EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 2, 1999 (the
"Agreement"), by and among (i) ▇▇▇▇▇▇▇ CORPORATION, a Delaware corporation
("Parent"), (ii) BENGAL ACQUISITION CORP., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), and (iii) BRIGHT TIGER
TECHNOLOGIES, INC., a Delaware corporation (the "Company"; Merger Sub and the
Company being hereinafter sometimes referred to together as the "Constituent
Corporations").
W I T N E S S E T H
WHEREAS, the respective boards of directors of Parent, Merger Sub and
the Company have determined that it is advisable that Merger Sub be merged with
and into the Company (the "Merger") on the terms and conditions set forth herein
and in accordance with the provisions of the General Corporation Law of the
State of Delaware (the "GCL");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger;
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests under generally accepted accounting
principles ("GAAP"); and
WHEREAS, 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 (the "Code");
NOW, THEREFORE, Parent, Merger Sub and the Company hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1. CERTAIN MATTERS OF CONSTRUCTION. A reference to an Article,
Section, Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit
or Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."
1.2. CROSS REFERENCES. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
TERM DEFINITION
Affiliate Agreements Section 6.2.
Agreement Preamble
Balance Certificate Section 2.8.2.
Certificate of Merger Section 2.1.
Closing Section 2.9.
Code Preamble
Company Preamble
Company Balance Sheet Section 3.6.
Company Common Stock Section 2.3.1.
Company Consent Section 3.26.
Company Financial Statements Section 3.6.
Company Insurance Contracts Section 3.19.
Company Insurance Contracts Section 3.19.
Company Option Plan Section 2.4.
Company Plans Section 3.11.1.
Constituent Corporations Preamble
Dissenting Shares Section 2.6.
Effective Date Section 2.1.
Effective Time Section 2.1.
Employee List Section 3.12.2.
Encumbrances Section 3.15.1.
Escrow Agent Section 2.8.2.
Escrow Agreement Section 2.8.2.
Escrow Fund Escrow Agreement
Escrow Shares Section 2.8.2
Exclusivity Period Section 6.5.
February Balance Sheet Section 3.6.
GAAP Preamble
Governmental Entity Section 3.5.2.
Holder's Agent Section 2.7.
Indemnified Persons Section 6.18
Information Statement Section 3.26.
Liabilities Section 3.7.2.
Merger Preamble
Merger Sub Preamble
Merger Sub Stock Section 2.3.2.
Parent Preamble
Parent Claims Section 8.2.
Parent Group Section 8.2.
Parent Material Adverse Effect Section 4.4.
Parent Reports Section 4.4.
Parent Stock Section 2.3.1.
Permits Section 3.8.
Pooling Affiliates Section 6.2.
Registration Rights Agreement Section 6.14.
Series A Preferred Stock Section 3.2.1.
Series B Preferred Stock Section 2.3.1.
Series C Preferred Stock Section 2.3.1.
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Stockholder Agreements Section 6.1.
Stockholders Section 2.8.1.
Stockholders List Section 2.8.1.
Stockholder's Share Amount Section 2.8.2.
Stock Options Section 2.4.
Surviving Corporation Section 2.1.
Taxes Section 3.10.7.
Third-Party Parent Claims Section 8.4.2.
Transmittal Letter Section 2.8.2.
1.3. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:
1.3.1. AFFILIATE: with respect to any Person, any Person
which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person where control
(including with correlative meaning, controlled by and under
common control with) as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise.
1.3.2. COMPANY CAPITAL STOCK: Company Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock.
1.3.3. COMMERCIAL SOFTWARE: packaged commercial software
programs generally available to the public through retail
dealers in computer software or directly from the manufacturer
which have been licensed to the Company pursuant to End-User
Licenses and which are used in the Company's business but are
in no way a component of or incorporated in or specifically
required to develop or support any of the Company's products
and related trademarks, technology and know-how.
1.3.4. COMPANY LEASES: each lease, sublease, license or other
agreement under which the Company uses, occupies or has the
right to occupy any real property or interest therein that (a)
provides for future minimum payments of $25,000 or more
(ignoring any right of cancellation or termination) or (b) the
cancellation or termination of which would have a Company
Material Adverse Effect.
1.3.5. COMPANY MATERIAL ADVERSE EFFECT: any materially adverse
change in or effect on the financial condition, business,
operations, assets, properties, results of operations or
prospects of the Company.
1.3.6. END-USER LICENSES: any object code end-user licenses
granted to end-users in the ordinary course of business that
permit use of software products without a right to modify,
distribute or sublicense the same.
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1.3.7. ENVIRONMENTAL CLAIM: any notice alleging potential
liability (including, potential liability for investigatory
costs, cleanup costs, response or remediation costs, natural
resources damages, property damages, personal injuries, fines
or penalties) arising out of, based on or resulting from (a)
the presence, or release of any Material of Environmental
Concern at any location, whether or not owned by that party or
any of its Affiliates or (b) circumstances forming the basis
of any violation, or alleged violation, by that party of any
Environmental Law.
1.3.8. ENVIRONMENTAL LAWS: any and all statutes, regulations
and ordinances relating to the protection of public health,
safety or the environment.
1.3.9. ERISA: the Employee Retirement Income Security Act of
1974, as amended.
1.3.10. ERISA AFFILIATE: with respect to a party, any member
(other than that party) of a controlled group of corporations,
group of trades or businesses under common control or
affiliated service group that includes that party (as defined
for purposes of Section 414(b), (c) and (m) of the Code).
1.3.11. EXCHANGE ACT: the Securities Exchange Act of 1934, as
amended.
1.3.12. MATERIALS OF ENVIRONMENTAL CONCERN: petroleum and its
by-products and all substances or constituents that are
regulated by, or form the basis of liability under, any
Environmental Law.
1.3.13. PERMITTED ENCUMBRANCES: (a) liens for current taxes
and other statutory liens and trusts not yet due and payable
or that are being contested in good faith, (b) liens that were
incurred in the ordinary course of business, such as
carriers', warehousemen's, landlords' and mechanics' liens and
other similar liens arising in the ordinary course of
business, (c) liens on personal property leased under
operating leases, (d) liens, pledges or deposits incurred or
made in connection with workmen's compensation, unemployment
insurance and other social security benefits, or securing the
performance of bids, tenders, leases, contracts (other than
for the repayment of borrowed money), statutory obligations,
progress payments, surety and appeal bonds and other
obligations of like nature, in each case incurred in the
ordinary course of business, (e) pledges of or liens on
manufactured products as security for any drafts or bills of
exchange drawn in connection with the importation of such
manufactured products in the ordinary course of business, (f)
liens under Article 2 of the Uniform Commercial Code that are
special property interests in goods identified as goods to
which a contract refers, and (g) liens under Article 9 of the
Uniform Commercial Code that are purchase money security
interests, none of which are material in the aggregate or
individually.
1.3.14. PERSON: an individual, a corporation, an association,
a partnership, an estate, a limited liability company, a trust
and any other entity or organization.
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1.3.15. SEC: the Securities and Exchange Commission, or any
Governmental Entity succeeding to its functions.
1.3.16. SECURITIES ACT: the Securities Act of 1933, as
amended.
1.3.17. SUBSIDIARY: any corporation, association, or other
business entity a majority (by number of votes on the election
of directors or persons holding positions with similar
responsibilities) of the shares of capital stock (or other
voting interests) of which is owned by Parent, the Company or
their respective Subsidiaries, as the case may be.
ARTICLE 2
THE MERGER
2.1. PROCEDURE FOR THE MERGER. Merger Sub shall be merged, in
accordance with section 251 of the GCL, with and into the Company, which shall
be and is sometimes referred to herein to as the "Surviving Corporation". The
Merger shall be effected by filing a certificate of merger, substantially in the
form of EXHIBIT A attached hereto (the "Certificate of Merger"), with the
Secretary of State of the State of Delaware in accordance with section 251(c) of
the GCL. The effective date of the Merger (the "Effective Date") shall be the
date upon which the Certificate of Merger shall have been filed with the
Secretary of State of the State of Delaware and the effective time of the Merger
(the "Effective Time") shall be the time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware.
2.2. SURVIVING CORPORATION.
2.2.1. CORPORATE EXISTENCE. The Surviving Corporation shall
continue its corporate existence under the laws of the State of Delaware. The
separate corporate existence of Merger Sub shall cease at the Effective Time.
2.2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
certificate of incorporation of the Surviving Corporation shall be as set forth
in the Certificate of Merger until the same shall be amended thereafter in
accordance with the GCL and such certificate of incorporation. The by-laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation until the same shall be amended thereafter
in accordance with the GCL, the certificate of incorporation of the Surviving
Corporation and such by-laws.
2.2.3. DIRECTOR. As of the Effective Time, ▇▇▇▇▇ ▇. ▇▇▇▇▇
shall be the sole director of the Surviving Corporation, to hold office in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation.
2.2.4. EFFECT OF THE MERGER. As of the Effective Time, the
effect of the Merger shall be as provided in this Agreement and the applicable
provisions of the GCL. Without limiting the generality of the foregoing, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all the
debts,
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liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.3. CONVERSION OF STOCK.
2.3.1. STOCK OF THE COMPANY. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders thereof, each
share of Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than (i) Company Capital Stock held in the Company's
treasury and (ii) Dissenting Shares (as defined in and to the extent provided in
Section 2.6(a)) will be canceled and extinguished and be converted automatically
into the right to receive the number of shares of the Common Stock, $.01 par
value per share, of Parent ("Parent Stock") as follows:
(a) each share of the Common Stock, $.01 par value per share,
of the Company ("Company Common Stock") shall be converted into .02824 shares of
Parent Stock (the "Common Exchange Ratio");
(b) each share of the Series B Convertible Preferred Stock,
$.01 par value per share, of the Company ("Series B Preferred Stock") shall be
converted into .06271 shares of Parent Stock; and
(c) each share of the Series C Convertible Preferred Stock,
$.01 par value per share, of the Company ("Series C Preferred Stock") shall be
converted into .09847 shares of Parent Stock;
PROVIDED, HOWEVER, that a portion of the shares of Parent Stock issuable
pursuant to the Merger in respect of shares of Company Capital Stock shall be
delivered into escrow and held as specified in Section 2.8. Each share of Parent
Stock issued pursuant to the Merger shall be validly issued, fully paid and
nonassessable. The conversion ratios set forth in clauses (a) through (c) above
shall be appropriately adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend, reorganization, recapitalization or like
change with respect to Parent Stock occurring after the date hereof and prior to
the Effective Time.
2.3.2. STOCK OF MERGER SUB. At the Effective Time, each share
of the Common Stock, par value $.01 per share, of Merger Sub ("Merger Sub
Stock") issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become one validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation.
2.4. STOCK OPTIONS. At the Effective Time, all options to purchase
Company Common Stock (the "Stock Options") outstanding under the Company's 1996
Stock Option Plan (the "Company Option Plan") shall become options to purchase
Parent Stock in accordance with Section 6.8.1 hereof.
2.5. FRACTIONAL SHARES. Only whole shares of Parent Stock will be
issued by virtue of the Merger. Any holder of shares of Company Capital Stock
who would otherwise be entitled to a fraction of a share of Parent Stock (after
aggregating all fractional shares of Parent Stock to be
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received by such holder) shall have such fractional share interest rounded up to
the nearest whole share.
2.6. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of Company Capital Stock who has demanded and
perfected appraisal rights, or who still has the right to demand and perfect
appraisal rights, for such shares in accordance with the GCL and who has not
effectively withdrawn or lost such appraisal rights in accordance with the GCL
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Stock pursuant to Section 2.3.1, but the holder thereof shall
only be entitled to such rights as are granted by the GCL.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under the GCL or who does not vote in favor of the adoption of this Agreement
shall effectively withdraw or forfeit the right to appraisal, then, as of the
later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Stock pursuant to Section 2.3.1, without interest thereon, upon
surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to the
GCL and received by the Company which relate to any such demand for appraisal
and (ii) the opportunity to participate in all negotiations and proceedings
which take place prior to the Effective Time with respect to demands for
appraisal under the GCL. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any demands for
appraisal of Company Capital Stock or offer to settle any such demands.
2.7. HOLDER'S AGENT. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall, by virtue of the Merger
and the resolutions set forth in the Company Consent, be irrevocably appointed
attorney-in-fact and authorized and empowered to act, for and on behalf of any
or all of the Stockholders with respect to all shares of Parent Stock issued in
the Merger (with full power of substitution in the premises) in connection with
the indemnity provisions of Article 8 as they relate to the Stockholders
generally, the Escrow Agreement, the Registration Rights Agreement, the notice
provisions of this Agreement and such other matters as are reasonably necessary
for the consummation of the transactions contemplated hereby and thereby
including to act as the representative of the Stockholders to review and
authorize all set-offs, claims and other payments authorized or directed by the
Escrow Agreement and dispute or question the accuracy thereof, to compromise on
their behalf with Parent any claims asserted thereunder and to authorize
payments to be made with respect thereto, to sell from time to time shares of
Parent Stock held in escrow pursuant to the Escrow Agreement, and to take such
further actions as are authorized in this Agreement (the above named
representative, as well as any subsequent representative of the Stockholders
appointed by him or after his death or incapacity elected by vote of holders of
a majority of the shares of Parent Stock issued to the Stockholders pursuant to
the Merger, being referred to herein as the "Holder's Agent"). By his execution
hereof, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ hereby accepts such appointment and agrees to act as
the Holder's Agent
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hereunder. The Holder's Agent shall not be liable to any Stockholder, Parent and
their respective Affiliates or any other person with respect to any action taken
or omitted to be taken by the Holder's Agent under or in connection with this
Agreement, the Escrow Agreement or the Registration Rights Agreement unless such
action or omission results from or arises out of fraud, gross negligence or
willful misconduct on the part of the Holder's Agent. Each of Parent and Merger
Sub and each of their respective Affiliates (including, after the Closing, the
Surviving Corporation) shall be entitled to rely on such appointment and treat
such Holder's Agent as the duly appointed attorney-in-fact of each Stockholder.
Each Stockholder who votes in favor of the Merger pursuant to the terms hereof,
by such vote, without any further action, and each Stockholder who receives
shares of Parent Stock in connection with the Merger, by acceptance thereof and
without any further action, confirms such appointment and authority and
acknowledges and agrees that such appointment is irrevocable and coupled with an
interest, it being understood that the willingness of the Parent and Merger Sub
to enter into this Agreement is based, in part, on the appointment of a
representative to act on behalf of the Stockholders.
2.8. ISSUANCE OF PARENT STOCK.
2.8.1. STOCKHOLDER LIST. The Company shall prepare a list (the
"Stockholder List") setting forth the names and addresses of all Persons who are
the record holders of Company Capital Stock immediately prior to the Effective
Time (the "Stockholders"), which it shall deliver to Parent at the Closing. The
Stockholder List shall set forth for each Stockholder the number of shares of
Company Capital Stock owned of record by such Stockholder immediately prior to
the Effective Time and the percentage ownership of the Company held by each
Stockholder immediately prior to the Effective Time on a fully-diluted basis.
2.8.2. DELIVERY OF CERTIFICATES. At or promptly after the
Effective Time, Parent shall cause its transfer agent to prepare two
certificates for each Stockholder, each such certificate registered in the name
of such Stockholder and together representing the total number of shares of
Parent Stock issuable pursuant to the Merger in respect of shares of Company
Capital Stock held by such Stockholder (the "Stockholder's Share Amount"), as
follows: (a) one certificate shall represent ten percent (10%) of such
Stockholder's Share Amount (rounded up to the nearest whole number of shares of
Parent Stock)(the "Escrow Shares"), and shall be delivered by Parent to State
Street Bank and Trust Company, as escrow agent (the "Escrow Agent"), as security
for Parent Claims and (b) one certificate (the "Balance Certificate") shall
represent the balance of such Stockholder's Share Amount after deducting
therefrom the shares of Parent Stock being placed in escrow hereunder. At and
after the Effective Time, each such Stockholder shall be entitled to receive
such Stockholder's Balance Certificate upon delivery to Parent of a certificate
or certificates representing the full number of shares of Company Capital Stock
held by such Stockholder immediately prior to the Effective Time, together with
a properly completed transmittal letter, substantially in the form of EXHIBIT B
attached hereto (a "Transmittal Letter"), which shall be mailed by Parent to the
Stockholders no later than seven days following the Effective Date. The Escrow
Agent shall hold and administer the shares of Parent Stock delivered to it
hereunder in accordance with the terms of an escrow agreement dated as of the
Effective Date among Parent, the Holder's Agent and the Escrow Agent (the
"Escrow Agreement"), such Escrow Agreement to be substantially in the form of
EXHIBIT C attached hereto.
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2.8.3. RESTRICTED STOCK. A Stockholder whose shares of Company Capital
Stock are subject at the Effective Time to a stock restriction agreement with
the Company shall receive his shares of Parent Stock subject to the continuing
terms of such stock restriction agreement. With respect to any Stockholder bound
by such a stock restriction agreement, his Escrow Shares shall be comprised of a
pro rata split of vested and unvested shares of Parent Stock based on the
vesting provisions of such stock restriction agreement, provided that such
Stockholder has delivered to arent a letter in form and substance reasonably
satisfactory to Parent that contains his agreement to have any cash resulting
from a sale of any such unvested shares be subject to the terms of such stock
restriction agreement. Any such Stockholder who does not deliver to Parent such
a letter will have only vested shares of Parent Stock placed in escrow
hereunder.
2.9. CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP in Boston, Massachusetts on
April 12, 1999, or at such other time and place or on such other date as the
parties hereto agree.
2.10. TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
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 thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Stockholder requesting
such exchange will have paid to Parent or any agent designated by it any
transfer or other taxes required by reason of issuance of a certificate for
shares of Parent Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the reasonable satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
2.11. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (a) constitute a reorganization within the meaning
of Section 368 of the Code and (b) qualify for accounting treatment as a pooling
of interests under GAAP.
2.12. ADDITIONAL ACTIONS. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest, perfect or confirm in the Surviving Corporation title to
or ownership or possession of any property, right, privilege, power, franchise
or other asset of either Constituent Corporation acquired or to be acquired by
reason of, or as a result of, the Merger, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as
follows:
3.1. CORPORATE STATUS OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power to own, operate and lease its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in all
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jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes qualification
necessary, except where the failure to be so qualified would not have a Company
Material Adverse Effect. All jurisdictions in which the Company is qualified to
do business are set forth on SCHEDULE 3.1 hereto.
3.2. CAPITAL STOCK.
3.2.1. AUTHORIZED STOCK OF THE COMPANY. The authorized capital
stock of the Company consists of (a) 10,000,000 shares of Company Common Stock,
of which 1,414,615 shares are issued and outstanding; (b) 350,000 shares of
Series A Convertible Preferred Stock, $.01 par value per share ("Series A
Preferred Stock"), all of which are issued and outstanding; (c) 1,634,500 shares
of Series B Preferred Stock, all of which are issued and outstanding; and (d)
1,333,334 shares of Series C Preferred Stock, all of which are issued and
outstanding. The outstanding shares of Company Capital Stock will be,
immediately prior the Effective Time, held of record by the Stockholders in the
amounts set forth opposite their respective names as set forth on the
Stockholder List. All of the outstanding shares of Company Capital Stock have
been duly authorized and validly issued, were not issued in violation of any
person's preemptive rights, and are fully paid and nonassessable. Each share of
Series A Preferred Stock is convertible by the holder thereof into 1.5 shares of
Company Common Stock. The Company has Stock Options outstanding on the date
hereof that are exercisable (whether vested or unvested) for an aggregate of
559,425 shares of Company Common Stock, of which 121,108 shares are vested on
the date hereof.
3.2.2. OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY.
Except as set forth on SCHEDULE 3.2 hereto, there are no outstanding
subscriptions, options, warrants, conversion rights or other rights, securities,
agreements or commitments obligating the Company to issue, sell or otherwise
dispose of shares of its capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of its capital
stock. Except as set forth on SCHEDULE 3.2, there are no voting trusts or other
agreements or understandings to which the Company or, to the Company's
knowledge, any Stockholder is a party with respect to the voting of the shares
of Company Capital Stock, and the Company is not a party to or bound by any
outstanding restrictions, options or other obligations, agreements or
commitments to sell, repurchase, redeem or acquire any outstanding shares of
Company Capital Stock or other equity securities of the Company.
3.3. SUBSIDIARIES. The Company does not have any Subsidiaries. Other
than as reflected in the Company Balance Sheet, the Company does not own,
directly or indirectly, any shares or other equity interest or securities in any
business organization, entity or enterprise.
3.4. CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS. The
Company has delivered to Parent true and correct copies of the certificate of
incorporation and by-laws of the Company, including all amendments thereto, as
in effect on the date hereof. The minute book of the Company contains accurate,
in all material respects, records of all meetings and consents in lieu of
meetings of the board of directors of the Company (and any committees thereof,
whether permanent or temporary) and of its stockholders since the date of its
incorporation, and such records accurately, in all material respects, reflect
all transactions referred to in such minutes and consents. The stock book of the
Company accurately reflects record ownership of the Company's capital stock.
Parent
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has been provided with a copy of or access to such minutes or consents and stock
book. SCHEDULE 3.4 hereto sets forth a list of the directors and officers of the
Company.
3.5. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
3.5.1. AUTHORITY. The Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the board of directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, other than the approval of this Agreement and the
transactions contemplated hereby by the stockholders of the Company in
accordance with the GCL and the Company's certificate of incorporation. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to the qualifications that enforcement of
the rights and remedies created hereby are subject to (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other laws of
general application affecting the rights and remedies of creditors and (b)
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law). On or before the Effective Date, the other
agreements contemplated hereby to be executed and delivered by the Company on or
before the Effective Date will have been executed and delivered by the Company,
and, upon such execution and delivery, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to the qualifications that enforcement of the
rights and remedies created thereby are subject to (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (b) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
3.5.2. NO CONFLICT. Except as set forth on SCHEDULE 3.5.2
hereto, Neither the execution and delivery of this Agreement by the Company, nor
the performance by the Company of its obligations hereunder, nor the
consummation by the Company of the transactions contemplated hereby will (a)
conflict with or result in a violation of any provision of the certificate of
incorporation or by-laws of the Company, (b) with or without the giving of
notice or the lapse of time, or both, conflict with, or result in any violation
or breach of, or constitute a default under, or result in any right to
accelerate or result in the creation of any Encumbrance pursuant to, or right of
termination under, any provision of any note, mortgage, indenture, lease,
instrument or other agreement, permit, concession, grant, franchise, license,
judgment, order, decree, statute, ordinance, rule or regulation to which the
Company is a party or by which it or any of its assets or properties is bound or
which is applicable to it or any of its assets or properties, except under any
lease, instrument or other agreement, permit, concession, grant, franchise or
license which is not material to the Company or its business. The Company has
provided holders of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock with such information concerning the terms of the
Merger and the value of the assets of the Company as reasonably requested by any
such holder. No authorization, consent or approval of, or filing with or notice
to, any United States or foreign governmental or public body or authority (each
a "Governmental Entity") is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company
11
of the transactions contemplated hereby, except for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware.
3.6. FINANCIAL STATEMENTS. The Company has previously furnished Parent
with accurate and complete copies of (a) the balance sheets of the Company as of
December 31, 1997 and 1996 and the statements of operations and cash flows of
the Company for the respective years then ended, as audited by
PricewaterhouseCoopers LLP, the Company's certified public accountants, (b) the
unaudited balance sheet of the Company as of December 31, 1998 and the
statements of operations and cash flows of the Company for the year then ended
and (c) the unaudited balance sheet of the Company as of February 28, 1999 and
the unaudited statements of operations and cash flows of the Company for the two
months then ended. Collectively, the financial statements referred to in the
immediately preceding sentence are sometimes referred to herein as the "Company
Financial Statements" and the unaudited balance sheet of the Company as of
December 31, 1998 is referred to herein as the "Company Balance Sheet" and the
unaudited balance sheet of the Company as of February 28, 1999 is referred to
herein as the "February Balance Sheet." Each of the balance sheets included in
the Company Financial Statements (including any related notes) fairly presents
in all material respects the financial position of the Company as of its date,
and the other statements included in the Company Financial Statements (including
any related notes) fairly present in all material respects the results of
operations and cash flows, as the case may be, of the Company for the periods
therein set forth, in each case in accordance with GAAP consistently applied
(except as otherwise stated therein), subject, in the case of unaudited interim
financial statements, to (i) the absence of certain notes thereto and (ii)
normal year-end audit adjustments which are not in the aggregate material.
3.7. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES.
3.7.1. CHANGES. Except as described on SCHEDULE 3.7.1 hereto,
since the date of the Company Balance Sheet, the Company has not suffered any
Company Material Adverse Effect, nor has there occurred or arisen any event,
condition or state of facts of any character that could reasonably be expected
to result in a Company Material Adverse Effect. Except as described on SCHEDULE
3.7.1, without limiting the generality of the foregoing, since the date of the
Company Balance Sheet, the Company has not:
(a) sold, leased, transferred or assigned any of its
assets, tangible or intangible, other than in the ordinary course of business;
(b) accelerated, terminated, modified in a manner
adverse to the Company, or canceled any contract, lease, sublease, license, or
sublicense (or series of related contracts, leases, subleases, licenses, and
sublicenses) involving more than $25,000 to which the Company is a party;
(c) canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving more
than $10,000 or outside the ordinary course of business;
(d) granted any license or sublicense of any rights
under or with respect to any Company Proprietary Rights other than (i) pursuant
to End-User Licenses granted by the Company
12
and (ii) to the Company's distributors, resellers and other licensees under
agreements disclosed on SCHEDULE 3.17 hereto;
(e) experienced material damage, destruction, or loss
(whether or not covered by insurance) to its property (other than ordinary wear
and tear not caused by neglect);
(f) created or suffered to exist any Encumbrance not
in effect on December 31, 1998 (other than Permitted Encumbrances) upon any of
its assets, tangible or intangible;
(g) issued, sold, otherwise disposed of or reacquired
any of its capital stock, or granted or reacquired any options, warrants, or
other rights to purchase or obtain (including upon conversion or exercise) any
of its capital stock, or any securities convertible or exchangeable into any of
its capital stock or otherwise changed its capital structure or stock ownership
in any way;
(h) declared, set aside, or paid any dividend or
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(i) entered into financial arrangements for the
benefit of any of the Stockholders except in the ordinary course of business
consistent with past practice;
(j) made or committed to make any capital
expenditures or entered into any other material transaction, in either case
outside the ordinary course of business or involving an expenditure in excess of
$25,000;
(k) amended or modified in any respect any employment
contract or arrangement or any profit sharing, bonus, incentive compensation,
severance, employee benefit or multiemployer plans;
(l) entered into any employment agreement or
collective bargaining agreement or increased the compensation (A) of any
Stockholder or (B) of any other of its employees;
(m) incurred any indebtedness for borrowed money; or
(n) committed (orally or in writing) to any of the
foregoing.
3.7.2. LIABILITIES. The Company has no liabilities or
obligations, fixed, accrued, contingent or otherwise (collectively,
"Liabilities"), that are not fully reflected or provided for on, or disclosed in
the notes to, the balance sheets included in the Company Financial Statements,
except (i) Liabilities incurred in the ordinary course of business since the
date of the February Balance Sheet, none of which individually or in the
aggregate has had or could reasonably be expected to have a Company Material
Adverse Effect, (ii) Liabilities expressly disclosed on the Schedules delivered
hereunder and (iii) contractual and other liabilities incurred in the ordinary
course of business and not required by GAAP to be reflected on a balance sheet.
13
3.8. COMPLIANCE WITH APPLICABLE LAW, CERTIFICATE OF INCORPORATION AND
BY-LAWS. The Company has all requisite licenses, permits and certificates from
all Governmental Entities (collectively, "Permits") necessary to conduct its
business as currently conducted, and to own, lease and operate its properties in
the manner currently held and operated, except for any the absence of which
could not reasonably be expected to have a Company Material Adverse Effect. The
Company is in compliance in all material respects with all the terms and
conditions related to such Permits. There are no proceedings in progress,
pending or, to the knowledge of the Company, threatened, which may result in
revocation, cancellation, suspension, or any material adverse modification of
any of such Permits. The business of the Company is not being conducted in
violation of any applicable law, statute, ordinance, regulation, rule, judgment,
decree, order, Permit, concession, grant or other authorization of any
Governmental Entity, except for violations that have not, and could not
reasonably be expected to have, a Company Material Adverse Effect. The Company
is not in default or violation of any provision of its certificate of
incorporation or its by-laws.
3.9. LITIGATION AND AUDITS. There is no investigation by any
Governmental Entity with respect to the Company pending or, to the knowledge of
the Company, threatened, nor has any Governmental Entity indicated to the
Company an intention to conduct the same. There is no claim, action, suit,
arbitration or proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, or any of its assets or properties,
at law or in equity, or before any arbitrator or Governmental Entity and there
are no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company.
3.10. TAX MATTERS. Except as set forth on SCHEDULE 3.10 hereto:
3.10.1. FILING OF RETURNS. The Company has prepared and filed
on a timely basis with all appropriate governmental authorities all material
returns in respect of Taxes that it is required to file prior to the Closing,
and all such returns are correct and complete in all material respects. The
Company is not currently the beneficiary of any extension of time within which
to file any such return.
3.10.2. PAYMENT OF TAXES. The Company has paid in full all
Taxes due on or before the date hereof and, in the case of Taxes accruing on or
before the date hereof that are not due on or before the date hereof, the
Company has made adequate provision in its books and records and financial
statements for such payment.
3.10.3. WITHHOLDING. The Company has withheld from each
payment made to any of its present or former employees, officers and directors
all amounts required by law to be withheld and has, where required, remitted
such amounts within the applicable periods to the appropriate governmental
authorities.
3.10.4. ASSESSMENTS. There are no assessments of the Company
with respect to Taxes that have been issued and are outstanding. No Governmental
Entity has examined or audited the Company in respect of Taxes. The Company has
not received any indication in writing from any Governmental Entity that an
assessment in respect of the Company is proposed. The Company has not executed
or filed any agreement extending the period of assessment or collection of any
Taxes.
14
3.10.5. ELECTIONS AND CONSENTS. No elections with respect to
the Company's Taxes that are adverse to the Company are in effect. No election
under Section 1362 of the Code relating to taxation as an S corporation is in
effect with respect to the Company. The Company has not filed a consent pursuant
to Section 341(f) of the Code relating to collapsible corporations, nor has it
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code).
The Company has not made any payments, is not obligated to make any payments,
and is not a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Section 280G
of the Code. The Company is not a party to any Tax allocation or sharing
agreement. The Company has never been a member of an affiliated group filing a
consolidated federal income Tax return and has no liability for the Taxes of an
person under Treasury regulation section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor by contract, or
otherwise.
3.10.6. ACCESS TO RETURNS. Parent has been provided with a
copy of or access to all federal, state, local and foreign income Tax returns
filed by the Company. Parent has been provided with a copy of or access to all
assessments, extensions and waivers resulting from any audits of the Company by
a Governmental Entity in respect of Taxes, and all such assessments and related
penalties and interest have been paid in full unless being contested in good
faith by the Company and described on SCHEDULE 3.10 hereto.
3.10.7. DEFINITION OF TAXES. As used herein, "Taxes" means all
taxes, levies and other assessments, including all federal, state, local or
foreign income, gross receipts, license, employment, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, social
security (or similar), unemployment, disability, negotiation, alternative or
add-on minimum, estimated, sales, use, goods and services, value added, capital,
capital gains, net worth, transfer, profits, withholding, payroll, employer
health, excise, real property and personal property taxes, and any other taxes,
assessments or similar charges in the nature of a tax including unemployment
insurance payments and workers compensation premiums, together with any
installments with respect thereto, and any interest, fines and penalties,
imposed by any Governmental Entity (including federal, state, municipal and
foreign Governmental Entities), and whether disputed or not.
3.11. EMPLOYEE BENEFIT PLANS.
3.11.1. LIST OF PLANS. SCHEDULE 3.11 hereto contains a correct
and complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee benefit
or health insurance plans, life insurance or other death benefit plans,
disability, stock option, stock purchase, restricted stock, stock compensation,
bonus, vacation pay, severance pay and other similar plans, programs or
agreements, relating to any persons employed by the Company or in which any
person employed by the Company is eligible to participate and which is currently
maintained or that was maintained at any time in the last five calendar years by
the Company (collectively, the "Company Plans"). The Company has provided to
Parent complete copies, as of the date hereof, of all of the Company Plans that
have been reduced to writing, together with all documents establishing or
constituting any related trust, annuity contract, insurance contract or other
funding instrument, and summaries of those that have not been reduced to
writing. The Company has provided to Parent complete copies of current plan
summaries, employee booklets,
15
personnel manuals and other material documents or written materials concerning
the Company Plans that are in the possession of the Company as of the date
hereof. The Company does not have any "defined benefit plans" as defined in
Section 3(35) of ERISA.
3.11.2. ERISA. Neither the Company nor any ERISA Affiliate of
the Company has incurred any "withdrawal liability" calculated under Section
4211 of ERISA and there has been no event or circumstance which would cause them
to incur any such liability. Except with respect to individual employees,
neither the Company nor any ERISA Affiliate of the Company has ever maintained a
Company Plan providing health or life insurance benefits to former employees,
other than as required pursuant to Section 4980B of the Code or to any state law
conversion rights. No pension plan (as defined by ERISA) previously maintained
by the Company or its ERISA Affiliates which was subject to ERISA has been
terminated; no proceedings to terminate any such plan have been instituted
within the meaning of Subtitle C of Title IV of ERISA; and no reportable event
within the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any such
Company Plan, and no liability to the Pension Benefit Guaranty Corporation has
been incurred by the Company or its ERISA Affiliates. With respect to all the
Company Plans, the Company and every ERISA Affiliate of the Company are in
material compliance with all requirements prescribed by all statutes,
regulations, orders or rules currently in effect, and have in all material
respects performed all obligations required to be performed by them. Neither the
Company nor any ERISA Affiliate of the Company, nor any of their directors,
officers, employees or agents, nor any trustee or administrator of any trust
created under the Company Plans, has engaged in or been a party to any
"prohibited transaction" as defined in Section 4975 of the Code and Section 406
of ERISA which could subject the Company or its Affiliates, directors or
employees or the Company Plans or the trusts relating thereto or any party
dealing with any of the Company Plans or trusts to any material tax or penalty
on "prohibited transactions" imposed by Section 4975 of the Code. Neither the
Company Plans nor the trusts created thereunder have incurred any "accumulated
funding deficiency," as such term is defined in Section 412 of the Code and
regulations issued thereunder, whether or not waived.
3.11.3. PLAN DETERMINATIONS. Each Company Plan intended to
qualify under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies of all
determination letters have been delivered to the Company; and nothing has
occurred since the date of such determination letters which is likely to cause
the loss of such qualification or exemption. With respect to each Company Plan
which is a qualified profit sharing plan, all employer contributions accrued for
plan years ending prior to the date hereof under the Company Plan terms and
applicable law have been made.
3.11.4. FUNDING. Except as set forth on SCHEDULE 3.11:
(a) all contributions, premiums or other payments
due or required to be made to the Company Plans as of the end of the month prior
to the date hereof have been made as of the date hereof or are properly
reflected on the Company Balance Sheet;
16
(b) there are no actions, liens, suits or claims
pending or, to the knowledge of the Company, threatened (other than routine
claims for benefits) with respect to any Company Plan;
(c) each Company Plan that is a "group health plan"
(as defined in Section 607(1) of ERISA) has been operated at all times in
material compliance with the provisions of COBRA and any applicable, similar
state law; and
(d) with respect to any Company Plan that is
qualified under Section 401(k) of the Code, individually and in the aggregate,
no event has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company
could be subject to any liability that is reasonably likely to have a Company
Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any other
applicable law.
3.12. EMPLOYMENT-RELATED MATTERS.
3.12.1. LABOR RELATIONS. The Company is not a party to any
collective bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of the Company.
There is no labor strike, dispute, slowdown, work stoppage or lockout that is
pending or threatened against or otherwise affecting the Company, and the
Company has not experienced the same since its inception. The Company has not
closed any plant or facility, nor has the Company planned or announced any such
action for the future with respect to which the Company has any liability. All
salaries, wages, vacation pay, bonuses, commissions and other compensation
payable by the Company to the employees of the Company before the date hereof
have been paid or accrued in all material respects as of the date hereof.
3.12.2. EMPLOYEE LIST. The Company has heretofore delivered to
Parent a list (the "Employee List") containing the name of each employee of the
Company, and each such employee's position, starting employment date and annual
salary. The Employee List is correct and complete as of the date of the Employee
List, and is correct and complete as of the date hereof, except for changes
since that date that are not material in the aggregate or individually. No third
party has asserted any claim, or, to the knowledge of the Company, has any
reasonable basis to assert any valid claim, against the Company that either the
continued employment by, or association with, the Company of any of the present
officers or employees of, or consultants to, the Company contravenes any
agreements or laws applicable to unfair competition, trade secrets or
proprietary information. To the knowledge of the Company, each of the employees
of the Company listed on SCHEDULE 3.12 hereto intends to continue his or her
employment with the Company after the Closing.
3.13. ENVIRONMENTAL.
3.13.1. ENVIRONMENTAL LAWS. The Company is in compliance in
all material respects with all applicable Environmental Laws. The Company has
not received any communication that alleges that the Company is not in
compliance in all respects with all applicable Environmental Laws in effect on
the date hereof. To the knowledge of the Company, there are no circumstances
that may prevent, and there are no circumstances specific to the Company that
may
17
interfere with, compliance by the Company in the future with all applicable
Environmental Laws. All Permits and other governmental authorizations currently
held by the Company pursuant to the Environmental Laws are in full force and
effect, the Company is in compliance in all material respects with all of the
terms of such Permits and authorizations, and no other Permits or authorizations
are required by the Company for the conduct of its business as of the date
hereof. The management, handling, storage, transportation, treatment, and
disposal by the Company of all Materials of Environmental Concern has been in
compliance in all material respects with all applicable Environmental Laws.
3.13.2. ENVIRONMENTAL CLAIMS. There is no Environmental
Claim pending or, to the knowledge of the Company, threatened against or
involving the Company or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company has or may have
retained or assumed either contractually or by operation of law.
3.13.3. NO BASIS FOR CLAIMS. To the knowledge of the Company,
there are no past or present actions or activities by the Company, or any
circumstances, conditions, events or incidents, including the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal of
any Material of Environmental Concern, that could reasonably form the basis of
any Environmental Claim against the Company or against any person or entity
whose liability for any Environmental Claim the Company may have retained or
assumed either contractually or by operation of law.
3.14. NO BROKER'S OR FINDER'S FEES. Except for the fees and certain
expenses of (a) ▇▇▇▇▇▇▇▇▇ Associates pursuant to an agreement between the
Company and ▇▇▇▇▇▇▇▇▇ Associates dated December 1, 1998 (a true and correct copy
of which has been delivered to Parent) and (b) R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ pursuant to an
oral agreement between the Company and ▇▇. ▇▇▇▇▇▇▇, the Company has not paid or
become obligated to pay any fee or commission to any broker, finder, financial
advisor or intermediary in connection with the transactions contemplated by this
Agreement.
3.15. ASSETS OTHER THAN REAL PROPERTY.
3.15.1. TITLE. The Company has good and marketable title to
all of the tangible assets shown on the Company Balance Sheet, in each case,
free and clear of any mortgage, pledge, lien, claim, charge, security interest,
lease or other encumbrance (collectively, "Encumbrances"), except for (a) assets
disposed of since the date of the Company Balance Sheet in the ordinary course
of business and in a manner consistent with past practices and not material in
amount, (b) liabilities, obligations and Encumbrances reflected in the Company
Balance Sheet or otherwise in the Company Financial Statements, (c) Permitted
Encumbrances, and (d) liabilities, obligations and Encumbrances set forth on
SCHEDULE 3.15 hereto.
3.15.2. CONDITION. Except as set forth on SCHEDULE 3.15, all
receivables shown on the Company Balance Sheet and all receivables accrued by
the Company since the date of the Company Balance Sheet, have been collected or
are collectible in the aggregate amount shown, less any allowances for doubtful
accounts reflected therein, and, in the case of receivables arising since the
date of the Company Balance Sheet, any additional allowance in respect thereof
calculated in a
18
manner consistent with the allowance reflected in the Company Balance Sheet. All
material plant, equipment and personal property owned by the Company and
regularly used in its business is in good operating condition and repair,
ordinary wear and tear excepted.
3.16. REAL PROPERTY.
3.16.1. COMPANY REAL PROPERTY. The Company does not own any
real property.
3.16.2. COMPANY LEASES. SCHEDULE 3.16 hereto lists all of the
Company Leases. Complete copies of the Company Leases, and all material
amendments thereto (which are identified on SCHEDULE 3.16), have previously been
delivered by the Company to Parent. The Company Leases grant leasehold estates
free and clear of all Encumbrances, except Permitted Encumbrances. The Company
Leases are in full force and effect and are binding and enforceable against each
of the parties thereto in accordance with their respective terms; except as set
forth on SCHEDULE 3.16, none of the Company Leases has been amended since the
date of delivery of a copy thereof to Parent. Neither the Company nor, to the
knowledge of the Company, any other party to a Company Lease, has committed a
material breach or default under any Company Lease, nor, to the knowledge of the
Company, has there occurred any event that with the passage of time or the
giving of notice or both would constitute such a breach or default, nor are
there any facts or circumstances known to the Company that would reasonably
indicate that the Company is likely to be in material breach or default
thereunder. SCHEDULE 3.16 correctly identifies each Company Lease that requires
the consent of any third party in connection with the transactions contemplated
hereby. No material construction, alteration or other leasehold improvement work
with respect to the real property covered by any of the Company Leases remains
to be paid for or to be performed by the Company.
3.16.3. CONDITION. All buildings, structures and fixtures, or
parts thereof, used by the Company in the conduct of its business are in good
operating condition and repair, ordinary wear and tear excepted, and are insured
with coverages that are usual and customary for similar properties and similar
businesses or are required, pursuant to the terms of the Company Leases, to be
insured by third parties.
3.17. INTELLECTUAL PROPERTY.
3.17.1. RIGHT TO INTELLECTUAL PROPERTY. The Company owns, or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
algorithms, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material (excluding Commercial Software) that are used in the business of the
Company as currently conducted by the Company or as currently proposed by the
Company to be conducted (the "Company Proprietary Rights"), free and clear (in
the case of Company Proprietary Rights owned by the Company) of any and all
Encumbrances. The Company knows of no reason why the Company will not be able to
continue to own or have rights to use all Company Proprietary Rights necessary
for the lawful conduct of its business as currently conducted and as currently
proposed by the Company to be conducted, without any infringement or conflict
with the rights of others. Except as set forth in SCHEDULE 3.17 hereto, all of
the Company's rights in and to the Company Proprietary Rights, including (if
applicable) the right to create
19
derivatives, are freely assignable in its own name and the Company is under no
obligation to obtain any approval or consent for use of any of the Company
Proprietary Rights.
3.17.2. LIST OF COMPANY PROPRIETARY RIGHTS. Set forth on
SCHEDULE 3.17 is a complete list of all patents, trademarks, trade names,
service marks, registered copyrights, and any applications therefor, (excluding
Commercial Software) included in the Company Proprietary Rights, specifying,
where applicable, the jurisdictions in which each such Company Proprietary Right
has been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Except as set forth
on SCHEDULE 3.17, none of the Company's currently marketed software products has
been registered for copyright protection with the United States Register of
Copyrights or any foreign offices nor has the Company been requested to make any
such registration.
3.17.3. ROYALTIES. Except as set forth in SCHEDULE 3.17, the
Company is not obligated to pay any royalties or other compensation to any third
party in respect of its ownership, use or license of any of the Company
Proprietary Rights.
3.17.4. LICENSES. Set forth on SCHEDULE 3.17 is a complete
list of all material licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company or any other person is
authorized to use any Company Proprietary Right (excluding End-User Licenses).
The Company Proprietary Rights include all patents, trademarks, trade names,
service marks, trade secrets and software that are necessary for the Company to
satisfy and perform such licenses, sublicenses and agreements. The Company is
not in violation of any license, sublicense or agreement described on such list
except such violations as do not materially impair the Company's rights under
such license, sublicense or agreement. Such licenses, sublicenses and agreements
are in full force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms. The execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will not cause the Company to be in violation
or default under any such license, sublicense or agreement, nor entitle any
other party to any such license, sublicense or agreement to terminate or modify
such license, sublicense or agreement.
3.17.5. STATUS OF REGISTRATIONS. All of the Company
Proprietary Rights set forth on SCHEDULE 3.17 as having been issued by,
registered with or filed with the United States Patent and Trademark Office or
Register of Copyrights or the corresponding offices of other countries listed on
SCHEDULE 3.17 have been so duly registered, filed in or issued, as the case may
be, and have been properly maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and each such other country. The Company has at all times diligently protected
its rights in the Company Proprietary Rights and has maintained the
confidentiality of its trade secrets, pending patent applications, know-how and
other confidential Company Proprietary Rights, and, to the knowledge of the
Company, there have been no acts or omissions by the Company, the result of
which would be to compromise the rights of the Company to apply for or enforce
appropriate legal protection of such Company Proprietary Rights. Without
limiting the generality of the foregoing, the Company's products, packaging and
documentation contain copyright notices sufficient to maintain copyright
protection on the copyrighted portions of the Company Proprietary Rights.
20
3.17.6. NO CONFLICT. No claims with respect to the Company
Proprietary Rights have been asserted or, to the knowledge of the Company, are
threatened by any person nor are there any valid grounds for any bona fide
claims (a) to the effect that the development, sale, licensing or use of any of
the products of the Company as now developed, sold or licensed or used by the
Company or proposed by the Company for development, sale, licensing or use
infringes on any copyright, patent, trademark, service ▇▇▇▇ or trade secret, (b)
against the use by the Company of any trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently conducted
by the Company or as proposed by the Company to be conducted, or (c) challenging
the ownership by the Company, validity or effectiveness of any of the Company
Proprietary Rights; provided that the representation in this sentence regarding
patent rights of others is given to the Company's knowledge. To the knowledge of
the Company there is no unauthorized use, infringement or misappropriation of
any of the Company Proprietary Rights by any third party, including any employee
or former employee of the Company. No Company Proprietary Right or product of
the Company is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company.
3.17.7. EMPLOYEE AGREEMENTS. Each employee, officer and
consultant of the Company has executed a confidentiality agreement in
substantially the form attached hereto as SCHEDULE 3.17.7. To the knowledge of
the Company, no employee, officer or consultant of the Company is in violation
of any term of any employment or consulting contract, proprietary information
and inventions agreement, non-competition agreement, or any other contract or
agreement relating to the relationship of any such employee, officer or
consultant with the Company or any previous employer.
3.18. AGREEMENTS, CONTRACTS AND COMMITMENTS.
3.18.1. COMPANY AGREEMENTS. Except as set forth on SCHEDULE
3.18 hereto, the Company is not a party to:
(a) any employment agreement with any present
employee, officer, director or consultant (or former employees,
officers, directors and consultants to the extent there remain at the
date hereof obligations to be performed by the Company);
(b) any agreement for personal services or employment
with a term of service or employment specified in the agreement in
which the Company has agreed on the termination of such agreement to
make any payments greater than those that would otherwise be imposed by
law;
(c) any agreement of guarantee of the obligations of
others;
(d) any agreement or commitment containing a covenant
limiting or purporting to limit the freedom of the Company to compete
with any person in any geographic area or to engage in any line of
business;
(e) any joint venture or profit-sharing agreement;
21
(f) except for trade indebtedness incurred in the
ordinary course of business and reflected on the February Balance
Sheet, any loan or credit agreements providing for the extension of
credit to the Company or any instrument evidencing or related in any
way to indebtedness incurred in the acquisition of companies or other
entities or indebtedness for borrowed money by way of direct loan, sale
of debt securities, purchase money obligation, conditional sale, lease,
guarantee, or otherwise that individually is in the amount of $25,000
or more;
(g) any license or royalty agreement (other than (A)
those disclosed on SCHEDULE 3.17, (B) with respect to Commercial
Software or (C) End-User Licenses granted by the Company as licensor);
(h) any distribution, VAR or OEM agreement
(identifying any that contain exclusivity provisions);
(i) any agreement or arrangement with any third party
to develop any intellectual property or other asset expected to be used
or currently used or useful in the Company's business;
(j) any agreement or arrangement for the Company to
develop any intellectual property or other asset for any third party;
(k) any agreement or arrangement providing for the
payment of any commission based on sales;
(l) any agreement for the sale or license by or to
the Company of materials, products, services or supplies that involves
future payments to the Company of more than $25,000;
(m) any agreement for the purchase by the Company of
any materials, equipment, services, or supplies, that either (i)
involves a binding commitment by the Company to make future payments in
excess of $25,000 and cannot be terminated by it without penalty upon
less than three months' notice or (ii) was not entered into in the
ordinary course of business;
(n) any agreement or commitment for the acquisition,
construction or sale of fixed assets owned or to be owned by the
Company that involves future payments by it of more than $25,000;
(o) any agreement or commitment to which present or
former directors or officers (or their Affiliates or members of their
immediate families) or Affiliates (or directors or officers of an
Affiliate) are also parties;
(p) any agreement not described above (ignoring,
solely for this purpose, any dollar amount thresholds in those
descriptions) involving the payment or receipt by the Company of more
than $25,000, other than the Company Leases; or
22
(q) any agreement not described above that was not
made in the ordinary course of business and that is material to the
financial condition, business, operations, assets, results of
operations or prospects of the Company.
3.18.2. VALIDITY. Except as set forth on SCHEDULE 3.18, all
contracts, leases, instruments, licenses and other agreements or documents
described on SCHEDULE 3.18 are valid and in full force and effect and the
Company has not, nor, to the knowledge of the Company, has any other party
thereto, committed any material breach of or default under the terms of any such
contract, lease, instrument, license or other agreement or document. SCHEDULE
3.18 identifies each agreement and other document set forth on SCHEDULE 3.18 or
disclosed by the Company on another Schedule hereto that requires the consent of
a third party in connection with the transactions contemplated hereby.
3.19. INSURANCE CONTRACTS. SCHEDULE 3.19 hereto lists all contracts of
insurance and indemnity (not shown on any other Schedule to this Agreement) in
force at the date hereof with respect to the Company. Such contracts of
insurance and indemnity and those shown in other Schedules to this Agreement
(collectively, the "Company Insurance Contracts") insure against such risks, and
are in such amounts, as are reasonable and appropriate considering the Company
and its property, business and operations. All of the Company Insurance
Contracts are in full force and effect, with no default thereunder by the
Company which could permit the insurer to deny payment of claims thereunder. The
execution and delivery of this Agreement by the Company, and the consummation of
the transactions contemplated hereby, will not cause the Company to be in
violation or default under any Company Insurance Contracts, nor entitle any
other party thereto to terminate or modify a Company Insurance Contract. The
Company has not received notice from any of its insurance carriers that any
insurance premiums will be materially increased in the future or that any
insurance coverage provided under the Company Insurance Contracts will not be
available in the future on substantially the same terms as now in effect. The
Company has not received or given a notice of cancellation with respect to any
of the Company Insurance Contracts.
3.20. BANKING RELATIONSHIPS. SCHEDULE 3.20 hereto shows the names and
locations of all banks and trust companies in which the Company has accounts,
lines of credit or safety deposit boxes and, with respect to each account, line
of credit or safety deposit box, the names of all persons authorized to draw
thereon or to have access thereto.
3.21. POOLING. To the knowledge of the Company, neither the Company nor
any of the Company's directors, officers or stockholders has taken any action
that would prevent Parent from accounting for the Merger as a pooling of
interests under GAAP.
3.22. SUPPLIERS, DISTRIBUTORS AND CUSTOMERS. Since the date of the
Company Balance Sheet, no material supplier, distributor or customer of the
Company has cancelled or otherwise modified its relationship with the Company in
a manner adverse to the Company and, to the knowledge of the Company, no
supplier, distributor or customer of the Company has any intention to do so.
3.23. PRODUCT WARRANTY. Each product sold, leased, licensed or
delivered by the Company has been in material conformity with all applicable
contractual commitments and all express and
23
implied warranties, and the Company has no Liability, individually or in the
aggregate (and the Company has no knowledge of any basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand giving rise to any Liability, individually or in the aggregate)
that could reasonably be expected to result in a Company Material Adverse Effect
for replacement or repair thereof or other damages in connection therewith.
SCHEDULE 3.23 hereto includes copies of the standard terms and conditions of
license and sale for the Company (containing applicable warranty and indemnity
provisions). Except as set forth on SCHEDULE 3.23, no product sold, leased,
licensed or delivered by the Company is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of license
and sale and such other indemnities and warranties disclosed on SCHEDULE 3.23.
3.24. ACQUIRED BUSINESS. Upon consummation of the Merger, the Surviving
Corporation, through the Merger, will acquire the entire assets of the Company
immediately prior to the Effective Time, and the Surviving Corporation will then
own and have the right to use all tangible and intangible assets and properties
necessary for the normal continued conduct of the Company's business as now
conducted by it and as proposed by the Company to be conducted.
3.25. ACCOUNTING SYSTEM. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability; (c) access to assets is permitted only in accordance with
management's general or specific authorization; and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.26. INFORMATION STATEMENT. The information supplied by the Company
for inclusion in the information statement (the "Information Statement") to be
sent to the stockholders of the Company in connection with distribution of a
consent of stockholders of the Company to consider approving this Agreement and
consummation of the Merger and the other transactions contemplated hereby (the
"Company Consent") shall not, on the date the Information Statement is first
mailed to the Company's stockholders and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not false or misleading.
If at any time prior to the Effective Time any event relating to the Company or
any of its Affiliates, officers or directors should be discovered by the Company
that should be set forth in an amendment to the Information Statement or a
supplement to the Information Statement, the Company shall promptly inform
Parent. Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Parent or Merger Sub that
is contained in the Information Statement.
3.27. FULL DISCLOSURE. Neither this Agreement nor any written
statement, report or other document furnished or to be furnished by the Company
pursuant to this Agreement contains, or will contain, any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not false or misleading. There is no fact known to
the Company which has not been disclosed to Parent in writing that materially
adversely affects, or so
24
far as the Company can now foresee will materially adversely affect, the ability
of the Company to perform this Agreement and carry out the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to
the Stockholders as follows:
4.1. CORPORATE STATUS OF PARENT AND MERGER SUB. Each of Parent and
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the requisite corporate
power to own, operate and lease its properties and to carry on its business as
now being conducted.
4.2. CAPITALIZATION. The authorized capital stock of Parent consists of
(a) 35,000,000 shares of Parent Stock, of which 10,875,877 shares were issued
and outstanding as of March 2, 1999, and (b) 5,000,000 shares of Preferred
Stock, $.01 par value per share, of which no shares are issued or outstanding.
There are no outstanding options, warrants or other rights to acquire any
capital stock of Parent except pursuant to stock plans or other instruments
disclosed in the Parent Reports. All of the issued and outstanding shares of
Parent Stock are duly authorized, validly issues, fully paid, non assessable and
free of all preemptive rights. All of the shares of Parent Stock issued in the
Merger will be, when issued in accordance with this Agreement, duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights.
4.3. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
4.3.1. AUTHORITY. Each of Parent and Merger Sub has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the boards of directors of Parent and Merger Sub and the
stockholder of Merger Sub and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligation of Parent and Merger Sub,
enforceable against each of them in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created hereby are
subject to (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other laws of general application affecting the rights and
remedies of creditors and (b) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law). On or
before the Effective Date, the other agreements contemplated hereby to be
executed and delivered by Parent and Merger Sub on or before the Effective Date
will have been executed and delivered by Parent and Merger Sub, and, upon such
execution and delivery, will constitute valid and binding obligations of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance with
their respective terms, subject to the qualifications that enforcement of the
rights and remedies created thereby are subject to (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (b) general
25
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
4.3.2. NO CONFLICT. Neither the execution and delivery of this
Agreement by Parent or Merger Sub, nor the performance by Parent or Merger Sub
of its obligations hereunder, nor the consummation by Parent or Merger Sub of
the transactions contemplated hereby will (a) conflict with or result in a
violation of any provision of the certificate of incorporation or by-laws of
Parent or Merger Sub, or (b) with or without the giving of notice or the lapse
of time, or both, conflict with, or result in any violation or breach of, or
constitute a default under, or result in any right to accelerate or result in
the creation of any Encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, Permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which Parent or Merger Sub is
a party or by which either of them or any of their respective assets or
properties is bound or which is applicable to either of them or any of their
assets or properties. No authorization, consent or approval of, or filing with
or notice to, any Governmental Entity is necessary for the execution and
delivery of this Agreement by Parent or Merger Sub or the consummation by Parent
or Merger Sub of the transactions contemplated hereby, except for (i) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of a Form 8-K with the SEC within fifteen days after
the Closing, (iii) any filings as may be required under the Registration Rights
Agreement, and (iv) any filings as may be required under applicable federal or
state securities laws and the laws of any foreign country.
4.4. SEC STATEMENTS, REPORTS AND DOCUMENTS. Parent heretofore has
delivered or made available to counsel for the Stockholders true and complete
copies of (a) its Registration Statement on Form S-1 (Registration Statement No.
333-68639) as declared effective by the SEC on January 22, 1999, (b) all reports
on Forms 10-K, 10-Q and 8-K filed by it with the SEC since January 22, 1999, and
(c) all amendments and supplements to such registration statement and reports
filed by Parent with the SEC (the documents referred to in clauses (a), (b) and
(c) being hereinafter referred to as the "Parent Reports"). As of their
respective dates, the Parent Reports complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (including any related notes) of Parent included in the Parent
Reports were prepared in conformity with GAAP applied on a consistent basis
(except as otherwise stated in the financial statements), and present fairly the
financial position, results of operations and cash flows of Parent as of the
dates and for the periods indicated, subject, in the case of unaudited interim
financial statements, to (i) the absence of certain notes thereto and (ii)
normal year-end audit adjustments which are not in the aggregate material. The
Parent Reports constitute all of the documents required to be filed by Parent
under Section 13 or 14 of the Exchange Act with the SEC through the date of this
Agreement. Since December 31, 1998, there has occurred no event or development
which has had, or could reasonably be foreseen to have in the future, a material
adverse effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of Parent (a "Parent Material
Adverse Effect").
26
4.5. LITIGATION. Except as disclosed in the Parent Reports, there is no
claim, action, suit arbitration or proceeding pending or, to the knowledge of
Parent, threatened against or involving Parent which, if determined adversely to
Parent, could have a Parent Material Adverse Effect.
4.6. POOLING; TAX-FREE REORGANIZATION. To the knowledge of Parent,
neither Parent nor any of its Affiliates has taken any action that would (a)
prevent Parent from accounting for the Merger as a pooling of interests under
GAAP or (b) prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Code.
4.7. INTERIM OPERATIONS OF THE MERGER SUBSIDIARY. The Merger
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
4.8. NO BROKER'S OR FINDER'S FEES. Except for the fees and certain
expenses of Credit Suisse First Boston Corporation, Parent has not paid or
become obligated to pay any fee or commission to any broker, finder, financial
advisor or intermediary in connection with the transactions contemplated by this
Agreement.
4.9. INFORMATION STATEMENT. The information supplied by Parent and
Merger Sub for inclusion in the Information Statement shall not, on the date the
Information Statement is first mailed to the Company's stockholders and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not false or misleading. If at any time prior to the Effective Time any event
relating to Parent, Merger Sub or any of their Affiliates, officers or directors
should be discovered by Parent or Merger Sub that should be set forth in an
amendment to the Information Statement or a supplement to the Information
Statement, Parent shall promptly inform the Company. Notwithstanding the
foregoing, neither Parent nor Merger Sub makes any representation or warranty
with respect to any information supplied by the Company that is contained in the
Information Statement.
4.10. DISCLOSURE. Neither this Agreement nor any written statement,
report or other document furnished or to be furnished by Parent pursuant to this
Agreement contains, or will contain, any untrue statement of a material fact or
omit or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. There is no fact known to Parent
which has not been disclosed to the Company in writing that materially adversely
affects, or so far as Parent can now foresee will materially adversely affect,
the ability of Parent to perform this Agreement and carry out the transactions
contemplated hereby.
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as set forth on
SCHEDULE 5.1 hereto, between the date of this Agreement and the Effective Time
or the date, if any, on which this Agreement is earlier terminated pursuant to
its terms, the Company shall, except to the extent that Parent shall otherwise
consent in writing, (i) carry on its business in the usual, regular and ordinary
27
course in substantially the same manner as heretofore conducted, pay its debts
and taxes when due subject to good faith disputes over such debts or taxes, pay
or perform other material obligations when due subject to good faith disputes
over such obligations, and use all reasonable efforts consistent with past
practices and policies to preserve intact the Company's present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business relationships with it, to the end that the Company's goodwill and
ongoing business be unimpaired at the Effective Time, and (ii) promptly notify
Parent of any event or occurrence (A) not in the ordinary course of business of
the Company which will have or could reasonably be expected to have a Company
Material Adverse Effect or (B) that could prevent or materially delay the
consummation of the transactions contemplated hereunder. In addition, between
the date of this Agreement and the Effective Time or the date, if any, on which
this Agreement is earlier terminated pursuant to its terms, the Company shall
not, except to the extent that Parent shall otherwise consent in writing:
(a) amend its certificate of incorporation or
by-laws;
(b) declare or pay any dividends or distributions on
the Company's outstanding shares of capital stock nor purchase, redeem
or otherwise acquire for consideration any shares of the Company's
capital stock or other securities except in accordance with agreements
existing as of the date hereof or as permitted under the Company Option
Plan;
(c) issue or sell any shares of its capital stock,
effect any stock split or otherwise change its capitalization as it
exists on the date hereof, or issue, grant, or sell any options, stock
appreciation or purchase rights, warrants, conversion rights or other
rights, securities or commitments obligating it to issue or sell any
shares of its capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of its
capital stock, other than the issuance of shares of Company Common
Stock pursuant to the conversion, exercise or exchange of securities
therefor outstanding as of the date hereof in accordance with their
terms;
(d) borrow or agree to borrow any funds or
voluntarily incur, or assume or become subject to, whether directly or
by way of guaranty or otherwise, any obligation or Liability, except
obligations incurred in the ordinary course of business consistent with
past practices;
(e) pay, discharge or satisfy any claim, obligation
or Liability in excess of $10,000 (in any one case) or $25,000 (in the
aggregate), other than the payment, discharge or satisfaction in the
ordinary course of business of obligations reflected on or reserved
against in the Company Balance Sheet, or incurred since the date of the
Company Balance Sheet in the ordinary course of business consistent
with past practices;
(f) except as required by applicable law, adopt or
amend in any material respect, any agreement or plan (including
severance arrangements) for the benefit of its employees;
28
(g) sell, mortgage, pledge or otherwise encumber or
dispose of any of its assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary
course of business consistent with past practices;
(h) acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets
of, any business or any corporation, partnership interest, association
or other business organization or division thereof, or otherwise
acquire any assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary
course of business consistent with past practices;
(i) increase the following amounts payable or to
become payable: (i) the salary of any of its directors, officers or
other employees, or (ii) any other compensation of its directors,
officers or other employees, including any increase in benefits under
any bonus, commission, insurance, pension or other benefit plan made
for or with any of those persons;
(j) dispose of, permit to lapse, or otherwise fail to
preserve the rights of the Company to use the Company Proprietary
Rights or enter into any settlement regarding the breach or
infringement of, any Company Proprietary Rights, or modify any existing
rights with respect thereto, other than in the ordinary course of
business consistent with past practices, and other than any such
disposal, lapse, failure, settlement or modification that does not
have, and could not reasonably be expected to have, a Company Material
Adverse Effect;
(k) sell, or grant any right to exclusive use of, all
or any part of the Company Proprietary Rights;
(l) enter into any contract or commitment or take any
other action that is not in the ordinary course of its business or
could reasonably be expected to have an adverse impact on the
transactions contemplated hereunder or that would have or could
reasonably be expected to have a Company Material Adverse Effect;
(m) amend in any material respect any agreement to
which the Company is a party the amendment of which will have or could
reasonably be expected to have a Company Material Adverse Effect;
(n) waive, release, transfer or permit to lapse any
claims or rights (i) that has a value, or involves payment or receipt
by it, of more than $25,000 or (ii) the waiver, release, transfer or
lapse of which would have or could reasonably be expected to have a
Company Material Adverse Effect;
(o) intentionally take any action, including the
acceleration of vesting of any options or other rights to acquire
shares of the capital stock of the Company, which would be reasonably
likely to interfere with Parent's ability to account for the Merger as
a pooling of interests under GAAP;
29
(p) make any change in any method of accounting or
accounting practice other than changes required to be made in order
that the Company's financial statements comply with GAAP; or
(q) agree, whether in writing or otherwise, to take
any action described in this Section 5.1.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. STOCKHOLDER AGREEMENTS AND IRREVOCABLE PROXIES. Simultaneously
with the execution of this Agreement, the Company shall cause certain
stockholders of the Company identified by Parent and each of the Company's
directors and their investment affiliates holding capital stock of the Company
or options or other rights convertible into or exercisable for capital stock of
the Company to deliver to Parent an executed Stockholder Agreement in the form
attached hereto as EXHIBIT D (collectively, the "Stockholder Agreements")
(including the irrevocable proxy attached thereto).
6.2. AFFILIATE AGREEMENTS. Set forth on SCHEDULE 6.2 hereto is a list
of those persons who are, in the Company's reasonable judgment, "affiliates" of
the Company as such term is used in Accounting Series Release No. 135
promulgated by the SEC (the "Pooling Affiliates"). Simultaneously with the
execution of this Agreement, the Company shall deliver or cause to be delivered
to Parent from each of the Pooling Affiliates, an executed Affiliate Agreement
in the form attached hereto as EXHIBIT E (collectively, the "Affiliate
Agreements"). Parent shall be entitled to place appropriate legends on the
certificates evidencing any shares of Parent Stock to be received by the Pooling
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Stock, consistent
with the terms of the Affiliate Agreements.
6.3. CONSENT OF STOCKHOLDERS. As promptly as practical after the
execution of this Agreement, Parent and the Company shall prepare the
Information Statement. The Information Statement shall include the
recommendation of the Board of Directors of the Company in favor of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby, which recommendation shall not be withdrawn, modified or
withheld, unless the Board of Directors of the Company reasonably concludes,
after consultation with its outside legal counsel, that the fiduciary duties of
the Board of Directors under applicable law require it to withdraw, modify or
withhold such recommendation. As promptly as practical after completion of the
Information Statement, the Company shall mail the Information Statement to each
of the Stockholders, together with the form of Company Consent to be signed by
the Stockholders. The Company shall not send the Information Statement or the
Company Consent to its stockholders without first obtaining Parent's approval as
to the form and content of each such document, such approval not to be
unreasonably withheld or delayed.
6.4. EXPENSES. Each party hereto shall be responsible for its own costs
and expenses in connection with the Merger, including fees and disbursements of
consultants, investment bankers and other financial advisors, brokers and
finders, counsel and accountants, provided, however, that
30
the aggregate costs and expenses of the Company in connection with the Merger
(including, the fees and disbursements of ▇▇▇▇▇▇▇▇▇ Associates, ▇▇▇▇ and ▇▇▇▇
LLP, Pricewaterhouse Coopers LLP and R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇) shall not exceed
$700,000.
6.5. EXCLUSIVITY. From and after the date of this Agreement until the
earlier of the Effective Time and termination of this Agreement in accordance
with Article 9 hereof (the "Exclusivity Period), the Company will not, directly
or indirectly, through any officer, director, employee, Affiliate or agent of
the Company, or otherwise, take any action to solicit, initiate, seek,
entertain, encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any third party
regarding any acquisition of the Company, any merger or consolidation with or
involving the Company, or any acquisition of any material portion of the stock
or assets or the Company. The Company agrees that, in no event, will the Company
accept or enter into an agreement concerning any such third party acquisition
transaction during the Exclusivity Period. The Company will notify Parent
immediately after receipt by the Company (or any of its officers, directors,
employees, affiliates or agents) at any time during the Exclusivity Period of
any unsolicited proposal for, or inquiry respecting, any third party acquisition
transaction involving the Company or any request for nonpublic information in
connection with such a proposal or inquiry, or for access to the properties,
books or records of the Company by any person, or entity that informs the
Company that it is considering making, or has made, such a proposal or inquiry.
Such notice to Parent will indicate in reasonable detail the identity of the
person making the proposal or inquiry and the terms and conditions of such
proposal or inquiry.
6.6. POOLING ACCOUNTING. Each of Parent and the Company shall use its
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests under GAAP. The Company shall use its
best efforts to cause the Pooling Affiliates not to take any action that would
adversely affect the ability of Parent to account for the business combination
to be effected by the Merger as a pooling of interests under GAAP.
6.7. BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of shares of Parent Stock pursuant hereto and the
transactions contemplated hereby except that it will not be required to execute
a general consent to service of process in jurisdictions where it has not
already done so. The Company shall use its best efforts to assist Parent as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Stock pursuant hereto.
6.8. STOCK OPTIONS.
6.8.1. EXERCISABLE FOR PARENT STOCK. Parent agrees that, at
the Effective Time, each outstanding Stock Option, whether vested or unvested,
will become an option exercisable into Parent Stock. Each such Stock Option
shall continue to have, and be subject to, the same terms and conditions set
forth in the option agreement for such Stock Option and the Company Option Plan,
except that (a) such Stock Option shall be exercisable (when vested) for that
number of whole shares of Parent Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such Stock
Option immediately prior to the Effective Time multiplied by the Common Exchange
Ratio, rounded down to the nearest whole number of shares of Parent Stock,
31
and (b) the per share exercise price for shares of Parent Stock issuable upon
exercise of such Stock Option shall be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Stock Option was exercisable immediately prior to the Effective Time by the
Common Exchange Ratio, rounded up to the nearest whole cent. After the Effective
Time, Parent or the Surviving Corporation shall issue to each holder of an
outstanding Stock Option a document evidencing the foregoing. Parent intends
that the assumption and substitution of Stock Options that constitute "incentive
stock options," as defined in Section 422(b) of the Code, will not constitute a
modification of such options, as defined in Section 424 of the Code.
6.8.2. FORM S-8. Parent shall file a registration statement on
Form S-8 for the shares of Parent Stock issuable with respect to Stock Options
no later than thirty days after the Effective Date, and Parent shall use its
best efforts to cause such registration statement to become effective then and
remain effective for as long as the Stock Options are outstanding.
6.9. TAX-FREE REORGANIZATION. Parent and the Company shall each use all
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368 of the Code.
6.10. ACCESS AND INFORMATION. The Company and Parent shall afford to
the other and to its officers, employees, accountants, counsel and other
authorized representatives full and complete access, upon 24 hours advance
telephone notice, during regular business hours, throughout the period prior to
the earlier of the Effective Time or the termination of this Agreement pursuant
to its terms, to its offices, properties, books and records, and shall use
reasonable efforts to cause its representatives and independent public
accountants to furnish to the other party such additional financial and
operating data and other information as to its business, customers, vendors and
properties as the other party may from time to time reasonably request. Parent
and the Company shall exercise such rights in a manner so as not to interfere
unreasonably with the normal business operations of the other.
6.11. PUBLIC DISCLOSURE. The Company and Parent agree that each party's
non-disclosure obligations contained in a letter agreement dated March 16, 1999
by and between Parent and the Company, and any other non-disclosure obligations
agreed to in writing by Parent and the Company, shall remain in full force and
effect in accordance with the terms of such letter agreement and such other
writings.
6.12. NASDAQ LISTING. Parent agrees to authorize for listing on the
Nasdaq National Market, prior to the Effective Time, the shares of Parent Stock
issuable in connection with the Merger (including pursuant to Stock Options),
upon official notice of issuance.
6.13. ESCROW AGREEMENT. At the Closing, Parent and the Holder's Agent
shall enter into the Escrow Agreement with the Escrow Agent.
6.14. REGISTRATION RIGHTS AGREEMENT. At the Closing, Parent and the
Holder's Agent shall enter into a Registration Rights Agreement (the
"Registration Rights Agreement") substantially in the form of EXHIBIT F hereto.
32
6.15. EMPLOYMENT AGREEMENTS. Simultaneously with the execution of this
Agreement, the Company and Parent shall enter into with each of the persons
listed on EXHIBIT G-1 (a) an employment agreement in the form attached hereto as
EXHIBIT G-2 and (b) a Confidentiality and Inventions Agreement in the form
attached hereto as EXHIBIT I.
6.16. REASONABLE EFFORTS. Subject to terms and conditions herein
provided, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, the Company
and Parent each will use all reasonable efforts (a) to cooperate in the
preparation and mailing of the Information Statement and the Company Consent and
(b) to obtain all approvals, authorizations, consents and waivers from, and give
all notices to, any public or private third parties that are necessary on its
part in order to effect the transactions contemplated hereby.
6.17. STOCK OPTIONS. Within two days following the Effective Date,
Parent shall grant stock options to employees of the Surviving Corporation
covering a total of 350,000 shares of Parent Stock (subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Parent Stock prior to such grant). Such stock
options shall be allocated among employees of the Surviving Corporation in the
manner reasonably agreed by Parent and the current management of the Company,
shall have an exercise price equal to the fair market value of Parent Stock on
the date of grant and have such other terms as are customary for employee stock
option grants by Parent.
6.18. INDEMNITY OF COMPANY DIRECTORS AND OFFICERS.
(a) Parent shall not, for a period of three years after the
Effective Date, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
By-laws of the Company for the benefit of any individual who served as a
director or officer of the Company at any time prior to the Effective Time (the
"Indemnified Persons"), except for any changes which do not affect the
application of such provisions to acts or omissions of such individuals prior to
the Effective Time.
(b) From and after the Effective Time, Parent agrees to
indemnify and hold harmless each Indemnified Person against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent
permitted under Delaware law (and Parent shall also advance expenses as incurred
to the fullest extent permitted under Delaware law, provided the Indemnified
Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Indemnified Person is not
entitled to indemnification).
ARTICLE 7
CONDITIONS PRECEDENT
33
7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the parties hereto to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions:
7.1.1. STOCKHOLDER APPROVAL. The stockholders of the Company
shall have approved this Agreement and the transactions contemplated hereby by
the requisite vote under applicable law and the Company's certificate of
incorporation.
7.1.2. NO INJUNCTION. No injunction or restraining or other
order issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Merger or the other transactions contemplated
hereby shall be in effect (each party agreeing to use all reasonable efforts to
have any injunction or other order immediately lifted), and no action or
proceeding shall have been commenced seeking any injunction or restraining or
other order that seeks to prohibit, restrain, invalidate or set aside
consummation of the Merger or any of the other transactions contemplated hereby.
7.1.3. ILLEGALITY. There shall not have been any action taken,
and no statute, rule or regulation shall have been enacted, by any state or
federal government agency that would prohibit or materially restrict the
consummation of the Merger or the other transactions contemplated hereby.
7.1.4. CERTIFICATE OF MERGER. The Certificate of Merger shall
have been filed with the Secretary of State of the State of Delaware.
7.2. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUB TO
EFFECT THE MERGER. The obligation of Parent and Merger Sub to effect the Merger
shall be subject to the fulfillment (or waiver by Parent) at or prior to the
Closing of the following additional conditions:
7.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and correct
on and as of the Effective Time, except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date) and except to the extent that any such inaccuracies, individually or
in the aggregate, would not have a Company Material Adverse Effect or a material
adverse effect on the ability of the parties to consummate the transactions
contemplated by this Agreement (provided that any event or circumstance which is
caused by the execution or announcement of this Agreement shall not be deemed to
have a Company Material Adverse Effect), with the same force and effect as if
made on and as of the Effective Time; and the Company shall have delivered to
Parent a certificate to that effect, dated the date of the Closing and signed by
a duly authorized officer of the Company.
7.2.2. AGREEMENTS AND COVENANTS. The Company shall have
performed in all material respects all of its agreements and covenants set forth
herein that are required to be performed at or prior to the Effective Time; and
the Company shall have delivered to Parent a certificate to that effect, dated
the date of the Closing and signed by a duly authorized officer of the Company.
34
7.2.3. LEGAL OPINION. Parent and Merger Sub shall have
received an opinion from ▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Company, in
substantially the form attached as EXHIBIT H hereto.
7.2.4. CLOSING DOCUMENTS. The Company shall have delivered to
Parent and Merger Sub such closing documents as Parent shall reasonably request
(other than additional opinions of counsel).
7.2.5. ESCROW AGREEMENT. The Holder's Agent and the Escrow
Agent shall have entered into the Escrow Agreement with Parent as contemplated
by Section 6.13 hereof.
7.2.6. CONVERSION OF SERIES A PREFERRED STOCK. All of the
shares of Series A Preferred Stock shall have been converted by the holder
thereof into shares of Company Common Stock.
7.2.7. RESIGNATIONS. Each member of the board of directors
of the Company shall have resigned as a director of the Company, effective as of
the Effective Time.
7.2.8. POOLING OPINION. Parent shall have received a letter
from Pricewaterhouse Coopers LLP regarding that firm's concurrence with the
conclusions of Parent's management and the Company's management as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16.
7.2.9. THIRD PARTY CONSENTS. All material third party consents
or approvals listed in SCHEDULE 3.5.2 shall have been obtained by the Company
and shall be effective and shall not have been suspended, revoked, or stayed by
action of any such third party.
7.2.10. NO MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, the Company shall not have suffered a Company Material Adverse Effect
(provided that any event or circumstance which is caused by the execution or
announcement of this Agreement shall not be deemed to have a Company Material
Adverse Effect).
7.2.11. STOCKHOLDER APPROVAL. The Company Consent shall have
been signed by (a) all of the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock outstanding on the date hereof and
(b) holders of not less than 1,000,000 shares of Company Common Stock
outstanding on the date hereof.
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment (or waiver by the Company) at or prior to the Closing of the
following additional conditions:
7.3.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Effective Time, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date) and except to the extent that any such inaccuracies, individually or
in the aggregate, would not have a Parent Material Adverse Effect or a material
adverse effect on the
35
ability of the parties to consummate the transactions contemplated by this
Agreement (provided that any event or circumstance which is caused by the
execution or announcement of this Agreement shall not be deemed to have a Parent
Material Adverse Effect), with the same force and effect as if made on and as of
the Effective Time; and Parent shall have delivered to the Company a certificate
to that effect, dated the date of the Closing and signed by a duly authorized
officer.
7.3.2. AGREEMENTS AND COVENANTS. Parent and Merger Sub shall
have performed in all material respects all of their agreements and covenants
set forth herein that are required to be performed at or prior to the Effective
Time; and Parent shall have delivered to the Company a certificate to that
effect, dated the date of the Closing and signed by a duly authorized officer.
7.3.3. LEGAL OPINION. The Stockholders shall have received an
opinion from ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to Parent, in substantially the
form attached hereto as EXHIBIT J hereto.
7.3.4. REGISTRATION RIGHTS AGREEMENT. Parent and the Holder's
Agent shall have entered into the Registration Rights Agreement as contemplated
by Section 6.14 hereof.
7.3.5. TAX OPINION. The Stockholders shall have received an
opinion from ▇▇▇▇ and ▇▇▇▇ LLP to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code; provided that if ▇▇▇▇ and ▇▇▇▇ LLP does not render such
opinion, this condition shall nonetheless be deemed satisfied if ▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇ LLP renders such opinion to the Stockholders. Parent and the Company each
agree to provide customary representations to such law firm for the purpose of
rendering such opinion.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS. All representations, warranties and
covenants made by any party in this Agreement or any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of any other
party, provided, however, that any claims for breach of any representations and
warranties of the Company shall be included in Parent Claims, and subject to the
provisions of this Article 8.
8.2. AGREEMENT TO INDEMNIFY. Subject to the terms and conditions of
this Article 8, the Stockholders agree (without any right of contribution from
the Company or the Surviving Corporation or any right of indemnification against
the Company or the Surviving Corporation) to indemnify, defend and hold harmless
Parent and each of its directors, officers, agents and Affiliates (collectively,
the "Parent Group") from and against any loss, liability, damage, cost or
expense (including reasonable attorneys' fees and disbursements) suffered,
incurred or paid by any member of the Parent Group as a result of a breach of
any of the representations and warranties of the Company contained in this
Agreement or in any other agreement, certificate or other document delivered by
the Company pursuant hereto(collectively, "Parent Claims"). With respect to any
member of the Parent Group other than Parent, the Company on behalf of the
Stockholders and the Holder's Agent acknowledges and agrees that Parent is
contracting on its own behalf and for such
36
member and Parent shall obtain and
hold the rights and benefits provided for in this Section 8.2 in trust for and
on behalf of such member.
8.3. LIMITATION OF STOCKHOLDERS' LIABILITY.
8.3.1. LIMITATION OF PARENT CLAIMS. The obligations and
liabilities of the Stockholders hereunder with respect to indemnification for
Parent Claims shall be subject to the following limitations:
(a) The Stockholders shall be obligated to indemnify
Parent only with respect to actual or potential Parent Claims as to which Parent
has given the Holder's Agent written notice on or prior to the earlier of (i)
the first anniversary of the Closing or (ii) the date on which Parent's
independent auditors deliver their signed report on their audit of Parent's
financial statements as of and for the year ended December 31, 1999.
(b) No indemnification shall be required to be made
by the Stockholders hereunder unless the amount of Parent Claims to which the
Parent Group is entitled to indemnification hereunder exceeds $250,000 in the
aggregate, in which case the Stockholders' indemnification obligations shall
apply to the full amount of such Parent Claims and all Parent Claims thereafter.
(c) All Parent Claims shall be brought and recovered
by Parent solely by the return to Parent of property from the Escrow Fund. The
terms of the Escrow Agreement shall govern how property in the Escrow Fund is
valued for purposes of satisfying a Parent Claim subject to indemnification
hereunder.
(d) The amount recoverable by Parent under this
Article 8 shall be reduced by any proceeds received by Parent or an
Affiliate, or which Parent or an affiliate is legally entitled to receive,
with respect to such Parent Claim from an insurance carrier, net of any cost
of collection, deductible, premium adjustment, reimbursement obligation or
other cost of Parent or its Affiliates directly related to such insurance
claim.
(e) Parent, the Surviving Corporation, the
Stockholders and the Holder's Agent acknowledge and agree that any distribution
of property from the Escrow Fund to satisfy a Parent Claim hereunder shall be
done so as to reduce each Stockholder's interest in the Escrow Fund in a pro
rata manner based on the Stockholders' respective ownership interests in the
Parent Stock in the Escrow Fund as of the Effective Time.
8.3.2. EXCLUSIVE REMEDY. The indemnification provided in this
Article 8 shall be Parent's exclusive remedy for any breach by the Company of a
representation or warranty or covenant contained in this Agreement or in any
other agreement, certificate or other document delivered by the Company pursuant
hereto or in connection herewith. Notwithstanding the foregoing, nothing
contained herein shall limit Parent's rights or remedies with respect to claims
resulting from or arising out of fraud.
37
8.4. PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.
8.4.1. RECOVERY BY PARENT. In seeking to collect the amount of
any Parent Claim that a member of the Parent Group seeks to recover, in whole or
in part, from the Escrow Fund, Parent shall first give the Holder's Agent and
the Escrow Agent written notice of such Parent Claim. Such notice of a Parent
Claim or potential Parent Claim shall specify the amount of the Parent Claim (or
Parent's good faith estimate of the amount of the Parent Claim if the amount is
not yet determined) and the property recoverable from the Escrow Fund sufficient
to satisfy such Parent Claim, after giving effect to the limitations set forth
in this Article 8 and the manner of valuing property in the Escrow Fund as set
forth in the Escrow Agreement. The notice shall also provide a reasonably
detailed summary of the basis for such Parent Claim. The delay or failure of
Parent to provide notice hereunder shall not in any way limit Parent's
indemnification rights hereunder except to the extent that the Stockholders
shall have been materially adversely affected by such delay or failure and
except that in any event such notice shall be made within the period provided in
Section 8.3.1(a) hereof. If the Holder's Agent does not dispute the basis or
amount of any Parent Claim within 30 days of receiving written notice thereof,
Parent shall have the right promptly to recover indemnity as and to the extent
provided herein. If the Holder's Agent disagrees with the basis of the Parent
Claim or the amount of damages caused thereby, then within 30 days of receiving
written notice thereof, the Holder's Agent shall give notice to Parent of such
disagreement and, in that case, Parent shall have no right to recover indemnity
hereunder until such time, if at all, as (a) a court of competent jurisdiction
issues a final, non-appealable order specifying the amount of Parent's recovery,
in which case Parent shall have the right promptly to recover the amount so
specified (subject to the limitations contained in Section 8.3 hereof) or (b)
Parent and the Holder's Agent agree in writing to the amount of Parent's
recovery, in which case Parent shall have the right promptly to recover the
amount so agreed.
8.4.2. THIRD-PARTY PARENT CLAIMS. Parent agrees to notify the
Holder's Agent of any Parent Claims asserted by third parties that, in the
opinion of Parent, are reasonably likely to give rise to indemnification
hereunder ("Third-Party Parent Claims"). The Holder's Agent may (i) participate
in the defense of any Third-Party Parent Claim or (ii) upon written notice
thereof to Parent, assume the defense of any Third-Party Parent Claim, with
counsel reasonably satisfactory to Parent; provided that the Holder's Agent may
not assume such defense if there exists a conflict of interest between the
positions of Parent and the Stockholders with respect to such Third-Party Parent
Claim or such Third-Party Parent Claim seeks equitable relief against a member
of the Parent Group. Parent agrees that it will not settle any Third-Party
Parent Claims without the consent of the Holder's Agent, which consent shall not
be unreasonably withheld or delayed. Parent further agrees that if the Holder's
Agent wishes to enter into a settlement with respect to a Third-Party Parent
Claim on terms reasonably acceptable to Parent, Parent will cooperate in such
settlement, provided that such settlement includes, as an unconditional term
thereof, the giving by the third party to Parent of a release from all liability
in respect of such Third-Party Parent Claim.
38
ARTICLE 9
TERMINATION
9.1. TERMINATION EVENTS. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the
Company;
(b) by Parent if there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and such breach has not been cured within ten business
days after written notice to the Company (provided, that neither Parent nor
Merger Sub is in material breach of the terms of this Agreement, and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured) such that the conditions set forth in Section 7.2.1 or Section
7.2.2 hereof, as the case may be, will not be satisfied;
(c) by the Company if there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and such breach has not been cured within ten
business days after written notice to Parent (provided, that the Company is not
in material breach of the terms of this Agreement, and provided further, that no
cure period shall be required for a breach which by its nature cannot be cured)
such that the conditions set forth in Section 7.3.1 or Section 7.3.2 hereof, as
the case may be, will not be satisfied;
(d) by any party hereto 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 final 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 make
consummation of the Merger illegal or which would prohibit Parent's ownership or
operation of all or a material portion of the business or assets of the Company,
or compel Parent to dispose of or hold separate all or a material portion of the
business or assets of the Company or Parent as a result of the Merger; or
(e) by any party hereto if the Merger shall not have
been consummated by April 30, 1999, provided that the right to terminate this
Agreement under this Section 9.1(e) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date.
Where action is taken to terminate this Agreement pursuant to this Section 9.1,
such action shall be authorized by the board of directors of the party taking
such action.
9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 9.1 hereof, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
Parent, Merger Sub, the Company or their respective officers, directors,
stockholders or Affiliates, except to the extent that a party hereto is in
willful breach of any of its representations or warranties set forth in this
Agreement, or breach of any of its covenants or agreements set forth in this
Agreement, and provided that the provisions of Sections 6.4 and 6.11 hereof and
Article 10 hereof shall remain in full force and effect and survive any
termination of this Agreement.
39
ARTICLE 10
MISCELLANEOUS
10.1. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except (i) prior
to the Effective Time, by an instrument in writing signed by Parent, the Company
and the Holder's Agent and (ii) after the Effective Time, by an instrument in
writing signed by Parent and the Holder's Agent.
10.2. WAIVER. The terms and conditions of this Agreement may be waived
only by a written instrument signed by the party waiving compliance. The failure
of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
10.3. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws; provided
that the implementation and effect of the Merger shall be governed by the laws
of the State of Delaware.
10.4. NOTICE. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of receipt, sent via a reputable overnight
courier service with confirmation of receipt requested, or mailed by registered
or certified mail (postage prepaid and return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of receipt as confirmed:
TO PARENT OR MERGER SUB:
▇▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
With copies to:
▇▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
40
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
TO THE COMPANY:
Bright Tiger Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
TO THE HOLDER'S AGENT:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Northbridge Venture Partners, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.5. ENTIRE AGREEMENT. This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by or
referred to herein constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof, including a letter agreement dated March 16, 1999 by
and between Parent and the
41
Company and the preliminary term sheet attached thereto, but excluding written
non-disclosure agreements between Parent and the Company, which shall remain in
effect in accordance with their terms. Each party hereto acknowledges that, in
entering into this Agreement and completing the transactions contemplated
hereby, such party is not relying on any representation, warranty, covenant or
agreement not expressly stated in this Agreement or in the agreements,
certificates and other documents among or between the parties contemplated by or
referred to herein.
10.6. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement is not intended to confer upon any person
other than the parties hereto and members of the Parent Group (and such parties'
and members' respective successors and assigns) any rights or remedies
hereunder, except as otherwise expressly provided herein; provided that the
provisions in Article 2 concerning issuance of shares of Parent Stock in the
Merger, in Sections 6.8 and 6.17 concerning stock options and in Section 6.18
concerning indemnification of directors and officers of the Company are intended
for the benefit of the individuals referred to therein and may be enforced by
them. Neither this Agreement nor any of the rights and obligations of the
parties hereunder shall be assigned or delegated, whether by operation of law or
otherwise, without the written consent of all parties hereto, except that
certain rights and obligations of Merger Sub and the Company may be assigned and
delegated to the Surviving Corporation as a result of the Merger without any
further consent hereunder.
10.7. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.
* * * * *
42
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be executed as an agreement under seal as of the date first
above written.
▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Title: President and CEO
BENGAL ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Title: President
BRIGHT TIGER TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: CEO
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
43
Agreement and Plan of Merger, dated as of April 2, 1999, by and among ▇▇▇▇▇▇▇
Corporation ("▇▇▇▇▇▇▇"), Bengal Acquisition Corp. and Bright Tiger Technologies,
Inc. ("Bright Tiger").
Schedules and Exhibits Omitted
IN ACCORDANCE WITH ITEM 601(B)(2) OF REGULATION S-K
Disclosure Schedules of Bright Tiger.
EXHIBIT DESCRIPTION
A Form of Certificate of Merger
B Form of Transmittal Letter
C Form of Escrow Agreement
D Form of Stockholder Agreement
E Form of Affiliate Agreement
F Form of Registration Rights Agreement
G-1 Persons entering into Employment Agreements
and Confidentiality and Inventions
Agreements
G-2 Form of Employment Agreement
H Form of Opinion from Bright Tiger's Counsel
I Form of Confidentiality Agreement
J Form of Opinion from ▇▇▇▇▇▇▇'▇ Counsel
▇▇▇▇▇▇▇ will furnish supplementally a copy of any omitted schedule or exhibit to
the Securities and Exchange Commission upon request, provided, however, that
▇▇▇▇▇▇▇ may request confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended, for any schedule or exhibit so
furnished.
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