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EXHIBIT 3.1
AGREEMENT AND PLAN OF MERGER
by and among
THE VANTIVE CORPORATION
a Delaware corporation,
SOLAR ACQUISITION CORPORATION
a Delaware corporation and a wholly-owned
subsidiary of The Vantive Corporation
and
SCOTCH BONNET INTEGRATION, INC.
a Delaware corporation,
Dated as of September 2, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 2,
1998 by and among The Vantive Corporation, a Delaware corporation ("Buyer"),
Solar Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Buyer ("Sub"), and Scotch Bonnet Integration Inc., a Delaware
corporation ("Target").
WHEREAS, the Boards of Directors of Buyer, Sub and Target deem it advisable
and in the best interests of each corporation and its respective stockholders
that Buyer and Target combine in order to advance the long-term business
interests of Buyer and Target;
WHEREAS, the combination of Buyer and Target shall be effected by the terms
of this Agreement through a transaction in which Sub will merge with and into
Target, Target will become a wholly-owned subsidiary of Buyer and the Target
stockholders will become stockholders of Buyer; and
WHEREAS, for federal income tax purposes, the parties to this Agreement
intend, by approving resolutions authorizing this Agreement, to adopt this
Agreement as a plan of reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
(the "Code"), and that the merger of Sub with and into Target shall qualify as a
reorganization within the meaning of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the provisions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Sub shall be
merged with and into Target (the "Merger"). As a result of the Merger, the
outstanding shares of capital stock of Sub and Target shall be converted or
canceled in the manner provided in Article II of this Agreement; the separate
corporate existence of Sub shall cease; and Target shall be the surviving
corporation in the Merger and shall become a subsidiary of Buyer (the "Surviving
Corporation").
Section 1.2 Closing; Effective Time of the Merger. The closing of the
Merger (the "Closing") will take place at 10:00 a.m., California time, on a date
to be specified by Buyer and Target (the "Closing Date") at the offices of ▇▇▇▇
▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, unless
another date or place is agreed to in writing by Buyer and Target. On the
Closing Date, a certificate of merger in accordance with Section 251 and
containing the substantive provisions of Articles I and II of this Agreement
(and other applicable
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provisions) of the Delaware General Corporation Law (the "Certificate of
Merger") shall be duly signed by the Surviving Corporation and shall be filed
with the Secretary of State of the State of Delaware (the "Secretary of State").
The Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State (the date and time of such filing being referred to
herein as the "Effective Time").
Section 1.3 Effects of Merger.
(a) At the Effective Time: (i) the separate existence of Sub shall
cease and Sub shall be merged with and into Target (Sub and Target are sometimes
referred to herein as the "Constituent Corporations"), (ii) the Certificate of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of the Surviving Corporation; and (iii) the
Bylaws of Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
(b) From and after the Effective Time, (i) the Surviving Corporation
shall possess all the rights, privileges, immunities, powers and purposes of
each of the Constituent Corporations; (ii) all the property, real and personal,
including subscriptions to shares, causes of action and every other asset of
each of the Constituent Corporations, shall vest in the Surviving Corporation
without further act or deed; (iii) the Surviving Corporation shall assume and be
liable for all the liabilities, obligations and penalties of each of the
Constituent Corporations; and (iv) the Merger shall have the further effects set
forth in this Agreement and in the DGCL.
Section 1.4 Directors and Officers. The director and officer of Sub
immediately prior to the Effective Time shall be the initial director and
officer of the Surviving Corporation, and shall hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation, in
each case until his respective successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES; MERGER CONSIDERATION
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, par value $.01 per share, of Target ("Target Common
Stock") or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, $0.001 par value per share, of the
Surviving Corporation.
(b) Cancellation of Buyer-Owned Stock. All shares of Target Common
Stock owned by Target as treasury shares or by Buyer, Sub or any other
wholly-owned subsidiary of Buyer shall be canceled and retired and shall cease
to exist, and no stock of Buyer or other consideration shall be delivered in
exchange therefor.
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(c) Consideration for Target Common Stock. Subject to Section 2.2
and as set forth in Annex 2.1, each issued and outstanding share of Target
Common Stock (other than Dissenting Shares as defined in Section 2.1(e)) shall
be converted into the right to receive the following:the number of fully paid
and nonassessable shares of Buyer Common Stock, equal to $572,000 divided by the
average closing price of Buyer Common Stock for the five days preceding the date
of this Agreement (as determined by reference to the "Last Sale" price reported
on the NASDAQ NMS);
All such shares of Target Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer
Common Stock to be issued or paid in consideration therefor upon the surrender
of such certificate in accordance with this Article II.
(d) Cash Consideration. Each of the holders of Target Common Stock
shall be entitled to receive a share of $143,000, in proportion to their
percentage holdings of Target Common Stock as set forth in Annex 2.1.
(e) Appraisal Rights. Notwithstanding any provision of this
Agreement to the contrary, each outstanding share of Target Common Stock held by
a holder seeking payment of the fair value of such shares pursuant to Section
262 or other applicable provisions of the DGCL (including any holder who has not
assented to the Merger and has filed written objection or notice of election to
dissent with respect to the Merger), who has not effectively withdrawn or lost
the right to payment of fair value (a "Dissenting Share"), shall not be
converted into or represent a right to receive shares of Buyer Common Stock
pursuant to Article II, but the holder thereof shall be entitled only to such
rights as are granted by the applicable provisions of the DGCL; provided,
however, that each Dissenting Share held by a person at the Effective Time who
shall, after the Effective Time, withdraw such demand for payment of fair value
or lose the right to payment of fair value, in either case pursuant to the DGCL,
shall be deemed to be converted, as of the Effective Time, into the right to
receive shares of Buyer Common Stock pursuant to this Article II. Target shall
give Buyer (a) prompt notice and copies of all written demands for payment of
fair value, withdrawals of demands for payment of fair value and other
instruments received by Target relating to demands for payment of fair value
received by Target and (b) the opportunity to direct all negotiations and
proceedings with respect to demands for payment of fair value under the DGCL.
Target will not voluntarily make any payment with respect to any demands for
payment of fair value and will not, except with the prior written consent of
Buyer, settle or offer to settle any such demands.
(f) Certificate Legends. The shares of Buyer Common Stock to be issued
pursuant to this Article II shall not have been registered and shall be
characterized as "restricted securities" under the federal securities laws, and
under such laws such shares may be resold without registration under the
Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. Each certificate evidencing shares of Buyer Common Stock
to be issued pursuant to this Article II shall bear the following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF
LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
Section 2.2 Exchange of Certificates. The procedures for exchanging
outstanding shares of Target Common Stock for Buyer Common Stock pursuant to the
Merger are as follows:
(a) Exchange Agent. Promptly after the Effective Time, Buyer shall
deposit with an exchange agent designated by Buyer (the "Exchange Agent"), for
the benefit of the holders of shares of Target Common Stock, for exchange in
accordance with this Section 2.2, through the Exchange Agent, certificates
representing the shares of Buyer Common Stock issuable pursuant to Section 2.1.
The shares of Buyer Common Stock deposited with the Exchange Agent, together
with any dividends or distributions with respect thereto, hereinafter shall be
referred to as the "Exchange Fund".
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate that immediately prior to the Effective Time represented outstanding
shares of Target Common Stock (a "Target Certificate") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Target Certificates shall pass, only upon delivery of the
Target Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Buyer and Target may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Target Certificates in
exchange for certificates representing shares of Buyer Common Stock ("Buyer
Certificates"). Upon surrender of a Target Certificate for cancellation to the
Exchange Agent (or such other agent or agents as may be appointed by Buyer),
together with a duly executed letter of transmittal, the holder of such Target
Certificate shall be entitled to receive in exchange therefor a Buyer
Certificate representing that number of whole shares of Buyer Common Stock which
such holder has the right to receive pursuant to the provisions of Section
2.1(c), and the Target Certificate so surrendered shall immediately be canceled.
In the event of a transfer of ownership of Target Common Stock which is not
registered in the transfer records of Target, a Buyer Certificate representing
the proper number of shares of Buyer Common Stock may be issued to a transferee
if the Target Certificate representing such Target Common Stock is presented to
the Exchange Agent, accompanied by all documents reasonably required to evidence
and effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section 2.2,
each Target Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a Buyer Certificate as
contemplated by this Agreement.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Buyer Common Stock
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with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Target Certificate with respect to the shares of
Buyer Common Stock represented thereby until the holder of record of such Target
Certificate shall surrender such Target Certificate. Subject to the effect of
applicable laws, following surrender of any such Target Certificate, there shall
be paid to the record holder of the Buyer Certificates issued in exchange
therefor, without interest, (i) the amount of dividends or other distributions
with a record date after the Effective Time previously paid with respect to such
whole shares of Buyer Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Buyer Common Stock.
(d) No Further Ownership Rights in Target Common Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of shares of Target
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to subsection (c) of this Section 2.2) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Common Stock, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Target Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Target Certificates are presented to Buyer or the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.2.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Target Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Buyer.
Notwithstanding any other provision of this Agreement, the number of shares to
be issued to each holder of shares of Target Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Buyer Common Stock (after taking into account all Target Certificates
delivered by such holder) shall be rounded up to the nearest whole share.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the stockholders of Target one year after the
Effective Time shall be delivered to Buyer, upon demand, and any stockholders of
Target who have not previously complied with this Section 2.2 shall thereafter
look only to Buyer for payment of their claim for Buyer Common Stock and any
dividends or distributions with respect to Buyer Common Stock.
(g) No Liability. Neither Buyer nor Target shall be liable to any
holder of shares of Target Common Stock or Target Preferred Stock or Buyer
Common Stock, as the case may be, for such shares (or dividends or distributions
with respect thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
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Except as set forth in the disclosure schedule (which disclosure schedule
shall be organized into numbered sections corresponding with the section numbers
of this Agreement) delivered by Target to Buyer on or before the date of this
Agreement and attached hereto (the "Target Disclosure Schedule"), Target
represents and warrants to Buyer as follows:
Section 3.1 Organization, Standing and Power; Qualification; Subsidiaries.
Target is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; has all requisite corporate power to
own, lease and operate its properties and to carry on its business as currently
being conducted and as currently proposed to be conducted; is duly qualified to
do business and is in good standing in each jurisdiction in which the failure to
be so qualified and in good standing would have a material adverse effect on the
business, assets (including intangible assets), properties, liabilities
(contingent or otherwise), financial condition, operations, or results of
operation (a "Material Adverse Effect") of Target; and Target does not directly
or indirectly own any equity or similar interest in, or any interest convertible
or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
Target has delivered true and correct copies of the Certificate of Incorporation
and Bylaws of Target, each as amended to date, to Buyer. Target is not in
violation of any of the provisions of its Certificate of Incorporation or
Bylaws.
Section 3.2 Target Capital Structure.
(a) The authorized capital stock of Target consists of 40,000 shares
of Target Common Stock, $.01 par value, of which 16,900 shares of Target Common
Stock are issued and outstanding. The Capital Stock of Target is held of record
by those persons set forth in Section 3.2 of the Target Disclosure Schedule
(which list sets forth the amount of Target Common Stock and Target Preferred
Stock held by each such person and/or entity). All outstanding shares of Target
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, were issued in compliance with state and federal securities laws,
and are subject to no preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of Target or any agreement
to which Target is a party or by which it is bound.
(b) Except as set forth in Section 3.2(a) or Section 3.2 of the
Target Disclosure Schedule, there are (i) no equity securities of any class of
Target or any securities exchangeable into or exercisable for such equity
securities issued, reserved for issuance, or outstanding and (ii) no outstanding
subscriptions, options, warrants, puts, calls, rights, or other commitments or
agreements of any character to which Target is a party or by which it is bound
obligating Target to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any equity securities of
Target or obligating Target to grant, extend, accelerate the vesting of, change
the price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. Section 3.2 of the Target Disclosure Schedule
sets forth the number of shares of Target capital stock for which each such
option may be exercised, and the exercise price and vesting schedule (including
acceleration provisions, if any) for each such option. There are no contracts,
commitments or agreements relating to voting, purchase or sale of Target capital
stock (i) between or among Target and any of its stockholders
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or Target Option holders or (ii) to the best of Target's knowledge, between or
among any Target stockholders or Target Option holders.
Section 3.3 Authority; No Conflict; Required Filings and Consents
(a) Target has all requisite corporate power and authority to enter
into this Agreement and the other documents required to be executed and
delivered by Target hereunder, including the Merger Agreement (collectively, the
"Target Transaction Documents") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the other
Target Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Target. This Agreement and the other Target
Transaction Documents have been duly executed and delivered by Target and
constitute the valid and binding obligations of Target, enforceable against
Target in accordance with their terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors' rights generally, and (ii) general
principles of equity.
(b) The execution and delivery by Target of this Agreement and the
other Target Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation or breach of any provision of the Certificate of
Incorporation or Bylaws of Target, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any benefit under any note, mortgage, indenture,
lease, contract or other agreement or obligation to which Target is a party or
by which Target or any of its properties or assets may be bound, or (iii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Target
or any of its properties or assets, except in the case of (ii) and (iii) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not be reasonably likely to have a Material Adverse
Effect on Target or to interfere with the consummation by Target of its
obligations under this Agreement and the other Target Transaction Documents.
(c) The outstanding shares of Target Common Stock are the only shares
of Target capital stock entitled to vote with respect to the Merger, and the
approval of this Agreement by the holders of a majority of the issued and
outstanding shares of Target Common Stock is the only approval of Target
stockholders required for the consummation of the Merger, no other class vote of
any series or class of Target capital stock being required. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity (as defined in Section 8.2) is required by or with
respect to Target in connection with the execution and delivery of this
Agreement or the other Target Transaction Documents or the consummation of the
transactions contemplated hereby or thereby except for (i) the filing of the
Delaware Certificate of Merger in accordance with the DGCL, (ii) items described
in Section 3.3 of the Target Disclosure Schedule, and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a
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Material Adverse Effect on Target or materially and adversely affect the ability
of Target to consummate the transactions contemplated by this Agreement in
accordance with its terms.
Section 3.4 Financial Statements. Target has delivered to Buyer copies of
Target's unaudited financial statements (balance sheet, income statement and
statement of cash flows) for the year ended December 31, 1997 and unaudited
interim financial statements as at, and for the six-month period ended, July 31,
1998 (collectively, the "Target Financial Statements"). The Target Financial
Statements were to the best of Target's knowledge prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved, except for the absence of required footnotes.
The Target Financial Statements present fairly in all material respects the
financial position of Target as of the respective dates and the results of
Target's operations and cash flows for the periods indicated, except that the
interim Target Financial Statements are subject to normal and recurring year-end
audit adjustments which will not be material in amount. Target maintains a
standard system of accounting established and administered in accordance with
GAAP.
Section 3.5 Absence of Liabilities. Except as set forth on the Target
Financial Statements, Target does not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with GAAP), and whether due or to become due, except for liabilities
listed in Section 3.5 of the Target Disclosure Schedule.
Section 3.6 Accounts Receivable. The accounts receivable shown on the
Target balance sheet dated July 31, 1998 (the "Target Balance Sheet") arose in
the ordinary course of business and have been collected or are reasonably
expected to be collectible in the book amounts thereof, less an amount not in
excess of the allowance for doubtful accounts and returns provided for in the
Target Balance Sheet. The accounts receivable of Target arising after the date
of the Target Balance Sheet and prior to the Closing Date arose, or will arise,
in the ordinary course of business and have been collected or will be
collectible in the book amounts thereof, less allowances for doubtful accounts
and returns determined in accordance with the past practices of Target. Except
as set forth in Section 3.6 of the Target Disclosure Schedule, none of such
accounts receivables is subject to any valid and material claim of offset or
recoupment or counterclaim, and Target has no knowledge of any specific facts
that would be likely to give rise to any such claim; no material amount of such
accounts receivable are contingent upon the performance by Target of any
obligation; and no agreement for deduction or discount has been made with
respect to any such accounts receivable.
Section 3.7 Absence of Certain Changes or Events. Except as set forth in
Section 3.7 of the Target Disclosure Schedule, and except as reflected in the
Target Financial Statements, since July 31, 1998 Target has conducted its
business in the ordinary course and in a manner consistent with past practices,
and has not:
(a) to its knowledge, suffered any event or occurrence that has had
or could reasonably be expected to have a Material Adverse Effect on Target;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, adversely affecting its properties or business;
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(c) granted any increase in the compensation payable or to become
payable by Target to its officers or employees;
(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition of such
shares;
(e) issued any shares of its capital stock or any warrants, rights,
or options for, or entered into any commitment relating to such capital stock
except for exercises and conversions of employee stock options.
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any real
property or machinery, equipment or other operating property;
(h) sold, assigned, transferred, licensed or otherwise disposed of
any patent, trademark, trade name, brand name, copyright (or pending application
for any patent, trademark or copyright), invention, work of authorship, process,
know-how, formula or trade secret or interest thereunder or other material
intangible asset, except for non-exclusive licenses which were granted in the
ordinary course of business and in a manner consistent with past practices;
(i) entered into any material commitment or transaction (including
without limitation any borrowing or capital expenditure);
(j) incurred any liability, except in the ordinary course of business
and consistent with past practice;
(k) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except for liens for current taxes not yet due
and purchase money security interests incurred in the ordinary course of
business;
(l) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of ten thousand dollars
($10,000) or in the aggregate in excess of twenty-five thousand dollars
($25,000);
(m) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with any of its officers, directors or stockholders or any affiliate of any of
the foregoing, other than employee compensation and benefits and reimbursement
of employment related business expenses incurred in the ordinary course of
business;
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(n) agreed to take any action described in this Section 3.7 or which
to its knowledge would constitute a breach of any of the representations or
warranties of Target contained in this Agreement; or
Section 3.8 Taxes. As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) Target has prepared and timely filed all returns, estimates,
information statements and reports required to be filed prior to the Closing
Date with any taxing authority ("Returns") relating to any and all Taxes
concerning or attributable to Target or its operations, and such Returns are
true and correct in all material respects.
(b) Target, as of the Closing Date: (i) will have paid all Taxes
shown to be payable on such Returns covered by Section 3.8(a) and (ii) will have
withheld with respect to its employees all Taxes required to be withheld.
(c) There is no Tax deficiency outstanding or assessed or, to the
best of Target's knowledge, proposed against Target that is not reflected as a
liability on the Target Balance Sheet nor has Target executed any agreements or
waivers extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) Target has no material liabilities for unpaid Taxes that have not
been accrued for or reserved on the Target Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(e) Target is not a party to any tax-sharing agreement or similar
arrangement with any other party, or any contractual obligation to pay any Tax
obligations of, or with respect to any transaction relating to, any other person
or to indemnify any other person with respect to any Tax.
(f) Section 3.8 of the Target Disclosure Schedule sets forth the date
or dates through which the Internal Revenue Service ("IRS") has examined the
federal tax returns of Target and the date or dates through which any foreign,
state, local or other taxing authority has examined any other tax returns of
Target. Section 3.8 of the Target Disclosure Schedule also contains a complete
list of each year for which any federal, state, local or foreign tax authority
has obtained or has requested an extension of the statute of limitations from
Target and lists each tax case of Target currently pending in audit, at the
administrative appeals level or in litigation. Section 3.8 of the Target
Disclosure Schedule further lists the date and issuing authority of each
statutory notice of deficiency, notice of proposed assessment and revenue
agent's report issued to Target within the last twelve (12) months. Except as
set forth in Section 3.8 of the Target
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Disclosure Schedule, neither the IRS nor any foreign, state, local or other
taxing authority has, since Target's inception, examined or is in the process of
examining any federal, foreign, state, local or other tax returns of Target.
Neither the IRS nor any foreign, state, local or other taxing authority is now
asserting to the knowledge of Target, or threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith) except as set forth on Section 3.8 of the Target Disclosure Schedule.
There is no contract, agreement, plan or arrangement to which Target is a party
as of the date of this Agreement, including but not limited to the provisions of
this Agreement or any transaction contemplated hereby, covering any employee or
former employee of Target that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Sections
280(G), 404 or 162(m) of the Code.
Section 3.9 Tangible Assets and Real Property.
(a) Target owns or leases all tangible assets and properties which
are necessary for the conduct of its business as currently conducted or which
are reflected on the Target Balance Sheet or acquired since the date of the
Target Balance Sheet ("Material Tangible Assets"). The Material Tangible Assets
are in good operating condition and repair.
(b) Target has good and marketable title to all Material Tangible
Assets that it owns, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except for liens for current taxes not
yet due and payable and purchase money security interests.
(c) Assuming the due execution and delivery thereof by the other
parties thereto, all leases of Material Tangible Assets to which Target is a
party are in full force and effect and are valid, binding and enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. True and correct copies of all
such leases have been provided to Buyer.
(d) Target owns no real property. The Target Disclosure Schedule sets
forth a true and complete list of all real property leased by Target. Assuming
the due execution and delivery thereof by the other parties thereto, all such
real property leases are in full force and effect and are valid, binding and
enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy laws and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. True and
correct copies all such of real property leases have been provided to Buyer.
Section 3.10 Intellectual Property.
(a) Target owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights and mask works,
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and any applications for and registrations of such patents, trademarks, trade
names, service marks, copyrights and mask works, and all processes, formulae,
methods, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or materials
that are necessary to conduct the business of Target as currently conducted or
as currently planned to be conducted (all of which are referred to as the
"Target Intellectual Property Rights").
(b) Section 3.10 of the Target Disclosure Schedule contains an
accurate and complete description of (i) all patents and patent applications and
all registered trademarks, trade names, service marks and copyrights included in
the Target Intellectual Property Rights, including the jurisdictions in which
each such Target Intellectual Property Right has been issued or registered or in
which any such application for such issuance and registration has been filed,
(ii) all licenses, sublicenses, distribution agreements and other agreements to
which Target is a party and pursuant to which any person is granted rights with
respect to any Target Intellectual Property Rights or has the right to
manufacture, reproduce, market or exploit any product of Target (a "Target
Product") or any adaptation, translation or derivative work based on any Target
Product or any portion thereof, (iii) all licenses, sublicenses and other
agreements to which Target is a party and pursuant to which Target is authorized
to use any third party technology, trade secret, know-how, process, patent,
trademark or copyright, including software ("Licensed Intellectual Property"),
except for freely transferable "shrink wrap" software for which no royalties are
currently owed or in the future may be owed, (iv) all joint development
agreements to which Target is a party, and (v) all agreements with Governmental
Entities or other third parties pursuant to which Target has obtained funding
for research and development activities.
(c) Target is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Target Intellectual Property Rights or Licensed Intellectual Property.
(d) Target (i) as not received notice that it has been sued in any
suit, action or proceeding which involves a claim of infringement of any patent,
trademark, service ▇▇▇▇, copyright, trade secret or other proprietary right of
any third party; (ii) has no knowledge that the manufacturing, marketing,
licensing or sale of any Target Product or the provision of services in the
course of Target's business infringes any patent, trademark, service ▇▇▇▇,
copyright, trade secret or other proprietary right of any third party; and (iii)
has no knowledge of any claim challenging or questioning the validity or
effectiveness of any license or agreement relating to any Target Intellectual
Property Rights or Licensed Intellectual Property.
(e) All designs, drawings, specifications, source code, object code,
documentation, flow charts and diagrams incorporating, embodying or reflecting
any Target Product at any stage of its development or created in the course of
providing services to customers of Target (the "Target Components") were
written, developed and created solely and exclusively by employees of Target
without the assistance of any third party or were created by third parties who
assigned ownership of their rights with respect thereto to Target by means of
valid and enforceable agreements, copies of which have been provided to Buyer.
Target has at
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all times used commercially reasonable efforts to treat the Target Products and
Target Components as containing trade secrets and has not disclosed or otherwise
dealt with such items in such a manner as to cause the loss of such trade
secrets by their release into the public domain.
(f) Each person currently or formerly employed by Target (including
independent contractors, if any) that has or had access to confidential
information of Target has executed and delivered to Target a confidentiality and
non-disclosure agreement in the form previously provided to Buyer. Each person
currently or formerly employed by Target (including independent contractors, if
any) has executed and delivered to Target an inventions agreement in the form
previously provided to Buyer. To the best of Target's knowledge, neither the
execution or delivery of any such agreement, nor the carrying on of Target's
business as currently conducted and as currently proposed to be conducted by any
such person, as an employee or independent contractor, has conflicted or will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such persons is obligated.
Section 3.11 Bank Accounts. Section 3.11 of the Target Disclosure Schedule
sets forth the names and locations of all banks and other financial institutions
at which Target maintains accounts of any nature, the type of accounts
maintained at each such institution and the names of all persons authorized to
draw thereon or make withdrawals therefrom.
Section 3.12 Contracts.
(a) Except as set forth in Section 3.12 of the Target Disclosure
Schedule, Target is not a party or subject to any agreement, obligation or
commitment, written or oral:
(i) that calls for any fixed and/or contingent payment or
expenditure or any related series of fixed and/or contingent payments or
expenditures by or to Target.
(ii) with agents, advisors, salesmen, sales representatives,
independent contractors or consultants that are not cancelable by it on no more
than thirty (30) days' notice and without liability, penalty or premium;
(iii) that restricts Target from carrying on anywhere in the
world its business or any portion thereof as currently conducted;
(iv) to provide funds to or to make any investment in any other
person or entity (in the form of a loan, capital contribution or otherwise);
(v) with respect to obligations as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the obligation of any
other person or entity;
(vi) for any line of credit, standby financing, revolving credit
or other similar financing arrangement;
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(vii) with any distributor, original equipment manufacturer,
value added remarketer or other person for the distribution of any of the Target
Products; or
(viii) that is otherwise material to the business, financial
results of operations or prospects of Target.
(b) To the best of Target's knowledge, no party to any such contract,
agreement or instrument has expressed its intention to cancel, withdraw, modify
or amend such contract, agreement or instrument.
(c) Target is not in material default under or in material breach or
violation of, nor is there any valid basis for any claim of material default by
Target under, or material breach or violation by Target of, any contract,
commitment or restriction to which Target is a party or by which Target or any
of its properties or assets is bound or affected. To the best of Target's
knowledge, no other party is in material default under or in material breach or
violation of, nor, to the best of Target's knowledge, is there any valid basis
for any claim of material default by any other party under, or any material
breach or violation by any other party of, any contract, commitment, or
restriction to which Target is a party or by which Target or any of its
properties or assets is bound or affected.
Section 3.13 Labor Difficulties. Target is not engaged in any unfair labor
practice or in violation of any applicable laws respecting employment,
employment practices or terms and conditions of employment. There is no unfair
labor practice complaint against Target pending, or to the best of Target's
knowledge threatened, before any Governmental Entity. There is no strike, labor
dispute, slowdown, or stoppage pending, or to the best of Target's knowledge
threatened, against Target. Target is not now and has never been subject to any
union organizing activities. Target has never experienced any work stoppage or
other labor difficulty. To the best of Target's knowledge, except as set forth
in Section 3.13 of the Target Disclosure Schedule, no Target employees intend to
leave their employment, whether as a result of the transactions contemplated by
this Agreement or otherwise.
Section 3.14 Trade Regulation. Target has not terminated its relationship
with or refused to ship Target Products or services to any dealer, distributor,
third party marketing entity or customer which had theretofore paid or been
obligated to pay Target. To the best of Target's knowledge, all of the prices
charged by Target in connection with the marketing or sale of any Target
products or services have been in compliance with all applicable laws and
regulations. No claims have been asserted or, to the best of Target's knowledge,
threatened against Target with respect to the wrongful termination of any
dealer, distributor or any other marketing entity, discriminatory pricing, price
fixing, unfair competition, false advertising, or any other material violation
of any laws or regulations relating to anti-competitive practices or unfair
trade practices of any kind, and, to the best of Target's knowledge, no specific
situation, set of facts, or occurrence provides any basis for any such claim.
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Section 3.15 Environmental Matters.
(a) Except as set forth in the Target Disclosure Schedule, no
material amount of any substance that has been designated by applicable law or
regulation to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment (a "Hazardous Material"), excluding office, janitorial and
other supplies held in very limited quantities, is present, as a result of the
actions of Target or, to the best of Target's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water, that Target has
at any time owned, operated, occupied or leased. To the best of Target's
knowledge, no underground storage tanks are present under any property that
Target has at any time owned, operated, occupied or leased.
(b) At no time has Target transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous Materials
in violation of any law, rule, regulation or treaty promulgated by any
Governmental Entity (collectively, "Hazardous Materials Activities").
(c) Target currently holds all environmental approvals, permits,
licenses, clearances and consents (the "Environmental Permits") necessary for
the conduct of its business as such businesses is currently being conducted.
(d) No action, proceeding, writ, injunction or claim is pending or,
to the best of Target's knowledge, threatened concerning any Environmental
Permit or any Hazardous Materials Activity of Target. Target is not aware of any
fact or circumstance which could involve Target in any material environmental
litigation or impose upon Target any material liability concerning Hazardous
Materials Activities.
Section 3.16 Employee Benefit Plans.
(a) Section 3.16 of the Target Disclosure Schedule lists with respect
to Target or any trade or business (whether or not incorporated) which is a
member or which is under common control with Target within the meaning of
Section 414 of the Code (together, the "Target Employee Plans") (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended), (ii) all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit, dependent care insurance, life insurance or accident
insurance and other similar employee benefit plans, (iii) all unexpired
severance agreements, written or otherwise, for the benefit of, or relating to,
any current or former employee of Target and (iv) each loan to a non-officer
employee in excess of $10,000, loans to any officers and directors and any
fringe or employee benefit plans that apply to senior management of Target that
do not apply generally to all employees.
(b) With respect to each Target Employee Plan, Target has made
available to Buyer a true and correct copy of (i) such Target Employee Plan and
(ii) each trust agreement and group annuity contract, if any, relating to such
Target Employee Plan.
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(c) With respect to the Target Employee Plans, individually and in
the aggregate, no event has occurred, and to the best of Target's knowledge,
there exists no condition or set of circumstances in connection with which
Target could be subject to any material liability.
(d) With respect to the Target Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves on the financial
statements or books of Target. Neither Target nor any subsidiary or affiliate
maintains a pension plan subject to Title IV of ERISA or is party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in ERISA Section 3(37). No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Target is threatened against or with respect to any Target Employee
Plan, including any audit or inquiry by the IRS or the United States Department
of Labor.
(e) Target is not a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of Target, the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving Target of
the nature contemplated by this Agreement, (iii) agreement with any officer of
Target providing any term of employment or compensation guarantee extending for
a period longer than six months from the date hereof or for the payment of
compensation in excess of $20,000 or (iv) agreement or plan, including any stock
option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the 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.
(f) Target has taken all steps necessary to effect termination of its
401(k) plan as of the Effective Time.
Except as set forth in Section 3.16 of the Target Disclosure Schedule, all
Target Employee Plans comply with and are and have been operated in accordance
with each applicable provision of ERISA, the Code, other federal statutes, state
law (including, without limitation, state insurance law) and the regulations and
rules promulgated pursuant thereto or in connection therewith. Each Target
Employee Plan which is a group health plan (within the meaning of Section
5000(b)(1) of the Code) complies with and has been maintained and operated in
accordance with each of the requirements of Section 4980B of the Code and Part 6
of Subtitle B of Title I of ERISA. Other than continued health care coverage
required under the Omnibus Reconciliation Act of 1985, as amended ("COBRA"),
none of the Target Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any person. With respect to each Target Employee
Plan, Target has complied with (i) the applicable health care continuation and
notice provisions of COBRA and the regulations thereunder; (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder; and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations thereunder.
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3.17 Compliance with Laws. Target has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any statute, law or regulation applicable to the
ownership or operation of its business, including, without limitation, United
States statutes, laws and regulations governing the license and delivery of
technology and products abroad by persons subject to the jurisdiction of the
United States.
3.18 Employees and Consultants. Section 3.18 of the Target Disclosure
Schedule contains a list of the names of all employees and consultants of
Target, their salaries or wages, other compensation and dates of employment and
positions.
3.19 Litigation. Except as set forth in Section 3.19 of the Target
Disclosure Schedule, there is no action, suit, proceeding, claim, arbitration or
investigation pending before any agency, court or tribunal, or to the best of
Target's knowledge, threatened, against Target or any of its properties or
officers or directors (in their capacities as such). There is no judgment,
decree or order against Target or, to the best of Target's knowledge, any of its
directors or officers (in their capacities as such) that could prevent, enjoin
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target.
3.20 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon Target which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any current
or future business practice of Target, any acquisition of property by Target, or
the conduct of business by Target as currently conducted or as currently
proposed to be conducted.
3.21 Governmental Authorization. Other than with respect to Target
Intellectual Property Rights, Target has obtained each governmental consent,
license, permit, grant or other authorization of a Governmental Entity that is
required for the operation of the business of Target as currently conducted
(collectively, the "Target Authorizations"), and all such Target Authorizations
are in full force and effect.
3.22 Insurance. Section 3.22 of the Target Disclosure Schedule contains a
list and description of all insurance policies of Target. There is no material
claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies. All
premiums due and payable under all such policies have been paid, and Target is
otherwise in compliance with the terms of such policies. Target has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies.
3.23 Indemnification Claims. Section 3.23 of the Target Disclosure Schedule
sets forth a list of all persons who are parties to director, officer and/or
employee indemnification agreements with Target (the "Indemnification
Agreements"). Except as set forth in Section 3.23 of the Target Disclosure
Schedule, there are no outstanding claims under any of the Indemnification
Agreements or under any indemnification rights granted pursuant to the Articles
of Incorporation or Bylaws of Target (as currently in effect); and to the best
of Target's knowledge, there are no facts or circumstances that either now, or
with the passage of time, could
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reasonably be expected to provide a basis for a claim under any such
Indemnification Agreement or under any indemnification rights granted pursuant
to the Articles of Incorporation or Bylaws of Target.
3.24 No Brokers. Except as set forth in Section 3.24 of the Target
Disclosure Schedule, Target is not obligated for the payment of fees or expenses
of any broker, finder or other person in connection with the origination,
negotiation or execution of this Agreement or the other Target Transaction
Documents or any transaction contemplated hereby or thereby. Target agrees to
indemnify and hold Buyer and its affiliates harmless from and against any and
all claims, liabilities or obligations with respect to any such fees,
commissions or expenses.
3.25 Real Property Holding Corporation. Target is not a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
3.26 Certain Documents. Target has made available to Buyer, or its
representatives, for its examination: (i) Target's minute book; (ii) all
permits, orders, and consents issued by any Governmental Entity with respect to
Target and (iii) all documents requested by Buyer in written "due diligence"
requests. The corporate minute books and other corporate records of Target are
complete and accurate in all material respects, and the signatures appearing on
all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction. Target has delivered or made available to Buyer true
and complete copies of all documents which are referred to in this Article III
or in the Target Disclosure Schedule.
3.27 Payments Resulting from Mergers. Neither the consummation nor
announcement of any transaction contemplated by this Agreement will (either
alone or upon the occurrence of any additional or further acts or events) result
in any material payment (whether of severance pay or otherwise) becoming due
from Target to any director, officer, employee or former employee thereof under
(i) any management, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or employee or any
plan, agreement or understanding similar to any of the foregoing, or any "rabbi
trust" or similar arrangement, or (ii) material benefit under any Target
Employee Plan being established or becoming accelerated, vested or payable.
3.28 Interested Party Transactions.
To the knowledge of Target, no director, officer or stockholder of Target
has any interest in (i) any material equipment or other property or asset, real
or personal, tangible or intangible, including, without limitation, any of the
Target Intellectual Property Rights, used in connection with or pertaining to
the business of Target, (ii) any creditor, supplier, customer, manufacturer,
agent, representative, or distributor of any of the Target Products, (iii) any
entity that competes with Target, or with which Target is affiliated or has a
business relationship, or (iv) any agreement, obligation or commitment, written
or oral, to which Target is a party; provided, however, that no such person
shall be deemed to have such an interest solely by virtue
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of ownership of less than five percent (5%) of the outstanding stock or debt
securities of any publicly held company, the stock or debt securities of which
are traded on a recognized stock exchange or on the Nasdaq National Market.
Target is not a party to any (i) agreement with any officer or other employee of
Target the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Target in the
nature of any of the transactions contemplated by this Agreement, or (ii)
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.
3.29 No Existing Discussions. As of the date hereof, Target is not engaged,
directly or indirectly, in any discussions or negotiations with any other party
with respect to a Target Acquisition Proposal (as defined in Section 6.1).
3.30 No Misrepresentation. No representation or warranty by Target in this
Agreement, and no statement, certificate or schedule furnished or to be
furnished by or on behalf of Target pursuant to this Agreement, when taken
together, contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make such
statements, in light of the circumstances under which they were made, not
misleading.
3.31 Approval of Stockholders. Target has taken all action necessary in
accordance with the law of the State of Delaware and its Certificate of
Incorporation to obtain the approval of the Merger by Target stockholders.
Target has prepared and, after receiving the authorization of Buyer, distributed
an information statement (the "Information Statement") to its stockholders for
the purpose of soliciting the Target Stockholders. The Information Statement
includes the recommendation of and approval of the merger by the Board of
Directors of Target in favor of the Merger and this Agreement. Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Information Statement, Target shall promptly inform Buyer of such occurrence
and cooperate in mailing to stockholders of Target, such amendment or
supplement. Target shall take all other action necessary or advisable to secure
the vote or consent of stockholders required to effect the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Except as set forth in the disclosure schedule delivered by Buyer to Target
on or before the date of this Agreement and attached hereto (the "Buyer
Disclosure Schedule"), or in the Buyer SEC Reports (as defined herein), Buyer
and Sub represent and warrant to Target as follows:
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Section 4.1 Organization. Each of Buyer and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect on Buyer and
its Subsidiaries, taken as a whole.
Section 4.2 Buyer Capital Structure.
(a) The authorized capital stock of Buyer consists of fifty million
(50,000,000) shares of Buyer Common Stock, $0.001 par value, and two million
(2,000,000) shares of preferred stock, $0.001 par value ("Buyer Preferred
Stock"). As of August 1, 1998: (i) 26,106,690 shares of Buyer Common Stock were
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable; (ii) no shares of Buyer Common Stock were held in the
treasury of Buyer or by Subsidiaries of Buyer; (iii) approximately 4,978,664
shares of Buyer Common Stock were reserved for future issuance pursuant to stock
options granted and outstanding under Buyer's stock option plans (the "Buyer
Option Plans") and rights outstanding under Buyer's employee stock purchase plan
(the "Buyer Purchase Plan"); and (iv) 1,645,600 shares of Buyer Common Stock
were reserved for issuance upon conversion of Buyer's outstanding 4 3/4%
convertible subordinated notes due 2002. As of the date of this Agreement, none
of the shares of Buyer Preferred Stock are issued and outstanding. The
authorized capital stock of Sub consists of one thousand (1,000) shares of
common stock, par value $0.001 per share ("Sub Common Stock"), of which one
hundred (100) shares are or will be issued and outstanding as of the Closing
Date. All of the outstanding shares of capital stock of Sub are duly authorized,
validly issued, fully paid and nonassessable, and all such shares are owned by
Buyer free and clear of all security interests, liens, claims, pledges,
agreements, limitations on Buyer's voting rights, charges or other encumbrances
of any nature.
(b) Except as set forth in Section 4.2(a) or as reserved for future
grants of options under the Buyer Option Plans or the Buyer Purchase Plan, there
are no equity securities of any class of Buyer, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in this Section 4.2, there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Buyer is a party or by which it is bound obligating Buyer to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Buyer or obligating Buyer to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. To the best knowledge of Buyer,
there are no voting trusts, proxies or other agreements or understandings with
respect to the shares of capital stock of Buyer.
(c) The shares of Buyer Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid, and
nonassessable, and free of and not subject to any preemptive rights or rights of
first refusal.
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Section 4.3 Authority; No Conflict; Required Filings and Consents.
(a) Buyer and Sub have all requisite corporate power and authority to
enter into this Agreement and the other documents required to be executed and
delivered by Buyer or Sub hereunder (collectively, the "Buyer Transaction
Documents") and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Buyer Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Buyer and Sub, respectively. This Agreement and the Buyer Transaction
Documents to which they are parties have been duly executed and delivered by
Buyer and Sub and constitute the valid and binding obligations of Buyer and Sub,
respectively, enforceable in accordance with their terms, except as such
enforceability may be limited by (i) bankruptcy laws and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Buyer and Sub and
the other Buyer Transaction Documents do not, and the consummation of the
transactions contemplated hereby or thereby will not, (i) conflict with, or
result in any violation or breach of any provision of the Certificate of
Incorporation or Bylaws of Buyer or Sub, (ii) result in any violation or breach
of, or constitute (with or without notice or lapse of time, or both) a default
(or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Buyer or Sub is a party or by which
either of them or any of their properties or assets may be bound, or (iii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or Sub or any of its or their properties or assets, except in the case of (ii)
and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not be reasonably likely to have a
Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, or that
would not interfere with the consummation by Buyer and Sub of its obligations
under this Agreement and the other Buyer Transaction Documents.
(c) The outstanding shares of Sub Common Stock are the only shares of
Sub capital stock entitled to vote with respect to the Merger, and the approval
of this Agreement by the holders of a majority of the issued and outstanding
shares of Sub Common Stock is the only approval of Sub stockholders required for
the consummation of the Merger, no other class vote of any series or class of
Sub capital stock being required. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to Buyer or any of its Subsidiaries in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger in accordance with the DGCL, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign country
or which Buyer is obligated to file pursuant to the Declaration of Rights
attached hereto as Annex 6.11 and (iii) such other consents, authorizations,
filings, approvals and registrations which, if not
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obtained or made, would not be reasonably likely to have a Material Adverse
Effect on Buyer and its Subsidiaries, taken as a whole.
Section 4.4 SEC Filings; Financial Statements.
(a) Buyer has filed and made available to Target all forms, reports
and documents required to be filed by Buyer with the SEC since December 31, 1995
other than registration statements on Form S-8 (collectively, the "Buyer SEC
Reports"). The Buyer SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Buyer SEC Reports or necessary in
order to make the statements in such Buyer SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of Buyer's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Buyer SEC Reports, including any Buyer
SEC Reports filed after the date of this Agreement until the Closing, complied
or will comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q promulgated
by the SEC) and fairly presented or will present the consolidated financial
position of Buyer and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements do not contain notes and
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount. The unaudited consolidated balance
sheet of Buyer as of June 30, 1998 is referred to herein as the "Buyer Balance
Sheet."
(c) The Buyer is eligible to utilize Form S-3 under the Securities
Act for purposes of registering the shares of Buyer Common Stock being issued in
the Merger, and Buyer is not aware of any circumstance or event which would
cause Buyer to become ineligible to utilize such Form S-3 for such purpose.
Buyer will use its best efforts to file a Form S-3 under the Securities Act as
soon as practicable but not later than ninety (90) days after the Closing Date.
Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in
writing to Target or as otherwise disclosed in the Buyer SEC Reports, Buyer and
its Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in accordance
with GAAP), and whether due or to become due, which individually or in the
aggregate would be reasonably likely to have a Material Adverse Effect on Buyer
and its Subsidiaries, taken as a whole, other than (i) liabilities reflected in
the Buyer Balance Sheet, (ii) liabilities specifically described in this
Agreement, and (iii) normal or
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recurring liabilities incurred since June 30, 1998, in the ordinary course of
business consistent with past practices.
Section 4.6 Absence of Certain Changes or Events. Since June 30, 1998,
Buyer has conducted its business only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been: (i) any
event or occurrence that has had a Material Adverse Effect on Buyer and its
Subsidiaries, taken as a whole; (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to Buyer having a Material Adverse Effect
on Buyer and its Subsidiaries, taken as a whole; (iii) any material change by
Buyer in its accounting methods, principles or practices to which Target has not
previously consented in writing; or (iv) any revaluation by Buyer of any of its
assets having a Material Adverse Effect on Buyer and its Subsidiaries, taken as
a whole.
Section 4.7 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.8 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or to the best knowledge of Buyer,
threatened, against Buyer or Sub which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
Section 4.9 Tax Representations. Buyer has no current plan or intention to
cause Target to issue additional shares of Target Common Stock that would result
in Buyer losing control of Target within the meaning of Section 368(c)(1) of the
Internal Revenue Code. Buyer has no current plan or intention to reacquire any
of the Buyer Common Stock issued in connection with the Merger. Buyer has no
current plan or intention to liquidate Target, to merge Target with or into
another corporation, to sell or otherwise dispose of the stock of Target except
for transfers of stock to corporations controlled by Buyer or to cause Target to
sell or otherwise dispose of any of its assets or any of the assets acquired
from Sub, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by Target. After the Effective
Time, Target will continue its historic business or use a significant portion of
its historic business assets in a business. After the Effective Time, Buyer
intends to cause Target to continue its historic business. Buyer does not own,
nor has it owned during the past five years, any shares of Target Common Stock.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Tax-Free Reorganization. Buyer and Target shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.
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Section 5.2 Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party, including by
provision of information. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
Section 5.3 Registration. The shares of Buyer Common Stock issued in the
Merger shall be registered pursuant to the Securities Act of 1933, as amended,
subject to the terms and conditions set forth in Annex 5.3 hereto.
Section 5.4 Expenses. The parties shall each pay their own legal,
accounting and financial advisory fees and other out-of-pocket expenses related
to the negotiation, preparation and carrying out of this Agreement and the
transactions herein contemplated. In the event the Merger is consummated, legal,
accounting and financial advisory fees and other out-of-pocket expenses incurred
by Target and the Target stockholders relating to the negotiation, preparation
and carrying out of this Agreement and the transactions herein contemplated
shall be borne by the Target securityholders pro rata, except that Buyer will
bear $25,000 in legal expenses of Target in connection with the Merger. In the
event the Merger is not consummated, each party will pay its own fees and
expenses.
Section 5.5 Employee Arrangements.
(a) Buyer shall offer, or cause the Surviving Corporation to offer,
employment with the Surviving Corporation after the Closing to all of the
employees of Target listed on Annex 5.5 hereto. All such Target employees
accepting employment with the Surviving Corporation shall be eligible for the
same employee benefit plans, on the same terms, as other employees of Buyer of
comparable rank and length of service. In determining eligibility for benefits
which depend on length of service, Buyer shall provide each such Target employee
with full credit for the period of such employee's service with Target (other
than with respect to options, if any, granted by Buyer to such Target
employees). Except as set forth in this Section 5.11, the terms of employment of
such Target employees shall be determined by agreement of Buyer (or the
Surviving Corporation, as the case may be) and each such employee. At the
Effective Time, Buyer shall issue options to purchase an aggregate of 100,000
shares of Buyer's Common Stock to the individuals and in the amounts set forth
on Annex 5.5 hereto, which options shall vest as to one-eighth of the amount of
shares after six months and then monthly for thirty six months thereafter and
shall have an exercise price equal to the fair market value of the Buyer Common
Stock on the date of grant.
Buyer shall provide a severance package, which will be comparable to the
severance package as set forth on Annex 5.5 to each Target employee identified
in Annex 5.5 (i) who is
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either not offered employment with Buyer or (ii) whose employment with Buyer or
the Surviving Corporation is terminated by Buyer within six (6) months after the
Effective Time if such termination is not for cause.
Section 5.6 Target Employee Retention. Buyer agrees to pay additional
consideration in the form of Buyer Common Stock to be divided among the five
principals of Target identified in Annex 5.6 (the "Principals") based on the
retention of the Target employees identified at the Closing Date in Annex 2.1
("Identified Employees"), provided the Principals are employed by Buyer on the
Payout Date and the Identified Employees are willing and able to remain employed
by Buyer or the Surviving Corporation after the Effective Time on terms
reasonably satisfactory to Buyer employees ("Earnout"). This Earnout will be
pro-rated based on the number of Identified Employees that have been retained as
further described in Annex 5.6.
Section 5.7 Registration Statement; Proxy Statement/Prospectus. Target will
ensure that the information supplied by Target for inclusion in the registration
statement on Form S-3 pursuant to which shares of Buyer Common Stock issued in
the Merger will be registered with the SEC (the "Registration Statement") shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Target for inclusion in the proxy statement/prospectus (the "Proxy
Statement") to be sent to the stockholders of Target in connection with the
meeting of Target's stockholders to consider this Agreement and the Merger (the
"Target Stockholders' Meeting") shall not, on the date the Proxy Statement is
first mailed to stockholders of Target, at the time of the Target Stockholders'
Meeting, or at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it was made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made in the Proxy Statement not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Target Stockholders' Meeting Stockholders' Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to Target or any of its Affiliates, officers or directors should be
discovered by Target which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Target shall
promptly inform Buyer.
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
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(a) Governmental Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity shall have been obtained or filed, or shall
have occurred as the case may be.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or restricting
Buyer's conduct or operation of the business of Buyer or Target after the Merger
shall have been issued, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic Governmental Entity,
seeking any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal or
prevents or prohibits the Merger.
(c) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the holders of outstanding
shares of Target Common Stock, as required by Target's Certificate of
Incorporation and the DGCL.
Section 6.2 Additional Conditions to Obligations of Buyer and Sub. The
obligations of Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following additional conditions, any of which may be
waived in writing exclusively by Buyer and Sub:
(a) Representations and Warranties. The representations and
warranties of Target set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement, except for changes
contemplated by this Agreement, and Buyer shall have received a certificate
signed on behalf of Target by an executive officer of Target to such effect.
(b) Performance Obligations. Target 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, and Buyer shall have received a
certificate signed on behalf of Target by an executive officer of Target to such
effect.
(c) Confidentiality and Inventions Agreements. Buyer shall have
received confidentiality and inventions assignment agreements signed by each
employee in substantially the form annexed hereto as Annex 6.2(c), and each such
confidentiality and inventions assignment agreement shall be in full force and
effect.
(d) Non-Compete Agreements. Buyer shall have received from each of
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Key
Employees"), a non-competition and non-solicitation agreement in substantially
the form annexed hereto as Annex 6.2(d).
(e) Legal Opinion. Buyer shall have received a written opinion from
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,counsel to Target, reasonably satisfactory in form
and substance to Buyer.
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(f) No Material Adverse Effect. Since June 30, 1998, there has been
no event or occurrence that had a Material Adverse Effect on Target.
(g) Third-Party Consents and Waivers. Target shall have provided all
notices to third parties, and shall have received all third-party consents or
waivers, required for or in connection with the consummation of the transactions
contemplated by this Agreement under any contract set forth (or required to be
set forth) in Section 3.4 of the Target Disclosure Schedule.
(h) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by all of the securityholders of Target.
(i) Target 401(k) Plan. Target shall as of the Effective Time,,
terminate Target's 401(k) plan (the "Plan") and no further contributions shall
be made to the Plan. Target shall provide to Buyer (i) executed resolutions of
the Board of Directors of Target authorizing the termination and (ii) an
executed amendment to the Plan sufficient to ensure compliance with all
applicable requirements of the Code and the regulations thereunder so that the
tax-qualified status of the Plan will be maintained at the time of termination.
If annual returns have not been filed for the Plan for any years for which such
returns are required to be filed, Target shall file such returns under the U.S.
Department of Labor's Delinquent Filer Voluntary Compliance Program.
(j) Buyer shall have received from all Target stockholders completed
Investor Representation Letters and Questionnaires in a form reasonably
satisfactory to Buyer.
Section 6.3 Additional Conditions to Obligations of Target. The obligation
of Target to effect the Merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived, in writing,
exclusively by Target:
(a) Representations and Warranties. The representations and
warranties of Buyer and Sub 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, except for changes
contemplated by this Agreement, and Target shall have received a certificate
signed on behalf of Buyer by an executive officer of Buyer to such effect.
(b) Performance Obligations. Buyer and Sub shall have performed in
all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date; and Target shall have received a
certificate signed on behalf of Buyer by an executive officer of Buyer to such
effect.
(c) Legal Opinion. Target shall have received a written opinion from
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, counsel to Buyer, reasonably satisfactory in
form and substance to Target.
Section 6.4 Post Closing Covenant. Target agrees to deliver to Buyer an
accurate balance sheet for Target as of the Closing Date.
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ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of Target
contained in this Agreement or any instrument delivered pursuant to this
Agreement shall survive the Effective Time and shall continue in full force and
effect until the second anniversary of this Agreement. The second anniversary of
the Agreement is sometimes referred to as the "Termination Date".
Section 7.2 Indemnification by Target Stockholders.
(a) Subject to the terms and conditions contained herein, the
stockholders of Target immediately prior to the Effective Time hereby agree to
indemnify, defend and hold harmless Buyer, its stockholders, officers,
directors, employees and attorneys, all Subsidiaries and Affiliates of Buyer,
and the respective officers, directors, employees and attorneys of such entities
(all such persons and entities being collectively referred to as the "Buyer
Group") from, against, for and in respect of any and all claims, losses,
liabilities, damages, costs and expenses (including reasonable legal fees and
expenses and expenses of investigation and defense) which any member of the
Buyer Group may sustain or incur (collectively, "Buyer Losses") which are caused
by or arise out of any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by Target in this Agreement, the Target
Disclosure Schedule or the officer certificates delivered pursuant to Section
6.2. References to stockholders of Target, Target stockholders or words of
similar import in this Article VII shall be deemed to be references to the
persons who were holders of securities, including stock, options and warrants,
of Target immediately prior to the Effective Time.
(b) The maximum aggregate liability of the stockholders of Target
pursuant to Section 7.2(a) shall be limited to the total amount of consideration
paid by Buyer to Target in this Merger. The parties agree Buyer's first recourse
will be the $370,000 Earnout described in Section 5.13. Anything in this
Agreement to the contrary notwithstanding, the stockholders of Target shall not
be liable for indemnification under this Section 7.2 until the aggregate of all
amounts for which indemnity due and payable is more than $50,000, in which case
Buyer shall be entitled to indemnification for the full amount of the
indemnification including the first $50,000.
(c) The obligation of the stockholders of Target to indemnify members
of the Buyer Group for a Buyer Loss under this Article VII is subject to the
condition that the Stockholder Representative (as defined in Section 7.9) shall
have received an Indemnification Claim (as defined in Section 7.3(b)) for such
Buyer Loss on or before (i) the first anniversary of the Closing Date, with
respect to Buyer Losses arising under Section 7.2(a)(i), and (ii) the
Termination Date, with respect to Buyer Losses arising under Section 7.2(a)(ii).
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Section 7.3 Procedures for Indemnification.
(a) As used in this Article VII, the term "Indemnitor" means the
party or parties against whom indemnification hereunder is sought, and the term
"Indemnitee" means the member or members of the Buyer Group seeking
indemnification hereunder.
(b) A claim for indemnification hereunder (an "Indemnification
Claim") shall be made by the Indemnitee by delivery of a written notice to the
Stockholder Representative requesting indemnification and specifying the basis
on which indemnification is sought in reasonable detail (and shall include
relevant documentation related to the Indemnification Claim), the amount of the
asserted Buyer Losses and, in the case of a Third Party Claim (as defined in
Section 7.4), containing (by attachment or otherwise) such other information as
Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 7.4 hereof shall be observed by Indemnitee and
Indemnitor. If the Indemnification Claim involves a Tax Claim, the procedures
set forth in Section 7.6 hereof shall be observed by the Indemnitee and
Indemnitor.
Section 7.4 Defense of Third Party Claims. Should any claim be made, or
suit or proceeding be instituted against an Indemnitee which, if prosecuted
successfully, would be a matter for which such Indemnitee is entitled to
indemnification under this Article VII (a "Third Party Claim"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
(other than Third Party Claims with respect to Taxes) shall be subject to the
following terms and conditions:
(a) Indemnitee shall give the Stockholder Representative written
notice of any such claim promptly after receipt by Indemnitee of notice thereof,
and Indemnitor may undertake control of the defense thereof by counsel of its
own choosing reasonably acceptable to Indemnitee. Indemnitee may participate in
the defense through its own counsel at its own expense. The assumption of the
defense of any Third Party Claim by Indemnitor shall be an acknowledgment by
Indemnitor that such Third Party Claim is subject to indemnification under the
provisions of this Article VII and that such provisions are binding on
Indemnitor. If, however, Indemnitor fails or refuses to undertake the defense of
such Third Party Claim within ten (10) days after written notice of such claim
has been delivered to the Stockholder Representative by Indemnitee, Indemnitee
shall have the right to undertake the defense, compromise and, subject to
Section 7.5, settlement of such Third Party Claim with counsel of its own
choosing. Failure of Indemnitee to furnish written notice to the Stockholder
Representative of a Third Party Claim shall not release Indemnitor from
Indemnitor's obligations hereunder, except to the extent Indemnitor is
prejudiced by such failure.
(b) Indemnitee and Indemnitor shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing
employees of Indemnitee as may be reasonably necessary for the preparation of
the defense of any such Third Party Claim or for testimony as witness in any
proceeding relating to such claim.
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Section 7.5 Settlement of Third Party Claims. No settlement by Indemnitee
of a Third Party Claim shall be made without the prior written consent by or on
behalf of Indemnitor, which consent shall not be unreasonably withheld or
delayed. If Indemnitor has assumed the defense of a Third Party Claim as
contemplated by Section 7.4(a), no settlement of such Third Party Claim may be
made by Indemnitor without the prior written consent by or on behalf of
Indemnitee, unless such settlement includes a complete release of all claims
against Indemnitee.
Section 7.6 Tax Claims.
(a) Should Buyer or Target receive any notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding
(including the issuance of a "30-Day Letter," a "90-Day Letter" and a notice of
audit) involving Indemnitor which, if determined adversely to the taxpayer,
would be grounds for indemnification under Section 7.2 with respect to Taxes (a
"Tax Claim"), Buyer or Target shall notify Indemnitor promptly in writing;
provided, however, that a failure to give such notice will not affect Buyer or
Target's right to indemnification hereunder that unless Indemnitor establishes
(and then only to the extent) that such failure diminished the ability of
Indemnitor to avoid the Tax liability in question. In addition, Buyer or Target
shall request the longest available extension of the time to contest, if there
are fewer than 30 days to contest.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, Indemnitor may, at
its election and expense, control the conduct of such audit or proceeding, and
Buyer or Target, as appropriate, shall provide Indemnitor reasonably requested
documentation to facilitate Indemnitor in controlling and conducting such audit
or proceeding; provided, that Indemnitor shall not settle any such audit or
proceeding without the advance written consent of Buyer, which consent shall not
be unreasonably withheld. Buyer or Target also may participate in any such audit
or proceeding and, if Indemnitor does not assume the defense of any such audit
or proceeding, Buyer or Target may defend the same in such manner as it may deem
appropriate, including, but not limited to, settling such audit or proceeding
after giving five days' prior written notice to Indemnitor setting forth the
terms and conditions of settlement.
(c) Neither Buyer or Target nor Indemnitor shall enter into any
compromise or agree to settle any claim pursuant to any Tax audit or proceeding
which would adversely affect the other party for such period without the written
consent of the other party, which consent may not be unreasonably withheld.
Buyer or Target and Indemnitor shall cooperate in the defense against or
compromise of any claim in any audit or proceeding.
Section 7.7 Resolution of Indemnification Claim. Any Indemnification Claim
received by the Stockholder Representative pursuant to Section 7.3 above will be
resolved as follows:
(a) In the event that the Stockholder Representative gives written
notice contesting all, or a portion of, an Indemnification Claim to Indemnitee
(a "Contested Claim") within the period provided above in Section 7.4_(a), the
matter will be settled by binding arbitration pursuant to this Section 7.7(b),
unless otherwise agreed by the Stockholder Representative and the Indemnitee.
The final decision of the arbitrator shall be furnished to the
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Stockholder Representative and Indemnitee in writing and will constitute a
conclusive determination of the issue in question, binding upon the stockholders
of Target and Indemnitee and shall not be contested or appealed by any of them.
Section 7.8 Arbitration. Any Contested Claim shall be settled by
arbitration at a mutually agreeable location in Santa Clara, California and,
except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules") then in
effect. However, in all events, these arbitration provisions shall govern over
any conflicting rules which may now or hereafter be contained in the AAA Rules.
Any judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction over the subject matter thereof. The arbitrator shall
have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve a Contested Claim.
Section 7.9 Stockholder Representative. For purposes of this Agreement, the
stockholders of Target, without any further action on the part of any such
stockholder, shall be deemed to have consented to the appointment of ▇▇▇ ▇▇▇▇▇▇
as the representative of such stockholders (the "Stockholder Representative"),
as the attorney-in-fact for and on behalf of each such Stockholder, and the
taking by the Stockholder Representative of any and all actions and the making
of any decisions required or permitted to be taken by him under this Agreement,
including, without limitation, the exercise of the power to (i) agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
Indemnification Claims, (ii) resolve any Indemnification Claims and (iii) take
all actions necessary in the judgment of the Stockholder Representative for the
accomplishment of the foregoing and all of the other terms, conditions and
limitations of this Agreement. Accordingly, the Stockholder Representative has
unlimited authority and power to act on behalf of each stockholder of Target
with respect to this Agreement and the disposition, settlement or other handling
of all Indemnification Claims, rights or obligations arising from and taken
pursuant to this Agreement. The stockholders of Target will be bound by all
actions taken by the Stockholder Representative in connection with this
Agreement and Buyer shall be entitled to rely on any action or decision of the
Stockholder Representative. The Stockholder Representative will incur no
liability with respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other document
believed by it to be genuine and to have been signed by the proper person (and
shall have no responsibility to determine the authenticity thereof), nor for any
other action or inaction, except its own willful misconduct, bad faith or gross
negligence. In all questions arising under this Agreement, the Stockholder
Representative may rely on the advice of counsel, and for anything done, omitted
or suffered in good faith by the Stockholder Representative based on such
advice, the Stockholder Representative will not be liable to anyone. The
Stockholder Representative will not be required to take any action involving any
expense unless the payment of such expense is made or provided for in a manner
satisfactory to it.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
overnight delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Buyer, to:
The Vulcan Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Target, to
Scotch Bonnet Integration, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇ ▇▇▇ ▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
33
34
(c) If to Stockholder Representative, to:
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇ ▇▇▇ ▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to the Stockholders (as defined in Annex 5.5 hereof) to:
The address of such Holder as set forth in the stock transfer
books and other applicable records of Buyer.
Section 8.2 Interpretation. When a reference is made in this Agreement to
an article or a section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrases "the date of this Agreement," "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the first date written above. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. In
determining whether a Material Adverse Effect exists with respect to a party,
materiality shall be determined on the basis of the applicable party and all of
its subsidiaries, taken together as a whole, and not on the basis of the party
or any single Subsidiary alone. Reference to a party's "knowledge" mean actual
knowledge after reasonable inquiry of such party's directors, officers, and
other management-level employees who could reasonably be expected to have
knowledge of such matters. As used in this Agreement, the term "Governmental
Entity" means any (i) nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; or (iii) governmental or
quasi-governmental authority of any nature (including any governmental division,
department, agency, commission, official, organization, and any court or other
tribunal), and the term "Subsidiary" means, with respect to any party, any
corporation, at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
Section 8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
34
35
Section 8.4 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 8.5 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
Section 8.6 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 8.8 Third Party Beneficiary. Nothing contained in this Agreement is
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under, or by reason of this Agreement, except that the persons who are
stockholders of Target immediately prior to the Effective Time of the Merger
(and their successors and assigns) are express intended third party
beneficiaries of Articles I and II, Section 5.11, Article VII, and, to the
extent relevant to any of the foregoing, Article VIII and as such are entitled
to rely on the provisions hereof as if a party hereto.
[Remainder of Page Intentionally Left Blank]
35
36
IN WITNESS WHEREOF, each of Buyer, Sub, and Target has caused this
Agreement to be signed by its respective officer thereunto duly authorized and
the Stockholder Representative has signed this Agreement, as of the date first
written above.
THE VANTIVE CORPORATION SCOTCH BONNET INTEGRATION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
Title: President & CEO Title: President
SOLAR ACQUISITION CORPORATION STOCKHOLDER REPRESENTATIVE
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
▇▇▇ ▇▇▇▇▇▇,
Title: President as Stockholder Representative
36
37
Annex 2.1
DISTRIBUTION OF CERTAIN CONSIDERATION
The Holders shall divide the number of fully-paid and nonassessable shares of
Buyer Common Stock equal to $572,000 divided by the average closing price of
Buyer Common Stock for the five days preceding the Closing Date (as determined
by reference to the "Last Sale" price reported on the NASDAQ NMS) in the
proportions listed below:
------------------------ -----------
HOLDER PORTION
------------------------ -----------
▇▇▇ ▇▇▇▇▇▇ 32.54%
------------------------ -----------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -----------
▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -----------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -----------
Systar, Inc. 12.50%
------------------------ -----------
The Holders shall divide $143,000 in the proportions listed below:
------------------------ -----------
HOLDER PORTION
------------------------ -------------
▇▇▇ ▇▇▇▇▇▇ 32.54%
------------------------ -------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -------------
▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------ -------------
Systar, Inc. 12.50%
------------------------ -------------
38
Annex 5.3
Registration Rights for Buyer Common Stock
This Annex 5.9 is an annex to that certain Agreement and Plan of Merger
by and among The Vulcan Corporation, a Delaware corporation, Solar Acquisition
Corporation, a Delaware corporation and Scotch Bonnet Integration, Inc., a
Delaware corporation, dated September 2, 1998 (the "Merger Agreement"). All
capitalized terms used herein and not defined herein shall have the same meaning
as set forth in the Merger Agreement.
(a) Buyer shall use all reasonable efforts to cause the Buyer Common Stock
issued in exchange for Target Stock ("Registrable Buyer Common Stock") to be
registered under the Securities Act so as to permit the resale thereof, and in
connection therewith shall prepare and file with the SEC within forty five (45)
days following the Closing, and shall use all reasonable efforts to cause to
become effective no later than one hundred eighty (180) days following the
Closing, a registration statement (the "Registration Statement") on Form S-3 or
on such other form as is then available under the Securities Act covering such
Buyer Common Stock; provided, however, that each holder of such Buyer Common
Stock shall provide all such information and materials to Buyer and take all
such action as may be required in order to permit Buyer to comply with all
applicable requirements of the SEC and to obtain any desired acceleration of the
effective date of such Registration Statement. Such provision of information and
materials is a condition precedent to the obligations of Buyer pursuant to this
Annex 5.9. Buyer shall not be required to effect more than one (1) registration
under this Annex 5.9. The offering made pursuant to such registration shall not
be underwritten.
(b) Notwithstanding the provisions of Section (a) above, Buyer shall be
entitled to a one-time postponement of the declaration of effectiveness of the
Registration Statement prepared and filed pursuant to Section (a) for a period
of time up to forty-five (45) calendar days after the deadline therefor set
forth in Section (a), if the Board of Directors of Buyer, acting in good faith,
determines that there exists material nonpublic information about Buyer which
the Board does not wish to disclose in a registration statement, which
information would otherwise be required by the Securities Act to be disclosed in
the Registration Statement to be filed pursuant to Section (a) above.
(c) Subject to the limitations of Section (b) above, Buyer shall: (i)
prepare and file with the SEC the Registration Statement in accordance with
Section (a) with respect to the shares of Registrable Buyer Common Stock and
shall use all reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable after filing and to keep the Registration
Statement effective until the earlier of (A) one (1) year after the Effective
Time or (B) such time as the shares of Registrable Buyer Common Stock can be
sold without compliance with the registration requirements of the Securities
Act; (ii) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all securities proposed to be registered in the
39
Registration Statement during such period; and (iii) furnish to each holder of
Registrable Buyer Common Stock such number of copies of any prospectus
(including any preliminary prospectus and any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as each such holder may reasonably request in order to effect
the offering and sale of the shares of such Registrable Buyer Common Stock, but
only so long as Buyer shall be required under the provisions hereof to cause the
Registration Statement to remain effective.
(d) Notwithstanding any other provision of this Annex 5.9 but subject to
Section (e) below, Buyer shall have the right at any time to require that all
holders suspend open market offers and sales of Registrable Buyer Common Stock
whenever, and for so long as, in the reasonable judgment of Buyer in good faith
after consultation with counsel, there is or may be in existence material
undisclosed information or events with respect to Buyer (the "Suspension
Right"). In the event Buyer exercises the Suspension Right, such suspension will
continue for the period of time reasonably necessary for disclosure to occur at
a time that is not materially detrimental to Buyer and its stockholders or until
such time as the information or event is no longer material, each as determined
in good faith by Buyer after consultation with counsel. Buyer will use all
reasonable efforts to limit the length of any such suspension to thirty (30)
calendar days or less.
(e) If any holder of Registrable Buyer Common Stock shall propose to sell
any Registrable Buyer Common Stock pursuant to the Registration Statement, it
shall notify the General Counsel of Buyer of its intent to do so (including the
proposed manner and timing of all sales) at least three (3) full trading days
prior to such sale, and the provision of such notice to Buyer shall conclusively
be deemed to reestablish and reconfirm an agreement by such holder to comply
with the registration provisions set forth in this Agreement. Unless otherwise
specified in such notice, such notice shall be deemed to constitute a
representation that any information previously supplied by such holder expressly
for inclusion in the Registration Statement (as such information may have been
superseded by information provided subsequently) is accurate as of the date of
such notice. At any time within such three (3) trading day period, Buyer may
refuse to permit such holder to resell any Registrable Buyer Common Stock
pursuant to the Registration Statement; provided, however, that in order to
exercise this right, Buyer must deliver a certificate in writing to such holder
to the effect that a delay in such sale is necessary because a sale pursuant to
the Registration Statement in its then current form without the addition of
material, non-public information about Buyer could constitute a violation of the
federal securities laws; and provided further, that Buyer will use all
reasonable efforts to limit any such delay to as short a period as practicable
and agrees to notify such holder promptly upon termination of the suspension.
Notwithstanding anything to the contrary in this Agreement, Buyer will ensure
that in any event such holders of Registrable Buyer Common Stock shall have at
least thirty (30) trading days (prorated for partial quarters) available to sell
Buyer Common Stock during each calendar quarter (or portion thereof) after the
effectiveness of the Registration Statement until the first anniversary of the
Effective Time. For any offer or sale of any of Registrable Buyer Common Stock
by a holder of Registrable Buyer Common Stock in a transaction that is not
exempt under the Securities Act, the holder, in addition to complying with any
other
2
40
federal securities laws, shall deliver a copy of the final prospectus (or
amendment of or supplement to such prospectus) of Buyer covering the Registrable
Buyer Common Stock in the form furnished to such holder by Buyer to the
purchaser of any of the Registrable Buyer Common Stock on or before the
settlement date for the purchase of such Registrable Buyer Common Stock.
(f) Buyer will indemnify each holder of Registrable Buyer Common Stock,
each of its officers and directors and partners, and each person controlling
such holder within the meaning of Section 15 of the Securities Act against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any
registration, qualification or compliance effected pursuant to this Section
6.15, or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, or any
violation or any alleged violation by Buyer of any rule or regulation
promulgated under the Securities Act or the Exchange Act in connection with any
such registration, qualification or compliance, and Buyer will reimburse each
such holder, each of its officers and directors, and each person controlling
such holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, as such expenses are incurred; provided, however,
that Buyer will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to Buyer by
such holder or controlling person for use therein.
(g) Each holder of Registrable Buyer Common Stock will, if Registrable
Buyer Common Stock held by such holder is included in the securities as to which
such registration is being effected, indemnify Buyer, each of its directors and
officers, each person who controls Buyer within the meaning of Section 15 of the
Securities Act, and each other such holder of Registrable Buyer Common Stock,
each of its officers and directors and each person controlling such holder
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse Buyer, such other holders of
Registrable Buyer Common Stock, directors, officers, persons or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
such expenses are incurred, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration
3
41
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Buyer by such holder for use
therein.
(h) Each party entitled to indemnification under Section (f) or (g) (for
purposes of this Annex 5.9, the "Indemnified Party") shall give notice to the
party required to provide indemnification (for purposes of this Annex 5.9, the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that an Indemnified Party (together with all other
Indemnified Parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to differing or potentially differing interests between such Indemnified
Party and any other party represented by such counsel in such proceeding. The
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under Section (f) or (g)
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(i) Buyer shall pay all of the out-of-pocket expenses, other than
underwriting discounts and commissions, if any, incurred in connection with any
registration of Registrable Buyer Common Stock pursuant to this Annex 5.9,
including, without limitation, all registration and filing fees, printing
expenses, transfer agents' and registrars' fees, and the reasonable fees and
disbursements of Buyer's outside counsel and independent accountants.
4
42
Annex 5.5
EMPLOYMENT OF TARGET EMPLOYEES
Option and Employment Arrangements
The following persons shall be offered employment by Buyer as of the Effective
Time, and shall receive options to purchase Common Stock of the Buyer in the
amounts set forth opposite their names, in accordance with the terms set forth
in Section 5.11(a) of the Merger Agreement:
---------------------------- ---------------
PERSON OPTIONS
---------------------------- ---------------
▇▇▇ ▇▇▇▇▇▇ 27,000
---------------------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 14,000
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇▇▇ 14,000
---------------------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 11,500
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇▇ 8,000
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇▇▇▇ 6,000
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇▇▇▇ 6,000
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇ 3,000
---------------------------- ---------------
▇. ▇▇▇▇▇▇▇▇▇ 3,000
---------------------------- ---------------
▇▇▇▇ ▇▇▇▇ 3,000
---------------------------- ---------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,000
---------------------------- ---------------
▇▇▇▇▇ ▇▇▇▇▇▇ 1,500
---------------------------- ---------------
The following persons shall be offered work as independent contractors by Buyer
as of the Effective Time at the following rates:
---------------------------- ---------------
PERSON HOURLY RATE
---------------------------- ---------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $85.00
---------------------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $14.00
---------------------------- ---------------
Termination Arrangements:
The following persons shall have an opportunity to find positions with Buyer,
and, if no position is found, the severance provisions set forth below shall
operate: If ▇▇▇▇▇▇ ▇▇▇▇▇▇ is terminated without cause from Buyer within three
months of the Effective Date, he will participate in the standard Buyer
severance program (including one week's salary for every year of service).
If ▇▇▇▇▇ ▇▇▇▇▇▇ is terminated without cause from Buyer within two months of the
Effective Date, she will participate in the standard Buyer severance program
(including one week's salary for every year of service).
43
Annex 5.6
Employee Retention Pool
1. Additional Consideration Pool Payout. Subject to the provisions of paragraph
3 below, the following persons will receive on the first anniversary of the
Closing Date (the "First Anniversary") the following portions of the Additional
Consideration Pool (as defined below):
------------------------- --------------------
PERSON PORTION OF BONUS
POOL
------------------------- --------------------
▇▇▇ ▇▇▇▇▇▇ 32.54%
------------------------- --------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------- --------------------
▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------- --------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 18.32%
------------------------- --------------------
Systar, Inc. 12.50%
------------------------- --------------------
Other than ▇▇▇▇▇▇ ▇▇▇▇▇▇ and Systar, Inc., the persons named in the table above
must be employed at Buyer on the First Anniversary in order to receive their
individual portion of the Additional Consideration Pool, unless terminated by
Buyer other than for cause prior to the First Anniversary, in which case no
amount of the Additional Consideration Pool will be paid to such person.
2. Additional Consideration Pool Determination. The "Additional Consideration
Pool" will be determined in accordance with the following formula:
Additional Consideration Pool = the number of shares of Buyer Common Stock equal
to $370,000 divided by the average closing price of Buyer Common Stock for the
five trading days preceding the date of the Agreement (as determined by
reference to the "Last Sale" price reported on the NASDAQ NMS), multiplied by
the aggregate Formula Ratings of the persons employed by Buyer on the First
Anniversary, unless a person listed below has his or her employment relationship
terminated by Buyer for Buyer's convenience, in which case the Formula Rating
associated with that person shall not be deducted from the aggregate number.
--------------------------------------------- -----------------
PERSON FORMULA RATING
--------------------------------------------- -----------------
▇▇▇ ▇▇▇▇▇▇ .19
--------------------------------------------- -----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ .15
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇▇▇ .15
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇▇ .08
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇▇▇▇ .10
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇▇▇▇ .10
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇ .05
--------------------------------------------- -----------------
8
44
--------------------------------------------- -----------------
▇. ▇▇▇▇▇▇▇▇▇ .05
--------------------------------------------- -----------------
▇▇▇▇ ▇▇▇▇ .05
--------------------------------------------- -----------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ .08
--------------------------------------------- -----------------
3. No Fractional Shares. No certificate or scrip representing fractional shares
of Buyer Common Stock shall be issued in connection with the Bonus Pool payouts
set forth herein, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Buyer. Notwithstanding any
other provision of this Annex 5.13, the number of shares of Buyer Common Stock
to be issued to each person in connection herewith who would otherwise have been
entitled to receive a fraction of a share of Buyer Common Stock shall be rounded
up to the nearest whole share.
4. Timing of Payout. Provided that the Additional Consideration has been earned,
Buyer agrees to cause the shares of Buyer Common Stock to be issued within
thirty days of the date earned.
2
45
Annex 6.2(c)
THE VANTIVE CORPORATION
EMPLOYEE AGREEMENT
FOR
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
In consideration of employment by The Vantive Corporation ("The Company"),
and/or its divisions, or any parent, subsidiary, or affiliated company, and any
successor or assigns of any of them, The Company (hereinafter referred to as
"Employer") and the employee (hereinafter referred to as "Employee") agree as
follows:
1. Duties
During employment, Employee shall devote Employee's full energies, interest,
abilities, and productive time to the performance of this Agreement and shall
not, without Employer's prior written consent, render to others services of any
kind for compensation, or engage in any other business activity that would
materially interfere with the performance of Employee's duties under this
Agreement.
2. Trade Secrets - Confidential Business Information
(a) Employee specifically agrees that Employee will not at any time,
whether during or subsequent to the term of Employee's employment with Employer,
in any fashion, form, or manner, unless specifically consented to in writing in
advance by Employer, either directly or indirectly use or divulge, disclose or
communicate to any person, or corporation, in any manner whatsoever, any
confidential information of any kind, nature or description concerning any
matters affecting or relating to business of Employer, or any information
belonging to customers of Employer which Employer has agreed or agrees to hold
in confidence, including, without limiting the generality of the foregoing,
trade secrets, processes, formulas, computer programs, computer software, source
code, object code, data, know-how, inventories, techniques, product plans,
strategies, forecasts, the names, buying habits, or practices of any of its
customers, customer lists, codes designating customers or codes of other
information, its marketing methods and related data, credit information of
Employer or its customers, the names of any of its vendors or suppliers, costs
of materials, the prices it obtains or has obtained or at which it sells or has
sold its products or services, manufacturing and sales costs, lists of other
written records used in Employer's business, compensation paid to Employees and
other terms of employment, designs, parts lists, manufacturing diagrams,
schematics, test procedures, quality control procedures or any other
confidential information of, about, or concerning the business of Employer, its
manner of operation, or other confidential data of any kind, nature, or
description, the parties hereto stipulating that as between them, the same are
important, material, and confidential trade secrets and affect the successful
conduct of the Employer's business, and its goodwill, and that any breach of any
term of this paragraph is a material breach of this Agreement, (i) unless the
specific item of confidential information is or becomes available to persons
external to the Employer without violation of this Agreement or any other
confidentiality agreement among Employee and Employer and or any other
confidentiality agreement to which Employee is a party, or (ii) unless such
disclosure is compelled by law, in which event Employee agrees to give Employer
prior written notice of any disclosure to be made pursuant to this Subsection
46
EMPLOYEE NONDISCLOSURE AGREEMENT (CONTINUED)
(iii), and Employee, at Employer's expense, shall cooperate fully with Employer
and/or the Company to obtain protection orders, confidential treatment or other
such protective action as may be available to preserve the confidentiality of
the information required to be disclosed. All equipment, documents, memoranda,
reports, files, samples, books, correspondence, lists, other written and graphic
records and the like, affecting or relating to the business of Employer, which
Employee shall prepare, use, construct, observe, possess, or control shall be
and remain Employer's sole property.
(b) In the event of termination of employment with Employer, Employee
agrees to deliver promptly to Employer all equipment, notebooks, documents,
memoranda, reports, files, samples, books, correspondence, lists, or other
written or graphic records, and the like, relating to Employer's business, which
are or have been in Employee's possession or under Employee's control, and to
execute a Termination Certification in substantially the form set forth in
Exhibit B, attached hereto and incorporated herein.
(c) Employee agrees specifically that Employee will not impart to
subsequent employers information to be held by Employee in confidence as defined
above, nor use for Employee's own benefit any of the items covered by this
Agreement.
(d) Employee warrants to Employer that Employee's performance of his or her
duties will not breach any agreement or obligation to maintain as confidential
any proprietary information belonging to any former employer of Employee.
Employee further warrants to Employer that Employee has not taken nor disclosed
to any person at The Company and will not disclose nor use in the performance of
Employee's duties at The Company, any confidential or proprietary information or
trade secrets belonging to any former or concurrent employer of Employee, if
any, or bring onto the Employer's premises any unpublished documents or any
property belonging to any former or any concurrent employers, unless consented
to in writing by said employees.
(e) Employee agrees that for six months after termination of employment
with Employer, Employee will not recruit or hire any other employee of The
Vantive Corporation without Employer's prior written consent.
3. Inventions
(a) Employee agrees to disclose promptly to the Employer, in writing, all
inventions, developments, and discoveries, which, during the period of
employment with Employer, Employee has or may make or conceive either solely or
jointly with others that relate to any inventions or matters described in
subparagraph (b) below.
(b) As to any inventions made by Employee during the term of his
employment, solely or jointly with others, which are made with Employer's
equipment, supplies, facilities, trade secrets, or time, or which relate to the
business of Employer or Employer's actual or demonstrably anticipated research
or development, or which result from any work performed by Employee for
Employer, Employee agrees that such inventions shall belong to Employer and
promises to assign such inventions to Employer and cooperate with Employer to
obtain patents or copyrights on the inventions for Employer in the United States
and all foreign countries. Employee also agrees that Employer shall have the
right to keep such inventions as trade secrets, if Employer chooses. Employee
agrees to assign to Employer his rights in any other
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EMPLOYEE NONDISCLOSURE AGREEMENT (CONTINUED)
inventions where Employer is required to grant those rights to the U.S.
Government or any agency thereof.
Employee acknowledges that all original works of authorship which are made
by Employee (solely or jointly with others) within the scope of his employment
and which are protectable by copyright are "works made for hire," as that term
is defined in the United States Copyright Act of 1976 (17 U.S.C., Section 101).
(c) This Agreement does not apply to any inventions which are the subject
of Section 2870 of the California Labor Code, attached as Exhibit A. Receipt of
a copy of that Section is acknowledged by the Employee.
(d) In order to permit Employer to claim the rights to which Employer may
be entitled to under subparagraph (b) above, and in addition to Employee's
prompt disclosure under subparagraph (a) above of inventions described in
subparagraph (b), Employee further agrees to disclose to Employer in confidence
all inventions which Employee makes during the period of his employment and all
patent and copyright applications filed by Employee within a year after
termination of his employment.
(e) For the purpose of this Agreement, an invention is deemed to have been
made during the period of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice, and Employee
agrees that any such patent or copyright application filed within a year after
termination of his/her employment shall be presumed to relate to an invention
which was made during the term of Employee's employment unless Employee can
provide evidence to the contrary.
(f) Listed below by descriptive title for purposes of identification are
all the inventions made by Employee prior to employment with Employer which
Employee considers to be Employee's property and which are excluded from this
Agreement.
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4. General
(a) This Agreement is considered by Employer and Employee to be a binding
contract and shall remain in effect indefinitely, even after Employee's
employment with Employer terminates.
(b) This Agreement may not be modified or terminated except by an
instrument in writing signed by an officer of the Employer.
(c) If any legal action arises relating to this Agreement, the prevailing
party shall be entitled to recover all costs, expenses and reasonable attorneys'
fees incurred because of legal action. This Agreement shall be construed in
accordance with the laws of the State of California.
(d) If any provision of this Agreement is held invalid or unenforceable the
remainder of this Agreement shall nevertheless remain in full force and effect.
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EMPLOYEE NONDISCLOSURE AGREEMENT (CONTINUED)
(e) This agreement shall in no way restrict the right of Employer to
terminate the employment of Employee at any time and for any reason, with or
without cause; and Employee expressly waives any right to a term of employment
for any period of time.
(f) This Agreement shall be binding upon Employee's heirs, successors, and
assigns. The provisions for nondisclosure of confidential information provided
for in this Agreement apply to The Company employing Employee and to such
information of all its parent, subsidiary and affiliated companies anywhere in
the world.
Dated this ____ day of __________________, 19__ at ____________________________
THE VANTIVE CORPORATION
By: ____________________________
Its: ___________________________
_________________________________
EMPLOYEE'S SIGNATURE
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49
EMPLOYEE NONDISCLOSURE AGREEMENT (CONTINUED)
EXHIBIT A
Labor Code Section 2870
"Employment agreements; assignment of rights.
(a) Any provision in an employment agreement which provides that an
employee shall assign, or order to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
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EMPLOYEE NONDISCLOSURE AGREEMENT (CONTINUED)
EXHIBIT B
TERMINATION CERTIFICATION
(Only to be completed upon termination from The Vantive Corporation)
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to The Vantive Corporation, its subsidiaries, affiliates,
successors or assigns (together, the "Company").
I further certify that I have complied with all terms of The Company's
Agreement For Nondisclosure of Confidential Information signed by me, including
the reporting of any inventions and original works of authorship (as defined
therein), conceived or made by me (solely or jointly with others) covered by
that agreement.
I further certify that in compliance with the terms of The Company's
Agreement For Nondisclosure of Confidential Information, I will preserve as
confidential all trade secrets, confidential knowledge, date or other
proprietary information relating to products, processes, know-how, designs,
formulas, developmental or experimental work, computer programs, data bases,
other original works of authorship, customer lists, business plans, financial
information of other subject matter pertaining to any business of The Company or
any of its clients, consultants or licensees.
Date: ________________ ____________________________________
(Employee's Signature)
____________________________________
(Type or Print Employee's Name)
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51
Annex 6.2(d)
NONCOMPETITION AGREEMENT
This Noncompetition Agreement is made and entered into this 2nd day of
September 1998, by and between ________________, an individual Stockholder
("Stockholder"), and The Vantive Corporation, a Delaware corporation ("Buyer").
For the purposes of this Agreement, "Buyer" shall be deemed to include Buyer and
its majority-owned direct and indirect subsidiaries that operate the Business of
Solar (as hereinafter defined) during the term of this Agreement.
Recitals
A. Scotch Bonnet Integration, Inc., a Delaware corporation ("SBII"), is engaged
throughout the United States of America and the world. SBII is in the business
of providing consulting services for client-server software (the "Business of
SBII");
B. Pursuant to that certain Agreement and Plan of reorganization (the
"Reorganization Agreement") dated September 2, 1998 by and among Buyer, SBII
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
Buyer ("Sub"), and SBII, Buyer is acquiring SBII through a merger of Sub with
and into SBII (the "Merger"). After the Merger becomes effective, the separate
existence of Sub shall cease, and SBII, as the surviving corporation in the
Merger, shall continue its corporate existence under the laws of the State of
Delaware and will continue to operate the Business of SBII as a wholly-owned
subsidiary of Buyer;
C. Stockholder is the beneficial owner of shares of capital stock of SBII and is
a key employee or officer of SBII;
D. Stockholder has been actively involved in the design, development and or
marketing of SBII's services and products, including management of a key
function within SBII; and
E. In consideration of and as an inducement to Buyer and Sub to consummate the
Merger, Stockholder, intending to be bound hereby, has agreed to execute this
Agreement.
Now, therefore, the parties agree as follows:
1. Covenant Not to Compete. Stockholder agrees that, for a period of one (1)
year from the Effective Time of the Merger (as defined in the Reorganization
Agreement) and for so long thereafter as he is employed by or serves as
consultant to Buyer, or such shorter period ending upon Stockholder's
termination of employment from the Buyer without "Cause" or because of "Certain
Reasons" (as defined in Sections 1(d) and 1(e) hereof, respectively) (the
"Noncompetition Period"), he will not:
A. engage directly or indirectly in Competition;
52
B. directly or indirectly be or become an officer, director, shareholder, owner,
partner, promoter, employee, agent, consultant, licensor or joint venturer, of,
for or to, or otherwise be or become associated with or acquire or hold (of
record, beneficially or otherwise) any direct or indirect interest in, any
Person that engages directly or indirectly in Competition, except that
Stockholder may be or become an employee, consultant, agent, licensor or
sublicensor of, for or to, or otherwise be or become associated with, such
Person if Stockholder's actual services rendered or activity in connection with
such Person do not reasonably relate to a Competing Product or Competing
Service;
C. request or advise any of the customers, suppliers or other business contacts
of Solar with which Stockholder had contact while employed by SBII to withdraw,
curtail, cancel or not increase their business with SBII. Notwithstanding the
foregoing, Stockholder is permitted to own as a passive investor up to a five
percent (5%) interest in any publicly traded entity. Stockholder agrees to
notify Buyer in writing of each employment or consulting position he accepts
during the Noncompetition Period (including the name and address of the hiring
party) and will, upon request by Buyer, describe in reasonable detail the nature
of his duties in each such position.
D. "Cause" shall mean Stockholder's:
(i) failure to perform such assigned duties and responsibilities as shall be
consistent with the duties and responsibilities of an employee of Buyer in a
similar job position after receipt of a written or oral notice of specific
deficiencies consistent with Buyer's performance review policies in effect at
such time and a reasonable period, not to exceed thirty (30) days for
Stockholder to cure any such deficiencies;
(ii) engaging in gross negligence or willful misconduct which is or is likely to
be materially injurious to Buyer;
(iii) committing a felony, an act of fraud against or the misappropriation of
property belonging to Buyer; or
(iv) breaching in any material respect the terms of any employment agreement or
any confidential or proprietary information agreement between Stockholder and
Buyer or Buyer; and
(v) the Chief Executive Officer of Buyer authorizes a for Cause termination
after the occurrence of any of the events described in the clauses set forth in
this Subsection 1(D) above.
E. "Certain Reasons" shall mean (i) a reduction in cash compensation (exclusive
of bonuses) or a material reduction in benefits, except as part of a salary or
benefit reduction program by Buyer that is applicable generally to employees of
Stockholder's level; (ii) assignment to a position materially not commensurate
with Stockholder's training and abilities; or (iii) relocation of Stockholder's
workplace to any place more than fifty (50) miles from Davis, California,
provided, in each case, that Stockholder has given Buyer written notice of
Stockholder's intention to terminate for Certain Reasons, citing the Certain
Reasons, and Buyer has not cured the Certain Reasons within thirty (30) days
after receipt of such notice.
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53
F. "Competing Service" means any (i) activities relating to the development,
marketing and/or distribution of consulting services carried on by any business
worldwide which competed with the Business of SBII; (ii) service that has been
provided, performed or offered by or on behalf of SBII at any time on or prior
to the date of this Noncompetition Agreement; or (iii) service that facilitates,
supports or otherwise related to the design, development, marketing, promotion,
sale, supply distribution, resale, installation, support, maintenance, license
or sublicense of any front office automation software such as sales force
automation, customer support, help desk or field service automation software.
Notwithstanding anything to the contrary herein, a Competing Service does not
include services related to database software or back office application
software, such as services related to Oracle or Sybase database or human
resources, manufacturing or financial applications.
G. A person shall be deemed to be engaged in "Competition" if such Person is
engaged in providing, performing or offering any Competing Service. References
to engaging directly or indirectly in Competition include (without prejudice to
the generality of that expression) references to acting alone or jointly with
others or by means of any other Person.
H. "Person" means any (i) individual; (ii) corporation, general partnership,
limited partnership, limited liability partnership, trust, company (including
any limited liability company or joint stock company) or other organization or
entity; or (iii) governmental body or authority.
2. Covenant Not to Hire. During the Noncompetition Period, Stockholder agrees
that he will not directly or indirectly attempt to hire, whether as an employee,
consultant or otherwise, any person who at such time is, or who at any time in
the month period prior to that time had been, employed by Buyer or SBII.
3. Nondisruption, Other Matters. During the Noncompetition Period, Stockholders
agrees that he will not directly or indirectly interfere with, disrupt or
attempt to disrupt any past, present or prospective relationship, contractual or
otherwise, between Buyer or Solar, on the one hand, and any of their respective
customers, suppliers or employees on the other hand.
4. Equitable Relief. Stockholder acknowledges and agrees that Buyer's remedies
at law for breach of any provisions of this Agreement would be inadequate and,
in recognition of this fact, Stockholder agrees that, in the event of such
breach, in addition to any remedies at law it may have, Buyer, without posting
any bond, shall be entitled to obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy that may be available. Stockholder further
acknowledges that should Stockholder violate any of the provisions of this
Agreement, it will be difficult to determine the amount of damages resulting to
Buyer and that in addition to any other remedies it may have, Buyer shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving damages.
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5. Acknowledgment. Each of Stockholder and Buyer acknowledges and agrees that
the covenants and agreements contained in this Agreement have been negotiated in
good faith by the parties, are reasonable and are not more restrictive or
broader than necessary to protect the interests of the parties thereto, and
would not achieve their intended purpose if they were on different terms or for
periods of time shorter than the periods of time provided herein or applied in
more restrictive geographical areas than are provided herein. Each party further
acknowledges that Buyer would not enter into the Reorganization Agreement and
the transactions contemplated thereby in the absence of the covenants and
agreement contained in this Agreement and that such covenants and agreements are
essential to protect the value of SBII to Buyer.
6. Separate Covenants. The covenants contained in this Agreement shall be
construed as a series of separate covenants, one for each of the counties in
each of the states of the United States of America, one for each province of
Canada and one for each country outside the United States and Canada.
7. Severability. The parties agree that construction of this Agreement shall be
in favor of its reasonable nature, legality and enforceability, and that any
construction causing unenforceability shall yield to a construction permitting
enforceability. It is agrees that the noncompetition, nonsolicitation and
nonhiring covenants and provisions of this Agreement are severable, and that if
any single covenant or provision or multiple covenants or provisions should be
found unenforceable, the entire Agreement and remaining covenants and provisions
shall not fail but shall be construed as enforceable without any severed
covenant or provision in accordance with the tenor of this Agreement.
8. Not an Employment Agreement. This Agreement is not, and nothing in this
Agreement shall be construed as, an agreement to provide employment to
Stockholder.
9. Governing Law, Jurisdiction. This Agreement is made under and shall be
governed by, construed in accordance with and enforced under the internal laws
of the State of California. All disputes arising under this Agreement shall be
brought in the federal and state courts located in Santa ▇▇▇▇▇ County,
California, as permitted by law, and each of the parties hereby consents to the
personal jurisdiction, service of process and venue of such courts.
10. Entire Agreement. This Agreement, together with the Reorganization
Agreement, constitutes and contains the entire agreement and understanding
concerning the subject matter addressed herein between the parties, and
supersedes and replaces all prior negotiations and all agreements proposed and
otherwise, whether written or oral, concerning the subject matter hereof, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein
or in the Reorganization Agreement.
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11. Notices. Any notice or communication under this Agreement shall be in
writing, signed by the party making same, and shall be delivered personally or
sent by certified or registered mail or by nationally-recognized overnight
courier, addressed as follows:
If to Stockholder:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
If to Buyer: The Vantive Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
or to such other address as may hereafter be designated by either party hereto.
All such notices shall be deemed given on the date personally delivered or
mailed.
12. Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or
related to this Agreement.
13. Amendments, No Waiver. No amendment or modification of this Agreement shall
be deemed effective unless made in writing and signed by the parties hereto. No
term or condition of this Agreement shall be deemed to have been waived except
by a statement in writing signed by the party against whom waiver is sought.
14. Assignment. This Agreement may be assigned to Buyer to any affiliate of
Buyer or to any nonaffiliate of Buyer that shall succeed to the business and
assets of Buyer, SBII and the Business of SBII. This Agreement is personal to
Stockholder, and Stockholder may not assign any rights or delegate
responsibilities hereunder.
15. Headings. The headings of paragraphs in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
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In witness whereof, the parties hereto have executed this Agreement as of
the date first written above.
----------------------------------------
Stockholder
THE VANTIVE CORPORATION
----------------------------------------
By:
---------------------------------
Title:
---------------------------------
6