EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
ACTUATE CORPORATION,
TT ACQUISITION CORP.,
TIDESTONE TECHNOLOGIES, INC.
and
MICHAEL J. GASSMAN, as
STOCKHOLDERS' REPRESENTATIVE
Dated as of May 1, 2001
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TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER................................................................................... 2
SECTION 1.01 The Merger........................................................................ 2
SECTION 1.02 Effective Time; Closing........................................................... 2
SECTION 1.03 Effect of the Merger.............................................................. 3
SECTION 1.04 Certificate of Incorporation; Bylaws.............................................. 3
SECTION 1.05 Directors and Officers............................................................ 3
ARTICLE II MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES............................................... 3
SECTION 2.01 Merger Consideration.............................................................. 3
SECTION 2.02 Exchange of Certificates.......................................................... 5
SECTION 2.03 Stock Transfer Books.............................................................. 8
SECTION 2.04 Company Stock Options............................................................. 8
SECTION 2.05 Securities Laws Issues............................................................ 8
SECTION 2.06 Dissenting Shares................................................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 9
SECTION 3.01 Organization and Qualification.................................................... 9
SECTION 3.02 Amended and Restated Articles of Incorporation and Bylaws......................... 10
SECTION 3.03 No Subsidiaries................................................................... 10
SECTION 3.04 Capitalization.................................................................... 11
SECTION 3.05 Authority Relative to this Agreement.............................................. 12
SECTION 3.06 No Conflict; Required Filings and Consents........................................ 13
SECTION 3.07 Permits; Compliance............................................................... 14
SECTION 3.08 Financial Statements.............................................................. 14
SECTION 3.09 Absence of Certain Changes or Events.............................................. 15
SECTION 3.10 Absence of Litigation............................................................. 15
SECTION 3.11 Employee Benefit Plans; Labor Matters............................................. 15
SECTION 3.12 Contracts......................................................................... 19
SECTION 3.13 Environmental Matters............................................................. 21
SECTION 3.14 Intellectual Property............................................................. 22
SECTION 3.15 Taxes............................................................................. 25
SECTION 3.16 Vote Required..................................................................... 27
SECTION 3.17 Assets; Absence of Liens and Encumbrances......................................... 27
SECTION 3.18 Owned Real Property............................................................... 28
SECTION 3.19 Certain Interests................................................................. 28
SECTION 3.20 Insurance Policies................................................................ 28
SECTION 3.21 Restrictions of Business Activities............................................... 29
SECTION 3.22 Brokers........................................................................... 29
SECTION 3.23 State Takeover Statutes........................................................... 29
SECTION 3.24 Customers and Suppliers........................................................... 29
SECTION 3.25 Accounts Receivable; Bank Accounts................................................ 29
SECTION 3.26 Powers of Attorney................................................................ 30
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SECTION 3.27 Offers............................................................................ 30
SECTION 3.28 Warranties........................................................................ 30
SECTION 3.29 Books and Records................................................................. 30
SECTION 3.30 Tax Matters....................................................................... 30
SECTION 3.31 No Misstatements.................................................................. 30
SECTION 3.32 No Other Representations or Warranties............................................ 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................... 31
SECTION 4.01 Organization and Qualification.................................................... 31
SECTION 4.02 Authority Relative to This Agreement.............................................. 32
SECTION 4.03 Capital Structure................................................................. 32
SECTION 4.04 No Conflict; Required Filings and Consents........................................ 32
SECTION 4.05 SEC Filings; Financial Statements................................................. 33
SECTION 4.06 Interim Operations of Merger Sub.................................................. 33
SECTION 4.07 Valid Issuance of Parent Shares................................................... 34
SECTION 4.08 Tax Matters....................................................................... 34
SECTION 4.09 Form S-3 Eligibility.............................................................. 34
ARTICLE V CONDUCT OF BUSINESSES PENDING THE MERGER................................................... 34
SECTION 5.01 Conduct of Business by the Company Pending the Merger............................. 34
SECTION 5.02 Litigation........................................................................ 37
SECTION 5.03 Notification of Certain Matters................................................... 37
ARTICLE VI ADDITIONAL AGREEMENTS...................................................................... 37
SECTION 6.01 Company Stockholder Approval; Exemption from Registration.......................... 37
SECTION 6.02 Access to Information; Confidentiality............................................ 38
SECTION 6.03 No Solicitation of Transactions................................................... 39
SECTION 6.04 Employee Benefits Matters......................................................... 40
SECTION 6.05 Further Action; Consents; Filings................................................. 41
SECTION 6.06 Plan of Reorganization............................................................ 41
SECTION 6.07 No Public Announcement............................................................ 42
SECTION 6.08 Expenses.......................................................................... 42
SECTION 6.09 Indemnification of Officers and Directors......................................... 42
SECTION 6.10 Nasdaq National Market Listing.................................................... 43
SECTION 6.11 Stockholder Certificates.......................................................... 43
SECTION 6.12 Conversion Schedule............................................................... 43
SECTION 6.13 Collection of Accounts Receivable................................................. 43
SECTION 6.14 Vesting of Options................................................................ 43
ARTICLE VII CONDITIONS TO THE MERGER................................................................... 44
SECTION 7.01 Conditions to the Obligations of Each Party....................................... 44
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub............................ 44
SECTION 7.03 Conditions to the Obligations of the Company...................................... 47
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................... 49
SECTION 8.01 Termination....................................................................... 49
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SECTION 8.02 Effect of Termination............................................................. 49
SECTION 8.03 Amendment......................................................................... 50
SECTION 8.04 Waiver............................................................................ 50
ARTICLE IX INDEMNIFICATION.............................................................................. 50
SECTION 9.01 Survival of Representations and Warranties........................................ 50
SECTION 9.02 Indemnification by the Company Stockholders....................................... 50
SECTION 9.03 Indemnification Procedures........................................................ 52
SECTION 9.04 Stockholders' Representative...................................................... 54
ARTICLE X GENERAL PROVISIONS............................................................................ 55
SECTION 10.01 Notices.......................................................................... 55
SECTION 10.02 Certain Definitions.............................................................. 56
SECTION 10.03 Severability..................................................................... 59
SECTION 10.04 Assignment; Binding Effect; Benefit.............................................. 60
SECTION 10.05 Incorporation of Exhibits........................................................ 60
SECTION 10.06 Specific Performance............................................................. 60
SECTION 10.07 Governing Law; Forum............................................................. 60
SECTION 10.08 Time of the Essence.............................................................. 60
SECTION 10.09 Waiver of Jury Trial............................................................. 60
SECTION 10.10 Construction..................................................................... 61
SECTION 10.11 Further Assurances............................................................... 61
SECTION 10.12 Headings......................................................................... 61
SECTION 10.13 Counterparts..................................................................... 61
SECTION 10.14 Entire Agreement................................................................. 61
Exhibit A Form of Voting Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Form of Company Counsel Legal Opinion
Exhibit D Form of Parent Counsel Legal Opinion
Exhibit E Form of Stockholder Certificate
Exhibit F Form of Registration Rights Agreement
Schedule 6.04(b) Schedule of Company Employees Entering Into Offer Letters
Schedule 6.04(c) Schedule of Individuals Entering Into Non-Solicitation
Agreements
Schedule 7.02(r) Schedule of Company Employees to Be Employed at Closing
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of May 1,
2001 (this "Agreement"), among ACTUATE CORPORATION, a Delaware corporation
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("Parent"), TT ACQUISITION CORP., a Delaware corporation and a wholly owned
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subsidiary of Parent ("Merger Sub"), TIDESTONE TECHNOLOGIES, a Kansas
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corporation (the "Company"), and MICHAEL J. GASSMAN, as Stockholders'
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Representative (as defined in Section 9.04 hereof).
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the Kansas General Corporation Law (the "KGCL")
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and the Delaware General Corporation Law (the "DGCL"), Parent and the Company
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will enter into a business combination transaction pursuant to which Merger Sub
will merge with and into the Company (the "Merger");
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WHEREAS, the Board of Directors of the Company has (i) determined that
the Merger is fair to, and in the best interests of, the Company and its
stockholders, (ii) unanimously approved and adopted this Agreement, the Merger,
and the other transactions contemplated by this Agreement, and (iii) determined
to unanimously recommend that the stockholders of the Company adopt and approve
this Agreement and the Merger;
WHEREAS, the Boards of Directors of each of Parent and Merger Sub have
(i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests of,
Parent and its stockholders and (ii) approved and adopted this Agreement, the
Merger, and the other transactions contemplated by this Agreement;
WHEREAS, for Federal income tax purposes, the Merger is intended to
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code");
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WHEREAS, for accounting purposes it is intended that the Merger shall
be accounted for as a "purchase" transaction;
WHEREAS, certain stockholders of the Company own such number of shares
of common stock, par value $0.01 per share, of the Company (the "Company Common
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Stock) as is set forth in Section 1.01 of the Company Disclosure Schedule (as
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defined in Article III) (such stockholders being referred to herein as the
"Principal Stockholders");
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WHEREAS, pursuant to the Merger, each outstanding share of Company
Common Stock and all outstanding options and other rights to acquire or receive
shares of Company Common Stock shall be converted into the right to receive
shares of Parent's authorized common stock, par value $0.001 per share ("Parent
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Common Stock"), at the rate determined in this Agreement;
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WHEREAS, as a condition and inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, each of the
Principal Stockholders is entering into a voting agreement with Parent (a
"Voting Agreement"), dated the date hereof, and substantially in the form
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attached hereto as Exhibit A, and the Company is delivering to each of its
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stockholders for execution and delivery to Parent a Stockholder Certificate in
the form attached hereto as Exhibit E (a "Stockholder Certificate");
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WHEREAS, a portion of the Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in this Agreement and the Escrow Agreement (as defined in
Section 2.02(b));
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's willingness to enter
into this Agreement, each individual listed on Schedule 6.04(b) is entering into
an Employment Agreement (as defined in Section 6.04(b)) and each individual
listed on Schedule 6.04(c) is entering into a Non-Solicitation Agreement (as
defined in Section 6.04(c)); and
WHEREAS, certain capitalized terms used in this Agreement are defined
in Section 10.02 of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub, the Company and the Stockholders' Representative
hereby agree as follows:
ARTICLE I
THE MERGER
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SECTION 1.01 The Merger. Upon the terms of this Agreement and subject
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to the conditions set forth in this Agreement, and in accordance with the KGCL
and the DGCL, at the Effective Time (as defined in Section 1.02), Merger Sub
shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
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Corporation").
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SECTION 1.02 Effective Time; Closing. As promptly as practicable
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following the satisfaction or, if permissible, waiver of the conditions set
forth in Article VII (or such other date as may be agreed by each of the parties
hereto), the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretaries of
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State of the States of Kansas and Delaware in such form as is required by, and
executed in accordance with, the relevant portions of the KGCL and the DGCL.
The term "Effective Time" means the date and time of such filing (or such later
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time as may be agreed by each of the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the Certificate of
Merger, a closing (the "Closing") will be held at the offices of Gunderson
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Dettmer Stough Villeneuve Franklin & Hachigian, LLP ("Gunderson Dettmer"),
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155 Constitution Drive, Menlo Park, California (or such other place as the
parties may agree). The date on which the Closing shall occur is referred to
herein as the "Closing Date."
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SECTION 1.03 Effect of the Merger. At the Effective Time, the effect
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of the Merger shall be as provided in the applicable provisions of the KGCL and
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of each of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of each of the Company and Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 1.04 Certificate of Incorporation; Bylaws
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(a) At the Effective Time, the Amended and Restated Articles of
Incorporation of the Company as the Surviving Corporation shall be amended and
restated to read the same as the Certificate of Incorporation of Merger Sub as
in effect immediately prior to the Effect Time, except that Section 1 of the
amended and restated Certificate of Incorporation of the Surviving Corporation,
instead of reading the same as Section 1 of the Certificate of Incorporation of
Merger Sub, shall read as follows: "The name of this corporation is Tidestone
Technologies, Inc. "
(b) At the Effective Time, the Bylaws of the Company as the
Surviving Corporation shall be amended to read the same as the Bylaws of Merger
Sub as in effect immediately prior to the Effective Time, except that all
references to Merger Sub in the Bylaws of the Surviving Corporation shall be
changed to refer to Tidestone Technologies, Inc.
SECTION 1.05 Directors and Officers. The directors of Merger Sub
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immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II
MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES
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SECTION 2.01 Merger Consideration.
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(a) At the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Merger Sub, the Company or the holders of any
of the following securities:
(i) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock to be canceled pursuant to Section 2.01(a)(ii) and any
Dissenting Shares (as defined in Section 2.06)) shall be converted into the
right to receive such number of shares of Parent Common Stock equal to the
Common Exchange Ratio (as defined in Section 2.01(b));
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(ii) each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be cancelled and extinguished
without any conversion thereof and no payment or distribution shall be made with
respect thereto; and
(iii) each share of common stock, par value $0.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) As used in this Agreement, the following terms have the
following meanings:
(i) "Aggregate Merger Consideration" means such number
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of shares of Parent Common Stock equal to 878,000 minus the Purchase Price
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Adjustment (as defined below).
(ii) "Escrow Shares" means the number of shares of Parent
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Common Stock (rounded up to the next whole number) determined by multiplying the
Aggregate Merger Consideration (less any shares of Parent Common Stock allocable
to vested Company Options) by 0.20.
(iii) "Common Exchange Ratio" means the number of shares
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of Parent Common Stock determined by dividing (x) the Aggregate Merger
Consideration by (y) the Fully Diluted Common Shares Amount (as defined below).
(iv) "Fully Diluted Common Shares Amount" means a number
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of shares of Company Common Stock equal to the sum of (x) the number of shares
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (including such shares that are issued and outstanding as a
result of any acceleration of vesting or otherwise in connection with the
Merger) and (y) the number of shares of Company Common Stock issuable upon
exercise, conversion and/or exchange of all securities issued and outstanding
immediately prior to the Effective Time (including such securities that that are
issued and outstanding as a result of any acceleration of vesting or otherwise
in connection with the Merger) that are then exercisable, convertible and/or
exchangeable for shares of Company Common Stock, including, without limitation,
the vested Company Options (as defined in Section 2.04 below).
(v) "Purchase Price Adjustment" means that number of
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shares of Parent Common Stock equal to (i) the aggregate amount of Stockholder
Expenses (as defined in Section 6.08), divided by (ii) $9.50.
(c) If, during the period between the date hereof and the
Effective Time, any change in the capital stock of Parent shall occur by reason
of reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period or any similar event, the Aggregate Merger Consideration, the Common
Exchange Ratio and the Escrow Shares shall be
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correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange or readjustment of shares.
(d) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement, stock option exercise agreement or other
agreement with the Company, then the shares of Parent Common Stock issued in
exchange for such shares of Company Common Stock will also be unvested and/or
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends.
SECTION 2.02 Exchange of Certificates.
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(a) Exchange Procedures. From and after the Effective Time, a
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bank or trust company to be designated by Parent shall act as exchange agent
(the "Exchange Agent") in effecting the exchange of the applicable shares of
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Parent Common Stock for certificates which immediately prior to the Effective
Time represented outstanding shares of Company Stock ("Company Share
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Certificates") and which were converted into the right to receive the applicable
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shares of Parent Common Stock pursuant to Section 2.01. As promptly as
practicable after the Effective Time, but in no event later than 10 business
days following the Effective Time, Parent and the Exchange Agent shall mail to
each record holder of Company Share Certificates a letter of transmittal (the
"Letter of Transmittal") in a form approved by Parent and the Company and
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instructions for use in surrendering such Company Share Certificates and
receiving shares of Parent Common Stock pursuant to Section 2.01. Promptly after
the Effective Time, but in no event later than 20 business days following the
Effective Time, Parent shall cause to be deposited in trust with the Exchange
Agent the shares of Parent Common Stock (and cash in lieu of fractional shares
pursuant to Section 2.02(e)) less the Escrow Shares.
Upon the surrender of each Company Share Certificate for cancellation
to the Exchange Agent, together with a properly completed Letter of Transmittal
and such other documents as may reasonably be required by Parent:
(i) Parent shall cause to be issued to the holder of such
Company Share Certificate in exchange therefor a separate stock certificate
representing the shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.01 (less the Escrow Shares attributable to the pro rata
interest of such holder in the Escrow Fund pursuant to Section 2.02(b)) and cash
in lieu of fractional shares pursuant to Section 2.02(e); and
(ii) the Company Share Certificates so surrendered shall
forthwith be cancelled.
In the event of a transfer of ownership of shares of Company Common
Stock that is not registered in the transfer records of the Company, the
applicable shares of Parent Common Stock may be issued to a person other than
the person in whose name the Company Share Certificate so surrendered is
registered if the Company Share Certificate representing such shares of Company
Common Stock is presented to Parent, accompanied by all documents required to
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evidence and effect such transfer and evidence that (i) the shares are
transferable and (ii) any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Article II, each Company
Share Certificate shall, subject to appraisal rights under the KGCL and Section
2.06, be deemed at any time after the Effective Time to represent only the right
to receive upon surrender the applicable shares of Parent Common Stock with
respect to the shares of Company Common Stock formerly represented thereby to
which such holder is entitled pursuant to Section 2.01 and cash in lieu of any
fractional shares pursuant to Section 2.02(e).
(b) Escrow Fund. Prior to or simultaneously with the Closing,
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the Stockholders' Representative and Parent shall enter into an escrow agreement
(the "Escrow Agreement") with an escrow agent selected by Parent and reasonably
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acceptable to the Stockholders' Representative (the "Escrow Agent")
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substantially in the form of Exhibit B hereto. Pursuant to the terms of the
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Escrow Agreement, within 20 days after the Closing, Parent shall deposit one or
more certificates representing, in the aggregate, the Escrow Shares into an
escrow account, which account is to be managed by the Escrow Agent (the "Escrow
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Account"). Any Escrow Shares in the Escrow Account are referred to herein as the
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"Escrow Fund". In connection with such deposit of the Escrow Shares with the
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Escrow Agent and as of the Effective Time, each holder of Company Common Stock
will be deemed to have received and deposited with the Escrow Agent each
stockholder's pro rata interest in the Escrow Fund as determined as of Closing
by reference to such stockholder's ownership of shares of Company Common Stock
(plus any additional shares as may be issued upon any stock split, stock
dividend or recapitalization effected by Parent after the Effective Time with
respect to shares constituting the Escrow Fund), without any act of the
stockholders of the Company (the "Company Stockholders"). Distributions of any
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Escrow Shares from the Escrow Account shall be governed by the terms and
conditions of the Escrow Agreement. The adoption of this Agreement and the
approval of the Merger by the Company Stockholders shall constitute approval of
the Escrow Agreement and of all the arrangements relating thereto, including,
without limitation, the placement of the Escrow Shares in escrow and the
appointment of the Stockholders' Representative. No portion of the Escrow Fund
shall be contributed in respect of any Company Option or any other security
exercisable or convertible into Company Common Stock. To the extent possible, no
shares of Parent Common Stock contributed to the Escrow Fund shall be unvested
or subject to any right of repurchase, risk of forfeiture or other condition in
favor of the Surviving Corporation.
(c) Distributions with Respect to Unexchanged Parent Shares. No
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dividends or other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock comprising part of the Aggregate Merger
Consideration with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Company Share Certificate with respect to the shares
of Parent Common Stock represented thereby until the holder of such Company
Share Certificate shall surrender such Company Share Certificate in accordance
with this Section 2.02.
(d) No Further Rights in Company Common Stock. All shares of
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Parent Common Stock issued upon conversion of shares of Company Common Stock in
accordance with the terms hereof (and any cash paid in lieu of fractional shares
pursuant to
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Section 2.02(e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No certificates or scrip representing
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fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Company Share Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. Each holder of a fractional share interest shall be paid an amount in
cash (without interest) equal to the product obtained by multiplying (i) such
fractional share interest to which such holder (after taking into account all
fractional share interests then held by such holder) would otherwise be entitled
by (ii) $9.50.
(f) No Liability. Neither Parent nor the Surviving Corporation
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shall be liable to any holder of shares of Company Common Stock for any such
shares of Parent Common Stock (or dividends or distributions with respect
thereto) or cash properly and legally delivered to a public official pursuant to
any abandoned property, escheat or similar Law (as defined in Section 3.06(a)).
(g) Withholding Rights. Each of the Exchange Agent, the
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Surviving Corporation and Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign Tax (as defined in Section 3.15(c)) Law. To
the extent that amounts are so withheld by the Exchange Agent, the Surviving
Corporation or Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Exchange Agent, the Surviving Corporation or Parent,
as the case may be.
(h) Lost Certificates. If any Company Share Certificate shall
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have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Company Share Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
person of a bond, in such reasonable amount as the Surviving Corporation may
direct, as indemnity against any claim that may be made against it with respect
to such Company Share Certificate, Parent shall issue in exchange for such lost,
stolen or destroyed Company Share Certificate, the applicable shares of Parent
Common Stock (and dividends or other distributions pursuant to Section 2.02(c)
and cash in lieu of fractional shares pursuant to Section 2.02(e)) to which such
person is entitled pursuant to the provisions of this Article II.
(i) Return of Parent Shares. Promptly following the end of the
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fifth full calendar month after the Effective Time, the Exchange Agent shall
return to Parent all of the remaining shares of Parent Common Stock held by the
Exchange Agent and the Exchange Agent's duties shall terminate. Thereafter, upon
the surrender of a Company Share Certificate to Parent and such other documents
as may reasonably be required by Parent, and subject to applicable abandoned
property, escheat and similar laws, the holder of such Company Share Certificate
shall be entitled to receive in exchange therefor the applicable shares of
Parent
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Common Stock (and dividends or other distributions pursuant to Section 2.02(c)
and cash in lieu of fractional shares pursuant to Section 2.02(e)) without any
interest thereon.
SECTION 2.03 Stock Transfer Books. At the Effective Time, the stock
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transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided in this Agreement
or by Law.
SECTION 2.04 Company Stock Options. At the Effective Time, Parent
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shall assume all options to purchase Common Stock issued by the Company pursuant
to the Stock Plans (as defined in Section 3.04(b)) whether vested or unvested
and whether exercisable or unexercisable (each a "Company Option"). The
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Company's repurchase right with respect to any unvested shares acquired by the
exercise of Company Options shall be assigned to Parent by virtue of the Merger
and without any further action on the part of the Company or the holder of such
unvested shares. Immediately after the Effective Time, each Company Option
outstanding immediately prior to the Effective Time shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Option at the Effective Time, such number of
shares of Parent Common Stock that is equal to the number of shares of Company
Common Stock subject to the unexercised portion of such Company Option
multiplied by the Common Exchange Ratio (rounded down to the nearest whole
number). The per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Option shall be equal to the
exercise price per share of such Company Option in effect immediately prior to
the Effective Time divided by the Common Exchange Ratio (rounded up to the
nearest whole cent). The term, vesting schedule, status as an "incentive stock
option" under Section 422 of the Code, if applicable, and all of the other terms
of the Company Options shall otherwise remain unchanged. It is the intention of
the parties that each Company Option so assumed by Parent shall qualify
following the Effective Time as an incentive stock option as defined in Section
422 of the Code to the extent permitted under Section 422 of the Code and to the
extent such Company Option qualified as an incentive stock option prior to the
Effective Time. Within 20 business days after the Effective Time, Parent will
issue to each person who, immediately prior to the Effective Time was a holder
of a Company Option, a document evidencing the foregoing assumption of such
option by Parent. Within 30 business days after the Effective Time, Parent shall
file a registration statement on Form S-8 (or any successor or other appropriate
forms) that will register the shares of Parent Common Stock subject to assumed
Company Options to the extent permitted by Federal securities laws and shall use
its commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
SECTION 2.05 Securities Laws Issues. Parent shall issue the shares of
----------------------
Parent Common Stock as provided in this Agreement pursuant to a "private
placement" exemption or exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), and/or Regulation D
--------------
promulgated under the Securities Act and the exemption from qualification under
the laws of the State of Kansas and other applicable state securities
8
laws. Parent and the Company shall comply with all applicable provisions of, and
rules under, the Securities Act and applicable state securities laws in
connection with the offering and issuance of the shares of Parent Common Stock
pursuant to this Agreement.
SECTION 2.06 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the
contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time and which are held by stockholders who have exercised and
perfected appraisal rights for such shares of Company Common Stock in accordance
with the KGCL (collectively, the "Dissenting Shares") shall not be converted
-----------------
into or represent the right to receive the applicable shares of Parent Common
Stock (or cash in lieu of fractional shares). Such stockholders shall be
entitled to receive payment of the appraised value of such shares of Company
Common Stock held by them in accordance with the KGCL, unless and until such
stockholders fail to perfect or effectively withdraw or otherwise lose their
appraisal rights under the KGCL. All Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such shares of Company Common Stock under the KGCL
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the applicable
shares of Parent Common Stock (or cash in lieu of fractional shares), without
any interest thereon, upon the surrender in the manner provided in Section 2.02,
including the provision of the Escrow Shares pursuant to Section 2.02(b), of the
corresponding Company Share Certificate.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other related instruments served pursuant to the KGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the KGCL. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Parent and Merger Sub
that the statements contained in this Article III are true and correct except as
set forth in the disclosure schedule delivered by the Company to Parent and
Merger Sub concurrently with the execution of this Agreement (the "Company
-------
Disclosure Schedule"). The Company Disclosure Schedule shall be arranged
- -------------------
according to specific sections in this Article III and shall provide exceptions
to, or otherwise qualify in reasonable detail, only the corresponding section in
this Article III and any other section hereof where it is clear, upon a reading
of such disclosure without any independent knowledge on the part of the reader
regarding the matter disclosed, that the disclosure is appropriate with respect
to such other section.
SECTION 3.01 Organization and Qualification. The Company is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Kansas and has all requisite corporate power and authority to
own, lease and otherwise hold and operate its
9
properties and other assets and to carry on its business as it is now being
conducted and as currently proposed to be conducted, except where the failure to
be so organized, existing or in good standing or to have such corporate power
and authority has not had, and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect (as defined
below). The Company is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing has not had, and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Section 3.01 of the Company Disclosure Schedule sets
forth each jurisdiction where the Company is qualified or licensed as a foreign
corporation and each other jurisdiction in which the Company owns, uses,
licenses or leases real property or has employees or engages independent
contractors. The term "Company Material Adverse Effect" means any event, change,
-------------------------------
violation, inaccuracy, circumstance or effect that is, or could reasonably be
expected to be, individually or in the aggregate, materially adverse to the
business, operations, financial condition, assets (tangible or intangible),
liabilities, prospects or capitalization of the Company, except for any such
events, changes, violations, inaccuracies, circumstances or effects resulting
from or arising in connection with (i) any changes in general economic or
business conditions that do not disproportionately impact the Company or (ii)
any changes or events affecting the industry in which the Company operates that
do not disproportionately impact the Company (it being understood that in any
controversy concerning the applicability of the preceding exceptions, the
Company shall have the burden of proof with respect to the elements of such
exceptions).
SECTION 3.02 Amended and Restated Articles of Incorporation and
--------------------------------------------------
Bylaws. The Company has heretofore made available to Parent a complete and
- ------
correct copy of (a) the Amended and Restated Articles of Incorporation and the
Bylaws of the Company including all amendments thereto, (b) the minute books
containing all consents, actions and meeting of the stockholders of the Company
and the Company's Board of Directors and any committees thereof, and (c) the
stock transfer books of the Company setting forth all issuances or transfers of
any capital stock of the Company. Such Amended and Restated Articles of
Incorporation and Bylaws are in full force and effect. The Company is not in
violation of any of the provisions of its Amended and Restated Articles of
Incorporation or Bylaws. The corporate minute books, stock certificate books,
stock registers and other corporate records of the Company are complete and
accurate in all material respects, and the signatures appearing on all documents
contained therein are the true or facsimile signatures of the persons purported
to have signed the same.
SECTION 3.03 No Subsidiaries. The Company does not own, of record or
---------------
beneficially, or control any direct or indirect equity or other interest, or any
right (contingent or otherwise) to acquire the same, in any corporation,
partnership, limited liability company, joint venture, association or other
entity. The Company is not a member of (nor is any part of the Company's
business conducted through) any partnership, nor is the Company a participant in
any joint venture or similar arrangement. There are no contractual obligations
of the Company to provide funds to, or make any investment in (whether in the
form of a loan, capital contribution or otherwise), any other person.
10
SECTION 3.04 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock. As of the date hereof, (i) 4,365,348
shares of Company Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable, (ii) no shares of
Company Common Stock are held in the treasury of the Company and (iii) 839,000
shares of Company Common Stock are reserved for future issuance pursuant to
outstanding Company Options. As of the date hereof, the outstanding shares of
Company Common Stock are owned as set forth in Section 3.04(a) of the Company
Disclosure Schedule. Section 3.04(a) of the Company Disclosure Schedule also
provides an accurate and complete description of the terms of each repurchase
option which is held by the Company and to which any of such shares is subject.
(b) The Company has reserved 600,000 shares of Company Common
Stock for issuance under the Company's 1998 Incentive Stock Option Plan and
400,000 shares of Company Common Stock for issuance under the Company's 1999
Non-Qualified Stock Option Plan (together with the 1998 Incentive Stock Option
Plan, the "Stock Plans") of which options to purchase 839,000 shares of Company
-----------
Common Stock are outstanding as of the date of this Agreement. Section 3.04(b)
of the Company Disclosure Schedule accurately sets forth with respect to each
Company Option that is outstanding as of the date of this Agreement: (i) the
name of the holder of such Company Option; (ii) the total number of shares of
Company Common Stock that was originally subject to such Company Option; (iii)
the number of shares of Company Common Stock that remain subject to such Company
Option, (iv) the date on which such Company Option was granted and the term of
such Company Option; (v) the vesting schedule and vesting commencement date for
such Company Option; (vi) the exercise price per share of Company Common Stock
purchasable under such Company Option; (vii) whether such Company Option has
been designated an "incentive stock option" as defined in Section 422 of the
Code; and (viii) the current employee or independent contractor status of the
holder of such Company Option. Except as provided in Section 3.04(b) of the
Company Disclosure Schedule, no Company Option will by its terms require an
adjustment in connection with the Merger, except as contemplated by this
Agreement. Except as provided in Section 3.04(b) of the Company Disclosure
Schedule, neither the consummation of transactions contemplated by this
Agreement nor any action taken or to be taken by the Company in connection with
such transactions will result in (i) any acceleration of exercisability or
vesting, whether or not contingent on the occurrence of any event after
consummation of the Merger, in favor of any optionee under any Company Option;
(ii) any additional benefits for any optionee under any Company Option; or (iii)
the inability of Parent after the Effective Time to exercise any right or
benefit held by Company prior to the Effective Time with respect to any Company
Option assumed by Parent or any shares of Company Common Stock previously issued
upon exercise of a Company Option, including, without limitation, the right to
repurchase an optionee's unvested shares on termination of such optionee's
employment. The assumption by Parent of Company Options in accordance with
Section 2.04 hereunder will not give rise to any event described in clauses (i)
through (iii) in the immediately preceding sentence or constitute a breach of
the Stock Plans or any agreement entered into pursuant to such plans.
(c) Except as set forth in Section 3.04(b) of the Company
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or
11
commitments of any character, whether or not contingent, relating to the issued
or unissued capital stock of the Company or obligating the Company to issue or
sell any share of capital stock of, or other equity interest in, the Company.
All shares of Company Common Stock so subject to issuance, upon issuance in
accordance with the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. The holders of Company Options have been or will be given, or
shall have properly waived, any required notice of the Merger prior thereto, and
all such rights, if any, will terminate at or prior to the Effective Time.
(d) All of the securities offered, sold or issued by the Company
(i) have been offered, sold or issued in compliance with the requirements of the
Federal securities laws and any applicable state securities or "blue sky" laws,
and (ii) are not subject to any preemptive right, right of first refusal, right
of first offer or right of recission.
(e) The Company has never repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities of the Company, other
than unvested securities in the ordinary course upon termination of employment
or consultancy. There are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any share of capital stock of, or
other equity interest in, the Company. There are no stockholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party, or of which the Company is aware, that (i) relate to the voting,
registration or disposition of any securities of the Company, (ii) grant to any
person or group of persons the right to elect, or designate or nominate for
election, a director to the Board of Directors of the Company, or (iii) grant to
any person or group of persons information rights.
(f) An updated Section 3.04 of the Company Disclosure Schedule
reflecting changes permitted by this Agreement in the capitalization of the
Company between the date hereof and the Effective Time shall be delivered by the
Company to Parent on the Closing Date.
SECTION 3.05 Authority Relative to this Agreement.
------------------------------------
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and, subject to obtaining the necessary
approvals of the Company Stockholders, to perform its obligations hereunder and
to consummate the Merger and the other transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Merger
and the other transactions contemplated by this Agreement (other than, with
respect to the Merger, the approval of this Agreement by the Company
Stockholders as described in Section 3.16 hereof and the filing and recordation
of appropriate merger documents as required by the KGCL and the DGCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium
12
or similar Laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity.
(b) Without limiting the generality of the foregoing, the Board
of Directors of the Company, by written consent or at a meeting duly called and
held, has by the unanimous vote or consent of all of the directors (i)
determined that the Merger and the other transactions contemplated hereby are
fair to, and in the best interests of, the Company and its stockholders, (ii)
approved and adopted the Merger, this Agreement and the other transactions
contemplated hereby in accordance with the provisions of the KGCL and the
Company's charter documents, (iii) directed that this Agreement and the Merger
be submitted to the Company Stockholders for their approval and adoption and
(iv) resolved to recommend that the Company Stockholders vote in favor of the
approval and adoption of this Agreement.
SECTION 3.06 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by the Company
do not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Amended and Restated Articles of Incorporation or
Bylaws of the Company, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.06(b) have been obtained
and all filings and obligations described in Section 3.06(b) have been made or
complied with, conflict with or violate any foreign or domestic (Federal, state
or local) law, statute, ordinance, franchise, permit, concession, license, writ,
rule, regulation, order, injunction, judgment or decree ("Law") applicable to
---
the Company or by which any property or asset of the Company is bound or
affected, or (iii) except as set forth in Section 3.06(a) of the Company
Disclosure Schedule, conflict with, result in any material breach of or
constitute a material default (or an event which with notice or lapse of time or
both would become a default) under, require consent, approval or notice under,
give to others any right of termination, amendment, acceleration or cancellation
of, required any payment under, or result in the creation of a lien or other
encumbrance on any property or asset of the Company pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other material instrument or obligation to which the Company is a
party or by which any property or asset of the Company is bound or affected.
(b) The execution and delivery of this Agreement by the Company
do not, and the performance of this Agreement by the Company will not, require
any consent, approval, order, authorization, registration or permit of, or
filing with or notification to, any domestic or foreign governmental, regulatory
or administrative authority, agency or commission, any court, tribunal or
arbitral body, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental authority (a "Governmental
------------
Entity"), except (i) for the filing and recordation of appropriate merger
- ------
documents as required by the KGCL and the DGCL, and (ii) for such other
consents, approvals, orders, authorizations, registrations, permits, filings or
notifications, which if not obtained or made could not reasonably be expected,
individually or in the aggregate, to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
13
SECTION 3.07 Permits; Compliance.
-------------------
(a) The Company is in possession of all material franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Company to own, lease and otherwise hold and operate its
properties and other assets and to carry on its business as it is now being
conducted and as currently proposed to be conducted (the "Company Permits"). All
---------------
Company Permits are in full force and effect and will remain so after the
Closing and no suspension or cancellation of any Company Permit is pending or,
to the knowledge of the Company, threatened. The Company has not received any
notice or other communication from any Governmental Entity regarding (i) any
actual or possible violation of or failure to comply with any term or
requirement of any Company Permit, or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any Company
Permit.
(b) The Company is not in conflict with, or in default or
violation of, in each case in any material respect, (i) any Law applicable to
the Company or by which any property or asset of the Company is bound or
affected, (ii) except as set forth in Section 3.12(b) of the Company Disclosure
Schedule, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any property or asset of the
Company is bound or affected, or (iii) any Company Permit.
SECTION 3.08 Financial Statements.
--------------------
(a) True and complete copies of (i) the unaudited balance sheets
of the Company as of December 31, 1998, 1999, and 2000, and the related
statements of operations for the years then ended (collectively referred to
herein as the "Financial Statements"), and (ii) the balance sheet of the Company
--------------------
as of March 31, 2001 (the "Reference Balance Sheet"), and the related statement
-----------------------
of operations for the three months ended March 31, 2001 (collectively referred
to herein as the "Interim Financial Statements"), are attached as Section
----------------------------
3.08(a) of the Company Disclosure Schedule. Except as set forth in Section
3.08(a) of the Company Disclosure Schedule, (i) the Financial Statements and the
Interim Financial Statements were prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied on a consistent
---------
basis throughout the periods indicated and (ii) each present fairly, in all
material respects, the financial position of the Company as at the respective
dates thereof and for the respective periods indicated therein, except as
otherwise noted therein (subject, in the case of unaudited statements, to normal
and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material).
(b) Except for the debts, liabilities and claims in the amounts
set forth in Section 3.08(b) of the Company Disclosure Schedule, there are no
debts, liabilities or obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable ("Liabilities")
-----------
of the Company, other than Liabilities (i) reflected on the Reference Balance
Sheet or (ii) incurred since March 31, 2001, in the ordinary course of the
business, consistent with the past practice (such that the aggregate balance for
Liabilities on the Company's balance sheet will not have increased more than
$50,000 from the balance for Liabilities reflected on the Reference Balance
Sheet). Except as set forth in Section 3.08(b) of
14
the Company Disclosure Schedule, there are no outstanding warranty claims
against the Company.
SECTION 3.09 Absence of Certain Changes or Events. Since January 1, 2001,
------------------------------------
except as contemplated by or as disclosed in Section 3.09 of the Company
Disclosure Schedule, the Company has conducted its business only in the ordinary
course and in a manner consistent with past practice and, since such date, (a)
there has not been any Company Material Adverse Effect and (b) the Company has
not taken or legally committed to take any of the actions specified in Sections
5.01(a) through 5.01(bb).
SECTION 3.10 Absence of Litigation. Except as set forth in Section 3.10
---------------------
of the Company Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company, or any property or asset owned or used by the
Company or any person whose liability the Company has or may have assumed,
either contractually or by operation of Law, before any arbitrator or
Governmental Entity (a "Legal Proceeding") that could reasonably be expected, if
----------------
resolved adversely to the Company, to (i) materially impair the operations of
the Company as currently conducted, including, without limitation, any claim of
infringement of any intellectual property right, (ii) result in losses to the
Company in excess of $25,000, (iii) impair the ability of the Company to perform
its obligations under this Agreement or (iv) prevent, delay or make illegal the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Sections 3.08(b) and 3.10 of the Company Disclosure Schedule, to the
Company's knowledge no event has occurred, and no claim, dispute or other
condition or circumstance exists, that could reasonably be expected to, give
rise to or serve as a basis of the commencement of any Legal Proceeding. None of
the Company, the officers or directors thereof in their capacity as such, or any
property or asset of the Company is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with, or, to the
knowledge of the Company, continuing investigation by, any Governmental Entity,
or any order, writ, judgment, injunction, decree, determination or award of any
court, arbitrator or Governmental Entity. The Company does not have any plans to
initiate any Legal Proceeding against any third party.
SECTION 3.11 Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Schedule 3.11(a) of the Company Disclosure Schedule lists
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
-----
stock option, stock purchase, stock appreciation right, restricted stock,
phantom stock, incentive, deferred compensation, retiree medical, disability or
life insurance, cafeteria benefit, dependent care, disability, director or
employee loan, fringe benefit, sabbatical, supplemental retirement, severance or
other benefit plans, programs or arrangements, and all employment, termination,
severance or other contracts or agreements (whether legally enforceable or not,
whether formal or informal and whether in writing or not) to which the Company
is a party, with respect to which the Company has any obligation or which are
maintained, contributed to or sponsored by the Company for the benefit of any
current or former employee, officer or director of the Company, (ii) each
employee benefit plan for which the Company could incur liability under Section
4069 of ERISA in the event such plan has been or were to be terminated, (iii)
any plan in respect of which the Company could incur liability under Section
4212(c) of ERISA, and (iv) any employment
15
agreements, offer letters or other contracts, arrangements or understandings
between the Company and any employee of the Company (whether legally enforceable
or not, whether formal or informal and whether in writing or not) including,
without limitation, any contracts, arrangements or understandings relating to a
sale of the Company (each, a "Plan," and collectively, the "Plans").
---- -----
(b) Each Plan is in writing and the Company has furnished Parent
with a true and complete copy of each Plan (or a written summary where the Plan
is not in writing) and a true and complete copy of each material document, if
any, prepared in connection with each such Plan, including, without limitation,
(i) a copy of each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the three (3) most
recent annual reports (Form 5500 series and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Plan, (iv) the most recently received Internal Revenue
Service determination letter for each Plan intended to qualify under ERISA or
the Code, (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan, (vi) any correspondence with the
Internal Revenue Service or the Department of Labor with respect to each such
Plan and (vii) each form of notice of grant and stock option agreement used to
document Company Options. Except as disclosed on Schedule 3.11(a) of the Company
Disclosure Schedule, there are no other employee benefit plans, programs,
arrangements or agreements, whether formal or informal, whether in writing or
not, to which the Company is a party, with respect to which the Company has any
obligation or which are maintained, contributed to or sponsored by the Company
for the benefit of any current or former employee, officer or director of the
Company. Except as provided in this Agreement, the Company does not have an
express or implied commitment, whether legally enforceable or not, (x) to
create, incur liability with respect to, or cause to exist, any other employee
benefit plan, program or arrangement, (y) to enter into any contract or
agreement to provide compensation or benefits to any individual, or (z) to
modify, change or terminate any Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(c) None of the Plans is a multi-employer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multi-employer Plan") or a
-------------------
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). Each of the Plans is subject only to the
----------------------
Laws of the United States or a political subdivision thereof.
(d) Except as provided in Section 3.11(d) of the Company
Disclosure Schedule, none of the Plans provides for the payment of separation,
severance, termination or similar benefits to any person or obligates the
Company to pay separation, severance, termination or similar-type benefits
solely or partially as a result of any transaction contemplated by this
Agreement or as a result of a "change in ownership or control," within the
meaning of such term under Section 280G of the Code. Except as provided in
Section 3.11(d) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby, either alone or together with another event, will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, forgiveness of indebtedness or otherwise) becoming due under
any Plan, whether or not such payment is contingent, (ii) increase any benefits
otherwise payable
16
under any Plan or other arrangement, (iii) result in the acceleration of the
time of payment, vesting or funding of any benefits including, but not limited
to, the acceleration of the vesting and exercisability of any Company Option,
whether or not contingent, or (iv) affect in any material respects any Plan's
current treatment under any Laws including any Tax or social contribution Law.
Except as provided in Section 3.11(d) of the Company Disclosure Schedule, no
Plan provides, or reflects or represents any liability to provide, retiree
health, disability, or life insurance benefits to any person for any reason,
except as may be required by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), or other applicable statute, and the Company has
-----
never represented, promised or contracted (whether in oral or written form) to
any employee (either individually or to employees as a group) or any other
person that such employee(s) or other person would be provided with retiree
health, disability, or life insurance benefits, except to the extent required by
statute.
(e) Except as set forth in Section 3.11(e) of the Company
Disclosure Schedule, each Plan is now and always has been operated in all
material respects in accordance with its terms and the requirements of all
applicable Laws, regulations and rules promulgated thereunder including, without
limitation, ERISA and the Code. The Company has performed all obligations
required to be performed by it under, is not in any respect in default under or
in violation of, and has no knowledge of any default or violation by any party
to, any Plan. No action, claim or proceeding is pending or, to the knowledge of
the Company, threatened with respect to any Plan (other than claims for benefits
in the ordinary course) and no fact or event exists that could give rise to any
such action, claim or proceeding. Neither the Company nor any person that is a
member of the same controlled group as the Company or under common control with
the Company within the meaning of Section 414 of the Code (each, an "ERISA
-----
Affiliate") is subject to any penalty or Tax with respect to any Plan under
- ---------
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. Except as
provided in Section 3.11(e) of the Company Disclosure Schedule, each Plan can be
amended, terminated or otherwise discontinued at any time without material
liability to Parent, the Company or any of their ERISA Affiliates (other than
ordinary administration expenses). Neither the Company nor any affiliate has,
prior to the Effective Time and in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of the Family
Medical Leave Act of 1993, the requirements of the Health Insurance Portability
and Accountability Act of 1996, the requirements of the Women's Health and
Cancer Rights Act of 1998, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996, or any amendment to each such act, or any similar
provisions of state Law applicable to its employees.
(f) Except as set forth in Section 3.11(f) of the Company
Disclosure Schedule, each Plan intended to qualify under Section 401(a) or
Section 401(k) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination, opinion,
notification or advisory letter from the Internal Revenue Service with respect
to each such Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, and no fact or event has occurred since the date of such
determination letter or letters from the Internal Revenue Service to adversely
affect the qualified status of any such Plan or the exempt status of any such
trust, or has remaining a period of time under applicable Treasury regulations
or Internal Revenue Service pronouncements in which to apply for such a letter
and make any
17
amendments necessary to obtain a favorable determination as to the qualified
status of each such Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability under, arising out of or by operation of Title IV of ERISA (other than
liability for premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course), including, without limitation, any liability in connection
with (i) the termination or reorganization of any employee benefit plan subject
to Title IV of ERISA or (ii) the withdrawal from any Multi-employer Plan or
Multiple Employer Plan, and no fact or event exists which could give rise to any
such liability.
(h) The Company has not, since January 1, 1995, terminated,
suspended, discontinued contributions to or withdrawn from any employee pension
benefit plan, as defined in Section 3(2) of ERISA, including (without
limitation) any Multi-employer Plan. All contributions, premiums or payments
required to be made or accrued with respect to any Plan have been made on or
before their due dates. Except for contributions made on account of the 2001
Plan year, all such contributions have been fully deducted for income tax
purposes and no such deduction has been challenged or disallowed by any
Governmental Entity and no fact or event exists which could give rise to any
such challenge or disallowance.
(i) Except as set forth in Section 3.11(i) of the Company
Disclosure Schedule, (i) the Company is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or in the Company's business, and currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition of a
collective bargaining unit that could affect the Company; (ii) there are no
controversies, strikes, slowdowns or work stoppages pending or, to the best
knowledge of the Company after due inquiry, threatened between the Company and
any of its employees, and the Company has not experienced any such controversy,
strike, slowdown or work stoppage within the past three years; (iii) the Company
has not breached or otherwise failed to comply with the provisions of any
collective bargaining or union contract and there are no grievances outstanding
against the Company under any such agreement or contract; (iv) the Company has
not engaged in any unfair labor practice, and there are no unfair labor practice
complaints pending against the Company before the National Labor Relations Board
or any other Governmental Entity or any current union representation questions
involving employees of the Company; (v) the Company is currently in compliance
with all applicable Laws relating to the employment of labor, including those
related to wages, hours, worker classification, collective bargaining and the
payment and withholding of Taxes and other sums as required by the appropriate
Governmental Entity and has withheld and paid to the appropriate Governmental
Entity or is holding for payment not yet due to such Governmental Entity all
amounts required to be withheld from employees of the Company and is not liable
for any arrears of wages, Taxes, penalties or other sums for failure to comply
with any of the foregoing; (vi) the Company has paid in full to all employees or
adequately accrued for in accordance with U.S. GAAP consistently applied (except
as set forth in Section 3.08(a) of the Company Disclosure Schedule) all wages,
salaries, commissions, bonuses, benefits and other compensation due to or on
behalf of such employees; (vii) there is no claim with respect to payment of
wages, salary, overtime pay, workers compensation benefits or disability
benefits that has been asserted or threatened against the Company or that is now
pending before any Governmental Entity with respect to any person currently or
formerly
18
employed by the Company; (viii) the Company is not a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Entity
relating to employees or employment practices; (ix) the Company is in compliance
with all Laws and regulations relating to occupational safety and health Laws
and regulations, and there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or threatened with respect to the Company; and (x) the Company
is in compliance with all Laws and regulations relating to discrimination in
employment, and there is no charge of discrimination in employment or employment
practices for any reason, including, without limitation, age, gender, race,
religion or other legally protected category, which has been asserted or, to the
knowledge of the Company, threatened against the Company or that is now pending
before the United States Equal Employment Opportunity Commission or any other
Governmental Entity.
(j) Section 3.11(j) of the Company Disclosure Schedule contains
a true and complete list of (i) all individuals who serve as employees of or
consultants to the Company as of the date hereof, (ii) in the case of such
employees, the position and base compensation to each payable to each such
individual, and (iii) in the case of each such consultant, the consulting rate
payable to such individual.
(k) To the Company's knowledge, no employee of or consultant to
the Company has been injured in the workplace or in the course of his or her
employment or consultancy, except for injuries which are covered by insurance or
for which a claim has been made under worker's compensation or similar Laws.
SECTION 3.12 Contracts.
---------
(a) Section 3.12(a) of the Company Disclosure Schedule lists
each of the following written or oral contracts and agreements of the Company
(such contracts and agreements being "Material Contracts"):
------------------
(i) each contract and agreement for the purchase or lease
of personal property with any supplier or for the furnishing of services to the
Company with payments greater than $10,000 per year;
(ii) all broker, exclusive dealing or exclusivity,
distributor, dealer, manufacturer's representative, franchise, agency, sales
promotion, market research, marketing, consulting and advertising contracts and
agreements to which the Company is a party or any other contract that
compensates any person based on any sales by the Company;
(iii) all leases and subleases of real property;
(iv) all contracts and agreements relating to indebtedness
other than trade indebtedness of the Company, including any contracts and
agreements in which the Company is a guarantor of indebtedness;
(v) all contracts and agreements with any Governmental
Entity to which the Company is a party;
19
(vi) all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business or with any
person or in any geographic area or during any period of time;
(vii) all contracts containing confidentiality requirements
(including all nondisclosure agreements);
(viii) all contracts and agreements between or among the
Company and any stockholder of the Company or any affiliate of such person;
(ix) all contracts and agreements relating to the voting and
any rights or obligations of a stockholder of the Company;
(x) all contracts to manufacture for, supply to or
distribute to any third party any products or components;
(xi) all contracts regarding the acquisition, issuance or
transfer of any securities and each contract affecting or dealing with any
securities of the Company, including, without limitation, any restricted stock
agreements or escrow agreements;
(xii) all contracts providing for indemnification of any
officer, director, employee or agent of the Company;
(xiii) all contracts related to or regarding the performance
of consulting, advisory or other services or work of any type of any third
party;
(xiv) all other contracts that have a term of more than 60
days and that may not be terminated by the Company, without penalty, within 30
days after the delivery of a termination notice by the Company;
(xv) any agreement of the Company that is terminable upon,
prohibits, or requires consent in connection with, a merger or a change of
ownership or control of the Company;
(xvi) all other contracts and agreements, whether or not made
in the ordinary course of business, that contemplate an exchange of
consideration with an aggregate value greater than $10,000; and
(xvii) any agreement to indemnify, hold harmless or defend
another person, and any other agreement of guarantee, assumption or endorsement
of, or any similar commitment with respect to, the obligations, liabilities
(whether accrued, absolute, contingent or otherwise) or indebtedness of any
person.
(b) Each Material Contract (i) is valid and binding on the Company
and, to the knowledge of the Company, on the other parties thereto, and is in
full force and effect, and (ii) except as set forth in Section 3.12(b) of the
Company Disclosure Schedule, upon consummation of the transactions contemplated
by this Agreement shall continue in full force and effect without penalty or
other adverse consequence. Except as set forth in Section 3.12(b)
20
of the Company Disclosure Schedule, the Company is not in breach or violation
of, or default under, any Material Contract and, to the knowledge of the
Company, no other party to any Material Contract is in breach or violation
thereof or default thereunder.
(c) The Company has delivered or made available to Parent accurate
and complete copies of all Material Contracts identified in Section 3.12(a) of
the Company Disclosure Schedule, including all amendments thereto. Section
3.12(a) of the Company Disclosure Schedule provides an accurate description of
the terms of each Material Contract that is not in written form.
(d) Except as set forth in Section 3.12(b) or 3.12(d) of the Company
Disclosure Schedule, to the Company's knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, (i) result in a breach or violation
of, or default under, any Material Contract, (ii) give any entity the right to
declare a default, seek damages or exercise any other remedy under any Material
Contract, (iii) give any entity the right to accelerate the maturity or
performance of any Material Contract or (iv) give any entity to the right to
cancel, terminate or modify any Material Contract.
SECTION 3.13 Environmental Matters.
---------------------
(a) The Company (i) is in substantial compliance with all applicable
Environmental Laws (as defined below), (ii) holds all Environmental Permits (as
defined below) necessary to conduct the Company's business and (iii) is in
substantial compliance with its Environmental Permits.
(b) The Company has not released and, to the knowledge of the
Company, no other person has released Hazardous Materials (as defined below) on
any real property owned or leased by the Company or, during their ownership or
occupancy of such property, on any property formerly owned or leased by the
Company.
(c) The Company has not received any written request for information,
or been notified that it is a potentially responsible party, under CERCLA (as
defined below) or any similar Law of any state, locality or any other
jurisdiction. The Company has not entered into or agreed to any consent decree
or order or is subject to any judgment, decree or judicial order relating to
compliance with Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous
Materials and, to the knowledge of the Company, no investigation, litigation or
other proceeding is pending or threatened in writing with respect thereto.
(d) None of the real property currently owned or leased by the
Company is listed on the "National Priorities List" under CERCLA, as updated
through the date of this Agreement, or any similar list of sites in the United
States or any other jurisdiction requiring investigation or cleanup
(collectively, the "NPL"). To the knowledge of the Company, (i) none of the real
---
property formerly owned or leased by the Company is listed on the NPL and (ii)
none of the real property formerly owned or leased by the Company is proposed to
be listed on the NPL.
21
For purposes of this Agreement:
"CERCLA" means the U.S. Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any Federal, state or local statute, law,
------------------
ordinance, regulation, rule, code or order of the United States, or any other
jurisdiction and any enforceable judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to pollution or protection of the environment or natural
resources, including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, as in effect as of the date of this Agreement.
"Environmental Permits" means any permit, approval, identification
---------------------
number, license and other authorization required under any applicable
Environmental Law.
"Hazardous Materials" means (i) any petroleum, petroleum products, by-
-------------------
products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
SECTION 3.14 Intellectual Property.
---------------------
(a) The Company owns or is licensed for, and in any event
possesses sufficient and legally enforceable rights with respect to, all Company
Intellectual Property (as defined below) used in its business, as previously or
presently conducted, or necessary to conduct such business without any conflict
with or infringement or misappropriation of any rights or property of any person
("Infringement"). Except as set forth in Section 3.14(a) of the Company
------------
Disclosure Schedule, such ownership, licenses and rights are exclusive except
with respect to standard, generally commercially available, "off-the-shelf"
third party products that are not part of any previous, current or proposed
product, service or Intellectual Property offering of the Company. "Intellectual
------------
Property" means (i) inventions (whether or not patentable); trade names, trade
- --------
and service marks, logos, domains, URLs, websites, addresses and other
designations ("Marks"); works of authorship; mask works; data; technology, know-
-----
how, trade secrets, ideas and information; designs; formulas; algorithms;
processes; schematics; computer software (in source code and/or object code
form); and all other intellectual property of any sort ("Inventions") and (ii)
----------
patent rights; Mark rights; copyrights; mask work rights; sui generis database
rights; trade secret rights; moral rights; and all other intellectual and
industrial property rights of any sort throughout the world, and all
applications, registrations, issuances and the like with respect thereto ("IP
--
Rights"). "Company Intellectual Property" means all Intellectual Property that
- ------ -----------------------------
was or is used, exercised, or exploited ("Used") in any business of the Company,
----
or that may be necessary to conduct such business as previously or presently
conducted; this term will also include all other Intellectual Property owned by
or licensed to the Company now or in the past. Except as forth in Section
3.14(a) of the Company Disclosure Schedule, all copyrightable matter within
Company Intellectual Property has been created by persons who were employees of
the Company at the time of creation and no third party has or will have "moral
rights" or rights to terminate any assignment or license with respect thereto.
22
(b) To the extent included in Company Intellectual Property,
Section 3.14(b) of the Company Disclosure Schedule lists (by name, number,
jurisdiction and owner) all patents and patent applications; all registered and
unregistered Marks; and all registered and material unregistered copyrights and
mask works; and all other issuances, registrations, applications and the like
with respect to those or any other IP Rights. All the foregoing (i) are valid,
enforceable and subsisting, and (ii) along with all related filings,
registrations and correspondence, have been provided to Parent. No cancellation,
termination, expiration or abandonment of any of the foregoing (except natural
expiration or termination at the end of the full possible term, including
extensions and renewals) is anticipated by the Company. The Company is not aware
of any questions or challenges (or any potential basis therefor) with respect to
the patentability or validity of any claims of any the foregoing patents or
patent applications or the validity (or any other aspect or status) of any such
IP Rights.
(c) Section 3.14(c) of the Company Disclosure Schedule lists:
(i) all licenses, sublicenses and other agreements to which the Company is a
party (or by which it or any Company Intellectual Property is bound or subject)
and pursuant to which any person has been or may be assigned, authorized to Use,
granted any lien or encumbrance regarding, or given access to any Company
Intellectual Property; (ii) all licenses, sublicenses and other agreements
pursuant to which the Company has been or may be assigned or authorized to Use,
or has or may incurred any obligation in connection with, (A) any third party
Intellectual Property that may be influential in the development of, require
payment with respect to, be incorporated or embodied in, or form all or any part
of any previous, current or proposed product, service or Intellectual Property
offering of the Company or (B) any Company Intellectual Property; and (iii) each
agreement pursuant to which the Company has deposited or is required to deposit
with an escrowholder or any other person, all or part of the source code (or any
algorithm or documentation contained in or relating to any source code) of any
Company Intellectual Property ("Source Materials"). Except as set forth on in
----------------
Section 3.14(c) of the Company Disclosure Schedule, the Company has not entered
into any agreement to indemnify, hold harmless or defend any other person with
respect to any assertion of Infringement or warranting the lack thereof.
(d) Except as set forth in Section 3.14(d) of the Company
Disclosure Schedule, no event or circumstance has occurred, exists or is
contemplated (including, without limitation, authorization, execution or
delivery of this Agreement or the consummation of any of the transactions
contemplated hereby) that (with or without notice or the lapse of time) could
reasonably be expected to result in (i) the breach or violation of any license,
sublicense or other agreement required to be listed in Section 3.14 of the
Company Disclosure Schedule, (ii) the loss or expiration of any right or option
by the Company (or the gain thereof by any third party) under any such license,
sublicense or other agreement, or (iii) the release, disclosure or delivery to
any third party of any part of the Source Materials. Further, the Company makes
all the same representations and warranties with respect to each license,
sublicense and agreement listed on Section 3.14 of the Company Disclosure
Schedule as are made with respect to Material Contracts elsewhere in this
Agreement.
(e) There is, to the knowledge of the Company, no unauthorized
Use, disclosure, or Infringement of any Company Intellectual Property by any
third party, including, without limitation, any employee or former employee of
the Company. The Company has not
23
brought or threatened any action, suit or proceeding against any third party for
any Infringement of any Company Intellectual Property or any breach of any
license, sublicense or agreement involving Company Intellectual Property.
(f) Except as set forth in Section 3.14(f) of the Company
Disclosure Schedule, the Company has taken commercially reasonable steps to
protect and preserve the confidentiality of all Company Intellectual Property
not otherwise disclosed in published patents or patent applications or
registered copyrights ("Company Confidential Information"). All use by and
--------------------------------
to employees or others of Company Confidential Information has been disclosure
pursuant to the terms of valid and binding written confidentiality and
nonuse/restricted-use agreements or agreements that contain similar obligations.
Except as set forth in Section 3.14(f) of the Company Disclosure Schedule, the
Company has not disclosed or delivered to any third party, or permitted the
disclosure or delivery to any escrow agent or other third party, any part of the
Source Materials.
(g) Each current employee and contractor (it being understood
that the term "contractor" as used in this section means any person who has been
engaged (other than as an employee) to perform software programming or other
services pursuant to which such contractor conceived or developed Company
Intellectual Property) of the Company has executed and delivered (and to the
Company's knowledge, is in compliance with) an agreement in substantially the
form of the Company's standard Proprietary Information and Inventions Agreement
(in the case of an employee) or Consulting Agreement (in the case of a
contractor) (which agreements provide valid written assignments to the Company
of all title and rights to any Company Intellectual Property conceived or
developed thereunder but not already owned by the Company by operation of Law).
No former employee or contractor has any title or right to any Company
Intellectual Property.
(h) The Company has not received any communication alleging or
suggesting that, or questioning whether, the Company has been or may be (whether
in its past, current or proposed business or otherwise) engaged in, liable for
or contributing to any Infringement, nor does the Company have any reason to
expect that any such communication will be forthcoming.
(i) The Company is not aware that any of its employees or
contractors is obligated under any agreement, commitment, judgment, decree,
order or otherwise (an "Employee Obligation") that could reasonably be expected
-------------------
interfere with the use of his or her best efforts to promote the interests to of
the Company or that could reasonably be expected to conflict with its business
as conducted or proposed to be conducted. Neither the execution nor delivery of
this Agreement nor the conduct of the Company's business as conducted or
proposed to be conducted will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any Employee
Obligation. The Company is not Using, and it will not be necessary to Use, (i)
except as set forth in Section 3.14(i) of the Company Disclosure Schedule, any
Inventions of any of its past or present employees or contractors (or people
currently intended to be hired) made prior to or outside the scope of their
employment by the Company or (ii) any confidential information or trade secret
of any former employer of any such person.
24
(j) All Software is free of all intentionally installed viruses,
worms, trojan horses and other infections or harmful routines and, except as set
forth in Section 3.14(j) of the Company Disclosure Schedule, does not contain
any material bugs, errors, or problems that could reasonably be expected to
disrupt its operation in a materially adverse manner or have a material adverse
impact on the operation of other software programs or operating systems.
"Software" means software, programs, databases and related documentation, in any
--------
form (including Internet sites, Internet content and links) that is (i) material
to the operation of the business of the Company, including, but not limited to,
that operated by the Company on its web sites or used by the Company in
connection with processing customer orders, storing customer information, or
storing or archiving data, or (ii) manufactured, distributed, sold, licensed or
marketed by the Company.
(k) The Company has obtained all material approvals and agreements
necessary or appropriate (including, without limitation, assurances from
customers regarding further export) for exporting any Company Intellectual
Property outside the United States and importing any Company Intellectual
Property into any country in which they are or have been disclosed, sold or
licensed for Use, and all such export and import approvals in the United States
and throughout the world are valid, current, outstanding and in full force and
effect.
SECTION 3.15 Taxes. Except as set forth in Section 3.15 of the Company
-----
Disclosure Schedule:
(a) All Tax (as defined below) returns, statements, reports,
declarations and other forms and documents (including without limitation
estimated Tax returns and reports and material information returns and reports)
required to be filed with any Tax Authority (as defined below) with respect to
any Taxable (as defined below) period ending on or before the Closing, by or on
behalf of Company (collectively, "Tax Returns" and individually, a "Tax
----------- ---
Return"), have been or will be completed and filed when due (including any
- ------
extensions of such due date) if due on or before the Effective Time and all
amounts shown due on such Tax Returns on or before the Effective Time have been
or will be paid on or before such date. The Interim Financial Statements (i)
fully accrue all actual and contingent liabilities for Taxes (as defined below)
with respect to all periods through March 31, 2001, and the Company has not and
will not incur any Tax liability in excess of the amount reflected (excluding
any amount thereof that reflects timing differences between the recognition of
income for purposes of U.S. GAAP and for Tax purposes) on the Reference Balance
Sheet included in the Interim Financial Statements with respect to such periods,
and (ii) properly accrues in accordance with U.S. GAAP all material liabilities
for Taxes payable after March 31, 2001, with respect to all transactions and
events occurring on or prior to such date. The Company has not incurred any
material Tax liability since March 31, 2001, other than in the ordinary course
of business and the Company has made adequate provisions for all Taxes since
that date in accordance with U.S. GAAP on at least a quarterly basis.
(b) The Company has withheld and paid to the applicable financial
institution or Tax Authority all amounts required to be withheld. To the best
knowledge of the Company, no Tax Returns filed with respect to Taxable years
through the Taxable year ended December 31, 2000, in the case of the United
States, have been examined and closed. The Company (or any member of any
affiliated or combined group of which the Company has been a
25
member) has not granted any extension or waiver of the limitation period
applicable to any Tax Returns that is still in effect and there is no material
claim, audit, action, suit, proceeding, or (to the knowledge of the Company)
investigation now pending or threatened against or with respect to the Company
in respect of any Tax or assessment. No notice of deficiency or similar document
of any Tax Authority has been received by the Company, and there are no
liabilities for Taxes (including liabilities for interest, additions to Tax and
penalties thereon and related expenses) with respect to the issues that have
been raised (and are currently pending) by any Tax Authority that could, if
determined adversely to the Company, materially and adversely affect the
liability of the Company for Taxes. There are no liens for Taxes upon the assets
of the Company. The Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code. The Company is in
full compliance with all the terms and conditions of any Tax exemption or other
Tax-sharing agreement or order of a foreign government and the consummation of
the Merger will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemption or other Tax-sharing agreement or order.
Neither the Company nor any person on behalf of the Company has entered into or
will enter into any agreement or consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income tax law) or agreed to have Section 341(f)(2) of
the Code (or any corresponding provision of state, local or foreign income tax
law) apply to any disposition of any asset owned by the Company. None of the
assets of the Company is property that the Company is required to treat as being
owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code. None of the assets of the
Company directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code. None of the assets of the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code. The
Company has not made and will not make a deemed dividend election under Treas.
Reg. (S)1.1502-32(f)(2) or a consent dividend election under Section 565 of the
Code. The Company has never been a party (either as a distributing corporation,
a distributed corporation or otherwise) to any transaction intended to qualify
under Section 355 of the Code or any corresponding provision of state Law. The
Company has not participated in (and will not participate in) an international
boycott within the meaning of Section 999 of the Code. No Company Stockholder is
other than a United States person within the meaning of the Code. The Company
does not have and has not had a permanent establishment in any foreign country,
as defined in any applicable Tax treaty or convention between the United States
of America and such foreign country and the Company has not engaged in a trade
or business within any foreign country. The Company has never elected to be
treated as an S corporation under Section 1362 of the Code or any corresponding
provision of Federal or state Law. All material elections with respect to the
Company's Taxes made during the fiscal years ending December 31, 1998, 1999 and
2000, are reflected on the Company's Tax Returns for such periods, copies of
which have been provided to Parent. After the date of this Agreement, no
material election with respect to Taxes will be made without the prior written
consent of Parent, which consent will not be unreasonably withheld or delayed.
The Company is not party to any joint venture, partnership, or other arrangement
or contract which could be treated as a partnership for Federal income tax
purposes. The Company is not currently and never has been subject to the
reporting requirements of Section 6038A of the Code. There is no agreement,
contract or arrangement to which the Company is a party that could, individually
or collectively, result in the payment of any amount that would not be
deductible by reason of Sections 280G (as determined without
26
regard to Section 280G(b)(4)), 162 (other than 162(a)) or 404 of the Code.
Company is not a party to or bound by any Tax indemnity, Tax sharing or Tax
allocation agreement (whether written or unwritten or arising under operation of
federal Law as a result of being a member of a group filing consolidated Tax
Returns, under operation of certain state Laws as a result of being a member of
a unitary group, or under comparable Laws of other states or foreign
jurisdictions) which includes a party other than the Company nor does the
Company owe any amount under any such agreement. The Company has previously
provided or made available to Parent true and correct copies of all income,
franchise, and sales Tax Returns, and, as reasonably requested by Parent, prior
to or following the date hereof, presently existing information statements and
reports. The Company is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Other than
by reason of the Merger, the Company has not been and will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax Laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(c) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
--- ----- -------
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity responsible for the imposition of any such
tax (domestic or foreign) (a "Tax Authority"), (ii) any liability for the
-------------
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any taxable
period or as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other person. As
used in this Section 3.15, the term "Company" means the Company and any entity
included in, or required under U.S. GAAP to be included in, any of the Financial
Statements or the Interim Financial Statements.
SECTION 3.16 Vote Required. The only vote of the holders of any
-------------
classes or series of capital stock of the Company necessary to approve and adopt
this Agreement, the Merger and the other transactions contemplated by this
Agreement are the affirmative vote of the holders of at least a majority of the
outstanding shares of the Company Common Stock in favor of the approval and
adoption of this Agreement and the Merger. The shares of Company Common Stock
subject to the Voting Agreements are sufficient to secure the affirmative vote
of the holders of at least a majority of the outstanding shares of the Company
Common Stock in favor of the approval and adoption of this Agreement and the
Merger.
SECTION 3.17 Assets; Absence of Liens and Encumbrances. Except as set
-----------------------------------------
forth in Section 3.17 of the Company Disclosure Schedule, the Company owns,
leases or has the legal right to use all of the properties and assets,
including, without limitation, real property and personal property (other than
Intellectual Property, which is covered by Section 3.14 hereof),
27
used or intended to be used in the conduct of the business of the Company or
otherwise owned, leased or used by the Company (all such properties and assets
are referred to herein as the "Assets"). Except as set forth in Section 3.17 of
------
the Company Disclosure Schedule, the Company has good and marketable title to,
or, in the case of leased or subleased Assets, valid and subsisting leasehold
interests in, all the Assets, free and clear of all mortgages, liens, pledges,
charges, claims, security interests or encumbrances of any kind or character
("Liens"). The equipment of the Company used in the operation of its business
-----
is, taken as a whole, in good operating condition and repair, ordinary wear and
tear excepted.
SECTION 3.18 Owned Real Property. The Company does not own any real
-------------------
property.
SECTION 3.19 Certain Interests.
-----------------
(a) Except as set forth in Section 3.19(a) of the Company
Disclosure Schedule, no holder of greater than 3% of the voting power of the
Company or its affiliates or any officer or director of the Company and, to the
knowledge of the Company, no immediate relative or spouse (or immediate relative
of such spouse) who resides with, or is a dependent of, any such officer or
director:
(i) has any direct or indirect financial interest in any
creditor, competitor, supplier manufacturer, agent, representative, distributor
or customer of the Company; provided, however, that the ownership of securities
-------- -------
representing no more than 3% of the outstanding voting power of any creditor
competitor, supplier manufacturer, agent, representative, distributor or
customer, and which are listed on any national securities exchange or traded
actively in the national over-the-counter market, shall not be deemed to be a
"financial interest" as long as the person owning such securities has no other
connection or relationship with such competitor, supplier, agent, distributor or
customer;
(ii) owns, directly or indirectly, in whole or in part, or
has any other interest, in any tangible or intangible property which the Company
uses in the conduct of its business (except for any such ownership or interest
resulting from the ownership of securities in a public company);
(iii) has any claim or cause of action against the Company;
or
(iv) has outstanding any indebtedness to the Company.
(b) Except as set forth in Section 3.19(b) of the Company
Disclosure Schedule and except for the payment of employee compensation in the
ordinary course of business, consistent with past practice, the Company does not
have any liability or any other obligation of any nature whatsoever to any
Company Stockholder or any affiliate thereof or to any officer or director of
the Company or, to the knowledge of the Company, to any immediate relative or
spouse (or immediate relative of such spouse) of any such officer or director.
SECTION 3.20 Insurance Policies. Section 3.20 of the Company
------------------
Disclosure Schedule sets forth (i) a true and complete list of all insurance
policies to which the Company is a party or is a beneficiary or named insured
and (ii) any material claims made thereunder or
28
made under any other insurance policy within the past three years. True and
complete copies of all such policies have been provided to Parent. All premiums
due on such policies have been paid and the Company is otherwise in compliance
with the terms of such policies. The Company has not failed to give any notice
or present any claim under any such policy in a timely fashion. Such insurance
to the date hereof has been maintained in full force and effect and not been
canceled or changed, except to extend the maturity dates thereof. Since December
31, 1998, the Company has not received any notice or other communication
regarding any actual or possible (i) cancellation or threatened termination of
any insurance policy, (ii) refusal of any coverage or rejection of any claim
under any insurance policy or (iii) adjustment in the amount of the premiums
payable with respect to any insurance policy.
SECTION 3.21 Restrictions of Business Activities. There is no
-----------------------------------
agreement, commitment, judgment, injunction, order or decree binding upon the
Company or to which the Company is a party which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice material to the Company, any acquisition of property by the Company or
the conduct of business by the Company as currently conducted or as proposed to
be conducted.
SECTION 3.22 Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the origination, negotiation or execution of this Agreement, the Merger or
the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
SECTION 3.23 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has taken all action necessary to ensure that any restrictions on
business combinations contained in the KGCL will not apply to the Merger and the
other transactions contemplated by this Agreement. No other state takeover
statute is applicable to the Merger or the other transactions contemplated by
this Agreement.
SECTION 3.24 Customers and Suppliers. Section 3.24 of the Company
-----------------------
Disclosure Schedule contains a complete list of all customers who individually
accounted for more than $100,000 of the Company's gross revenues during the
fiscal years ended December 31, 1999 and 2000, or the most recent fiscal quarter
ended March 31, 2001. No customer listed on Section 3.24 of the Company
Disclosure Schedule has, within the past 12 months, cancelled or otherwise
terminated, or made any threat to cancel or terminate, its relationship with the
Company. No material supplier of the Company, has cancelled or otherwise
terminated any contract with the Company prior to the expiration of the contract
term, or to the Company's knowledge made any threat to the Company to cancel,
reduce the supply or otherwise terminate its relationship with the Company. The
Company has not (i) breached (so as to provide a benefit to the Company that was
not intended by the parties) any agreement with or (ii) engaged in any
fraudulent conduct with respect to, any customer or supplier of the Company.
SECTION 3.25 Accounts Receivable; Bank Accounts. The accounts
----------------------------------
receivable of the Company reflected on the Reference Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which they first became due and
payable), net of the applicable reserve for bad debts on the Reference Balance
Sheet. The accounts receivable reflected in the financial or accounting records
of the
29
Company that have arisen since the date of Reference Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which they first became due and
payable), net of a reserve for bad debts in an amount proportionate to the
reserve shown on the Reference Balance Sheet. Section 3.25 of the Company
Disclosure Schedule describes each account maintained by or for the benefit of
the Company at any bank or other financial institution.
SECTION 3.26 Powers of Attorney. There are no outstanding powers of
------------------
attorney executed on behalf of the Company.
SECTION 3.27 Offers. The Company has suspended or terminated, and
------
has the legal right to terminate or suspend, all negotiations and discussions of
any acquisition, merger, consolidation or sale of all substantially all of the
assets of Company with parties other than Parent.
SECTION 3.28 Warranties. No product or service manufactured, sold,
----------
leased, licensed or delivered by the Company is subject to any guaranty,
warranty, right of return, right of credit or other indemnity other than (i)
pursuant to the terms and conditions of Material Contracts and (ii)
manufacturers' warranties for which the Company has no liability. Section 3.28
of the Company Disclosure Schedule sets forth the aggregate expenses incurred by
the Company in fulfilling its obligations under any guaranty, warranty, right of
return and indemnity provisions during each of the fiscal years covered by the
Financial Statements and, assuming the Surviving Corporation continues to
maintain the products in accordance with the Company's historical practices, the
Company does not know of any reason why such expenses should significantly
increase as a percentage of sales in the future.
SECTION 3.29 Books and Records. The minute books and other similar
-----------------
records of the Company contain, in all material respects, complete and accurate
records of all actions taken at any meetings of the Company's stockholders,
Board of Directors of any committee thereof and of all written consents executed
in lieu of the holder of any such meeting. The books and records of the Company
accurately reflect in all material respects the assets, liabilities, business,
financial condition and results of operations of the Company and have been
maintained in accordance with good business and bookkeeping practices.
SECTION 3.30 Tax Matters. Neither the Company nor any of its
-----------
affiliates has taken or agreed to take any action that would prevent the Merger
from constituting a reorganization qualifying under Section 368(a) of the Code.
Neither the Company nor any of its affiliates is aware of any agreement, plan or
other circumstance that would prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code.
SECTION 3.31 No Misstatements. No representation or warranty made by
----------------
the Company in this Agreement, the Company Disclosure Schedule or any
certificate delivered or deliverable pursuant to the terms hereof contains or
will contain any untrue statement of a material fact, or omits, or will omit,
when taken as a whole, to state a material fact, necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. The Company has disclosed to Parent all material information
relating to the business of the Company or the transactions contemplated by this
Agreement.
30
SECTION 3.32 No Other Representations or Warranties. Except as otherwise
--------------------------------------
specifically set forth in this Agreement, the Company makes no other
representation or warranty (express or implied) regarding the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub hereby represent and warrant to the Company that
the statements contained in this Article IV are true and correct except as set
forth in (i) the disclosure schedule delivered by Parent to the Company
concurrently with the execution of this Agreement (the "Parent Disclosure
-----------------
Schedule") and (ii) the Parent SEC Reports (as defined in Section 4.05). The
- --------
Parent Disclosure Schedule shall be arranged according to specific sections in
this Article IV and shall provide exceptions to, or otherwise qualify in
reasonable detail, only the corresponding section in this Article IV and any
other section hereof where it is clear, upon a reading of such disclosure
without any independent knowledge on the part of the reader regarding the matter
disclosed, that the disclosure is appropriate with respect to such other
section.
SECTION 4.01 Organization and Qualification.
------------------------------
(a) Parent is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such corporate power and
authority have not had, and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect (as defined
below). Parent is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing has not had, and could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. The term "Parent Material Adverse Effect" means any
------------------------------
event, change or effect that is materially adverse to the business, operations,
condition (financial or otherwise), assets (tangible or intangible) or
liabilities of Parent and its subsidiaries taken as a whole, except for any such
events, changes or effects resulting from or in connection with (i) any changes
in general economic or business conditions that do not disproportionately impact
Parent and its subsidiaries taken as a whole, (ii) any changes or events
affecting the industry in which Parent and its subsidiaries operate that do not
disproportionately impact Parent and its subsidiaries taken as a whole, (iii)
any decline in the trading price of Parent Common Stock, (iv) any adverse change
in the United States securities market or (v) any failure by Parent to meet the
revenue or earnings predictions of equity analysts as reflected in the First
Call consensus estimates, or any other revenue or earnings estimate, or any
other revenue or earnings prediction or expectation, for any period ending (or
for which earnings are released) on or after the date of this Agreement and
prior to the Closing Date.
(b) Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
31
SECTION 4.02 Authority Relative to this Agreement. Each of Parent and
------------------------------------
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, and to perform its obligations hereunder and to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by each of Parent and Merger Sub
and the consummation by each of Parent and Merger Sub of the Merger and the
other transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the Merger and the other transactions contemplated by this
Agreement (other than with respect to the Merger, the filing and recordation of
appropriate merger documents as required by the KGCL and the DGCL). This
Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar Laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity.
SECTION 4.03 Capital Structure.
-----------------
(a) As of the date hereof, the authorized capital stock of Parent
consists of (i) 100,000,000 shares of Parent Common Stock and (ii) 5,000,000
shares of preferred stock, par value $0.001 per share, of Parent ("Parent
------
Preferred Stock"). As of April 6, 2001, (i) 58,599,869 shares of Parent Common
- ---------------
Stock were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and non-assessable, (ii) 19,382,339 shares of Parent Common
Stock were reserved for future issuance pursuant to outstanding, unexercised
options to purchase Parent Common Stock and (iii) no shares of Parent Common
Stock were reserved for issuance pursuant to outstanding, unexercised warrants
to purchase Parent Common Stock. As of the date hereof, no shares of Parent
Preferred Stock were issued and outstanding.
(b) As of April 24, 2001, except for outstanding options and warrants
referred to in clauses (ii) and (iii) of the second sentence of Section 4.03(a)
and otherwise as disclosed in the Parent SEC Reports (as defined below), there
are no outstanding options, warrants, or other agreements relating to the
issuance of capital stock of Parent or obligating Parent to issue or sell any
shares of its capital stock.
SECTION 4.04 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by each of Parent
and Merger Sub do not, and the performance of this Agreement by each of Parent
and Merger Sub will not, (i) conflict with or violate their respective
organizational documents, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.04(b) have been obtained
and all filings and obligations described in Section 4.04(b) have been made or
complied with, conflict with or violate in any material respect any Law
applicable to Parent or Merger Sub or by which any property or asset of Parent
or Merger Sub is bound or affected, or (iii) conflict with, result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
32
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Merger Sub pursuant
to, any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Merger Sub is a party, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults, or other occurrences that could
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of Parent
and Merger Sub do not, and the performance of this Agreement by each of Parent
and Merger Sub will not, require any consent, approval, order, authorization,
registration or permit of, or filing with or notification to, any Governmental
Entity, except (i) for the filing and recordation of appropriate merger
documents as required by the KGCL and the DGCL, (ii) for applicable
requirements, if any, of the Exchange Act of 1934, as amended (the "Exchange
--------
Act"), Federal and state securities laws and The Nasdaq National Market, and
- ---
(iii) for such other consents, approvals, orders authorizations, registrations
or permits, filings or notifications that if not obtained or made could not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
SECTION 4.05 SEC Filings; Financial Statements.
---------------------------------
(a) Parent has timely filed all forms, reports and documents required
to be filed by it with the Securities and Exchange Commission (the "SEC") since
---
June 1, 1998, through the date of this Agreement (collectively, the "Parent SEC
----------
Reports"). As of the respective dates they were filed (and if amended or
- -------
superceded by a filing prior to the date of this Agreement, then on the date of
such filing), (i) the Parent SEC Reports complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) none of the Parent SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Parent SEC Reports was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q or 8-K promulgated by the SEC)
and each presented fairly, in all material respects, the consolidated financial
position of Parent and its consolidated subsidiaries as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected, individually
or in the aggregate, to have a Parent Material Adverse Effect).
SECTION 4.06 Interim Operations of Merger Sub. Merger Sub was formed by
--------------------------------
Parent solely for the purpose of engaging in the transactions contemplated by
this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement. Merger Sub has no
liabilities and, except for a subscription agreement pursuant to which all of
its authorized capital stock was issued to Parent, is not a party to any
33
agreement other than this Agreement and agreements with respect to the
appointment of registered agents and similar matters.
SECTION 4.07 Valid Issuance of Parent Shares. The shares of Parent
-------------------------------
Common Stock to be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and non-assessable.
SECTION 4.08 Tax Matters. Neither Parent nor Merger Sub nor any of their
-----------
affiliates has taken or agreed to take any action that would prevent the Merger
from constituting a reorganization qualifying under Section 368(a) of the Code.
Parent is not aware of any agreement, plan or other circumstance that would
prevent the Merger from qualifying as a reorganization under Section 368(a) of
the Code.
SECTION 4.09 Form S-3 Eligibility. Parent is eligible to utilize Form S-
--------------------
3 under the Securities Act to register for resale the shares of Parent Common
Stock issued to the Company Stockholders pursuant to this Agreement
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
----------------------------------------
SECTION 5.01 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, the Company
agrees (except to the extent that Parent shall otherwise consent in writing) to
carry on its business in the usual, regular and ordinary course and in
substantially the same manner as previously conducted, to pay its liabilities,
debts and Taxes when due, (subject to good faith disputes over such liabilities,
debts or Taxes), to pay or perform other obligations when due and, to the extent
consistent with such business, use all commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and consultants and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses would be
unimpaired at the Effective Time. The Company shall promptly notify Parent of
any event or occurrence not in the ordinary course of business of Company.
By way of amplification and not limitation, except as specifically
contemplated by this Agreement or as specifically set forth in Section 5.01 of
the Company Disclosure Schedule, the Company shall not, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of Parent:
(a) amend or otherwise change its Amended and Restated Articles of
Incorporation or Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, authorize or
propose the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to
34
acquire any shares of such capital stock or any other ownership interest
(including, without limitation, any phantom interest), of the Company, except
pursuant to the terms of options outstanding on the date of this Agreement;
(c) sell, lease, license, pledge, grant, encumber or otherwise
dispose of any of its properties or assets which are material, individually or
in the aggregate, to its business;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(e) split, combine, subdivide, redeem or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
purchase or otherwise acquire, directly or indirectly, any shares of its capital
stock except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party;
(f) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest or any assets in any
corporation, partnership, other business organization or any division thereof;
(g) institute or settle any Legal Proceeding;
(h) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances;
(i) authorize any capital expenditure in excess of $10,000,
individually or in the aggregate;
(j) enter into any lease or contract for the purchase or sale of any
property, real or personal, except in the ordinary course of business,
consistent with past practice;
(k) waive or release any material right or claim;
(l) increase or agree to increase the compensation payable or to
become payable to its officers or employees, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any of its directors, officers or other employees, or establish, adopt, enter
into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other Plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee; provided, however, that the foregoing provisions of this subsection
-------- -------
shall not apply to any amendments to employee benefit plans described in Section
3(3) of ERISA that may be required by Law;
(m) accelerate, amend or change the period of exercisability or the
vesting schedule of restricted stock or Company Options granted under any option
plan,
35
employee stock plan or other agreement or authorize cash payments in exchange
for any Company Options granted under any of such plans except as specifically
required by the terms of such plans or any such agreement or any related
agreement in effect as of the date of this Agreement and disclosed in the
Company Disclosure Schedule;
(n) extend any offers of employment to potential employees,
consultants or independent contractors or terminate any existing employment
agreements;
(o) amend or terminate any Material Contract, other than customer
contracts in the ordinary course of business consistent with past practice;
(p) enter into, amend or terminate any contract, agreement,
commitment or arrangement that, if fully performed, would not be permitted under
this Section 5.01;
(q) other than in the ordinary course of business consistent with
past practice enter into any licensing, distribution, OEM agreements,
sponsorship, advertising, merchant program or other similar contracts,
agreements or obligations;
(r) enter into any contract or agreement material to the business,
results of operations or financial condition of the Company, other than customer
contracts in the ordinary course of business consistent with past practice;
(s) pay, discharge or satisfy any material claim, liability or
obligation (absolute, accrued, asserted, unasserted, contingent or otherwise);
(t) take any action, other than reasonable and usual action in the
ordinary course of business, consistent with past practice, with respect to
accounting policies, principles or procedures;
(u) make or change any material Tax or accounting election, change
any annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Company, surrender any right to claim refund of
Taxes, consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment relating to the Company, or take any other action or
omit to take any action that would have the effect of increasing the Tax
liability of the Company or Parent;
(v) (i) sell, assign, lease, terminate, abandon, transfer, permit to
be encumbered or otherwise dispose of or grant any security interest in and to
any item of the Company Intellectual Property, in whole or in part, (ii) grant
any license with respect to any Company Intellectual Property, other than a
license of Software granted to customers of the Company to whom the Company
licenses such Software in the ordinary course of business, (iii) develop, create
or invent any Intellectual Property jointly with any third party, or (iv)
disclose, or allow to be disclosed, any confidential Company Intellectual
Property, unless such Company Intellectual Property is subject to a
confidentiality or non-disclosure covenant protecting against disclosure
thereof;
36
(w) make (or become obligated to make) any bonus payments to any of
its officers or employees;
(x) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained up to the date
of this Agreement, subject only to ordinary wear and tear;
(y) take any action or fail to take any action that would cause there
to be a Company Material Adverse Effect;
(z) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated without notice to Parent;
(aa) write off as uncollectible, or establish any extraordinary
reserve with respect to, any account receivable or other indebtedness in excess
of $10,000 with respect to a single matter, or in excess of $50,000 in the
aggregate; or
(bb) take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (aa) above, or any action which is
reasonably likely to make any of Company's representations or warranties
contained in this Agreement untrue or incorrect on the date made (to the extent
so limited) or as of the Effective Time.
SECTION 5.02 Litigation. The Company shall notify Parent in writing
----------
promptly after learning of any claim, action, suit, arbitration, mediation,
proceeding or investigation by or before any court, arbitrator or arbitration
panel, board or other Governmental Entity initiated by it or against it, or
known by the Company to be threatened against the Company or any of its
officers, directors, employees or stockholders in their capacity as such.
SECTION 5.03 Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to the Company, and the Company shall give prompt notice to Parent, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause (x) any representation or warranty
contained in this Agreement to be untrue or inaccurate or (y) any covenant,
condition or agreement contained in this Agreement not to be complied with or
satisfied and (ii) any failure or inability of Parent or the Company, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
-------- -------
delivery of any notice pursuant to this Section 5.03 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01 Company Stockholder Approval; Exemption from Registration.
---------------------------------------------------------
(a) As promptly as practicable, and in any event within 5 business
days after the date hereof, and in accordance with applicable Law, the Company's
Amended and Restated Articles of Incorporation and Bylaws, the Company shall
call a meeting of its
37
stockholders or solicit written consents from its stockholders to obtain their
approval and adoption of this Agreement and the other transactions contemplated
hereby. The Company shall ensure that the stockholders' meeting is called,
noticed, convened and held, and that all proxies or written consents, if any,
are solicited and obtained from the Company Stockholders, in compliance with
applicable Law, the Company's Amended and Restated Articles of Incorporation and
Bylaws, and all other applicable legal requirements. The Company agrees to use
its commercially reasonable efforts to take all action necessary or advisable to
secure the necessary votes required by applicable Law and the Company's Amended
and Restated Articles of Incorporation and Bylaws to effect the Merger. The
Board of Directors of the Company shall unanimously recommend that the Company
Stockholders vote in favor of and adopt and approve this Agreement and the other
transactions contemplated hereby. Neither the Board of Directors of the Company
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify in a manner adverse to Parent, the recommendation
of the Board of Directors of the Company that the Company Stockholders vote in
favor of and adopt and approve this Agreement and the other transactions
contemplated hereby.
(b) Each of the parties hereto acknowledge that the shares of Parent
Common Stock issued to the Company Stockholders pursuant to this Agreement are
intended to be issued pursuant to the "private placement" exemption from
registration under Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act and agree to fully cooperate with Parent in
its efforts to ensure that the shares of Parent Common Stock may be issued
pursuant to such private placement exemption; provided, however, that neither
-------- -------
Parent nor Merger Sub makes any representation or warranty that such
issuance in fact qualifies for such private placement exemption.
(c) On the date of this Agreement, the Company shall deliver to
Parent's counsel a draft of an information statement (together with any
amendments thereof or supplements thereto, the "Information Statement") and,
---------------------
after such delivery, Parent will assist the Company in finalizing the
Information Statement. The Information Statement shall include the unanimous
recommendation of the Board of Directors of the Company to the Company
Stockholders to vote in favor of the approval and adoption of this Agreement and
the other transactions contemplated hereby. As promptly as practicable after the
date hereof, but in no event more than 5 business days following the date
hereof, the Company will send to each Company Stockholder the Information
Statement for the purpose of considering, approving and adopting this Agreement,
and the other transactions contemplated hereby. None of the information included
in the Information Statement or any other document prepared to comply with
Federal or state securities laws shall, at the time it is first mailed to the
Company Stockholders or 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 were made, not misleading. No amendment or
supplement to the Information Statement will be made by the Company without the
approval of Parent.
SECTION 6.02 Access to Information; Confidentiality.
--------------------------------------
(a) From the date of this Agreement to the Effective Time, the
Company shall: (i) provide to Parent (and its officers, directors, employees,
accountants,
38
consultants, legal counsel, agents and other representatives (collectively,
"Representatives")) access at reasonable times upon prior notice to the
---------------
directors, officers, employees, agents, properties, offices and other facilities
of the Company and to the books and records thereof and (ii) furnish promptly
such information concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of the Company as Parent or its
Representatives may reasonably request.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Non-Disclosure Agreement dated February 8, 2001, (the "Non-Disclosure
--------------
Agreement") between the Company and Parent.
- ---------
SECTION 6.03 No Solicitation of Transactions.
-------------------------------
(a) The Company will not, directly or indirectly, and will instruct
its officers, directors, employees, agents, advisors or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it), not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), or take any other action
to facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction (as defined
below), or enter into or maintain or continue discussions or negotiate with any
person in furtherance of such inquiries or to obtain a Competing Transaction, or
agree to or endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of the Company, or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company, to take any such action. The Company will notify Parent immediately
after receipt by the Company (or any of its officers, directors, employees,
agents, advisors or other representatives) of any proposal for, or inquiry
respecting, any Competing Transaction, or any request for nonpublic information
in connection with such proposal or inquiry or for access to the properties,
books or records of the Company by any person that informs or has informed the
Company that it is considering making or has made such a proposal or inquiry.
Such notice to Parent shall indicate in reasonable detail the identity of the
person making such proposal or inquiry and the terms and conditions of such
proposal or inquiry. The Company immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to a Competing Transaction. The Company agrees not to
release any third party from, or waive any provision of, any confidentiality
agreement to which it is a party.
(b) A "Competing Transaction" means any of the following involving
---------------------
the Company (other than the Merger and the other transactions contemplated by
this Agreement): (i) a merger, consolidation, share exchange, business
combination or other similar transaction; (ii) any sale, lease, exchange,
transfer or other disposition of a material portion of the assets of such party;
(iii) a tender offer or exchange offer for 15% or more of the outstanding voting
securities of such party; or (iv) any solicitation in opposition to approval by
the stockholders of the Company of this Agreement and the Merger.
39
SECTION 6.04 Employee Benefits Matters.
-------------------------
(a) All employees of the Company shall continue in their existing
benefit plans until such time as, in Parent's sole discretion, an orderly
transition can be accomplished to employee benefit plans and programs maintained
by Parent for its and its affiliates' employees in the United States. Parent
shall take such reasonable actions, to the extent permitted by Parent's benefits
programs, as are necessary to allow eligible employees of the Company to
participate in the health, welfare and other employee programs of Parent or
alternative benefits programs in the aggregate that are substantially equivalent
to those applicable to employees of Parent in similar functions and positions on
similar terms (it being understood that equity incentive plans are not
considered employee benefits). Pending such action, Parent shall maintain the
effectiveness of the Company's benefit plans.
(b) Simultaneously with the execution of this Agreement, Parent has
entered into offer letters (collectively, the "Offer Letters," and,
-------------
individually, an "Offer Letter") with the individuals set forth on Schedule
------------
6.04(b) hereto.
(c) Simultaneously with the execution of this Agreement, Parent has
entered into non-solicitation and non-competition agreements (collectively, the
"Non-Solicitation Agreements", and, individually, a "Non-Solicitation
--------------------------- ----------------
Agreement") with the individuals set forth on Schedule 6.04(c) hereto.
- ---------
(d) Prior to the Effective Time, the Company shall take all necessary
actions to obtain the requisite stockholder approval under Section 280G(b)(5) of
the Code of any payments or benefits that could be considered "excess parachute
payments" within the meaning of Section 280G of the Code and shall require all
"disqualified individuals" within the meaning of Section 280G of the Code, to
subject their existing benefits and payments to the stockholder approval
requirements of Section 280G(b)(5) of the Code, as contemplated in the Proposed
Treasury Regulations promulgated thereunder.
(e) The Company shall take all necessary corporate action to
terminate its 401(k) plan (the "401(k) Plan") effective as the date immediately
-----------
prior to the Closing Date, but contingent on the Closing. Parent shall receive
from the Company evidence that the Company's Board of Directors has adopted
resolutions to terminate the 401(k) Plan (the form and substance of which
resolutions shall be subject to review and approval of Parent), effective as of
the date immediately preceding the Closing Date.
(f) The Company and, as applicable, its ERISA Affiliates each agree
to terminate any and all group severance, separation or salary continuation
plans, programs or arrangements immediately prior to Closing as requested by
Parent in writing. Parent shall receive from the Company evidence that the
plans, programs or arrangements of the Company and, as applicable, each ERISA
Affiliate have been terminated pursuant to resolution of each such entity's
Board of Directors (the form and substance of which resolutions shall be subject
to review and approval of the Parent), effective as of the day immediately
preceding the Closing Date but contingent on the Closing.
40
(g) With respect to all stock purchase, stock option and stock award
agreements (including any restricted stock, stock purchase, stock option or
stock award agreement under the Stock Plans) between the Company and any current
or former employee, director, consultant or founder effective as of the
Effective Time, any and all rights of repurchase under each such agreement shall
be assigned to Parent (or to such other entity as Parent shall designate) by
virtue of the Merger and without any further action on the part of the Company,
such assignment to be effective as of the Effective Time.
SECTION 6.05 Further Action; Consents; Filings.
---------------------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its commercially reasonable best efforts to (i) take,
or cause to be taken, all appropriate action and do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement, (ii) obtain from any Governmental Entity or any other person
all consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement and (iii) make all necessary filings, and
thereafter make any other required submission, with respect to this Agreement,
the Merger and the other transactions contemplated by this Agreement required
under applicable Law. The parties hereto shall cooperate with each other in
connection with the making of all such filings, including by providing copies of
all such documents to the nonfiling party and its advisors prior to filing and,
if requested, by accepting all reasonable additions, deletions or changes
suggested in connection therewith.
(b) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, each party shall promptly
notify the other party in writing of any pending or, to the knowledge of such
party, threatened action, proceeding or investigation by any Governmental Entity
or any other person (i) challenging or seeking material damages in connection
with this Agreement or the transactions contemplated hereunder or (ii) seeking
to restrain or prohibit the consummation of the Merger or the transactions
contemplated hereunder or otherwise limit the right of Parent or its
subsidiaries to own or operate all or any portion of the business, assets or
properties of the Company.
SECTION 6.06 Plan of Reorganization.
----------------------
(a) This Agreement is intended to constitute a "plan of
reorganization" within the meaning of Section 1.368-2(g) of the income tax
regulations promulgated under the Code. From and after the date of this
Agreement and until the Effective Time, each party hereto shall use its
reasonable best efforts to cause the Merger to qualify, and will not knowingly
take any action, cause any action to be taken, fail to take any action or cause
any action to fail to be taken which action or failure to act could prevent the
Merger from qualifying as a reorganization under the provisions of Section
368(a) of the Code. Following the Effective Time, neither the Surviving
Corporation, Parent nor any of their affiliates shall knowingly take any action,
cause any action to be taken, fail to take any action or cause any action to
fail to be taken, which action
41
or failure to act could cause the Merger to fail to qualify as a reorganization
under Section 368(a) of the Code.
(b) As of the date hereof, the Company does not know of any reason (i)
why it would not be able to deliver to Polsinelli Shalton & Welte (counsel to
the Company) or Gunderson Dettmer (counsel to Parent), at the date of the legal
opinions referred to below, certificates substantially in compliance with
Internal Revenue Service published advance ruling guidelines, with customary
exceptions and modifications thereto, to enable such firms to deliver the legal
opinions contemplated by Sections 7.03(c) and 7.02(d), and the Company hereby
agrees to deliver such certificates effective as of the date of such opinions,
or (ii) why Polsinelli Shalton & Welte or Gunderson Dettmer would not be able to
deliver the opinions required by Sections 7.03(c) and 7.02(d). As of the date
hereof, Parent and Merger Sub do not know of any reason why they would not be
able to deliver to Gunderson Dettmer or Polsinelli Shalton & Welte, at the date
of the legal opinions referred to below, certificates substantially in
compliance with the Internal Revenue Service published advance ruling
guidelines, with customary exceptions and modifications thereto, to enable such
firms to deliver the legal opinions contemplated by Sections 7.02(d) and
7.03(c), and Parent hereby agrees to deliver such certificates effective as of
the date of such opinions, or (ii) why Gunderson Dettmer or Polsinelli Shalton &
Welte would not be able to deliver the opinions required by Sections 7.02(d) and
7.03(c).
SECTION 6.07 No Public Announcement. The initial press release relating to
----------------------
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, unless otherwise required by
applicable Law or listing agreement with an applicable stock exchange, neither
Parent nor the Company shall issue any press release or otherwise make any
public statements with respect to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement without the prior written consent of
the other.
SECTION 6.08 Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement, the Merger and other
transactions contemplated by this Agreement (including, without limitation, the
fees and expenses of financial advisors, accountants and legal counsel) (i) if
incurred by Parent and Merger Sub, shall be paid by Parent and (ii) if incurred
by the Company or its stockholders (the "Stockholder Expenses"), shall be paid
--------------------
by the Company Stockholders.
SECTION 6.09 Indemnification of Officers and Directors. For a period of
-----------------------------------------
six years from and after the Closing Date, Parent agrees to indemnify (including
advancement of expenses) and hold harmless all past and present officers and
directors of the Company to the same extent such persons are indemnified as of
the date of this Agreement by the Company pursuant to the Company's Amended and
Restated Articles of Incorporation or Bylaws, employment agreements or
indemnification agreements identified on the Company Disclosure Schedule or
under applicable Law for acts or omissions which occurred at or prior to the
Effective Time. This indemnification shall not apply to any claim by any such
officer or director pursuant to the terms of this Agreement or any other
agreement contemplated by this Agreement. The Company hereby represents to
Parent that no claim for indemnification has been made by
42
any director or officer of the Company and, to the knowledge of the Company, no
basis exists for any such claim for indemnification.
SECTION 6.10 Nasdaq National Market Listing. If necessary, Parent shall
------------------------------
promptly prepare and file with The Nasdaq National Market a Notification Form
for Listing Additional Shares with respect to the shares of Parent Common Stock
to be issued pursuant to this Agreement and pursuant to the Company Options and
the Company shall cooperate with Parent with respect to such filing.
SECTION 6.11 Stockholder Certificates. The Company shall use its
------------------------
commercially reasonable efforts to cause each Company Stockholder to execute and
deliver to Parent prior to Closing a Stockholder Certificate.
SECTION 6.12 Conversion Schedule. Section 6.12 of the Company Disclosure
-------------------
Schedule is a schedule prepared by the Company (the "Preliminary Conversion
----------------------
Schedule") showing the number of shares of Parent Common Stock to be issued to
- --------
each holder of shares of Company Stock and each holder of rights to acquire
capital stock of the Company, including the number of shares of Parent Common
Stock to be deposited in the Escrow Fund, as of the execution of this Agreement
as if the Effective Time and the exchange of shares pursuant to the Merger had
occurred as of the date of the execution of this Agreement. The Company and the
Stockholders' Representative shall prepare a final schedule as of the Effective
Time (the "Final Conversion Schedule"), and an officer of the Company shall
-------------------------
execute the Final Conversion Schedule and deliver such schedule to Parent at
Closing.
SECTION 6.13 Collection of Accounts Receivable. From and after the Closing
---------------------------------
Date, the Surviving Corporation shall use its commercially reasonable efforts to
collect the accounts receivable of the Company that are reflected on the
financial or accounting records of the Company as of the Closing (the "Accounts
--------
Receivable"). The Surviving Corporation shall not settle an Account Receivable
- ----------
at less than face value without the prior written consent of the Stockholders'
Representative, which consent will not be unreasonably withheld. If an Account
Receivable has not been collected within 120 days after the Closing Date, then,
for a period of 45 days after the date that the Stockholders' Representative
receives notice that the Accounts Receivable are past due (the "Collection
----------
Period"), the Stockholders' Representative, on behalf of the Surviving
- ------
Corporation, shall use commercially reasonable efforts with the cooperation of
the Surviving Corporation to effect such collection and the Stockholders'
Representative shall remit any monies so collected to the Surviving Corporation.
The Company Stockholders shall not have liability under Section 3.25 until the
expiration of such Collection Period. If any Parent Indemnified Party receives
indemnification due to the uncollectability of Accounts Receivable, then the
Surviving Corporation shall assign all of its right, title and interest to all
uncollected Accounts Receivable to the Stockholders' Representative at the time
of such indemnity payment. The liability of the Company Stockholders to the
Parent Indemnified Parties is only if and to the extent that the Accounts
Receivable are not collected in a total amount of the face amount of the
Accounts Receivable less the applicable reserve reflected on the financial or
accounting records of the Company as of the Closing.
SECTION 6.14 Vesting of Options. Parent and the Company acknowledge and
------------------
agree that, for purposes of Section L. of the Company's 1998 Incentive Stock
Option Plan (as
43
amended by Amendment Number 2 to such plan on February 4, 1999), and for
purposes of Section L. of the Company's Non-Qualified Stock Option Plan of 1999,
the Merger shall be treated as a "merger or consolidation in which the Company
is not a surviving corporation," such that any outstanding Company Options which
have vested, or which are to vest on or before May 1, 2002, shall be immediately
vested as of the Closing Date.
ARTICLE VII
CONDITIONS TO THE MERGER
------------------------
SECTION 7.01 Conditions to the Obligations of Each Party. The obligations
-------------------------------------------
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
--------------------
adopted by the requisite affirmative vote of the stockholders of the Company in
accordance with the KGCL and the Company's Amended and Restated Articles of
Incorporation and Bylaws;
(b) No Order. No Governmental Entity or court of competent
--------
jurisdiction located or having jurisdiction in the United States shall have
enacted, issued, promulgated, enforced or entered any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent (each an
"Order") which is then in effect and has the effect of making the Merger illegal
-----
illegal or otherwise prohibiting consummation of the Merger;
(c) Listing. If necessary, Parent shall have filed with The Nasdaq
-------
National Market a Notification Form for Listing Additional Shares with respect
to the shares of Parent Common Stock to be issued pursuant to this Agreement and
pursuant to the Company Options; and
(d) Registration Rights Agreement. Parent and the Stockholders'
-----------------------------
Representative shall have entered into a Registration Rights Agreement
substantially in the form attached hereto as Exhibit F, and such Registration
---------
Rights Agreement shall be in full force and effect.
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub. The
------------------------------------------------------
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement that are qualified as to
materiality or Company Material Adverse Effect, or any similar standard or
qualification, shall be true and correct in all respects, and each of the
representations and warranties of the Company contained in this Agreement that
are not qualified as to materiality or Company Material Adverse Effect, or any
similar standard or qualification, shall be true and correct in all material
respects, in each case as of the Effective Time with the same force and effect
as if made on and as of the Effective Time, except that those representations
and warranties that address matters only as of a particular
44
date shall remain true and correct as of such date, and Parent shall have
received a certificate of the Chief Executive Officer of the Company to such
effect;
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time and Parent shall have received a certificate of the Chief
Executive Officer of the Company to that effect;
(c) Approvals. Parent shall have received, each in form and
---------
substance reasonably satisfactory to Parent, (i) all required authorizations,
consents, orders and approvals of all Governmental Entities and officials, if
any, and (ii) all third party consents set forth in Section 7.02(c) of the
Company Disclosure Schedule;
(d) Tax Opinion of Parent's Counsel. Parent shall have received
-------------------------------
the opinion of Gunderson Dettmer, counsel to Parent, based upon representations
of Parent, Merger Sub and the Company and normal assumptions, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
qualifying under the provisions of Section 368(a) of the Code, which opinion
shall not have been withdrawn or modified in any material respect. The issuance
of such opinion shall be conditioned on receipt by Gunderson Dettmer of
representation letters from each of Parent, Merger Sub and the Company as
contemplated in Section 6.06 of this Agreement. Each such representation letter
shall be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect as of the Effective Time.
Notwithstanding the foregoing, if Parent's counsel does not render such opinion,
this condition shall nevertheless be deemed satisfied with respect to Parent if
Polsinelli Shalton & Welte, counsel to the Company, renders such opinion to
Parent;
(e) Dissenters. Stockholders holding no more than 4% of the Company
----------
Common Stock outstanding immediately prior to the Effective Time shall have
objected in writing to the approval and adoption of this Agreement, the Merger
or the other transactions contemplated by this Agreement;
(f) No Company Material Adverse Effect. Since the date of this
----------------------------------
Agreement, no event or events shall have occurred, nor does any circumstance
exist, which, individually or in the aggregate, have, or could reasonably be
expected to have, a Company Material Adverse Effect;
(g) Employment Agreements. Each individual set forth on Schedule
---------------------
6.04(b) hereto shall remain employed by the Company and the Employment Agreement
entered into with such individual shall remain in full force and effect and
shall not have been anticipatorially breached or repudiated by such individual;
(h) Non-Solicitation Agreements. Each of the Non-Solicitation
---------------------------
Agreements entered into with the individuals set forth on Schedule 6.04(c)
hereto shall remain in full force and effect and shall not have been
anticipatorially breached or repudiated by any of such individuals;
(i) No Restraints. There shall not be pending or threatened any
-------------
suit, action, investigation or proceeding to which a Governmental Entity is a
party (i) seeking to
45
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from Parent or
the Company any damages that are material or (ii) seeking to prohibit or limit
the ownership or operation by Parent or the Company of any material portion of
their respective businesses or assets;
(j) Issuance of Shares of Parent Common Stock. Parent shall have
-----------------------------------------
received the opinion of Gunderson Dettmer, counsel to Parent, in form and
substance reasonably satisfactory to Parent, to the effect that the issuance of
the shares of Parent Common Stock pursuant to this Agreement will be validly
issued pursuant to the "private placement" exemption from registration provided
by Section 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act;
(k) Escrow Agreement. Parent and the Stockholders' Representative
----------------
shall have entered into the Escrow Agreement and the Escrow Agreement shall be
in full force and effect and shall not have been anticipatorially breached or
repudiated;
(l) Termination of Employee Plans. The Company shall have terminated
-----------------------------
the Plans identified by Parent prior to the Closing pursuant to Section 6.04(f),
and the Company shall have provided Parent with evidence, reasonably
satisfactory to Parent, as to the termination of such Plans;
(m) Opinion of the Company's Counsel. Parent shall have received
--------------------------------
the opinion of the Company's counsel substantially in the form attached hereto
as Exhibit C;
---------
(n) Secretary's Certificate. Parent shall have received a
-----------------------
certificate executed by the Secretary of the Company attaching and certifying as
to the Company's current Amended and Restated Articles of Incorporation and
Bylaws and the resolutions of the Company's Board of Directors and the Company
Stockholders approving and adopting this Agreement and the transactions relating
hereto;
(o) Estoppel Certificate. Parent shall have received an estoppel
--------------------
certificate, dated as of a date not more than five days prior to the Closing
Date and satisfactory in form and content to Parent, executed by Southcreek V
Associates, L.P.;
(p) FIRPTA Compliance. The Company shall, prior to the Closing Date,
-----------------
provide Parent with a properly executed Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA") Notification Letter, in form and substance satisfactory
------
to Parent, which states that shares of capital stock of the Company do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3). In addition, simultaneously with delivery of such
Notification Letter, the Company shall have provided to Parent, as agent for the
Company, a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) along with written
authorization for Parent to deliver such notice form to the Internal Revenue
Service on behalf of the Company upon the consummation of the Merger;
(q) Parachute Payments. Prior to the Effective Time, the Company
------------------
shall have obtained the requisite stockholder approval under Section 280G(b)(5)
of the Code of
46
any payments or benefits that could be considered "excess parachute payments"
within the meaning of Section 280G of the Code, and any "disqualified
individuals" as defined in Section 280G of the Code shall have agreed to forfeit
any payments that would otherwise be non-deductible if such stockholder approval
is not obtained;
(r) Employees. Each of the individuals set forth on Schedule
---------
7.02(r)(i) and 90% of the individuals set forth on Schedule 7.02(r)(ii) shall be
employed in good standing by the Company;
(s) Board and Officer Resignations. The Company shall have received
------------------------------
written letters of resignation from each of the current members of the Board of
Directors and officers of the Company, in each case effective at the Effective
Time;
(t) Stockholder Agreements. Each of letter agreements entered into
----------------------
with Messrs. Killen, Lowe, Melton, Spann, Spencer and Stafford regarding their
Company Options shall be in full force and effect and shall not have been
anticipatorially breached or repudiated;
(u) Termination of the Company's Agreements. Parent shall have been
---------------------------------------
furnished evidence satisfactory to it that all rights, if any, granted by
the Company to its stockholders and in effect prior to the Closing, including,
but not limited to, rights of co-sale, voting, registration, first refusal,
first offer, preemptive, board observation or information or operational
covenants, shall have terminated prior to the Closing Date;
(v) Termination of 401(k) Plan. The Company shall have terminated
--------------------------
the 401(k) Plan effective at least one day prior to the Closing Date and all
contributions payable to the 401(k) Plan shall have been made. The Company shall
have provided to Parent (i) executed resolutions of the Board of Directors of
the Company authorizing the termination and (ii) an executed amendment to the
401(k) Plan sufficient to ensure compliance with all applicable requirements of
the Code and regulations thereunder so that the tax-qualified status of the
401(k) Plan will be maintained at the time of termination; and
(w) Termination of the Company's Obligations. The Company shall have
----------------------------------------
delivered the "Notice" to Sybase, Inc. pursuant to, and as that term is defined
in, that certain Amendment to Redemption Agreement, dated April 24, 2001, by and
between the Company and Sybase, Inc.
SECTION 7.03 Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement that are
qualified as to materiality or Parent Material Adverse Effect, or any similar
standard or qualification, shall be true and correct, and each of the
representations and warranties of Parent and Merger Sub contained in this
Agreement that are not qualified as to materiality or Parent Material Adverse
Effect, or any similar standard or qualification, shall be true and correct in
all material respects, in each case as of the Effective Time with the same force
and effect as if made on and as of the
47
Effective Time, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date, and the Company shall have received a certificate of a duly authorized
officer of Parent to such effect;
(b) Agreements and Covenants. Each of Parent and Merger Sub shall
------------------------
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Effective Time, and the Company shall have received a
certificate of a duly authorized officer of Parent to that effect;
(c) Tax Opinion of Company's Counsel. The Company shall have received
--------------------------------
the opinion of Polsinelli Shalton & Welte, counsel to the Company, based upon
representations of Parent, Merger Sub and the Company and normal assumptions, to
the effect that the Merger will be treated for Federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code and
that each of Parent, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, which opinion
shall not have been withdrawn or modified in any material respect. The issuance
of such opinion shall be conditioned on receipt by Polsinelli Shalton & Welte of
representation letters from each of Parent, Merger Sub and the Company as
contemplated in Section 6.06 of this Agreement. Each such representation letter
shall be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect as of the Effective Time.
Notwithstanding the foregoing, if the Company's counsel does not render such
opinion, this condition shall nevertheless be deemed satisfied with respect to
the Company if Gunderson Dettmer, counsel to Parent, renders such opinion to the
Company;
(d) Opinion of Parent's Counsel. The Company shall have received
---------------------------
the opinion of Gunderson Dettmer, counsel to Parent, or another counsel
reasonably satisfactory to the Company, substantially in the form attached
hereto as Exhibit D;
---------
(e) Personal Guarantees. The personal guarantees of the Principal
-------------------
Stockholders, as set forth in Section 7.03(e) of the Company Disclosure
Schedule, shall have been released;
(f) Stockholder Loans. The loans to the Company from the Principle
-----------------
Stockholders, as set forth in Section 7.03(f) of the Company Disclosure
Schedule, shall be paid in full.
(g) No Parent Material Adverse Effect. Since the date of this
---------------------------------
Agreement, no event or events shall have occurred, nor does any circumstance
exist, which, individually or in the aggregate, have, or could reasonably be
expected to have, a Parent Material Adverse Effect; and
(h) Escrow Agreement. Parent and the Stockholders' Representative
----------------
shall have entered into the Escrow Agreement and the Escrow Agreement shall be
in full force and effect and shall not have been anticipatorially breached or
repudiated.
48
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 8.01 Termination. This Agreement may be terminated and the
-----------
Merger and the other transactions contemplated by this Agreement may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated by
this Agreement, as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not
have occurred on or before June 15, 2001; provided, however, that the right to
-------- -------
terminate his Agreement under this Section 8.01(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before June 15, 2001;
(c) by either Parent or the Company upon the issuance of any Order
which is final and nonappealable which would (i) prevent the consummation of the
Merger, (ii) prohibit Parent's or the Company's ownership or operation of any
portion of the business of the Company or (ii) compel Parent or the Company to
dispose of or hold separate, as a result of the Merger, any portion of the
business or assets of the Company or Parent;
(d) by Parent upon a breach of any material representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Sections 7.02(a) and 7.02(b)
would not be satisfied ("Terminating Company Breach"); provided, however, that,
-------------------------- -------- -------
if such Terminating Company Breach is curable by the Company through the
exercise of its best efforts and for so long as the Company continues to
exercise such best efforts, Parent may not terminate this Agreement under this
Section 8.01(d) unless such breach is not cured within 30 days after notice
thereof is provided by Parent to the Company (but no cure period is required for
a breach which, by its nature, cannot be cured); or
(e) by the Company upon a breach of any material representation,
warranty, covenant or agreement on the part of Parent and Merger Sub set forth
in this Agreement, or if any representation or warranty of Parent and Merger Sub
shall have become untrue, in either case such that the conditions set forth in
Sections 7.03(a) and 7.03(b) would not be satisfied ("Terminating Parent
------------------
Breach"); provided, however, that, if such Terminating Parent Breach is curable
- ------ -------- -------
by Parent and Merger Sub through the exercise of their respective best efforts
and for so long as Parent and Merger Sub continue to exercise such best efforts,
the Company may not terminate this Agreement under this Section 8.01(e) unless
such breach is not cured within 30 days after notice thereof is provided by the
Company to Parent (but no cure period is required for a breach which, by its
nature, cannot be cured).
SECTION 8.02 Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be
49
no liability under this Agreement on the part of Parent, Merger Sub or the
Company or any of their respective officers or directors, and all rights and
obligations of each party hereto shall cease; provided, however, that (i)
-------- -------
Sections 6.02(b) and 6.08 and Article VIII shall remain in full force and effect
and survive any termination of this Agreement and (ii) nothing herein shall
relieve any party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 8.03 Amendment. This Agreement may be amended by the
---------
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.04 Waiver. At any time prior to the Effective Time, any
------
party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.01 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Company and the Company Stockholders
contained in this Agreement, the Voting Agreements, the Stockholder Certificates
and any other document relating hereto (collectively, the "Acquisition
-----------
Documents") shall survive the Effective Time for a period of 12 months. The
- ----------
representations and warranties of Parent contained in the Acquisition Documents
shall not survive beyond the Effective Time. Neither the period of survival nor
the liability of the Company Stockholders with respect to the Company's and such
stockholders' representations and warranties shall be reduced by any
investigation made at any time (whether before or after the Effective Time) by
or on behalf of Parent or by any actual, implied or constructive knowledge or
notice of any facts or circumstances that Parent may have as a result of any
such investigation or otherwise. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties by
Parent to the Stockholders' Representative, then the relevant representations
and warranties shall survive as to such claim until such claim has been finally
resolved.
SECTION 9.02 Indemnification by the Company Stockholders.
-------------------------------------------
(a) After the Effective Time, Parent and its affiliates
(including, after the Effective Time, the Surviving Corporation), officers,
directors, employees, agents, successors and assigns (collectively, the "Parent
Indemnified Parties") shall be indemnified and held harmless by the Company
Stockholders (to the extent of each Company Stockholder's pro-rata share of the
Escrow Fund), severally and not jointly, for any and all liabilities, losses,
damages of any kind, diminution in value, claims, costs, expenses, fines, fees,
deficiencies, interest, awards, judgments, amounts paid in settlement and
penalties (including, without limitation, attorneys',
50
consultants' and experts' fees and expenses and other costs of defending,
investigating or settling claims) suffered, incurred, accrued (in accordance
with U.S. GAAP) or paid by them (including, without limitation, in connection
with any action brought or otherwise initiated by any of them) (hereinafter, a
"Loss"), without adjustment for any tax deduction relating thereto, arising out
of or resulting from:
(i) any inaccuracy or breach of any representation or warranty
made by the Company or any Company Stockholder in the Acquisition Documents;
(ii) the breach of any covenant or agreement made by the
Company or any Company Stockholder in the Acquisition Documents;
(iii) Losses from breach of contract or other claims made by any
party alleging to have had a contractual or other right to acquire the Company's
capital stock or assets ;
(iv) the value of any Tax deduction lost by the Company by
virtue of the application of Section 280G of the Code ;
(v) any Stockholder Expenses payable by the Surviving
Corporation following the Closing that were not included in the Purchase Price
Adjustment; and
(vi) Losses that result from any former employee or contractor
(it being understood that the term "contractor" as used in this section means
any person who has been engaged (other than as an employee) to perform software
programming or other services pursuant to which such contractor conceived or
developed Company Intellectual Property) of the Company having failed to execute
and deliver an agreement in substantially the form of the Company's standard
Proprietary Information and Inventions Agreement (in the case of an employee) or
Consulting Agreement (in the case of a contractor) (which agreements provide
valid written assignments to the Company of all title and rights to any Company
Intellectual Property conceived or developed thereunder but not already owned by
the Company by operation of Law).
(b) As used herein, "Losses" are not limited to matters asserted by
third parties, but include Losses incurred or sustained by the Parent
Indemnified Parties in the absence of claims by third parties.
(c) Notwithstanding anything to the contrary contained in this
Agreement, except with respect to claims based on fraud or willful
misrepresentation or misconduct:
(i) the maximum aggregate amount of indemnifiable Losses arising
out of or resulting from the causes enumerated in Section 9.02(a) that may be
recovered from the Company Stockholders shall not exceed the Escrow Fund, which
shall be the sole and exclusive remedy for any such Losses;
(ii) no indemnification payment by the Company Stockholders with
respect to any indemnifiable Losses otherwise payable under Section 9.02(a)
and arising out
51
of or resulting from the causes enumerated in Section 9.02(a)(i) shall be
payable until such time as all such indemnifiable Losses shall aggregate to more
than $50,000, after which time the Company Stockholders shall be liable in full
for all indemnifiable Losses (including the first $50,000); and
(iii) in the event that any Loss is covered by insurance
maintained by or for the benefit of the Parent Indemnified Parties, such Loss
shall be reduced by the amount of any insurance payments (net of any costs,
premium adjustments or other obligations of the Parent Indemnified Parties
relating to such recovery) actually received by the Parent Indemnified Parties.
(d) Notwithstanding anything to the contrary contained in this
agreement, the term "Losses" as used herein shall not include liabilities,
losses, claims, costs, expenses, fines, fees, deficiencies, interest, awards,
judgments, or amounts paid in settlement and penalties (including, without
limitation, attorneys', consultants' and experts' fees and expenses and other
costs of defending, investigating or settling claims) that result from the
actions of Parent in terminating the 401(k) Plan or any subsequent action with
respect to such plan; provided, however, that the term "Losses" as used in
-------- -------
herein shall include all liabilities, losses, claims, costs, expenses, fines,
fees, deficiencies, judgments, amounts paid in settlement and penalties
(including, without limitation, attorneys', consultants' and experts' fees and
expenses and other costs of defending, investigating or settling claims) that
result from the failure of the Company to obtain favorable Determination Letters
from the Internal Revenue Service with respect to the 401(k) Plan and the
failure to file Form 5500s with the Internal Revenue Service with respect to the
401(k) Plan (including, but not limited to, any liabilities, expenses, fees,
penalties or amounts paid in settlement incurred in terminating the 401(k) Plan
that result from such failures).
SECTION 9.03 Indemnification Procedures.
--------------------------
(a) For purposes of this Section 9.03, a party against which
indemnification may be sought is referred to as the "Indemnifying Party" and the
------------------
party which may be entitled to indemnification is referred to as the
"Indemnified Party".
-----------------
(b) The obligations and liabilities of Indemnifying Parties under
this Article IX with respect to Losses arising from actual or threatened claims
or demands by any third party which are subject to the indemnification provided
for in this Article IX ("Third Party Claims") shall be governed by and
------------------
contingent upon the following additional terms and conditions: if an Indemnified
Party shall receive notice of any Third Party Claim, the Indemnified Party shall
give the Indemnifying Party notice of such Third Party Claim within 45 days of
the receipt by the Indemnified Party of such notice; provided, however, that the
-------- -------
failure to provide such notice shall not release an Indemnifying Party from any
of its obligations under this Article IX except to the extent that such
Indemnifying Party is materially prejudiced by such failure. The notice of claim
shall describe in reasonable detail the facts known to the Indemnified Party
giving rise to such indemnification claim, and the amount or good faith estimate
of the amount arising therefrom.
52
(c) If the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party hereunder against any Losses (to
the extent of the Escrow Fund) that may result from such Third Party Claim, then
the Indemnifying Party shall be entitled to assume and control the defense of
such Third Party Claim through counsel of its choice (such counsel to be
reasonably acceptable to the Indemnified Party) if it gives notice of its
intention to do so to the Indemnified Party within 10 business days of the
receipt of such notice from the Indemnified Party; provided, however, that the
-------- -------
Indemnifying Party shall not have the right to assume the defense of the Third
Party Claim if (i) any such claim seeks, in addition to or in lieu of monetary
losses, any injunctive or other equitable relief, (ii) the Indemnifying Party
fails to provide reasonable assurance to the Indemnified Party of the adequacy
of the Escrow Fund to provide indemnification in accordance with the provisions
of this Agreement and the Escrow Agreement with respect to such proceeding,
(iii) there is reasonably likely to exist a conflict of interest that would make
it inappropriate (in the judgment of the Indemnified Party in its reasonable
discretion) for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, or (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim may establish (in the good faith judgment of the
Indemnified Party) a precedential custom or practice adverse to the business
interests of the Indemnified Party or would increase the Tax liability of the
Indemnified Party; provided further, that if by reason of the Third Party Claim
----------------
a Lien, attachment, garnishment, execution or other encumbrance is placed upon
any of the property or assets of such Indemnified Party, the Indemnifying Party,
if it desires to exercise its right to assume such defense of the Third Party
Claim, must agree to use a portion of the Escrow Fund to furnish a satisfactory
indemnity bond to obtain the prompt release of such Lien, attachment,
garnishment, execution or other encumbrance. If the Indemnifying Party assumes
the defense of a Third Party Claim, it will conduct the defense actively,
diligently and at its own expense, and it will hold all Indemnified Parties
harmless from and against all Losses caused by or arising out of any settlement
thereof (which shall be paid out of the Escrow Fund as provided in the Escrow
Agreement). The Indemnified Party shall cooperate with the Indemnifying Party in
such defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense (which shall be paid out of the Escrow Fund as provided in the
Escrow Agreement), all witnesses, pertinent records, materials and information
in the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably requested by the Indemnifying Party. Except
with the written consent of the Indemnified Party (not to be unreasonably
withheld), the Indemnifying Party will not, in the defense of a Third Party
Claim, consent to the entry of any judgment or enter into any settlement (i)
which does not include as an unconditional term thereof the giving to the
Indemnified Party by the third party of a release from all liability with
respect to such suit, claim, action, or proceeding; (ii) unless there is no
finding or admission of (A) any violation of Law by the Indemnified Party (or
any affiliate thereof), (B) any liability on the part of the Indemnified Party
(or any affiliate thereof) or (C) any violation of the rights of any person and
no effect on any other claims of a similar nature that may be made by the same
third party against the Indemnified Party (or any affiliate thereof); or (iii)
which exceeds the then current value of the Escrow Shares remaining in the
Escrow Fund.
(d) In the event that the Indemnifying Party fails or elects not
to assume the defense of an Indemnified Party against such Third Party Claim
which the Indemnifying Party had the right to assume pursuant to Section
9.03(c), the Indemnified Party shall have the right, at the expense of the
Indemnifying Party (to the extent of the Escrow Fund), to defend or prosecute
such claim in any manner as it may reasonably deem appropriate and may
53
settle such claim after giving written notice thereof to the Indemnifying Party,
on such terms as such Indemnified Party may deem appropriate, and the
Indemnified Party may seek prompt reimbursement from the Escrow Fund for any
Losses incurred in connection with such settlement (to the extent of the Escrow
Fund). If no settlement of such Third Party Claim is made, the Indemnified Party
may seek prompt reimbursement from the Escrow Fund for any Losses arising out of
any judgment rendered with respect to such claim. Any Losses for which an
Indemnified Party is entitled to indemnification hereunder shall be promptly
paid as provided in the Escrow Agreement. If the Indemnifying Party does not
elect to assume the defense of a Third Party Claim which it has the right to
assume hereunder, the Indemnified Party shall have no obligation to do so.
(e) In the event that the Indemnifying Party is not entitled to
assume the defense of the Indemnified Party against such Third Party Claim
pursuant to Section 9.03(c), the Indemnified Party shall have the right, at the
expense of the Indemnifying Party (to the extent of the Escrow Fund), to defend
or prosecute such claim and consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim in any manner it may
reasonably deem appropriate after giving written notice thereof to the
Indemnifying Party, and the Indemnified Party may seek prompt reimbursement from
the Escrow Fund for any Losses incurred in connection with such judgment or
settlement. In such case, the Indemnified Party shall conduct the defense of the
Third Party Claim actively and diligently, and the Indemnifying Party shall
cooperate with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnifying Party's expense (to the extent of the
Escrow Fund), all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as is reasonably requested by the Indemnified Party. If no
settlement of such Third Party Claim is made, the Indemnified Party may seek
prompt reimbursement from the Escrow Fund for any Losses arising out of any
judgment rendered with respect to such claim. Any Losses for which an
Indemnified Party is entitled to indemnification hereunder shall be promptly
paid as provided in the Escrow Agreement.
SECTION 9.04 Stockholders' Representative. Michael J. Gassman
----------------------------
(such person and any successor or successors being the "Stockholders'
------------
Representative") shall act as the representative of the Company Stockholders,
- --------------
and hereby is authorized to act on behalf of the Company Stockholders and to
take any and all actions required or permitted to be taken by the Stockholders'
Representative under this Agreement or the Escrow Agreement, with respect to any
claims (including the settlement thereof) made by a Parent Indemnified Party for
indemnification pursuant to this Article IX and with respect to any actions to
be taken by the Stockholders' Representative pursuant to the terms of the Escrow
Agreement (including, without limitation, the exercise of the power to (i)
authorize the delivery of Escrow Shares to a Parent Indemnified Party in
satisfaction of claims by a Parent Indemnified Party, (ii) agree to, negotiate,
enter into settlements and compromises of, and comply with orders of courts with
respect to such claims and (iii) take all actions necessary in the judgment of
the Stockholders' Representative for the accomplishment of the foregoing). The
Company Stockholders shall be bound by all actions taken by the Stockholders'
Representative in its capacity thereof, except for any action that conflicts
with the limitation set forth in the final sentence of this Section 9.04. The
Stockholders' Representative shall promptly, and in any event within 5 business
days, provide written notice to the Company Stockholders of any action taken on
behalf of them by the
54
Stockholders' Representative pursuant to the authority delegated to the
Stockholders' Representative under this Section 9.04. The Stockholders'
Representative shall at all times act in his or her capacity as Stockholders'
Representative in a manner that the Stockholders' Representative believes to be
in the best interest of the Company Stockholders. The Stockholders'
Representative shall not be liable to any person for any error of judgment, or
any action taken, suffered or omitted to be taken, under this Agreement or the
Escrow Agreement, except in the case of its gross negligence, bad faith or
willful misconduct. The Stockholders' Representative may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts. The
Stockholders' Representative shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement or the Escrow Agreement. As to any matters not expressly
provided for in this Agreement or the Escrow Agreement, the Stockholders'
Representative shall not exercise any discretion or take any action. Each
Company Stockholder severally shall indemnify and hold harmless and reimburse
the Stockholders' Representative from and against such Company Stockholder's
ratable share of any and all liabilities, losses, damages, claims, costs or
expenses suffered or incurred by the Stockholders' Representative arising out of
or resulting from any action taken or omitted to be taken by the Stockholders'
Representative under this Agreement or the Escrow Agreement, other than such
liabilities, losses, damages, claims, costs or expenses arising out of or
resulting from the Stockholders' Representative's gross negligence, bad faith or
willful misconduct. In all matters relating to this Article IX, the
Stockholders' Representative shall be the only party entitled to assert the
rights of the Company Stockholders, and the Stockholders' Representative shall
perform all of the obligations of the Company Stockholders hereunder. The Parent
Indemnified Parties shall be entitled to rely on all statements, representations
and decisions of the Stockholders' Representative. Notwithstanding anything to
the contrary herein or in the Escrow Agreement, (i) the Stockholders'
Representative is not authorized to, and shall not, accept on behalf of any
Company Stockholder any merger consideration to which such Company Stockholder
is entitled under this Agreement and (ii) the Stockholders' Representative shall
not in any manner exercise, or seek to exercise, any voting power whatsoever
with respect to shares of capital stock of the Company or Parent now or
hereafter owned of record or beneficially by any Company Stockholder unless the
Stockholders' Representative is expressly authorized to do so in a writing
signed by such Company Stockholder.
ARTICLE X
GENERAL PROVISIONS
------------------
SECTION 10.01 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, facsimile, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.01):
55
(a) if to Parent or Merger Sub:
Actuate Corporation
701 Gateway Blvd.
South San Francisco, California 94080
Facsimile No.: (650) 827-1568
Attention: General Counsel
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP
155 Constitution Drive
Menlo Park, California 94025
Facsimile No.: (650) 321-2800
Attention: Christopher D. Dillon, Esq.
(b) if to the Company:
Tidestone Technologies, Inc.
12980 Metcalf Avenue, Suite 300
Overland Park, Kansas 66213
Facsimile No.: (913) 851-1390
Attention: Michael J. Gassman
with a copy to:
Polsinelli Shalton & Welte
700 West 47/th/ Street, Suite 1000
Kansas City, Missouri 64112
Facsimile No.: (816) 753-1536
Attention: James A. Polsinelli, Esq.
SECTION 10.02 Certain Definitions. (a) As used in this Agreement,
-------------------
the following terms shall have the following meanings:
(i) "affiliate" of a specified person means a person who
---------
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such specified person.
(ii) "business day" means any day on which banks are not
------------
required or authorized to close in San Francisco, California.
(iii) "control" (including the terms "controlled by" and
-------
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
56
(iv) "knowledge" means, with respect to any party hereto,
---------
actual or deemed knowledge of the directors, officers, legal or financial
personnel of such party and such knowledge that would be imputed to such persons
upon reasonable inquiry or due investigation.
(v) "person" means an individual, corporation, partnership,
------
limited partnership, syndicate, person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust, association
or entity or government, political subdivision, agency or instrumentality of a
government.
(vi) "subsidiary" or "subsidiaries" of any person means any
----------
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.
(b) The following terms shall have the meanings defined for such
terms in the Sections of this Agreement set forth below :
Term Section
- ---- -------
401(k) Plan............................................ 6.04(e)
Accounts Receivable.................................... 6.13
Acquisition Documents.................................. 9.01
affiliate.............................................. 10.02(a)
Aggregate Merger Consideration......................... 2.01(b)
Agreement.............................................. Preamble
Assets................................................. 3.17
Financial Statements................................... 3.08(a)
business day........................................... 10.02(a)
CERCLA................................................. 3.13
Certificate of Merger.................................. 1.02
Closing................................................ 1.02
Closing Date........................................... 1.02
COBRA.................................................. 3.11(c)
Code................................................... Recitals
Collection Period...................................... 6.13
Common Exchange Ratio.................................. 2.01(b)
Company................................................ Preamble
Company Common Stock................................... Recitals
Company Confidential Information....................... 3.14(f)
Company Disclosure Schedule............................ Article III
Company Intellectual Property.......................... 3.14(a)
Company Material Adverse Effect........................ 3.01
Company Options........................................ 2.04
Company Permits........................................ 3.07(a)
Company Share Certificates............................. 2.02(a)
Company Stockholder.................................... 2.02(b)
57
Competing Transaction.................................. 6.03(b)
control................................................ 10.02(a)
DGCL................................................... Recitals
Dissenting Shares...................................... 2.06(a)
Effective Time......................................... 1.02
Employee Obligation.................................... 3.14(i)
Environmental Laws..................................... 3.13
Environmental Permits.................................. 3.13
ERISA.................................................. 3.11(a)
ERISA Affiliate........................................ 3.11(e)
Escrow Account......................................... 2.02(b)
Escrow Agent........................................... 2.02(b)
Escrow Agreement....................................... 2.02(b)
Escrow Fund............................................ 2.02(b)
Escrow Shares.......................................... 2.01(b)
Exchange Act........................................... 4.04(a)
Exchange Agent......................................... 2.02(a)
Final Conversion Schedule.............................. 6.12
FIRPTA................................................. 7.02(p)
Fully Diluted Common Shares Amount..................... 2.01(b)
Governmental Entity.................................... 3.06(b)
Gunderson Dettmer...................................... 1.02
Hazardous Materials.................................... 3.13
Indemnified Party...................................... 9.03(a)
Indemnifying Party..................................... 9.03(a)
Information Statement.................................. 6.01(d)
Infringement........................................... 3.14(a)
Intellectual Property.................................. 3.14(a)
IP Rights.............................................. 3.14(a)
Interim Financial Statements........................... 3.08(a)
Inventions............................................. 3.14(a)
KGCL................................................... Recitals
knowledge.............................................. 10.02(a)
Law.................................................... 3.06(a)
Legal Proceeding....................................... 3.10
Letter of Transmittal.................................. 2.02(a)
Liabilities............................................ 3.08(b)
Liens.................................................. 3.17
Losses................................................. 9.02(a)
Marks.................................................. 3.14(a)
Material Contracts..................................... 3.12(a)
Merger................................................. Recitals
Merger Sub............................................. Preamble
Multi-employer Plan.................................... 3.11(c)
Multiple Employer Plan................................. 3.11(c)
Non-Disclosure Agreement............................... 6.02(b)
58
Non-Solicitation Agreement............................. 6.04(c)
NPL.................................................... 3.13(d)
Offer Letter........................................... 6.04(b)
Order.................................................. 7.01(b)
Parent................................................. Preamble
Parent Common Stock.................................... Recitals
Parent Disclosure Schedule............................. Article IV
Parent Indemnified Parties............................. 9.02(a)
Parent Material Adverse Effect......................... 4.01(a)
Parent Preferred Stock................................. 4.03
Parent SEC Reports..................................... 4.05(a)
person................................................. 10.02(a)
Plans.................................................. 3.11(a)
Preliminary Conversion Schedule........................ 6.12
Principal Stockholders................................. Recitals
Purchase Price Adjustment.............................. 2.01(b)
Reference Balance Sheet................................ 3.08(a)
Representatives........................................ 6.02(a)
SEC.................................................... 4.05(a)
Securities Act......................................... 2.05
Software............................................... 3.14(j)
Source Materials....................................... 3.14(c)
Stock Plans............................................ 3.04(b)
Stockholder Certificate................................ Recitals
Stockholder Expenses................................... 6.08
Stockholder Indemnified Parties........................ 9.03(a)
Stockholders' Representative........................... 9.04
subsidiaries........................................... 10.02(a)
subsidiary............................................. 10.02(a)
Surviving Corporation.................................. 1.01
Tax.................................................... 3.15(c)
Taxable................................................ 3.15(c)
Tax Authority.......................................... 3.15(c)
Taxes.................................................. 3.15(c)
Tax Return............................................. 3.15(a)
Terminating Company Breach............................. 8.01(d)
Terminating Parent Breach.............................. 8.01(e)
Third Party Claims..................................... 9.03(b)
U.S. GAAP.............................................. 3.08(a)
Used................................................... 3.14(a)
Voting Agreement....................................... Recitals
SECTION 10.03 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is
59
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.04 Assignment; Binding Effect; Benefit. Neither this
-----------------------------------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person, other than the
parties hereto and the Company Stockholders (including their respective
successors and assigns), any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
SECTION 10.05 Incorporation of Exhibits. The Company Disclosure
-------------------------
Schedule, the Parent Disclosure Schedule, the Schedules and all Exhibits
attached hereto and referred to herein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein .
SECTION 10.06 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy at law or in equity.
SECTION 10.07 Governing Law; Forum. This Agreement shall be
--------------------
governed by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that state and
without regard to any applicable conflicts of law. In any action between the
parties hereto arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement: (i) each of the parties irrevocably
and unconditionally consents and submits to the exclusive jurisdiction and venue
of either (A) the state courts located in San Francisco County, California, or
Johnson County, Kansas, or (B) the United States District Court for the Northern
District of California or the District of Kansas, and (ii) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid.
SECTION 10.08 Time of the Essence. For purposes of this Agreement
-------------------
and the transactions contemplated by this Agreement, time is of the essence.
SECTION 10.09 Waiver of Jury Trial. Each of the parties hereto
--------------------
hereby irrevocably waives any and all right to trial by jury in any Legal
Proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
60
SECTION 10.10 Construction.
------------
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections," "Schedules" and "Exhibits" are intended to refer to
Sections of this Agreement and Schedules and Exhibits to this Agreement.
SECTION 10.11 Further Assurances. Each party hereto shall execute
------------------
and cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
SECTION 10.12 Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.13 Counterparts. This Agreement may be executed and
------------
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.14 Entire Agreement. This Agreement (including the
----------------
Exhibits, the Schedules, the Company Disclosure Schedule and the Parent
Disclosure Schedule) and the Non-Disclosure Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
61
IN WITNESS WHEREOF, each of Parent, Merger Sub, the Company and the
Stockholders' Representative has executed or has caused this Agreement to be
executed by its respective officer thereunto duly authorized as of the date
first written above.
ACTUATE CORPORATION
By: _________________________________________
Daniel A. Gaudreau
Chief Financial Officer
TT ACQUISITION CORP.
By: _________________________________________
Daniel A. Gaudreau
Chief Executive Officer and President
TIDESTONE TECHNOLOGIES, INC.
By: _________________________________________
Michael J. Gassman
President
MICHAEL J. GASSMAN
By: _________________________________________
Michael J. Gassman, solely as Stockholders'
Representative
62
Schedule 6.04(b)
Schedule of Company Employees Entering Into Offer Letters
Mark Spencer
Mark Spann
Joe Erickson
Tom Stafford
Brian Moser
Doug Lowe
William Melton
Brian Killen
63
Schedule 6.04(c)
Schedule of Individuals Entering Into Non-Solicitation Agreements
Mark Callegari
Tom DeBacco
Michael Gassman
Joe Erickson
Brian Killen
Doug Lowe
64
Schedule 7.02(r)
Schedule of Company Employees to be Employed at Closing
Schedule 7.02(r)(i)
- -------------------
Mark Spencer
Mark Spann
Joe Erickson
Tom Stafford
Brian Moser
Doug Lowe
William Melton
Brian Killen
Schedule 7.02(r)(ii)
- --------------------
LuAnn Hadlock
Ryan Skorupan
Ryan Cunningham
Herb Smith
Virgil Dodson
Donald Gustafson
Sally Wachtel
Dean Brown
Jackie King
Greg McClain
Dennis Collins
Kiley Sieber
Rich Huey
Kaleb Axon
Jason Boehle
Terry Erickson
Mark Finger
JT Keller
Erik Larson
Dale Manny
Ben Phelps
Elizabeth Uppman
John Childers
Merlin Nuss
Mark Cleveland
Matt Stephens
65
EXHIBIT A
Form of Voting Agreement
66
EXHIBIT B
Form of Escrow Agreement
67
EXHIBIT C
Form of Company Counsel Legal Opinion
68
EXHIBIT D
Form of Parent Counsel Legal Opinion
69
EXHIBIT E
Form of Stockholder Certificate
70
EXHIBIT F
Form of Registration Rights Agreement
71