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EXHIBIT 10.15
OPTION AGREEMENT
This Option Agreement (the "Agreement") is made and entered into this
25th day of July, 1997 among ▇▇▇▇▇ International, Inc., a Georgia corporation
("▇▇▇▇▇"), and NetGain Corporation, a Georgia corporation ("NetGain"):
For value received, and in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
OPTION TO CAUSE MERGER
1.1 Grant of Options. NetGain hereby grants to ▇▇▇▇▇, subject to the
terms and conditions hereinafter set forth, and in consideration of the payment
by ▇▇▇▇▇ to NetGain, on the date hereof, of the sum of $200,000 by check
delivered to NetGain, an exclusive and irrevocable right and option (the
"Option") to require NetGain to approve the merger (the "Merger") of NetGain
into and with ▇▇▇▇▇ Acquisition, Inc., a Georgia corporation and a newly formed,
wholly owned subsidiary of ▇▇▇▇▇ (the "Subsidiary") pursuant to an Agreement and
Plan of Merger between ▇▇▇▇▇, NetGain and the Subsidiary in the form attached
hereto as Exhibit A (the "Merger Agreement"). ▇▇▇▇▇ may exercise the option at
any time prior to the close of business on January 31, 1998 by giving written
notice of its exercise of the Option to NetGain, which notice shall state that
▇▇▇▇▇ is exercising the option and requiring the Board of Directors and
stockholders of NetGain to approve the Merger. Within three business days of
receipt of notice from ▇▇▇▇▇ that it is exercising the Option, NetGain shall
cause its Board of Directors, either at a meeting duly called and held or by
unanimous written consent, to approve the Merger Agreement, and to cause a
special meeting of stockholders of NetGain to be held to approve the Merger,
which meeting shall be held as soon as practicable after approval of the Merger
by the Board of Directors of NetGain and, in any event, within 30 days after
exercise by ▇▇▇▇▇ of the Option.
1.1 Continuation of Option. In order to continue the Option in full
force and effect, on the third business day prior to the fifteenth or last day
of a month next following the Closing Date (as hereinafter defined) and on each
third business day prior to the fifteenth and last day of each month thereafter
until exercise, lapse or expiration of the Option, ▇▇▇▇▇ shall pay to NetGain by
wire transfer (each payment hereinafter referred to as a "Bimonthly Payment" and
collectively as "Bimonthly Payments"), as payment for the continuation of the
Option, the sum of $35,000. If such wire transfer is not received by NetGain by
the close of business on the date it is due to be made, NetGain agrees to notify
▇▇▇▇▇ by telephone, followed by written notice sent to ▇▇▇▇▇ by telecopy, as
provided in Section 9.4 hereof. Upon receipt of such notice of failure to
receive a Bimonthly Payment, ▇▇▇▇▇ will have to the end of the next business day
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following such notice to cure the failure to make the Bimonthly Payment. If
▇▇▇▇▇ fails to make a bimonthly payment or fails to cure the nonreceipt of a
Bimonthly Payment as provided herein, the Option will lapse and will thereafter
be null and void. ▇▇▇▇▇ shall not be obligated to exercise the Option and may
discontinue to make Bimonthly Payments provided for in this Section 1.2 and
allow the Option to lapse, provided, however, it shall give written notice of
such determination to NetGain at such time ▇▇▇▇▇ determines to allow the Option
to lapse. In the event such written notice of ▇▇▇▇▇'▇ determination to allow the
Option to lapse is given, ▇▇▇▇▇ shall advance, as a loan to NetGain evidenced by
NetGain's promissory note (to be substantially in the form attached hereto as
Exhibit B) at the time such Bimonthly Payments shall have otherwise been due,
amounts equal to each of the next two Bimonthly Payments which would have been
due after the date of such notice of ▇▇▇▇▇'▇ election to allow the Option to
lapse, including (i) one loan, in an amount equal to a Bimonthly Payment, to be
made by ▇▇▇▇▇ to NetGain on February 11, 1998, provided that, between January 1,
1998 and January 15, 1998, the Option lapses or is otherwise not exercised by
▇▇▇▇▇, and (ii) another loan, in an amount equal to a Bimonthly Payment to be
made by ▇▇▇▇▇ to NetGain on February 24, 1998, provided that, after January 15,
1998, the Option lapses, expires or is otherwise not exercised by ▇▇▇▇▇.
NetGain's promissory note given in respect of all such advances shall be payable
in full 90 days after the notice by ▇▇▇▇▇ of its determination to allow the
Option to 1.2 lapse, or with respect to the loans provided for in clauses (i)
and (ii), 90 days after each such loan.
1.3 Issuance of Shares Upon Lapse or Expiration of the Option. If ▇▇▇▇▇
should fail to exercise the Option on or before its expiration date either by
reason of ▇▇▇▇▇'▇ determination to allow the Option to lapse, a failure to make
a Bimonthly Payment or upon ▇▇▇▇▇'▇ failure to exercise the Option, in
consideration of the payments theretofore made by ▇▇▇▇▇ to NetGain (other than
the advances against NetGain's promissory note or notes, if any) NetGain shall
issue to ▇▇▇▇▇ on the earlier of (i) receipt of notice from ▇▇▇▇▇ of its
determination to allow the Option to lapse, or (ii) January 31, 1998, shares of
common stock, $.01 par value ("NetGain Common Stock"), which, at the time of
issue, shall represent 10% of the then fully diluted equity of NetGain. For
purposes of the immediately preceding sentence, "fully diluted equity of
NetGain" shall mean the sum of the number of outstanding shares of NetGain
Common Stock plus the number of shares of NetGain Common Stock issuable upon the
exercise of then outstanding options to purchase NetGain Common Stock or upon
the conversion or exercise of any other outstanding instruments or rights
entitling the holder thereof to purchase shares of NetGain Common Stock which
are outstanding on the date of such notice or such date. ▇▇▇▇▇ acknowledges that
the shares of NetGain Common Stock which would be issued to it pursuant to this
Section 1.3 shall not have been registered under the Securities Act of 1933, as
amended, that ▇▇▇▇▇ would acquire such shares for investment only and not with a
view toward the distribution thereof and that any disposition of such shares by
▇▇▇▇▇ will be made only in accordance with the registration provisions of the
Securities Act and applicable state securities or "blue sky" laws, or pursuant
to a valid exemption from registration under such laws.
1.4 Delivery of Proxies. In order to ensure that ▇▇▇▇▇ shall have the
right to cause the Board of Directors of NetGain to approve the Merger and to
call a special meeting of stockholders of NetGain to approve the Merger and to
cause the stockholders of NetGain to
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approve the Merger at such meeting, NetGain shall deliver to ▇▇▇▇▇ on the
Closing Date, irrevocable proxies (individually a "Proxy" and collectively, the
"Proxies"), in the form attached hereto as Exhibit C, from stockholders of
NetGain holding at least a majority on the Closing Date of the issued and
outstanding shares of NetGain Common Stock on a fully diluted equity basis (and
including Proxies from those individuals whose names appear in Section 7.1(f)
hereof).
ARTICLE II
THE MERGER AND THE MERGER AGREEMENT
2.1 The Merger. In the event ▇▇▇▇▇ exercises the Option, the Merger
shall occur as soon as practicable after approval of the Merger and the Merger
Agreement by the stockholders of NetGain. In such an instance, NetGain agrees to
execute and deliver the Merger Agreement and such other documents, certificates
and agreements as may be contemplated hereby or thereby or as shall be necessary
or appropriate in connection therewith in order to permit the filing of the
Merger Agreement with the Secretary of State of the State of Georgia as soon as
practicable after the approval of the Merger by the stockholders of NetGain.
2.2 The Merger Agreement. The Merger shall occur pursuant to the Merger
Agreement, which shall be in the form attached hereto as Exhibit A. The Merger
shall become effective upon the filing of the Merger Agreement with the
Secretary of State of the State of Georgia, which date and time is hereafter
referred to as the "Effective Date of the Merger".
2.3 The Escrow Agreement. As contemplated hereby and by the Merger
Agreement, each of the holders of NetGain Common Stock at the Effective Date of
the Merger shall enter into an escrow agreement (the "Escrow Agreement") in the
form attached hereto as Exhibit D providing for, among other things, the
delivery of shares of common stock, $.01 par value, of ▇▇▇▇▇ ("▇▇▇▇▇ Common
Stock") issuable pursuant to the Merger Agreement into escrow under the terms of
the Escrow Agreement and for the indemnification by holders of NetGain Common
Stock of ▇▇▇▇▇ from and against Undisclosed Liabilities (as defined in the
Escrow Agreement) of NetGain. In order to comply with its obligation to insure
execution and delivery by each of the holders of NetGain Common Stock of the
Escrow Agreement, between the date of the meeting of the Board of Directors of
NetGain to approve the Merger and the meeting of the stockholders of NetGain to
approve the Merger, NetGain shall cause the Escrow Agreement to be executed by
each of the holders of NetGain Common Stock, but shall hold the Escrow Agreement
for delivery to ▇▇▇▇▇ upon the Effective Date of the Merger.
ARTICLE III
THE CLOSING
3.1 The Closing. The closing of the Merger shall be held at the offices
of Powell, Goldstein, ▇▇▇▇▇▇, and ▇▇▇▇▇▇ LLP in Atlanta, Georgia on the date of
the meeting of the
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NetGain stockholders to approve the Merger, immediately following such meeting,
at which time the documents to be delivered pursuant to this Agreement shall be
executed and delivered. Such date is referred to in this Agreement as the
"Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NETGAIN
NetGain hereby represents and warrants to ▇▇▇▇▇ as follows:
4.1 Organization and Good Standing of NetGain. NetGain is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia, has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business makes such qualification necessary. NetGain
has delivered or made available to ▇▇▇▇▇ or counsel for ▇▇▇▇▇ true, correct and
complete copies of its Articles of Incorporation and Bylaws as in affect on the
date hereof, and the minute books, including minutes of all meetings, or consent
actions in lieu thereof, of the stockholders and Board of Directors of NetGain
(and any committees thereof) and of the members of the predecessor of NetGain,
NetGain, L.L.C., a Georgia limited liability company (the "Predecessor").
4.2 Capital Structure of NetGain. The entire authorized capital stock
of NetGain consists of 10,000,000 shares of common stock, $.01 par value per
share, of which 4,584,250 shares are issued and outstanding. No shares of
NetGain Common Stock are held by NetGain in its treasury. All of the issued and
outstanding shares of NetGain Common Stock have been duly authorized, are
validly issued, fully paid and nonassessable, are not subject to pre-emptive
rights and were issued in full compliance with all federal, state and local
laws, rules and regulations. There are no outstanding or authorized options,
warrants, calls, rights, puts, rights to subscribe, conversion rights or
commitments or agreements of any character to which NetGain is a party or by
which it is bound obligating NetGain to issue, deliver or sell, or cause to be
issued, delivered or sold, shares of NetGain Common Stock or obligating NetGain
to grant, extend or enter into any such option, warrant, call, right, put, right
to subscribe, conversion right, commitment or agreement, except pursuant to
Promissory Notes dated January 31, 1997 and April 30, 1997 payable to Carpe
Fund, L.P., and except as set forth on Schedule 4.2 delivered to ▇▇▇▇▇. There
are no outstanding or authorized stockholder or other restrictive agreements
with respect to the ownership of NetGain Common Stock or the management of
NetGain or any voting trust or other agreements or understandings with respect
to the voting of NetGain Common Stock other than those listed and described on
Schedule 4.2. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to NetGain. There is no liability for
indebtedness for dividends or other distributions declared or accumulated but
unpaid with respect to any equity securities of NetGain or the predecessor.
NetGain has no subsidiaries.
4.3 Authority. NetGain has all requisite corporate power and authority
to enter into this Agreement and, subject to approval of the Merger and the
Merger Agreement by the Board
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of Directors and stockholders of NetGain, to perform its obligations hereunder
and under the Merger Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement has been duly
authorized by all necessary corporate action on the part of NetGain and this
Agreement is the valid and binding obligation of NetGain enforceable in
accordance with its terms except as may be limited by equitable principles and
applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally.
4.4 Noncontravention. Neither the execution, delivery and performance
of this Agreement or the Merger Agreement, nor the consummation of the
transactions contemplated hereby and thereby, nor the compliance with the
provisions hereof or thereof will:
(a) Conflict with, result in a violation of, result in a breach of,
cause a default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation contained in, or the loss of any
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon, any of the properties or assets
of NetGain under any term, condition or provision of any loan or credit
agreement, note, bond, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to NetGain, its
properties or assets or the predecessor or its properties or assets;
(b) Violate any provision of the Articles of Incorporation or
Bylaws of NetGain; or
(c) Require the consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity to be
obtained by NetGain in connection with the execution and delivery of
this Agreement or the Merger Agreement, or the consummation of the
transactions contemplated hereby and thereby.
4.5 Absence of Liabilities. Except as set forth on Schedule 4.5 hereto,
NetGain has no liabilities or obligations of any nature (matured or unmatured,
fixed or contingent) (other than liabilities resulting from the use of the
NetGain Products, which liability does not result from a breach of the
representations contained in Section 4.8) and all reserves established by
NetGain and set forth in the Interim Financial Statements (as hereinafter
defined) are adequate for all known liabilities and reasonably anticipated
losses. Since the date of the Interim Financial Statements, there were no loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board) which are
not adequately provided for in the Interim Financial Statements as required by
such Statement No. 5.
4.6 Interim Financial Statements. Schedule 4.6 previously delivered to
▇▇▇▇▇ has attached hereto true, correct and complete copies of the Interim
Financial Statements of NetGain as of the inception of the Predecessor through
June 30, 1997 (the "Interim Financial Statements"). The Interim Financial
Statements are in accordance with the books and records of
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NetGain, present fairly the financial condition of NetGain as of the date
thereof and the results of operations of NetGain for the periods then ended and
have been prepared in accordance with generally accepted accounting principles
consistently applied.
4.7 Agreements. Schedule 4.7 previously delivered to ▇▇▇▇▇ sets forth
true, correct and complete lists of all written or oral contracts, agreements
and other instruments not made in the ordinary course of business to which
NetGain is a party, or made in the ordinary course of business and referred to
in clauses (i) through (xii) of this Section 4.7. Except as set forth in
Schedule 4.7, NetGain is not a party to any written or oral, formal or informal:
(i) continuing contract for the future purchase ,
sale, license or subscription of products or services which calls for
performance over a period of more than one year which is not terminable
on 30 days' or less notice, without cost or other liabilities;
(ii) joint venture contract or other agreement which
has involved or is reasonably expected to involve a sharing of profits
with any third parties;
(iii) contract or commitment for the employment of, or
any other type of contract or understanding with, any employee, officer
or consultant which is not immediately terminable without cost or other
liability on or at any time after the Effective Date of the Merger;
(iv) indenture, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money, a
line of credit or a leasing transaction of a type required to be
capitalized;
(v) lease or other agreement under which NetGain is
lessor of, lessee of, or holds or operates any items of tangible
personal property or real property owned by any third party and under
which payments due or received from such third party exceed $5,000 per
annum;
(vi) material agreement, license, franchise, permit,
indenture or authorization;
(vii) agreement that restricts NetGain from engaging
in any aspect of its business or competing in any line of business in
any geographic area;
(viii)agreement with respect to confidential
obligations to any third party;
(ix) distributor, sales agency, sales representation
or vendor, contracts or subcontracts;
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(x) arrangement under which the consequences of a
default or termination could have a material adverse effect on the
assets, liabilities, business, financial condition, operation, results
of operations or future prospects of NetGain;
(xi) unfilled customer order or commitment obligating
NetGain to delivery products or perform services which will result in a
loss to NetGain upon completion of performance;
(xii) purchase order or commitment of NetGain in
excess of normal requirements or in which prices provided therein are
in excess of current market prices for the products or services to be
provided thereunder; or
(xiii) Agreement to enter into any of the agreements
referred to in subsections (i) through (xii) of this Section 4.7.
(b) Each End User Agreement (as hereinafter defined) substantially
conforms to the standard form(s) established by NetGain, subject to changes
that (assuming continuation of its present business practices) are not
material. Except for reasonable and ordinary marketing and service
commitments and practices, or except as provided in written purchase orders,
license agreements, maintenance contracts and customer files maintained by
NetGain (true, complete and correct copies of which have previously been
provided to ▇▇▇▇▇) NetGain has not made or entered into any contracts or
commitments for the benefit of any current customers. "End User Agreement"
mean the license agreements, maintenance agreements and any other
agreements, options, commitments or understandings entered into by NetGain
in the ordinary course of business with licensees or perspective licensees
or purchasers or perspective purchasers of NetGain Products (as hereinafter
defined). "NetGain Products" shall mean: (i) the Virtua Enterprise family of
products of NetGain, (ii) the computer programs related thereto and
developed by or on behalf of NetGain, (iii) related hardware sold or leased
by NetGain or any affiliate of NetGain in combination of a license of the
product lines by NetGain, (iv) any other computer software programs of
NetGain that are competitive with or provide functionality equivalent to the
Virtua Enterprise products of NetGain, and (v) any other software programs
developed, maintained or serviced by NetGain.
4.8 Title and Design Warranties. The NetGain Products, and any prior or
subsequent versions thereof (including any components thereof) developed,
marketed, sold or licensed by NetGain at any time prior to the date of this
Agreement and on or prior to the Effective Date of the Merger:
(i) are or will be, aside from any ▇▇▇▇▇ assistance,
completely designed by NetGain and written or will be written solely by
NetGain, using regular, salaried, full time NetGain employees within
the scope of their employment or by independent contractors pursuant to
agreements providing that
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the work product of such independent contractor is the sole property of
NetGain, except as disclosed on Schedule 4.8;
(ii) are or will be developed entirely with private
funding, with no portion of the development either funded by the United
States Government, or specified in any United States Government
contract or subcontract or provided or created in the performance of
any United States Government contract or subcontract;
(iii) do not and will not include any design
components, actual code or documentation which is owned by or licensed
from any third parties;
(iv) are not now, have not been and will not be
pledged, covered, collaterally assigned as security or otherwise
affected in any way by any bank loan, lending or security arrangement
or other such arrangement entered into by or binding upon NetGain in
any way, except as disclosed in Schedule 4.8 previously delivered to
▇▇▇▇▇:
(v) are and will be original works of authorship
as works made for hire under the United States Copyright Act, of which
works NetGain is the sole author;
(vi) have been programmed in accordance with
recognized principles of modular coding (including such principles as
(1) the use of well defined procedures, functions or subroutines, with
suitably designed interface parameters and (2) the avoidance of side
effects caused by unrestrained use of global variables) and are capable
of being understood, after a reasonable period of study, by an
experienced programmer appropriately skilled in the relevant
programming language;
(vii) contain no material errors, defects,
inconsistencies or other problems which are known to NetGain, except as
disclosed on Schedule 4.8;
(viii) are and will be suitable for use with the
hardware configurations and operating systems for which they are or
will be designed;
(ix) do not contain any virus, Trojan Horse, worm,
or other software routine design to permit unauthorized access to the
associated computer system, or to disable, erase or otherwise harm
software, hardware or data, or to perform other similar actions; and do
not contain or implement any backdoor, time bomb, software lockout key
or device, drop dead device or other software routing designed to
disable a computer program, either automatically with the passage of
time or under the positive control of a person other than NetGain; and
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(x) do not infringe any Intellectual Property Rights
(as hereinafter defined) of any third party (a "Third Party Right") and
NetGain has not been notified of any possibility or allegation that any
NetGain Products infringe any Third Party Right. "Intellectual Property
Rights" means any and all worldwide rights in and with respect to
patents, copyrights, proprietary information, know-how, trade secrets,
moral rights, contract or licensing rights, confidential and
proprietary information protected under contract or otherwise under
law, and other similar rights or interests in intellectual or
industrial property.
4.9 Absence of Owned Real Property. NetGain owns no real property.
4.10 Compliance with Applicable Laws.
(a) The business of NetGain is not being conducted in violation of any
law, ordinance, regulation, rule or order of any governmental entity, the
consequences of which in the aggregate would cause material damage or
additional costs and expenses to NetGain. No charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand or notice by any
governmental entity with respect to NetGain is pending or, to the knowledge
of NetGain, threatened, nor has any governmental entity indicated, to the
knowledge of NetGain, an intention to conduct the same;
(b) NetGain has all material permits, licenses and franchises from
governmental entities required to conduct its business as now being
conducted;
(c) NetGain has not:
(i) made or agreed to make any contribution, payment,
or gift of funds or property to any official, employee or agent of any
governmental entity where either the contribution, payment or gift or
the purpose thereof was illegal under the laws and regulations of such
governmental entity or otherwise;
(ii)established or maintained any unrecorded fund or
asset for any purpose, or made any false entries on any books and
records for any reason; or
(iii) made or agreed to make any contribution, or
reimburse any political gift or contribution made by any person or
entity to any candidate for public office of any governmental entity.
(d) NetGain has filed in a timely manner all reports, documents and
other materials required to be filed under the applicable laws and
regulations of any governmental entity and the information contained therein
was true, correct and complete in all material respects; and
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(e) NetGain has possession of all records and documents required to be
retained under the applicable laws and regulations of any governmental
entity.
4.11 Absence of Litigation. There are no suits, grievances, arbitrations,
actions, proceedings or investigations pending or, to the knowledge of NetGain,
threatened against or affecting NetGain. There are no judgments, decrees,
injunctions, rules or orders of any governmental entity or arbitrator
outstanding against NetGain which involve the likelihood of any adverse judgment
or liability, whether or not fully covered by insurance, which can reasonably be
expected to result in any liability of NetGain with respect to its business or
assets or any material adverse change in the operations, prospects or condition
of NetGain.
4.12 Employee Benefits. Schedule 4.12, previously delivered to ▇▇▇▇▇, lists
all welfare benefit, pension, retirement, insurance, bonus, deferred
compensation or other similar plans or arrangements which NetGain maintains, or
to which NetGain has any outstanding, present or future liability with respect
thereto, including without limitation obligation to contribute to or make
payments under whether formal or informal, written or unwritten (hereinafter
referred to as the "NetGain Plans" and NetGain Plans together with any such
plans maintained by any entity which together with NetGain constitutes a single
employer within the meaning of Section 414 of the Internal Revenue Code of 1986
(the "Code") are hereinafter referred to as "The NetGain Group Plans"), copies
of which, including trust agreements under such NetGain Plans and determination
letters issued by the Internal Revenue Service with respect thereto, and IRS
Forms 5500 and attorney's response to an auditor's request for information for
each of the three most recent plan years, have been provided to ▇▇▇▇▇. No
NetGain Group Plan is subject to Title IV of the Employee Retirement Income
Security Act of 1974, as amended (hereinafter referred to as "ERISA") or is
intended to meet the requirements of Section 401(a) of the Code. No NetGain
Group Plan has been involved in prohibited transaction, as defined in Section
4975(c)(1) of the Code or Section 406 of ERISA. NetGain has no knowledge of any
breach of a fiduciary duty with respect to any NetGain Group Plan maintained
pursuant thereto. There has been no failure to file any reports or returns with
respect to any NetGain Group Plan. Both NetGain and any entity which together
with NetGain constitutes a single employer within the meaning of the Code
(hereinafter referred to as the "NetGain Group") have no outstanding, present or
future obligation or liability to contribute to a multiemployer plan. If any
Group Plans were terminated on the Closing Date, no member of the NetGain Group
would have any liability as a result of the termination. Each member of the
NetGain Group has made full and timely payment of, or has accrued on its
financial statements, pending full and timely payments, all amounts which are
required under the terms of each NetGain Group Plan and in accordance with
applicable law for the plan year within which the Closing Date falls. No member
of the NetGain Group has any liability with respect to any NetGain Group Plan.
All NetGain Group Plan comply in all material respects with ERISA and, when
applicable, with the Code. All of The NetGain Group Plans have been administered
in substantial compliance with the requirements of ERISA and, when applicable,
with the requirements of the Code. Other than routine claims for benefits, there
are no actions, audits, investigations, suits, or claims pending, or threatened
against any of The NetGain Group Plans or any fiduciary of any of The NetGain
Group Plans or against the assets of any of The NetGain Group Plans. The
consummation of the transactions contemplated hereby
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will not accelerate or increase any liability under any NetGain Group Plan
because of an acceleration or increase of any of the rights or benefits to which
employees may be entitled thereunder. Except for benefit obligations under any
NetGain Group Plan which is intended to meet the requirements of Section 401(a)
of the Code, no member of NetGain Group has any obligation to any retired or
former employee, or any current employee upon retirement, under any NetGain
Group Plan, and any NetGain Group Plan can be terminated without resulting in
any NetGain liability to ▇▇▇▇▇.
4.13 No Defaults.
(a) NetGain is not in default under and there exists no event,
condition or occurrence, which with notice, lapse of time or both, which
would constitute such a default by NetGain under any agreement to which
NetGain is a (a) party, the consequences of which in the aggregate would
cause material damage or additional costs and expenses to NetGain;
(b) There exists no actual or, to the knowledge of NetGain, threatened
termination, cancellation or limitation of, or any modification or change
in, the business relationship of NetGain with any customer or group of
customers of NetGain or the business relationship of any supplier or
licensor to NetGain; and
(c) There are no defaults or claims purported, or alleged defaults, or
any state of facts which, with notice, lapse of time or both, would
constitute defaults under any obligations on the part of NetGain to be
performed under any instruments, documents, agreements (oral or written) to
which NetGain is a party, including, without limitation, any contracts or
licenses, the consequences of which in the aggregate would cause material
damage or additional costs and expenses to NetGain.
4.14 Taxes. As of the Closing Date, NetGain and the Predecessor will
have filed all tax returns which are required to have been filed, and will have
paid all taxes and governmental charges due and payable with respect to such
returns. Each such return is or will be true, correct and complete in all
material respects, and copies of such returns have been or will be provided to
▇▇▇▇▇. NetGain agrees to capitalize all research and development expenditures
accrued for NetGain Products and any other accrued research and development
expenditures on its 1997 annual tax returns. As of the date hereof and as of the
Closing Date, NetGain has and will have accrued in accordance with generally
accepted accounting principles all taxes and governmental charges, including
deferred taxes, that are or will become due and payable with respect to its
operations through the Closing Date. All amounts required to be withheld by
NetGain from its employees (as classified for payroll tax purposes by the
appropriate governmental authority, without regard to the classification by
NetGain) for income tax, social security contributions, unemployment tax,
workers' compensation, or other employment tax purposes have been and will be
withheld and, if applicable, paid to the appropriate governmental agencies. The
transaction resulting in the acquisition by NetGain of all of its assets from
the Predecessor constituted a transfer to a controlled corporation within the
meaning of Section 351 of the
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Internal Revenue Code (the "Code"). The members of NetGain's predecessor have
paid all income taxes, if any, that were due with respect to the Predecessor's
income for all periods prior to the Closing Date. No claim or assessment is
pending or, to the knowledge of NetGain, threatened against NetGain, the
Predecessor, or the members of the Predecessor. There are no pending or, to the
knowledge of NetGain, threatened audits of any tax return of NetGain, the
Predecessor, or the members of the Predecessor. Neither NetGain, the
Predecessor, or the members of the Predecessor have executed a waiver or consent
extending any statute of limitations for the assessment or collection of any
taxes which remains outstanding. NetGain is not, nor has it ever been, a member
of a consolidated group of corporations as defined in Section 1504 of the Code,
or comparable provision of the laws of any state.
4.15 Disclosure. No representation or warranty made by NetGain in this
Agreement, the schedules delivered to ▇▇▇▇▇, the Merger Agreement or with
respect to any document, written information, statement, Interim Financial
Statement, certificate or exhibit prepared or furnished or to be prepared and
furnished by NetGain or its representatives pursuant hereto, or pursuant to the
Merger Agreement, or in connection with the transactions contemplated hereby or
thereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or therein not misleading in light of the circumstances
under which they were made or furnished.
4.16 Acquisition of the Predecessor. NetGain duly and validly acquired all
of the business and assets of the Predecessor pursuant to the Agreement and Plan
of Merger between NetGain Acquisition Corporation and the Predecessor dated July
9, 1997 effective as of July 9, 1997, which agreement was duly and validly
approved by the members of the Predecessor and the Board of Directors and
stockholders of NetGain.
4.17 Vacation Pay. NetGain shall amend its employment policies, as
necessary, so that, as of the Effective Date of the Merger, it shall have no
liability to employees or former employees of NetGain for accrued but untaken
vacation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇
▇▇▇▇▇ represents and warrants to NetGain as follows:
5.1 Organization and Good Standing. ▇▇▇▇▇ is and the Subsidiary will be
a corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia and ▇▇▇▇▇ has and the Subsidiary will have all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted or as may be conducted.
▇▇▇▇▇ will own all of the outstanding capital stock of the Subsidiary.
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5.2 Authority. ▇▇▇▇▇ has and the Subsidiary will have all requisite
corporate power and authority to enter into this Agreement and the Merger
Agreement and to perform their respective obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby on the part
of ▇▇▇▇▇ and the Subsidiary, respectively. The execution and delivery by ▇▇▇▇▇
of this Agreement and by ▇▇▇▇▇ and the Subsidiary of the Merger Agreement and
the consummation by ▇▇▇▇▇ and the Subsidiary of the transactions contemplated on
their part by this Agreement and the Merger Agreement have been or will be duly
authorized by all necessary corporate action on the part of ▇▇▇▇▇ and the
Subsidiary. This Agreement has been duly executed and delivered by ▇▇▇▇▇ and is
the valid and binding obligation of ▇▇▇▇▇ enforceable in accordance with its
terms.
5.3 ▇▇▇▇▇ SEC Filings. ▇▇▇▇▇ has made available to NetGain (and NetGain
agrees to furnish or make copies available to each holder of NetGain Common
Stock and each holder of an option to purchase NetGain Common Stock on or prior
to the Effective Date of the Merger) true, complete and correct copies of Annual
Report on Form 10-K for the year ended December 31, 1996, its quarterly report
on Form 10-Q for the quarter ended March 31, 1997, its proxy statement for its
annual meeting of stockholders held on May 6, 1997 and its Annual Report to
Stockholders for the year ended December 31, 1996. ▇▇▇▇▇ agrees to furnish to
NetGain (and NetGain agrees to furnish or cause to be made available to each
holder of NetGain Common Stock and each holder of an option to purchase NetGain
Common Stock on or before the Effective Date of the Merger) any filings made
hereafter and prior to January 31, 1998 or the lapse of the Option, whichever
shall first occur, by ▇▇▇▇▇ with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934 or the Securities Act and
copies of each press release made generally available to the public by ▇▇▇▇▇. In
their entirety, these documents are hereinafter referred to as the "▇▇▇▇▇ SEC
Filings."
5.4 Disclosure. No representation or warranty made by ▇▇▇▇▇ in this
Agreement, the Merger Agreement, the ▇▇▇▇▇ SEC Filings or with respect to any
document, written information, statement, certificate or exhibit prepared or
furnished or to be prepared and furnished by ▇▇▇▇▇ or its representatives
pursuant hereto, or pursuant to the Merger Agreement, or in connection with the
transactions contemplated hereby or thereby, (as of the date of filing with the
SEC or release to the public with respect to the ▇▇▇▇▇ SEC Filings), contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
made or furnished.
5.5 Adverse Tax Consequences. The parties hereto intend that this
transaction qualify as a reorganization under Section 368(a)(1)(A)(a)(2)(D) of
the Code, and neither party hereto shall take a contrary position with respect
to such party's federal or state tax returns.
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ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO
THE EFFECTIVE DATE OF THE MERGER
6.1 Information and Access.
(a) During the period from the date hereof until the Effective
Date of the Merger, or until termination of this Agreement pursuant to
Article VIII hereof, NetGain shall afford and, with respect to clause
(ii) below, shall cause NetGain's independent certified public
accountants to afford:
(i) to the employees, independent public
accountants, counsel and other representatives of ▇▇▇▇▇,
reasonable access to the properties, books, records (including
tax returns filed and those in preparation) and the right to
receive copies thereof and to the personnel of NetGain in
order that ▇▇▇▇▇ shall have a full opportunity to make such
investigation as it reasonably desires to make of NetGain,
provided that ▇▇▇▇▇'▇ access to the premises of NetGain and to
its representatives shall be during normal business hours and
on reasonable notice to NetGain and shall be conducted by such
persons in a manner not to unduly disrupt the business
activities of NetGain;
(ii)to the independent public accountants of
▇▇▇▇▇, access to the audit work papers and other records of
the independent public accountants of NetGain and the right to
receive copies thereof.
(b) No investigation pursuant to this Section 6.1 and no
information received by ▇▇▇▇▇ in the course of conducting its due
diligence investigation and no assistance provided by ▇▇▇▇▇ or its
representatives in the preparation of schedules furnished by NetGain to
▇▇▇▇▇ shall affect or otherwise diminish any representations and
warranties of NetGain or any conditions precedent to the obligations of
▇▇▇▇▇ and the Subsidiary.
6.2 Confidentiality.
(a) ▇▇▇▇▇ shall not release, publish, reveal or disclose,
directly or indirectly, any Proprietary Material (as hereinafter
defined) except:
(i) to ▇▇▇▇▇'▇ officers, directors,
employees, financial advisors, legal counsel, independent
certified public accountants, lenders, or other agents,
advisors or representatives as shall require access thereto
for the purposes of the transactions contemplated by this
Agreement and who shall agree to be bound by the terms of this
Section 6.2; or
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(ii)with the prior consent of NetGain and
then only to the extent specified in such consent.
"Proprietary Material" shall mean any business or technical
information of or relating to NetGain including, without
limitation, systems, processes, data, functional
specifications, computer programs, marketing and advertising
methods, customer lists, pricing policies, financial
information, projections, forecasts, strategies, budgets or
other information related to its business or its customers
provided that such information is identified as constituting
"Proprietary Material" to ▇▇▇▇▇ prior to being furnished to
▇▇▇▇▇. ▇▇▇▇▇ agrees to take all reasonable precautions to
safeguard the confidentiality of the Proprietary Material.
(b) The restrictions on disclosure of information contained in
this Section 6.2 do not extend to any item of information that:
(i) is publicly known at the time of its
disclosure,
(ii) is lawfully received by ▇▇▇▇▇ from a
third party not bound in a confidential relationship to
NetGain to the knowledge of ▇▇▇▇▇,
(iii) is published or otherwise made known
to the public by NetGain,
(iv) was generated independently before its
receipt from NetGain, or
(v) is required to be disclosed pursuant to
an order or decree of a governmental entity or other legal
requirement to produce or disclose such item or information
provided, however, that upon receiving notice that any such
order or decree is being sought or that any legal requirement
is applicable, ▇▇▇▇▇ shall promptly give NetGain notice
thereof and ▇▇▇▇▇ shall cooperate with NetGain's efforts, if
any, to contest the issuance of such order or decree or the
application of such legal requirement.
6.3 Conduct of Business. From the date hereof until the Effective
Date of the Merger, or until the earlier termination of this Agreement pursuant
to Article VIII hereof, NetGain shall conduct its business in the ordinary and
usual course consistent with past practice, and NetGain shall use its reasonable
efforts to maintain and preserve intact its business organization, to keep
available the services of its officers and employees, and to maintain
satisfactory relations with licensors, franchisers, licensees, suppliers,
customers and others having business relationships with it. Without limiting the
generality of the foregoing and except as provided in this Agreement, prior to
the Effective Date of the Merger without the prior written consent of ▇▇▇▇▇,
NetGain shall not, to the extent such actions are within the control of NetGain,
unless this Agreement has been previously terminated pursuant to Article VIII
hereof do any of the following:
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(a) acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock or
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof;
(b) amend its articles of incorporation or bylaws;
(c) license, sell, transfer, lease, pledge or otherwise
dispose of or encumber any of its material assets (including, without
limitation, any Intellectual Property Rights) or any indebtedness owed
to it or any claims held by it, except for the sale, license, or
subscription for (or the furnishing of associated services) of NetGain
Products in the ordinary course of business;
(d) incur any indebtedness for borrowed money, guaranty any
such indebtedness, issue or sell any debt securities, guaranty, endorse
or otherwise as an accommodation become responsible for obligations of
others, or make loans or advances;
(e) issue any NetGain Common Stock or issue or grant any
rights to purchase or otherwise acquire shares of NetGain Common Stock
other than the acceleration after exercise of the Option of the vesting
of options outstanding on the date hereof to purchase shares of NetGain
Common Stock which are not already vested on the date of exercise of
the Option ("NetGain Option Shares"), provided that the following
conditions are satisfied:
(i) options to purchase NetGain Option
Shares shall only vest during the period between the exercise
of the Option and the Effective Date of the Merger;
(ii)shares of ▇▇▇▇▇ Common Stock issuable or
deliverable pursuant to the Merger Agreement in respect of
NetGain Option Shares shall be held in Escrow pursuant to the
Escrow Agreement until January 1, 1999 even if the NetGain
Option Shares are otherwise deliverable pursuant to the
release provisions of the Merger Agreement; and
(iii) If the holders of NetGain Option
Shares ("NetGain Option Holders") leave the employ of ▇▇▇▇▇ or
the Subsidiary, as the case may be, prior to January 1, 1999,
they shall forfeit, pursuant to the terms of the Escrow
Agreement, all shares of ▇▇▇▇▇ Common Stock issuable or
deliverable in respect of NetGain Option Shares;
(f) grant any increase in rates of pay, salaries, bonuses or
benefits to its employees or enter into any new employment contracts
with employees, agents or independent contractors (other than
agreements that are terminable at will by the Company), provide for any
severance, change in control or similar benefit or any increase
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in severance or termination benefits, payable or to become payable by
NetGain to its employees;
(g) adopt or amend in any material respect any NetGain Plans;
(h) change in any material respect the accounting methods or
practices followed by NetGain;
(i) take any action that would result in any of the
representations and warranties of NetGain set forth in this Agreement
to become untrue or in any of the conditions to the consummation of the
transactions contemplated by this Agreement not to be satisfied;
(j) enter into any written or oral contract, agreement or
other involvement of the type to be disclosed to ▇▇▇▇▇ pursuant to
Section 4.7 hereof, or modify, accelerate, terminate or cancel, any
such contract, agreement or other instrument; or
(k) authorize or propose any of the foregoing, or enter into
any contract, agreement, commitment or arrangement to do any of the
foregoing.
6.4 Distribution Agreement. From the date hereof until the
Effective Date of the Merger or the earlier termination of this Agreement
pursuant to Article VIII hereof, the parties hereto agree to distribute the
NetGain Products as follows:
(a) ▇▇▇▇▇ and NetGain will split evenly all revenues from the
sale or license of or subscription for NetGain Products but only
NetGain's one-half thereof shall be credited toward revenues from
NetGain Products as provided in Section 2.2 of the Merger Agreement,
and ▇▇▇▇▇ shall retain all cash received as a result of its
distribution of NetGain Products unless the Option lapses or expires
unexercised, in which case ▇▇▇▇▇ shall promptly pay to NetGain one-half
of such cash;
(b) If the Option lapses, expires or is otherwise not
exercised by ▇▇▇▇▇, ▇▇▇▇▇ will, as soon as practicable thereafter,
assign to NetGain all of ▇▇▇▇▇'▇ rights with respect to the customers
of NetGain Products as they relate to such products;
(c) NetGain shall approve all the sales or licenses of or
subscriptions for NetGain Products; and
(d) NetGain agrees to provide appropriate services and support
to all the customers of NetGain Products; provided, however, that
NetGain shall be obligated to provide such services and support
directly to such customers only in the event that the Option lapses or
is terminated and that at all times prior to the lapse or termination
of the Option, such services and support shall be provided through
authorized ▇▇▇▇▇ personnel.
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6.5 Negotiation with Others.
(a) From and after the date hereof until the Effective Date of
the Merger, the earlier termination of this Agreement pursuant to
Article VIII hereof or notice by ▇▇▇▇▇ of ▇▇▇▇▇'▇ decision to allow the
option to lapse, NetGain will not, directly or indirectly (and will use
its reasonable efforts to cause its officers, employees,
representatives and advisors not to, directly or indirectly):
(i) solicit, initiate discussions, or engage
in negotiations with any Person (as hereinafter defined),
whether such negotiations are initiated by NetGain or
otherwise, or take any other action to facilitate the efforts
of any Person, other than ▇▇▇▇▇, relating to the possible
acquisition of NetGain (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets;
(ii)provide information with respect to
NetGain to any Person, other than ▇▇▇▇▇, relating to the
possible acquisition of NetGain (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or
any material portion of its capital stock or assets;
(iii) enter into any agreement with any
Person, other than ▇▇▇▇▇, providing for the possible
acquisition of NetGain (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets; or
(iv)make or authorize any statement,
recommendation or solicitation in support of any possible
acquisition of NetGain (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets by any Person,
other than ▇▇▇▇▇.
"Person" shall mean any material person, company, corporation, partnership,
joint venture, trust, limited liability company or any other entity.
(b) If NetGain receives any unsolicited offer or proposal to
enter into negotiations relating to the possible acquisition by NetGain
by any person other than ▇▇▇▇▇, NetGain shall immediately notify ▇▇▇▇▇
thereof, including information as to the identity of the offeror or the
party making such offer or proposal and the specific terms of such
offer or proposal, as the case may be.
(c) NetGain recognizes that a breach of Section 6.5 will cause
irreparable and material loss to damage.
(d) NetGain understands that ▇▇▇▇▇ will not have an adequate
remedy at law for a breach or threatened breach by ▇▇▇▇▇ of the terms
of Section 6.5, and NetGain therefore
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agrees that if it should breach its agreement contained in Section 6.5,
NetGain shall pay to ▇▇▇▇▇ on demand the sum of $100,000 plus amounts
previously paid by ▇▇▇▇▇ to NetGain upon execution of the letter of
intent between ▇▇▇▇▇ and NetGain on July 9, 1997, upon execution of
this Agreement and in respect of Bimonthly Payments, to reimburse ▇▇▇▇▇
for the expenses ▇▇▇▇▇ shall have incurred in connection with the
transactions contemplated hereby and as partial reimbursement to ▇▇▇▇▇
for its damages arising out of loss of bargain; provided, however, the
right to receive such payment shall not be ▇▇▇▇▇'▇ exclusive remedy for
such breach and ▇▇▇▇▇ shall have, in addition to the right to receive
such payment, such other rights and remedies in respect of such breach
as may be provided at law or in equity including, without limitation,
the right to seek temporary and permanent injunctions enjoining any
such breach or the continuation thereof by NetGain.
6.6 Consultation with ▇▇▇▇▇. From and after the date hereof until the
Effective Date of the Merger or the earlier termination of this Agreement
pursuant to Article VIII hereof, NetGain shall afford to ▇▇▇▇▇ the right and
opportunity to make recommendations as to the conduct of the business and
affairs of NetGain in contemplation of the Merger (including specifically,
without limitation, recommendations concerning relations with employees,
customers and vendors and the use of NetGain's assets and its product
development activities) and NetGain shall promptly advise ▇▇▇▇▇ in writing of
any change or event having, or which, insofar as can reasonably be foreseen,
could have, a material adverse effect on the business, operations, financial
condition or prospects of NetGain.
6.7 No Impediment to Merger. From and after the date hereof and until
the Effective Date of the Merger or the earlier termination of this Agreement
pursuant to Article VIII hereof, NetGain agrees not to take or cause to be taken
any action which would reasonably be expected to have the effect of causing
▇▇▇▇▇ not to exercise the Option or which would cause the Merger not to be
consummated and NetGain agrees to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws or regulations to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.8 Public Announcements. ▇▇▇▇▇ and NetGain shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement and shall not
issue any such press release or make any such public statement prior to such
consultation and without the consent of the other party, except as may be
required by law.
6.9 Expenses. ▇▇▇▇▇ on the one hand and the stockholders of NetGain, on
the other hand, shall pay the expenses (including legal fees and expenses)
incurred by ▇▇▇▇▇ and NetGain, respectively, in connection with the transactions
contemplated by this Agreement, except that ▇▇▇▇▇ shall pay up to $15,000 of
such expenses incurred by NetGain through the Effective Date of the Merger,
should the Merger occur. On the Effective Date of the Merger, the stockholders
of NetGain shall have contributed to the capital account of NetGain such amount
as may be
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necessary to cause the accrued liabilities of NetGain on the Effective Date of
the Merger not to exceed payroll expenses of NetGain accrued since the last
Bimonthly Payment and up to $10,000 of other current liabilities incurred by
NetGain in the ordinary course of business, and such amount contributed by the
stockholders of NetGain to its capital account shall be used to discharge
liabilities of NetGain in excess of such amounts.
6.10 Notification of Certain Matters. NetGain shall give prompt
notice to ▇▇▇▇▇ of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause:
(i) any representation or warranty contained
in this Agreement to be untrue or inaccurate in any respect
from the date hereof until the Effective Date of the Merger,
or
(ii)any failure of NetGain or any officer,
director, employee, or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied
with or satisfied by it or them under this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of ▇▇▇▇▇. The obligation of ▇▇▇▇▇ to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions, unless waived by ▇▇▇▇▇:
(a) Representations and Warranties. All information required
to be furnished or delivered by NetGain pursuant to this Agreement or
the schedules contemplated hereby shall have been furnished or
delivered as of the date hereof and the Closing Date, as required
hereunder. The representations and warranties of NetGain set forth in
this Agreement and the Merger Agreement shall be true, correct and
complete in all respects as of the date hereof, the Closing Date and
the Effective Date of the Merger, as though made on and as of such
dates. ▇▇▇▇▇ shall have received a certificate signed by an officer of
NetGain to such effect as of each of the Closing Date and the Effective
Date of the Merger. Any inspection or audit of any matters relating to
NetGain pursuant to this Agreement shall in no way limit the ability of
▇▇▇▇▇ to rely on the representations or warranties set forth herein.
(b) No Effect on Right to Rely on Representations. The fact
that a stockholder of NetGain shall become an employee or stockholder
of ▇▇▇▇▇ on or after the Effective Date of the Merger shall in no way
limit, affect or impair the ability of ▇▇▇▇▇ to rely on the
representations, warranties, covenants and agreements of NetGain set
forth herein.
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(c) Performance of Obligations of NetGain. NetGain shall have
performed in all material respects all obligations and covenants
required to be performed by it under this Agreement prior to or as of
the Closing Date and the Effective Date of the Merger, as the case may
be, and ▇▇▇▇▇ shall have received a certificate signed by an officer of
NetGain to such effect as of each of such dates.
(d) No Injunction, Etc. No suit, action or proceeding shall be
pending or threatened before any governmental entity wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge
would:
(i) prevent consummation of any of the
transactions contemplated by this Agreement;
(ii) cause any of the transactions
contemplated hereby or by the Merger Agreement to be rescinded
following consummation; or
(iii) materially and adversely affect the
right of ▇▇▇▇▇ to own, operate or control the business or
assets of NetGain.
(e) Receipt of Proxies. ▇▇▇▇▇ shall have received the Proxies
provided for in Section 1.4 hereof.
(f) Approval and Execution of Agreement; Employment
Agreements. This Agreement, the Merger Agreement, the Escrow Agreement
and the Promissory Note of NetGain attached hereto as Exhibit A, D and
B, respectively, shall each have been approved by the Board of
Directors of NetGain and executed by NetGain and the stockholders of
NetGain, as the case may be, and the form of Employment Agreements
attached hereto as Exhibit F (the "Employment Agreements"), modified as
to each such person as confirmed in a letter to each of them,
respectively, from ▇▇▇▇▇ dated the date hereof, shall have been
executed and delivered by the persons to be employed thereunder upon
the Effective Date of the Merger, who are: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
(g) Agreement with Lender. Carpe Fund, L.P., a Georgia limited
partnership ("Lender") shall have executed an agreement substantially
in the form attached hereto as Exhibit G providing for the issuance to
Lender of shares of ▇▇▇▇▇ Common Stock, valued at the average of the
closing prices for the common stock as reported in the Wall Street
Journal, for the ten trading days preceding the Effective Date of the
Merger, equal in value to the amounts owed by NetGain to Lender on the
Effective Date of the Merger in satisfaction of the outstanding
obligations of NetGain to Lender as of such date.
(h) Results of Due Diligence. ▇▇▇▇▇ shall have been reasonably
satisfied with the results of its due diligence investigation of
NetGain, including, without limitation, with the demonstration by
NetGain of a working version of NetGain Products.
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(i) Appointment of Representatives. The stockholders of
NetGain shall have approved the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇
▇▇▇▇▇▇▇▇ (the "Representatives") to represent such former holders of
NetGain Common Stock upon and after the Effective Date of the Merger
under the Escrow Agreement and, in the event of the inability or
unwillingness prior to execution of the Escrow Agreement of any of the
persons so selected to act as Representatives, substitute
Representatives similarly selected, the Representatives to have the
powers and authority provided for in the Escrow Agreement.
(j) Accuracy of Disclosures. Examination by ▇▇▇▇▇ shall not
have revealed any material inaccuracy in any of the representations and
warranties made by NetGain in this Agreement or in the schedules
delivered pursuant hereto.
(k) Condition of NetGain Assets. As of the Closing Date, all
of NetGain's properties and assets shall be in substantially the same
condition as at the close of business on the date hereof, except for
ordinary use and wear thereof and changes occurring in the ordinary
course of business between the date hereof and the Closing Date and
▇▇▇▇▇ shall have received a certificate of the President of NetGain
dated as of the Closing Date to such effect.
(l) Uniform Commercial Code Searches. Uniform commercial code
searches, if desired by ▇▇▇▇▇, shall be made or caused to be made by
▇▇▇▇▇ at its expense. The results of such searches shall be reasonably
satisfactory to ▇▇▇▇▇ and its counsel, shall have been received by
▇▇▇▇▇ and any and all liens, claims, security interests or encumbrances
against any of NetGain's properties or assets disclosed thereby which
are not acceptable to ▇▇▇▇▇ shall have been released or terminated by
NetGain prior to or at the time of the closing.
(m) Releases. Each stockholder and option holder of NetGain
shall have executed and delivered to ▇▇▇▇▇ a release of any claims
against NetGain, its officers and directors and other persons acting on
its behalf, in such capacities and against any other stockholder of
NetGain, as a stockholder, in form and substance satisfactory to ▇▇▇▇▇
and its counsel.
(n) Approval of ▇▇▇▇▇'▇ Counsel. The form and substance of all
legal matters contemplated by this Agreement and the Merger Agreement
and of all papers delivered hereunder shall be reasonably satisfactory
to Powell, Goldstein, ▇▇▇▇▇▇, and ▇▇▇▇▇▇ LLP, counsel to ▇▇▇▇▇.
(o) Approval of Merger and the Merger Agreement. The Board of
Directors of NetGain shall have approved the Merger and the Merger
Agreement, NetGain shall have executed and delivered the Merger
Agreement and the stockholders of NetGain shall have approved the
Merger and the Merger Agreement at a special meeting of stockholders of
NetGain duly called for such purpose.
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(p) Acceleration of NetGain Option Shares. NetGain shall have
accelerated the vesting of all options to purchase NetGain Option
Shares after the exercise of the Option but before the Effective Date
of the Merger.
(a) (q) Expense Obligations. The stockholders of NetGain shall have
satisfied their obligations in Section 6.9 of this Agreement.
7.2 Conditions to Obligations of NetGain. The obligations of NetGain
to consummate the transactions contemplated by this Agreement and the Merger
Agreement are subject to the satisfaction of the following conditions, unless
waived by NetGain:
(a) Representations and Warranties. The representations and
warranties of ▇▇▇▇▇ set forth in this Agreement and the Merger
Agreement shall be true and correct in all material respects as of the
date hereof, the Closing Date and the Effective Date of the Merger, as
though made on and as of such dates. NetGain shall have received a
certificate signed by an officer of ▇▇▇▇▇ to such effect as of each of
the Closing Date and the Effective Date of the Merger.
(b) Performance of Obligations of ▇▇▇▇▇ and the Subsidiary.
▇▇▇▇▇ and the Subsidiary shall have performed in all material respects
all obligations and covenants required to be performed by them under
this Agreement prior to or as of the Closing Date and the Effective
Date of the Merger, as the case may be, and NetGain shall have received
a certificate signed by an officer of ▇▇▇▇▇ and the Subsidiary to such
effect as of each of such dates.
(c) No Injunction, Etc. No suit, action or proceeding shall be
pending or threatened before any governmental entity wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge
would:
(i) prevent consummation of any of the transactions
contemplated by this Agreement;
(ii) cause any of the transactions contemplated
hereby or by the Merger Agreement to be rescinded following
consummation; or
(iii) adversely affect the right of ▇▇▇▇▇ to own,
operate or control the business or assets of NetGain.
(d) Approval of NetGain's Counsel. The form and substance of
all legal matters contemplated by this Agreement and the Merger
Agreement and of all papers delivered hereunder and thereunder shall be
reasonably satisfactory to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to
NetGain.
(e) Approval and Execution of Agreements. This Agreement, the
Merger Agreement, the Escrow Agreement and the Employment Agreements
shall each have
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been approved by the Board of Directors of ▇▇▇▇▇ and the Subsidiary, as
the case may be, and executed and delivered by ▇▇▇▇▇ or the Subsidiary,
as the case may be.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date by:
(a) mutual agreement of the parties to this Agreement;
(b) ▇▇▇▇▇, if there has been a breach by NetGain of any
representation, warranty, covenant or agreement set forth in this
Agreement which is material and which NetGain fails to cure within five
business days after notice thereof is given by ▇▇▇▇▇ (except that no
cure period shall be provided for a breach by NetGain which by its
nature cannot be cured);
(c) NetGain, if there has been a breach by ▇▇▇▇▇ of any
representation, warranty, covenant or agreement set forth in this
Agreement which is material and which ▇▇▇▇▇ fails to cure within five
business days after notice thereof is given by NetGain (except that no
cure period shall be provided for a breach by ▇▇▇▇▇ which by its nature
cannot be cured);
(d) by either party hereto if the Option lapses, ▇▇▇▇▇ gives
notice under Section 1.2 hereof of its intention not to exercise the
Option or if the Option is not exercised on or prior to January 31,
1998;
(e) by either party hereto of any permanent injunction or
other order of a governmental entity of competent authority preventing
the consummation of the transactions contemplated by this Agreement
shall have become final and nonappealable.
8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1 hereof, this Agreement shall be of no
further force or effect except for the provisions of Sections 6.2, 6.8, 6.9 and
Article IX, each of which shall survive the termination of this Agreement.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.2 Extension; Waiver. At any time prior to the Closing Date, the
parties, through duly authorized officer, may:
extend the time for performance of any of the obligations, rights
or other acts of the other party;
(b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to
this Agreement;
(c) waive compliance with any of the agreements or conditions
contained in this Agreement.
Any agreement on the part of the party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of the
party granting such extension or waiver.
9.3 Entire Agreement. This Agreement (including the schedules
furnished to ▇▇▇▇▇ pursuant hereto) and the other documents attached hereto as
exhibits contain the agreement between the parties with respect to the subject
matter hereof and supersede all prior arrangements and understandings, both
written and oral, with respect thereto.
9.4 Notices. All notices and other communications pursuant to this
Agreement shall be in writing (except as otherwise specifically provided) and
shall be deemed to be sufficient if contained in a written instrument and shall
be deemed given if delivered personally, telecopied, sent by recognized national
overnight courier, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to ▇▇▇▇▇ or the Subsidiary, to:
▇▇▇▇▇ International, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
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With a copy to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to NetGain, to:
NetGain Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
(c) All notices and other communications shall be deemed to
have been received:
(i) in the case of personal delivery, on the date of
such delivery,
(ii) in the case of a telecopy, when the party
receiving such telecopy shall have confirmed receipt of the
communication, or
(iii)in the case of delivery by recognized national
overnight courier, on the next business day following delivery
to such courier.
9.5 Headings. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or
interpretation of this Agreement.
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9.6 Benefits, Assignments. This Agreement is not intended to confer
against any Person other than the parties hereto any rights or remedies
hereunder and shall not be assigned by operation of law or otherwise.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia applicable to contracts made
and to be performed therein.
9.8 Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Nothing in any
schedule delivered to ▇▇▇▇▇ pursuant to this Agreement shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless such
schedule identifies the exception with particularity and describes the relevant
facts in detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other items themselves). The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
9.9 Arbitration. Except for the equitable remedies provided for in
this Agreement, the parties hereto have agreed to settle all disputes by binding
arbitration by a single arbitrator in accordance with the rules of the American
Arbitration Association.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf of the
parties hereto by their duly authorized officers, all as of the date first above
written.
▇▇▇▇▇ INTERNATIONAL, INC.
By:
-------------------------------
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
NETGAIN CORPORATION
By:
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
President
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