EXHIBIT 10.16
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 28, 1998 (the
"Agreement"), by and among PREVIEW SYSTEMS, INC., (formerly known as P2
Software, Inc.) a Delaware corporation ("Newco"), PREVIEW SOFTWARE, INC., a
California corporation ("Preview"), PORTLAND SOFTWARE, INC., an Oregon
corporation ("Portland"), PREVIEW ACQUISITION CORP., a California corporation
and PORTLAND ACQUISITION CORP., an Oregon Corporation.
WHEREAS, (i) Newco is a newly formed corporation organized and existing
under the laws of the State of Delaware, one-half of the issued and outstanding
capital stock of which is owned by each of Preview and Portland, (ii) Preview is
a corporation organized and existing under the laws of the State of California
and (iii) Portland is a corporation organized and existing under the laws of the
State of Oregon; and
WHEREAS, Preview and Portland have caused Newco to form a wholly owned
subsidiary called Preview Acquisition Corp., a corporation organized under the
laws of the State of California ("Preview Sub"), and a wholly owned subsidiary
called Portland Acquisition Corp., a corporation organized under the laws of the
State of Oregon ("Portland Sub"), and all the outstanding capital stock of each
of Preview Sub and Portland Sub is owned by Newco; and
WHEREAS, the Board of Directors of each of Newco, Preview and Portland deem
it advisable and in the best interests of their stockholders or shareholders, as
the case may be, that each of Preview and Portland become subsidiaries of Newco
pursuant to the Mergers (as hereinafter defined) provided for in this Agreement,
and desire to make certain representations, warranties and agreements in
connection with such Mergers; and
WHEREAS, for Federal income tax purposes, it is intended that the
transactions contemplated by this Agreement constitute transactions described in
section 351 and/or section 368 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder.
NOW THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements set forth in this Agreement and such other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement, intending to be legally bound
hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
Section 1.1 "Affiliate" shall mean, as to any person, any other person
that directly or indirectly controls, or is under common control with or is
controlled by such person.
Section 1.2 "Agreement" shall have the meaning in the introductory
clauses above.
Section 1.3 "Articles of Merger" shall have the meaning set forth in
Section 2.3.
Section 1.4 "CGCL" shall have the meaning set forth in Section 2.1(a).
Section 1.5 "Cause" shall have the meaning set forth in Section 7.7(a).
Section 1.6 "COBRA" shall have the meaning set forth in Section 4.10(a).
Section 1.7 "Code" shall have the meaning set forth in the introductory
clauses hereto.
Section 1.8 "Disclosure Documents" shall have the meaning provided in
Section 1.19.
Section 1.9 "Dissenting Shares" shall have the meaning provided in
Section 8.2(e).
Section 1.10 "Effective Time" shall have the meaning set forth in Section
2.3.
Section 1.11. "End-User Licenses" shall have the meaning set forth in
Section 4.7(a)(viii).
Section 1.12 "ERISA" shall have the meaning set forth in Section 4.10(b).
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.14 "Fairness Hearing" shall mean the hearing pursuant to Section
25142 of the CGCL on the fairness of the Mergers and the securities issued in
connection therewith.
Section 1.15 "Fully Diluted Preview Shares" shall have the meaning
provided in Section 2.1(c).
Section 1.16 "Fully Diluted Portland Shares" shall have the meaning
provided in Section 2.2(c).
Section 1.17 "GAAP" shall have the meaning set forth in Section 4.5(a).
Section 1.18 "Governmental Entity" shall mean any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign.
Section 1.19 "Hearing Documents" shall mean the Application for
Qualification of Securities by permit under Section 25121 of the CGCL, the
related Notice of Hearing and the proxy statements and other disclosure
materials (collectively, such notice, proxy statements and other disclosure
materials are referred to as the "Disclosure Documents") to be supplied to the
shareholders of Preview and Portland in connection with the transactions
contemplated hereby (collectively, the "Hearing Documents").
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Section 1.20 "Incentive Stock Option" shall have the meaning provided in
Section 2.2(b).
Section 1.21 "Intellectual Property Rights" shall have the meaning
provided in Section 4.13(h).
Section 1.22 "Knowledge of Portland" means the actual knowledge of Xxxxxxx
Xxxxxxxx, Xx Xxxxxx and Xxxxxx Xxxxxxxx; references to the "Knowledge of
Preview" means the actual knowledge of Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxx and R.
Xxxxxxx Xxxxxx.
Section 1.23 "Licenses" shall have the meaning provided in Section 4.17.
Section 1.24 "Material Adverse Effect," with respect to any party, shall
mean a material adverse effect (or any development which, insofar as reasonably
can be foreseen, in the future is reasonably likely to have a material adverse
effect) on the business, assets, financial or other condition, results of
operations or prospects of such party and its Subsidiaries taken as a whole.
Section 1.25 "Merger Agreements" shall mean the Preview Merger Agreement
and the Portland Merger Agreement.
Section 1.26 "Mergers" shall mean the Preview Merger and the Portland
Merger.
Section 1.27 "Newco Board" shall have the meaning set forth in Section
2.5(a)(i).
Section 1.28 "Newco Common Stock" shall have the meaning set forth in
Section 2.1(a)(i).
Section 1.29 "Newco Preferred Stock" shall mean the Newco Series A
Preferred Stock, Newco Series B Preferred Stock, Newco Series C Preferred Stock,
Newco Series D Preferred Stock and Newco Series E Preferred Stock.
Section 1.30 "Newco Series A Preferred Stock," "Newco Series B Preferred
Stock," "Series C Preferred Stock" and "Newco Series D Preferred" shall have the
meanings set forth in Section 2.1.
Section 1.31 "Newco Series E Preferred Stock" shall have the meaning set
forth in Section 2.2.
Section 1.32 "Newco Stock Option Plan" shall have the meaning set forth in
Section 7.9.
Section 1.33 "OBCA" shall have the meaning set forth in Section 2.2(a).
Section 1.34 "Portland Charter Documents" shall have the meaning set forth
in Section 4.1.
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Section 1.35 "Portland Common Stock" shall have the meaning set forth in
Section 2.2(a)(i).
Section 1.36 "Portland Common Stock Exchange Amount" shall have the
meaning set forth in Section 2.2(a)(ii).
Section 1.37 "Portland Disclosure Schedule" shall have the meaning set
forth in Article IV.
Section 1.38 "Portland Employee Plans" shall have the meaning set forth in
Section 4.10(b).
Section 1.39 "Portland Financial Statements" shall have the meaning set
forth in Section 4.5(a).
Section 1.40 "Portland Intellectual Property Rights" shall have the
meaning provided in Section 4.13(h).
Section 1.41 "Portland Legal Proceedings" shall have the meaning set forth
in Section 4.8.
Section 1.42 "Portland Merger" shall have the meaning set forth in Section
2.2(a).
Section 1.43 "Portland Merger Agreement" shall have the meaning set forth
in Section 2.2(a).
Section 1.44 "Portland Options" shall have the meaning set forth in
Section 4.2(c).
Section 1.45 "Portland Plan" shall have the meaning set forth in Section
4.2(c).
Section 1.46 "Portland Preferred Stock" shall have the meaning set forth
in Section 2.2(a)(ii).
Section 1.47 "Portland Preferred Stock Exchange Amount" shall have the
meaning set forth in Section 2.2(a)(ii).
Section 1.48 "Portland Products" shall have the meaning set forth in
Section 4.13(b).
Section 1.49 "Portland" shall have the meaning set forth in the
introductory clauses above.
Section 1.50 "Portland Stock Options" means the options to acquire
Portland Common Stock outstanding as of the Effective Time.
Section 1.51 "Portland Sub" shall have the meaning set forth in the
introductory clauses hereto.
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Section 1.52 "Portland Warrants" shall have the meaning set forth in
Section 4.2(d).
Section 1.53 "Preview Charter Documents" shall have the meaning set forth
in Section 5.1.
Section 1.54 "Preview Common Stock" shall have the meaning set forth in
Section 2.1(a)(i).
Section 1.55 "Preview Common Stock Exchange Amount" shall have the meaning
set forth in Section 2.1(a)(i).
Section 1.56 "Preview Disclosure Schedule" shall have the meaning set
forth in Article V.
Section 1.57 "Preview Employee Plans" shall have the meaning set forth in
Section 5.10(b).
Section 1.58 "Preview Exchange Ratio" shall have the meaning set forth in
Section 2.1(c).
Section 1.59 "Preview Financial Statements" shall have the meaning set
forth in Section 5.5(a).
Section 1.60 "Preview Intellectual Property Rights" shall have the
meaning set forth in Section 5.13(h).
Section 1.61 "Preview Legal Proceedings" shall have the meaning set forth
in Section 5.8.
Section 1.62 "Preview Merger" shall have the meaning set forth in Section
2.1(a).
Section 1.63 "Preview Merger Agreement" shall have the meaning set forth
in Section 2.1(a).
Section 1.64 "Preview New Plan" shall have the meaning set forth in
Section 5.2(c).
Section 1.65 "Preview Old Plan" shall have the meaning set forth in
Section 5.2(c).
Section 1.66 "Preview Plans" shall have the meaning set forth in Section
5.2(c).
Section 1.67 "Preview Preferred Stock" means the Preview Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred Stock.
Section 1.68 "Preview Products" shall have the meaning set forth in
Section 5.13(b).
Section 1.69 "Preview Series A Preferred" shall have the meaning set forth
in Section 2.1(a)(ii).
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Section 1.70 "Preview Series A Preferred Exchange Amount" shall have the
meaning set forth in Section 2.1(a)(ii).
Section 1.71 "Preview Series B Preferred" shall have the meaning set forth
in Section 2.1(a)(iii).
Section 1.72 "Preview Series B Preferred Exchange Amount" shall have the
meaning set forth in Section 2.1(a)(iii).
Section 1.73 "Preview Series C Preferred" shall have the meaning set forth
in Section 2.1(a)(iv).
Section 1.74 "Preview Series C Preferred Stock Exchange Amount" shall have
the meaning set forth in Section 2.1(a)(iv).
Section 1.75 "Preview Series D Preferred" shall have the meaning set forth
in Section 2.1(a)(v).
Section 1.76 "Preview Series D Preferred Stock Exchange Amount" shall have
the meaning set forth in Section 2.1(a)(v).
Section 1.77 "Preview" shall have the meaning set forth in the
introductory clauses above.
Section 1.78 "Preview Stock Options" means the options to acquire Preview
Common Stock outstanding as of the Effective Time.
Section 1.79 "Preview Sub" shall have the meaning set forth in the
introductory clauses hereto.
Section 1.80 "Preview Warrants" means the warrants, if any, to acquire
Preview Preferred Stock or Preview Common Stock outstanding as of the Effective
Time.
Section 1.81 "Returns" shall have the meaning set forth in Section
4.12(a)(ii).
Section 1.82 "SEC" shall mean the United States Securities and Exchange
Commission.
Section 1.83 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.84 "Stock Options" shall mean the Portland Stock Options and the
Preview Stock Options.
Section 1.85 "Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
Section 1.86 "Taxes" shall have the meaning set forth in Section
4.12(a)(i).
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Section 1.87 "Termination Date" shall have the meaning set forth in
Section 9.1.
Section 1.88 "Third Party" shall mean any person or group that is deemed
to be a "person" within the meaning of Section 13(d) of the Exchange Act.
ARTICLE II
THE MERGERS
Section 2.1 Preview Merger.
(a) Preview and Portland will cause Newco and Preview Sub to
execute and deliver, and Preview will execute and deliver, and agrees, subject
to the terms and conditions of this Agreement and the Preview Merger Agreement,
to submit to its shareholders for adoption and approval as required under the
California General Corporation Law (the "CGCL"), together with this Agreement,
in accordance with Article II hereof, the Agreement of Merger, a form of which
is set forth as Exhibit A hereto, with such further changes as may be mutually
agreed upon by the parties to this Agreement (the "Preview Merger Agreement"),
providing for the merger of Preview Sub with and into Preview (the "Preview
Merger") and the conversion of each outstanding share of:
(i) Preview Common Stock, par value $0.01 per share (the
"Preview Common Stock"), into that number of shares of Newco Common Stock par
value $0.0001 per share (the "Newco Common Stock") equal to the Preview Common
Stock Exchange Amount; the "Preview Common Stock Exchange Amount" shall equal
one share of Preview Common Stock outstanding at the Effective Time multiplied
by the "Preview Exchange Ratio;"
(ii) Preview Series A Preferred Stock (the "Preview Series A
Preferred") into that number of shares of Newco Series A Preferred Stock par
value $0.0001 per share (the "Newco Series A Preferred") equal to the Preview
Series A Preferred Exchange Amount; the "Preview Series A Preferred Exchange
Amount" shall equal one share of Preview Series A Preferred issued and
outstanding at the Effective Time multiplied by the Preview Exchange Ratio;
(iii) Preview Series B Preferred Stock (the "Preview Series B
Preferred") into that number of shares of Newco Series B Preferred Stock par
value $0.0001 per share (the "Newco Series B Preferred") equal to the Preview
Series B Preferred Exchange Amount; the "Preview Series B Preferred Exchange
Amount" shall equal one share of Preview Series B Preferred issued and
outstanding at the Effective Time multiplied by the Preview Exchange Ratio;
(iv) Preview Series C Preferred Stock (the "Preview Series C
Preferred") into that number of shares of Newco Series C Preferred Stock par
value $0.0001 per share (the "Newco Series C Preferred") equal to the Preview
Series C Preferred Exchange Amount; the "Preview Series C Preferred Stock
Exchange Amount" shall equal one share of
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Preview Series C Preferred issued and outstanding at the Effective Time
multiplied by the Preview Exchange Ratio; and
(v) Preview Series D Preferred Stock (the "Preview Series D
Preferred") into that number of shares of Newco Series D Preferred Stock par
value $0.0001 per share (the "Newco Series D Preferred") equal to the Preview
Series D Preferred Exchange Amount; the "Preview Series D Preferred Stock
Exchange Amount" shall equal one share of Preview Series D Preferred issued and
outstanding at the Effective Time multiplied by the Preview Exchange Ratio.
(b) At the Effective Time, to the extent permitted by the terms of
the relevant governing instruments, each outstanding Preview Stock Option and
each outstanding Preview Warrant, whether vested or unvested, shall be assumed
or exchanged by Newco for an option or warrant of Newco, as applicable, to
acquire, on substantially the same terms and conditions as were applicable under
such Preview Stock Option or Preview Warrant, the same number of shares (rounded
down to the nearest whole share) of Newco Common Stock or Newco Preferred Stock
as the holder of such Preview Stock Option or Preview Warrant would have been
entitled to receive pursuant to the Preview Merger had such holder exercised
such option or warrant in full immediately prior to the Effective Time, at a
Newco per share exercise price (rounded up to the nearest whole cent) equal to
(i) the per share exercise price for the shares of Preview Common Stock or
Preview Preferred Stock, as applicable, purchasable pursuant to such Preview
Stock Option or Preview Warrant divided by (ii) the Preview Exchange Ratio;
provided, however, that in the case of any option to which section 421 of the
Code applies by reason of its qualification under any of sections 422-424 of the
Code ("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with section 424(a) of the
Code, subject to the terms and conditions of the relevant governing instruments.
(c) The "Preview Exchange Ratio" shall equal one. The "Fully Diluted
Preview Shares" shall equal the fully diluted shares of capital stock of Preview
as of the Effective Time, assuming the conversion of all convertible securities
of Preview and the exercise of all outstanding options, warrants and other
rights to acquire Preview capital stock and shall include Preview Dissenting
Shares, if any.
(d) As provided in the Preview Merger Agreement, Preview shall be the
surviving corporation in the Preview Merger and shall become a wholly owned
subsidiary of Newco. From and after the Effective Time, the identity and
separate existence of Preview Sub shall cease, and Preview shall succeed,
without other transfer, to all the rights, properties, debts and liabilities of
Preview Sub.
(e) In connection with the Preview Merger, Preview and Portland shall
take such actions as may be necessary to cause Newco to reserve sufficient
shares of Xxxxx Xxxxxx Xxxxx, Xxxxx Preferred Stock, Newco Series A Preferred,
Newco Series B Preferred, Newco Series C Preferred and Newco Series D Preferred
prior to the Preview Merger, to permit the issuance of shares of Newco Common
Stock and Newco Preferred Stock (i) to the holders of
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Preview Common Stock and Preview Preferred Stock as of the Effective Time in
accordance with the terms of the Preview Merger Agreement and (ii) upon the
exercise of Preview Stock Options and Preview Warrants (and conversion of
preferred stock underlying such warrants) to be assumed or exchanged for
equivalent securities of Newco in accordance with Section 2.1(b) of this
Agreement. Each of Newco and Preview shall use its best efforts to cause the
Preview Merger to be consummated in accordance with the terms of this Agreement
and the Preview Merger Agreement.
Section 2.2 Portland Merger.
(a) Preview and Portland will cause Newco and Portland Sub to
execute and deliver, and Portland will execute and deliver, and agrees, subject
to the terms and conditions of this Agreement and the Portland Merger Agreement,
to submit to its shareholders for adoption and approval, as required under the
Oregon Business Corporation Act (the "OBCA"), together with this Agreement, in
accordance with Article II hereof, the Agreement of Merger, a form of which is
set forth as Exhibit B hereto, with such further changes as may be mutually
agreed upon by the parties to this Agreement (the "Portland Merger Agreement"),
providing for the merger of Portland Sub with and into Portland (the "Portland
Merger") and the conversion of each outstanding share of:
(i) Portland Common Stock, par value $.01 per share (the
"Portland Common Stock") into that number of shares of Newco Common Stock equal
to the Portland Common Stock Exchange Amount; the "Portland Common Stock
Exchange Amount" shall equal one share of Portland Common Stock multiplied by
the Portland Exchange Ratio (as defined below);
(ii) Portland Preferred Stock, par value $.01 per share,
including both the Portland Series A Preferred Stock and the Portland Series B
Preferred Stock (the "Portland Preferred Stock") into that number of shares of
Newco Series E Preferred Stock par value $0.0001 per share (the "Newco Series E
Preferred Stock") equal to the Portland Preferred Stock Exchange Amount; the
"Portland Preferred Stock Exchange Amount" shall equal one share of Portland
Preferred Stock multiplied by the Portland Exchange Ratio.
(b) At the Effective Time, to the extent permitted by the terms of
the relevant governing instruments, each outstanding Portland Stock Option and
each outstanding Portland Warrant, whether vested or unvested, shall be assumed
as exchanged by Newco for an option or warrant of Newco, as applicable, to
acquire, on substantially the same terms and conditions as were applicable under
such Portland Stock Option or Portland Warrant, the same number of shares
(rounded down to the nearest whole share) of Newco Common Stock or Newco
Preferred Stock as the holder of such Portland Stock Option or Portland Warrant
would have been entitled to receive pursuant to the Portland Merger had such
holder exercised such option or warrant in full immediately prior to the
Effective Time, at a Newco per share exercise price (rounded up to the nearest
whole cent) equal to (i) the per share exercise price for the shares of Portland
Common Stock or Portland Preferred Stock, as applicable, purchasable pursuant to
such Portland Stock Option or Portland Warrant divided by (ii) the Portland
Exchange Ratio; provided,
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however, that in the case of any option to which section 421 of the Code applies
by reason of its qualification under any of sections 422-424 of the Code
("incentive stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with section 424(a) of the Code, subject
to the terms and conditions of the relevant governing instruments.
(c) The "Portland Exchange Ratio" shall equal the quotient
obtained by dividing (a) the Fully Diluted Preview Shares by (b) the Fully
Diluted Portland Shares. The "Fully Diluted Portland Shares" shall equal the
fully diluted shares of capital stock of Portland as of the Effective Time,
assuming the conversion of all convertible securities of Portland and the
exercise of all outstanding options and warrants and other rights to acquire
Portland capital stock and shall include Portland Dissenting Shares, if any.
Notwithstanding the foregoing, for purposes of calculating the Portland Exchange
Ratio pursuant to this Section 2.2(c), the "Fully Diluted Preview Shares" and
the "Fully Diluted Portland Shares" shall not include the securities outstanding
or to be issued as set forth on Schedule 2.2(c), as such schedule may be amended
or modified from time to time by the parties pursuant to Section 9.3 hereof.
(d) As set forth in the Portland Merger Agreement, Portland shall
be the surviving corporation in the Portland Merger and shall become a wholly
owned subsidiary of Newco. From and after the Effective Time, the identity and
separate existence of Portland Sub shall cease, and Portland shall succeed,
without other transfer, to all the rights, properties, debts and liabilities of
Portland Sub.
(e) In connection with the Portland Merger, Preview and Portland
shall take such actions as may be necessary to cause Newco to reserve sufficient
shares of Newco Common Stock and Newco Preferred Stock prior to the Portland
Merger to permit the issuance of shares of Newco Common Stock and Newco
Preferred Stock (i) to the holders of Portland Common Stock and Newco Preferred
Stock as of the Effective Time in accordance with the terms of the Portland
Merger Agreement and (ii) upon the exercise of Portland Stock Options and
Portland Warrants to be assumed by or exchanged for equivalent securities of
Newco in accordance with Section 2.2(b) of this Agreement. Each of Newco and
Portland shall use its best efforts to cause the Portland Merger to be
consummated in accordance with the terms of this Agreement and the Portland
Merger Agreement.
Section 2.3 Filing of Merger Agreements and Related Certificates.
Immediately after all conditions to this Agreement have been satisfied or
waived, the articles of merger pertaining to the Preview Merger and the Portland
Merger, respectively (together the "Articles of Merger"), or such other
documents necessary to effect the Mergers, shall be executed and filed in
accordance with the CGCL and the OBCA, as the case may be, and the Mergers
shall become effective substantially simultaneously in accordance with the terms
of the Merger Agreements (such time and date are referred to herein as the
"Effective Time").
Section 2.4 Effect of Mergers. The parties agree to the following
provisions with respect to the Mergers:
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(a) Names of Surviving Corporations. The names of Preview and
Portland, as the surviving corporations in the Mergers, from and after the
Effective Time shall be, respectively, "Preview Software, Inc." and "Portland
Software, Inc." until changed or amended in accordance with applicable law.
(b) Charter Documents. At the Effective Time (i) the Articles of
Incorporation and Bylaws of Preview, as in effect immediately prior to the
Effective Time, shall be amended so that the operative provisions read in their
entireties exactly as the Articles of Incorporation and Bylaws, respectively, of
Preview Sub, except that the name of the corporation specified therein shall be
"Preview Software, Inc." and (ii) the Articles of Incorporation and Bylaws of
Portland, shall be amended so that the operative provisions read in their
entireties exactly as the Articles of Incorporation and Bylaws, respectively, of
Portland Sub, as in effect immediately prior to the Effective Time, except that
the name of the corporation specified therein shall be "Portland Software, Inc."
(c) Other Effects. The Preview Merger shall have such other
effects as are set forth in the Preview Merger Agreement and the CGCL and the
Portland Merger shall have such other effects as are set forth in the Portland
Merger Agreement and the OBCA.
Section 2.5 Directors and Officers of Newco, Preview and Portland;
Headquarters.
(a) Newco Governance.
(i) Preview and Portland shall take all actions necessary to
cause the directors comprising the full board of directors of Newco (the "Newco
Board") at the Effective Time to be comprised of seven directors. Preview and
Portland agree that the initial Board of Directors of Newco shall consist of the
persons listed on Exhibit C. If, prior to the Effective Time, any of the
foregoing persons shall decline or be unable to serve as a Newco director,
Preview and Portland shall jointly designate another person to serve in such
person's stead. If Preview and Portland are unable to agree on a replacement
designee prior to the Effective Time, the Newco Board shall appoint a
replacement to fill the resulting vacancy if permitted by the Newco Articles of
Incorporation with respect to the vacant seat.
(ii) At or prior to the Effective Time, Preview and Portland
shall cause (A) the person listed as such on Exhibit C hereto to be designated
as Chairman of the Board of Directors of Newco and (B) Newco to designate the
persons listed on such Exhibit C to be named officers of Newco, holding the
positions indicated on such Exhibit; provided, that if any such persons are
unwilling or unable to serve in such capacities, their replacements shall be
selected by the Newco Board as constituted at the Effective Time. Newco shall
also have such other officers as may be elected by the Newco Board. The home
office activities of Newco from and after the Effective Time shall be as further
set forth on such Exhibit C.
(b) Tenure. The foregoing officers and directors of Newco,
Preview and Portland shall hold their positions until their resignation or
removal or the election or appointment of their successors in the manner
provided by each corporation's respective charter documents and applicable law.
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Section 2.6 Approval of Mergers by Newco. Newco, as the sole shareholder
of each of Portland Sub and Preview Sub, has heretofore executed a formal
written consent under (i) Section 60.211 of the OBCA, approving, authorizing and
adopting the Portland Merger Agreement and (ii) Section 603 of the CGCL,
approving, authorizing and adopting the Preview Merger Agreement.
Section 2.7 Newco Certificate of Incorporation. Prior to the Effective
Time, Preview and Portland, as the shareholders of Newco, shall cause Newco to
amend its certificate of incorporation to read in its entirety as set forth in
Exhibit D hereto, with such further changes thereto as Preview and Portland may
mutually agree, and to amend its bylaws in a manner reasonably acceptable to
Portland and Preview.
Section 2.8 Preview Sub and Portland Sub Charter Documents. Prior to the
Effective Time the articles of incorporation and bylaws of each of Preview Sub
and Portland Sub shall be amended in a manner reasonably acceptable to each of
Preview and Portland.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to Preview and Portland as follows:
Section 3.1 Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
so qualify or be in good standing would not have a Material Adverse Effect on
Newco. True, accurate and complete copies of the certificate of incorporation
and bylaws of Newco as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to Preview and Portland.
Section 3.2 Capitalization.
(a) The authorized capital stock of Newco consists of 1,000 shares
of Newco Common Stock. As of the date hereof, there were 1,000 shares of Newco
Common Stock issued and outstanding, 500 shares of which are owned by Preview
and 500 shares of which are owned by Portland, and all of which are validly
issued, fully paid and nonassessable and are not subject to and were not issued
in violation of any preemptive rights.
(b) Except for this Agreement and the Merger Agreements, there are
not now, and at the Effective Time there will not be, any options, warrants,
calls, rights, subscriptions, convertible securities or other rights or
agreements, arrangements or commitments of any kind obligating Newco to issue,
transfer or sell any securities of Newco. There are no outstanding contractual
or other obligations of Newco to purchase, redeem or otherwise acquire any
shares of
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Xxxxx Xxxxxx Stock. There is not now, and at the Effective Time there will not
be, any stockholder agreement, voting trust or other agreement or understanding
to which Newco is a party or bound relating to the voting of any shares of the
capital stock of Newco.
Section 3.3 Authority. Newco has all requisite corporate power and
authority to execute and deliver this Agreement and the Merger Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Merger Agreements, and the consummation by
Newco of the transactions contemplated hereby and thereby, have been duly
authorized by Newco's board of directors and stockholders and no other corporate
proceedings on the part of Newco are necessary to authorize the execution and
delivery of this Agreement and the Merger Agreements and the consummation by
Newco of the transactions contemplated hereby and thereby. This Agreement has
been and, as of the Effective Time, the Merger Agreements will have been, duly
and validly executed and delivered by Newco and, assuming the due authorization,
execution and delivery hereof and thereof by Preview and Portland, constitute or
will constitute, as the case may be, valid and binding agreements of Newco,
enforceable against Newco in accordance with their terms, except that such
enforceability may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (ii) by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
Section 3.4 Consents and Approvals; No Violation. None of the execution
and delivery of this Agreement or the Merger Agreements, the consummation by
Newco of the transactions contemplated hereby and thereby or compliance by Newco
with any of the provisions hereof will (i) conflict with or result in a breach
of any provision of the certificate of incorporation or bylaws of Newco, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) pursuant
to Section 3(a)(10) of the Securities Act and certain state securities statutes
and (B) for filing the Articles of Merger with respect to the Mergers pursuant
to the OBCA and the CGCL, (iii) result in a default (or an event which with
notice or lapse of time or both would become a default) or give to any third
party any right of termination, cancellation, amendment or acceleration under,
or result in the creation of a lien or encumbrance on any of the assets of Newco
pursuant to any note, license, agreement or other instrument or obligation to
which Newco is a party or by which Newco or any of its assets may be bound or
affected, or (iv) violate or conflict with any order, writ, injunction, decree,
statute, rule or regulation applicable to Newco or any of its properties or
assets; other than (A) such defaults, rights of termination, cancellation,
amendment or acceleration, liens and encumbrances, violations and conflicts set
forth pursuant to (iii) and (iv) above, and (B) failure to obtain such consents,
approvals, authorizations, permits or filings, as set forth pursuant to (ii)
above, which, in the aggregate, would not have a Material Adverse Effect on
Newco.
Section 3.5 No Prior Activities. Except for obligations or liabilities
incurred in connection with their respective incorporation or organization or
the negotiation and consummation of this Agreement and the Merger Agreements and
the transactions contemplated hereby and thereby, none of Newco, Preview Sub or
Portland Sub has incurred any obligations or
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liabilities nor engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person or
entity.
Section 3.6 Information Supplied. The information supplied or to be
supplied by Newco for inclusion in the Hearing Documents, including any
amendments and supplements thereto, will not, either at the date mailed to
shareholders of Preview and Portland or at the times of the meetings of
shareholders of Preview and Portland to be held in connection with the
transactions contemplated by this Agreement and the Merger Agreements contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PORTLAND
Portland represents and warrants to Preview, except as otherwise set forth
in the Portland Disclosure Schedule (the "Portland Disclosure Schedule") as
follows:
Section 4.1 Organization and Qualification. Each of Portland and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to so qualify or be
in good standing would not have a Material Adverse Effect on Portland. True and
complete copies of the articles of incorporation and bylaws of Portland (the
"Portland Charter Documents") as in effect on the date hereof, including all
amendments thereto, have heretofore been made available or delivered to Preview.
The copy of the minute books of Portland provided to Preview's counsel contains
minutes of all meetings of directors and shareholders and all actions by written
consent without a meeting by the directors and shareholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and shareholders with respect to all transactions referred to in such
minutes accurately in all material respects.
Section 4.2 Capitalization. The authorized capital of Portland consists,
or will consist, immediately prior to the Effective Time, of:
(a) 5,338,323 shares of Portland Preferred Stock, of which 838,323
shares have been designated Portland Series A Preferred Stock, 838,323 of which
are issued and outstanding immediately prior to the Effective Time and 4,500,000
shares have been designated Portland Series B Preferred Stock, 2,395,209 of
which are issued and outstanding. The rights, privileges and preferences of the
Portland Preferred Stock are as stated in the Portland Charter Documents.
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(b) 20,000,000 shares of Portland Common Stock, 7,466,210 shares
of which are issued and outstanding immediately prior to the Effective Time. All
of the outstanding shares of Portland Common Stock have been duly authorized,
fully paid and are nonassessable and issued in compliance with all applicable
Federal and state securities laws. Portland has reserved 5,338,323 shares of
Portland Common Stock for issuance upon conversion of the Portland Preferred
Stock.
(c) Portland has issued and outstanding options to acquire
2,393,526 shares of Portland Common Stock (the "Portland Options") to officers,
directors, employees and consultants of Portland pursuant to a 1994 Stock
Incentive Plan (the "Portland Plan"). Options to acquire 1,828,224 shares remain
available for future grant under the Portland Plan.
(d) Portland has issued and currently has outstanding warrants to
acquire (i) 674,000 shares of Portland Common Stock and (ii) 838,324 shares
of Portland Series B Preferred Stock (collectively, the "Portland Warrants").
(e) Except as set forth in the preceding subparagraphs, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements, orally or
in writing, for the purchase or acquisition from Portland of any shares of its
capital stock (other than as set forth in the Portland Series A Preferred Stock
Purchase Agreement dated October 21, 1996 and the Series B Stock Purchase
Agreement dated August 1, 1997, as amended by and among Portland and the parties
listed therein).
(f) All issued and outstanding shares of Portland Preferred
Stock and Portland Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable and free of any preemptive or similar rights
contained in the Portland Charter Documents. All outstanding shares of
Portland's capital stock issued have been or will be issued in compliance with
applicable state and Federal securities laws.
Section 4.3 Authority. Portland has all requisite corporate power and
authority to execute and deliver this Agreement and the Portland Merger
Agreement and, subject to approval of this Agreement and the Portland Merger
Agreement by the shareholders of Portland, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Portland Merger Agreement, and the consummation by Portland of the
transactions contemplated hereby and thereby, have been duly authorized by
Portland's board of directors and no other corporate proceedings on the part of
Portland are necessary to authorize the execution and delivery of this Agreement
and the Portland Merger Agreement and the consummation by Portland of the
transactions contemplated hereby and thereby except for the approval of this
Agreement and the Portland Merger Agreement by the shareholders of Portland.
This Agreement has been, and as of the Effective Time, the Portland Merger
Agreement will be, duly and validly executed and delivered by Portland and,
assuming the due authorization, execution and delivery hereof and thereof by
Newco, Preview Sub, Portland Sub and Preview, constitute or will constitute, as
the case may be, valid and binding agreements of Portland, enforceable against
Portland in accordance with their terms, except that such enforceability may
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be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (ii) by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 4.4 Consents and Approvals; No Violation. None of the execution
and delivery by Portland of this Agreement and the Portland Merger Agreement,
the consummation by Portland of the transactions contemplated hereby and thereby
or compliance by Portland with any of the provisions of this Agreement will (i)
conflict with or result in a breach of any provision of the respective charters
or bylaws (or similar governing documents) of Portland or any of its
Subsidiaries, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (A) pursuant to
Section 3(a)(10) of the Securities Act and certain state securities statutes,
and (B) for filing the Articles of Merger with respect to the Portland Merger
pursuant to the OBCA, (iii) except as set forth in the Portland Disclosure
Schedule, result in a default (or an event which with notice or lapse of time or
both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a lien or encumbrance on any of the assets of Portland or any of its
Subsidiaries pursuant to any note, license, agreement or other instrument or
obligation to which Portland or any of its Subsidiaries is a party or by which
Portland or any of its Subsidiaries or any of their respective assets may be
bound or affected, or (iv) violate or conflict with any order, writ, injunction,
decree, statute, rule or regulation applicable to Portland or any of its
Subsidiaries or any of their respective properties or assets, other than (A)
such defaults, rights of termination, cancellation, amendment or acceleration,
liens and encumbrances, violations and conflicts set forth pursuant to (iii) and
(iv) above, and (B) such consents, approvals, authorizations, permits or
filings, as set forth pursuant to (ii) above that are not obtained, which, in
the aggregate, would not have a Material Adverse Effect on Portland and would
not materially impair Portland's ability to consummate the transactions
contemplated by this Agreement and the Portland Merger Agreement.
Section 4.5 Financial Statements; Absence of Undisclosed Liabilities.
(a) Portland has furnished Preview with the audited balance sheet
of Portland as of December 31, 1997, and the related audited statements of
operations, cash flows and changes in stockholders' equity for the year ended
December 31, 1997, and the unaudited balance sheet of Portland as of March 31,
1998, and the related statements of operations, cash flows and changes in
stockholders' equity for the three-month period ended March 31, 1998 (the
"Portland Financial Statements"). All of such financial statements, including
the notes thereto, (i) are in accordance with the respective books of Portland;
(ii) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved except
that the unaudited financial statements do not contain footnotes; (iii) present
fairly the financial position of Portland as of the respective dates thereof and
the results of operations and cash flows of Portland for the respective periods
indicated therein; and (iv) do not reflect any material items of nonrecurring
income except as stated therein.
(b) Portland has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that would
be required to be
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reflected in a balance sheet, or in the notes thereto, prepared in accordance
with GAAP that were not disclosed or provided for in the Portland Financial
Statements or the notes thereto other than liabilities incurred since March 31,
1998, which were incurred in the ordinary course of business and are not
individually or in the aggregate, material to Portland's business. All reserves
set forth on the Portland Financial Statements or the notes thereto are
adequate. There are no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5) that are not adequately
provided for in the Portland Financial Statements or reflected in the notes
thereto.
Section 4.6 Absence of Changes. Since March 31, 1998: (a) there has been
no material adverse change in Portland's business or any development particular
to Portland's business and not generally known to the public that reasonably
could be expected to cause a material adverse change in Portland's business; (b)
there has been no damage, destruction or loss (whether or not covered by
insurance) which has had a material adverse effect on any assets material to
Portland's business; (c) there has been no change by Portland in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (d) there has been no revaluation by Portland of
any of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable; and (e) Portland has
conducted its business only in the ordinary course consistent with past
practice.
Section 4.7 Contracts and Commitments.
(a) Portland is not a party or subject to:
(i) Any union contract or collective bargaining agreement
or any employment contract or arrangement, written or oral, providing for future
compensation with any officer, consultant, director or employee that is not
terminable by it on two weeks' notice or less without penalty or obligation to
make payments related to such termination, other than (A) (in the case of
employees other than executive officers) such severance agreements as are not
different from standard arrangements offered to employees generally in the
ordinary course of business consistent with Portland's past practices, a
description of which is set forth in the Portland Disclosure Schedule and (B)
such agreements as may be imposed or implied by law;
(ii) Any plans, contracts or arrangements, written or oral,
which collectively require aggregate payments by Portland in excess of $25,000
for bonuses, pensions, deferred compensation, severance pay or benefits,
retirement payments, profit-sharing, or the like;
(iii) Any joint marketing, joint development or joint
venture contract or arrangement or any other agreement that has involved or is
expected to involve a sharing of profits or royalties with other persons;
(iv) Any existing license agreement, OEM agreement,
distribution agreement, volume purchase agreement, or other similar agreement
pursuant to which Portland has granted or received most favored customer
provisions or exclusive marketing rights related to any product, group of
products or territory;
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(v) Any lease for real or personal property pursuant to
which the amount of payments which Portland is required to make on an annual
basis exceeds $25,000;
(vi) Any agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment or
authorization that may be, by its terms, terminated or breached by reason of the
execution of this Agreement or the Portland Merger Agreement or the closing of
the Mergers, or the consummation of the transactions contemplated hereby or
thereby;
(vii) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness in excess of $25,000 incurred in the acquisition of companies or
other entities or indebtedness in excess of $25,000 for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or licensee
(excluding nonexclusive object code software licenses granted to end-users in
the ordinary course of business that permit use of software products without a
right to modify, distribute or sublicense the same ("End-User Licenses"));
(ix) Any contract containing covenants purporting to limit
Portland's freedom to compete in any line of business or in any geographic area
or with any third party;
(x) Any agreement, contract or commitment relating to
capital expenditures and involving future obligations in excess of $25,000; or
(xi) Any other agreement, contract or commitment that is
material to Portland.
(b) Each agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and commitment
listed in the Portland Disclosure Schedule pursuant to this Section 4.7 is valid
and binding on Portland and is in full force and effect, and neither Portland,
nor to the knowledge of Portland any other party thereto, has breached in any
material respect any provision of, or is in default in any material respect
under the terms of, any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license or
commitment.
(c) There is no agreement, judgment, injunction, order or decree
binding upon Portland which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any material current business
practice of Portland, any acquisition of material property by Portland or the
conduct of business by Portland as currently conducted or as proposed to be
conducted.
Section 4.8 Legal Proceedings. Portland is not in violation of, and has
not received any notice of any violation of: (a) any applicable statute, law,
regulation, ordinance, writ, injunction, order, judgment or decree, the effect
of which violation could, individually or in the
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aggregate, reasonably be expected to have a Material Adverse Effect on Portland;
or (b) any provision of the Portland Charter Documents. There is no order, writ,
injunction, judgment or decree outstanding, and no legal, administrative,
arbitration or other proceeding, action, suit or governmental investigation or
inquiry by or against Portland, its assets or business or its employees,
officers or directors in such capacities ("Portland Legal Proceedings") pending
or, to the knowledge of Portland, threatened. To the knowledge of Portland,
there are no claims against Portland, its assets or business or its employees,
officers or directors in such capacities, that could, individually or in the
aggregate, have a Material Adverse Effect on Portland. There is no Portland
Legal Proceeding that in any manner challenges or seeks to prevent, enjoin,
alter or delay any of the transactions contemplated hereby. There are no
existing agreements to provide indemnification for liabilities of its officers
and directors for acts or omissions by such persons.
Section 4.9 Information Supplied. The information supplied or to be
supplied by Portland or its Subsidiaries for inclusion in (i) the Hearing
Documents will not, either at the time filed with the California Department of
Corporations or at the time mailed to the shareholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Disclosure Document, including any amendments and supplements thereto,
will not, either at the date mailed to shareholders or at the time of the
meeting of shareholders (or action by written consent of shareholders in lieu
thereof) of Preview and Portland to be held in connection with the transactions
contemplated by this Agreement and the Merger Agreements, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except by Preview
with respect to information supplied by Preview for inclusion therein.
Section 4.10 Employee Matters.
(a) Portland is in compliance in all material respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment and wages and hours and
occupational safety and health and employment practices, and is not engaged in
any unfair labor practice. Portland has not received any notice from any
governmental entity, and to the knowledge of Portland, there has not been
asserted before any governmental entity, any claim action or proceeding to which
Portland is a party, and there is neither pending nor, to the knowledge of
Portland, threatened any investigation or hearing concerning Portland arising
out of or based upon any such laws, regulations or practices. There are no
pending claims against Portland under any workers compensation plan or policy
for any long-term disability, and to the knowledge of Portland, there is no
basis for any such claim. Portland has complied in all material aspects with all
applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and has no material obligations with respect to any former
employees or qualifying beneficiaries thereunder.
(b) Portland has disclosed in Section 4.10 of the Portland
Disclosure Schedule a list of all material employee welfare benefit plans (as
defined in Section 3(1) of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA")), employee pension
benefit plans (as defined in Section 3(2) of ERISA) and all other bonus, stock
option, stock purchase, benefit, profit sharing, savings, retirement,
disability, insurance, incentive, deferred compensation and other similar fringe
or employee benefit plans, programs or arrangements for the benefit of, or
relating to, any employee of, or independent contractor or consultant to,
Portland or any of its subsidiaries (together, the "Portland Employee Plans").
(c) Portland has made available to Preview true and complete copies
of all Portland Employee Plans, as in effect, together with all amendments
thereto that will become effective at a later date, as well as the latest
Internal Revenue Service determination letters obtained with respect to any
Portland Employee Plan qualified under Section 401(a) or 501(a) of the Code.
Also with respect to each Portland Employee Plan, true and complete copies of
the (i) three most recent annual actuarial valuation reports, if any, (ii) three
last filed Forms 5500 together with Schedule A or B thereto or both, (iii)
summary plan description (as defined in ERISA), if any, and all modifications
thereto communicated to employees, and (iv) three most recent annual and
periodic accountings of related plan assets, if any, have been, or will be, made
available to Preview and are, or will be, correct in all material respects.
(d) Neither Portland nor any of its directors, officers, employees
or agents, nor, to the knowledge of Portland, any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Portland Employee Plan,
engaged in or been a party to any "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which could result
in the imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in each case applicable to
Portland, any of its subsidiaries or any Portland Employee Plan.
(e) All Portland Employee Plans are in compliance in all material
respects with the currently applicable requirements prescribed by all statutes,
orders, or governmental rules or regulations currently in effect with respect to
such Portland Employee Plans, including, but not limited to, ERISA and the Code
and, to the best knowledge of Portland, there are no pending or threatened
claims, lawsuits or arbitrations (other than routine claims for benefits) which
have been asserted or instituted against Portland, any of its subsidiaries, any
Portland Employee Plan or the assets of any trust for any Portland Employee
Plan. Each Portland Employee Plan which is a group health plan (within the
meaning of Section 5000(b)(i) of the Code) complies with and has been maintained
and operated in accordance with each of the requirements of Section 162(k) of
the Code as in effect for years beginning prior to 1989, Section 4980B of the
Code for years beginning after December 31, 1988 and Part 6 of Subtitle B of
Title I of ERISA.
(f) Each Portland Employee Plan intended to qualify under Section
401(a) of the Code does so qualify, and the trusts created thereunder are exempt
from tax under the provisions of Section 501(a) of the Code. Each Portland
Employee Plan that has been terminated by Portland or any of its subsidiaries
which was intended to qualify under Section 401(a) of the Code has received a
final determination of such qualification from the Internal Revenue Service.
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(g) All contributions or payments required to be made or accrued
before the Effective Time under the terms of any Portland Employee Plan will
have been made or accrued by Portland or by its subsidiaries, as applicable, by
the Effective Time.
(h) Portland has no Employee Plan subject to Section 412 of the
Code and no "multiemployer plan" (as defined in Section 3(37) of ERISA).
(i) There have been no changes in the operation or
interpretation of any of the Portland Employee Plans since the most recent
annual report or actuarial report that would have any material effect on the
cost of operating or maintaining such Portland Employee Plans.
(j) No amounts payable under any Portland Employee Plan as a
result of the transactions contemplated by this Agreement will fail to be
deductible for Federal income tax purposes by virtue of Section 280G of the
Code.
(k) The consummation of the transaction contemplated by this
Agreement will not (i) entitle any current or former employee or officer of
Portland to severance pay or other payment except as expressly provided in this
Agreement; or (ii) accelerate the time of payment or vesting or increase the
amount of compensation due any sick employee or officer.
Section 4.11 Affiliate Agreements. Except for this Agreement and except
as set forth in the Portland Disclosure Schedule, as of the date of this
Agreement neither Portland nor any of its Subsidiaries is a party to any oral or
written agreement with any of its Affiliates, other than with any of its
Subsidiaries.
Section 4.12 Taxes.
(a) For purposes of this Agreement, the following definitions
shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any Federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
Federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, hazardous waste fees, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, that are required to be paid, withheld or collected,
(B) any liability for the payment of amounts referred to in (A) as a result of
being a member of any affiliated, consolidated, combined or unitary group, or
(C) any liability for amounts referred to in (A) or (B) as a result of any
obligations to indemnify another person.
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(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) All Returns required to be filed by or on behalf of Portland
have been duly filed on a timely basis and such Returns are true, complete and
correct in all material respects. All Taxes shown to be payable on the Returns
or on subsequent assessments with respect thereto, and all payments of estimated
Taxes required to be made by or on behalf of Portland under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis or have been accrued on the Portland Financial Statements
in accordance with GAAP, and no other Taxes are payable by Portland with respect
to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any other period prior to the
date hereof. Portland has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of Portland with respect to Taxes, other than liens for Taxes not yet due
and payable or for Taxes that Portland is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been established
in accordance with GAAP. Portland has not at any time been (i) a member of an
affiliated group of corporations filing consolidated, combined or unitary income
or franchise tax returns, or (ii) a member of any partnership or joint venture
for a period for which the statue of limitations for any Tax potentially
applicable as a result of such membership has not expired.
(c) The amount of Portland's liability for unpaid Taxes (whether
actual or accrued) for all periods through the date of the Portland Financial
Statements does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) reflected
on such Portland Financial Statements, and the Financial Statements properly
accrue in accordance with GAAP all liabilities for Taxes of Portland payable
after the date of the Portland Financial Statements attributable to transactions
and events occurring prior to such date. No liability for Taxes of Portland has
been incurred (or prior to the Effective Time will be incurred) since such date
other than in the ordinary course of business.
(d) Preview has been furnished by Portland with true and
complete copies of (i) relevant portions of income tax audit reports, statements
of deficiencies, closing or other agreements received by or on behalf of
Portland relating to Taxes, (ii) all material Federal and state income or
franchise tax Returns and state sales, use and property tax Returns for Portland
for all periods since inception, and (iii) any material elections relating to
Taxes which are not reflected in the Returns described in (ii).
(e) The Returns of Portland have never been audited by a
government or taxing authority, nor to the knowledge of Portland is any such
audit in process threatened or pending (either in writing or orally, formally or
informally). No deficiencies exist or have been asserted (either in writing or
orally, formally or informally) or, to the knowledge of Portland, will
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in the future be asserted with respect to Taxes of Portland, and Portland has
not received notice (either in writing or orally, formally or informally) nor,
to the knowledge of Portland, will in the future receive notice that it has not
filed a Return or paid Taxes required to be filed or paid by it. Portland is
neither a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing or
orally, formally or informally) against Portland or any of its assets. No waiver
or extension of any statute of limitations is in effect with respect to Taxes or
Returns of Portland. Portland has disclosed on its Federal income tax returns
all positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the Code.
(f) Portland is not and has never been a party to any tax
sharing agreement.
(g) Portland is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the
Tax Equity and Fiscal Responsibility Act of 1982. Portland is not, nor has it
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)(1)(A)(ii) of the Code, and Newco is not required to withhold tax on the
acquisition of the stock of Portland by reason of Section 1445 of the Code.
Portland is not a "consenting corporation" under Section 341(f) of the Code.
Portland has not participated in an international boycott as defined in Section
999 of the Code. Portland has not agreed to, and is not required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method, and Portland does not otherwise have any income reportable for a period
ending after the Effective Time attributable to a transaction or other event
(e.g., an installment sale) occurring prior to the Effective Time involving in
excess of $10,000. Portland is not and has not been a "reporting corporation"
subject to the information reporting and record maintenance requirements of
Section 6038A of the Code and the regulations thereunder.
Section 4.13 Intellectual Property.
(a) Portland owns or has the exclusive right to use, make, sell,
license, or sublicense and bring actions for infringement of all Portland
Products (as defined below) and Portland Intellectual Property Rights (as
defined below) developed by or for Portland or that are used in the business of
Portland as currently conducted. All of the Portland Products and Portland
Intellectual Property Rights are owned by Portland free and clear of any rights
or claims of any current or former employees, consultants, officers and
directors of Portland. The source code for the Portland Products constitutes a
trade secret of Portland, and is not part of the public knowledge or literature,
and Portland has taken reasonable action to protect such source code as a trade
secret. All taxes and fees, including, without limitation, patent and trademark
registration and prosecution fees and all professional fees in connection
therewith pertaining to the Portland Intellectual Property Rights, due and
payable on or before the date hereof, have been paid by Portland.
(b) Portland's current products and products under development
are listed on the Portland Disclosure Schedule (collectively, the "Portland
Products"). No person has a license to use or the right to acquire a license to
use any future version of any Portland Product,
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and no agreement to which Portland is a party will restrict Newco from charging
customers for any such new version. No agreement for the support or maintenance
of Portland Products obligates Portland, or would obligate Newco after the
Effective Time to provide any improvement, enhancement, change in functionality
or other alteration in the performance of the Portland Products.
(c) No person has a right to receive a royalty or similar
payment in respect of any Portland Product or Portland Intellectual Property
Rights or, to the knowledge of Portland, other Intellectual Property Right
licensed to Portland whether or not pursuant to any contractual arrangements
entered into by Portland. Except for End-User Licenses, Portland has no licenses
granted, sold or otherwise transferred by or to it nor other agreements to which
it is a party, relating in whole or in part to any Portland Product or Portland
Intellectual Property Rights.
(d) The execution, delivery and performance of this Agreement
and the Portland Merger Agreements, the consummation of the Mergers and the
consummation of the other transactions contemplated hereby and thereby
(including without limitation the continued conduct by Newco after the Mergers
of Portland's business as presently conducted and the incorporation of any
Portland Product or Portland Intellectual Property Right in any product of
Newco) will not breach, violate or conflict with any instrument or agreement
governing any such Portland Product or Portland Intellectual Property Right
necessary or required for the conduct of the business of Portland as presently
conducted, and will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of any such Portland Product or Portland
Intellectual Property Right or in any way impair the right of Newco or any of
its subsidiaries to use, sell, license or dispose of, either as part or all of a
Portland Product or subsequent to the Effective Time as part or all of a product
of Newco, or to bring any action for the infringement of, any such Portland
Product or Portland Intellectual Property Right or portion thereof.
(e) Neither the development, manufacture, marketing, license,
sale or intended use of any Portland Product violates or could reasonably be
expected to violate any license or agreement to which Portland is a party or
infringes or could reasonably be expected to infringe any Intellectual Property
Right of any other party, provided, that with respect to patent rights, rights
with respect to marks, names or designations and moral rights, such
representation is made only to Portland's knowledge; there is no pending or, to
the knowledge of Portland, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any Portland
Intellectual Property Right necessary or required for, or used in, the conduct
of the business of Portland as presently conducted nor, to the knowledge of
Portland, is there any basis for any such claim, nor has Portland received any
notice asserting that any such Intellectual Property Right or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party, nor, to the knowledge of Portland, is there any basis for
any such assertion. To Portland's knowledge, there is no infringement on the
part of any third party of Portland's Intellectual Property Rights.
(f) Portland has taken reasonable and practicable steps
(including, without limitation, entering into confidentiality and non-disclosure
agreements with all officers and employees of and consultants to Portland with
access to or knowledge of Portland's Intellectual
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Property Rights) to maintain the secrecy and confidentiality of, and its
proprietary rights in, all Portland Intellectual Property Rights necessary or
required for the conduct of Portland's business. All employees, consultants,
officers, directors and shareholders of Portland that have had access to any
material portion of the Portland Intellectual Property Rights are parties to a
written agreement under which each such person or entity (i) is obligated to
disclose and transfer to Portland, without the receipt by such person of any
additional value therefor (other than normal salary or fees for consulting
services), all inventions, developments and discoveries which, during the period
of employment (for employees) with or performance of services for, he makes or
conceives of either solely or jointly with others, that relate to any subject
matter with which his or her work for Portland may be concerned, or relate to or
are connected with the business, products or projects of Portland, or involve
the use of the time, material or facilities of Portland, and (ii) is obligated
to maintain the confidentiality of proprietary information of Portland. To
Portland's knowledge, none of Portland's employees, consultants, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their obligation to promote the interests of Portland in the Portland business
or that would conflict with the Portland business. To Portland's knowledge, it
is currently not necessary, nor will it be necessary for Portland to utilize in
the Portland business nor has Portland utilized in the Portland business any
inventions of any of such persons or entities (or people it currently intends to
hire) made or owned prior to his or her employment by or affiliation with
Portland that Portland has not already licensed or acquired, nor is it or will
it be necessary to utilize any other assets or rights of any such persons or
entities (or people it currently intends to hire) made or owned prior to their
employment with or engagement by Portland that Portland has not already licensed
or acquired, in violation of any registered patents, trade names, trademarks or
copyrights or any other limitations or restrictions to which any such person or
entity is a party or to which any of such assets or rights may be subject,
except to the extent that such utilization would not have a material adverse
effect on the Portland business. To Portland's knowledge, none of Portland's
employees, consultants, officers, directors or stockholders that has had
knowledge or access to information relating to Portland's business has taken,
removed or made use of any proprietary documentation, manuals, products,
materials, or any other tangible item from his or her previous employer relating
to the business as conducted of such previous employer which has resulted in
Portland's access to or use of such proprietary items in Portland's business,
and Portland will not gain access to or make use of any such proprietary items
in Portland's business, except to the extent that any such activities would not
have a Material Adverse Effect on Portland.
(g) The Portland Disclosure Schedule also sets forth a complete
list of all licenses, sublicenses and other agreements as to which Portland is a
party and pursuant to which Portland or any other person is authorized to use,
license, sublicense, sell or distribute any Intellectual Property Right
(excluding End-User Licenses). Portland is not in violation of any license,
sublicense or agreement described on such list except such violations as do not
materially impair Portland's rights under such license, sublicense or agreement.
The Portland Disclosure Schedule separately identifies each exclusive
arrangement between Portland and any third party to use, license, sublicense,
sell or distribute any Portland Intellectual Property Right or any Portland
Product.
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(h) The Portland Disclosure Schedule contains a complete and
accurate list of all applications, filings and other formal actions made or
taken pursuant to Federal, state, local and foreign laws by Portland to perfect
or protect its interest in Portland Intellectual Property Rights, including,
without limitation, all patents, patent applications, trademark registrations,
trademark applications, service xxxx registrations and copyright registrations.
As used herein, the term "Intellectual Property Rights" means all intellectual
property rights, including, without limitation, domestic and foreign patents,
patent applications, patent rights, trademarks, trademark registrations,
trademark applications, trade names, service marks, service xxxx applications,
copyrights, copyright applications, licenses, know-how, trade secrets, trade
rights, proprietary processes and formulae, inventions, development tools,
designs, plans, specifications, technical information and other proprietary
rights, whether or not registered, and all documentation and media relating to
the above, and the term "Portland Intellectual Property Right" shall mean
Intellectual Property Rights owned by or granted exclusively or nonexclusively
to Portland.
Section 4.14 Environmental Matter. Except for failures which will not
have a Material Adverse Effect on Portland, Portland has met, and continues to
meet, all applicable local, state, Federal and national environmental
regulations and has disposed of its waste products and effluents and/or has
caused others to dispose of such waste products and effluents, in accordance
with all applicable state, local, Federal and national environmental
regulations.
Section 4.15 Interests of Officers and Directors. No officer or director
of Portland or any "affiliate" or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act) of any such person has, either
directly or indirectly, a material interest in: (a) any person or entity that
purchases from or sells, licenses or furnishes to Portland any goods, property,
technology or intellectual or other property rights or services; (b) any
contract or agreement to which Portland is a party or by which it may be bound;
or (c) any property, real or personal, tangible or intangible, used in or
pertaining to Portland's business, including any interest in the Portland
Intellectual Property Rights.
Section 4.16 Title to Properties; Absence of Liens and Encumbrances.
The Portland Disclosure Schedule lists all facilities occupied by Portland since
Portland's incorporation, and indicates the nature of Portland's interest in
such facilities. Portland has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of their tangible
properties and assets, real, personal and mixed, used in their business, free
and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the Portland Financial Statements or except
for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and which do not materially detract
from the value, or interfere with the present use, of the property subject
thereto or affected thereby.
Section 4.17 Governmental Authorizations and Licenses. Portland holds all
licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity (collectively, the "Licenses") required to
operate its business, except as would not have a Material Adverse Effect on
Portland. The Licenses are in full force and effect and Portland is in
compliance in all material respects with the terms of the Licenses.
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Section 4.18 Insurance. The Portland Disclosure Schedule contains a
complete and accurate list of all policies or binders of fire, liability, title,
worker's compensation, product liability and other forms of insurance maintained
by Portland. Portland is not in default under any of such policies or binders,
and has not failed to give any notice or to present any claim under any such
policy or binder in a due and timely fashion. There are no outstanding unpaid
claims under any such policies or binders. All policies and binders provide
sufficient coverage for the risks insured against, are in full force and effect
on the date hereof and shall be kept in full force and effect through the
Effective Time.
Section 4.19 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement.
Section 4.20 Bank Accounts. The Portland Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which Portland maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals.
Section 4.21 Disclosure. No representation or warranty made by Portland
in this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished by Portland
or its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished. To the knowledge of Portland
after reasonable inquiry, there is no event, fact or condition particular to
Portland's business that is not generally known to the public that has resulted
in, or could reasonably be expected to result in, a Material Adverse Effect on
Portland that has not been set forth in this Agreement or in the Portland
Disclosure Schedule. Portland has complied in all material respects with the due
diligence request of Preview dated March 17, 1998.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PREVIEW
Preview represents and warrants to Portland, except as otherwise set forth
in the Preview Disclosure Schedule (the "Preview Disclosure Schedule") as
follows:
Section 5.1 Organization and Qualification. Each of Preview and its
Significant Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to so qualify or be
in good standing would not have a Material Adverse Effect on Preview. True and
complete copies of the articles of incorporation
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and bylaws of Preview (the "Preview Charter Documents") as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Portland. The copy of the minute books of Preview provided to Portland's counsel
contains minutes of all meetings of directors and shareholders and all actions
by written consent without a meeting by the directors and shareholders since the
date of incorporation and reflects all actions by the directors (and any
committee of directors) and shareholders with respect to all transactions
referred to in such minutes accurately in all material respects.
Section 5.2 Capitalization. The authorized capital of Preview consists,
or will consist, immediately prior to the Effective Time, of:
(a) 5,011,990 shares of Preview Preferred Stock, of which
602,802 shares have been designated Series D Preview Preferred Stock, 598,802 of
which are issued and outstanding immediately prior to the Effective Time,
2,557,188 shares have been designated Preview Series C Preferred Stock,
2,500,000 of which are issued and outstanding, 705,000 shares have been
designated Preview Series B Preferred Stock, all of which are issued and
outstanding, 1,147,000 Shares of Preview Series A Preferred Stock all of which
are issued and outstanding. The rights, privileges and preferences of the
Preview Preferred Stock are as stated in the Preview Charter Documents.
(b) 10,000,000 shares of Preview Common Stock, 1,444,022
shares of which are issued and outstanding immediately prior to the Effective
Time. All of the outstanding shares of Preview Common Stock have been duly
authorized, fully paid and are nonassessable and issued in compliance with all
applicable Federal and state securities laws. Preview has reserved 5,011,990
shares of Preview Common Stock for issuance upon conversion of the Preview
Preferred Stock.
(c) Preview has issued and outstanding options to acquire
399,625 shares of Preview Common Stock to officers, directors, employees and
consultants of Preview pursuant to a subsequently terminated stock plan (the
"Preview Old Plan"). Under a new stock option plan (the "Preview New Plan" and,
collectively with the Preview Old Plan, the "Preview Plans"), Preview has issued
and outstanding options to purchase 597,200 shares of Preview Common Stock and
388,800 shares of such reserved shares of Preview Common Stock remain available
for issuance to officers, directors, employees and consultants. Preview has
granted options to acquire 70,000 shares of Preview Common Stock outside the
Preview Plans.
(d) Preview (i) has issued warrants to acquire 50,860 shares
of Preview Series C Preferred Stock and (ii) anticipates issuing, in connection
with an equipment leaseline transaction, warrants to purchase up to 4,000 shares
of Preview Series D Preferred Stock (collectively, the "Preview Warrants").
(e) Except for outstanding options as set forth in the
preceding paragraph, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, for the purchase or
acquisition from Preview of any shares of its capital stock (other than as set
forth in
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the Second Amended and Restated Rights Agreement dated April 21, 1998 by and
among Preview and the parties listed therein).
(f) All issued and outstanding shares of Preview Preferred
Stock and Preview Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable and free of any preemptive or similar rights
contained in Preview Charter Document. All outstanding shares of Preview's
capital stock have been issued in compliance with applicable state and Federal
securities laws.
Section 5.3 Authority. Preview has all requisite corporate power and
authority to execute and deliver this Agreement and the Preview Merger Agreement
and, subject to approval of this Agreement and the Preview Merger Agreement by
the shareholders of Preview, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Preview Merger
Agreement, and the consummation by Preview of the transactions contemplated
hereby and thereby, have been duly authorized by Preview's board of directors
and no other corporate proceedings on the part of Preview are necessary to
authorize the execution and delivery of this Agreement and the Preview Merger
Agreement and the consummation by Preview of the transactions contemplated
hereby and thereby, except for the approval of this Agreement and the Preview
Merger Agreement by the shareholders of Preview. This Agreement has been, and as
of the Effective Time, the Preview Merger Agreement will be, duly and validly
executed and delivered by Preview and, assuming the due authorization, execution
and delivery hereof and thereof by Newco, Preview Sub, Portland Sub and
Portland, constitute or will constitute, as the case may be, valid and binding
agreements of Preview, enforceable against Preview in accordance with their
terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
Section 5.4 Consents and Approvals; No Violation. None of the execution
and delivery by Preview of this Agreement and the Preview Merger Agreement, the
consummation by Preview of the transactions contemplated hereby and thereby or
compliance by Preview with any of the provisions of this Agreement will (i)
conflict with or result in a breach of any provision of the respective charters
or bylaws (or similar governing documents) of Preview or any of its
Subsidiaries, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (A) pursuant to
Section 3(a)(10) of the Securities Act, certain state securities statutes, and
(B) for filing the Articles of Merger with respect to the Preview Merger
pursuant to the CGCL, (iii) except as set forth in the Preview Disclosure
Schedule, result in a default (or an event which with notice or lapse of time or
both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a lien or encumbrance on any of the assets of Preview or any of its
Subsidiaries pursuant to any note, license, agreement or other instrument or
obligation to which Preview or any of its Subsidiaries is a party or by which
Preview or any of its Subsidiaries or any of their respective assets may be
bound or affected, or (iv) violate or conflict with any order, writ, injunction,
decree, statute, rule or regulation applicable to Preview or any of its
Subsidiaries or any of their respective properties or assets,
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other than (A) such defaults, rights of termination, cancellation, amendment or
acceleration, liens and encumbrances, violations and conflicts set forth
pursuant to (iii) and (iv) above, and (B) such consents, approvals,
authorizations, permits or filings, as set forth pursuant to (ii) above that are
not obtained, which, in the aggregate, would not have a Material Adverse Effect
on Preview and would not materially impair Preview's ability to consummate the
transactions contemplated by this Agreement and the Preview Merger Agreement.
Section 5.5 Financial Statements; Absence of Undisclosed Liabilities.
(a) Preview has furnished Portland with the audited balance sheet of
Preview as of December 31, 1997, and the related audited statements of
operations, cash flows and changes in stockholders' equity for the year ended
December 31, 1997, and the unaudited balance sheet of Preview as of March 31,
1998, and the related statements of operations, cash flows and changes in
stockholders' equity for the three-month period ended March 31, 1998 (the
"Preview Financial Statements"). All of such financial statements, including the
notes thereto, (i) are in accordance with the respective books of Preview; (ii)
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except that the unaudited financial statements do not contain
footnotes; (iii) present fairly the financial position of Preview as of the
respective dates thereof and the results of operations and cash flows of Preview
for the respective periods indicated; and (iv) do not reflect any material items
of nonrecurring income except as stated therein.
(b) Preview has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that would
be required to be reflected in a balance sheet, or in the notes thereto,
prepared in accordance with GAAP that were not disclosed or provided for in the
Preview Financial Statements or the notes thereto other than liabilities
incurred since March 31, 1998, which were incurred in the ordinary course of
business and are not individually or in the aggregate, material to Preview's
business. All reserves set forth on the Preview Financial Statements or the
notes thereto are adequate. There are no material loss contingencies (as such
term is used in Statement of Financial Accounting Standards No. 5) that are not
adequately provided for in the Preview Financial Statements or reflected in the
notes thereto.
Section 5.6 Absence of Changes. Since March 31, 1998: (a) there has been
no Material Adverse Effect in Preview's business or any development particular
to Preview's business and not generally known to the public that reasonably
could be expected to cause a material adverse change in Preview's business; (b)
there has been no damage, destruction or loss (whether or not covered by
insurance) which has had a Material Adverse Effect on any assets material to
Preview's business; (c) there has been no change by Preview in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (d) there has been no revaluation by Preview of
any of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable; and (e) Preview has
conducted its business only in the ordinary course consistent with past
practice.
Section 5.7 Contracts and Commitments.
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(a) Preview is not a party or subject to:
(i) Any union contract or collective bargaining agreement or
any employment contract or arrangement, written or oral, providing for future
compensation with any officer, consultant, director or employee that is not
terminable by it on two weeks' notice or less without penalty or obligation to
make payments related to such termination, other than (A) (in the case of
employees other than executive officers) such severance agreements as are not
different from standard arrangements offered to employees generally in the
ordinary course of business consistent with Preview's past practices, a
description of which is set forth in the Preview Disclosure Schedule and (B)
such agreements as may be imposed or implied by law;
(ii) Any plans, contracts or arrangements, written or oral,
which collectively require aggregate payments by Preview in excess of $25,000
for bonuses, pensions, deferred compensation, severance pay or benefits,
retirement payments, profit-sharing, or the like;
(iii) Any joint marketing, joint development or joint venture
contract or arrangement or any other agreement that has involved or is expected
to involve a sharing of profits or royalties with other persons;
(iv) Any existing license agreement, OEM agreement,
distribution agreement, volume purchase agreement, or other similar agreement
pursuant to which Preview has granted or received most favored customer
provisions or exclusive marketing rights related to any product, group of
products or territory;
(v) Any lease for real or personal property pursuant to which
the amount of payments which Preview is required to make on an annual basis
exceeds $25,000;
(vi) Any agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment or
authorization that may be, by its terms, terminated or breached by reason of the
execution of this Agreement or the Preview Merger Agreement, the closing of the
Mergers, or the consummation of the transactions contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness in excess of $25,000 incurred in the acquisition of companies or
other entities or indebtedness in excess of $25,000 for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or licensee
(excluding End-User Licenses);
(ix) Any contract containing covenants purporting to limit
Preview's freedom to compete in any line of business or in any geographic area
or with any third party;
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(x) Any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000; or
(xi) Any other agreement, contract or commitment that is material
to Preview.
(b) Each agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and commitment
listed in the Preview Disclosure Schedule is valid and binding on Preview and is
in full force and effect, and neither Preview, nor to the knowledge of Preview
any other party thereto, has breached in any material respect any provision of,
or is in default in any material respect under the terms of, any such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment.
(c) There is no agreement, judgment, injunction, order or decree
binding upon Preview which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any material current business
practice of Preview, any acquisition of material property by Preview or the
conduct of business by Preview as currently conducted or as proposed to be
conducted.
Section 5.8 Legal Proceedings. Preview is not in violation of, and has not
received any notice of any violation of: (a) any applicable statute, law,
regulation, ordinance, writ, injunction, order, judgment or decree, the effect
of which violation could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Preview's business; or (b) any
provision of the Preview Charter Documents. There is no order, writ, injunction,
judgment or decree outstanding, and no legal, administrative, arbitration or
other proceeding, action, suit or governmental investigation or inquiry against
Preview, its assets, business or its employees, officers or directors in such
capacities ("Preview Legal Proceedings") pending or, to the knowledge of
Preview, threatened. To the knowledge of Preview, there are no claims by or
against Preview, its assets or business or its employees, officers or directors
in such capacities, that could, individually or in the aggregate, have a
Material Adverse Effect on Preview. There is no Preview Legal Proceeding that in
any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated hereby. There are no existing agreements to provide
indemnification for liabilities of its officers and directors for acts or
omissions by such persons.
Section 5.9 Information Supplied. The information supplied or to be
supplied by Preview or its Subsidiaries for inclusion in (i) the Hearing
Documents will not, either at the time filed with the California Department of
Corporations or at the time mailed to the shareholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Disclosure Document, including any amendments and supplements thereto,
will not, either at the date mailed to shareholders or at the time of the
meeting of shareholders (or action by written consent of shareholders in lieu
thereof) of Portland and Preview to be held in connection with the transactions
contemplated by this Agreement and the Merger Agreements, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or
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necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading except by Portland with respect to
information supplied by Portland for inclusion therein.
Section 5.10 Employee Matters.
(a) Preview is in compliance in all material respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment and wages and hours and
occupational safety and health and employment practices, and is not engaged in
any unfair labor practice. Preview has not received any notice from any
governmental entity, and to the knowledge of Preview, there has not been
asserted before any governmental entity, any claim action or proceeding to which
Preview is a party, and there is neither pending nor, to the knowledge of
Preview, threatened any investigation or hearing concerning Preview arising out
of or based upon any such laws, regulations or practices. There are no pending
claims against Preview under any workers compensation plan or policy for any
long-term disability and, to the knowledge of Preview, there is no basis for any
such claim. Preview has complied in all material aspects with COBRA and has no
material obligations with respect to any former employees or qualifying
beneficiaries thereunder.
(b) Preview has disclosed in Section 5.11 of the Preview Disclosure
Schedule a list of all material employee welfare benefit plans (as defined in
Section 3(1) of ERISA), employee pension benefit plans (as defined in Section
3(2) of ERISA) and all other bonus, stock option, stock purchase, benefit,
profit sharing, savings, retirement, disability, insurance, incentive, deferred
compensation and other similar fringe or employee benefit plans, programs or
arrangements for the benefit of, or relating to, any employee of, or independent
contractor or consultant to, Preview or any of its subsidiaries (together, the
"Preview Employee Plans").
(c) Preview has made available to Portland true and complete copies
of all Preview Employee Plans, as in effect, together with all amendments
thereto that will become effective at a later date, as well as the latest
Internal Revenue Service determination letters obtained with respect to any
Preview Employee Plan qualified under Section 401(a) or 501(a) of the Code. Also
with respect to each Preview Employee Plan, true and complete copies of the (i)
three most recent annual actuarial valuation reports, if any, (ii) three last
filed Forms 5500 together with Schedule A or B thereto or both, (iii) summary
plan description (as defined in ERISA), if any, and all modifications thereto
communicated to employees, and (iv) three most recent annual and periodic
accountings of related plan assets, if any, have been, or will be, made
available to Portland and are, or will be, correct in all material respects.
(d) Neither Preview nor any of its directors, officers, employees or
agents, nor, to the best knowledge of Preview, any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Preview Employee Plan, engaged
in or been a party to any "prohibited transaction", as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could result in the
imposition of either a penalty assessed pursuant to Section 502(i) of ERISA or a
tax imposed by
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Section 4975 of the Code, in each case applicable to Preview, any of its
subsidiaries or any Preview Employee Plan.
(e) All Preview Employee Plans are in compliance in all material
respects with the currently applicable requirements prescribed by all statutes,
orders, or governmental rules or regulations currently in effect with respect to
such Preview Employee Plans, including, but not limited to, ERISA and the Code
and, to the best knowledge of Preview, there are no pending or threatened
claims, lawsuits or arbitrations (other than routine claims for benefits) which
have been asserted or instituted against Preview, any of its subsidiaries, any
Preview Employee Plan or the assets of any trust for any Preview Employee Plan.
Each Preview Employee Plan which is a group health plan (within the meaning of
Section 5000(b)(i) of the Code) complies with and has been maintained and
operated in accordance with each of the requirements of Section 162(k) of the
Code as in effect for years beginning prior to 1989, Section 4980B of the Code
for years beginning after December 31, 1988 and Part 6 of Subtitle B of Title I
of ERISA.
(f) Each Preview Employee Plan intended to qualify under Section
401(a) of the Code does so qualify, and the trusts created thereunder are exempt
from tax under the provisions of Section 501(a) of the Code. Each Preview
Employee Plan that has been terminated by Preview or any of its subsidiaries
which was intended to qualify under Section 401(a) of the Code has received a
final determination of such qualification from the Internal Revenue Service.
(g) All contributions or payments required to be made or accrued
before the Effective Time under the terms of any Preview Employee Plan will have
been made or accrued by Preview or by its subsidiaries, as applicable, by the
Effective Time.
(h) Preview has no Employee Plan subject to Section 412 of the Code
and no "multiemployer plan" (as defined in Section 3(37) of ERISA).
(i) There have been no changes in the operation or interpretation of
any of the Preview Employee Plans since the most recent annual report or
actuarial report that would have any material effect on the cost of operating or
maintaining such Preview Employee Plans.
(j) No amounts payable under any Preview Employee Plan as a result of
the transactions contemplated by this Agreement will fail to be deductible for
Federal income tax purposes by virtue of Section 280G of the Code.
(k) The consummation of the transaction contemplated by this
Agreement will not (i) entitle any current or former employee or officer of
Preview to severance pay or other payment except as expressly provided in this
Agreement; or (ii) accelerate the time of payment or vesting or increase the
amount of compensation due any sick employee or officer.
Section 5.11 Affiliate Agreements. Except for this Agreement and except
as set forth in the Preview Disclosure Schedule, as of the date of this
Agreement neither Preview nor any of its Subsidiaries is a party to any oral or
written agreement with any of its Affiliates, other than with any of its
Subsidiaries.
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Section 5.12 Taxes.
(a) All Returns required to be filed by or on behalf of Preview have
been duly filed on a timely basis and such Returns are true, complete and
correct in all material respects. All Taxes shown to be payable on the Returns
or on subsequent assessments with respect thereto, and all payments of estimated
Taxes required to be made by or on behalf of Preview under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis or have been accrued on the Preview Financial Statements
in accordance with GAAP, and no other Taxes are payable by Preview with respect
to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any other period prior to the
date hereof. Preview has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of Preview with respect to Taxes, other than liens for Taxes not yet due
and payable or for Taxes that Preview is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been established
in accordance with GAAP. Preview has not at any time been (i) a member of an
affiliated group of corporations filing consolidated, combined or unitary income
or franchise tax returns, or (ii) a member of any partnership or joint venture
for a period for which the statue of limitations for any Tax potentially
applicable as a result of such membership has not expired.
(b) The amount of Preview's liability for unpaid Taxes (whether
actual or accrued) for all periods through the date of the Preview Financial
Statements does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) reflected
on such Preview Financial Statements, and the Financial Statements properly
accrue in accordance with GAAP all liabilities for Taxes of Preview payable
after the date of the Preview Financial Statements attributable to transactions
and events occurring prior to such date. No liability for Taxes of Preview has
been incurred (or prior to the Effective Time will be incurred) since such date
other than in the ordinary course of business.
(c) Portland has been furnished by Preview with true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Preview
relating to Taxes, (ii) all material Federal and state income or franchise tax
Returns and state sales, use and property tax Returns for Preview for all
periods since inception, and (iii) any material elections relating to Taxes
which are not reflected in the Returns described in (ii).
(d) The Returns of Preview have never been audited by a government or
taxing authority, nor to the knowledge of Preview is any such audit in process
threatened or pending (either in writing or orally, formally or informally). No
deficiencies exist or have been asserted (either in writing or orally, formally
or informally) or, to the knowledge of Preview, will in the future be asserted
with respect to Taxes of Preview, and Preview has not received notice (either in
writing or orally, formally or informally) nor, to the knowledge of Preview,
will in the future receive notice that it has not filed a Return or paid Taxes
required to be filed or paid by it.
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Preview is neither a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or orally, formally or informally) against Preview or any of its assets.
No waiver or extension of any statute of limitations is in effect with respect
to Taxes or Returns of Preview. Preview has disclosed on its Federal income tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(e) Preview is not and has never been a party to any tax sharing
agreement.
(f) Preview is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the
Tax Equity and Fiscal Responsibility Act of 1982. Preview is not, nor has it
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)(1)(A)(ii) of the Code, and Newco is not required to withhold tax on the
acquisition of the stock of Preview by reason of Section 1445 of the Code.
Preview is not a "consenting corporation" under Section 341(f) of the Code.
Preview has not participated in an international boycott as defined in Section
999 of the Code. Preview has not agreed to, and is not required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method, and Preview does not otherwise have any income reportable for a period
ending after the Effective Time attributable to a transaction or other event
(e.g., an installment sale) occurring prior to the Effective Time involving in
excess of $10,000. Preview is not and has not been a "reporting corporation"
subject to the information reporting and record maintenance requirements of
Section 6038A of the Code and the regulations thereunder.
Section 5.13 Intellectual Property.
(a) Preview owns or has the exclusive right to use, make, sell,
license, or sublicense and bring actions for infringement of all Preview
Products (as defined below) and Preview Intellectual Property Rights (as defined
below) developed by or for Preview or that are used in the business of Preview
as currently conducted. All of the Preview Products and Preview Intellectual
Property Rights are owned by Preview free and clear of any rights or claims of
any current or former employees, consultants, officers and directors of Preview.
The source code for the Preview Products constitutes a trade secret of Preview,
and is not part of the public knowledge or literature, and Preview has taken
reasonable action to protect such source code as a trade secret. All taxes and
fees, including, without limitation, patent and trademark registration and
prosecution fees and all professional fees in connection therewith pertaining to
the Preview Intellectual Property Rights, due and payable on or before the date
hereof, have been paid by Preview.
(b) Preview's current products and products under development are
listed on the Preview Disclosure Schedule (collectively, the "Preview
Products"). No person has a license to use or the right to acquire a license to
use any future version of any Preview Product or any Preview Product that is
under development, and no agreement to which Preview is a party will restrict
Newco from charging customers for any such new version. No agreement for the
support or maintenance of Preview Products obligates Preview, or would obligate
Newco after
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the Effective Time to provide any improvement, enhancement, change in
functionality or other alteration in the performance of the Preview Products.
(c) No person has a right to receive a royalty or similar payment in
respect of any Preview Product or Preview Intellectual Property Rights, to the
knowledge of Preview, or other Intellectual Property Right licensed to Preview
whether or not pursuant to any contractual arrangements entered into by Preview.
Except for End-User Licenses, Preview has no licenses granted, sold or otherwise
transferred by or to it nor other agreements to which it is a party, relating in
whole or in part to any Preview Product or Preview Intellectual Property Rights.
(d) The execution, delivery and performance of this Agreement and the
Preview Merger Agreement the consummation of the Mergers and the consummation of
the other transactions contemplated hereby and thereby (including without
limitation the continued conduct by Newco after the Preview Merger of Preview's
business as presently conducted and the incorporation of any Preview Product or
Preview Intellectual Property Right in any product of Newco) will not breach,
violate or conflict with any instrument or agreement governing any such Preview
Product or Preview Intellectual Property Right necessary or required for the
conduct of the business of Preview as presently conducted will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any such Preview Product or Preview Intellectual Property Right or in any way
impair the right of Newco or any of its subsidiaries to use, sell, license or
dispose of, either as part or all of a Preview Product or subsequent to the
Effective Time as part or all of a product of Newco, or to bring any action for
the infringement of, any such Preview Product or Preview Intellectual Property
Right or portion thereof.
(e) Neither the development, manufacture, marketing, license, sale or
intended use of any Preview Product violates or could reasonably be expected to
violate any license or agreement to which Preview is a party or infringes or
could reasonably be expected to infringe any Intellectual Property Right of any
other party, provided, that with respect to patent rights, rights with respect
to marks, names or designations and moral rights, such representation is made
only to Preview's knowledge; there is no pending or, to the knowledge of
Preview, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Preview Intellectual Property
Right necessary or required for, or used in, the conduct of the business of
Preview as presently conducted nor, to the knowledge of Preview, is there any
basis for any such claim, nor has Preview received any notice asserting that any
such Intellectual Property Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the knowledge of Preview, is there any basis for any such
assertion. To Preview's knowledge, there is no infringement on the part of any
third party of Preview's Intellectual Property Rights.
(f) Preview has taken reasonable and practicable steps (including,
without limitation, entering into confidentiality and non-disclosure agreements
with all officers and employees of and consultants to Preview with access to or
knowledge of Preview's Intellectual Property Rights) to maintain the secrecy and
confidentiality of, and its proprietary rights in, all Preview Intellectual
Property Rights necessary or required for the conduct of Preview's business.
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All employees, consultants, officers, directors and shareholders of Preview that
have had access to any material portion of the Preview Intellectual Property
Rights are parties to a written agreement under which each such person or entity
(i) is obligated to disclose and transfer to Preview, without the receipt by
such person of any additional value therefor (other than normal salary or fees
for consulting services), all inventions, developments and discoveries which,
during the period of employment (for employees) with or performance of services
for, he makes or conceives of either solely or jointly with others, that relate
to any subject matter with which his or her work for Preview may be concerned,
or relate to or are connected with the business, products or projects of
Preview, or involve the use of the time, material or facilities of Preview, and
(ii) is obligated to maintain the confidentiality of proprietary information of
Preview. To Preview's knowledge, none of Preview's employees, consultants,
officers or directors is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with their obligation to promote the interests of Preview in the
Preview business or that would conflict with the Preview business. To Preview's
knowledge, it is currently not necessary, nor will it be necessary for Preview
to utilize in the Preview business nor has Preview utilized in the Preview
business any inventions of any of such persons or entities (or people it
currently intends to hire) made or owned prior to his or her employment by or
affiliation with Preview that Preview has not already licensed or acquired, nor
is it or will it be necessary to utilize any other assets or rights of any such
persons or entities (or people it currently intends to hire) made or owned prior
to their employment with or engagement by Preview, that Preview has not already
licensed or acquired in violation of any registered patents, trade names,
trademarks or copyrights or any other limitations or restrictions to which any
such person or entity is a party or to which any of such assets or rights may be
subject, except to the extent that such utilization would not have a material
adverse effect on the Preview business. To Preview's knowledge, none of
Preview's employees, consultants, officers, directors or shareholders that has
had knowledge or access to information relating to Preview's business has taken,
removed or made use of any proprietary documentation, manuals, products,
materials, or any other tangible item from his or her previous employer relating
to the business as conducted of such previous employer which has resulted in
Preview's access to or use of such proprietary items in Preview's business, and
Preview will not gain access to or make use of any such proprietary items in
Preview's business, except to the extent that any such activities would not have
a Material Adverse Effect on Preview.
(g) The Preview Disclosure Schedule also sets forth a complete list
of all licenses, sublicenses and other agreements as to which Preview is a party
and pursuant to which Preview or any other person is authorized to use, license,
sublicense, sell or distribute any Intellectual Property Right (excluding End-
User Licenses). Preview is not in violation of any license, sublicense or
agreement described on such list except such violations as do not materially
impair Preview's rights under such license, sublicense or agreement. The Preview
Disclosure Schedule separately identifies each exclusive arrangement between
Preview and any third party to use, license, sublicense, sell or distribute any
Preview Intellectual Property Right or any Preview Product.
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(h) The Preview Disclosure Schedule contains a complete and accurate
list of all applications, filings and other formal actions made or taken
pursuant to Federal, state, local and foreign laws by Preview to perfect or
protect its interest in Preview Intellectual Property Rights, including, without
limitation, all patents, patent applications, trademark registrations, trademark
applications, service xxxx registrations and copyright registrations. As used
herein, the term "Preview Intellectual Property Right" shall mean Intellectual
Property Rights owned by or granted exclusively or nonexclusively to Preview.
Section 5.14 Environmental Matters. Except for failures which will not
have a Material Adverse Effect on Preview, Preview has met, and continues to
meet, all applicable local, state, Federal and national environmental
regulations and has disposed of its waste products and effluents and/or has
caused others to dispose of such waste products and effluents, in accordance
with all applicable state, local, Federal and national environmental
regulations.
Section 5.15 Interests of Officers and Directors. No officer or director
of Preview or any "affiliate" or "associate" (as those terms are defined in Rule
405 promulgated under the Securities Act) of any such person has, either
directly or indirectly, a material interest in: (a) any person or entity that
purchases from or sells, licenses or furnishes to Preview any goods, property,
technology or intellectual or other property rights or services; (b) any
contract or agreement to which Preview is a party or by which it may be bound;
or (c) any property, real or personal, tangible or intangible, used in or
pertaining to Preview's business, including any interest in the Preview
Intellectual Property Rights.
Section 5.16 Title to Properties; Absence of Liens and Encumbrances.
The Preview Disclosure Schedule lists all facilities occupied by Preview since
Preview's incorporation, and indicates the nature of Preview's interest in such
facilities. Preview has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of their tangible
properties and assets, real, personal and mixed, used in their business, free
and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the Preview Financial Statements or except
for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and which do not materially detract
from the value, or interfere with the present use, of the property subject
thereto or affected thereby.
Section 5.17 Governmental Authorizations and Licenses. Preview holds all
Licenses required to operate its business, except as would not have a Material
Adverse Effect on Preview. The Licenses are in full force and effect and Preview
is in compliance in all material respects with the terms of the Licenses.
Section 5.18 Insurance. The Preview Disclosure Schedule contains a
complete and accurate list of all policies or binders of fire, liability, title,
worker's compensation, product liability and other forms of insurance maintained
by Preview. Preview is not in default under any of such policies or binders, and
has not failed to give any notice or to present any claim under any such policy
or binder in a due and timely fashion. There are no outstanding unpaid claims
under any such policies or binders. All policies and binders provide sufficient
coverage for the
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risks insured against, are in full force and effect on the date hereof and shall
be kept in full force and effect through the Effective Time.
Section 5.19 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement.
Section 5.20 Bank Accounts. The Preview Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which Preview maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals.
Section 5.21 Disclosure. No representation or warranty made by Preview in
this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished by Preview or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished. To the knowledge of Preview after
reasonable inquiry, there is no event, fact or condition particular to Preview's
business that is not generally known to the public that has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect on Preview
that has not been set forth in this Agreement or in the Preview Disclosure
Schedule. Preview has complied in all material respects with the due diligence
request of Portland dated March 17, 1998.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business of Portland Pending the Effective Time.
Except as expressly permitted or contemplated by this Agreement or the Merger
Agreements or as shall be consented to by Preview (which consent shall not be
unreasonably withheld), until the Effective Time, Portland shall, and shall
cause each of its Subsidiaries to, conduct its operations in the ordinary and
usual course of business consistent with past practice and use its best efforts
(in the ordinary course of business consistent with past practice) to preserve
intact their respective business organizations' goodwill, keep available the
services of their respective present officers and key employees, and preserve
the goodwill and business relationships with licensors, licensees, suppliers,
distributors, customers and others having business relationships with them.
Without limiting the generality of the foregoing, and except as otherwise
permitted by this Agreement, prior to the Effective Time, without the consent of
Preview, which consent shall not be unreasonably withheld, Portland will not,
and will cause each of its Subsidiaries not to:
(a) amend or propose to amend their respective charters or bylaws
(other than as contemplated by this Agreement); or split, combine or reclassify
their outstanding capital stock or declare, set aside or pay any dividend or
distribution in respect of any capital stock (other than the payment to Portland
or any of its Subsidiaries of any such dividend or
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distribution) or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(b) (i) issue or authorize or propose the issuance of, sell, pledge
or dispose of, or agree to issue or authorize or propose the issuance of, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of, their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock, other than any such issuance (x) pursuant to the exercise of options,
warrants, rights or convertible securities outstanding as of the date hereof in
accordance with their terms or (y) to employees or consultants of Portland in
the ordinary course of business and consistent with past practice; (ii) acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization division thereof or otherwise acquire or agree to
acquire any assets in each case which are material, individually or in the
aggregate, to Portland and its Subsidiaries taken as a whole, (iii) sell
(including by sale-leaseback), lease, pledge, dispose of or encumber any assets
or interests therein, which are material, individually or in the aggregate, to
Portland and its Subsidiaries taken as a whole, other than in the ordinary
course of business and consistent with past practice; (iv) except as set forth
in the Portland Disclosure Schedule, incur or become contingently liable with
respect to any material indebtedness for borrowed money or guarantee any such
indebtedness or issue any debt securities or otherwise incur any material
obligation or liability (absolute or contingent) other than short-term
indebtedness in the ordinary course of business and consistent with past
practice; (v) redeem, purchase, acquire or offer to purchase or acquire any
shares of its capital stock or long-term debt, other than as required by the
governing instruments relating thereto;
(c) enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other arrangements or
agreements with any directors, officers or key employees other than pursuant to
Section 7.7 hereof;
(d) adopt, enter into or amend any, or become obligated under any new,
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, health care, employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any employee or
retiree, except as required to comply with changes in applicable law occurring
after the date hereof and except, with respect to all plans other than bonus
plans, in the ordinary course of business and consistent with past practice; or
(e) take any action that would, or is reasonably likely to, result in
any of its representations and warranties set forth in this Agreement becoming
untrue, or in any of the conditions to the Mergers set forth in Article VIII not
being satisfied.
Section 6.2 Conduct of Business of Preview Pending the Effective Time.
Except as expressly permitted or contemplated by this Agreement or the Merger
Agreements or as shall be consented to by Portland (which consent will not
unreasonably be withheld), until the Effective Time, Preview shall, and shall
cause each of its Subsidiaries to, conduct its operations in the
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ordinary and usual course of business consistent with past practice and use
their best efforts to preserve intact their respective business organizations'
goodwill, keep available the services of their respective present officers and
key employees, and preserve the goodwill and business relationships with
licensors, licensees, suppliers, distributors, customers and others having
business relationships with them. Without limiting the generality of the
foregoing, and except as otherwise permitted by this Agreement, prior to the
Effective Time, without the consent of Portland, which consent shall not be
unreasonably withheld, Preview will not, and will cause each of its Subsidiaries
not to:
(a) amend or propose to amend their respective charters or bylaws
(other than as contemplated by this Agreement); or split, combine or reclassify
their outstanding capital stock or declare, set aside or pay any dividend or
distribution in respect of any capital stock (other than the payment to Preview
or any of its Subsidiaries of any such dividend or distribution) or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock;
(b) (i) issue or authorize or propose the issuance of, sell, pledge
or dispose of, or agree to issue or authorize or propose the issuance of, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of, their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock, other than any such issuance (x) pursuant to the exercise of options,
warrants, rights or convertible securities outstanding as of the date hereof in
accordance with their terms or (y) to employees or consultants of Preview in the
ordinary course of business and consistent with past practice; (ii) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of; or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or agree to
acquire any assets in each case which are material, individually or in the
aggregate, to Preview and its Subsidiaries taken as a whole; (iii) sell
(including by sale-leaseback), lease, pledge, dispose of or encumber any assets
or interests therein, which are material, individually or in the aggregate, to
Preview and its Subsidiaries taken as a whole, other than in the ordinary course
of business and consistent with past practice; (iv) except as set forth in the
Preview Disclosure Schedule, incur or become contingently liable with respect to
any material indebtedness for borrowed money or guarantee any such indebtedness
or issue any debt securities or otherwise incur any material obligation or
liability (absolute or contingent) other than short-term indebtedness in the
ordinary course of business and consistent with past practice; (v) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock or long-term debt, other than as required by the governing instruments
relating thereto;
(c) enter into or amend any, employment, severance, special pay
arrangement with respect to termination of employment or other arrangements or
agreements with any directors, officers or key employees other than pursuant to
Section 7.7 hereof;
(d) adopt, enter into or amend any, or become obligated under any
new, bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation,
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health care, employment or other employee benefit plan, agreement, trust, fund
or arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law occurring after the date
hereof and except, with respect to all plans other than bonus plans, in the
ordinary course of business and consistent with past practice; or
(e) take any action that would, or is reasonably likely to, result in
any of its representations and warranties set forth in this Agreement becoming
untrue, or in any of the conditions to the Mergers set forth in Article VIII not
being satisfied.
Section 6.3 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Portland and Preview shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger Agreements and the transactions
contemplated hereby and thereby.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
Section 7.1 No Solicitation.
(a) Without the prior written consent of Preview, Portland and its
Subsidiaries will not, and will use their best efforts to cause their respective
officers, directors, employees, consultants, and agents not to, initiate or
solicit, directly or indirectly, any inquiries or the making of any proposal
with respect to or engage in negotiations concerning, provide any confidential
information or data to or have any discussions with, any Third Party, other than
Preview or any Affiliate of Preview, relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, Portland or any of its Subsidiaries. Portland will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Portland shall immediately notify Preview if any such
negotiations, or providing of confidential information or data or discussions
are entered into or made or any such inquiries are received in respect thereof,
and shall provide details with respect thereto.
(b) Without the prior written consent of Portland, Preview and its
Subsidiaries will not, and will use their best efforts to cause their respective
officers, directors, employees, consultants, and agents not to, initiate or
solicit, directly or indirectly, any inquiries or the making of any proposal
with respect to or engage in negotiations concerning, provide any confidential
information or data to, or have any discussions with, any Third Party, other
than Portland or any Affiliate of Portland relating to, any acquisition,
business combination or purchase of all or any significant portion of the assets
of, or any equity interest in, Preview or any of its Subsidiaries. Preview will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Preview shall immediately notify Portland if any such
negotiations, or
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providing of confidential information or data or discussions are entered into or
made or any such inquiries are received in respect thereof, and shall provide
details with respect thereto.
Section 7.2 Access to Information.
(a) Subject to compliance with applicable law, upon reasonable notice
Preview and Portland shall each (and shall cause each of their respective
Subsidiaries to) afford to the other and the officers, employees, accountants,
counsel, financial advisors and other representatives of the other, access
throughout the period prior to the Effective Time to all of its properties,
books, contracts, commitments and records and, during such period, each of
Preview and Portland shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of applicable state or Federal
securities laws, and (b) all other information concerning its businesses,
properties and personnel as such other party may reasonably request.
(b) The parties shall comply with the provisions of the
Confidentiality Agreement dated April 6, 1998 between Portland and Preview.
Section 7.3 Taxes; Consent. Each party shall prepare and timely file all
Returns and amendments thereto required to be filed by it on or before the
Effective Time. Each party shall have a reasonable opportunity to review all
material Returns and amendments thereto of the other party and to approve such
Returns within seven days of receipt thereof (which approval shall not be
unreasonably withheld). Each party shall pay and discharge all Taxes,
assessments and governmental charges upon or against it or any of its properties
or assets, and all liabilities at any time existing, before the same shall
become delinquent and before penalties accrue thereon, except to the extent and
as long as: (a) the same are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause any Material
Adverse Effect on such party; and (b) such party shall have set aside on its
books adequate reserves for such Taxes.
Section 7.4 Shareholder Approval. Each of Preview and Portland, as
promptly as practicable (but no earlier than permitted under applicable law)
will solicit written consents from its shareholders, or hold a shareholders'
meeting, for the purpose of seeking the approval of this Agreement, the Preview
Merger or the Portland Merger (as applicable) and related transactions
contemplated in this Agreement. The respective boards of directors of Portland
and Preview shall recommend to their respective shareholders approval of such
matters. Portland and Preview shall coordinate and cooperate with respect to the
timing of such meetings and shall use their best efforts to hold any such
meetings or to obtain written consults in lieu thereof as soon as practicable
after the date of the Fairness Hearing. Each of Preview and Portland shall
authorize and cause one of its officers to vote its shares of Newco Common Stock
for adoption and approval of this Agreement, the Merger Agreements and the
transactions contemplated hereby and to take all additional actions as the
shareholders of Newco necessary to adopt and approve this Agreement, the Merger
Agreements and the transactions contemplated hereby and thereby.
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Section 7.5 Lockups. Preview and Portland shall each cause each person
acquiring its capital stock from such entity (or the right to acquire such
shares) after the date first written above, to deliver to Preview and Portland
on or prior to the Effective Time a written agreement (to the extent such
persons have not already done so pursuant to agreements which will be binding
with respect to Newco capital stock) which provides that, in connection with the
initial public offering of Newco's securities and upon request of Newco or the
underwriters managing any underwritten offering of Newco's securities, such
holder agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Newco securities (other than those,
if any, included in the registration) without the prior written consent of Newco
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
Newco or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
Section 7.6 Agreement to Cooperate; Further Assurances. Subject to the
terms and conditions of this Agreement, each of the parties to this Agreement
shall use all reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Merger Agreements, subject
to the appropriate vote of shareholders of Portland and Preview described in
Section 8.1(a) hereof, including providing information and using reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals,
and effecting all necessary registrations and filings; provided, that nothing
herein shall require Newco, Preview or Portland to hold, manage or operate any
assets separately in order to obtain any such consent or approval or to enter
into any sale or divestiture of assets. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement and the Merger Agreements, the proper officers and directors of
each party to this Agreement shall take all necessary actions to the extent not
inconsistent with their other duties and obligations or applicable law.
Section 7.7 Stock Options; Warrants.
(a) To the extent that acceleration of the exercisability of (or lapse
of repurchase right by Portland or its successor with respect to) any
outstanding Portland Option, Portland Warrant or other Portland security is
permitted or required by the applicable governing instrument as a result of the
Mergers or related transactions, then Portland shall take all necessary action
to cause such acceleration not to occur. Notwithstanding the foregoing, if any
employee waiving any such acceleration of vesting contained in existing written
agreements is terminated by Newco, Portland or Preview (other than a termination
by Preview or Portland of an employee so that such employee may become a Newco
employee) prior to 90 days following the Effective Time for other than Cause,
the employee shall remain entitled to receive the benefit of such acceleration.
For these purposes, "Cause" shall constitute conviction of any felony, the
commission of any act of fraud, embezzlement or dishonesty with respect to Newco
or its Subsidiaries (including Portland and Preview), any unauthorized use or
disclosure of confidential information or trade secrets of Newco or its
Subsidiaries (including Portland and Preview) any other intentional misconduct
adversely affecting the business or affairs of Newco or its Subsidiaries
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(including Portland and Preview) in a material manner or repeated unexcused
absence from Newco or its Subsidiaries.
(b) To the extent that acceleration of the exercisability of (or
lapse of repurchase right by Preview or its successor with respect to) any
outstanding Preview Option, Preview Warrant or other Preview security is
permitted or required by the applicable governing instrument as a result of the
Mergers or related transactions, then Preview shall take all necessary action to
cause such acceleration not to occur. Notwithstanding the foregoing, if any
employee waiving any such acceleration of vesting contained in existing written
agreements is terminated by Newco, Preview or Portland (other than a termination
by Preview or Portland of an employee so that such employee may become an
employee of Newco) prior to 90 days following the Effective Time for other than
Cause, the employee shall receive the benefit of such acceleration.
Section 7.8 Public Statements. The parties shall consult with each other
prior to issuing any public announcement or statement with respect to this
Agreement, the Merger Agreements or the transactions contemplated hereby or
thereby and shall not issue any such public announcement or statement prior to
such consultation, except as may be required by law, including, without
limitation, in connection with the Fairness Hearing.
Section 7.9 Rights Agreement; Co-Sale Agreement. Each of Newco, Preview
and Portland shall cause Newco to adopt an investor rights agreement, stock
option plan (the "Newco Stock Option Plan") and co-sale agreement in form and
substance reasonably satisfactory to the parties.
Section 7.10 Expenses. All costs and expenses incurred in connection
with this Agreement and the Merger Agreements and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses, except
that the filing fee incurred in connection with filing the Hearing Documentation
with the California Department of Corporations in connection with the Fairness
Hearing shall be shared equally by Preview, on the one hand, and Portland, on
the other hand.
Section 7.11 Newco Activities. Until the Effective Time except in
connection with or furtherance of the transactions contemplated by this
Agreement and the Merger Agreements, Newco will incur no obligations or
liabilities nor engage in any business or activities of any type or kind
whatsoever or enter into any agreements or arrangements with any person or
entity.
Section 7.12 Noncompete Agreements. Preview and Portland will use their
good faith efforts to obtain, with respect to the persons listed on Schedule
7.12, noncompetition agreements, in a form agreed to by the parties, pursuant to
which the subject employee/shareholder agrees not to compete with Newco or its
Subsidiaries with respect to the business of Newco for a period of the shorter
of three years after the Effective Time or one year after termination of such
employee's employment with Newco, its Subsidiaries or its successors.
Section 7.13 Dissenters. Neither Portland with respect to Portland
Dissenting Shares (as defined below) nor Preview with respect to Preview
Dissenting Shares (as defined below) will, without the consent of the other,
voluntarily make any payment with respect to any
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demands for purchase or offer to settle any such demands in respect of
Dissenting Shares. Each of Portland, Preview and Newco will cooperate with the
other in any negotiations or proceedings with respect to demands for purchase of
Dissenting Shares pursuant to applicable state law.
Section 7.14 Carve Out From Covenants. Each of Preview and Portland
shall have the right to consummate any or all of the transactions described in
Schedule 7.14, hereto on the terms specified therein, as such terms may be
modified by Preview or Portland and Newco, provided that such modifications are
not material and adverse to the other party and such transactions shall be
exempt from the covenants of this Agreement to the extent specified on Schedule
7.14.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers.
The respective obligations of each party to effect the Mergers shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement, the Merger Agreements and the transactions
contemplated hereby and thereby shall have been approved and adopted by the
affirmative vote of the requisite number of outstanding shares of Preview
capital stock and Portland capital stock entitled to vote with respect to such
matters;
(b) No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent jurisdiction which
prevents the consummation of the Mergers or imposes material conditions with
respect thereto shall have been issued and remain in effect (each party agreeing
to use its reasonable best efforts to have any such injunction, order or decree
lifted);
(c) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any Governmental Entity which would
prevent the consummation of the Mergers or impose material conditions with
respect thereto;
(d) All governmental consents and approvals legally required for the
consummation of the Mergers and the transactions contemplated hereby shall have
been obtained and be in effect at the Effective Time, including all Federal,
state securities or blue sky registrations, permits and other authorizations (or
exemptions therefrom) necessary to issue the Newco securities pursuant to this
Agreement and the Merger Agreements and as contemplated by Section 7.6 hereof
(each party agrees to use its reasonable best efforts to obtain such consents
and approvals) except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Newco, or upon the consummation of the transactions contemplated
hereby.
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Section 8.2 Condition to Obligation of Portland to Effect the Portland
Merger. The obligation of Portland to effect the Portland Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Preview shall have performed in all material respects its
agreements contained in this Agreement and the Merger Agreements required to be
performed on or prior to the Effective Time and the representations and
warranties of Preview contained in this Agreement and the Merger Agreements
shall be true and correct in all material respects on and as of the date of this
Agreement, except as contemplated or permitted by this Agreement and the Merger
Agreements and Portland shall have received a certificate of the Chief Executive
Officer, President, Chief Financial Officer or Executive Vice President of
Preview to that effect;
(b) Preview shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument, except those set
forth on Schedule 8.2(b) and those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Preview, or upon the consummation of the transactions contemplated
hereby;
(c) Portland and Newco shall have received an opinion of Venture Law
Group, A Professional Corporation or other outside counsel to Preview acceptable
to Portland, in substantially the form set forth as Exhibit E hereto;
(d) Portland and Newco shall have received an opinion from Ater Xxxxx
Xxxxxx Xxxxxx & Xxxxxxxx, LLP or other outside counsel to Portland substantially
to the effect that the Portland Merger shall be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
for Newco, Portland and the shareholders of Portland who receive Newco Common
Stock or Newco Preferred Stock in the Portland Merger. In rendering such
opinion, counsel may rely on, among other things, reasonable assumptions as well
as representations of Newco, Portland, Preview, Portland Sub, Preview Sub and
their respective shareholders.
(e) Dissenting Shares. The aggregate number of Preview Dissenting
Shares for which demands for payment are filed or may still be filed shall not
be equal to or exceed 1% of the outstanding shares of Preview voting stock
immediately prior to the Effective Time. "Dissenting Shares" means shares of
capital stock which are dissenting shares (as defined in the CGCL or OBCA, as
applicable), or which remain eligible at the Effective Time to become dissenting
shares.
(f) Fairness Hearing and Permit. The hearing on the fairness of the
Mergers pursuant to Section 25142 of the CGCL shall have occurred, and Newco
shall have received a permit relating to the issuance of the Newco securities
(including options and warrants) pursuant to the Mergers and the other
transactions contemplated by this Agreement, from the Department of Corporations
of the State of California pursuant to its Application for Qualification of
Securities by permit under Section 25121 of the CGCL.
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(g) Preview Rights Agreement. The Preview Rights Agreement shall
terminate at or prior to the Effective Time.
Section 8.3 Conditions to Obligations of Preview to Effect the Preview
Merger. The obligations of Preview to effect the Preview Merger shall be
subject to the fulfillment at or prior to the Effective Time of the additional
following conditions:
(a) Portland shall have performed in all material respects its
agreements contained in this Agreement and the Merger Agreements required to be
performed on or prior to the Effective Time and the representations and
warranties of Portland contained in this Agreement and the Merger Agreements
shall be true and correct in all material respects on and as of the date of this
Agreement, except as contemplated by this Agreement and the Merger Agreements,
and Preview shall have received a Certificate of the Chief Executive Officer,
President, Chief Financial Officer or Executive Vice President of Portland to
that effect;
(b) Portland shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transaction contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those set forth in Schedule 8.3(b) and those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on Portland, or upon the consummation of the
transactions contemplated hereby;
(c) Preview and Newco shall have received an opinion of Ater Xxxxx
Xxxxxx Xxxxxx & Xxxxxxxx, LLP or other outside counsel to Portland acceptable to
Preview, in substantially the form set forth as Exhibit F hereto;
(d) Preview and Newco shall have received an opinion from Venture Law
Group, A Professional Corporation or other outside counsel to Preview
substantially to the effect that the Preview Merger shall be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code for Newco, Preview and the shareholders of Preview who receive Newco
Common Stock or Newco Preferred Stock in the Preview Merger. In rendering such
opinion, counsel may rely on, among other things, reasonable assumptions as well
as representations of Newco, Portland, Preview, Portland Sub, Preview Sub and
their respective shareholders.
(e) Dissenting Shares. The aggregate number of Portland Dissenting
Shares for which demands for payment are filed or may still be filed shall not
be equal to or exceed 1% of the outstanding shares of Portland voting stock
immediately prior to the Effective Time.
(f) Fairness Hearing and Permit. The hearing on the fairness of the
Mergers pursuant to Section 25142 of the CGCL shall have occurred, and Newco
shall have received a permit relating to the issuance of the Newco Securities
pursuant to the Mergers and the other transactions contemplated by this
Agreement, from the Department of Corporations of the State of California
pursuant to its Application for Qualification of Securities by permit under
Section 25121 of the CGCL.
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(g) Portland Rights Agreement. The Portland Rights Agreement shall
terminate at or prior to the Effective Time.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Preview or Portland:
(a) by the mutual written consent of Preview and Portland;
(b) by either Preview or Portland if (i) the Mergers shall not have
been consummated on or before September 30, 1998 (or such later date as shall
have been agreed to in writing by the parties acting through their respective
Boards of Directors) (the "Termination Date"); (ii) any Governmental Entity, the
consent of which is a condition to the obligations of Preview and Portland to
consummate the transactions contemplated hereby or by the Merger Agreements,
shall have determined not to grant its consent and all appeals of such
determination shall have been taken and have been unsuccessful; or (iii) any
court of competent jurisdiction in the United States or any State shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting either of the Mergers and such
order, judgment or decree shall have become final and nonappealable;
(c) by Portland if (i) the Preview Merger shall have been voted on by
holders of Preview capital stock at a meeting duly convened therefor, and the
votes shall not have been sufficient to satisfy the condition set forth in
Section 8.1(a) hereof; (ii) there has been an intentional misrepresentation by
Preview with respect to facts, circumstances, events or developments relating
to, having or resulting in a Material Adverse Effect on Preview, or a material
breach by Preview of a covenant or agreement set forth in this Agreement or the
Preview Merger Agreement, which breach has not been cured within 15 business
days following receipt by the breaching party of notice of such breach; (iii)
the Board of Directors of Preview should fail to recommend to its shareholders
approval of the transactions contemplated by this Agreement and the Preview
Merger Agreement or such recommendation shall have been made and subsequently
withdrawn; or (iv) except as provided in Schedule 7.14 following the execution
of this Agreement, Preview shall have engaged in negotiations concerning,
provided any confidential information or data to, or had any discussions with,
any Third Party other than Portland or any of its Affiliates relating to, any
acquisition, business combination or purchase of all or any significant portion
of the assets of, or equity interest in, Preview or any of its Subsidiaries;
(d) by Portland if this Agreement, the Merger Agreements and the
transactions contemplated hereby and thereby have not been approved and adopted
by the affirmative vote of the requisite number of outstanding shares of
Portland capital stock entitled to vote with respect to such matters.
(e) by Preview if (i) the Portland Merger shall have been voted on by
holders of Portland capital stock at a meeting duly convened therefor and the
votes shall not have been
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sufficient to satisfy the condition set forth in Section 8.1(a); (ii) there has
been an intentional misrepresentation by Portland with respect to facts,
circumstances, events or developments relating to, having or resulting in a
Material Adverse Effect on Portland, or a material breach by Portland of a
covenant or agreement set forth in this Agreement or the Portland Merger
Agreement, which breach has not been cured within 15 business days following
receipt by the breaching party of notice of such breach; (iii) the Board of
Directors of Portland should fail to recommend to its shareholders approval of
the transactions contemplated by this Agreement and the Portland Merger
Agreement or such recommendation shall have been made and subsequently
withdrawn; or (iv) except as provided in Schedule 7.14 following the execution
of this Agreement, Portland shall have engaged in negotiations concerning,
provided any confidential information or data to, or had any discussions with,
any Third Party other than Preview or any of its Affiliates relating to, any
acquisition, business combination or purchase of all or any significant portion
of, the assets of, or equity interest in, Portland or any of its Subsidiaries.
(f) by Preview if this Agreement, the Merger Agreements and the
transactions contemplated hereby and thereby have not been approved and adopted
by the affirmative vote of the requisite number of outstanding shares of Preview
capital stock entitled to vote with respect to such matters.
Notwithstanding the foregoing, the right to terminate this Agreement (i)
under Section 9.1(b)(i) hereof shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date
and (ii) under Section 9.1(c) and (e) hereof shall not be available to any party
who at such time has intentionally made a misrepresentation with respect to
facts, circumstances, events or developments relating to, having or resulting in
a Material Adverse Effect or is in material breach of any covenant or agreement
set forth in this Agreement or the Merger Agreements.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either Preview or Portland as provided in Section 9.1 hereof; this
Agreement shall forthwith become void (except as set forth in this Section 9.2,
in Sections 7.2(b), 7.10, 9.5 and in Sections 10.2 through 10.8 hereof which
shall survive the termination of this Agreement) and there shall be no liability
on the part of Newco, Preview or Portland or their respective officers or
directors except for any breach of any of its obligations under this Section
9.2, and Sections 7.2, 7.10, 9.5 and Sections 10.2 through 10.8 hereof.
Notwithstanding the foregoing, no party hereto shall be relieved from liability
for any willful, material breach of this Agreement.
Section 9.3 Amendment. This Agreement and the Merger Agreement may be
amended by the parties hereto at any time before or after approval hereof by the
shareholders of Preview or Portland, provided that after any such approval, no
amendment shall be made which (a) changes the method for calculating the ratios
at which shares are to be converted into shares of Newco capital stock pursuant
to the Merger Agreements hereof; (b) in any way that has a Material Adverse
Effect on the rights of holders of shares of Preview capital stock or Portland
capital stock or (c) changes any of the principal terms of this Agreement or the
Merger Agreements, in each case without the further approval of such
shareholders. This Agreement and the Merger
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Agreements may not be amended except by an instrument in writing signed on
behalf of Newco, Portland and Preview.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
this Agreement to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
Section 9.5 Break-Up Arrangements.
(a) If this Agreement is terminated pursuant to any subsection of
Section 9.1(c) or pursuant to Section 9.1(f) hereof and if Preview is not
entitled to terminate this Agreement by reason of Section 9.1(e) hereof; then,
in addition to any other rights or remedies that may be available, Preview shall
promptly (and in any event within two days of receipt by Preview of written
notice from Portland) pay to Portland (by wire transfer of immediately available
funds to an account designated by Portland) a termination fee of $2,000,000, and
shall reimburse Portland for all out-of-pocket expenses (including all fees and
expenses of its counsel, advisors, accountants and consultants) incurred by
Portland or on its behalf in connection with the transactions contemplated by
this Agreement, provided, however, that no termination fee or out-of-pocket
expenses shall be payable by Preview pursuant to this Section 9.5(a) if one or
more members of the Board of Directors of Preview dies or becomes incapacitated
and the number of shares owned by such director or an entity under the control
of such director voted against the Preview Merger by the estate, successor or
assignee of such director (including any successor in control of an entity
controlled by such director prior to death or incapacity) equals or exceeds the
number of votes by which the Preview Merger failed to satisfy the condition set
forth in Section 8.1(a).
(b) If this Agreement is terminated pursuant to Section 9.1(d) or
pursuant to any subsection of Section 9.1(e) hereof and if Portland is not
entitled to terminate this Agreement by reason of Section 9.1(c) hereof; then,
in addition to any other rights or remedies that may be available, Portland
shall promptly (and in any event within two days of receipt by Portland of
written notice from Preview) pay to Preview (by wire transfer of immediately
available funds to an account designated by Preview) a termination fee of
$2,000,000, and shall reimburse Preview for all out-of-pocket expenses
(including all fees and expenses of its counsel, advisors, accountants and
consultants) incurred by them or on their behalf in connection with the
transactions contemplated by this Agreement; provided, however, that no
termination fee or out-of-pocket expenses shall be payable by Portland pursuant
to this Section 9.5(b) if one or more members of the Board of Directors of
Portland dies or becomes incapacitated and the number of shares owned by such
director or an entity under the control of such director voted against the
Portland Merger by the estate, successor or assignee of such director (including
any successor in control of an entity controlled by such director prior to death
or incapacity) equals or exceeds the
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number of votes by which the Portland Merger failed to satisfy the condition set
forth in Section 8.1(a).
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time.
Section 10.2 Notices. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given upon (a)
transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or when delivered by hand or
(c) the expiration of three business days after the day when mailed by certified
or registered mail, postage prepaid, addressed at the following addresses (or at
such other address as the parties hereto shall specify by like notice):
If to Preview, to:
Preview Software, Inc.
0000 X. Xx Xxxx Xxxx., Xxx. 000
Xxxxxxxxx, XX 00000
Phone: 408/000-0000
Fax: 408/000-0000
Attention: Xxxxxxx Xxxxxxxxx
Chief Executive Officer, President
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Phone: 650/000-0000
Fax: 650/000-0000
Attention: Xxxxx X. Xxxxxx
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If to Portland, to:
Portland Software, Inc.
0000 XX Xxxxxxxx
Xxxxx 0000
Xxxxxxxx XX 00000
Phone: 503/000-0000
Fax: 503/000-0000
Attention: Xxxxxx Xxxxxxxx
Chief Financial Officer
with a copy to:
Ater Xxxxx Xxxxxx Xxxxxx & Xxxxxxxx, LLP
000 X.X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Phone: 503/000-0000
Fax: 503/000-0000
Attention: Xxxxxxx Going
Section 10.3 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to this Agreement or attached to it) (a) together with the
Confidentiality Agreement dated April 6, 1998 and the Merger Agreements
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, including, without limitation, the letter
of intent dated April 6, 1998 between Preview and Portland; (b) is not intended
to confer upon any other person any rights or remedies hereunder; (c) shall not
be assigned by operation of law or otherwise without the prior written consent
of the other parties hereto; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California (without giving effect to the provisions thereof relating to
conflicts of law). The parties hereby acknowledge that, except as hereinafter
agreed to in writing, no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of the other party pursuant to
the Mergers until consummation thereof.
Section 10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Signatures to this Agreement are
deemed acceptable by facsimile transmission.
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Section 10.6 Parties in Interest. Subject to the provisions of Section
10.4(c) of this Agreement, this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns and, except as set forth in Section 10.4 of this
Agreement, nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 10.7 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 10.8 Attorneys' Fees. If any action at law or equity, including
an action for declaratory relief; is brought to enforce or interpret any
provision of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and expenses from the other party, which fees and
expenses shall be in addition to any other relief which may be awarded.
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IN WITNESS WHEREOF, Newco, Preview and Portland have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
PREVIEW SYSTEMS, INC.
By /s/ Xxxxxxx Xxxxxxxxx
-----------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer, President
PORTLAND SOFTWARE, INC.
By /s/ Xxxxxx Xxxxxxxx
---------------------
Xxxxxx Xxxxxxxx
Chief Financial Officer
PREVIEW SOFTWARE, INC.
By /s/ Xxxxxxx Xxxxxxxxx
-----------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer, President
PREVIEW ACQUISITION CORP.
By /s/ Xxxxxxx Xxxxxxxxx
-----------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer, President
PORTLAND ACQUISITION CORP.
By /s/ Xx Xxxxxxxx
-----------------
Xx Xxxxxxxx
Chief Financial Officer
