AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 20, 1998, is entered into by and among Oracle Corporation, a Delaware
corporation ("Parent"), AQX Acquisition Corporation, a Delaware corporation and
a wholly owned subsidiary of Parent (the "Purchaser"), and Versatility Inc., a
Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of the Company and the Purchaser deem it
advisable and in the best interests of the stockholders of such corporations to
effect the merger (the "Merger") of the Purchaser with and into the Company, all
pursuant to this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL").
B. As a condition and inducement to Parent's and the Purchaser's
willingness to enter into this Agreement, upon the execution and delivery of
this Agreement, (i) Ronald R. Charnock, Marcus Heth, Keith Roberts, Edison
Venture Fund, Noro Mosley Partners and Ernie Connon are simultaneously entering
into and delivering support agreements in the form attached hereto as Exhibit A
(collectively, the "Support Agreements"), and (ii) the Company and Parent are
entering into a license agreement (the "License Agreement") in the form attached
hereto as Exhibit B.
The parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Merger.
(a) At the Effective Time (as defined in Section 1.1(b) below)
and subject to the terms and conditions hereof and the provisions of the DGCL,
the Purchaser will be merged with and into the Company in accordance with the
DGCL, the separate existence of the Purchaser shall thereupon cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Purchaser and the Company are sometimes hereinafter referred
to collectively as the "Constituent Corporations."
(b) Subject to the terms and conditions hereof, the Merger shall
be consummated as promptly as practicable after the Stockholders' Meeting (as
defined in Section 4.2), if any, by duly filing a certificate of merger, in such
form as is required by, and executed in accordance with, the relevant provisions
of the DGCL. The Merger shall be effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware in
accordance with the DGCL or at such later time as is specified in the
certificate of merger (the "Effective Time"). Prior to such filing, a closing
shall take place at the offices of Venture Law Group, A Professional
Corporation, 2800 Sand Hill Road, Menlo Park, California, or at such other place
as the parties shall agree, for the purpose of confirming the satisfaction or
waiver of the conditions contained in Article VI hereof. The date on which such
closing shall occur is referred to herein as the "Closing Date."
(c) The separate corporate existence of the Company, as the
Surviving Corporation, with all its purposes, objects, rights, privileges,
powers, certificates and franchises, shall continue unimpaired by the Merger.
The Surviving Corporation shall succeed to all the properties and assets of the
Constituent Corporations and to all debts, choses in action and other interests
due or belonging to the Constituent Corporations and shall be subject to and
responsible for all the debts, liabilities and duties of the Constituent
Corporations with the effect set forth in Section 259 of the DGCL.
1.2 Conversion of Shares. At the Effective Time and by virtue of the
Merger and without any action on the part of the holders of the capital stock of
the Constituent Corporations:
(a) Each share of Common Stock of the Company, par value $.01 per
share (the "Common Stock") issued and outstanding immediately prior to the
Effective Time (collectively, the "Shares") (other than (i) Shares to be
canceled pursuant to Section 1.2(b) below and (ii) Dissenting Shares (as defined
in Section 1.4)) shall be converted into the right to receive in cash an amount
per Share equal to $1.50 (the "Merger Price");
(b) Each Share held in the treasury of the Company and each Share
owned by Parent, the Purchaser or the Company, or by any direct or indirect
wholly owned subsidiary of any of them, shall be canceled and retired without
payment of any consideration therefor; and
(c) Each share of common stock, par value $0.001 per share, of
the Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation.
1.3 Exchange of Certificates.
(a) From and after the Effective Time, a bank or trust company to
be designated by Parent shall act as exchange agent (the "Exchange Agent") in
effecting the exchange of the Merger Price for certificates which prior to the
Effective Time represented Shares and which as of the Effective Time represent
the right to receive the Merger Price (the "Certificates"). Promptly after the
Effective Time, the Exchange Agent shall mail to each record holder of
Certificates a form of letter of transmittal and instructions for use in
surrendering such Certificates and receiving the Merger Price therefor in a form
approved by Parent and the Company. At or prior to the Effective Time, the
Purchaser shall deposit in trust with the Exchange Agent immediately available
funds in an amount sufficient to pay the Merger Price for all such Shares to the
Company's stockholders as contemplated by this Section 2.3. Upon the surrender
of each Certificate and the issuance and delivery by the Exchange Agent of the
Merger Price for the Shares represented thereby in exchange therefor, the
Certificate shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate shall represent solely the right to receive the Merger Price
for the Shares represented thereby, without any interest thereon. Upon the
surrender and exchange of such an outstanding Certificate, the holder thereof
shall receive the Merger Price multiplied by the number of Shares represented by
such Certificate, without any interest thereon. If any cash is to be paid to a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition to such payment or exchange that the
person requesting such payment or exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the payment of such cash to a name
other than that of the registered holder of the Certificate surrendered, or such
person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Certificates
for any part of the Merger Price payments made to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(b) Promptly following the first anniversary of the Effective
Time, the Exchange Agent shall return to the Surviving Corporation all cash
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Certificate may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Price for such Shares, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation under applicable law.
At and after the Effective Time, holders of Certificates shall cease to have any
rights as stockholders of the Company except for the right to surrender such
Certificates in exchange for the Merger Price for such Shares or to perfect
their right of appraisal with respect to their Shares pursuant to the applicable
provisions of the DGCL and Section 1.4 below, and there shall be no transfers on
the stock transfer books of the Company or the Surviving Corporation of any
Shares that were outstanding immediately prior to the Merger.
1.4 Dissenting Shares.
(a) Notwithstanding the provisions of Section 1.2 or any other
provision of this Agreement to the contrary, Shares that are issued and
outstanding immediately prior to the Effective Time and are held by stockholders
who shall have properly demanded appraisal of such Shares in accordance with the
DGCL ("Dissenting Shares") shall not be converted into the right to receive the
Merger Price at the Effective Time, unless and until the holder of such
Dissenting Shares shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal and payment under the DGCL. If a
holder of Dissenting Shares (a "Dissenting Stockholder") shall have so failed to
perfect or shall have effectively withdrawn or lost such right to appraisal and
payment, then, as of the Effective Time or the occurrence of such event,
whichever last occurs, such Dissenting Shares shall be converted into and
represent solely the right to receive the Merger Price, without any interest
thereon, as provided in Section 1.2.
(b) The Company shall give Parent (i) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to Section 262 of the DGCL and received by the
Company, and (ii) the opportunity to control all negotiations and proceedings
with respect to such demands for appraisal. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal or settle or offer to settle any such demands.
1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) At the Effective Time the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation is
[Company Name]."
(b) At the Effective Time the Bylaws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation or such Bylaws.
1.6 Directors and Officers of the Surviving Corporation. At the
Effective Time, the directors of the Purchaser immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation, until the
next annual stockholders' meeting of the Surviving Corporation and until their
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Purchaser immediately prior to the Effective Time
shall become the officers of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
1.7 Warrants. Parent shall not assume or continue any outstanding
warrants to purchase shares of Company Common Stock (the "Warrants"). The
parties hereto shall take all appropriate action to provide that, at or
following the Effective Time, each holder of an outstanding Warrant shall be
entitled to receive an amount in cash equal to the product of (i) the excess, if
any, of the Merger Price over the per share exercise price of such Warrant and
(ii) the number of Shares subject to such Warrant which are exercisable
immediately prior to the Effective Time.
1.8 Options. The Company Common Stock options shall be treated as set
forth in Section 5.5.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby jointly and severally represent and
warrant to the Company that, except as and to the extent set forth in a
Disclosure Schedule (the "Parent Disclosure Schedule") delivered to the Company
on or prior to the date hereof setting forth additional exceptions specified
therein to the representations and warranties contained in this Article II,
which Disclosure Schedule shall identify exceptions by specific Section
references:
2.1 Corporate Organization.
(a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has not engaged in any business since it was incorporated other than
in connection with the transactions contemplated by this Agreement. Parent owns
all of the outstanding capital stock of the Purchaser.
2.2 Authority. Each of Parent and the Purchaser has the full corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to consummate
the transactions so contemplated (other than, with respect to the Merger, the
filing and recordation of the appropriate merger documents as required by the
DGCL). This Agreement has been duly executed and delivered by each of Parent and
the Purchaser and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser, enforceable against such parties in accordance with
its terms, except as such enforceability may be limited by principles or public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
2.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent and the Purchaser nor the consummation by
Parent and the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of their respective
charter documents, or (ii) assuming compliance with the matters referred to in
clause (iii) below, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation contained
in or to the loss of a benefit under, or result in the creation of any lien or
other encumbrance upon any of the properties or assets of Parent or the
Purchaser under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease agreement or other agreement,
instrument, obligation, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or the
Purchaser, or to which either of them or any of their respective properties or
assets may be subject, except for such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens or other
encumbrances, which, individually or in the aggregate, will not have a material
adverse effect on Parent and its subsidiaries taken as a whole or prevent or
materially delay consummation of the Merger, or (iii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission or other governmental or regulatory
authority or instrumentality, domestic or foreign (a "Governmental Entity"),
except (A) pursuant to the Exchange Act, (B) filing of a certificate of merger
pursuant to the DGCL, (C) filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the termination or
expiration of the waiting periods thereunder, (D) filings required under
applicable antitrust laws of any foreign country, (E) filings necessary to
comply with state securities or "blue sky" laws, or (F) consents, approvals,
authorizations, permits, filings or notifications which if not obtained or made
will not, individually or in the aggregate, have a material adverse effect on
Parent and its subsidiaries taken as a whole or prevent or materially delay
consummation of the Merger.
2.4 Brokers and Finders. Neither Parent nor the Purchaser has employed
any broker or finder or incurred any liability for any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
hereby.
2.5 Financing. The Purchaser has or will have, prior to the Effective
Time of the Merger, sufficient cash or cash-equivalent funds available to
consummate the Merger and the transactions contemplated thereby and to pay
related fees and expenses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
that, except as and to the extent set forth in a Disclosure Schedule (the
"Company Disclosure Schedule") delivered to Parent on or prior to the date
hereof setting forth additional exceptions specified therein to the
representations and warranties contained in this Article III, which Disclosure
Schedule shall identify exceptions by specific Section references:
3.1 Corporate Organization. Each of the Company and its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization, has all requisite corporate
power and authority to own or lease and operate its properties and assets and to
carry on its business as it is now being conducted, and is duly qualified or
licensed as a foreign corporation to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
qualification or licensing necessary, except where the failure to be so
organized, existing, in good standing, qualified or licensed would not have a
Material Adverse Effect. As used herein, the term "Material Adverse Effect"
means any change, event or effect that, individually or in the aggregate, is or
is reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of the Company and its
Subsidiaries taken as a whole. The Company has made available to Parent a
complete and correct copy of the Company's and its Subsidiaries' certificates of
incorporation and bylaws (or comparable governing documents), each as amended to
the date hereof. The Company's and its Subsidiaries' certificates of
incorporation and bylaws (or comparable governing documents) made available are
in full force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
(or comparable) governing documents.
3.2 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"). As of the date
hereof (i) 7,595,009 shares of Company Common Stock were issued and outstanding,
(ii) no shares of Preferred Stock were issued and outstanding, (iii) 3,500,161
shares of Company Common Stock were reserved for issuance upon the exercise of
outstanding options to acquire shares of Company Common Stock ("Stock Options"),
(iv) 100,000 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding Warrants, and (v) no shares of Company Common Stock were
held by the Company in its treasury. As of the date hereof, 1,393,000 shares of
Company Common Stock were available for issuance under the Company's 1998
Nonqualified Stock Option Plan, 404,895 shares of Company Common Stock were
available for issuance under the Company's 1996 Stock Option Plan, and no shares
of Company Common Stock were available for issuance under the either of the
Company's 1995 Employee Plan or the Company's 1995 Incentive Plan (the foregoing
Stock Option Plans are referred to, collectively, as the "Company Stock Option
Plans"). As of the date hereof, 89,725 shares of Company Common Stock were
available for issuance under the Company's Employee Stock Purchase Plan. All of
the issued and outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of the
Company or any agreement to which the Company is a party or by which the Company
or its assets is bound. Each of the outstanding shares of Capital Stock or other
securities of each of the Company's Subsidiaries directly or indirectly owned by
the Company is duly authorized, validly issued, fully paid and nonassessable and
owned by the Company or by a direct or indirect Subsidiary of the Company, free
and clear of any limitation or restriction (including any restriction on the
right to vote or sell the same except as may be provided as a matter of law).
Except as disclosed in this Section 3.2 or Section 3.2 of the Company Disclosure
Schedule, there are no shares of capital stock of the Company issued or
outstanding, and except for the Stock Options and the Warrants, there are no
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character (including, without limitation,
rights which will or could become exercisable as a result of this Agreement or
any transaction contemplated hereby) relating to the issued or unissued capital
stock or other securities of the Company obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company to grant, extend or enter
into any subscription, option, warrant, right, convertible security or other
similar agreement or commitment. There are no voting trusts or other agreements
or understandings to which the Company is a party with respect to the voting of
the capital stock of the Company.
3.3 Subsidiaries. Section 3.3 of the Company Disclosure Schedule
contains a correct and complete list of each of the Company's Subsidiaries, the
jurisdiction where each of such Subsidiaries is organized and the percentage of
outstanding capital stock of such Subsidiaries that is directly or indirectly
owned by the Company. The Company or another Subsidiary of the Company owns its
shares of the Capital Stock of each Subsidiary of the Company free and clear of
all liens, claims and encumbrances. Section 3.3 of the Company Disclosure
Schedule sets forth a true and complete list of each equity investment in an
amount of $500,000 or more or which represents a 5% or greater ownership
interest in the subject of such investment made by the Company or any of its
Subsidiaries in any other Person other than the Company's Subsidiaries ("Other
Interests"). The Other Interests are owned by the Company, by one or more of the
Company's Subsidiaries or by the Company and one or more of its Subsidiaries, in
each case free and clear of all liens, claims and encumbrances. For purposes of
this Agreement, (i) the term "Subsidiary" shall mean any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, either alone or through
or together with any other Subsidiary, owns, directly or indirectly, 50% or more
of the capital stock, partnership interests, member interests or other ownership
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, and (ii) "Capital Stock" shall mean common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof, and (iii) the term "Person" shall mean an individual,
corporation (including not-for-profit), partnership, limited liability company,
association, trust, unincorporated organization, joint venture, estate,
Governmental Entity or other legal entity.
3.4 Authority. The Company has all necessary corporate power and
authority to enter into this Agreement and the License Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the License Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly approved by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the license Agreement or to consummate
the transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement by holders of a majority of the
outstanding shares of Common Stock of the Company, and the filing and
recordation of the appropriate merger documents as required by the DGCL). Each
of this Agreement and the License Agreement has been duly executed and delivered
by, and, assuming the due authorization, execution and delivery thereof by
Parent and the Purchaser, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by principles or public policy and subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.
3.5 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and the License Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby and thereby
will (i) (assuming stockholder approval of the Merger as described in Section
3.4 is obtained) conflict with or result in any breach or violation of any
provision of the Certificate of Incorporation or Bylaws of the Company or any of
its Subsidiaries, or (ii) except as set forth in Section 3.5 of the Company
Disclosure Schedule, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, consent, approval, cancellation or acceleration of any
obligation contained in or to the loss of a benefit under, or result in the
creation of any lien or other encumbrance upon any of the properties or assets
of the Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or to which the
Company, its Subsidiaries or any of their properties or assets may be subject,
except for such violations, conflicts, breaches, terminations, accelerations or
creations of liens or other encumbrances, which will not have a Material Adverse
Effect or prevent or materially delay consummation of the Merger, or (iii)
except as set forth in Section 3.5 of the Company Disclosure Schedule, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) pursuant to the Exchange
Act, (B) filing of a certificate of merger pursuant to the DGCL, (C) filings
under the HSR Act and the termination or expiration of the waiting periods
thereunder, (D) filings required under applicable antitrust laws of any foreign
country, (F) filings necessary to comply with state securities or "blue sky"
laws, or (G) consents, approvals, authorizations, permits, filings or
notifications which if not obtained or made will not have a Material Adverse
Effect or prevent or materially delay consummation of the Merger.
3.6 Brokers and Finders. Except for the Financial Advisor and the fees
payable by the Company to such firm described in an engagement letter dated
April 27, 1998, a complete and correct copy of which has been provided to Parent
on or prior to the date hereof, neither the Company nor any of its Subsidiaries
has employed any broker or finder or incurred any liability for any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
3.7 Conduct of Business.
(a) The business of the Company, as presently conducted, is not
being conducted in default or violation of any term, condition or provision of
(i) its respective charter or bylaws, or (ii) except as set forth in Section 3.7
of the Company Disclosure Schedule, any note, bond, mortgage, indenture, deed of
trust, lease, agreement or other instrument or obligation of any kind to which
the Company is a party or by which the Company or any of its properties or
assets may be bound, or (iii) any federal, state, local or foreign statute, law,
ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company, excluding from the foregoing clauses (ii) and (iii)
defaults or violations that could not reasonably be expected to have a Material
Adverse Effect.
(b) The Company has all licenses, permits, orders or approvals
of, and has made all required registrations with, all Governmental Entities that
are material to the conduct of the business of the Company (collectively,
"Permits"). All Permits are in full force and effect, no material violations are
or have been recorded in respect of any Permit, and no proceeding is pending or
threatened to revoke or limit any Permit.
(c) The Company has not received any written communication from a
Governmental Entity that alleges that the Company is not in compliance with any
Environmental Law (as defined below). There are no environmental materials or
conditions, including on-site or off-site disposal or releases of Hazardous
Materials (as defined below), that could reasonably be expected to have a
Material Adverse Effect. As used in this Agreement, the term "Environmental
Laws" means any applicable treaties, laws, regulations, enforceable
requirements, orders, decrees or judgments issued, promulgated or entered into
by any Governmental Entity, which relate to (A) pollution or protection of the
environment or (B) the generation, storage, use, handling, disposal or
transportation of or exposure to Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq., the Clean Air
Act of 1970, as amended, 42 U.S.C. Section 7401 et seq., the Toxic Substances
Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., and any similar or
implementing federal, foreign, state or local law, and all amendments or
regulations promulgated thereunder; and the term "Hazardous Materials" means all
explosive or regulated radioactive materials or substances, biological hazards,
genotoxic or mutagenic hazards, hazardous or toxic substances, medical wastes or
other wastes or chemicals, petroleum or petroleum distillates, asbestos or
asbestos-containing materials, and all other materials or chemicals regulated
pursuant to any Environmental Law, including materials listed in 49 C.F.R.
Section 172.101 and materials defined as hazardous pursuant to Section 101(14)
of CERCLA.
3.8 SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since December 31,
1996. All reports, schedules, forms, statements and other documents filed with
the SEC since December 31, 1997 (the "SEC Documents") complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC Documents,
and, at the time of filing, none of the SEC Documents 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 therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Company Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the financial position of the Company as of the dates thereof and its statements
of operations, stockholders' equity and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring year-end
audit adjustments which were and are not expected to be material). Except as and
to the extent set forth on the balance sheet of the Company on April 30, 1998,
including the notes thereto, or the Company Disclosure Schedule, the Company has
no liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet, or in
the notes thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since April 30, 1998 which
could not reasonably be expected to have a Material Adverse Effect. The Company
has heretofore delivered to Parent complete and correct copies of all of the SEC
Documents and all amendments and modifications thereto, as well as, to the
extent any shall exist, all amendments and modifications that have not been
filed by the Company with the SEC to all agreements, documents and other
instruments that previously had been filed by the Company with the SEC and are
currently in effect.
3.9 Litigation.
(a) Except as disclosed in Section 3.9 of the Company Disclosure
Schedule, there is no suit, action or proceeding pending or, to the knowledge of
the Company, threatened against the Company that seeks to restrain or enjoin the
consummation of the transactions contemplated by this Agreement or the License
Agreement or that, individually or in the aggregate, could reasonably be
expected to (i) have a Material Adverse Effect, (ii) materially impair the
ability of the Company to perform its obligations under this Agreement or the
License Agreement, or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement or the License Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company or any of its Subsidiaries having, or that could
reasonably be expected to have, any such effect. No Governmental Entity has at
any time challenged or questioned in a writing delivered to the Company the
legal right of the Company to design, manufacture, offer or sell any of its
products in the present manner or style thereof.
(b) Neither the Company nor any of its Subsidiaries has ever been
notified in writing that it has been subject to an audit, compliance review,
investigation or like contract review by the office of the Inspector General of
the U.S. General Services Administration or any other Governmental Entity or
agent thereof in connection with any government contract (a "Government Audit").
To the Company's knowledge, no Government Audit is threatened, and in the event
of any such Government Audit, to the knowledge of the Company, no basis exists
for a finding of noncompliance with any material provision of any government
contract or for a material refund of any amounts paid or owed to the Company or
any of its Subsidiaries by any Governmental Entity pursuant to such government
contract. For each item disclosed in the Company Disclosure Schedule pursuant to
this Section 3.9, a true and complete copy of all material correspondence and
documentation with respect thereto has been made available to Parent.
3.10 Labor Agreements and Actions.
(a) The Company is not bound by or subject to (and none of its
assets or properties is bound by or subject to) any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, has sought to represent
any of the employees, representatives or agents of the Company. There is no
strike, unfair labor practice complaint or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a Material Adverse Effect, nor is the Company aware of any labor organization
activity involving its employees. The Company is not engaged in any unfair labor
practice and is not in material violation of any applicable laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours. The Company has not experienced any material work stoppage or
other material labor difficulty.
(b) Except as set forth in Section 3.10 of the Company Disclosure
Schedule, the employment of each officer and employee of the Company is
terminable at the will of the Company, and the Company has not entered into any
oral or written agreements with any of its officers or employees that provide
for severance or termination pay or acceleration of vesting on stock options or
restricted stock. Except as set forth in Section 3.10 of the Company Disclosure
Schedule, the Company is not a party to any agreement, contract or arrangement
with any officer or employee the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature of any of the transactions contemplated by this
Agreement.
(c) The Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment. The Company has conducted all employee terminations
and reductions in force in accordance with Company policy and in compliance with
all applicable laws, including but not limited to the Worker Adjustment and
Retraining Notification Act ("WARN"). Except as set forth in Section 3.10 of the
Company Disclosure Schedule, there are no, and have not been any, claims against
the Company, or to the Company's knowledge, threatened against the Company,
based on actual or alleged race, age, sex, disability or other harassment or
discrimination, or similar tortious conduct, nor to the knowledge of the
Company, is there any basis for any such claim. There are no pending claims
against the Company under any workers' compensation plan or policy or for long
term disability. There are no pending or, to the knowledge of the Company,
threatened wage claims against the Company, and there are no other proceedings
pending or, to the knowledge of the Company, threatened against the Company, by
any employee or former employee.
(d) The Company is not aware that any executive officer intends
to terminate such officer's employment with the Company, nor does the Company
have any present intention to terminate the employment of any executive officer.
Each executive officer of the Company is currently devoting 100% of his or her
business time attending to the affairs of the Company.
3.11 Certain Agreements and Employee Benefit Plans.
(a) Section 3.11(a) of the Company Disclosure Schedule contains a
true and complete summary or list of, or otherwise describes, (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) which are maintained,
contributed to or sponsored by the Company or any trade or business (whether or
not incorporated) which is treated as a single employer with the Company (an
"ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the
Code, for the benefit of any current or former employee, officer or director of
the Company or an ERISA Affiliate, (ii) each loan to a non-officer employee and
loans to officers and directors of the Company, (iii) all bonus, stock option,
stock purchase, restricted stock, phantom stock, or stock appreciation right
plans, programs or arrangements, (iii) all incentive, deferred compensation,
supplemental retirement, savings, profit sharing, or severance plans, programs
or arrangements, (iv) all sabbatical, employee relocation, vacation, cafeteria
benefit (Code Section 125), dependent care benefit (Code Section 129), life or
accident insurance, disability, medical, dental, vision or any other fringe or
benefit plans, programs or arrangements, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any present or former employee,
consultant or director of the Company, as to which (with respect to any of items
(i) through (v) above) any obligation or potential liability is borne by the
Company (together, the "Company Employee Plans").
(b) The Company has delivered to Parent a true and complete copy
of each of the written Company Employee Plans and related plan documents
(including trust documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents and written
description of any unwritten Company Employee Plan, and, to the extent still in
its possession, any material employee communications relating thereto) and has,
with respect to each Company Employee Plan which is subject to ERISA reporting
requirements, provided copies of the most recently filed Form 5500, the most
recently prepared actuarial report and financial statement and the most current
summary of material modifications. Any Company Employee Plan intended to be
qualified under Section 401(a) of the Code has either obtained from the Internal
Revenue Service a favorable determination letter 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 with respect to which the remedial
amendment period under Section 401(b) of the Code has expired, or has applied to
the Internal Revenue Service for such a determination letter prior to the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for a determination letter and to make
any amendments necessary to obtain a favorable determination. The Company has
also furnished Parent with the most recent Internal Revenue Service
determination letter issued with respect to each such Company Employee Plan,
and, to the knowledge of the Company nothing has occurred since the issuance of
each such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Code Section
401(a).
(c) With respect to each Company Employee Plan, (i) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, (ii) each Company Employee Plan in all
material respects has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all applicable statutes,
rules and regulations (including ERISA and the Code), (iii) the Company (or, as
appropriate, an ERISA Affiliate) has prepared in good faith and timely filed all
requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to participants and beneficiaries required to be filed, distributed
or posted, (iv) no suit, administrative proceeding, action or other litigation
has been brought, or is pending or anticipated or to the knowledge of the
Company is threatened against such Company Employee Plan (excluding claims for
benefits incurred in the ordinary course of plan administration), including any
audit or inquiry by the Internal Revenue Service or United States Department of
Labor, (v) the Company and each ERISA Affiliate have performed all material
obligations required to be performed by them and are not in any material respect
in default under or in violation of, and have no knowledge of any material
default or violation of, such Company Employee Plan, (vi) neither the Company
nor any ERISA Affiliate, nor any officer or director of any of them, has
incurred any liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA, (vii) all contributions required to be made by the Company
or any ERISA Affiliate have been made on or before their due dates, (viii) such
Company Employee Plan is not covered by, and neither the Company nor any ERISA
Affiliate has incurred or expects to incur any material liability under, Title
IV of ERISA or Section 412 of the Code, (ix) neither the Company nor any ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multi-employer plan" as defined in Section 3(37) of
ERISA; and (x) except as disclosed in Section 3.11(c) of the Company Disclosure
Schedule, there has been no termination or partial termination of such Company
Employee Plan within the meaning of Section 411 of ERISA which would require the
acceleration of vesting of any benefits under such Company Employee Plan
pursuant to Section 411 of ERISA, except with respect to benefits for which
contributions have already been made by the Company to such Company Employee
Plan.
(d) With respect to each Company Employee Plan, the Company has
in all material respects complied with (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder,
(ii) the applicable requirements of the Family and Medical Leave Act of 1993
("FMLA") and the regulations thereunder, and (iii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and
the temporary regulations thereunder. Except as disclosed in Section 3.11(d) of
the Company Disclosure Schedule, no employee or former employee of the Company
or any qualifying beneficiary thereof is currently receiving or is qualified to
elect COBRA coverage with respect to a Company Employee Plan.
(e) Except as set forth in Section 3.11(e) of the Company
Disclosure Schedule, with respect to each Company Employee Plan, there has been
no amendment to, written interpretation announcement (whether or not written) or
express or implied commitment by the Company or other ERISA Affiliate relating
to, or change in participation, coverage or benefits under, such Company
Employee Plan, other than a modification or change required by ERISA or the
Code, which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Company financial statements. Except as set forth in
Section 3.11(e) of the Company Disclosure Schedule, the Company has made no
express or implied commitment to create any liability with respect to or cause
to exist any employee benefit plan, program or arrangement other than the
Company Employee Plans, or to enter into any contract or agreement to provide
compensation or benefits to any individual.
(f) Section 3.11(f) of the Company Disclosure Schedule contains a
true and correct list of each person who holds any stock option as of the date
hereof, together with (i) the number of shares of Company Common Stock subject
to such stock option, (ii) the date of grant of such stock option, (iii) the
extent to which such stock option is currently vested and, to the extent such
stock option is unvested, the vesting schedule, (iv) the exercise price of such
stock option, (v) whether such stock option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and (vi) the expiration date of such stock option. Section 3.11(f) of
the Company Disclosure Schedule also sets forth the aggregate number of ISO's
and nonqualified stock options outstanding as of the date hereof.
(g) The Company is not a party to any agreement or plan,
including, without limitation, any stock option plan, stock appreciation right
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, except as required pursuant to Section 411 of
the Code.
3.12 Taxes.
(a) The Company (i) has filed when due (taking into account
extensions) with the appropriate federal, state, local, foreign and other
governmental agencies, all tax returns, estimates and reports required to be
filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued all requisite federal, state, local or foreign
taxes, levies, imposts, duties, licenses and registration fees and charges of
any nature whatsoever, and unemployment and social security taxes and income tax
withholding, including interest and penalties thereon ("Taxes"), and (iii) have
established or will establish in accordance with its normal accounting practices
and procedures accruals and reserves that, in the aggregate, are adequate for
the payment of all Taxes not yet due and payable and attributable to any period
preceding the Effective Time.
(b) No deficiencies for Taxes have been threatened or claimed by
any taxing authority in respect of any tax returns filed by the Company (or any
predecessor corporations). Neither the Company nor any predecessor corporation
has executed or filed with any taxing authority any agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes. The Company is not currently being audited by any
taxing authority nor has it received notice of a proposed audit pertaining to
Taxes. There are no tax liens on any assets of the Company or any affiliate,
except for Taxes not yet due and payable. The accruals and reserves for taxes
reflected in the balance sheet of the Company as at April 30, 1998 are in all
material respects adequate to cover all Taxes accruable through the date thereof
(including interest and penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles.
(c) The Company neither is a party to, is bound by, nor has any
obligation under any tax sharing or similar agreement.
(d) The Company is not required to include in income (i) any
amount in respect of any adjustment under Section 481 of the Code, (ii) any
deferred intercompany transaction, or (iii) any installment sale gain, where the
inclusion in income would result in a Tax liability materially in excess of the
reserves therefor. The Company has not given a consent under Section 341(f) of
the Code. The Company is not, nor has it been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code. The Company does not own any property of a character which would give rise
to any documentary, stamp or other transfer tax as a result of the transactions
contemplated by this Agreement.
(e) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, the Company is not a party to any agreement, contract or arrangement
that may result, separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of Section 280G of the Code, determined
without regard to Section 280G(b)(4) of the Code, or under which any person may
receive payments subject to the tax imposed by Section 4999 of the Code, by
reason of the transactions contemplated by this Agreement.
(f) All independent contractors and consultants have been
properly classified as independent contractors for the purposes of federal and
applicable state income tax and tax withholding laws and laws applicable to
employee benefits.
3.13 Absence of Certain Changes or Events. Since April 30, 1998,
except as contemplated by this Agreement, set forth in Section 3.13 of the
Company Disclosure Schedule or as disclosed in any Company SEC Document prior to
July 31, 1998, the Company and each of its Subsidiaries has conducted its
business only in the ordinary course consistent with past practice, and there
has not been (i) any damage, destruction or loss, whether covered by insurance
or not, having or which, insofar as reasonably can be foreseen, in the future
would have a Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend (whether in cash, stock or property) with respect to
Company Common Stock, or any redemption, purchase or other acquisition of any of
its securities, (iii) any event or change in the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of the Company or any of
its Subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future would have a Material Adverse Effect, (iv) any labor dispute, other than
routine matters, none of which is material to the Company or any of its
Subsidiaries, (v) any entry into any material commitment or transaction
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice, (vi) any
material change by the Company in its accounting methods, principles or
practices, (vii) any revaluation by the Company of any asset (including, without
limitation, any writing down of the value of inventory or writing off of notes
or accounts receivable), (viii) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any of its Subsidiaries, or (ix) entry by the Company or any
of its Subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any material Intellectual Property other than
non-exclusive licenses granted in the ordinary course of business consistent
with past practice.
3.14 Title to Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) All of the existing real property leases to which the Company
or any of its Subsidiaries is a party have been previously delivered to Buyer.
Section 3.14(b) of the Company Disclosure Schedule sets forth a complete and
accurate list of all real property leased by the Company or any of its
Subsidiaries. All such leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) that would give
rise to a material claim.
(c) Except as set forth in Section 3.14 of the Company Disclosure
Schedule, the Company and each of its Subsidiaries owns or has valid leasehold
interests in all of its tangible properties and assets (real, personal and
mixed) used in its business, free and clear of any liens (other than liens for
Taxes that are not yet delinquent), charges, pledges, security interests or
other encumbrances, except as reflected in the Company Financial Statements and
except for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and that do not and are not
reasonably likely to materially detract from the value, or interfere with the
use of the property subject thereto or affected thereby. The Company has
delivered to Buyer correct and complete copies of each lease identified in
Section 3.14(b) of the Company Disclosure Schedule and each such lease is valid
and enforceable by the Company or a Subsidiary in accordance with its terms.
Neither the Company nor any Subsidiary has received notice that, and, to the
Company's knowledge, no circumstance exists which, with the passage of time or
the giving of notice or both, could constitute a default under any such lease.
(d) Each item of machinery and equipment owned or leased by the
Company or any of its Subsidiaries is (i) adequate for the conduct of the
business of the Company consistent with its past practice, (ii) suitable for the
uses to which it is currently employed, (iii) in good operating condition,
ordinary wear and tear excepted, and (iv) regularly and properly maintained.
3.15 Intellectual Property.
(a) The Company and each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights and any applications for such
patents, trademarks, trade names, service marks and copyrights, and all patent
rights, trade secrets, schematics, technology, know-how, computer software and
tangible or intangible proprietary information or material and other
intellectual property or proprietary rights (collectively, "Intellectual
Property") material to the conduct of its business as currently conducted,
including without limitation all copyrights registered in the name of the
Company or any of its Subsidiaries ("Company Intellectual Property"). The
Company and each of its Subsidiaries has taken reasonable measures to protect
the proprietary nature of each item of Company Intellectual Property that it
considers confidential, and to maintain in confidence all trade secrets and
confidential information that it presently owns or uses, except where the
failure to own, license or possess legally enforceable rights to use such
Company Intellectual Property would not, individually or in the aggregate,
reasonably be expected to result in a material loss of benefits or a material
loss to the Company's business.
(i) Section 3.15(a)(i) of the Company Disclosure Schedule
lists, as of the date hereof, all patents and patent applications and all
trademarks, registered copyrights, trade names and service marks owned by, or
licensed exclusively to, the Company or any of its Subsidiaries and which are
currently used in connection with the business of the Company or its
Subsidiaries, including the jurisdictions in which each item of such Company
Intellectual Property has been issued or registered or in which any such
application for such issuance or registration has been filed.
(ii) Section 3.15(a)(ii) of the Company Disclosure Schedule
lists, as of the date hereof, all written licenses, sublicenses and other
agreements to which Company or any of its Subsidiaries is a party and pursuant
to which any person is authorized to use any Company Intellectual Property
rights, including without limitation all object code end-user licenses granted
to end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same ("End-User
Licenses"), and excluding licenses, sublicenses or other agreements with
resellers, distributors, original equipment manufacturers and other third party
intermediaries that grant non-exclusive rights to use or modify (for purposes of
establishing program interfaces) and resell or sublicense object code which (I)
did not in any individual case represent $500,000 or more of revenues to the
Company in 1997 on a consolidated basis, (II) were in all material respects in
the standard form of agreements provided by the Company to Parent, and (III) the
Company has no reason to believe will be material to the Company's or any of its
Subsidiaries' business or would reasonably be expected to result in a material
loss to the Company.
(iii) Section 3.15(a)(iii) of the Company Disclosure
Schedule lists, as of the date hereof, all written licenses, sublicenses and
other agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any such Subsidiary is authorized to use any
third party Intellectual Property, including software ("Third Party Intellectual
Property") which is incorporated in any existing product or service of the
Company or any of its Subsidiaries, or any material product or service currently
under development ("Embedded Products").
(iv) Section 3.15(a)(iv) of the Company Disclosure Schedule
lists, as of the date hereof, all written agreements or other arrangements under
which the Company or any of its Subsidiaries has provided or agreed to provide
source code of any product of the Company or any of its Subsidiaries to any
third party.
(v) To the Company's knowledge after reasonable
investigation, Section 6.2(i) of the Company Disclosure Schedule lists all users
of the Company's products or Company Intellectual Property that have not
executed a license agreement with the Company relating to such use.
(vi) Section 3.15(a)(vi) of the Company Disclosure Schedule
lists all users of the Company's products or Company Intellectual Property that
have the right granted by the Company to use any portion of the Company's
products on a service bureau basis. Each of such listed users is obligated to
pay the Company fees on a per server or per concurrent user basis with respect
to the server software and on a per user basis with respect to the client
software.
The Company has made available to Parent correct and complete
copies of all patents, registrations, applications (owned by the Company or any
of its Subsidiaries), and all licenses, sublicenses and agreements referred to
in this Section 3.15(a), each as amended to date. Except for retail purchases of
software, neither the Company nor any of its Subsidiaries is a party to any oral
license, sublicense or agreement which, if reduced to written form, would be
required to be listed in Section 3.15 of the Company Disclosure Schedule under
the terms of this Section 3.15(a).
(b) With respect to each item of Company Intellectual Property
that the Company or any of its Subsidiaries owns: (i) other than common law
trademarks, and subject to such rights as have been granted by the Company or
any of its Subsidiaries under non-exclusive license agreements and joint
development agreements entered into by the Company or any of its Subsidiaries
(copies of which have previously been made available or disclosed in writing to
Parent), the Company or its Subsidiaries possess all right, title and interest
in and to such item; and (ii) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction that materially interferes
with the conduct of the Company's or any of its Subsidiaries' business as
currently conducted.
(c) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, with respect to each item of Third Party Intellectual Property listed
in Section 3.15(a)(iii): (i) the license, sublicense or other agreement covering
such item is legal, valid, binding, enforceable and in full force and effect
with respect to the Company or such subsidiary, and, to the Company's knowledge,
is legal, valid, binding, enforceable and in full force and effect with respect
to each other party thereto; (ii) neither the Company nor any of its
Subsidiaries is in material breach or default thereunder, and, to the Company's
knowledge, no other party to such license, sublicense or other agreement is in
material breach or default thereunder, and, to the Company's knowledge, no event
has occurred which with notice or lapse of time would constitute a material
breach or default by the Company or any of its Subsidiaries or permit
termination, modification or acceleration thereunder by the other party thereto;
(iii) to the Company's knowledge, the underlying item of Third Party
Intellectual Property is not subject to any outstanding judgment, order, decree,
stipulation or injunction to which the Company or any of its Subsidiaries is a
party or has been specifically named that materially interferes with the conduct
of the Company's or any of its Subsidiaries' business as currently conducted,
nor, to the Company's knowledge, subject to any other outstanding judgment,
order, decree, stipulation or injunction that materially interferes with the
conduct of the Company's or any of its Subsidiaries' business as currently
conducted.
(d) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, as of the date hereof, neither the Company nor any of its Subsidiaries
has (i) been named in any suit, action or proceeding as to which it has been
served with process which involves a claim of infringement or misappropriation
of any Intellectual Property right of any third party or (ii) received any
written notice alleging any such claim of infringement or misappropriation. The
Company has made available to Parent correct and complete copies of all such
suits, actions or proceedings or written notices. To the Company's knowledge,
except as set forth in Section 3.15 of the Company Disclosure Schedule, the
manufacturing, marketing, licensing or sale of the products or the performance
of the services offered by the Company and its Subsidiaries do not currently
infringe, and have not infringed, any Intellectual Property right of any third
party (other than patent rights) or, to the Company's knowledge, any patent
rights of third parties; and, to the knowledge of the Company, none of the
Company Intellectual Property rights are being infringed by activities, products
or services of any third party.
(e) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company nor any of its Subsidiaries to be in violation or default under any
license, sublicense or other agreement relating to Intellectual Property, nor
terminate nor modify nor entitle any other party to any such license, sublicense
or agreement to terminate or modify such license, sublicense or agreement, nor
limit in any way the Company's or any of its Subsidiaries' ability to conduct
its business or use or provide the use of Company Intellectual Property or any
Intellectual Property rights of others, which violation, default, termination,
modification or limitation would reasonably be expected, individually or in the
aggregate, to result in a material loss of benefits or material loss to the
Company.
(f) Except for Embedded Products for which the Company has valid
non-exclusive licenses which are disclosed in Section 3.15 of the Company
Disclosure Schedule and which are adequate for each of the Company's and its
Subsidiaries' businesses as presently conducted, and except for usual and
customary rights retained by the United States government with respect to
Intellectual Property developed under research contracts with the Federal
government (the "Retained Fed Rights"), the Company is the sole and exclusive
owner or the licensee of, with all right, title and interest in and to all
Company Intellectual Property (free and clear of any liens or encumbrances), and
has sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use and distribution
thereof or the material covered thereby in connection with the services or
products in respect of which Company Intellectual Property is being used, except
where the failure to have such rights would not reasonably be expected to result
in a material loss of benefits or loss to the Company. To the Company's
knowledge, the United States government has never exercised, and the Company has
no notice that the government intends to exercise, its rights to use or provide
to others the use of the Retained Fed Rights with respect to any Company
Intellectual Property in a manner that would be material to the Company's
non-governmental business. The Retained Fed Rights do not materially interfere
with the conduct of the Company's business.
(g) The Company has made available to Parent copies of the
Company's and each of its Subsidiaries' standard forms of End-User Licenses.
Except as disclosed in Section 3.15 of the Company Disclosure Schedule (which
describes the material variations from the standard form of End-User License),
as of the date hereof, neither the Company nor any of its Subsidiaries has
entered into any End-User Licenses which contain terms materially different than
as set forth in the standard forms of such agreements made available to Parent.
(h) The Company and each of its Subsidiaries has taken reasonable
security measures to safeguard and maintain the secrecy, confidentiality and
value of, and its property rights in, all Company Intellectual Property. All
officers, employees and consultants of the Company or any of its Subsidiaries
who have access to proprietary information or Company Intellectual Property have
executed and delivered to the Company or such Subsidiary an agreement regarding
the protection of proprietary information and the assignment to the Company or
any of its Subsidiaries of all Intellectual Property arising from the services
performed for the Company or any of its Subsidiaries by such persons. To the
Company's knowledge, no current or prior officers, employees or consultants of
the Company or any of its Subsidiaries claim any ownership interest in any
material Company Intellectual Property as a result of having been involved in
the development of such property while employed by or consulting to the Company
or any of its Subsidiaries, or otherwise. Except as set forth in Section 3.15 of
the Company Disclosure Schedule and except for the Embedded Products, all
Company Intellectual Property has been developed by employees of the Company or
its Subsidiaries, within the course and scope of their employment.
(i) To the Company's knowledge, there are no defects in the
Company's or any of its Subsidiaries' software products, and there are no errors
in any documentation, specifications, manuals, user guides, promotional
material, internal notes and memos, technical documentation, drawings, flow
charts, diagrams, source language statements, demo disks, benchmark test
results, and other written materials related to, associated with or used or
produced in the development of the Company's or any of its Subsidiaries'
software products (collectively, the "Design Documentation"), which defects or
errors would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The occurrence in or use by the computer
software products currently sold by the Company or any of its Subsidiaries, of
dates on or after January 1, 2000 (the "Millennial Dates") will not adversely
affect the performance of the software with respect to date dependent data,
computations, output or other functions (including without limitation,
calculating, computing and sequencing) and such software will create, sort and
generate output data related to or including Millennial Dates without errors or
omissions.
(j) No government funding or university or college facilities
were used in the development of the Company's or any of its Subsidiaries'
software products and such software was not developed pursuant to any contract
or other agreement with any person or entity except pursuant to contracts or
agreements listed in Section 3.15 of the Company Disclosure Schedule.
(k) Section 3.15 of the Company Disclosure Schedule lists all
material warranty claims (including any pending claims) related to the Company's
or any of its Subsidiaries' products and the nature of such claims, except for
customary product support and maintenance, that are pending or were made within
the past twelve months. Except as set forth in Section 3.15 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has made
any material oral or written representations or warranties with respect to its
products or services.
(l) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, the Company and its Subsidiaries have been and are in compliance with
the Export Administration Act of 1979, as amended, and all regulations
promulgated thereunder.
(m) As part of the Company Disclosure Schedule, the Company has
provided Parent a list (including names, addresses, contact names, telephone
numbers as well as the termination date and next renewal date of the agreement),
which is complete in all material respects, of all agreements or other
arrangements pursuant to which the Company or any Subsidiary is obligated to
provide support services (such agreements, as supplemented below, are referred
to collectively as the "Maintenance Agreements"). The versions of the products
currently supported by the Company or any Subsidiary are set forth in the
Company Disclosure Schedule. Prior to the Closing, the Company will supplement
the Company Disclosure Schedule with any addresses, contact names and telephone
numbers omitted from the initial Company Disclosure Schedule to include all
Maintenance Agreements entered into between the date hereof and the Closing.
Section 3.15(m) of the Company Disclosure Schedule sets forth and indicates the
agreements with source code escrow provisions relative to the Company's
products.
(n) The Company and Activox are parties to a distribution
agreement dated January 1, 1998 under which the distribution rights granted to
Activox become nonexclusive in the event that Activox does not pay at least
$760,000 in royalties to the Company during 1998. Through the date hereof, such
royalties equal $75,000. The Company and NCR (Hellas) S.A. are parties to a
distribution agreement dated October 1, 1997 which expires on October 1, 1998.
The Company is not a party to an agreement, and is not obligated to become a
party to an agreement, under which Baystone will acquire rights to the source
code for any of the Company's products.
(o) The statements made in the Memorandum dated August 18, 1998
from Marcus Heth to Paul Zoukis, a copy of which has been provided to Parent, do
not contain any untrue statement of a material fact.
3.16 Agreements, Contracts and Commitments. Except as set forth in
Section 3.16 of the Company Disclosure Schedule, as of the date hereof, neither
the Company nor any of its Subsidiaries is a party to or is bound by:
(a) any written or oral consulting agreement, contract or
commitment with any independent contractor or consultant other than those that
are terminable by the Company or any of its Subsidiaries on no more than 30
days' notice without liability or financial obligation, or any written or oral
consulting agreement, contract or commitment with any independent contractor or
consultant under which any benefits of which are contingent upon the occurrence
of a transaction involving the Company of the nature of any of the transactions
contemplated by this Agreement;
(b) any agreement of indemnification or any guaranty other than
any agreement of indemnification entered into in connection with the sale or
license of software products in the ordinary course of business; and any
commitment of the Company to honor or make any payment under any such
indemnification arrangement;
(c) any agreement, contract or commitment containing any covenant
(i) limiting in any respect the right of the Company or any of its Subsidiaries
to engage in any line of business or to compete with any person or (ii) granting
any exclusive distribution rights;
(d) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
Subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company has any
material ownership interest in any corporation, partnership, joint venture or
other business enterprise other than the Company's Subsidiaries;
(e) any joint marketing or development agreement currently in
force under which the Company or any of its Subsidiaries have continuing
material obligations to jointly market any product, technology or service and
which may not be canceled without penalty upon notice of 90 days or less, or any
material agreement pursuant to which the Company or any of its Subsidiaries have
continuing material obligations to jointly develop any intellectual property
that will not be owned, in whole or in part, by the Company or any of its
Subsidiaries and which may not be canceled without penalty upon notice of 90
days or less;
(f) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Company product, service
or technology except as a distributor in the normal course of business; or
(g) any loan, note, indenture or other instrument evidencing
indebtedness in excess of $100,000.
Neither the Company nor any of its Subsidiaries, nor to the
Company's knowledge any other party to any of the agreements, contracts or
commitments to which the Company or any of its Subsidiaries is a party or by
which any of them are bound that are required to be disclosed in the Company
Disclosure Schedule pursuant to Section 3.15 or this Section 3.16 ("Company
Contracts") is, as of the date hereof, in breach, violation or default under
(other than as a result of the insolvency of the Company), any Company Contract,
except for breaches, violations or defaults that in the aggregate would not have
a Material Adverse Effect. Except as set froth in Section 3.16 of the Company
disclosure Schedule, neither the Company nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any Company Contract in such a manner as
would permit any other party to cancel or terminate such Company Contract, or
would permit any other party to seek material damages or other remedies (for any
or all of such breaches, violations or defaults, in the aggregate).
3.17 Proprietary Information and Inventions Agreements. Except as set
forth in Section 3.17 of the Company Disclosure Schedule, each current and
former employee, consultant and officer of the Company and each of its
Subsidiaries has executed an agreement with the Company or a Subsidiary
regarding confidentiality and proprietary information substantially in the form
or forms delivered to Parent. The Company, after reasonable investigation, is
not aware that any of its employees or consultants is in violation thereof, and
the Company and each of its Subsidiaries has used and will use reasonable
efforts to prevent any such violation. All consultants to or vendors of the
Company and each of its Subsidiaries with access to confidential information of
the Company or any of its Subsidiaries are parties to a written agreement
substantially in the form or forms provided to Parent under which, among other
things, each such consultant or vendor is obligated to maintain the
confidentiality of confidential information of the Company and its Subsidiaries.
The Company is not aware that any of its consultants or vendors are in violation
thereof, and the Company will use its best efforts to prevent any such
violation.
3.18 No Conflict of Interest. Except as expressly disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries is indebted, directly
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the Company's knowledge, none of the
officers or directors of the Company or any of its Subsidiaries, or any members
of their immediate families, directly or indirectly, are indebted to the Company
or any of its Subsidiaries or have any direct or indirect ownership interest in
any firm or corporation with which the Company or any of its Subsidiaries is
affiliated or with which the Company or any of its Subsidiaries has a business
relationship, or any firm or corporation which competes with the Company or any
of its Subsidiaries, except that officers, directors and/or stockholders of the
Company and its Subsidiaries may own stock in (but not exceeding two percent of
the outstanding capital stock of) publicly traded companies that compete with
the Company and its Subsidiaries. To the Company's knowledge, none of the
officers or directors of the Company or any of its Subsidiaries or any member of
their immediate families is, directly or indirectly, interested in any material
contract with the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
3.19 Takeover Statutes Inapplicable. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
(each a "Takeover Statute") is applicable to the Company, any Subsidiary of the
Company, the Shares, the Merger or any of the other transactions contemplated by
this Agreement. The Company has heretofore delivered to Parent a complete and
correct copy of the resolutions of the Board of Directors of the Company
approving the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger, this Agreement and the transactions
contemplated by this Agreement the provisions of Section 203 of the DGCL.
SECTION IV
COVENANTS OF THE COMPANY AND PARENT
4.1 Conduct of Business of the Company. Except with the prior written
consent of Parent, as contemplated by this Agreement or as set forth in Section
4.1 of the Company Disclosure Schedule, during the period commencing on the date
of this Agreement and continuing until the first to occur of the Effective Time
or the termination of this Agreement in accordance with its terms, the Company
and each of its Subsidiaries shall conduct its operations in the ordinary and
usual course consistent with past practice, and the Company and each of its
Subsidiaries will endeavor to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relations with suppliers, contractors, distributors, licensors,
licensees, customers and others having business relationships with it. Without
limiting the generality of the foregoing and except as provided in this
Agreement or as set forth in Section 4.1 of the Company Disclosure Schedule,
prior to the Effective Time, the Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly do, or propose to do, any of the
following, without the prior written consent of Parent:
(a) Declare or pay any dividends on or make any other
distribution in respect of any of its capital stock;
(b) Split, combine or reclassify any of its capital stock or
issue or authorize any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, or repurchase, redeem or
otherwise acquire any shares of its capital stock;
(c) Issue, deliver, encumber, sell or purchase any shares of its
capital stock or any securities convertible into, or warrants, options or other
rights of any kind to acquire, any such shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) (other
than the issuance of Company Common Stock upon the exercise of outstanding Stock
Options and Warrants);
(d) Amend or otherwise change its Certificate of Incorporation or
Bylaws (or other comparable organizational document);
(e) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(f) Sell, lease, license or otherwise dispose of any of its
assets (including the Company Intellectual Property), other than End-User
Licenses in the ordinary course of business consistent with its past practice;
(g) Incur, assume or pre-pay any indebtedness for borrowed money,
guarantee any indebtedness or obligation of another person, issue or sell any
debt securities or options, warrants, calls or other rights to acquire any debt
securities, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic
effect of any of the foregoing other than (i) in connection with the financing
of ordinary course trade payables consistent with past practice, (ii) pursuant
to existing credit facilities in the ordinary course of business, or (iii) as
contemplated by this Agreement;
(h) Enter into or amend any contract or agreement other than in
the ordinary course of business consistent with past practice;
(i) Authorize any single capital expenditure which is in excess
of $100,000 or capital expenditures which are, in the aggregate, in excess of
$500,000 for the Company and its Subsidiaries taken as a whole;
(j) Increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practice in
salaries or wages of employees of the Company or its Subsidiaries who are not
officers of the Company or its Subsidiaries, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company or any of its
Subsidiaries, 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 of the Company
or any of its Subsidiaries;
(k) Take any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including, without limitation, procedures
with respect to cash management, the payment of accounts payable and the
collection of accounts receivable, except as required by law);
(l) Make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes;
(m) Amend or modify the warranty policy of the Company or any
Subsidiary;
(n) Pay, discharge, satisfy, settle or compromise any suit,
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the Company's balance sheet dated
as of April 30, 1998 as filed by the Company with the SEC in its Annual Report
on Form 10-K for its fiscal year ended April 30, 1998 or subsequently incurred
in the ordinary course of business and consistent with past practice;
(o) Take any action that would result in any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue in any material respect or in any of the conditions to the
Merger set forth in Article VI not being satisfied;
(p) Enter into, amend or extend any contracts, agreements, or
obligations relating to the distribution, sale, license or marketing by third
parties of the Company's or any Subsidiary's products or products licensed by
the Company or any Subsidiary, other than agreements, extensions or amendments
that grant non-exclusive rights to such third parties and provide for
termination by the Company or any Subsidiary for convenience on not more than 60
days' notice;
(q) Materially revalue any of its assets (other than the booking
of reserves in the ordinary course of business and consistent with past
practices) or, except as required by a change in law or in generally accepted
accounting principles or the rules of the SEC, make any change in accounting
methods, principles or practices, including inventory accounting practices;
(r) Materially accelerate or delay collection of any notes or
accounts receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of business;
(s) Materially delay or accelerate payment of any account payable
beyond or in advance of its due date or the date such liability would have been
paid in the ordinary course of business; or
(t) Cancel or terminate any material insurance policy naming it
as a beneficiary or a loss payable payee or permit any such policy to lapse (it
being understood that the Company and any Subsidiary may renew any insurance
policy in effect as of the date of this Agreement).
4.2 Stockholder Meeting; Proxy Material.
(a) The Company shall cause a meeting of its stockholders (the
"Stockholders' Meeting") to be duly called and held as soon as reasonably
practicable for the purpose of voting on the approval and adoption of this
Agreement and the transactions contemplated hereby. The Board of Directors of
the Company shall, subject to the terms of Section 4.3(b), recommend approval
and adoption of this Agreement and the Merger by the Company's stockholders. In
connection with such meeting, the Company (i) shall promptly prepare and file
with the SEC, use all reasonable efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Proxy
Statement and all other proxy materials for such meeting, (ii) shall notify
Parent of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC, (iii) shall give Parent and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give Parent and its
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC, (iv) shall,
subject to the fiduciary duties of its Board of Directors as advised by counsel,
use all reasonable efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby and (v) shall
otherwise comply with all legal requirements applicable to such meeting.
(b) The Company agrees that the proxy statement to be provided to
stockholders of the Company in connection with the Stockholders' Meeting
(together with the amendments and supplements thereto, the "Proxy Statement")
and all amendments thereof and supplements thereto shall comply as to form in
all material respects with the applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder, and shall not, at the time of
(i) first mailing thereof or (ii) the Stockholders' Meeting to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information supplied by Parent or any affiliates or
representatives of Parent or the Purchaser for inclusion in the Proxy Statement.
(c) Parent and the Purchaser agree that none of the information
supplied by Parent or the Purchaser specifically for inclusion or incorporation
by reference in the Proxy Statement and all amendments thereof and supplements
thereto shall comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, and shall not, at the time of (i) first mailing thereof or (ii) the
Stockholders' Meeting to be held in connection with the Merger, 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.
4.3 Third Party Acquisitions.
(a) The Company agrees that neither it, nor any of its
Subsidiaries, nor any of the employees, officers, directors or stockholders of
the Company or any of its Subsidiaries shall, and the Company shall direct and
cause the agents and representatives (including its Financial Advisor or any
other investment banker and any attorney or accountant retained by it
(collectively, "Company Advisors")) of it and each of its Subsidiaries not to,
directly or indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries in respect of, or the making of any proposal for, a Third Party
Acquisition (as defined in Section 4.3(b) below). The Company further agrees
that neither it, any of its Subsidiaries, nor any of the employees, officers,
directors or stockholders of the Company or any of its Subsidiaries shall, and
the Company shall direct and cause all Company Advisors not to, directly or
indirectly, engage in any negotiations concerning, or provide any information or
data to, or have any discussions with, any Third Party (as defined in Section
4.3(b) below) relating to the proposal of a Third Party Acquisition, or
otherwise facilitate any effort or attempt to make or implement a Third Party
Acquisition; provided, however, that if at any time prior to the Effective Time,
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to an inquiry, proposal or offer for a Third
Party Acquisition which was not solicited subsequent to the date hereof and that
does not result from a breach of this Section 4. 3, (x) furnish only such
information with respect to the Company and its Subsidiaries to any such person
pursuant to a customary confidentiality agreement as was delivered to Parent
prior to the execution of this Agreement and (y) participate in the discussions
and negotiations regarding such inquiry, proposal or offer. The Company shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Third Parties conducted heretofore with
respect to any of the foregoing, and to promptly request each Third Party that
has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any of its Subsidiaries, if any, to
return to the Company all confidential information heretofore furnished to such
Third Party by or on behalf of the Company. The Company shall take the necessary
steps to promptly inform all Company Advisors of the obligations undertaken in
this Section 4.3(a). The Company agrees to notify Parent promptly (and in any
event within 24 hours) if (i) any inquiries relating to or proposals for a Third
Party Acquisition are received by the Company, any of its Subsidiaries or any of
the Company Advisors, (ii) any information about the Company or its Subsidiaries
is requested from the Company, its Subsidiaries or any of the Company Advisors,
or (iii) any negotiations or discussions in connection with a possible Third
Party Acquisition are sought to be initiated or continued with the Company or
any of the Company Advisors indicating, in each such case, in connection with
such notice, the principal terms and conditions of any proposals or offers,
including the identity of the offering party, and thereafter shall keep Parent
informed in writing, on a reasonably current basis, on the status and terms of
any such proposals or offers and the status of any such negotiations or
discussions.
(b) Except as permitted by this Section 4.3(b), the Board of
Directors of the Company shall not withdraw its recommendation of the Merger and
other transactions contemplated hereby or approve or recommend, or cause the
Company or any of its Subsidiaries to enter into any agreement with respect to,
any Third Party Acquisition. Notwithstanding the preceding sentence, if the
Board of Directors of the Company determines in its good faith judgment, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Board of Directors may withdraw or alter its recommendation of the
Merger and the other transactions contemplated hereby, or approve or recommend
or cause the Company to enter into an agreement with respect to a Superior
Proposal (as defined below), but in each case only (i) after providing written
notice to Parent (a "Notice of Superior Proposal") advising Parent that the
Board of Directors has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person or
entity making such Superior Proposal and (ii) if Parent does not, within three
(3) business days (or within two (2) business days with respect to any amendment
to any Superior Proposal which was noticed at least three (3) business days
prior to such amendment) after Parent's receipt of the Notice of Superior
Proposal, make an offer which the Board of Directors of the Company determines
in its good faith judgment (based on the advice of its Financial Advisor or
another financial adviser of nationally recognized reputation) to be as
favorable to the Company's stockholders as such Superior Proposal; provided,
however, that the Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless this Agreement is concurrently terminated
by its terms pursuant to Section 7.1(e)(i).
(c) For purposes of this Agreement, "Third Party Acquisition"
means the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person or entity (which includes a
"person" as such term is defined in Section 13(d)(3) of the Exchange Act) other
than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (ii) the
acquisition by a Third Party of 20% or more of the total assets of the Company
(other than the purchase of the Company's products in the ordinary course of
business); (iii) the acquisition by a Third Party of 20% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of partial or
complete liquidation or the declaration or payment of an extraordinary dividend;
(v) the repurchase by the Company of 20% or more of the outstanding Shares; or
(vi) the acquisition by the Company by merger, purchase of stock or assets,
joint venture or otherwise of a direct or indirect ownership interest or
investment in any business whose annual revenues, net income or assets is equal
to or greater than 20% of the annual revenues, net income or assets of the
Company. For purposes of this Agreement, a "Superior Proposal" means any bona
fide proposal to acquire directly or indirectly, for consideration consisting of
cash and/or securities, 100% of the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company by a majority vote determines in its good
faith judgment (based on consultation with its Financial Advisor or another
financial adviser of nationally recognized reputation) to be reasonably capable
of being completed (taking into account all legal, financial, regulatory and
other aspects of the proposal and the person or entity making the proposal,
including the availability of financing therefor) and more favorable to the
Company's stockholders than the Merger.
4.4 Section 203 of the DGCL. From and after the date of this Agreement
until the earlier of the termination of this Agreement pursuant to its terms or
the Effective Time, the Company will not approve any acquisition of shares of
Company Common Stock by any person (other than Parent, the Purchaser or their
respective affiliates) which would result in such person becoming an "interested
stockholder" (as such term is defined in Section 203 of the DGCL) or otherwise
become subject to Section 203 of the DGCL, unless such acquisition is related to
a Superior Proposal and the Company has complied with Section 4.3 and, if
applicable, Section 7.3.
4.5 SEC Reports . From and after the date of this Agreement until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, the Company will timely file all reports required to be filed by
it under the Exchange Act.
4.6 Indemnification. Parent agrees that all rights to indemnification
existing in favor of directors, officers or employees of the Company as provided
in the Company's Certificate of Incorporation, By-Laws or the indemnification
agreements listed in Section 4.6 of the Company Disclosure Schedule, with
respect to matters occurring through the Effective Time (including the Merger),
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time. Effective upon the
Effective Time, to the fullest extent permitted by law Parent hereby assumes the
Company's and the Surviving Corporation's obligations described in the prior
sentence for a period of six years after the Effective Time. Notwithstanding the
foregoing, this Section 4.6 shall not restrict the Company from amending its
Certificate of Incorporation or By-Laws in any manner or consolidating with or
merging into any other person so long as the indemnification obligations
contained in such Certificate of Incorporation or By-Laws with respect to
matters occurring through the Effective Time are honored by the Company and
Parent or their respective successors or assigns. In addition, if Parent, the
Surviving Corporation or any of either of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provision shall be made so that the
successors and assigns of Parent and the Surviving Corporation assume the
obligations set forth in this Section 4.6. Parent also agrees to use reasonable
efforts to purchase an extension of the Company's existing director and officer
insurance policy to be effective for a period of six years after the Effective
Time; provided, however, that Parent shall not be obligated to spend more than
$150,000.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Between the date of this Agreement and the
Effective Time, the Company will afford to Parent and its authorized
representatives for the transactions contemplated hereby reasonable access at
all reasonable times to the officers, employees, agents, properties, offices and
all other facilities, books and records of the Company as Parent may reasonably
request. Additionally, the Company will permit Parent and its authorized
representatives for the transactions contemplated hereby to make such
inspections of the Company, each of its Subsidiaries and each of their
operations at all reasonable times as it may reasonably require and will cause
its officers, employees and agents to furnish Parent with such financial and
operating data and other information with respect to the business and properties
of the Company and each of its Subsidiaries as Parent may from time to time
reasonably request. No investigation pursuant to this Section 5.1 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. Parent agrees that any
information furnished to it, its subsidiaries or its authorized representatives
pursuant to this Section 5.1 will be subject to the provisions of the
Confidentiality Agreement (as defined in Section 5.3).
5.2 Legal Conditions to Merger.
(a) The Company will take, and will cause each of its
Subsidiaries to take, all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on the Company or any of its
Subsidiaries with respect to the Merger (including furnishing all information
required under the HSR Act and under applicable antitrust laws of any foreign
country) and will take, and will cause each of its Subsidiaries to take, all
reasonable actions necessary to cooperate promptly with and furnish information
to the Purchaser or Parent in connection with any such requirements imposed upon
the Purchaser or Parent in connection with the Merger. The Company will take,
and will cause each of its Subsidiaries to take, all reasonable actions
necessary to obtain (and will take and cause to be taken all reasonable actions
necessary to cooperate promptly with the Purchaser and Parent in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity, or other third party, required to be obtained or made by
the Company or any Subsidiary (or by the Purchaser or Parent) in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement. In addition to the foregoing, prior to the Effective Time, the
parties shall take, or cause to be taken, all such actions as may be necessary
or appropriate in order to effectuate, as expeditiously as practicable, the
Merger and the other transactions contemplated by this Agreement, including any
necessary consents and waivers.
(b) The Purchaser and Parent will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the Merger (including furnishing all information required
under the HSR Act and under applicable antitrust laws of any foreign country)
and will take all reasonable actions necessary to cooperate promptly with and
furnish information to the Company in connection with any such requirements
imposed upon the Company or any of its Subsidiaries in connection with the
Merger. The Purchaser and Parent will take all reasonable actions necessary to
obtain (and will take all reasonable actions necessary to cooperate promptly
with the Company in obtaining) any consent, authorization, order or approval of,
or exemption by, any Governmental Entity, or other third party, required to be
obtained or made by the Purchaser or Parent (or by the Company or any of its
Subsidiaries) in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
(c) Notwithstanding anything to the contrary in this Agreement,
including without limitation Section 5.2(b), as a result of filings made with
Governmental Entities pursuant to this Agreement, neither Parent nor any of its
subsidiaries, nor the Company nor any of its Subsidiaries, shall be required to
divest any of their respective businesses, product lines or assets, or agree to
any other limitation with respect to its business.
5.3 Confidentiality Agreement. The Company and Parent acknowledge that
the existing confidentiality agreement between such parties (the
"Confidentiality Agreement") shall remain in full force and effect at all times
prior to the Effective Time and after any termination of this Agreement, and
such parties agree to comply with the terms of such Agreement.
5.4 Public Announcements. The Purchaser, Parent and the Company will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger or any transaction contemplated
hereby and shall not issue any such press release or make any such public
statement except as they may mutually agree unless required so to do by law or
by obligations pursuant to any listing agreement with any national securities
exchange or the National Association of Securities Dealers, Inc. The Company and
Parent have agreed as to the form of joint press release announcing execution of
this Agreement.
5.5 Company Stock Plans.
(a) At the Effective Time, each option to purchase shares of
Common Stock outstanding under the Company's 1998 Non-Qualified Stock Option
Plan and 1996 Stock Plan shall terminate and each holder thereof shall receive
in exchange for such termination a cash payment equal, subject to Section 5.5(f)
below, to the excess of (i) Merger Price times the number of shares of Common
Stock subject to such option which are vested and exercisable (including such
number of shares that become vested and exercisable under the applicable option
terms as a result of the transactions contemplated by this Agreement), over (b)
the aggregate exercise price of such option. The fair market value of the Common
Stock on the Effective Time shall be deemed to equal the Merger Price.
(b) At the Effective Time, each option to purchase shares of
Common Stock outstanding under the Company's 1995 Employee Stock Option Plan and
1995 Incentive Stock Option Plan (the "1995 Options") shall convert
automatically into a right to receive upon exercise thereafter and subject to
any continuing vesting provisions applicable to the option the Merger Price
times the number of shares being exercised. No shares of Common Stock shall be
issued upon exercise of the 1995 Options after the Effective Time.
(c) At the Effective Time, each option outstanding under the
Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") shall
terminate and the holder of each such option shall receive in exchange therefor
a cash payment equal, subject to Section 5.5(f) below, to the excess of (a) the
Merger Price times the number of shares of Common Stock that the holder's
accumulated payroll deductions as of the Effective Time could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period (as defined in the Purchase Plan) and subject to the
limitations imposed by the Purchase Plan (including the limitation that no
option with respect to a single Payment Period be exercised for more than 250
shares of Common Stock), over (b) the product of such number of shares times the
option price. The fair market value of the Common Stock at the Effective Time
shall be deemed to equal the Merger Price.
(d) Prior to the Effective Time, the Company shall take all
actions (including if appropriate amending the terms of the Company Stock Option
Plans and the Purchase Plan and obtaining the consent of holders of Stock
Options or stock purchase rights) that are necessary to give effect to the
transactions contemplated by Sections 5.5(a), (b) and (c).
(e) The Company shall take all steps required to terminate the
Company Stock Option Plans and the Purchase Plan immediately after the Effective
Time.
(f) Payments pursuant to Sections 5.5(a), (b) and (c) above shall
be subject to any applicable tax withholding required under the Code, the rules
and regulations thereunder or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Stock Options and/or stock purchase rights.
5.6 Certain Employee Benefits Matters. Employees of the Company at the
Effective Time will be provided with employee benefit plans by the Surviving
Corporation or Parent, except with respect to such Company Benefit Plans Parent
determines that it will continue in effect. If any employee of the Company
becomes a participant in any employee benefit plan, program, policy or
arrangement of Parent or one of its subsidiaries, such employee shall be given
credit for all service with the Company prior to the Effective Time to the
extent permissible under the current terms of such plan, program, policy or
arrangement or through an amendment of such plan, program, policy or arrangement
at no cost in excess of $100,000 in the aggregate to Parent and without any
requirement of obtaining approval of the Parent's stockholders. Parent also
agrees to issue within a reasonable period of time after the Effective Time
options to purchase shares of its Common Stock in amounts reasonably consistent
with Parent's practices for employees on comparable levels as determined by
Parent to the lesser of seventy percent of the employees listed in Schedule
6.2(k) hereto or the number of such employees that remain employees of the
Surviving Corporation at the time of the grant of the stock options. Parent also
will provide bonuses of $10,000 per employee to seventy percent of the employees
listed in Schedule 6.2(k) hereto payable if such employees are employed by the
Company one year after the Effective Time.
5.7 Notice of Certain Events. The Company shall notify Parent, and
Parent shall promptly notify the Company, of:
(i) receipt of any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement;
(iii) receipt of notice that any actions, suits, claims,
investigations or proceedings have been commenced or, to the knowledge of the
Company, threatened, against or involving the Company, any of its Subsidiaries
or Parent, as applicable, which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.9 or which
relate to the consummation of the transactions contemplated by this Agreement;
(iv) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it (and, in the case of Parent, of the Purchaser)
contained in this Agreement to be untrue or inaccurate; and
(v) any failure of the Company, Parent or the Purchaser, 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 6.7 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.8 Obligations of Purchaser. Parent will take all action necessary to
cause the Purchaser to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
5.9 Voting of Shares. Parent agrees to cause the Purchaser to vote all
Shares beneficially owned by it in favor of adoption of this Agreement and the
Merger at the Stockholders' Meeting.
5.10 Expenses. Except as otherwise provided in Section 7.3, whether or
not the Merger shall be consummated, all costs and expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
5.11 Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
ARTICLE VI
CONDITIONS
6.1 Conditions of Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote or consent of the holders
of a majority of the outstanding shares of Common Stock of the Company in
accordance with the DGCL and the Certificate of Incorporation of the Company.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Entity, nor other legal
restriction, restraint or prohibition, preventing the consummation of the Merger
shall be in effect; provided, however, that each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as practicable any injunction or other order that may
be entered.
(c) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act and under any applicable foreign
antitrust laws shall have expired or been terminated, and, other than filing the
articles of merger, all filings with any Governmental Entity required to be made
prior to the Effective Time by the Company or Parent or any of their respective
subsidiaries, with, and all government consents required to be obtained prior to
the Effective Time by the Company or Parent or any of their respective
subsidiaries in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by the Company, Parent
and the Purchaser shall have been made or obtained (as the case may be).
6.2 Conditions to Obligations of Parent and the Purchaser. The
obligations of Parent and the Purchaser to effect the Merger are also subject to
the satisfaction or waiver by Parent prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (other than those relating
to the License Agreement) shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Settlement and Court Approval of the Lawsuits. The Company
shall have obtained final court approval of the settlement of the Lawsuits on
terms consistent with the Memorandum of Understanding Concerning Settlement
Terms dated July 9, 1998 (the "Memorandum of Understanding"), and all rights to
appeal, contest or modify the court's judgment approving the settlement and
dismissing the Lawsuits shall have expired without any such rights having been
exercised. In addition, the number of shares of the Company's Common Stock
purchased by persons filing requests for exclusion from the settlement shall not
exceed the number of shares set forth in the letter between Kevin J. O'Connor
and Samuel P. Sporn, dated July 30, 1998, referred to in paragraph 15 of the
Memorandum of Understanding. "Lawsuits" means the various putative securities
class actions filed in the United States District Court for the Southern
District of New York and the United States District for the Eastern District of
Virginia, as follows: Thomas Esposito, et al. v. Versatility, Inc., et al.
(S.D.N.Y.); Tammy Newsman v. Versatility, Inc., et al. (S.D.N.Y.); Sam Succar v.
Versatility, Inc. et al. (S.D.N.Y.); Thomas K. Doyle v. Versatility, Inc. et al.
(E.D. VA); and Steven Bowen v. Versatility, Inc. et al. (S.D.N.Y.).
(d) Employee Retention. Each of Marcus Heth and seventy percent
of the employees of the Company listed in Section 6.2(d) of the Company
Disclosure Schedule shall be employees of the Company as of the Effective Time
and shall not have indicated in writing an intention to leave the employment of
the Company.
(e) Dissenting Shares. The aggregate number of Shares held by
Dissenting Stockholders shall not be equal to or exceed ten percent of the
outstanding Shares immediately prior to the Effective Time.
(f) No Litigation. After the date hereof there shall not be
instituted and continuing any action, suit or proceeding against the Company,
Parent, Purchaser or any Indemnified Person (as defined below), by any
Governmental Entity or any other person or persons, (i) directly or indirectly
relating to the Merger or the License Agreement or any other transactions
contemplated by this Agreement; (ii) who is or was a stockholder or stockholders
of the Company, whether on behalf of such stockholder or stockholders, or in a
derivative action on behalf of the Company; (iii) alleging infringement by the
Company of intellectual property assets of any third party; or (iv) which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect on the Company and its subsidiaries, taken as a whole. After the
date hereof there shall not be threatened any action, suit or proceeding against
the Company, Parent, Purchaser or any Indemnified Person (as defined below), by
any Governmental Entity or any other person or persons which individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect on
the Company and its subsidiaries, taken as a whole. For purposes of this
paragraph, without limitation, any action, suit or proceeding alleging
infringement by the Company of intellectual property assets of any third party
shall be considered to reasonably be expected to have a Material Adverse Effect
on the Company and its subsidiaries, taken as a whole. "Indemnified Person"
shall mean any director, officer, employee, consultant or other person that the
Company is obligated to indemnify or hold harmless, whether under any law, rule,
regulation, the Company's certificate of incorporation or bylaws, any agreement
or otherwise.
(g) No Adverse Change. No event or events shall have occurred
which have caused or could reasonably be expected to cause a Material Adverse
Effect on the Company and its subsidiaries, taken as a whole.
(h) Opinion. Parent shall have received an opinion dated as of
the Closing Date from Tucker, Flyer & Lewis, counsel to the Company, or such
other counsel as chosen by the Company and is reasonably acceptable to Parent,
substantially in the form attached hereto as Exhibit D.
(i) Third Party Licenses. The Company shall have obtained
executed license agreements on commercially reasonable terms from each of the
entities listed in Section 6.2(i) of the Company Disclosure Schedule that has
access to all or any portion of the Company's client server products.
(j) Bank Actions. On or after the date hereof, Silicon Valley
Bank shall not have notified the Company of its acceleration of any amounts due
to Silicon Valley Bank or taken any other action to collect any such amounts or
realize the benefit of any security interest in the Company's assets.
6.3 Conditions to Obligations of the Company. The obligations of the
Company to effect the Merger are also subject to the satisfaction or waiver by
the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and the Purchaser set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Parent and the Purchaser. Each
of Parent and the Purchaser shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the transactions contemplated hereby by
the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and the Purchaser;
(b) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree, ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the acceptance for payment of,
or payment for, Shares pursuant to the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) by either Parent or the Company if the Effective Time shall
not have occurred on or prior to December 31, 1998; provided, however, that the
right to terminate this Agreement pursuant to this Section 7.1(c) shall not be
available to any party the failure of which (or the failure of the affiliates of
which) to perform in any material respect any of its obligations under this
Agreement results in the failure of any condition set forth in Article VI or if
the failure of such condition results from facts or circumstances that
constitute a material breach of a representation or warranty under this
Agreement by such party;
(d) by Parent if (i) prior to the Effective Time, (A) the Board
of Directors of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to the Purchaser or Parent its approval or
recommendation of this Agreement, the Merger or any other transaction
contemplated by this Agreement; (B) the Board of Directors of the Company or any
committee thereof shall have recommended to the stockholders of the Company,
taken no position with respect to, or failed to recommend against acceptance of
a Third Party Acquisition; (C) the Company shall have entered into any
definitive agreement with respect to a Third Party Acquisition; (D) the Company
fails to confirm its recommendation of this Agreement, the Merger and
transactions contemplated by this Agreement within five days of any written
request by Parent that it do so; or (E) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the foregoing; or (ii)
the Company shall have breached in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement which breach cannot be or has not been cured within 20 days after the
giving of written notice to the Company or shall have breached Section 4.3; or
(e) by the Company if (i) the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to the Purchaser or Parent
its approval or recommendation of this Agreement or the Merger in order to
approve the execution by the Company of a definitive agreement providing for the
transactions contemplated by a Superior Proposal, provided that the Company
shall have complied with the provisions of Section 4.3, including the notice
provisions therein, and shall have made payment of the fee contemplated by
Section 7.3 below; or (ii) Parent or the Purchaser shall have breached in any
material respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement which breach cannot be or has
not been cured within 20 days after the giving of written notice to Parent or
the Purchaser, as applicable, except, in any case, for such breaches which are
not reasonably likely to affect adversely Parent's or the Purchaser's ability to
complete the Merger.
7.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.1, this Agreement shall become void and of no effect with no liability
on the part of any party hereto, except for intentional breach of any provision
of this Agreement and except that the agreements contained in Sections 5.3, 5.10
and 7.3 and Article VIII shall survive the termination hereof.
7.3 Certain Payments.
(a) In the event that:
(i) this Agreement is terminated pursuant to Section
7.1(d)(i) or Section 7.1(e)(i) and the Company was not entitled to terminate the
Agreement pursuant to Section 7.1(e)(ii) at such time, or
(ii) this Agreement is terminated pursuant to Section 7.1(c)
or 7.1(d)(ii), the Company was not entitled to terminate the Agreement pursuant
to Section 7.1(e)(ii) at such time and the Company shall consummate a Third
Party Acquisition with any person other than Parent or any of its affiliates
before or within 12 months after the date of such termination,
then, in any such event, the Company shall pay Parent promptly (but in no event
later than 1 business day after the first of such events shall have occurred)
(i) a fee of $360,000, plus (ii) an amount equal to Parent's actual and
reasonably documented out-of-pocket fees and expenses (not to exceed $200,000)
incurred by Parent and the Purchaser in connection with the Merger, this
Agreement and the consummation of the transactions contemplated hereby, all of
which amounts shall be payable in immediately available funds (the "Termination
Fee"). In the event that the Company shall fail to pay any amounts owing
pursuant to the foregoing when due, interest shall be paid on such unpaid
amounts, commencing on the date such amounts became due, at a rate of 6% per
annum. The Company acknowledges that the agreement contained in this Section 7.3
is an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay any amount due pursuant to
this Section 7.3, and, in order to obtain such payment, Parent commences a suit
which results in a judgment against the Company for the amounts set forth in
this Section 7.3, the Company shall pay to Parent its reasonable costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amounts set forth in this Section 7.3. In no event
shall the Company be obligated to pay more than one termination fee and
reimbursement of expenses pursuant to this Section 7.3.
(b) The Termination Fee shall not be deemed to be liquidated
damages, and the right to the payment of the Termination Fee shall be in
addition to (and not a maximum payment in respect of) any other damages or
remedies at law or in equity to which Parent or the Purchaser may be entitled as
a result of an intentional breach of any term or provision of this Agreement or
any Support Agreement.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
except for the agreements contained in Sections 4.6, 5.3, 5.5, 5.6, 5.8 and 5.10
and Articles I and VIII of this Agreement, each of which shall survive the
Merger.
8.2 Amendments and Waivers. Any term of this Agreement may be amended
or waived only with the written consent of the parties; provided, however, that
Section 4.6 may only be amended with the consent of each of the persons with
rights to indemnification under Section 4.6. Any amendment or waiver effected in
accordance with this Section 8.2 shall be binding upon the parties and their
respective successors and assigns.
8.3 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, and
the application thereof, in any other jurisdiction.
8.4 Interpretation.
(a) The table of contents and Article, Section and subsection
headings herein are for convenience of reference only, do not constitute a part
of this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof. Where a reference in this Agreement is made to a Section,
Schedule, Annex or Exhibit, such reference shall be to a Section of, or
Schedule, Annex or Exhibit to, this Agreement, unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statues and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and assigns
and, in the case of an individual, to his or her heirs and estate, as
applicable.
(b) This Agreement has been negotiated at arm's length and
between persons sophisticated and knowledgeable in the matters addressed in this
Agreement. Each of the parties has been represented by experienced and
knowledgeable legal counsel. Accordingly, any rule of law or legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that has drafted it is not applicable and is waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the purpose
of the parties and this Agreement.
8.5 Assignment. This Agreement shall not be assignable by operation of
law or otherwise and any attempted assignment of this Agreement in violation of
this sentence shall be void; provided, however, that this Agreement shall be
assignable by any party after the Effective Time.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.7 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.8 Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail with postage prepaid, if such notice is addressed to the party
to be notified at such party's address or facsimile number as set forth below,
or as subsequently modified by written notice in accordance with this Section
8.8:
(a) If to Parent or the Purchaser:
Oracle Corporation
500 Oracle Parkway
Redwood City, CA 94065
Attention: Daniel S. Cooperman, Senior Vice President, General
Counsel and Secretary
with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Donald M. Keller, Jr.
(b) If to the Company:
Versatility Inc.
11781 Lee Jackson Memorial Highway
Seventh Floor
Fairfax, Virginia 22033
Attention: President
with a copy to:
Tucker, Flyer & Lewis
1615 L Street, N.W., Suite 400
Washington, DC 20036
Attn: Jack L. Lewis
8.9 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreement, are the product of all
of the parties hereto, and constitute the entire agreement between such parties
pertaining to the subject matter hereof, and merge all prior negotiations and
drafts of the parties with regard to the transactions contemplated herein. Any
and all other written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.
8.10 No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and their respective
successors and assigns, and nothing in this Agreement, express or implied, other
than pursuant to Section 4.6, 5.5 and 5.6 or the right to receive the
consideration payable in the Merger pursuant to Article I, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
8.11 Governing Law.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
(b) The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.
The parties have caused this Agreement and Plan of Merger to be signed
by their respective duly authorized officers, all as of the date first written
above.
ORACLE CORPORATION
By: /s/ David J. Roux
Name: David J. Roux
Title: Exec. Vice President
AQX ACQUISITION CORPORATION
By: /s/ David J. Roux
Name: David J. Roux
Title: Exec. Vice President
VERSATILITY INC.
By: /s/ Paul J. Zoukis
Name: Paul J. Zoukis
Title: President and Chief Executive Officer