I concerning issuance of the Merger Shares and Article
VI concerning registration rights are intended for the benefit of the Company
Stockholders.
8.3 ENTIRE AGREEMENT. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, with respect to the subject matter hereof.
8.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties; provided that the Transitory
Subsidiary may assign its rights, interests and obligations hereunder to an
Affiliate of the Buyer.
8.5 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.7 NOTICES. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
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If to the Company: Copy to:
------------------ --------
The Dodge Group, Inc. Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Burgoine House 1633 Broadway, 00xx Xxxxx
Xxxxx Xxxxxxxxxx Xxxx Xxx Xxxx, XX 00000
Kingston Upon Thames Attention: Xxxxx X. Xxxxxxxxx, Xxx.
Xxxxxx, XX0 0XX
Xxxxxx Xxxxxxx
Attention: Xx. Xxxx Xxxxxxxx
If to the Buyer: Copy to:
---------------- --------
FlexiInternational Software, Inc. Xxxx and Xxxx LLP
Xxx Xxxxxxxxxx Xxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attention: President Attention: Xxxx X.X. Xxxxx, Esq.
If to the Transitory Subsidiary: Copy to:
-------------------------------- --------
Princess Acquisition Corporation Xxxx and Xxxx LLP
c/o FlexiInternational Software, 00 Xxxxx Xxxxxx
Inc. Xxxxxx, XX 00000
Two Enterprise Drive Attention: Xxxx X.X. Xxxxx, Esq.
Xxxxxxx, XX 00000
Attention: President
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
8.8 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware.
8.9 AMENDMENTS AND WAIVERS. The Parties may mutually
amend any provision of this Agreement at any time prior to the Effective Time;
PROVIDED, HOWEVER, that any amendment effected subsequent to the Requisite
Stockholder Approval shall be subject to the restrictions contained in the
Delaware General
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Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
8.10 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
8.11 EXPENSES. Except as set forth in Section 6.4(d) and
in the Escrow Agreement, each of the Parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby; provided, HOWEVER, that if
the Merger is consummated, the Company and the Subsidiaries shall not incur more
than an aggregate of $100,000 in legal and accounting fees and expenses in
connection with the Merger, and any fees and expenses incurred by the Company or
its Subsidiaries in excess of such amount shall be recovered by the Buyer
pursuant to the Escrow Agreement without regard to the provisions of the first
sentence of Section 5.4.
8.12 SPECIFIC PERFORMANCE. Each of the Parties
acknowledges and agrees that one or more of the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions of Section 8.13), in addition to any other remedy to which it
may be entitled, at law or in equity.
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52
8.13 SUBMISSION TO JURISDICTION. Each of the Parties (a)
submits to the jurisdiction of any state or federal court sitting in the State
of Connecticut in any action or proceeding arising out of or relating to this
Agreement, (b) agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court, and (c) agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other Party with respect
thereto. Any Party may make service on another Party by sending or delivering a
copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 8.7. Nothing in this Section 8.13,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law.
8.14 CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Party. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
8.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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53
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
FLEXIINTERNATIONAL SOFTWARE, INC.
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------
Xxxxxxxx X. Xxxxx
Title: President
PRINCESS ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
Title: President
THE DODGE GROUP, INC.
By: /s/ Xxxx Xxxxxxxx
----------------------------------
Xxxx Xxxxxxxx
Title: Chief Executive Officer
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54
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ Xxxxxxxx X. Xxxxx
---------------------------------
Xxxxxxxx X. Xxxxx
Secretary
The undersigned, being the duly elected Secretary of the Company,
hereby certifies that this Agreement has been adopted by a majority of the votes
represented by the outstanding Company Shares entitled to vote on this
Agreement.
/s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx
Secretary
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55
SCHEDULE 1.11(c) NEW EMPLOYEE OPTIONS
--------------------------------------------------------------------------------
NAME NEW EMPLOYEE OPTIONS
--------------------------------------------------------------------------------
X. Xxxxxxxx 23,070
--------------------------------------------------------------------------------
X. Xxxxxx 5,229
--------------------------------------------------------------------------------
X. Xxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxxx 923
--------------------------------------------------------------------------------
X. Xxxxxxx 488
--------------------------------------------------------------------------------
X. Xxxxxxx 615
--------------------------------------------------------------------------------
X. Xxxxx 615
--------------------------------------------------------------------------------
X. Xxxxxx 461
--------------------------------------------------------------------------------
X. Xxxxxx 461
--------------------------------------------------------------------------------
X. Xxxx 165
--------------------------------------------------------------------------------
X. Xxxxxx 161
--------------------------------------------------------------------------------
X. Xxxxxxxxxx 154
--------------------------------------------------------------------------------
J. Absolum 154
--------------------------------------------------------------------------------
J. Barons 77
--------------------------------------------------------------------------------
X. Xxxxxxx 77
--------------------------------------------------------------------------------
X. Xxxx 77
--------------------------------------------------------------------------------
C. May 77
--------------------------------------------------------------------------------
X. Xxxxxxxx 154
--------------------------------------------------------------------------------
X. Xxxxxxx 123
--------------------------------------------------------------------------------
1.11(c)-1
56
SCHEDULE 1.11(d) NEW PERFORMANCE OPTIONS
--------------------------------------------------------------------------------
NAME NEW PERFORMANCE OPTIONS
--------------------------------------------------------------------------------
X. Xxxxxxxx 23,070
--------------------------------------------------------------------------------
X. Xxxxxx 5,229
--------------------------------------------------------------------------------
X. Xxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxx 4,229
--------------------------------------------------------------------------------
X. Xxxxxxx 923
--------------------------------------------------------------------------------
X. Xxxxxxx 488
--------------------------------------------------------------------------------
X. Xxxxxxx 615
--------------------------------------------------------------------------------
X. Xxxxx 615
--------------------------------------------------------------------------------
X. Xxxxxx 461
--------------------------------------------------------------------------------
X. Xxxxxx 461
--------------------------------------------------------------------------------
X. Xxxx 165
--------------------------------------------------------------------------------
X. Xxxxxx 161
--------------------------------------------------------------------------------
X. Xxxxxxxxxx 154
--------------------------------------------------------------------------------
J. Absolum 154
--------------------------------------------------------------------------------
J. Barons 77
--------------------------------------------------------------------------------
X. Xxxxxxx 77
--------------------------------------------------------------------------------
X. Xxxx 77
--------------------------------------------------------------------------------
C. May 77
--------------------------------------------------------------------------------
X. Xxxxxxxx 154
--------------------------------------------------------------------------------
X. Xxxxxxx 123
--------------------------------------------------------------------------------
1.11(d)-1
57
SCHEDULE 1.11(e) MANAGEMENT OPTIONS
--------------------------------------------------------------------------------
NAME MANAGEMENT OPTIONS
--------------------------------------------------------------------------------
X. Xxxxxxxx 25,000
--------------------------------------------------------------------------------
X. Xxxxxx 5,667
--------------------------------------------------------------------------------
X. Xxxxxx 4,583
--------------------------------------------------------------------------------
X. Xxxxxxxxx 4,583
--------------------------------------------------------------------------------
X. Xxxxx 4,583
--------------------------------------------------------------------------------
X. Xxxxxx 4,583
--------------------------------------------------------------------------------
X. Xxxxxxx 1,000
--------------------------------------------------------------------------------
1.11(e)-1
58
SCHEDULE 1.17(a) NOTE REPAYMENT SHARES
--------------------------------------------------------------------------------------------------------------------------------
INITIAL BRIDGE NOTE HOLDER SERIES A 7% SERIES A 7% SERIES B 7% SERIES B 7% TOTAL NOTE
DEMAND NOTE DEMAND DEMAND NOTE DEMAND PRINCIPAL & REPAYMENT
PRINCIPAL NOTE INTEREST PRINCIPAL NOTE INTEREST INTEREST SHARES
--------------------------------------------------------------------------------------------------------------------------------
Accel III L.P. $ 73,913.16 $ 6,956.05 $ 57,584.05 $ 1,839.49 $ 140,292.75 20,406
--------------------------------------------------------------------------------------------------------------------------------
Accel Investors '92 L.P. 5,156.73 485.31 5,356.75 171.12 11,169.90 1,625
--------------------------------------------------------------------------------------------------------------------------------
Accel Japan L.P. 6,875.64 647.07 4,017.53 128.34 11,668.58 1,697
--------------------------------------------------------------------------------------------------------------------------------
Brentwood Associates VI, L.P. 96,824.53 9,112.26 76,297.73 2,437.29 184,671.81 26,861
--------------------------------------------------------------------------------------------------------------------------------
Essex Special Growth Opportunities 15,664.89 1,474.24 12,049.19 384.90 29,573.22 4,302
Fund, L.P.
--------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxx 57,623.79 5,423.04 63,046.83 9,170
--------------------------------------------------------------------------------------------------------------------------------
Greylock Limited Partnership 74,734.84 7,033.88 58,224.30 1,859.94 141,852.46 20,633
--------------------------------------------------------------------------------------------------------------------------------
Highland Capital Partners II, L.P. 140,346.52 13,208.17 109,340.97 3,492.84 266,388.49 38,747
--------------------------------------------------------------------------------------------------------------------------------
XX Xxxxxx Investment Corporation 140,953.20 13,265.26 108,051.40 3,151.64 265,721.50 38,650
--------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Venture Captial, L.P. 181,510.88 17,082.19 139,615.35 4,459.93 342,668.36 49,843
--------------------------------------------------------------------------------------------------------------------------------
Sixty Wall Street SBIC Fund, L.P. 5,686.92 181.67 5,868.59 854
--------------------------------------------------------------------------------------------------------------------------------
SBIC Partners, L.P. 105,714.91 9,948.95 91,724.42 2,930.09 210,318.36 30,592
--------------------------------------------------------------------------------------------------------------------------------
St. Xxxx Venture Capital IV LLC 100,680.92 9,475.19 82,051.38 2,621.09 194,828.58 28,339
--------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,000,000.01 94,111.11 749,999.99 23,958.34 1,868,069.43 271,719
--------------------------------------------------------------------------------------------------------------------------------
1.17(a)-1
59
SCHEDULE 1.17(b) NOTE REPAYMENT PRICE
---------------------------------------------------------------------------------------------------------------------------
INITIAL BRIDGE NOTE HOLDER 12% DEMAND NOTE 12% DEMAND NOTE TOTAL PRINCIPAL & INTEREST
PRINCIPAL INTEREST TO BE PAID BY BUYER
---------------------------------------------------------------------------------------------------------------------------
Accel III L.P. $ 57,483.36 $ 306.58 $ 57,789.94
---------------------------------------------------------------------------------------------------------------------------
Accel Investors '92 L.P. 5,347.37 28.52 5,375.89
---------------------------------------------------------------------------------------------------------------------------
Accel Japan L.P. 4,010.52 21.39 4,031.91
---------------------------------------------------------------------------------------------------------------------------
Brentwood Associates VI, L.P. 76,135.18 406.05 76,541.23
---------------------------------------------------------------------------------------------------------------------------
Essex Special Growth Opportunities Fund, L.P. 12,033.34 64.18 12,097.52
---------------------------------------------------------------------------------------------------------------------------
Greylock Limited Partnership 58,122.47 309.99 58,432.46
---------------------------------------------------------------------------------------------------------------------------
Highland Capital Partners II, L.P. 109,149.75 582.13 109,731.88
---------------------------------------------------------------------------------------------------------------------------
XX Xxxxxx Investment Corporation 107,490.62 573.28 108,063.90
---------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Venture Captial, L.P. 139,431.74 743.64 140,175.38
---------------------------------------------------------------------------------------------------------------------------
Sixty Wall Street SBIC Fund, L.P. 5,657.40 30.17 5,687.57
---------------------------------------------------------------------------------------------------------------------------
SBIC Partners, L.P. 91,248.37 486.66 91,735.03
---------------------------------------------------------------------------------------------------------------------------
St. Xxxx Venture Capital IV LLC 83,889.87 447.41 84,337.28
---------------------------------------------------------------------------------------------------------------------------
TOTAL 749,999.99 4,000.00 753,999.99
---------------------------------------------------------------------------------------------------------------------------
1.17(b)-1
60
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement is entered into as of June __, 1998, by and among
FlexiInternational Software, Inc., a Delaware corporation (the "Buyer"), Xxxx
Xxxxxx and Xxxxx Xxxxxx (the "Indemnification Representatives") and State Street
Bank and Trust Company (the "Escrow Agent").
WHEREAS, the Buyer and The Dodge Group, Inc. (the "Company") have
entered into an Agreement and Plan of Merger dated June __, 1998 (the "Merger
Agreement") by and among the Company, the Buyer and a subsidiary of the Buyer.
Such subsidiary will be merged into the Company which, as the surviving
corporation (the "Surviving Corporation"), will become a wholly-owned subsidiary
of the Buyer.
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the indemnification obligations of the stockholders of the
Company (the "Company Stockholders") to the Buyer and the Surviving Corporation
(the "Indemnified Persons") under Article V of the Merger Agreement on the terms
and conditions set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow account will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINED TERMS. "Damages" shall mean any and all debts, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, reasonable fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) incurred or suffered by the Indemnified Persons or any affiliate (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended)
thereof.
2. CONSENT OF COMPANY STOCKHOLDERS. By virtue of the Company Stockholders'
approval of the Merger Agreement, the Company Stockholders receiving shares of
common stock of the Buyer, $0.01 par value per share ("Buyer Common Stock")
pursuant to the Merger (the "Indemnifying Stockholders") have, without any
further act of any Company Stockholder, consented to: (a) the establishment of
this escrow to secure the Company Stockholders' indemnification obligations
under Article V of the Merger Agreement in the manner set forth herein, (b) the
appointment of the Indemnification Representatives as their representatives for
purposes of this Agreement and as attorneys-in-fact and agents for and on behalf
of each
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61
Indemnifying Stockholder, and the taking by the Indemnification Representatives
of any and all actions and the making of any decisions required or permitted to
be taken or made by them under this Agreement and (c) all of the other terms,
conditions and limitations in this Agreement.
3. ESCROW AND INDEMNIFICATION.
3.1 ESCROW OF SHARES. Upon the execution of this
Agreement, the Buyer shall deposit with the Escrow Agent a certificate for
86,350 shares of Buyer Common Stock (the "Escrow Shares") issued in the name of
the Escrow Agent or its nominee. The Buyer may from time to time deposit
additional Escrow Shares with the Escrow Agent pursuant to the final sentence of
Section 1.6(a) of the Merger Agreement. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party hereto. The Escrow Agent
agrees to accept delivery of the Escrow Shares and to hold the Escrow Shares in
an escrow account (the "Escrow Account"), subject to the terms and conditions of
this Agreement, such Escrow Account to be called the "Flexi/Dodge Escrow
Account" or a similar designation.
3.2 INDEMNIFICATION. The Indemnifying Stockholders have
agreed in Article V of the Merger Agreement to indemnify and hold harmless the
Indemnified Persons from and against the Damages specified in Section 5.1 of the
Merger Agreement. The Buyer, the Indemnifying Stockholders and the
Indemnification Representatives agree that the Escrow Shares shall be security
for such indemnity obligation of the Indemnifying Stockholders, subject to the
limitations, and in the manner provided, in this Agreement. No indemnity
obligation of the Indemnifying Stockholders to the Buyer under Article V of the
Merger Agreement shall be satisfied except from the Escrow Shares.
3.3 DIVIDENDS, ETC. Any securities distributable to the
Indemnifying Stockholders in respect of or in exchange for any of the Escrow
Shares, whether by way of stock dividends, stock splits or otherwise, shall be
delivered to the Escrow Agent, who shall hold such securities in the Escrow
Account. Such securities shall be issued in the name of the Escrow Agent or its
nominee and shall be considered Escrow Shares for purposes hereof. Any cash
dividends or property (other than securities) distributable to the Indemnifying
Stockholders in respect of the Escrow Shares shall be distributed to the
Indemnifying Stockholders.
3.4 VOTING OF SHARES. The Indemnification Representatives
shall have the right, in their sole discretion, on behalf of the Indemnifying
Stockholders, to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrow Shares, and the Escrow Agent shall comply
with any such written instructions. In the absence of such instructions, the
Escrow Agent shall not vote any of the Escrow Shares. The Indemnification
Representatives shall have no obligation to solicit consents or proxies from the
Indemnifying Stockholders for purposes of any such vote.
A-2
62
3.5 TRANSFERABILITY. The respective interests of the
Indemnifying Stockholders in the Escrow Shares shall not be assignable or
transferable, other than by operation of law. Notice of any such assignment or
transfer by operation of law shall be given to the Escrow Agent and the Buyer,
and no such assignment or transfer shall be valid until such notice is given.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent shall
administer the Escrow Account as follows:
4.1 If an Indemnified Person has incurred or suffered
Damages, prior to the one-year anniversary of the date of this Agreement (the
"Termination Date"), for which it is entitled to indemnification under Article V
of the Merger Agreement, the Indemnified Person shall, prior to the Termination
Date, give written notice of such claim (a "Claim Notice") to the
Indemnification Representatives and the Escrow Agent. Each Claim Notice shall
state the amount, determined in good faith, of claimed Damages (the "Claimed
Amount") and the basis for such claim.
4.2 Within 20 days after delivery of a Claim Notice, the
Indemnification Representatives shall provide to the Indemnified Person, with a
copy to the Escrow Agent, a written response (the "Response Notice") in which
the Indemnification Representatives shall: (i) agree that Escrow Shares having a
Fair Market Value (as computed pursuant to Section 6) equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnified Person, (ii)
agree that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount (the "Agreed Amount") may be released from the Escrow
Account to the Indemnified Person or (iii) contest that any of the Escrow Shares
may be released from the Escrow Account to the Indemnified Person. The
Indemnification Representatives may contest the release of Escrow Shares having
a Fair Market Value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does not
constitute Damages for which the Indemnified Person is entitled to
indemnification under Article V of the Merger Agreement. If no Response Notice
is delivered by the Indemnification Representatives within such 20-day period,
the Indemnification Representatives shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount may be
released to the Indemnified Person from the Escrow Account.
4.3 If the Indemnification Representatives in the
Response Notice agree (or are deemed to have agreed pursuant to Section 4(b) of
this Agreement by not responding within such 20 day period) that Escrow Shares
having a Fair Market Value equal to all of the Claimed Amount may be released
from the Escrow Account to the Indemnified Person, the Escrow Agent shall,
within 10 days following the earlier of (i) the required delivery date for the
Response Notice or (ii) the delivery of the Response Notice, transfer, deliver
and assign to the Indemnified Person such number of Escrow Shares held in the
Escrow Account which have a Fair Market Value equal to the Claimed Amount (or
such lesser number of Escrow Shares as is then held in the Escrow Account).
A-3
63
4.4 If the Indemnification Representatives in the
Response Notice agree that Escrow Shares having a Fair Market Value equal to
part, but not all, of the Claimed Amount may be released from the Escrow Account
to the Indemnified Person, the Escrow Agent shall within 10 days following the
delivery of the Response Notice transfer, deliver and assign to the Indemnified
Person such number of Escrow Shares held in the Escrow Account which have a Fair
Market Value equal to the Agreed Amount (or such lesser number of Escrow Shares
as is then held in the Escrow Account).
4.5 If the Indemnification Representatives in the
Response Notice contest the release of Escrow Shares having a Fair Market Value
equal to all or part of the Claimed Amount (the "Contested Amount"), the matter
shall be settled by binding arbitration in Boston, Massachusetts. All claims
shall be settled by three arbitrators in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA Rules"). The Indemnification Representatives and the Indemnified Person
shall each designate one arbitrator within 15 days of the delivery of the
Indemnification Representatives' Response Notice contesting the Claimed Amount.
The Indemnification Representatives and the Indemnified Person shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 45 days of delivery of
the Indemnification Representatives' Response Notice, the third arbitrator shall
be appointed in accordance with the AAA Rules and (ii) if either the
Indemnification Representatives or the Indemnified Person fail to timely
designate an arbitrator, the dispute shall be resolved by the one arbitrator
timely designated. The Indemnifying Stockholders and the Indemnified Person
shall pay the fees and expenses of their respectively designated arbitrators and
shall bear equally the fees and expenses of the third arbitrator. The
Indemnification Representatives and the Indemnified Person shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 60 days
after the appointment of the last arbitrator. The arbitrators' decision shall
relate solely to whether the Indemnified Person is entitled to receive the
Contested Amount (or a portion thereof) pursuant to the applicable terms of the
Merger Agreement and this Agreement. The final decision of the majority of the
arbitrators shall be furnished to the Indemnification Representatives, the
Indemnified Person and the Escrow Agent in writing and shall constitute a
conclusive determination of the issue in question, binding upon the
Indemnification Representatives, the Indemnifying Stockholders, the Indemnified
Person and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' award. After delivery of a Response Notice that
the Claimed Amount is contested by the Indemnification Representatives, the
Escrow Agent shall continue to hold in the Escrow Account a number of Escrow
Shares having a Fair Market Value sufficient to cover the Contested Amount (up
to the number of Escrow Shares then available in the Escrow Account),
notwithstanding the occurrence of the Termination Date, until (i) delivery of a
copy of a settlement agreement executed by the Indemnified Person and the
Indemnification Representatives setting forth instructions to the Escrow Agent
as to the release of Escrow Shares, if any, that shall be made with respect to
the Contested Amount or (ii) delivery of a copy of the final award of the
majority of the arbitrators setting forth instructions to the Escrow Agent as to
the release of Escrow Shares, if any, that shall be
A-4
64
made with respect to the Contested Amount. The Escrow Agent shall thereupon
release Escrow Shares from the Escrow Account (to the extent Escrow Shares are
then held in the Escrow Account) in accordance with such agreement or
instructions.
5. RELEASE OF ESCROW SHARES.
5.1 Promptly after the Termination Date, the Escrow Agent
shall distribute to the Indemnifying Stockholders all of the Escrow Shares then
held in escrow. Notwithstanding the foregoing, if an Indemnified Person has
previously given a Claim Notice which has not then been resolved in accordance
with Section 4, the Escrow Agent shall retain in the Escrow Account after the
Termination Date a number of Escrow Shares having a Fair Market Value equal to
the Claimed Amount covered by any Claim Notice which has not then been resolved.
Any funds so retained in escrow shall be disbursed in accordance with the terms
of the resolution of such claims in accordance with Section 4 of this Agreement.
5.2 Any distribution of all or a portion of the Escrow
Shares to the Indemnifying Stockholders shall be made in accordance with the
percentages set forth opposite such holders' respective names on ATTACHMENT A
attached hereto; PROVIDED, HOWEVER, that the Escrow Agent shall withhold the
distribution of the portion of the Escrow Shares otherwise distributable to
Indemnifying Stockholders who have not, according to written notice provided by
the Buyer to the Escrow Agent, prior to such distribution, surrendered their
respective Certificates pursuant to the terms and conditions of the Merger
Agreement; and PROVIDED FURTHER that such ATTACHMENT A shall be appropriately
revised by written notice (which shall include a revised ATTACHMENT A attached
thereto) of the Buyer to the Escrow Agent in the event the Buyer deposits
additional Escrow Shares with the Escrow Agent pursuant to the final sentence of
Section 1.6(a) of the Merger Agreement following the date of this Agreement. Any
such withheld shares shall be delivered to the Buyer promptly after the
Termination Date, and shall be delivered by the Buyer to the Indemnifying
Stockholders to whom such shares would have otherwise been distributed upon
surrender of their respective Certificates. Distributions to the Indemnifying
Stockholders shall be made by mailing stock certificates (or mailing the stock
certificate or certificates held by the Escrow Agent for the Escrow Shares with
appropriate written instructions to the Buyer's transfer agent to reissue and
mail stock certificates in the appropriate amounts) to such holders at their
respective addresses shown on ATTACHMENT A (or such other address as may be
provided in writing in accordance with the provisions of Section 12 hereof to
the Escrow Agent by any such holder). No fractional Escrow Shares shall be
distributed to Indemnifying Stockholders pursuant to this Agreement. Instead,
the number of shares that each Indemnifying Stockholder shall receive shall be
rounded down to the nearest whole number; and the Escrow Agent shall sell such
number of Escrow Shares as is equal to the aggregate of the fractional shares
that would otherwise be distributed to the Indemnifying Stockholders and shall
distribute the proceeds of such sale to the Indemnifying Stockholders otherwise
entitled to a fractional Escrow Share pro rata based upon the fraction of an
Escrow Shares to which each such Indemnifying Stockholder is otherwise entitled.
A-5
65
6. VALUATION OF ESCROW SHARES. For purposes of this Agreement,
the Fair Market Value of the Escrow Shares shall be $8.68125 (which is based
upon the average of the closing prices of the Buyer Common Stock on the Nasdaq
National Market for the 20 trading days immediately preceding the date of this
Agreement).
7. FEES AND EXPENSES OF ESCROW AGENT. The Buyer and the
Indemnifying Stockholders agree to pay the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with the attached
fee schedule, which may be subject to change hereafter on an annual basis. The
Escrow Agent shall be entitled to reimbursement on demand for all reasonable
expenses incurred in connection with the administration of this Agreement or the
escrow created hereby which are in excess of its compensation for normal
services hereunder, including without limitation, payment of any legal fees and
expenses incurred by the Escrow Agent in connection with resolution of any claim
by any party. As between them, the Buyer on the one hand and the Indemnifying
Stockholders on the other hand shall each pay one-half of the fees and expenses
of the Escrow Agent hereunder, with the Indemnifying Stockholders being
severally liable for a portion of such fees and expenses in accordance with the
percentages set forth opposite each such Indemnifying Stockholder's respective
name on ATTACHMENT A attached hereto.
8. LIMITATION OF ESCROW AGENT'S LIABILITY.
8.1 The Escrow Agent shall incur no liability with
respect to any action taken or suffered by it in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by it to
be genuine and duly authorized, nor for other action or inaction except its own
willful misconduct or gross negligence. The Escrow Agent shall not be
responsible for the validity or sufficiency of this Agreement or for any
agreements referred to herein, but shall be obligated only for the performance
of such duties as are specified as set forth herein. In all questions arising
under the Escrow Agreement, the Escrow Agent may rely on the advice of counsel
(including in-house counsel), and for anything done, omitted or suffered in good
faith by the Escrow Agent based on such advice the Escrow Agent shall not be
liable to anyone. The Escrow Agent shall not be required to take any action
hereunder involving any expense unless the payment of such expense is made or
provided for in a manner reasonably satisfactory to it.
8.2 The Buyer and the Indemnifying Stockholders hereby,
jointly and severally, agree to indemnify the Escrow Agent and its directors,
officers and employees for, and hold it harmless against, any loss, liability or
expense, including legal fees and other costs of preparing or defending any
claim, incurred without gross negligence or willful misconduct on the part of
Escrow Agent, arising out of or in connection with its carrying out of its
duties hereunder. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages. The Buyer, on the one hand, and the
Indemnifying Stockholders, on the other hand, shall each be liable for one-half
of such amount, with the Indemnifying Stockholders being severally liable for a
portion of such fees and expenses in
A-6
66
accordance with the percentages set forth opposite each such Indemnifying
Stockholder's respective name on ATTACHMENT A attached hereto.
9. LIABILITY AND AUTHORITY OF INDEMNIFICATION REPRESENTATIVES;
SUCCESSORS AND ASSIGNEES.
9.1 The Indemnification Representatives shall incur no
liability to the Indemnifying Stockholders with respect to any action taken or
suffered by them in reliance upon any note, direction, instruction, consent,
statement or other documents believed by them to be genuinely and duly
authorized, nor for other action or inaction except their own willful misconduct
or gross negligence. The Indemnification Representatives may, in all questions
arising under the Escrow Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the Indemnification
Representatives based on such advice, the Indemnification Representatives shall
not be liable to the Indemnifying Stockholders.
9.2 In the event of the death or permanent disability of
either Indemnification Representative, or his resignation as an Indemnification
Representative, a successor Indemnification Representative shall be appointed by
the other Indemnification Representative or, absent its appointment, a successor
Indemnification Representative shall be elected by a majority vote of the
Indemnifying Stockholders, with each such Indemnifying Stockholder (or his or
her successors or assigns) to be given a vote equal to the number of votes
represented by the Company Shares held by such Indemnifying Stockholder
immediately prior to the Effective Time. Each successor Indemnification
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Indemnification Representatives,
and the term "Indemnification Representatives" as used herein shall be deemed to
include successor Indemnification Representatives. The Indemnification
Representatives shall promptly notify the Escrow Agent in writing of the death,
disability or resignation of a prior Indemnification Representative and of the
appointment of a successor Indemnification Representative.
9.3 The Indemnification Representatives, acting jointly
but not singly, shall have full power and authority to represent the
Indemnifying Stockholders, and their successors, with respect to all matters
arising under this Agreement and all actions taken by any Indemnification
Representative hereunder shall be binding upon the Indemnifying Stockholders,
and their successors, as if expressly confirmed and ratified in writing by each
of them. Without limiting the generality of the foregoing, the Indemnification
Representatives, acting jointly but not singly, shall have full power and
authority to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments to be made
with respect thereto, on behalf of the Indemnifying Stockholders and their
successors. All actions to be taken by the Indemnification Representatives
hereunder shall be evidenced by, and taken upon, the written direction of a
majority thereof.
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9.4 The Escrow Agent may rely on the Indemnification
Representatives, acting jointly but not singly, as the exclusive agent of the
Indemnifying Stockholders under this Agreement and shall incur no liability to
any party with respect to any actions taken or suffered by him in reliance
thereon.
10. AMOUNTS PAYABLE BY INDEMNIFYING STOCKHOLDERS. The amounts
payable by the Indemnifying Stockholders under this Agreement (i.e., the fees
and expenses of arbitrators payable pursuant to Section 4(e), the fees of the
Escrow Agent payable pursuant to Section 7 and the indemnification obligations
pursuant to Sections 8(b)) shall be payable solely as follows. The
Indemnification Representatives shall notify the Escrow Agent of any such amount
payable by the Indemnifying Stockholders as soon as they become aware that any
such amount is payable, with a copy of such notice to the Buyer. On the sixth
business day after the delivery of such notice, the Escrow Agent shall sell such
number of Escrow Shares as is necessary to raise such amount (up to the number
of Escrow Shares then available in the Escrow Account), subject to compliance
with all applicable securities laws, (i) to the Buyer, and the Buyer shall
purchase such Escrow Shares at a per share price equal to Fair Market Value
(determined in accordance with Section 6), if the Escrow Shares are not covered
by an effective registration statement (an "Effective Registration Statement")
under the Securities Act of 1933, as amended, on such date or (ii) on the Nasdaq
National Market, if such Escrow Shares are covered by an Effective Registration
Statement on such date, and, in either case, the Escrow Agent shall disburse
such proceeds to the party to whom such amount is owed in accordance with the
instructions of the Indemnification Representatives; provided that if the Buyer
delivers to the Escrow Agent (with a copy to the Indemnification
Representatives), within five business days after delivery of such notice by the
Indemnification Representatives, a written notice contesting the legitimacy or
reasonableness of such amount, then the Escrow Agent shall not sell Escrow
Shares to raise the disputed portion of such claimed amount, and such dispute
shall be resolved by the Buyer and the Indemnification Representatives in
accordance with the procedures set forth in Section 4(e).
11. TERMINATION. This Agreement shall terminate upon the later of
the Termination Date or the distribution by the Escrow Agent of all of the
Escrow Shares in accordance with this Agreement; provided that the provisions of
Sections 8 and 9 shall survive such termination.
12. NOTICES. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
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If to the Buyer: Copy to:
FlexiInternational Software, Inc. Xxxx and Xxxx LLP
Xxx Xxxxxxxxxx Xxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attention: President Attention: Xxxx X.X. Xxxxx, Esq.
If to the Indemnification Representatives: Copy to:
Xxxx Xxxxxx Xxxxxxx, Phleger & Xxxxxxxx LLP
Highland Venture Partners 0000 Xxxxxxxx, 00xx Xxxxx
0 Xxxxxxxxxxxxx Xxxxx Xxx Xxxx, XX 00000
Xxxxxx, XX 00000 Attention: Xxxxx Xxxxxxxxx, Esq.
Xxxxx Xxxxxx Proskauer Rose LLP
X.X. Xxxxxx Investment Corporation 0000 Xxxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx Xxx Xxxx, XX 00000
Xxx Xxxx, XX 00000 Attention: Xxxxx Xxxx
cc: J. Xxxxx Xxxxxxxx
If to the Escrow Agent: Copy to:
State Street Bank and Trust Company Peabody & Xxxxxx LLP
Corporate Trust Department 00 Xxxxx Xxxxx
0 Xxxxxxxxxxxxx Xxxxx Xxxxxx, XX 00000
Xxxxxx, XX 00000
Attention: Flexi/Dodge Escrow Account Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 12.
13. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by
delivering a resignation to the parties to this Escrow Agreement, not less than
30 days' prior to the date when such resignation shall take effect. The Buyer
may appoint a successor Escrow Agent without the consent of the Indemnification
Representatives so long as such successor is a bank with assets of at
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least $500 million, and may appoint any other successor Escrow Agent with the
consent of the Indemnification Representatives, which shall not be unreasonably
withheld. If, within such notice period, the Buyer provides to the Escrow Agent
written instructions with respect to the appointment of a successor Escrow Agent
and directions for the transfer of any Escrow Shares then held by the Escrow
Agent to such successor, the Escrow Agent shall act in accordance with such
instructions and promptly transfer such Escrow Shares to such designated
successor.
14. GENERAL.
14.1 GOVERNING LAW, ASSIGNS. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without regard to conflict-of-law principles and shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
14.2 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
14.3 ENTIRE AGREEMENT. Except, with respect to the Buyer,
the Indemnifying Stockholders and the Indemnification Representatives, for those
provisions of the Merger Agreement referenced herein, this Agreement constitutes
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement and supersedes all prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter hereof.
14.4 WAIVERS. No waiver by any party hereto of any
condition or of any breach of any provision of this Escrow Agreement shall be
effective unless in writing. No waiver by any party of any such condition or
breach, in any one instance, shall be deemed to be a further or continuing
waiver of any such condition or breach or a waiver of any other condition or
breach of any other provision contained herein.
14.5 AMENDMENT. This Agreement may be amended only with
the written consent of the Buyer, the Escrow Agent and the Indemnification
Representatives Stockholders.
14.6 DISPUTE RESOLUTION. It is understood and agreed that
should any dispute arise with respect to the delivery, ownership, right of
possession, and/or disposition of the Escrow Shares, or should any claim be made
upon such Escrow Shares by a third party, the Escrow Agent, upon receipt of
written notice of such dispute or claim by the parties hereto or by a third
party, is authorized and directed to retain in its possession without liability
to anyone, all or any of said Escrow Shares until such dispute shall have been
settled either by the mutual written agreement of the parties involved or by a
final order, decree or judgment of a Court in the United States of America, the
time for perfection
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of an appeal of such order, decree or judgment having expired. The Escrow Agent
may, but shall be under no duty whatsoever to, institute or defend any legal
proceedings which relate to the Escrow Account.
14.7 CONSENT TO JURISDICTION AND SERVICE. The parties
hereby absolutely and irrevocably consent and submit to the jurisdiction of the
courts in the Commonwealth of Massachusetts and of any Federal court located in
said Commonwealth in connection with any actions or proceedings brought against
any party hereto by the Escrow Agent arising out of or relating to this Escrow
Agreement. In any such action or proceeding, the parties hereby absolutely and
irrevocably waive personal service of any summons, complaint, declaration or
other process and hereby absolutely and irrevocably agree that the service
thereof may be made by certified or registered first-class mail directed to such
party, at their respective addresses in accordance with Section 12 hereof.
14.8 FORCE MAJEURE. Neither the Buyer, nor the
Indemnifying Stockholders, nor the Indemnification Representatives, nor Escrow
Agent shall be responsible for delays or failures in performance pursuant to
this Escrow Agreement resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
14.9 REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
14.10 ADDRESSES OF INDEMNIFYING STOCKHOLDERS. The Escrow
Agent may rely for all purposes on the address of each Indemnifying Stockholder
set forth on ATTACHMENT A attached hereto, unless and until notified in writing
by an Indemnifying Stockholder of a change is the address of such Indemnifying
Stockholder, in which case the Escrow Agent shall rely for all purposes on such
new address.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
FLEXIINTERNATIONAL SOFTWARE, INC.
By:
-----------------------------------
Xxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
---------------------------------------
STATE STREET BANK AND TRUST COMPANY
By:
-----------------------------------
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EXHIBIT B
FORM OF OPINION OF COUNSEL TO THE COMPANY
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The
Company has all requisite corporate power and authority to carry on the
businesses in which it has engaged and to own and use the properties owned and
used by it.
2. The authorized capital stock of the Company consists of (i)
28,000,000 shares of Company Common Stock, of which 598,291 shares are issued
and outstanding and no shares are held in the treasury of the Company, and (ii)
16,817,181 shares of Company Preferred Stock, of which (A) 143,750 shares have
been designated as Series A-1 Preferred, all of which shares are issued and
outstanding and none of which shares are held in the treasury of the Company,
(B) 143,750 shares have been designated as Series A-2 Preferred, all of which
shares are issued and outstanding and none of which shares are held in the
treasury of the Company, (C) 560,897 shares have been designated as Series B
Preferred, all of which shares are issued and outstanding and none of which
shares are held in the treasury of the Company, (D) 6,249,997 shares have been
designated as Series C Preferred, all of which shares are issued and outstanding
and none of which shares are held in the treasury of the Company, (E) 2,500,000
shares have been designated as Series D Preferred, all of which shares are
issued and outstanding and none of which shares are held in the treasury of the
Company and (F) 7,218,787 shares have been designated as Series E Preferred, of
which 7,172,414 shares are issued and outstanding and no shares are held in the
treasury of the Company. All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. Except as set forth on the
Disclosure Schedule, to the best of such counsel's knowledge, there are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance, disposition or acquisition of any of its capital stock. All of the
issued and outstanding shares of capital stock of the Company were issued in
compliance with the registration requirements (or valid exemptions therefrom)
under the Securities Act of 1933.
3. The Company has all requisite power and authority to execute
and deliver the Agreement and to perform its obligations thereunder. The
execution and delivery of the Agreement and the performance of the Agreement and
the consummation of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action (including the Requisite
Stockholder
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Approval) on the part of the Company. The Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
rights of creditors generally.
4. Except as set forth in the Disclosure Schedule, neither the
execution and delivery by the Company of the Agreement, nor the consummation by
the Company of the transactions contemplated thereby, (i) conflicts with or
violates any provision of the Restated Certificate of Incorporation or By-laws
of the Company, (ii) requires on the part of the Company or any Subsidiary any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity, (iii) to the best knowledge of such counsel, conflicts with, results in
a breach of, constitutes (with or without due notice or lapse of time or both) a
default under, results in the acceleration of, creates in any party the right to
accelerate, terminate, modify or cancel or requires any notice, consent or
waiver under, any contract, lease, license or other agreement or instrument
known to such counsel to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of their assets is
subject, (iv) to the best knowledge of such counsel, results in the imposition
of any Security Interest upon any assets of the Company or any Subsidiary or (v)
violates any foreign or domestic statute, rule or regulation, or any order,
writ, injunction or decree known to such counsel, that is applicable to the
Company, any Subsidiary or any of their properties or assets.
5. Except as set forth in the Disclosure Schedule, neither the
Company nor any of its Subsidiaries (i) is subject to any unsatisfied judgment,
order, decree, stipulation or injunction or (ii) is a party to, or to the
knowledge of such counsel, is threatened to be made a party to any complaint,
action, suit, proceeding, hearing or investigation of or in any court or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator.
6. All authorizations, consents and approvals of all federal,
state and foreign governmental agencies and authorities required in order to
permit consummation by the Company of the transactions contemplated by the
Agreement have been obtained.
7. Upon the filing of the Certificate of Merger with the
Secretary of State of Delaware, the Merger will be effective under Delaware law.
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00
XXXXXXX X
XXX-X.X. STOCKHOLDER REPRESENTATION LETTER
The undersigned stockholder (the "Company Stockholder") of The Dodge
Group, Inc., a Delaware corporation (the "Company"), hereby represents and
warrants to FlexiInternational Software, Inc., a Delaware corporation (the
"Buyer"), as follows:
1. INVESTMENT REPRESENTATIONS. With respect to the shares of
Common Stock of the Buyer, $.01 par value per share ("Buyer Common Stock"),
issuable to the Company Stockholder upon effectiveness of the proposed merger
(the "Merger") of a wholly-owned subsidiary of the Buyer with and into the
Company:
(a) The Company Stockholder will be acquiring the Buyer
Common Stock to be issued to such Company Stockholder for his or her own account
for investment only, and not with a view to, or for sale in connection with, any
distribution of such Buyer Common Stock in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any rule or regulation under the
Securities Act or any state or foreign securities law.
(b) The Company Stockholder has had adequate opportunity
to obtain from representatives of the Buyer such information as is necessary to
evaluate the merits and risks of the investment of such Company Stockholder in
the Buyer.
(c) The Company Stockholder has sufficient experience in
business, financial and investment matters to be able to evaluate the risks
involved in the acquisition of the Buyer Common Stock to be issued to such
Company Stockholder and to make an informed investment decision with respect to
such investment.
(d) The Company Stockholder understands that the Buyer
Common Stock, if and when issued, will not have been registered under the
Securities Act and will be "restricted securities" within the meaning of Rule
144 under the Securities Act; and the Buyer Common Stock will not be eligible to
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
(e) A legend substantially in the following form will be
placed on the certificate representing any Buyer Common Stock which may be
issued to such Company Stockholder:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold,
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transferred or otherwise disposed of in the absence of an
effective registration statement under such Act or an opinion
of counsel satisfactory to the corporation to the effect that
such registration is not required."
2. ADDITIONAL REPRESENTATIONS BY NON-U.S. PERSONS. The Company
Stockholder is not a "U.S. person" (as defined in Regulation S promulgated under
the Securities Act ("Regulation S")) and makes the following additional
representations with respect to the Buyer Common Stock issued to and acquired by
such Company Stockholder hereunder:
(a) The Company Stockholder understands and acknowledges
that (i) the Buyer Common Stock has not been registered under the Securities Act
and may not be offered or sold in the United States or to, or for the account or
benefit of, any U.S. person unless such securities are registered under the
Securities Act or such offer or sale is made pursuant to an exemption from the
registration requirements of the Securities Act and (ii) the Buyer Common Stock
is being distributed by the Buyer pursuant to the terms of Regulation S, which
permits securities to be sold to non- U.S. persons in "offshore transactions"
(as defined in Regulation S), subject to certain terms and conditions.
(b) The Company Stockholder is not a U.S. person and has
signed this Representation Letter and a Written Action of Stockholders approving
the Merger outside the United States.
(c) The Company Stockholder acknowledges that for a
period of one year following the closing of the Merger (the "Distribution
Compliance Period"), the Company Stockholder shall not (i) engage in any
activity for the purpose of, or which may reasonably be expected to have the
effect of, conditioning the market in the United States for the Buyer Common
Stock or (ii) unless such Buyer Common Stock is registered under the Securities
Act or an exemption from the registration requirements of the Securities Act is
available, offer, sell or transfer the Buyer Common Stock in the United States
or to, or for the account or benefit of, a U.S. person. The Company Stockholder
understands that the Buyer Common Stock or any interest therein are only
transferable on the books and records of the transfer agent and registrar of the
Buyer. The Company Stockholder further understands that such transfer agent and
registrar will not register any transfer of the Buyer Common Stock which the
Buyer in good faith believes violates the restrictions set forth in this
paragraph (c), and that the Buyer may place stop transfer orders with its
transfer agent with respect to certificates representing Buyer Common Stock.
(d) Unless the Buyer Common Stock shall first have been
registered under the Securities Act, any proposed offer, sale or transfer during
the Distribution Compliance Period of any of the Buyer Common Stock shall be
subject to the
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condition that the Company Stockholder must deliver to the Buyer (i) a written
certification that neither record not beneficial ownership of the Buyer Common
Stock has been offered or sold in the United States or to, or for the account or
benefit of, any U.S. person, (ii) a written certification of the proposed
transferee that such transferee (or any account for which such transferee is
acquiring such Buyer Common Stock) is not a U.S. person, that such transferee is
acquiring such Buyer Common Stock for such transferee's own account (or an
account over which he or she has investment discretion), and that such
transferee is knowledgeable of and agrees to be bound by the restrictions on
re-sale set forth in this section and Regulation S during the Distribution
Compliance Period, and (iii) a written opinion of United States counsel, in form
and substance reasonably satisfactory to the Buyer, to the effect that the
offer, sale and transfer of such Buyer Common Stock are exempt from registration
under the Securities Act.
(e) The Company Stockholder agrees that for the duration
of the Distribution Compliance Period the stock certificates representing the
Buyer Common Stock shall bear the legend set forth below:
"The shares of Common Stock represented by this certificate
may not be offered, sold or transferred except in accordance
with the provisions of Regulation S under the Securities Act
of 1933, as amended."
The above representations and warranties are true and correct in all
respects. The undersigned Company Stockholder recognizes that the Buyer is
relying on the truth and accuracy of such representations and warranties (i) in
connection with the proposed Merger and (ii) so that it may rely on certain
exemptions from registration contained in the Securities Act and the securities
laws of certain states. The provisions of Sections 2(c), 2(d) and 2(e) shall
survive any closing of the proposed Merger, and the undersigned Company
Stockholder agrees to comply therewith. THE UNDERSIGNED COMPANY STOCKHOLDER
AGREES TO NOTIFY THE BUYER PROMPTLY OF ANY CHANGES WHICH WOULD CAUSE THE
FOREGOING REPRESENTATIONS AND WARRANTIES NOT TO BE TRUE AND CORRECT AT ANY TIME
PRIOR TO THE CONSUMMATION OF THE PROPOSED MERGER.
Print Name:
-------------------------------
Signature:
--------------------------------
Dated:
------------------------------------
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EXHIBIT D
Form of Opinion of Counsel to the Buyer
and the Transitory Subsidiary
1. Each of the Buyer and the Transitory Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. The Buyer has all requisite corporate power
and authority to carry on the business in which it is engaged and to own and use
the properties owned and used by it.
2. The authorized capital stock of the Buyer consists of
50,000,000 shares of Buyer Common Stock, of which 16,506,753 shares were issued
and outstanding and no shares were held in the treasury of the Buyer as of March
31, 1998. All of the Merger Shares will be, when issued in accordance with the
Agreement, duly authorized, validly issued, fully paid and nonassessable.
3. Each of the Buyer and the Transitory Subsidiary has all
requisite power and authority to execute and deliver the Agreement and (in the
case of the Buyer) the Escrow Agreement and to perform its obligations
thereunder. The execution and delivery of the Agreement and (in the case of the
Buyer) the Escrow Agreement and the performance of the Agreement and (in the
case of the Buyer) the Escrow Agreement and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action on the part of the Buyer and the Transitory Subsidiary. The
Agreement and (in the case of the Buyer) the Escrow Agreement have been duly and
validly executed and delivered by the Buyer and the Transitory Subsidiary and
constitute valid and binding obligations of the Buyer and the Transitory
Subsidiary, enforceable against the Buyer and the Transitory Subsidiary in
accordance with their terms, subject to bankruptcy, insolvency and similar laws
affecting the rights of creditors generally.
4. Except as set forth in the Agreement, neither the execution
and delivery of the Agreement, nor the consummation of the transactions
contemplated thereby, (i) conflicts with or violates any provision of the
charter or by-laws of the Buyer or the Transitory Subsidiary, (ii) requires on
the part of the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (iii) to the
best knowledge of such counsel, conflicts with, results in a breach of,
constitutes (with or without due notice or lapse of time or both) a default
under, or requires any notice, consent or waiver under, any contract, lease,
license or other agreement or instrument filed as an Exhibit to the Buyer
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78
Reports, or (iv) violates any statute, rule or regulation, or any order, writ,
injunction or decree known to such counsel, that is applicable to the Buyer or
the Transitory Subsidiary or any of their properties or assets.
5. All authorizations, consents and approvals of all federal and
state governmental agencies and authorities required in order to permit
consummation by the Buyer and the Transitory Subsidiary of the transactions
contemplated by the Agreement have been obtained.
6. Based in part on the representations of each of the Company
Stockholders in either Investor Questionnaires of the Buyer received from such
Company Stockholders or representation letters received from such Company
Stockholders pursuant to Section 4.2(k) of the Agreement, the issuance of the
Buyer Common Stock at the Closing pursuant to the Agreement is exempt from the
registration requirements under the Securities Act.
7. Upon the filing of the Certificate of Merger with the
Secretary of State of Delaware, the Merger will be effective under Delaware law.
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