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EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ONDISPLAY, INC.,
OBIONE ACQUISITION CORPORATION
AND
OBERON SOFTWARE INCORPORATED
AND
XXXXXX XXXXXXXX,
AS STOCKHOLDER REPRESENTATIVE
DATED AS OF JANUARY 17, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..........................................................................2
1.1 The Merger.................................................................2
1.2 Effective Time.............................................................2
1.3 Effect of the Merger.......................................................2
1.4 Certificate of Incorporation and Bylaws....................................2
1.5 Directors and Officers.....................................................3
1.6 Effect of Merger on the Capital Stock of the Constituent Corporations......3
1.7 Surrender of Certificates..................................................4
1.8 No Further Ownership Rights in Company Common Stock........................6
1.9 Lost, Stolen or Destroyed Certificates.....................................6
1.10 Tax Consequences...........................................................7
1.11 Lock-up....................................................................7
1.12 Definitions................................................................7
1.13 Taking of Necessary Action; Further Action.................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................9
2.1 Organization of the Company...............................................10
2.2 Company Capital Structure.................................................10
2.3 Authority.................................................................11
2.4 No Conflict...............................................................11
2.5 Consents..................................................................11
2.6 Company Financial Statements..............................................12
2.7 No Undisclosed Liabilities................................................12
2.8 No Changes................................................................12
2.9 Tax Matters...............................................................14
2.10 Restrictions on Business Activities.......................................16
2.11 Title of Properties; Absence of Liens and Encumbrances....................16
2.12 Intellectual Property.....................................................17
2.13 Agreements, Contracts and Commitments.....................................19
2.14 Interested Party Transactions.............................................20
2.15 Governmental Authorization................................................20
2.16 Litigation................................................................21
2.17 Minute Books..............................................................21
2.18 Environmental Matters.....................................................21
2.19 Brokers' and Finders' Fees; Third Party Expenses..........................22
2.20 Employee Benefit Plan and Compensation....................................22
2.21 Insurance.................................................................25
2.22 Compliance with Laws......................................................26
2.23 Representations Complete..................................................26
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................................26
3.1 Organization, Standing and Power..........................................26
3.2 Authority.................................................................26
3.3 Consents..................................................................27
3.4 Parent Common Stock.......................................................27
3.5 Intellectual Property.....................................................27
3.6 Litigation................................................................27
3.7 SEC Reports; Financial Statements.........................................27
3.8 Representations Complete..................................................28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................28
4.1 Conduct of Business of the Company........................................28
4.2 No Solicitation...........................................................31
ARTICLE V ADDITIONAL AGREEMENTS..............................................................31
5.1 Information Statement; Registration Statement; Other Filings..............31
5.2 Access to Information.....................................................33
5.3 Confidentiality...........................................................33
5.4 Expenses..................................................................34
5.5 Public Disclosure.........................................................34
5.6 FIRPTA Compliance.........................................................34
5.7 Reasonable Efforts........................................................34
5.8 Notification of Certain Matters...........................................34
5.9 Additional Documents and Further Assurances...............................35
5.10 S-8 Registration..........................................................35
5.11 Employee Arrangements and Items...........................................35
5.12 Affiliate Agreements......................................................36
5.13 Nasdaq Listing............................................................36
5.14 Indemnification and Insurance.............................................36
5.15 Termination of 401(k) Plan................................................36
5.16 Termination of Severance Plans............................................36
ARTICLE VI CONDITIONS TO THE MERGER...........................................................37
6.1 Conditions to Obligations of Each Party to Effect the Merger..............37
6.2 Conditions to the Obligations of Parent and Sub...........................38
6.3 Conditions to Obligations of the Company..................................39
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW.................................40
7.1 Survival of Representations, Warranties and Covenants.....................40
7.2 Indemnification...........................................................40
7.3 Escrow Arrangements.......................................................40
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7.4 Stockholder Representative................................................46
7.5 Maximum Payments; Remedy..................................................47
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..................................................47
8.1 Termination...............................................................47
8.2 Effect of Termination.....................................................48
8.3 Amendment.................................................................48
8.4 Extension; Waiver.........................................................48
ARTICLE IX GENERAL PROVISIONS.................................................................49
9.1 Notices...................................................................49
9.2 Interpretation............................................................50
9.3 Counterparts..............................................................50
9.4 Entire Agreement; Assignment..............................................50
9.5 Severability..............................................................50
9.6 Other Remedies............................................................50
9.7 Governing Law.............................................................51
9.8 Rules of Construction.....................................................51
9.8 Rules of Construction.....................................................51
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EXECUTION COPY
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of January 17, 2000 by and among OnDisplay, Inc., a Delaware
corporation ("Parent"), ObiOne Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("Sub"), Oberon Software Incorporated, a
Massachusetts corporation (the "Company"), and with respect to Article VII and
Article IX hereof, Xxxxxx Xxxxxxxx (the "Stockholder Representative").
RECITALS
A. The Boards of Directors of each of Parent, Sub and the Company
believe it is in the best interests of each company and its respective
stockholders that Parent acquire the Company through the statutory merger of Sub
with and into the Company (the "Merger") and, in furtherance thereof, have
approved the Merger.
B. Pursuant to the Merger, among other things, (i) all of the issued and
outstanding Company Capital Stock shall be converted into the right to receive
the consideration set forth herein, and (ii) the stock option plans of the
Company and all issued and outstanding options to purchase capital stock of the
Company shall be assumed by the Surviving Corporation with shares of common
stock of Parent being substituted for the shares of capital stock of the Company
issuable thereunder.
C. A portion of the consideration otherwise payable by Parent in
connection with the Merger in respect of outstanding Company Capital Stock shall
be placed in escrow by Parent as security for the indemnification obligations
set forth in this Agreement.
D. Concurrent with the execution and delivery of this Agreement, as a
material inducement to Parent and Sub to enter into this Agreement, certain
stockholders of the Company are entering into Voting Agreements, in the form
attached hereto as Exhibit A (the "Voting Agreements"), with Parent, certain
employees of the Company are entering into Non-Competition Agreements in the
form attached hereto as Exhibit B, and certain other employees of the Company
are entering into Non-Competition Agreements in the form attached hereto as
Exhibit B-1 (together with Exhibit B, the "Non-Competition Agreements").
E. Concurrent with the execution and delivery of this Agreement, as a
material inducement to the Company to enter into this Agreement, certain
stockholders of Parent are entering Parent Voting Agreements in the form
attached hereto as Exhibit C (the "Parent Voting Agreements").
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other
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good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 hereof)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the Commonwealth of
Massachusetts ("Massachusetts Law"), Sub shall be merged with and into the
Company, the separate corporate existence of Sub shall cease and the Company
shall continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. The surviving corporation after the Merger is sometimes referred to
hereinafter as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1 hereof, the closing of the Merger (the "Closing") will take place
as promptly as practicable after the execution and delivery hereof by the
parties hereto, but no later than five (5) business days following satisfaction
or waiver of the conditions set forth in Article VI hereof, at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, Spear Xxxxxx Xxxxx,
Xxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, 00000, unless another time and/or place
is mutually agreed upon in writing by Parent and the Company. The date upon
which the Closing actually occurs shall be referred to herein as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing Articles of Merger (or like instrument) with the Secretary
of the Commonwealth of Massachusetts (the "Articles of Merger"), in accordance
with the applicable provisions of Massachusetts Law (the time of acceptance by
the Secretary of the Commonwealth of Massachusetts of such filing, or such later
time as may be specified in the Articles of Merger, shall be referred to herein
as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Massachusetts Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise agreed to pursuant to the terms of this
Agreement, all the property, rights, privileges, powers and franchises of the
Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, the articles of organization of Sub, as in effect immediately prior to the
Effective Time, shall be the articles of organization of the Surviving
Corporation at the Effective Time until thereafter amended in accordance with
Massachusetts Law and as provided in such articles of organization; provided,
however, that at the Effective Time, Article I of the Articles of Organization
of the Surviving Corporation shall be amended and restated in its entirety to
read as follows: "The name of the corporation is Oberon Software Incorporated."
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(b) Unless otherwise determined by Parent prior to the Effective
Time, the bylaws of Sub immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation at the Effective Time until thereafter
amended in accordance with Massachusetts Law and as provided in the articles of
organization of the Surviving Corporation and such bylaws.
1.5 Directors and Officers.
(a) Unless otherwise determined by Parent prior to the Effective
Time, the directors of Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation immediately after the Effective Time,
each to hold the office of a director of the Surviving Corporation in accordance
with the provisions of Massachusetts Law and the articles of organization and
bylaws of the Surviving Corporation until their successors are duly elected and
qualified.
(b) Unless otherwise determined by Parent prior to the Effective
Time or as otherwise provided herein, the officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
immediately after the Effective Time, each to hold office in accordance with the
provisions of the bylaws of the Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations.
(a) Conversion of Company Capital Stock. At the Effective Time,
each outstanding share of Company Common Stock and Preferred (collectively, the
"Company Capital Stock"), upon the terms and subject to the conditions set forth
below and throughout this Agreement, will be canceled and extinguished and be
converted automatically into the right to receive such number of shares of
Parent Common Stock equal to the Exchange Ratio, upon the terms and subject to
conditions set forth in this Section 1.6 and throughout this Agreement,
including, without limitation, the escrow provisions set forth in Article VII
hereof.
(b) Assumption of Company Plans and Options. As soon as
practicable following the Closing but effective as of the Effective Time, the
Company's 1990 and 1998 Stock Incentive Plans (collectively, the "Plan") and
each Company Option shall be assumed by the Surviving Corporation. Each Company
Option so assumed by Parent pursuant to this Section 1.6(b) shall continue to
have, and be subject to, the same terms and conditions (including vesting terms)
set forth in the Plan, and the option agreements relating thereto, as in effect
immediately prior to the Effective Time, except that (A) such assumed Company
Option will be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, and (B) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient obtained by dividing the
exercise price per share of Company Common Stock at which such assumed Company
Option was exercisable immediately prior to the Closing Date by the Exchange
Ratio, rounded up to the nearest whole cent. Parent will issue to each holder of
an outstanding Company Stock Option a notice describing the foregoing assumption
of such Company Stock Option by Parent. It is intended that Company Stock
Options assumed by the Surviving Corporation shall qualify following the
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Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent Company Stock Options qualified as incentive stock options
immediately prior to the Effective Time and the provisions of this Section
1.6(b) shall be applied consistent with such intent.
(c) Withholding Taxes. Any amounts payable to any Stockholder
pursuant to this Section 1.6 shall be subject to, and reduced by an amount equal
to, the amount of any state, federal and foreign withholding taxes incurred (and
not previously paid by or on behalf of such stockholder of the Company) in
connection with the acquisition of Company Common Stock or Preferred upon the
exercise of Company Options, upon the lapsing of repurchase rights in respect of
shares of Company Common Stock, or upon payment of a bonus in the form of
Company Common Stock, if any, to such stockholder.
(d) Stockholder Loans. In the event that any Stockholder has
outstanding loans from the Company as of the Effective Time, the consideration
payable to such stockholder pursuant to this Section 1.6 shall be reduced by an
amount equal to the outstanding principal plus accrued interest of such
stockholder's loans as of the Effective Time.
(e) Capital Stock of Sub. Each share of common stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Common Stock and Preferred (including Company Common Stock issuable upon
exercise of outstanding Company Options at the Effective Time) who would
otherwise be entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received by such
holder) shall be entitled to receive from Parent an amount of cash (rounded to
the nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the Trading Price.
(g) Sufficient Reserved Shares. Parent will reserve sufficient
shares of Parent Common Stock for issuance under this Section 1.6.
(h) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock or Preferred),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock or Preferred occurring on
or after the date hereof and prior to the Effective Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. The Corporate Secretary of Parent shall serve
as the exchange agent (the "Exchange Agent") for the Merger.
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(b) Parent to Provide Parent Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock and Preferred; provided that, on behalf of the Stockholders, Parent shall
deposit into the Escrow Fund (as defined in Section 7.3(a)) a number of shares
of Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable to the Stockholders pursuant to
Section 1.6. Each Stockholder shall be deemed to have contributed his or her Pro
Rata Portion of the Escrow Amount to the Escrow Fund (as defined in Section
7.3(a) below).
(c) Exchange Procedures. On or promptly after the Effective Time,
the Stockholders will surrender the certificates representing their Company
Common Stock and Preferred (the "Stock Certificates") to the Exchange Agent for
cancellation together with a letter of transmittal in such form and having such
provisions that Parent may reasonably request. Upon surrender of a Stock
Certificate for cancellation to the Exchange Agent, or such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
subject to the terms of Section 1.7(f) hereof, the holder of such Stock
Certificate shall be entitled to receive from the Exchange Agent in exchange
therefor a certificate representing the number of whole shares of Parent Common
Stock (less the number of shares of Parent Common Stock to be deposited in the
Escrow Fund on such holder's behalf pursuant to Section 1.7(b) above and Article
VII hereof), and the Stock Certificate so surrendered shall be canceled. Until
so surrendered, each outstanding Stock Certificate will be deemed from and after
the Effective Time, and for all corporate purposes, to evidence only the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Common Stock and Preferred shall have been so converted.
(d) Dissenting Stockholders.
(i) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock or Preferred held by a holder who,
immediately prior to the Effective Time, acting in accordance with Sections 86
to 98 of Chapter 156B of the Massachusetts Law, (i) prior to the special meeting
at which the Stockholders vote to approve the Merger (the "Special Meeting") has
delivered to the Company written notice of his intention to demand payment for
his shares of Company Common Stock or Preferred if the Merger is effectuated and
(ii) has not voted in favor of the Merger, shall not have his shares of Company
Common Stock or Preferred converted into a right to receive shares of Parent
Common Stock. If, however, after the Effective Time such holder withdraws or
loses his right to demand payment for his Company Common Stock or Preferred,
such Company Common Stock or Preferred shall be treated as if it had been
converted as of the Effective Time and (i) as of the occurrence of such event,
such holder's Company Common Stock or Preferred shall treated as if it had been
converted as of the Effective Time into the right to receive that number of
shares of Parent Common Stock as is set forth Section 1.6 hereof, and (ii)
promptly following the occurrence of such event, the Parent shall deliver to the
Exchange Agent a certificate representing 90% of the shares of Parent Common
Stock to which such holder is entitled pursuant to Section 1.6(a) and shall
deliver to the Escrow Agent a certificate representing the remaining 10% of the
shares of Parent Common Stock to which such holder is entitled pursuant to
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Section 1.6(a) (which shares shall be considered part of the Escrow Fund for all
purposes of this Agreement).
(ii) The Company shall give the Parent (i) prompt notice
of any written demands for payment of any Company Common Stock or Preferred,
withdrawals of such demands, and any other instruments that relate to such
demands received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
Massachusetts Law. The Company shall not, except with the prior written consent
of Parent, make any payment with respect to any demands for appraisal of Company
Common Stock or Preferred or offer to settle or settle any such demands.
(e) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Stock Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Stock Certificate shall surrender such Stock Certificate. Subject to
applicable law, following surrender of any such Stock Certificate, there shall
be paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock.
(f) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance and/or delivery thereof that the certificate so
surrendered will be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange will have paid to Parent or any
agent designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 1.7 hereof, neither the Exchange Agent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Company Common
Stock or Preferred for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. The shares of
Parent Common Stock paid in respect of the surrender for exchange of shares of
Company Common Stock and Preferred in accordance with the terms hereof, shall be
deemed to be full satisfaction of all rights pertaining to such shares of
Company Common Stock and Preferred, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Common Stock and Preferred which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock/Preferred shall have been
lost, stolen or destroyed, the Exchange Agent
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shall issue in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof, such amount, if
any, as may be required pursuant to Section 1.6 hereof; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the stockholder who is the owner of such lost, stolen or
destroyed certificates to deliver a bond in such amount as it may reasonably
direct against any claim that may be made against Parent or the Exchange Agent
with respect to the certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
1.11 Lock-up. Each share of Parent Common Stock constituting Merger
Shares may not be sold, transferred, hypothecated, pledged or otherwise
transferred, without the prior written consent of Parent, prior to the earlier
of (i) July 18, 2000 or (ii) the date on which any holders of Parent Common
Stock that executed agreements with Fleet Boston, Xxxxxxxxx Xxxxxxxx, Inc.,
Deutsche Bank AG, London Alex. Xxxxx and Society General S.A. in connection with
the initial public offering of the Parent Common Stock are permitted to sell
shares of Parent Common Stock in an offering or otherwise. Parent may, in its
sole discretion, legend the Merger Shares to give effect to this Section 1.11
and place stop transfer instructions with Parent's stock transfer agent to
enforce this Section 1.11.
1.12. Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"Company Common Stock" shall mean shares of common stock, $.01
par value, of the Company.
"Company Material Adverse Effect" shall mean, for purposes of
this Agreement, any change, event or effect that is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise) or results of operations of the Company and its subsidiaries, taken
as a whole except for those changes, events and effects that are caused by (i)
conditions affecting the United States economy as a whole, (ii) conditions
affecting the industry in which Company competes as a whole, (iii) conditions
resulting from the announcement or the pendency of the Merger, or (iv) actions
that the Parent may take or not take in response to requests made by the Company
for permission to take actions prohibited by, or to refrain from taking actions
required by, Section 4.1.
"Company Options" shall mean all issued and outstanding options,
warrants or other rights to purchase or otherwise acquire Company Common Stock
(whether or not vested) held by any person or entity.
"Escrow Agent" means a financial institution selected by Parent
and reasonably acceptable to the Company to act hereunder as escrow agent.
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"Escrow Amount" shall mean, with respect to each Stockholder, an
amount of Parent Common Stock equal to ten (10%) percent of the Merger Shares
issued to such Stockholder pursuant to Section 1.6.
"Estimated Third Party Expenses" shall mean the amount of Third
Party Expenses (as defined in Section 5.4) payable by the Company estimated by
the Company in good faith and based on reasonable assumptions of the Closing
Date.
"Exchange Ratio" shall mean an amount equal to the quotient
obtained by dividing (x) the Merger Shares, by (y) the Total Outstanding Shares.
"GAAP" shall mean United States generally accepted accounting
principles consistently applied.
"Knowledge" shall mean with respect to the Company, the knowledge
of the Company's officers, directors and other managers, provided that such
persons shall have made due and diligent inquiry of those employees and contract
workers of the Company whom such officers, directors and managers reasonably
believe would have actual knowledge of the matters represented.
"Merger Shares" shall mean the number of shares of Parent Common
Stock equal to the quotient of (x) the Total Consideration divided by (y) the
Trading Price.
"Parent Common Stock" shall mean registered shares of common
stock, par value $0.001 per share, of Parent.
"Parent Material Adverse Effect" shall mean, for purposes of this
Agreement, any change, event or effect that is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise) or results of operations of Parent and its subsidiaries, taken as a
whole (except for those changes, events and effects that are caused by (i)
conditions affecting the United States economy as a whole, (ii) conditions
affecting the industry in which Parent competes as a whole, (iii) conditions
resulting from the announcement or the pendency of the Merger, (iv) or any
decline in Parent's stock price).
"Parent Option" shall mean any option to purchase shares of
Parent Common Stock issued pursuant to the terms of Section 1.6(e) hereof in
connection with the assumption of a Company Option.
"Preferred" shall mean the Series 1 Participating Convertible
Preferred Stock, $0.01 par value and the Series 2, Non-Participating Convertible
Preferred Stock, $0.01 par value, of the Company.
"Pro Rata Portion" shall mean with respect to each Stockholder an
amount equal to the quotient obtained by dividing (x) the number of shares of
Company Common Stock owned by such Stockholder as of the Effective Time,
including shares of Company Common Stock obtainable upon conversion of the
Preferred by (y) the aggregate number of shares of Company Common Stock owned by
all Stockholders as of the Effective Time, including all shares of Company
Common
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Stock obtainable upon conversion of all Preferred issued and outstanding
immediately prior to the Effective Time.
"Retention Options" means up to 680,789 options to be granted,
unless otherwise determined by Parent, to the persons indicated, and in the
amounts indicated on Exhibit D-1 hereto which options shall (i) be granted under
the Company's 1998 Stock Incentive Plan, (ii) shall have no acceleration or
similar provisions (other than acceleration upon a change of control of Parent),
(iii) 25% of which shall vest on the one-year anniversary of the Effective Time
and the remainder quarterly over the ensuing 36 months following such one-year
anniversary, (iv) shall have an exercise price of not less than $2.50 per share
and (v) which shall be otherwise in form and substance satisfactory to Parent.
"Stockholder" shall mean each holder of any Company Common Stock
and Preferred immediately prior to the Effective Time.
"Total Consideration" shall be an amount equal to (x)
$200,000,000 less the amount, if any, by which the Estimated Third Party
Expenses exceed $750,000 plus an amount equal to the exercise price of all
unexercised Company options, warrants and conversion of Comdisco debt referred
to in the Company Disclosure Schedule immediately prior to the Effective Time
(excluding the Retention Options).
"Total Outstanding Shares" shall be the sum of (i) the aggregate
number of shares of Company Common Stock (including any other rights convertible
into, or exercisable or exchangeable for, shares of Company Common Stock on an
as-converted, exercised or exchanged basis including, without limitation, the
Preferred) issued and outstanding immediately prior to the Effective Time, and
(ii) the aggregate number of shares of Company Common Stock issued or issuable
upon the exercise of all Company Options and warrants outstanding immediately
prior to the Effective Time, whether vested or unvested, but excluding the
Retention Options.
"Trading Price" shall mean $91.5750.
1.13 Taking of Necessary Action; Further Action. If at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent, Sub, and the officers and directors of
the Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject to
such exceptions as are specifically disclosed in the disclosure letter
(referencing the appropriate section and paragraph numbers) supplied by the
Company to Parent (the "Company Disclosure Schedule") and
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dated as of the date hereof, that on the date hereof and (except as otherwise
noted) as of the Effective Time as though made at the Effective Time as follows.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Company has the corporate power to own its
properties and to carry on its business as currently conducted and as currently
contemplated to be conducted. The Company is duly qualified or licensed to do
business and in good standing as a foreign corporation in each jurisdiction in
which it conducts business except where the failure to so qualify would not have
a Company Material Adverse Effect. The Company has delivered a true and correct
copy of its articles of organization and bylaws, each as amended to date and in
full force and effect on the date hereof, to Parent. The operations now being
conducted by the Company are not now and have never been conducted by the
Company under any other name.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, of which 6,368,812 shares are issued and
outstanding as of the date hereof and 31,000,000 shares of Preferred of which
14,219,598 shares are issued and outstanding as of the date hereof. The Company
Common Stock and Preferred are held by the persons and in the amounts set forth
in Section 2.2(a) of the Company Disclosure Schedule. All outstanding shares of
Company Common Stock and Preferred are duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights created by statute,
the articles of organization or bylaws of the Company, and were issued free of
any similar rights under any agreement to which the Company is a party or by
which it is bound, and have been issued in compliance with federal and state
securities laws. There are no declared or accrued but unpaid dividends with
respect to any shares of Company Common Stock or Preferred. The Company has no
other capital stock authorized, issued or outstanding.
(b) Except for the Plan, the Company has never adopted or
maintained any stock option plan or other plan providing for equity compensation
of any person. The Company has reserved 3,764,689 shares of Company Common Stock
for issuance to employees, contract workers and directors of, and consultants
to, the Company upon the exercise of options granted under the Plan, of which
3,058,400 shares are issuable, as of the date hereof, upon the exercise of
outstanding, unexercised options granted under the Plan. Section 2.2(b) of the
Company Disclosure Schedule sets forth for each outstanding Company Option, the
name of the holder of such option and the number of shares of Company Common
Stock issuable upon the exercise of such option, the exercise price of such
option, the vesting schedule for such option, including the extent vested to
date and whether the vesting of such option will be accelerated by the
transactions contemplated by this Agreement, and whether such option is intended
to qualify as an incentive stock option as defined in Section 422 of the Code.
Except for the Company Options, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, otherwise
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amend or enter into any such option, warrant, call, right, commitment or
agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the
Company. Except as contemplated hereby, there are no voting trusts, proxies, or
other agreements or understandings with respect to the voting stock of the
Company.
2.3 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and any Related Agreements (as
hereinafter defined in this Section 2.3) to which it is a party and to
consummate the transactions contemplated hereby and thereby, subject to approval
of this Agreement and the Merger by the Stockholders. The execution and delivery
of this Agreement and any Related Agreements to which the Company is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company,
and no further action is required on the part of the Company to authorize the
Agreement and any Related Agreements to which it is a party and the transactions
contemplated hereby and thereby, subject only to the approval of this Agreement
and the Merger by the Stockholders. This Agreement and the Merger have been
unanimously approved by the Board of Directors of the Company. This Agreement
and each of the Related Agreements to which the Company is a party has been duly
executed and delivered by the Company and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. For all purposes of this
Agreement, the term "Related Agreements" shall mean the Voting Agreements and
the Articles of Merger.
2.4 No Conflict. The execution and delivery by the Company of this
Agreement and any Related Agreement to which the Company is a party, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation of or default under (with or without
notice or lapse of time, or both) or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the articles
of organization or bylaws of the Company, (ii) any mortgage, indenture, lease,
contract, covenant or other agreement, instrument or commitment, permit,
concession, franchise or license to which the Company or any of its properties
or assets (including intangible assets), is subject, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties (tangible and intangible) or assets except with
respect to such conflicts, violations or defaults, in the case of clauses (ii)
and (iii), that would not in the aggregate have a Company Material Adverse
Effect.
2.5 No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission (each, a "Governmental Entity")
or any third party, including a party to any agreement with the Company (so as
not to trigger any Conflict), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement and any Related
Agreement to which the Company is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) orders,
authorizations, registrations, declarations and filings as may be required under
applicable
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securities laws, (ii) the filing of the Articles of Merger with the
Secretary of the Commonwealth of the Commonwealth of Massachusetts, and (iii)
such other consents, waivers, approvals, orders, authorizations, registrations,
declarations or filings which if not obtained or made would not have a Company
Material Adverse Effect or otherwise have a material adverse effect on the
ability of the parties to consummate the Merger.
2.6 Company Financial Statements. The Company has provided to Parent its
balance sheet as of December 31, 1999 (the "Current Balance Sheet"), and the
related unaudited statements of income, cash flow and stockholders' equity for
the periods then ended (the "Financials"). The Financials are correct in all
material respects and have been prepared in accordance with GAAP consistently
applied on a basis consistent throughout the periods indicated and consistent
with each other (except that such financials do not contain footnotes and other
presentation items that may be required by GAAP). The Financials present fairly
the financial condition, operating results and cash flows of the Company as of
the dates and during the periods indicated therein.
2.7 No Undisclosed Liabilities. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
that are required to be reflected in financial statements in accordance with
GAAP, except for liabilities (i) reflected in the Financials, or (ii)
liabilities that have arisen in the ordinary course of business consistent with
past practices since December 31, 1999.
2.8 No Changes. Since September 30 ,1999 there has not been, occurred or
arisen any:
(a) amendments or changes to the articles of organization of the
Company;
(b) amendments or changes to the bylaws of the Company;
(c) payment, discharge or satisfaction, in any amount in excess
of $25,000 in any one case, or $100,000 in the aggregate, of any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than payment, discharge or satisfaction in the ordinary
course of business;
(d) destruction of, damage to or loss of any material assets,
material business or material customer of the Company (whether or not covered by
insurance);
(e) claim of wrongful discharge or other unlawful labor practice
or action or any attempt to unionize employees;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company other
than as required by GAAP;
(g) change in any material election in respect of Taxes (as
defined below), adoption or change in any accounting method in respect of Taxes,
agreement or settlement of any claim or assessment in respect of Taxes, or
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
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(h) revaluation by the Company of any of its assets;
(i) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any Company
Common Stock or Preferred, or any split, combination or reclassification in
respect of any shares of Company Common Stock or Preferred, or any issuance or
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of Company Common Stock or Preferred, or any
direct or indirect repurchase, redemption, or other acquisition by the Company
of any shares of Company Common Stock or Preferred (or options, warrants or
other rights convertible into, exercisable or exchangeable therefor), except for
the issuance of Company Options set forth in Section 2.2(b) of the Company
Disclosure Schedule or issuance of shares of Company Common Stock in accordance
with the agreements evidencing Company Options;
(j) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees,
contract workers or advisors, or the declaration, payment or commitment or
obligation of any kind for the payment by the Company of a severance payment,
termination payment, bonus or other additional salary or compensation to any
such person;
(k) other than in the ordinary course of business (which shall
exclude exclusive licenses or arrangements) entered into any agreement,
contract, covenant, instrument, lease, license or commitment to which the
Company is a party or by which it or any of its assets (including intangible
assets) are bound or permitted any termination, extension, amendment or
modification the terms of any agreement, contract, covenant, instrument, lease,
license or commitment to which the Company is a party or by which it or any of
its assets are bound;
(l) sale, lease, license (outside of the ordinary course of
business) or other disposition of any of the material assets or material
properties of the Company or any creation of any security interest in such
material assets or material properties;
(m) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees or contract workers
for travel and business expenses in the ordinary course of business consistent
with past practices;
(n) waiver or release of any material right or claim of the
Company, including any write-off of any account receivable of the Company;
(o) commencement, settlement, receipt of written notice of, or to
the Knowledge of the Company threat of, any lawsuit or proceeding or other
investigation against the Company or its affairs, or any reasonable basis for
any of the foregoing;
(p) notice of any claim or potential claim of ownership by any
person other than the Company of the Company Intellectual Property (as defined
in Section 2.12 hereof) owned by or
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developed or created by the Company or of infringement by the Company of any
other persons Intellectual Property (as defined in Section 2.12 hereof);
(q) issuance or sale, or contract to issue or sell, by the
Company of any shares of Company Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Company Common Stock, or any
securities, warrants, options or rights to purchase any of the foregoing, except
for issuance of Company Common Stock upon the exercise thereof;
(r) other than in the ordinary course of business (which shall
exclude exclusive licenses, distribution or similar agreements) (i) sale or
licenses of any Company Intellectual Property or entering into of any agreement
with respect to the Company Intellectual Property with any person or entity or
with respect to the intellectual property of any person or entity, or (ii)
purchase or license of any intellectual property or enter into of any agreement
with respect to the intellectual property of any person or entity, (iii)
agreement with respect to the development of any intellectual property with a
third party, or (iv) taken any action prohibited under Section 4.1(b)(iii);
(s) agreement or modification to any agreement pursuant to which
any other party was granted marketing, distribution or similar rights of any
type or scope with respect to any products or technology of the Company outside
of the ordinary course of business;
(t) any Company Material Adverse Effect; or
(u) agreement by the Company or any officer or employee on behalf
of the Company to do any of the things described in the preceding clauses (a)
through (t) of this Section 2.8 (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
2.9 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, the
term "Tax" or, collectively, "Taxes" shall mean (i) any and all federal, state,
local and foreign taxes and other assessments, governmental charges, duties,
impositions and liabilities in the nature of a tax, including taxes based upon
or measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts, (ii) any liability for the
payment of any amounts of the type described in clause (i) of this Section
2.9(a) as a result of being a member of an affiliated, consolidated, combined or
unitary group for any period, and (iii) any liability for the payment of any
amounts of the type described in clauses (i) or (ii) of this Section 2.9(a) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits.
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(i) As of the Effective Time, the Company will have timely
filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns are
true and correct in all material respects and have been completed in all
material respects in accordance with applicable law.
(ii) As of the Effective Time, the Company (A) will have
paid all Taxes it is required to pay and will have withheld with respect to its
employees and contract workers all federal and state income taxes, Federal
Insurance Contribution Act ("FICA"), Federal Unemployment Tax Act ("FUTA") and
other Taxes required to be withheld, and (B) will have accrued on the Current
Balance Sheet all unpaid Taxes attributable to the periods preceding the date of
the Current Balance Sheet and will not have incurred any liability for Taxes for
the period commencing on the date of the Current Balance Sheet and ending
immediately prior to the Effective Time, other than in the ordinary course of
business.
(iii) The Company has not been materially delinquent in
the payment of any Tax, nor is there any Tax deficiency outstanding, assessed or
proposed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax, which waiver remains in effect.
(iv) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company has no liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved on the
Financials, whether asserted or unasserted, contingent or otherwise, and the
Company has not incurred any liability for Taxes since the date of the
Financials other than in the ordinary course of business.
(vi) The Company has made available to Parent or its legal
counsel, copies of all foreign, federal, state and local income and all state
and local sales and use Returns for the Company filed for all periods since the
taxable year ended December 31, 1997.
(vii) There are (and immediately following the Effective
Time there will be) no material liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes other than Liens for Taxes not yet due and payable.
(viii) Neither the Company nor any Principal Stockholder
has Knowledge of any assertion of any claim relating or attributable to Taxes
which, if adversely determined, would result in any material Lien on the assets
of the Company.
(ix) None of the Company's assets is treated as
"tax-exempt use property," within the meaning of Section 168(h) of the Code.
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(x) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xi) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement.
(xii) The Company is not, and has not been at any time
during the period specified in Section 897(c)(1)(A)(ii), a "United States Real
Property Holding Corporation" within the meaning of Section 897(c)(2) of the
Code.
(xiii) No adjustment relating to any Return filed by the
Company has been proposed formally or, to the Knowledge of the Company,
informally by any Tax authority to the Company or any representative thereof.
(c) Executive Compensation Tax. There is no contract, agreement,
plan or arrangement to which the Company is a party, including, without
limitation, the provisions of this Agreement, covering any employee, former
employee or contract worker of the Company, which, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code.
(d) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
2.10 Restrictions on Business Activities. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
may reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company, or the conduct of business by the Company or
otherwise limiting the freedom of the Company to engage in any line of business
or to compete with any person. Without limiting the generality of the foregoing,
the Company has not entered into any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market.
2.11 Title of Properties; Absence of Liens and Encumbrances. The Company
owns no real property, nor has it ever owned any real property. The Company has
good and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except (i) as reflected in the Current Balance Sheet, (ii) Liens for
Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, which do not materially detract from the value or
interfere with the present use of the property subject thereto or affected
thereby.
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2.12 Intellectual Property.
(a) All patents (including, without limitation, all U.S. and
foreign patents, patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues, re-examinations and
extensions thereof), design rights, trademarks, trade names and service marks
(whether or not registered), trade dress, Internet domain names, copyrights
(whether or not registered) and any renewal rights therefor, sui generis
database rights, statistical models, technology, inventions, supplier lists,
trade secrets, know-how, computer software programs or applications in both
source and object code form, databases, technical documentation of such software
programs ("Technical Documentation"), registrations and applications for any of
the foregoing and all other tangible or intangible proprietary information or
materials that are or have been used in (including, without limitation, in the
development of) Company's business and/or in any product, technology or process
(i) currently being or formerly manufactured, published or marketed by Company
or (ii) previously or currently under development for possible future
manufacturing, publication, marketing or other use by Company are hereinafter
referred to as the "Company Intellectual Property."
(b) The Company Disclosure Schedule contains a true and complete
list of Company's patents, patent applications, trademarks, trademark
applications, trade names, service marks, service xxxx applications, Internet
domain names, copyright registrations and applications and other filings and
formal actions made or taken pursuant to Federal, state, local and foreign laws
by Company to protect its interests in Company Intellectual Property, and
includes details of all due dates for further filings, maintenance, payments or
other actions falling due in respect of Company Intellectual Property within
twelve (12) months of the Effective Time. All of Company's patents, patent
applications, registered trademarks, and trademark applications, and registered
copyrights remain in good standing with all fees and filings due as of the
Effective Time duly made and the due dates specified in the Company Disclosure
Schedule are accurate and complete.
(c) Company Intellectual Property contains only those items and
rights which are: (i) owned by Company; (ii) in the public domain; or (iii)
rightfully used by Company pursuant to a valid and enforceable license (the
"Company Licensed Intellectual Property"), the parties, date, term and subject
matter of each such license agreement (each, a "License Agreement") being set
forth on Section 2.12(c) of the Company Disclosure Schedule. Company has all
rights in Company Intellectual Property necessary to carry out Company's current
activities (and had all rights necessary to carry out its former activities at
the time such activities were being conducted), including without limitation, to
the extent required to carry out such activities, rights to use, and, other than
with respect to Company Licensed Intellectual Property, make, reproduce, modify,
adopt, create derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent and lease
assign and sell, Company Intellectual Property.
(d) To Company's knowledge, the reproduction, manufacturing,
distribution, licensing, sublicensing, and/or sale of Company's products and
services does not infringe on any patent, design right, trademark, trade name,
service xxxx, trade dress, Internet domain name, copyright, database, trade
secret, know-how, computer software program or application of any person,
anywhere in the world. Other than with respect to claims made against licensors
of
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Company Licensed Intellectual Property no claims (i) challenging the validity,
effectiveness or ownership by Company of any Company Intellectual Property, or
(ii) to the effect that the use, distribution, licensing, sublicensing, sale or
any other exercise of rights in any product, work, technology or process as now
used or offered or proposed for use, licensing, sublicensing or sale by the
Company or its agents or use by its customers and/or sale or any of Company's
products or services, infringes or will infringe on any intellectual property or
other proprietary or personal right of any person, have been asserted or, to the
knowledge of Company, are threatened by any person, nor are there, to Company's
knowledge, any valid grounds for any bona fide claim of any such kind. All of
the rights within Company Intellectual Property are enforceable and subsisting.
To the knowledge of Company, other than with respect to Company Licensed
Intellectual Property, there is no unauthorized use, infringement or
misappropriation of any Company Intellectual Property by any third party,
employee, former employee or contract worker.
(e) All personnel, including employees, contract worker, agents,
consultants and contractors, who have contributed to or participated in the
conception and development of Company Intellectual Property on behalf of
Company, have executed nondisclosure agreements in substantially the form set
forth on the Company Disclosure Schedule and either (i) have been a party to an
enforceable "work-for-hire" arrangement or agreements with Company in accordance
with applicable national and state law that has accorded Company full,
effective, exclusive and original ownership of all tangible and intangible
property thereby arising, or (ii) have executed appropriate instruments of
assignment in favor of Company as assignee that have conveyed to Company
effective and exclusive ownership of all tangible and intangible property
thereby arising.
(f) Company is not, nor as a result of the execution or delivery
of this Agreement, or performance of Company's obligations hereunder, will
Company be, in violation of any license, sublicense, agreement or instrument to
which Company is a party or otherwise bound, nor, except as provided in Section
2.12 (f) of the Company Disclosure Schedule will execution or delivery of this
Agreement, or performance of Company's obligations hereunder, cause the
diminution, termination or forfeiture of any Company Intellectual Property.
(g) Section 2.12(g) of the Company Disclosure Schedule contains a
true and complete list of all of software programs developed by Company for
distribution to its customers (the "Company Software Programs"). To the
knowledge of the Company, Company owns full and unencumbered right and good,
valid and marketable title to such the Company Software Programs free and clear
of all mortgages, pledges, liens, security interests, conditional sales
agreements, encumbrances or charges of any kind.
(h) The source code and system documentation relating to the
Company Software Programs (i) have at all times been maintained in strict
confidence, (ii) have been disclosed by Company only to employees or contract
workers who have a "need to know" the contents thereof in connection with the
performance of their duties to Company and who have executed the nondisclosure
agreements referred to in this Section 2.12, and (iii) have not been disclosed
to any third party.
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(i) Company has taken all reasonable steps, in accordance with
normal industry practice, to preserve and maintain complete notes and records
relating to Company Intellectual Property to cause the same to be readily
understood, identified and available.
(j) The Company Software Programs distributed to Customers of
Company (i) have been designed to ensure year 2000 compatibility, which
includes, but is not limited to, date data century recognition, and calculations
that accommodate same century and multi-century formulas and date values; (ii)
operate and will operate in substantial accordance with their specifications
prior to, during and after the calendar year 2000 AD; and (iii) shall not end
abnormally or provide invalid or incorrect results as a result of properly
entered and formatted date data, specifically including date data which
represents or references different centuries or more than one century.
(k) The Company Intellectual Property is free and clear of any
and all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges of any kind.
(l) Except as set forth in the Company Disclosure Schedule, the
Company does not owe any royalties or other payments to third parties in respect
of Company Intellectual Property. All royalties or other payments set forth in
the Company Disclosure Schedule that have accrued prior to the Effective Time
have been paid.
(m) To the Company's knowledge, the Company Software Programs and
other Company Intellectual Property contain no "viruses." For the purposes of
this Agreement, "virus" means any computer code intentionally designed to
disrupt, disable or harm in any manner the operation of any software or
hardware. None of the foregoing contains any worm, bomb, backdoor, clock, timer,
or other disabling device code, design or routine which causes the software to
be erased, inoperable, or otherwise incapable of being used, either
automatically or upon command by any party.
(n) The Company has implemented all reasonable steps which are
known in the information systems industry and in accordance with normal industry
practice in the physical and electronic protection of its information assets
from unauthorized disclosure, use or modification. Section 2.12(n) of the
Company Disclosure Schedule sets forth (i) each breach of security of which
Company is aware, (ii) its known consequences, and (iii) the steps Company has
taken to remedy such breach.
2.13 Agreements, Contracts and Commitments. Set forth on Section 2.13 of
the Company Disclosure Schedule is a list or description of each of the
following to which the Company is a party (each, a "Company Contract" and
collectively the "Company Contracts"):
(i) any employment or consulting agreement, contract or
commitment with an employee, contract worker or consultant or salesperson;
(ii) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan
(other than the Plan), any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence
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of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having rent in excess
of $10,000;
(v) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000
individually or $20,000 in the aggregate;
(vi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(vii) any mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit;
(viii) any purchase order or contract for the purchase of
materials involving in excess of $2,500 individually or $10,000 in the
aggregate;
(ix) any construction contracts;
(x) any dealer, distribution, joint marketing or
development agreement;
(xi) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software vendor
or other agreement for use or distribution of the Company's products, technology
or services; or
(xii) any other agreement, contract or commitment that
involves $10,000 individually or $500,000 in the aggregate or more and is not
cancelable without penalty within thirty (30) days.
Each Company Contract is in full force and effect. Neither the Company
nor to the Company's Knowledge, any other party to a Company Contract, is in
breach, violation or default under, and the Company has not received notice that
it has breached, violated or defaulted under, any of the material terms or
conditions of any Company Contract in such a manner as would permit any other
party to cancel or terminate any such Company Contract, or would permit any
other party to seek damages, which would be reasonably likely to exceed $50,000
(for any or all of such breaches, violations or defaults, in the aggregate).
2.14 Interested Party Transactions. No officer, director or, to the
Knowledge of the Company, Stockholder of the Company (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) an interest in any entity which furnished or
sold, or furnishes or sells, services, products or technology that the Company
furnishes or sells, or proposes
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to furnish or sell, or (ii) any interest in any entity that purchases from or
sells or furnishes to the Company, any goods or services, or (iii) a beneficial
interest in any Contract to which the Company is a party; provided, however,
that ownership of no more than one percent (1%) of the outstanding voting stock
of a publicly traded corporation shall not be deemed to be an "interest in any
entity" for purposes of this Section 2.14.
2.15 Governmental Authorization. Each consent, license, permit, grant or
other authorization from any Governmental Authority (i) pursuant to which the
Company currently operates or holds any interest in any of its properties, or
(ii) which is required for the operation of the Company's business as currently
conducted or currently contemplated to be conducted or the holding of any such
interest (collectively, "Company Authorizations") has been issued or granted to
the Company. The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company to operate
or conduct its business or hold any interest in its properties or assets, except
for those the failure of which to hold would not have a Company Material Adverse
Effect.
2.16 Litigation. There is no action, suit, claim or proceeding of any
nature pending, or to the Knowledge of the Company threatened, against the
Company, its properties (tangible or intangible) or any of its officers or
directors, nor to the Knowledge of the Company is there any reasonable basis
therefor. There is no investigation or other proceeding pending or to the
Knowledge of the Company threatened, against the Company, any of its properties
(tangible or intangible) or any of their officers or directors by or before any
Governmental Entity, nor to the Knowledge of the Company is there any reasonable
basis therefor. No Governmental Entity has at any time challenged or questioned
the legal right of the Company to conduct its operations as presently or
previously conducted or as presently contemplated to be conducted.
2.17 Minute Books. The minutes of the Company made available to counsel
for Parent are the only minutes of the Company and contain materially complete
summaries of all meetings of the Board of Directors (or committees thereof) of
the Company and its stockholders or actions by written consent since the time of
incorporation of the Company.
2.18 Environmental Matters. Except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect,
(i) the Company is in compliance with all applicable Environmental Laws and all
Company Permits required by Environmental Laws; (ii) all past noncompliance of
the Company with Environmental Laws or Environmental Permits has been resolved
without any pending, ongoing or future obligation, cost or liability; and (iii)
the Company has not released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by the Company, in violation of any Environmental Law. For purposes of
this Agreement, "Environmental Law" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Material, as in effect as
of the date hereof. "Environmental Permit" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any
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applicable Environmental Law. "Hazardous Material" shall mean (i) any petroleum,
petroleum products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except for fees
payable to SoundView Technology Group, Inc., the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with the
Agreement or any transaction contemplated hereby. Section 2.19 of the Company
Disclosure Schedule sets forth the Company's current estimate of all Third Party
Expenses (as defined in Section 5.4 hereof) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Benefit Plan and Compensation.
(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code, and the regulations issued thereunder.
"Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other material arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"DOL" shall mean the United States Department of Labor.
"Employee" shall mean any current or former employee, contract
worker, consultant or director of the Company or any Affiliate.
"Employment Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, or contract between the Company or any Affiliate and
any Employee other than a Company Employee Plan.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"FMLA" shall mean the Family Medical Leave Act of 1993, as
amended.
"International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by the Company or any Affiliate,
whether informally or formally, or with respect to which the Company or any
Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States.
"IRS" shall mean the United States Internal Revenue Service.
"Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA.
"Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Section 2.20(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Company Employee Plan,
International Employee Plan, and each Employment Agreement under each Company
Employee Plan or Employment Agreement. The Company has no plan or commitment to
establish any new Company Employee Plan, International Employee Plan, or
Employee Agreement, to modify any Company Employee Plan or Employment Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employment Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan, International Employee
Plan or Employment Agreement.
(c) Documents. The Company has made available to Parent (i)
correct and complete copies of all documents embodying each Company Employee
Plan, International Employee Plan, and each Employment Agreement including,
without limitation, all amendments thereto and all related trust documents, (ii)
the three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan, (iii) if the Company Employee
Plan is funded, the most recent annual and periodic accounting of Company
Employee Plan assets, (iv) the most recent summary plan description together
with the summary(is) of material modifications thereto, if any, required under
ERISA with respect to each Company Employee Plan, (v) all material written
agreements and contracts relating to each Company Employee Plan, including,
without limitation, administrative service agreements and group insurance
contracts, (vi) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plan, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any liability to the Company, (vii) all
correspondence to or from any governmental agency relating to any Company
Employee Plan, (viii) all COBRA forms and related notices, (ix) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Company Employee Plan, (x) the three (3) most recent plan years discrimination
tests for each Company Employee Plan, and (xi) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses prepared
in connection with each Company Employee Plan.
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(d) Employee Plan Compliance. The Company has performed in all
material respects all obligations required to be performed by it under, is not
in material default or violation of, and has no Knowledge of any default or
violation by any other party to each Company Employee Plan, and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code.
Each Company Employee Plan intended to qualify under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination, opinion, notification or advisory letter
from the IRS with respect to each such Company Employee Plan as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Company Employee Plan. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan which would
result in material liability to the Company. There are no actions, suits or
claims pending, or to the Knowledge of the Company and the Principal
Stockholders threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan that could reasonably be expected to result in material liability.
Each Company Employee Plan (other than any stock option plan) can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to Parent, the Company or any Affiliate (other than
ordinary administration expenses and already accrued benefits). There are no
audits, inquiries or proceedings pending or to the Knowledge of the Company and
the Principal Stockholders or any Affiliates, threatened by the IRS or DOL with
respect to any Company Employee Plan. Neither the Company nor any Affiliate is
subject to any material penalty or tax with respect to any Company Employee Plan
under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) No Pension Plan. Neither the Company nor any other Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any (i) Pension Plan subject to Title IV of ERISA or Section 412 of the Code
(f) Collectively Bargained, Multiemployer and Multiple Employer
Plans. At no time has the Company or any Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan. Neither the Company, nor any
Affiliate has at any time ever maintained, established, sponsored, participated
in, or contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) or any other
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person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(g) Health Care Compliance. Neither the Company nor any Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(h) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employment Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
expressly required by this Agreement.
(i) Employment Matters. The Company: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees, including all applicable laws of foreign jurisdictions where the
Company has Employees; (ii) has withheld and reported all amounts required by
law or by agreement to be withheld and reported with respect to wages, salaries
and other payments to Employees, (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing, and
(iv) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending, or
to the Knowledge of the Company threatened, claims or actions against the
Company under any worker's compensation policy or long-term disability policy.
(j) International Employee Plan. Each International Employee Plan
has been established, maintained and administered in compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan at any time for any
reason without liability to the Company, the Parent or its Affiliates (other
than ordinary administration expenses or routine claims for benefits).
2.21 Insurance. The Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, contract workers, officers and directors of the Company or any
Affiliate. There is no claim by the Company or any Affiliate
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pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid,
and the Company and its Affiliates are otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Company has no Knowledge of
threatened termination of, or premium increase with respect to, any of such
policies.
2.22 Compliance with Laws. The Company has complied with and is not in
violation of any foreign, federal, state or local statute, law or regulation
except when the failure to comply would not have a Company Material Adverse
Effect. The Company has not received any notices of violation with respect to
any such statute, law or regulation.
2.23 Representations Complete. Neither any of the representations or
warranties made by the Company (as modified by the Company Disclosure Schedule)
in this Agreement, contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. The information furnished by the Company for inclusion in any
documents mailed, delivered or otherwise furnished to Stockholders in connection
with the solicitation of their consent to this Agreement and the Merger, will
not contain, at or prior to the Effective Time, any untrue statement of a
material fact and will not omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company, subject to
such exceptions as are specifically disclosed in the disclosure letter
(referencing the appropriate section and paragraph numbers) supplied by the
Parent and Sub to the Company (the "Parent Disclosure Schedule") and dated as of
the date hereof, that on the date hereof and as of the Effective Time as though
made at the Effective Time as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. Sub
is a corporation duly organized, validly existing and in good standing under the
laws of Delaware. Each of Parent and Sub has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
Parent Material Adverse Effect, provided that a drop in the Parent's stock price
shall not constitute such a material adverse effect.
3.2 Authority. Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related Agreements
to which it is a party and the consummation of the transactions
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contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub, subject only to stockholder
approval. This Agreement and any Related Agreements to which Parent and Sub are
parties have been duly executed and delivered by Parent and Sub and constitute
the valid and binding obligations of Parent and Sub, enforceable in accordance
with their terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.3 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, or any
third party is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement and any Related Agreements to which
Parent or Sub is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not have a Parent Material Adverse Effect, and (iii) the filing
of the Merger Agreement with the Secretary of the Commonwealth of Massachusetts.
3.4 Parent Common Stock. The Parent Common Stock which constitutes the
Merger Shares has been duly authorized, and upon consummation of the
transactions contemplated by this Agreement, will be validly issued, fully paid
and nonassessable.
3.5 Intellectual Property. To Parent's knowledge, the reproduction,
manufacturing, distribution, licensing, sublicensing, and/or sale of Parent's
products and services does not infringe on any patent, design right, trademark,
trade name, service xxxx, trade dress, Internet domain name, copyright,
database, trade secret, know-how, of any person, anywhere in the world. No
claims, other than with respect to Parent's licensed intellectual property, (i)
challenging the validity, effectiveness or, ownership by Parent's of any Parent
intellectual property, or (ii) to the effect that the use, distribution,
licensing, sublicensing, and/or sale or any of Parent's products or services,
infringes or will infringe on any intellectual property or other proprietary or
personal right of any person, have been asserted or, to the knowledge of Parent,
are threatened by any person, nor are there, to Parent's knowledge, any valid
grounds for any bona fide claim of any such kind. To Parent's knowledge, no
third party is materially infringing Parent owned intellectual property.
3.6 Litigation. There is no material action, suit, claim or proceeding
of any nature pending, or to the Knowledge of Parent threatened, against Parent,
its properties (tangible or intangible) or any of its officers or directors.
There is no investigation or other proceeding pending or to the Knowledge of
Parent threatened, against Parent, any of its properties (tangible or
intangible) or any of their officers or directors by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of Parent to develop or distribute any of its products.
3.7 SEC Reports; Financial Statements. Parent has made available to
Company a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement
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filed by Purchaser with the SEC on or after September 30, 1999 (the "SEC
Reports"), which are all the forms, reports and documents required to be filed
by Parent with the SEC since September 30, 1999. The Parent SEC Reports (A) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (B) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a 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. Since September 30, 1999, there has not occurred
a Parent Material Adverse Effect. Each set of consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent SEC
Reports was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, do not contain footnotes as permitted
by Form 10-Q of the Exchange Act) and each fairly presents the consolidated
financial position of Parent and its subsidiaries at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal adjustments which are not material in the aggregate.
3.8 Representations Complete. Neither any of the representations or
warranties made by Parent (as modified by the Parent Disclosure Schedule) in
this Agreement contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. The information furnished by Parent for inclusion in any documents
mailed, delivered or otherwise furnished to the stockholders of Parent in
connection with the solicitation of their consent to this Agreement and the
Merger, will not contain, at or prior to the Effective Time, any untrue
statement of a material fact and will not omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees, except to the extent that
Parent shall otherwise consent in writing, to carry on the Company's business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use its reasonable best efforts consistent with past practice and
policies to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and key employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any material event involving the Company. Except as expressly
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required by this Agreement or as set forth in Section 4.1 of the Company
Disclosure Schedule, the Company shall not, without the prior written consent of
Parent:
(a) make any expenditures or enter into any commitment or
transaction exceeding $100,000;
(b) (i) sell, license or transfer to any person or entity any
rights to any Company Intellectual Property except for non-exclusive license
agreements entered into in the ordinary course of business or enter into any
agreement with respect to any intellectual property of any person or entity,
except for licenses of commercially available software, (ii) enter into any
agreement with respect to the development of any intellectual property with a
third party except for consulting agreements entered in to in the ordinary
course of business which provide for exclusive ownership by the Company of any
intellectual property developed thereunder or (iii) or change the methods of
establishing pricing or royalties charged by the Company to its customers or
licensees, or the methods of establishing pricing or royalties set or charged by
persons who have licensed intellectual property to the Company except as
required by the terms of agreements currently in effect;
(c) enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution, development or similar rights of any
type or scope with respect to any products or technology of the Company;
(d) amend or otherwise modify (or agree to do so), or violate the
terms of, any Company Contracts or License Agreements;
(e) commence or settle any litigation;
(f) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Common Stock or Preferred, or split, combine or reclassify any Company Common
Stock or Preferred or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Common Stock or
Preferred, or repurchase, redeem or otherwise acquire, directly or indirectly,
any shares of Company Common Stock or Preferred (or options, warrants or other
rights exercisable therefor) except in accordance with the agreements evidencing
Company Options or restricted stock awards;
(g) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of capital stock of the Company or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities, except for shares of Company Common Stock
issued upon exercise of Company Options outstanding on the date hereof or
pursuant to the Comdisco warrant and debt referred to in the Company Disclosure
Schedule;
(h) cause or permit any amendments to its articles of
organization, bylaws or other organizational documents of the Company;
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(i) acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;
(j) except as allowed pursuant to Section 4.1(b) hereof, sell,
lease, license or otherwise dispose of any of its properties or assets, except
properties or assets which are not Company Intellectual Property and only in the
ordinary course of business and consistent with past practices;
(k) incur any indebtedness or guarantee any indebtedness or issue
or sell any debt securities or guarantee any debt securities of others;
(l) grant any loans to others or purchase debt securities of
others or amend the terms of any outstanding loan agreement;
(m) grant any severance or termination pay (i) to any director or
officer, or (ii) to any other employee or contract worker except payments made
pursuant to standard written agreements outstanding on the date hereof and
disclosed in the Company Disclosure Schedule;
(n) adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director, employee or contract worker, or increase the
salaries or wage rates of its employees or contract workers except payments made
pursuant to standard written agreements in place on the date hereof and
disclosed in the Company Disclosure Schedule;
(o) revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(p) pay, discharge or satisfy, in an amount in excess of $100,000
in any one case, any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than such payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the Financials or arising in the ordinary course of business
after the date of the Current Balance Sheet;
(q) make or change any material election in respect of Taxes,
adopt or change any material accounting method in respect of Taxes, enter into
any material closing agreement, settle any material claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(r) enter into any strategic alliance or joint marketing
arrangement or agreement;
(s) take any action to accelerate the vesting schedule of any of
the outstanding Company Options or Company Common Stock;
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(t) hire or terminate any employees or contract workers, or
encourage any employees or contract workers to resign from the Company; or
(u) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through 4.1(u) hereof, or any other action
that would (x) prevent the Company from performing or cause the Company not to
perform their respective covenants hereunder or (y) cause or result in any
representations and warranties contained in Article II herein being untrue or
incorrect.
4.2 No Solicitation. Until the earlier of (i) the Effective Time, or
(ii) the date of termination of this Agreement pursuant to the provisions of
Section 8.1 hereof, the Company shall not (nor shall the Company permit, as
applicable, any of the Company's officers, directors, employees, contract
workers, stockholders, agents, representatives or affiliates to), directly or
indirectly, take any of the following actions with any party other than Parent
and its designees: (a) solicit, knowingly encourage, initiate or participate in
any inquiry, negotiations or discussions, or enter into any agreement, with
respect to any offer or proposal to acquire all or any material part of the
Company's business, properties or technologies, or any material amount of the
Company Common Stock or Preferred (whether or not outstanding), whether by
merger, purchase of assets, tender offer, license or otherwise, or effect any
such transaction, (b) disclose any information not customarily disclosed to any
person concerning the Company's business, technologies or properties, or afford
to any person or entity access to its properties, technologies, books or
records, not customarily afforded such access, (c) assist or cooperate with any
person to make any proposal to purchase all or any material part of the Company
Common Stock or Preferred or assets of the Company, other than inventory in the
ordinary course of business, or (d) enter into any agreement with any person
providing for the acquisition of the Company, whether by merger, purchase of
assets, license, tender offer or otherwise. In the event that the Company or any
of the Company's affiliates shall receive, prior to the Effective Time or the
termination of this Agreement, any offer, proposal, or request, directly or
indirectly, of the type referenced in clause (a) or (c) above, or any request
for disclosure or access pursuant to clause (b) above, the Company shall
immediately notify Parent thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Parent may reasonably request. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this Section
4.2 were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Parent shall be
entitled to seek an injunction or injunctions to prevent breaches of the
provisions of this Section 4.2 and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which Parent may be
entitled at law or in equity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Information Statement; Registration Statement; Other Filings. As
promptly as practicable after the execution of this Agreement, Company and
Parent will prepare, and file with the
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SEC, a joint proxy/information statement (the "Proxy Statement/Prospectus"), and
Parent will prepare and file with the SEC a registration statement on Form S-4
(the "S-4") in which the Proxy Statement/Prospectus will be included as a
prospectus. Each of Parent and Company shall provide promptly to the other such
information concerning its business and financial statements and affairs as, in
the reasonable judgment of the providing party or its counsel, may be required
or appropriate for inclusion in the Proxy Statement/Prospectus and the S-4, or
in any amendments or supplements thereto, and to cause its counsel and auditors
to cooperate with the other's counsel and auditors in the preparation of the
Proxy Statement/Prospectus and the S-4. Each of Company and Parent will respond
to any comments of the SEC, and will use its respective commercially reasonable
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and Company and Parent will cause the Proxy
Statement/Prospectus to be mailed to its respective stockholders at the earliest
practicable time after the S-4 is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Parent will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other Federal, foreign or Blue Sky or related
laws relating to the Merger and the transactions contemplated by this Agreement
(the "Other Filings"). Each of Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the S-4, the Proxy
Statement/Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC or its staff or any other
government officials, on the other hand, with respect to the S-4, the Proxy
Statement/Prospectus, the Merger or any Other Filing. Each of Company and Parent
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 5.1(a) to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement/Prospectus, the S-4
or any Other Filing, Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of Company,
such amendment or supplement.
(a) The Proxy Statement/Prospectus will include the
recommendation of the Board of Directors of Company and Parent in favor of
adoption and approval of this Agreement and approval of the Merger.
(b) Promptly after the date hereof, Company will take all action
necessary in accordance with Massachusetts Law to convene a Stockholders'
meeting ("Company Stockholders' Meeting") to be held as promptly as practicable,
and in any event (to the extent permissible under applicable law) within 45 days
after the declaration of effectiveness of the S-4, for the purpose of voting
upon this Agreement and the Merger. The Company will use its commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger and will
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of Nasdaq or Massachusetts Law to obtain
such approvals. Notwithstanding anything to the contrary contained in this
Agreement, the Company may adjourn or postpone the Company Stockholders' Meeting
to the extent necessary to
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ensure that any necessary supplement or amendment to the Prospectus/Proxy
Statement is provided to the Company stockholders in advance of a vote on the
Merger and this Agreement. The Company shall ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with Massachusetts Law, the
rules of Nasdaq and all other applicable legal requirements.
(c) Promptly after the date hereof, Parent will take all action
necessary in accordance with Delaware Law to convene a meeting of Parent's
stockholders (the "Parent Stockholder Agreement") to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the declaration of effectiveness of the S-4, for the
purpose of voting upon this Agreement and the Merger. Parent will use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary or advisable to secure the vote
or consent of its stockholders required by the rules of Nasdaq or Delaware Law
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, Parent may adjourn or postpone the Parent Stockholders' Meeting
to the extent necessary to ensure that any necessary supplement or amendment to
the Prospectus/Proxy Statement is provided to Parent's stockholders in advance
of a vote on the Merger and this Agreement.
(d) Parent shall ensure that the Parent Stockholders' Meeting is
called, noticed, convened, held and conducted, and that all proxies solicited by
the Parent in connection with the Parent's Stockholders' Meeting are solicited,
in compliance with Delaware Law, the rules of Nasdaq and all other applicable
legal requirements.
5.2 Access to Information. Each of the Company and the Parent shall
afford to the other and its respective accountants, counsel and other
representatives, reasonable access during the period prior to the Effective Time
to (i) all of its properties, books, contracts, commitments and records, (ii)
all other information concerning its business, properties and personnel (subject
to restrictions imposed by applicable law) as the other may reasonably request,
and (iii) in the case of the Company, all employees and contract workers of the
Company as identified by Parent. Each of the Company and the Parent agrees to
provide to the other and its respective accountants, counsel and other
representatives copies of internal financial statements (including Tax returns
and supporting documentation) promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 5.2 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger in
accordance with the terms and provisions hereof.
5.3 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.3 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidential Disclosure Agreement among the Company and Parent (the
"Confidential Disclosure Agreement").
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5.4 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses; provided that, in the
event the Merger is consummated, Parent agrees to pay up to $750,000 of such
unpaid reasonable and documented Third Party Expenses incurred by the Company,
and any Third Party Expenses incurred by the Company in excess of $750,000 shall
be paid out of the Escrow Amount and shall not be limited by the Basket Amount.
5.5 Public Disclosure. Neither party shall issue any statement or
communication to any third party (other than their respective agents) regarding
the subject matter of this Agreement or the transactions contemplated hereby,
including, if applicable, the termination of this Agreement and the reasons
therefor, without the consent of the other party, which consent shall not be
unreasonably withheld, except that this restriction shall be subject to Parent's
obligation to comply with applicable securities laws.
5.6 FIRPTA Compliance. On the Effective Time, the Company shall deliver
to Parent a properly executed statement (a "FIRPTA Compliance Certificate") in a
form reasonably acceptable to Parent for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.7 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations (including those required to register the
Merger Shares (or failing that, the granting of rights designed to replicate as
closely as possible the benefits of registered Merger Shares) and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
5.8 Notification of Certain Matters. Each of the Company and the Parent
shall give prompt notice to the other of: (i) the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty made by it in this Agreement to be materially untrue
or inaccurate at or prior to the Effective Time, and (ii) any failure by it to
materially comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.8 shall not (a) limit or otherwise
affect any remedies available to the party receiving such notice or (b)
constitute an acknowledgment or admission of a breach of this Agreement. No
disclosure by either party pursuant to this Section 5.8, however, shall be
deemed to amend or supplement the Company Disclosure Schedule or prevent or cure
any misrepresentations, breach of warranty or breach of covenant.
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5.9 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Merger and the
transactions contemplated hereby.
5.10 S-8 Registration. Not later than thirty (30) days after the
Effective Time, Parent agrees to file, if available for use by Parent, with the
Securities and Exchange Commission a registration statement on Form S-8
registering a number of shares of Parent Common Stock equal to the number of
shares of Parent Common Stock issuable upon the exercise of all Company Options
assumed by Parent pursuant to Section 1.6(b) hereof.
5.11 Employment Arrangements and Items.
(a) Retention Options. Prior to the Effective Time, the Company
shall issue the Retention Options to the persons listed on Exhibit D-1 in the
amounts indicated therein provided, that the form of the option agreement
governing such Retention Options shall have been delivered to Parent prior to
being furnished to such person and such agreement shall comply with the
restrictions set forth in the definition of "Retention Options."
(b) Benefit Arrangements. Parent covenants and agrees that to the
extent permitted by applicable law and to the extent the existing benefit plans
and arrangements provided by Company to its employees are terminated on or after
the Effective Time, such employees shall be entitled to benefits which are
available or subsequently become available to Parent's employees, and on a basis
which is on parity with Parent's employees. For purposes of satisfying the terms
and conditions of such plans, Parent shall give full credit for eligibility,
vesting or benefit accrual to the extent possible for each participant's period
of service at the Company prior to the Effective Time.
(c) Employee Plan Compliance.
(i) The Company shall prepare, or have prepared on its
behalf, in compliance with the requirements of ERISA, as provided in 29 CFR
Parts 2560 and 2570, a Delinquent Filer Voluntary Compliance Program filing
("DFVC") for its Premium Only Plan for the 1998 plan year; provided, however,
that Parent shall have the opportunity to review and approve such DFVC filing
(with Parent approval not to be unreasonably withheld), prior to the actual
filing thereof. The Company shall have prepared, have provided Parent the
opportunity to review, and have filed such DFVC filing by the later of: (i)
thirty (30) days after the execution of this Agreement; or (ii) the Closing
Date.
(ii) The Company shall prepare, or have prepared on its
behalf, in compliance with the requirements of the Code and ERISA, a Form 5500
for its Premium Only Plan for the 1998 plan year; provided, however, that Parent
shall have the opportunity to review and approve such Form 5500 (with Parent
approval not to be unreasonably withheld), prior to the actual filing thereof.
The Company shall have prepared, have provided Parent with opportunity to
review, and have filed such Form 5500 by the later of: (i) thirty (30) days
after the execution of this Agreement; or (ii) the Closing Date.
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5.12 Affiliate Agreements. Section 5.12 of the Company Disclosure
Schedule sets forth those persons who, in the Company's reasonable judgment, are
or may be "affiliates" of the Company within the meaning of Rule 145 (each such
person, an "Affiliate") promulgated under the Securities Act ("Rule 145"). The
Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. The Company shall use
its best efforts to deliver or cause to be delivered to Parent prior to the
Closing Date from each of the Affiliates of the Company, an executed Affiliate
Agreement in the form attached hereto as Exhibit F. Parent and Sub shall be
entitled to place appropriate legends on the certificates evidencing any Parent
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of such Affiliate
Agreements.
5.13 Nasdaq Listing. Parent agrees (i) to have the shares of Parent
Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, approved for quotation on the Nasdaq National Market
System subject only to official notice of issuance and (ii) to continue the
inclusion of the Parent Common Stock on the Nasdaq National Market until the
Effective Time.
5.14 Indemnification and Insurance. From and after the Effective Time,
Parent will, or will cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company pursuant to its articles of
organization and bylaws and any indemnification agreements between the Company
and each of its respective directors and officers existing prior to the
Effective Time. The articles of organization and bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification set
forth in the articles of organization and bylaws of the Company prior to the
Effective Time, which provisions will not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or agents of
the Company, unless such modification is required by law.
5.15 Termination of 401(k) Plan. The Company and its Affiliates, as
applicable, each agrees to terminate its 401(k) plan immediately prior to
Closing, unless the Parent, in its sole and absolute discretion, agrees to
sponsor and maintain such plans by providing the Company with written notice of
such election at least three (3) days before the Effective Time. Unless the
Parent provides such notice to the Company, the Parent shall receive from the
Company evidence that the Company's and each Affiliate's (as applicable) 401(k)
plan has been terminated pursuant to resolutions of each such entity's Board of
Directors (the form and substance of which resolutions shall be subject to
review and approval of the Parent), effective as of the day immediately
preceding the Effective Time.
5.16 Termination of Severance Plans. The Company and its Affiliates, as
applicable, each agrees to terminate any and all group severance, separation or
salary continuation plans, programs or arrangements that are covered under ERISA
immediately prior to Closing. The Parent shall receive from the Company evidence
that the Company's and each Affiliate's (as applicable) plan(s) has been
terminated pursuant to each such entity's Board of Directors (the form and
substance of which
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resolutions shall be subject to review and approval of the Parent), effective as
of the day immediately preceding the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of the Company and Parent to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
(c) Votes. This Agreement shall have been approved by the
requisite vote of the Stockholders by written consent or at a duly called
meeting of the Stockholders, and for the purposes of Rule 4460 of the NASD Rules
by Parent's stockholders.
(d) Registration Statement Effective. The SEC shall have declared
the S-4 effective. No stop order suspending the effectiveness of the S-4 or any
part thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC.
(e) Tax Opinions. Parent and Company shall each have received
written opinions from their respective tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Xxxx and Xxxx LLP, respectively), in form
and substance reasonably satisfactory to them, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn; provided, however, that if
the counsel to either Parent or Company does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to such party
if counsel to the other party renders such opinion to such party. The parties to
this Agreement agree to make such reasonable representations as requested by
such counsel for the purpose of rendering such opinions.
(f) Governmental Approval. Approvals from any court,
administrative agency or commission or other federal, state, county, local or
other foreign governmental authority, instrumentality, agency or commission that
are required to consummate the Merger shall have been timely obtained.
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6.2 Conditions to the Obligations of Parent and Sub. The obligation of
Parent and Sub to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent and Sub:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct as of the date of this Agreement and as of the Effective Time except (i)
to the extent that the failure of such representations and warranties to be true
and correct in each case or in the aggregate does not constitute a Company
Material Adverse Effect, (ii) for changes contemplated by this Agreement and
(iii) for those representations and warranties which address matters only as of
the date of this Agreement or any other particular date (which shall have been
true and correct as of such particular date except to the extent that the
failure of such representations and warranties to be true and correct as of such
particular date does not constitute a Company Material Adverse Effect) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties all "Material Adverse Effect" qualifications and
other qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded). Parent shall have
received a certificate with respect to the foregoing signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the
Effective Time, and Parent shall have received a certificate to such effect
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company.
(c) Litigation. There shall be no action, suit, claim or
proceeding of any nature pending, or overtly threatened brought by or on behalf
of a governmental entity, against Parent or the Company, their respective
properties or any of their respective officers or directors, arising out of, or
in any way connected with, the Merger or the other transactions contemplated by
the terms of this Agreement
(d) No Dissenters. Holders of no more than 7.5% of the
outstanding shares of Company Common Stock and Preferred shall have exercised
dissenters' rights with respect to the transactions contemplated by this
Agreement.
(e) Third Party Consents. Parent shall have received all
consents, waivers, approvals, and assignments listed in Schedule 6.2(d) to this
Agreement.
(f) Resignation of Directors. Parent shall have received a
written resignation from each of the directors of the Company effective as of
the Effective Time.
(g) Legal Opinion. Parent shall have received a legal opinion
from legal counsel to the Company in a form reasonably acceptable to legal
counsel to Parent.
(h) Non-Competition Agreements. The individuals listed on Exhibit
D-2 shall have executed and delivered to Parent a Non-Competition Agreement in
the form attached hereto as
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Exhibit B and the individuals listed on Exhibit D-5 shall have executed and
delivered to Parent a Non-Competition Agreement in the form attached hereto as
Exhibit B-1, and all of such Non-Competition Agreements shall be in full force
and effect.
(i) New Employment/Severance Arrangements. Each of the employees
listed in Exhibit D-3 hereto shall have agreed to be employees of Parent after
the Closing, each employee listed on Exhibit D-4 shall have executed a severance
agreement, and, in each case, shall have executed the appropriate version of
Exhibit E-1 and Exhibit E-2, respectively.
6.3 Conditions to Obligations of the Company. The obligations of the
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained in this Agreement shall have been true
and correct as of the date of this Agreement and as of the Effective Time except
(i) to the extent that the failure of such representations and warranties to be
true and correct in each case or in the aggregate does not constitute a Parent
Material Adverse Effect, (ii) for changes contemplated by this Agreement and
(iii) for those representations and warranties which address matters only as of
the date of this Agreement or any other particular date (which shall have been
true and correct as of such particular date except to the extent that the
failure of such representations and warranties to have been true and correct as
of such particular date does not constitute a Parent Material Adverse Effect )
(it being understood that, for purposes of determining the accuracy of such
representations and warranties all "Material Adverse Effect" qualifications and
other qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded). The Company shall
have received a certificate with respect to the foregoing signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such effect
signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Nasdaq National Market Listing. The shares of Parent Common
Stock issuable to Stockholders pursuant to this Agreement and such other shares
of Parent Common Stock required to be reserved for issuance in connection with
the Merger shall have been approved for quotation on the Nasdaq National Market
System subject only to official notice of issuance.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; ESCROW
7.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company contained in this Agreement, or in
any certificate or other instrument delivered pursuant to this Agreement, shall
terminate one year following the Closing Date. The representations and
warranties of Parent and Sub contained in this Agreement, or in any certificate
or other instrument delivered pursuant to this Agreement, shall terminate at the
Closing.
7.2 Indemnification. The Stockholders jointly and severally (severally
in the case of claims and Losses (or portions thereof), as defined below, after
exhaustion of the Escrow Fund) agree to indemnify and hold Parent and its
officers, directors and affiliates, including the Company after the Closing (the
"Indemnified Parties"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense relating to such claim, loss,
liability, damage, deficiency, cost or expense (hereinafter individually a
"Loss" and collectively "Losses") incurred or suffered by the Indemnified
Parties, or any of them (including the Company after the Closing), directly or
indirectly, as a result of (i) any breach or inaccuracy of a representation or
warranty of the Company contained in this Agreement or any certificate or
instrument delivered pursuant to this Agreement, (ii) any failure by the Company
to perform or comply with any covenant applicable to them contained in this
Agreement, and (iii) the failure of Estimated Third Party Expenses to equal or
exceed Third Party Expenses. The Stockholders shall not have any right of
contribution from the Company with respect to any Loss claimed by an Indemnified
Party after the Effective Time.
7.3 Escrow Arrangements.
(a) Escrow Fund. As partial security for the indemnity provided
for in Section 7.2 hereof and by virtue of this Agreement, the Stockholders will
be deemed to have received and deposited with the Escrow Agent the Escrow Amount
without any act of any Stockholder. The Escrow Fund shall be available to
compensate the Indemnified Parties, or any of them, for any claims by such
Indemnified Parties for any Losses suffered or incurred by them; provided,
however, that if the Escrow Period (as defined below) has terminated, and a
claim for Losses is made with respect to fraud, the claim shall be made directly
against the Stockholders. Within three days after the Closing, the Escrow
Amount, without any act of the Stockholders, will be deposited with the Escrow
Agent hereunder, or another institution acceptable to Parent and the Stockholder
Representative (as defined in Section 7.4 hereof), such deposit of the Escrow
Amount to constitute an escrow fund (the "Escrow Fund") to be governed by the
terms set forth herein. The Escrow Agent may execute this Agreement following
the date hereof and prior to the Closing, and such later execution, if so
executed after the date hereof, shall not affect the binding nature of this
Agreement as of the date hereof between the other signatories hereto. Nothing
herein shall limit the liability of the Company for any breach or inaccuracy of
any representation, warranty or covenant contained in this Agreement if the
Merger does not close. Parent may not receive any proceeds from the Escrow Fund
unless and until one or more Officer's Certificates (as defined in Section
7.3(d) hereof) identifying Losses in excess of $1,000,000 in the aggregate (the
"Basket Amount") has or
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have been delivered to the Escrow Agent as provided in Section 7.3(d) hereof, in
which case Parent shall be entitled to recover all Losses so identified in
excess of the Basket Amount. Notwithstanding the foregoing, Parent shall be
entitled to receive payments out of the Escrow Fund for, and the Basket Amount
shall not apply as a threshold to, any and all claims or payments made with
respect to Third Party Expenses in excess of $750,000.
(b) Escrow Period; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., P.S.T., on January 18, 2001 (the "Escrow Termination Period"); provided,
however, that the Escrow Period shall not terminate with respect to any amount
which, in the reasonable good faith judgment of Parent, subject to the objection
of the Stockholder Representative and the subsequent arbitration of the matter
in the manner provided in Section 7.3(f) hereof, is necessary to satisfy any
then pending and unsatisfied claims specified in any Officer's Certificate
delivered to the Escrow Agent prior to the thirtieth (30th) calendar day
following the termination of the Escrow Period with respect to facts and
circumstances existing prior to the termination of such Escrow Period. As soon
as all such claims have been resolved, the Escrow Agent shall deliver to the
Stockholders the remaining portion of the Escrow Fund, if any, not required to
satisfy such claims (the "Remaining Portion"). Deliveries of the Escrow Amount
out of the Escrow Fund to the Stockholders pursuant to this Section 7.3(b) shall
be made in proportion to their respective Pro Rata Portions of the Escrow Fund.
(c) Protection of Escrow Fund; Distribution of Interest from
Escrow Fund; Substitution of Cash.
(i) The Escrow Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund shall be added to the Escrow Fund
and become a part thereof. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Escrow Fund shall not be added to
the Escrow Fund but shall be distributed to the record holders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the record holders thereof.
(iii) Each Stockholder shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such Stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(iv) Subject to Section 1.11, the Stockholder
Representative may effect a sale of any or all of the shares comprising the
Escrow Fund by written direction given to the Escrow Agent provided that (i) the
net proceeds per share are at least equal to the Trading Price and (ii) the net
proceeds equal to the Trading Price multiplied by the number of shares of Parent
Common Stock
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so sold (the "Equivalent Net Proceeds") are retained in the Escrow Fund and are
held at the election of the Stockholder Representative in an interest-bearing or
non-interest bearing demand deposit account on behalf of the Stockholders. The
Equivalent Net Proceeds from any such disposition and any interest accruing
thereon shall be allocated among the Stockholders in accordance with their Pro
Rata Portions of the Escrow Fund. Any net proceeds in excess of the Equivalent
Net Proceeds shall be distributed to the Stockholders in accordance with their
Pro Rata Portions of the Escrow Fund. This sale will occur at the written
direction of the Stockholder Representative.
(v) In connection with the release to Parent of any shares
in the Escrow Fund as a result of Losses incurred by Parent under the Merger
Agreement, a Stockholder shall be permitted to deposit cash in escrow equal to
the Trading Price times that number of shares in the Escrow Fund held on behalf
of such Stockholder which are to be delivered to Parent as Losses (the "Cash Out
Amount") and to obtain the release of such shares in the Escrow Fund held on
behalf of such Stockholder (the "Cash Out Shares") equal to the amount of cash
so deposited divided by the Trading Price. The Cash Out Amount shall be in the
form of a cashier's check payable to the Escrow Agent. Parent shall provide the
Escrow Agent with such instructions as may be required to cause the release of
any shares to a Stockholder paying the Cash Out Amount.
(d) Claims for Indemnification.
(i) Upon receipt by the Escrow Agent at any time on or
before the thirtieth (30th) day following the last day of the Escrow Period of
an Officer's Certificate (as defined below) and, subject to the provisions of
Section 7.3(e) and Section 7.5 hereof, the Escrow Agent shall deliver to Parent
out of the Escrow Fund, as promptly as practicable, Parent Common Stock (or cash
in lien thereof) held in the Escrow Fund equal to Losses specified in the
Officer's Certificate. For purposes hereof, "Officer's Certificate" shall mean a
certificate signed by any officer of Parent: (a) stating that Parent has paid or
incurred or properly accrued or reasonably anticipates that it will have to pay,
incur or accrue Losses, and (b) specifying in reasonable detail the individual
items of Losses included in the amount so stated, the date each such item was
paid, incurred or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresentation, breach of warranty or covenant to which
such item is related.
(ii) For the purposes of determining the number of shares
of Parent Common Stock or cash in lieu of such shares to be delivered to Parent
out of the Escrow Fund as indemnity pursuant to Section 7.2 hereof, the shares
of Parent Common Stock shall be valued at the Trading Price and any cash paid in
lieu of such shares shall be calculated accordingly.
(e) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Stockholder Representative, and for a period of thirty
(30) days after such delivery, the Escrow Agent shall make no delivery to Parent
of any Escrow Amounts pursuant to Section 7.3(d) hereof unless and until the
Escrow Agent shall have received written authorization from the Stockholder
Representative to make such delivery. After the expiration of such thirty (30)
day period, the Escrow Agent shall make delivery of the Parent Common Stock (or
cash in lieu thereof) from the Escrow Fund in accordance with Section 7.3(d)
hereof; provided, however, that no such payment or delivery may be
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made if the Stockholder Representative shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Representative shall object in
writing to any claim or claims made in any Officer's Certificate to recover
Losses from the Escrow Fund within thirty (30) days after delivery of such
Officer's Certificate, the Stockholder Representative and Parent shall attempt
in good faith to agree upon the rights of the respective parties with respect to
each of such claims. If the Stockholder Representative and Parent should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties and, in the case of a claim against the Escrow Fund, shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute amounts from the Escrow Fund in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Representative may demand
arbitration of the matter unless the amount of the Loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration, and in
either such event the matter shall be settled by arbitration conducted by one
arbitrator mutually agreeable to Parent and the Stockholder Representative. In
the event that within forty-five (45) days after submission of any dispute to
arbitration, Parent and the Stockholder Representative cannot mutually agree on
one arbitrator, Parent and the Stockholder Representative shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrator or arbitrators, as the case may be, shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator or majority of the three arbitrators, as the case may
be, to discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator or a majority of the three arbitrators, as
the case may be, shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys' fees and costs, to
the extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that discovery
was sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator or
a majority of the three arbitrators, as the case may be, as to the validity and
amount of any claim in such Officer's Certificate shall be binding and
conclusive upon the parties to this Agreement. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrator(s).
(iii) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Any such
arbitration shall be held in San Francisco County, California, under the rules
then in effect of the American Arbitration Association. The arbitrator(s) shall
determine how all expenses relating to the arbitration shall be paid, including
without limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration Association.
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(g) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent reasonably believes may result in a demand
against the Escrow Fund, Parent shall notify the Stockholder Representative of
such claim, and the Stockholder Representative shall be entitled on behalf of
the Stockholders, at its expense, to participate in, but not to determine or
conduct, the defense of such claim. Parent shall have the right in its sole
discretion to conduct the defense of and settle any such claim; provided,
however, that except with the consent of the Stockholder Representative, no
settlement of any such claim with third-party claimants shall be determinative
of the amount of Losses relating to such matter. In the event that the
Stockholder Representative has consented in writing to any such settlement, the
Stockholders shall have no power or authority to object under any provision of
this Article VII to the amount of any claim by Parent against the Escrow Fund
with respect to such settlement.
(h) Escrow Agent's Duties. Prior to the Effective Time, Parent
shall select the Escrow Agent. Unless otherwise set forth in a separate escrow
agreement with the Escrow Agent:
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Stockholder Representative, and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of legal counsel shall be
conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under this Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
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reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
performing the Escrow Agent's duties under this Agreement and shall be fully
protected in any act taken, suffered, or permitted by him/her in good faith in
accordance with the advice of counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and the Escrow Amount and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Escrow Agent will not be liable
for damages. Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and the Escrow Amounts held in escrow, except all costs,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent due
to the interpleader action and which the parties jointly and severally agree to
pay. Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel and disbursements that may be imposed on Escrow Agent
or incurred by Escrow Agent in connection with the performance of his/her duties
under this Agreement, including but not limited to any litigation arising from
this Agreement or involving its subject matter, other than those arising out of
the negligence or willful misconduct of the Escrow Agent.
(viii) The Escrow Agent may resign at any time upon giving
at least thirty (30) days written notice to the Parent and the Stockholder
Representative; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: Parent and the Stockholder Representative shall use
their best efforts to mutually agree on a successor escrow agent within thirty
(30) days after receiving such notice. If the parties fail to agree upon a
successor escrow agent within such time, the Escrow Agent shall have the right
to appoint a successor escrow agent authorized to do business in the
Commonwealth of Massachusetts. The successor escrow agent shall execute and
deliver an instrument accepting such appointment and it shall, without further
acts, be vested with all the estates, properties, rights, powers, and duties of
the predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
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(i) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the standard fee
schedule of the Escrow Agent. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Escrow Fund or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation.
(j) Consequential Damages. In no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Escrow Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
(k) Successor Escrow Agents. Any corporation into which the
Escrow Agent in its individual capacity may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
7.4 Stockholder Representative.
(a) Each of the Stockholders hereby appoints Xxxxxx Xxxxxxxx its
agent and attorney-in-fact, as the Stockholder Representative for and on behalf
of the Stockholders, to give and receive notices and communications, to
authorize payment to Parent of shares of Parent Common Stock or cash from the
Escrow Fund in satisfaction of claims by Parent, to object to such payments, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all other actions that are either (i)
necessary or appropriate in the judgment of the Stockholder Representative for
the accomplishment of the foregoing or (ii) specifically mandated by the terms
of this Agreement. Such agency may be changed by the Stockholders from time to
time upon not less than thirty (30) days prior written notice to Parent;
provided, however, that the Stockholder Representative may not be removed unless
holders of a two-thirds interest of the Escrow Fund agree to such removal and to
the identity of the substituted agent. Any vacancy in the position of
Stockholder Representative may be filled by the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Stockholder
Representative, and the Stockholder Representative shall not receive
compensation for its services. Notices or communications to or from the
Stockholder Representative shall constitute notice to or from the Stockholders.
(b) The Stockholder Representative shall not be liable for any
act done or omitted hereunder as the Stockholder Representative while acting in
good faith and in the exercise of
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reasonable judgment. The Stockholders on whose behalf the Escrow Amount was
contributed to the Escrow Fund shall indemnify the Stockholder Representative
and hold the Stockholder Representative harmless against any loss, liability or
expense incurred without negligence or bad faith on the part of the Stockholder
Representative and arising out of or in connection with the acceptance or
administration of the Stockholder Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Stockholder Representative. After all claims for Losses by Parent set forth in
Officers' Certificates delivered to the Escrow Agent and the Stockholder
Representative has been satisfied, or reserved against, the Stockholder
Representative, with the consent of the majority in interest in the Escrow Fund,
may recover from the Escrow Fund at the end of the Escrow Period payments not
yet paid for any expenses incurred in connection with the Stockholder
Representative's representation hereby.
(c) A decision, act, consent or instruction of the Stockholder
Representative, including but not limited to an amendment, extension or waiver
of this Agreement pursuant to Section 8.3 and Section 8.4 hereof, shall
constitute a decision of the Stockholders and shall be final, binding and
conclusive upon the Stockholders; and the Escrow Agent and Parent may rely upon
any such decision, act, consent or instruction of the Stockholder Representative
as being the decision, act, consent or instruction of the Stockholders. The
Escrow Agent and Parent are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Stockholder Representative.
(d) Subject to Parent's prior claims for indemnification against
the Escrow Fund, the Stockholder Representative shall be entitled to receive
payment for its reasonable and documented expenses therefrom, prior to any
payments to the Stockholders.
7.5 Maximum Payments; Remedy. Notwithstanding anything to the contrary
set forth in this Article VII or elsewhere in this Agreement, if the Merger is
consummated the maximum amount the Indemnified Parties may recover from the
Stockholders pursuant to the indemnity obligations set forth in Section 7.2
hereof shall be limited to an amount equal to each such Stockholder's Pro Rata
Portion of the Escrow Fund; provided however, that such limitation shall not
apply with respect to fraud claims by taxing authorities relating to Taxes or
liabilities related to, assessable upon, or based upon, the transactions
undertaken in connection with that certain Recapitalization, Stock Purchase and
Shareholders Agreement, dated as of February 13, 1998 among the Company, Toyo
Information Systems Co. Ltd. and the other parties thereto.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 hereof, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Closing:
(a) by mutual agreement of the Company and Parent;
(b) by Parent or the Company if the Effective Time shall not have
occurred by July 31, 2000; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
action or failure to act has been a principal
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cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes breach of this Agreement;
(c) by Parent or the Company if: (i) there shall be a final
non-appealable order of a federal or state court in effect preventing
consummation of the Merger, or (ii) there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Closing by
any Governmental Entity that would make consummation of the Closing illegal;
(d) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity, which would: (i) prohibit Parent's
ownership or operation of any portion of the business of the Company or (ii)
compel Parent or the Company to dispose of or hold separate all or any portion
of the business or assets of the Company or Parent as a result of the Merger;
(e) by Parent if there has been a breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement such
that the conditions set forth in Section 6.2(a) would not be satisfied and such
breach has not been cured within ten (10) calendar days after written notice
thereof to the Company; provided, however, that no cure period shall be required
for a breach which by its nature cannot be cured; or
(f) by the Company if there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement such
that the conditions set forth in Section 6.3(a) would not be satisfied and such
breach has not been cured within ten (10) calendar days after written notice
thereof to Parent; provided, however, that no cure period shall be required for
a breach which by its nature cannot be cured.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company, or their respective officers, directors or stockholders, if applicable;
provided, however, that each party hereto shall remain liable for any breaches
of this Agreement prior to its termination; and provided further, however, that,
the provisions of Sections 5.4, 5.5 and 5.6 hereof, Article IX hereof and this
Section 8.2 shall remain in full force and effect and survive any termination of
this Agreement pursuant to the terms of this Article VIII.
8.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto. For purposes of this Section 8.3, the Stockholders agree
that any amendment of this Agreement signed by the Stockholder Representative
shall be binding upon and effective against the Stockholders whether or not they
have signed such amendment.
8.4 Extension; Waiver. At any time prior to the Closing, Parent, on the
one hand, and the Company, on the other hand, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit
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of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. For purposes of this Section 8.4, the
Stockholders agree that any extension or waiver signed by the Stockholder
Representative shall be binding upon and effective against all Stockholders
whether or not they have signed such extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Parent, to:
OnDisplay, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
Spear Street Tower
Xxx Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company or the Stockholder
Representative, to:
Oberon Software Incorporated
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
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Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
(c) If to the Escrow Agent, to its address as it may notify each
party hereto from time to time.
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the exhibits hereto,
the Company Disclosure Schedule, the Confidential Disclosure Agreement, and the
documents and instruments and other agreements among the parties hereto
referenced herein: (i) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof, (ii) are not intended to confer upon any other person any
rights or remedies hereunder, and (iii) shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign its rights and
delegate its obligations hereunder to its affiliates as long as Parent remains
ultimately liable for all of Parent's and Merger Sub's obligations hereunder.
Parent intends to substitute a Massachusetts corporation for Merger Sub as a
party to the Agreement.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within the Commonwealth of Massachusetts, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the Commonwealth of Massachusetts for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent, Sub, the Company, the Principal
Stockholders, the Escrow Agent and the Stockholder Representative have caused
this Agreement to be signed, all as of the date first written above.
OBERON SOFTWARE INCORPORATED ONDISPLAY, INC.
By: By:
------------------------------- ------------------------------------
Name: Name:
----------------------------- ----------------------------------
Title: Title:
---------------------------- ---------------------------------
OBIONE ACQUISITION CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
STOCKHOLDERS' REPRESENTATIVE:
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
