EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INFOSEEK CORPORATION
STEELHEAD ACQUISITION CORP.,
QUANDO, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, AND
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(AS PRINCIPAL SHAREHOLDERS)
AND, WITH RESPECT TO ARTICLE VII ONLY,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
AS SHAREHOLDER REPRESENTATIVE,
AND, WITH RESPECT TO ARTICLE VII ONLY,
U.S. BANK TRUST, N.A.
AS ESCROW AGENT
DATED AS OF JULY 24, 1998
TABLE OF CONTENTS
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ARTICLE I.--THE MERGER.................................................. 1
1.1 The Merger .................................................... 1
1.2 Effective Time ................................................ 2
1.3 Effect of the Merger .......................................... 2
1.4 Articles of Incorporation; Bylaws.............................. 2
1.5 Directors and Officers ........................................ 2
1.6 Certain Definitions............................................ 2
1.7 Effect of Merger on the Capital Stock of the Constituent
Corporations.................................................. 5
1.8 Dissenting Shares.............................................. 7
1.9 Surrender of Certificates...................................... 7
1.10 No Further Ownership Rights in Company Capital Stock........... 9
1.11 Dissenting Shares After Payment of Fair Value.................. 9
1.12 Tax and Accounting Consequences................................ 9
1.13 Taking of Necessary Action; Further Action .................... 9
ARTICLE II.--REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 10
2.1 Organization of the Company.................................... 10
2.2 Subsidiaries .................................................. 10
2.3 Company Capital Structure...................................... 10
2.4 Authority...................................................... 11
2.5 No Conflict.................................................... 12
2.6 Consents ...................................................... 12
2.7 Company Financial Statements .................................. 12
2.8 No Undisclosed Liabilities .................................... 13
2.9 No Changes .................................................... 13
2.10 Tax Matters.................................................... 14
2.11 Restrictions on Business Activities............................ 16
2.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment ....................................... 16
2.13 Intellectual Property.......................................... 17
2.14 Agreements, Contracts and Commitments.......................... 20
2.15 Interested Party Transactions.................................. 21
2.16 Governmental Authorization .................................... 21
2.17 Litigation .................................................... 22
2.18 Accounts Receivable............................................ 22
2.19 Minute Books .................................................. 22
2.20 Environmental Matters.......................................... 22
2.21 Brokers' and Finders' Fees; Third Party Expenses .............. 23
2.22 Employee Matters and Benefit Plans ............................ 23
2.23 Insurance...................................................... 27
2.24 Compliance with Laws .......................................... 27
2.25 Warranties; Indemnities........................................ 27
2.26 Pooling of Interests .......................................... 27
2.27 Proxy Statement and Shareholder Information Statement.......... 27
2.28 Complete Copies of Materials .................................. 28
2.29 Representations Complete ...................................... 28
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ARTICLE III.--REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... 28
3.1 Organization, Standing and Power .............................. 28
3.2 Charter and Bylaws............................................. 28
3.3 Authority...................................................... 29
3.4 Merger Shares.................................................. 29
3.5 No Conflict.................................................... 29
3.6 Consents ...................................................... 29
3.7 Proxy Statement and Shareholder Information Statement.......... 30
3.8 Other Matters.................................................. 30
ARTICLE IV.--CONDUCT PRIOR TO THE EFFECTIVE TIME........................ 31
4.1 Conduct of Business of the Company ............................ 31
4.2 No Solicitation................................................ 33
ARTICLE V.--ADDITIONAL AGREEMENTS ...................................... 34
5.1 Proxy Statement and Shareholder Information Statement.......... 34
5.2 Access to Information.......................................... 36
5.3 Confidentiality................................................ 36
5.4 Expenses ...................................................... 36
5.5 Public Disclosure.............................................. 37
5.6 Consents ...................................................... 37
5.7 FIRPTA Compliance.............................................. 37
5.8 Reasonable Efforts ............................................ 37
5.9 Notification of Certain Matters................................ 37
5.10 Additional Documents and Further Assurances.................... 37
5.11 Termination of Employment Agreements .......................... 37
5.12 Non-Disclosure Agreements...................................... 38
5.13 Employee Compensation; Relocation ............................. 38
5.14 Affiliate Agreements .......................................... 38
5.15 Tax-Free Reorganization........................................ 38
5.16 Pooling Accounting ............................................ 39
5.17 Loan .......................................................... 39
5.18 Directors' and Officers' Indemnification....................... 39
5.19 S-8 Registration .............................................. 39
ARTICLE VI.--CONDITIONS TO THE MERGER .................................. 39
6.1 Conditions to Obligations of Each Party to Effect the Merger... 39
6.1 Additional Conditions to Obligations of Company and the
Principal Shareholders ....................................... 40
6.3 Additional Conditions to the Obligations of Parent and Sub..... 41
ARTICLE VII.--SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION....................................................... 43
7.1 Survival of Representations and Warranties .................... 43
7.2 Indemnification; Escrow Arrangements .......................... 43
7.3 Escrow Agent .................................................. 47
7.4 Shareholder Representative..................................... 49
7.5 Maximum Payments; Remedy; Violation of Third Party Patent
Rights........................................................ 50
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ARTICLE VIII.--TERMINATION, AMENDMENT AND WAIVER.......................... 50
8.1 Termination....................................................... 50
8.2 Effect of Termination............................................. 51
8.3 Amendment......................................................... 51
8.4 Extension; Waiver................................................. 51
ARTICLE IX.--GENERAL PROVISIONS .......................................... 52
9.1 Notices........................................................... 52
9.2 Interpretation ................................................... 53
9.3 Counterparts ..................................................... 53
9.4 Entire Agreement; Assignment ..................................... 53
9.5 Severability ..................................................... 54
9.6 Other Remedies ................................................... 54
9.7 Governing Law..................................................... 54
9.8 Rules of Construction............................................. 54
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of July 24, 1998 among Infoseek Corporation, a California
corporation ("Parent"), Steelhead Acquisition Corp., an Oregon corporation and
a wholly-owned subsidiary of Parent ("Sub"), Quando, Inc., an Oregon
corporation (the "Company"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(collectively, the "Principal Shareholders," and individually, the "Principal
Shareholder"), U.S. Bank Trust, N.A. as Escrow Agent and, with respect to
Article VII only, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ as Shareholder Representative.
RECITALS
WHEREAS, the Boards of Directors of each of the Company, Parent and Sub
believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Sub with and into the Company (the "Merger") and, in furtherance thereof, have
approved the Merger.
WHEREAS, pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of the Company shall be converted into the
right to receive shares of common stock of Parent.
WHEREAS, a portion of the shares of common stock of Parent otherwise
issuable by Parent in connection with the Merger shall be placed in escrow by
Parent for purposes of satisfying damages, losses, expenses and other similar
charges which result from breaches of the representations, warranties and
covenants of the Company and the Principal Shareholders contained herein.
WHEREAS, the parties intend that the Merger shall (i) constitute a
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code") and (ii) to the extent possible, qualify for
accounting treatment as a pooling of interests.
WHEREAS, the Company and the Principal Shareholders, on the one hand, and
Parent and Sub, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject
to and upon the terms and conditions of this Agreement and the applicable
provisions of the Oregon Business Corporation Act ("Oregon Law"), Sub shall be
merged with and into the Company, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving corporation
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and as a wholly-owned subsidiary of Parent. The surviving corporation after
the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days following
the approval of the Merger by the Company's Shareholders at the Company
Shareholders Meeting (as described in Section 5.1) and the satisfaction or
waiver of the conditions set forth in Article VI, at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to in writing by
Parent and the Company. The date upon which the Closing actually occurs is
herein referred to as the "Closing Date." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing an Agreement of
Merger (or like instrument) substantially in the form attached hereto as
Exhibit A (the "Merger Agreement") with the Secretary of State of the State of
Oregon, in accordance with the applicable provisions of Oregon Law (the time
of acceptance by the Secretary of State of the State of Oregon of such filing
being referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Oregon Law. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the Articles of Incorporation of Sub shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation.
(b) The Bylaws of Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter
amended.
1.5 Directors and Officers. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation immediately
after the Effective Time, each to hold the office of director of the Surviving
Corporation in accordance with the provisions of the applicable laws of the
State of Oregon and the Articles of Incorporation and Bylaws of the Surviving
Corporation until their successors are duly qualified and elected. The
officers of Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation immediately after the Effective Time, each to
hold office in accordance with the provisions of the Bylaws of the Surviving
Corporation.
1.6 Certain Definitions. For all purposes of this Agreement, the following
terms shall have the following meanings:
"Adjusted Dollar Amount" shall mean an amount equal to $17,000,000 minus:
(i) the amount by which the Estimated Net Liabilities (excluding Estimated
Third Party Expenses reflected on the Estimated Balance Sheet) exceeds
$405,739 and (ii) the amount by which the Estimated Third Party Expenses
exceed $310,000.
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"Common Exchange Ratio" shall be equal to the quotient obtained by
dividing: (i) the Common Merger Consideration by (ii) the sum of (A) the total
number of shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and (B) the total number of shares of
Company Common Stock issuable upon conversion or exercise in full of all
options, warrants and other rights to acquire or receive Company Common Stock
that are outstanding immediately prior to the Effective Time (other than
preferred stock).
"Common Merger Consideration" shall mean the Merger Consideration less the
Preferred Merger Consideration.
"Company Capital Stock" shall mean shares of Company Common Stock, Company
Preferred Stock and any other capital stock of the Company (on an as converted
basis), exclusive of shares of Company Capital Stock issuable upon exercise of
Company Options.
"Company Common Stock" shall mean outstanding shares of common stock of
the Company.
"Company Options" shall mean all issued and outstanding and unexpired and
unexercised options and other rights to acquire or receive Company Capital
Stock (whether or not vested).
"Company Series A Preferred Stock" shall mean shares of Series A preferred
stock of the Company.
"Company Series B Preferred Stock" shall mean shares of Series B preferred
stock of the Company.
"Estimated Balance Sheet" shall mean the estimated unaudited balance sheet
of the Company dated the Closing Date which shall be: prepared in accordance
with GAAP (except that such unaudited balance sheet does not contain the
footnotes required by GAAP) based on reasonable assumptions certified as to
correctness by the Company and in a form reasonably satisfactory to Parent.
"Estimated Net Liabilities" shall mean the amount by which total
liabilities of the Company (excluding convertible debt and debt converted into
equity since the date of this Agreement) as determined in accordance with GAAP
("Total Liabilities") exceeds total current assets of the Company as
determined in accordance with GAAP ("Total Current Assets"), each as reflected
in the Estimated Balance Sheet.
"Estimated Third Party Expenses" shall mean Third Party Expenses (as
defined in Section 5.4) of the Company on the Closing Date as estimated by the
Company in good faith and based on reasonable assumptions.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"GAAP" shall mean United States generally accepted accounting principles.
"Key Employees" shall mean those employees of the Company listed on
Exhibit B.
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"Knowledge" of a person shall mean the actual knowledge of the person;
knowledge of the Company shall mean the actual knowledge of an officer or
director of the Company.
"Material Adverse Effect" shall mean any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Company.
"Meeting Price" shall mean the average closing sale price of the Parent
Common Stock as reported on the Nasdaq National Market for the ten (10)
consecutive trading days ending on the third business day prior to the date of
the Company's Shareholders meeting at which the Merger is approved.
"Merger Consideration" shall mean that number of shares of Parent Common
Stock equal to the quotient obtained by dividing the Adjusted Dollar Amount by
the Trading Price.
"Net Liabilities" shall mean the amount equal to Total Liabilities minus
the Total Current Assets of the Company as of the Closing Date.
"Parent Common Stock" shall mean shares of the common stock, no par value
per share, of Parent.
"Preferred Merger Consideration" shall mean the sum of the Series A Merger
Consideration and the Series B Merger Consideration.
"Related Agreements" shall mean all such ancillary agreements required in
this Agreement to be executed and delivered in connection with the
transactions contemplated hereby.
"SEC" shall mean the Securities Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Exchange Ratio" shall be equal to the quotient obtained by
dividing: (i) the Series A Merger Consideration by (ii) the total number of
shares of Series A Preferred Stock issued and outstanding immediately prior to
the Effective Time.
"Series A Liquidation Preference" shall mean the product of the per share
liquidation preference of the Company's Series A Preferred Stock as provided
in the Company's Articles of Incorporation, as amended to date, multiplied by
the total number of shares of Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time.
"Series A Merger Consideration" shall mean the Merger Consideration
determined by dividing the Series A Liquidation Preference by the Trading
Price.
"Series B Exchange Ratio" shall be equal to the quotient obtained by
dividing: (i) the Series B Merger Consideration by (ii) the total number of
shares of Series B Preferred Stock issued and outstanding immediately prior to
the Effective Time.
"Series B Liquidation Preference" shall mean the product of: (i) the per
share liquidation preference of the Company's Series B Preferred Stock as
provided in the Company's Articles of
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Incorporation, as amended to date, multiplied by (ii) the total number of
shares of Company Series B Preferred Stock issued and outstanding immediately
prior to the Effective Time.
"Series B Merger Consideration" shall mean the Merger Consideration
determined by dividing the Series B Liquidation Preference by the Trading
Price.
"Signing Price" shall mean the average closing sale price of Parent Common
Stock as reported on the Nasdaq National Market for the ten (10) consecutive
trading days ending on the third business day prior to the date of this
Agreement.
"Shareholder" shall mean each holder of any Company Capital Stock
immediately prior to the Effective Time.
"Trading Price" shall be equal to the Signing Price, provided, however,
that if the Meeting Price is between twenty percent (20%) to twenty-five
percent (25%) higher or lower than the Signing Price, the Trading Price shall
be equal to the Meeting Price, provided, further, that if the Meeting Price is
greater than twenty-five percent (25%) higher than the Signing Price, the
Trading Price shall be equal to one hundred twenty-five percent (125%) of the
Signing Price, and provided, further, that if the Meeting Price is greater
than twenty-five percent (25%) lower than the Signing Price, the Trading Price
shall be equal to seventy-five percent (75%) of the Signing Price.
1.7 Effect of Merger on the Capital Stock of the Constituent Corporations.
(a) Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Sub, the Company or the Shareholders:
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares (as
defined in Section 1.8)) will be canceled and extinguished and be converted
automatically into the right to receive, upon surrender of the certificate
representing such share of Company Common Stock in the manner provided for in
this Section 1.9(c), a fraction of a share of Parent Common Stock equal to the
Common Exchange Ratio.
(ii) Each share of Company Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined in Section 1.8)) will be canceled and extinguished and be
converted automatically into the right to receive, upon surrender of the
certificate representing such share of Company Series A Preferred Stock in the
manner provided for in Section 1.9(c), a fraction of a share of Parent Common
Stock equal to the Series A Exchange Ratio.
(iii) Each share of Company Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined in Section 1.8)) will be canceled and extinguished and be
converted automatically into the right to receive, upon surrender of the
certificate representing such share of Company Series B Preferred Stock in the
manner provided for in Section 1.9(c), a fraction of a share of Parent Common
Stock equal to the Series B Exchange Ratio.
(iv) All shares of Parent Common Stock issued in exchange for shares of
Company Capital Stock subject to Company repurchase rights or vesting
schedules shall be subject to the same repurchase rights and/or vesting
schedules and other terms as applicable to such shares of Company
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Capital Stock, with Parent succeeding to the rights of the Company thereunder
and with a proportionate adjustment to any per share repurchase price
applicable to such shares to reflect the applicable Exchange Ratio.
(b) Company Stock Options; Warrants.
(i) Assumption of Company Options. At the Effective Time, each Company
Option under the Company's 1994 Stock Option Plan (the "Option Plan") or
otherwise, whether vested or unvested, will, in connection with the Merger, be
assumed by Parent. Each Company Option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions, including vesting, set forth in the Option Plan and as provided in
the respective option agreements immediately prior to the Effective Time,
except that (A) such assumed Company Option will be exercisable for that
number of whole shares of Parent Common Stock equal to the product obtained by
multiplying the number of shares of Company Capital Stock that were issuable
upon exercise in full of such assumed Company Option immediately prior to the
Effective Time by the applicable Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (B) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient obtained by dividing the
exercise price per share of Company Capital Stock at which such Company Option
was exercisable immediately prior to the Effective Time by the applicable
Exchange Ratio, rounded up to the nearest whole cent.
(ii) Assumption Agreement. Promptly following the Effective Time, Parent
will issue to each holder of an outstanding Company Option a document
evidencing the foregoing assumption of such Company Option by Parent.
(iii) Option Status. It is the intention of the parties that Parent
Options issued by Parent following the Closing will, to the extent permitted
by applicable law, qualify as incentive stock options as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), to the
extent Company Options qualified as incentive stock options immediately prior
to the Closing.
(c) Capital Stock of Sub. Each share of common stock, no par value per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, no par value per share, of the Surviving
Corporation. Each stock certificate of Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(d) Adjustment to Parent Common Stock. The number of shares of Parent
Common Stock issuable hereunder shall be adjusted to reflect fully the effect
of any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Capital Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Capital Stock occurring after the
date hereof.
(e) Fractional Shares. No fractional share of Parent Common Stock shall be
issued in the Merger. In lieu thereof, any fractional share shall be rounded
up to the nearest whole share of Parent Common Stock.
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(f) Withholding Taxes. Any cash amount payable to any Shareholder pursuant
to Section 1.7(a) shall be subject to, and reduced by, the amount of any state
or federal withholding taxes incurred (and not previously paid by or on behalf
of such Shareholder or the Company) in connection with the Merger of Company
Capital Stock upon the exercise of Company Options or upon payment of a bonus
in the form of Company Capital Stock, if any, by such Shareholder.
1.8 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock issued and outstanding immediately prior to
the Effective Time that are held by a Shareholder who has exercised and
perfected appraisal rights for such shares in accordance with Oregon Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Parent Common Stock pursuant to Section 1.7, but
the holder thereof shall only be entitled to such rights as are granted by
Oregon Law.
(b) Notwithstanding the provisions of subsection 1.8(a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) his or her appraisal rights, then, as of the later of
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
shares of Parent Common Stock to which such Shareholder would otherwise be
entitled under Section 1.7(a) (less the number of shares allocable to such
Shareholder that have been deposited into the Escrow Fund on such holder's
behalf pursuant to Article VII), upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written demand
for appraisal received by the Company pursuant to the applicable provisions of
Oregon Law and (ii) the opportunity to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Parent, voluntarily make any payment with respect
to any such demands or offer to settle or settle any such demands. To the
extent that the Company makes any payment or payments in respect of any
Dissenting Shares prior to the Effective Time, Parent shall be entitled to
recover under the terms of Article VII hereof the aggregate amount by which
such payment or payments exceed the aggregate consideration that otherwise
would have been payable in respect of such shares.
1.9 Surrender of Certificates.
(a) Exchange Agent. Boston Equiserve (or such other entity as selected by
Parent) shall serve as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Within three (3) business days after
the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I the shares of Parent Common Stock
issuable pursuant to Section 1.7(a) in exchange for all the outstanding shares
of Company Capital Stock; provided, however, that on behalf of the
Shareholders, pursuant to Section 7.2 hereof, Parent shall deposit into an
escrow account ten percent (10%) of the Merger Consideration otherwise
issuable to the Shareholders pursuant to Section 1.7(a) (the "Escrow Amount").
The portion of the Escrow Amount contributed on behalf of each Shareholder
shall be in proportion to the aggregate number of Merger Consideration which
such Shareholder would otherwise be entitled to receive in the Merger by
virtue of ownership of outstanding shares of Company Capital Stock.
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(c) Exchange Procedures. On the Closing Date, the Shareholders will
surrender the certificates representing their Company Capital Stock (the
"Certificates") to the Exchange Agent for cancellation together with the
Shareholder Certificate in the form of Exhibit C hereto and a letter of
transmittal in such form and having such provisions as Parent may reasonably
request. Parent shall provide such Shareholder Certificate and letter of
transmittal to the Shareholders at least three (3) business days prior to the
Closing Date. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal and a Shareholder Certificate, duly completed
and validly executed in accordance with the instructions thereto, the Exchange
Agent will promptly (but in no event more than five (5) business days after
the Effective Time) deliver to the holder of such Certificate in exchange
therefor a certificate representing the number of whole shares of Parent
Common Stock (less the number of shares of Parent Common Stock to be deposited
in the Escrow Fund on such holder's behalf pursuant to Section 1.9(b) and
Article VII) to which such Shareholder is entitled pursuant to Section 1.7,
and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence only the right to receive the number of full shares of
Parent Common Stock into which such shares of Company Capital Stock shall have
been converted pursuant to this Article I (except as may otherwise be provided
under Oregon Law with respect to Dissenting Shares). As soon as practicable
after the Effective Time (but in no event more than five (5) business days
after the Effective Time), and subject to and in accordance with the
provisions of Article VII hereof, Parent shall cause to be distributed to the
Escrow Agent (as defined in Article VII) a certificate or certificates
representing that number of shares of Parent Common Stock equal to the Escrow
Amount, which shall be registered in the name of the Escrow Agent. Such shares
shall be beneficially owned by the holder on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article VII.
(d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Stock with a record date after the Effective Time will be paid to any
holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition to the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for shares
of Parent Common Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
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(f) Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, the number of shares of Parent Common Stock, if any, as may be
required pursuant to Section 1.7; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct against any claim that may be made against
Parent or the Exchange Agent with respect to the certificates alleged to have
been lost, stolen or destroyed.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.9, none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
1.10 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof shall be deemed to
be issued in full satisfaction of all rights pertaining to such shares of
Company Capital Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Capital Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article
I.
1.11 Dissenting Shares After Payment of Fair Value. Dissenting Shares, if
any, after payments of fair value in respect thereto have been made to
dissenting shareholders of the Company pursuant to Oregon Law and this Article
I, shall be canceled.
1.12 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall: (i) constitute a reorganization within the meaning of
Section 368 of the Code and (ii) to the extent possible, qualify for
accounting treatment as a pooling of interests. Each party has consulted with
its own tax advisors and accountants with respect to the tax and accounting
consequences, respectively, of the Merger.
1.13 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to consummate the
Merger, to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Sub, the officers
and directors of the Company, Parent and Sub are fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
9
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub, and each
Principal Shareholder severally but not jointly hereby represents and warrants
to Parent and Sub (but only to such Principal Shareholder's Knowledge),
subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the appropriate section and paragraph numbers) supplied
by the Company to Parent (the "Disclosure Schedule") and dated as of the date
hereof, that on the date hereof and as of the Effective Time as though made at
the Effective Time as follows:
2.1 Organization of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oregon.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified could have a Material Adverse Effect. The
Company has delivered a true and correct copy of its Articles of Incorporation
and Bylaws, each as amended to date, to Parent. Section 2.1 of the Disclosure
Schedule lists the directors and officers of the Company. The operations now
being conducted by the Company have not been conducted under any other name.
2.2 Subsidiaries. The Company does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any corporation, partnership, association, joint
venture or other business entity.
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 15,000,000
shares of authorized Common Stock and 4,000,000 shares of authorized Preferred
Stock, 300,000 of which are designated Series A Preferred Stock ("Series A
Preferred") and 880,000 of which are designated Series B Preferred Stock
("Series B Preferred"). 4,495,000 shares of Common Stock, 300,000 shares of
Series A Preferred and 880,000 shares of Series B Preferred are issued and
outstanding as of the date hereof. Each share of Series A Preferred is
convertible into 1.274080 shares of Common Stock and each share of Series B
Preferred is convertible into 1.107634 shares of Common Stock. The Company
Capital Stock is held by the persons, with the domicile addresses and in the
amounts set forth in Section 2.3(a) of the Disclosure Schedule. All
outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound and have
been issued in compliance with federal and state securities laws. There are no
declared or accrued unpaid dividends with respect to any shares of the
Company's Capital Stock. There are not outstanding any adjustments made or
required to be made to the conversion prices set forth in the Company's
current Articles of Incorporation. The Company has no other capital stock
authorized, issued or outstanding.
(b) Except for the Option Plan(s), the Company has never adopted or
maintained any stock option plan or other plan providing for equity
compensation of any person. The Company has
10
reserved 1,000,000 shares of Company Common Stock for issuance to employees
and consultants pursuant to the Option Plan none of which have been exercised
and 533,456 shares are subject to outstanding unexercised options. Section
2.3(b) of the Disclosure Schedule sets forth for each outstanding Company
Option, the name of the holder of such option, the domicile address of such
holder, the number of shares of Company Common Stock subject to such option,
the exercise price of such option, the vesting schedule for such option,
including the extent vested to date and whether the exercisability of such
option will be accelerated by the transactions contemplated by this Agreement,
and whether such option is intended to qualify as an incentive stock option as
defined in Section 422 of the Code. Except for the Company Options, there are
no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. Except as set
forth on Section 2.3(b) of the Disclosure Schedule, there is no outstanding
Company Capital Stock which is subject to vesting. Section 2.3(b) of the
Disclosure Schedule sets forth the name of the holder of any Company Capital
Stock subject to vesting, the number of shares of Company Capital Stock
subject to vesting and the vesting schedule for such Company Capital Stock,
including the extent vested to date and whether the vesting of such shares of
Company Capital Stock will be accelerated by the transactions contemplated by
this Agreement. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to
the Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company. As a result of
the Merger, Parent will be the record and sole beneficial owner of all
outstanding Company Capital Stock and all rights to acquire or receive any
Company Capital Stock, whether or not such Company Capital Stock is
outstanding.
2.4 Authority. The Company has all requisite power and authority to enter
into this Agreement and the agreements delivered in connection with this
Agreement (the "Related Agreements") to which it is a party and to consummate
the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and any Related Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company,
and no further action is required on the part of the Company to authorize the
Agreement, any Related Agreements to which it is a party and the transactions
contemplated hereby and thereby, subject only to the approval of this
Agreement by the Shareholders. This Agreement and the Merger have been
unanimously approved by the Board of Directors of the Company. This Agreement
has been, and any Related Agreements to which the Company is a party have been
or will have been prior to the Effective Time, duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by the
other parties hereto and thereto, constitute the valid and binding obligation
of the Company, enforceable in accordance with their respective terms, except
as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
11
2.5 No Conflict. Except as set forth in Section 2.5 of the Disclosure
Schedule, the execution and delivery of this Agreement and any Related
Agreements to which it is party by the Company do not, and, the consummation
of the transactions contemplated hereby and thereby will not, conflict with,
or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit (any
such event, a "Conflict") under (i) any provision of the Articles of
Incorporation and Bylaws of the Company, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license to which the Company or any of its properties or assets are subject,
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets; except for a
Conflict under subsection (ii) or (iii) above that would not have a Material
Adverse Effect on the Company or on the ability of the parties to consummate
the Merger or the other transactions contemplated by this Agreement.
2.6 Consents. Except as set forth in Section 2.6 of the Disclosure Schedule,
no consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission ("Governmental Entity") or any third
party, including a party to any agreement with the Company (so as not to
trigger any Conflict), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement and any Related
Agreements to which the Company is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws thereby, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings that have been obtained or made or will be obtained
or made prior to the Effective Time, (iii) consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not have a Material Adverse Effect on the Company or
on the ability of the parties to consummate the Merger or the other
transactions contemplated by this Agreement and (iv) the filing of the Merger
Agreement with the Secretary of State of the State of Oregon.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule sets
forth the Company's balance sheet as of December 31, 1997 and the related
statements of income and cash flow for the twelve-month period ended December
31, 1997 and the Company's balance sheet as of June 30, 1998, and the related
statements of income and cash flow for the six months then ended (the
"Financials"). The Financials are correct in all material respects and have
been prepared in accordance with GAAP, applied on a basis consistent
throughout the periods indicated and consistent with each other (except that
the Financials do not contain all the notes that may be required by GAAP). The
Financials present fairly the consolidated financial condition and
consolidated operating results of the Company and any consolidated
subsidiaries as of the dates and during the periods indicated therein, subject
to normal year-end adjustments, which will not be material in amount or
significance. The Company's Balance Sheet as of June 30, 1998 shall be
hereinafter referred to as the "Current Balance Sheet."
12
2.8 No Undisclosed Liabilities. The Company has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance with GAAP),
which individually or in the aggregate (i) has not been reflected in the
Current Balance Sheet, (ii) has not arisen in the ordinary course of business
consistent with past practices since June 30, 1998 or (iii) exceed $25,000.
2.9 No Changes. Except as set forth in Section 2.9 of the Disclosure
Schedule, since June 30, 1998, there has not been, occurred or arisen any
(other than or contemplated by this Agreement or the Related Agreements):
(a) amendments or changes to the Articles of Incorporation or Bylaws of the
Company;
(b) capital expenditure or commitment by the Company, either individually
exceeding $25,000 or in the aggregate exceeding $100,000.
(c) destruction of, damage to or loss of any material assets, business or
customer of the Company (whether or not covered by insurance);
(d) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action;
(e) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock or any direct or
indirect redemption, purchase or other acquisition by the Company of its
Capital Stock;
(h) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person;
(i) any agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
are bound or any termination, extension, amendment or modification the terms
of any agreement, contract, covenant, instrument, lease, license or commitment
to which the Company is a party or by which it or any of its assets are bound
other than in the ordinary course of the Company's business;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Company or any creation of any security interest in such
assets or properties other than in the ordinary course of the Company's
business;
(k) loan by the Company to any person or entity, incurring by the Company
of any indebtedness, guaranteeing by the Company of any indebtedness, issuance
or sale of any debt securities of the Company or guaranteeing of any debt
securities of others, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practice;
13
(l) incurrence by the Company of any liability in excess of $25,000
individually or $100,000 in the aggregate;
(m) waiver or release of any right or claim of the Company including any
write-off or other compromise of any account receivable of the Company;
(n) the commencement or notice or threat or reasonable basis therefor of
any lawsuit or, to the Company's Knowledge, proceeding or investigation
against the Company or its affairs;
(o) notice of any claim or potential claim of ownership by any person other
than the Company of the Company Intellectual Property (as defined in Section
2.13) or of infringement by the Company of any other person's Intellectual
Property (as defined in Section 2.13);
(p) issuance or sale, or contract to issue or sell, by the Company of any
shares of its capital stock or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to
purchase any of the foregoing, except for options to purchase capital stock of
the Company granted to employees of the Company in the ordinary course of
business consistent with past practice;
(q) (i) selling or entering into any license agreement with respect to the
Company Intellectual Property with any third party or (ii) buying or entering
into any license agreement with respect to the Intellectual Property of any
third party or (iii) change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property (as defined in
Section 2.13) to the Company;
(r) any event or condition of any character that has had a Material Adverse
Effect on the Company;
(s) transaction by the Company except in the ordinary course of business as
conducted on that date and consistent with past practices; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
collectively, "Taxes", means (i) any and all federal, state, local and foreign
taxes, 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; (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clause
(i) or (ii) as a result of any express or implied obligation to indemnify any
other person or as a result of 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.
14
(b) Tax Returns and Audits.
(i) As of the Effective Time the Company will have prepared and timely
filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns
are true and correct and have been completed in accordance with applicable
law.
(ii) As of the Effective Time the Company (A) will have paid all Taxes
it is required to pay and will have withheld with respect to its employees all
federal and state income taxes, Federal Insurance Contribution Act ("FICA"),
Federal Unemployment Tax Act ("FUTA") and other Taxes required to be withheld,
and (B) will have accrued on the Current Balance Sheet all Taxes attributable
to the periods covered by the Current Balance Sheet and will not have incurred
any liability for Taxes for the period prior to the Effective Time other than
in the ordinary course of business.
(iii) The Company has not been delinquent in the payment of any Tax nor
is there any Tax deficiency outstanding, assessed or proposed against the
Company, nor has the Company executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company is
presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) No adjustment relating to any Returns filed by the Company has been
proposed formally or informally by any Tax authority to the Company or any
representative thereof.
(vi) The Company has no liabilities for unpaid federal, state, local and
foreign Taxes which have not been accrued or reserved against in accordance
with GAAP on the Current Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has not incurred any liability for
Taxes since the date of the Current Balance Sheet other than in the ordinary
course of business.
(vii) The Company has made available to Parent or its legal counsel,
copies of all foreign, federal and state income and all state sales and use
Returns for the Company filed for all periods since its inception.
(viii) There are (and immediately following the Effective Time there
will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort (collectively,
"Liens") on the assets of the Company relating to or attributable to Taxes
other than Liens for Taxes not yet due and payable.
(ix) The Company does not have Knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
(x) None of the Company's assets are treated as "tax-exempt use
property," within the meaning of Section 168(h) of the Code.
(xi) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or
15
former employee of the Company that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by the Company
as an expense under applicable law.
(xii) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xiii) The Company is not a party to any tax sharing, indemnification or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiv) The Company's tax basis in its assets for purposes of determining
its future amortization, depreciation and other federal income tax deductions
is accurately reflected on the Company's tax books and records.
(xv) The Company is not, and has not been at any time, a "United States
Real Property Holding Corporation" within the meaning of Section 897(c)(2) of
the Code.
(xvi) No adjustments relating to any Return filed by the Company have
been proposed formally or informally by any tax authority to the Company or
any representative thereof.
(c) Executive Compensation Tax. There is no contract, agreement, plan or
arrangement to which Company is a party, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Code.
2.11 Restrictions on Business Activities. There is no agreement (noncompete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or, to the Company's Knowledge, otherwise binding upon the
Company which has or may have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its technology or products to or providing services to,
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The Company does not own any real property, and has never owned any
real property. Section 2.12(a) of the Disclosure Schedule sets forth a list of
all real property currently leased by the Company, the name of the lessor, the
date of the lease and each amendment thereto and, with respect to any current
lease, the aggregate annual rental and/or other fees payable under any such
lease. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Current
16
Balance Sheet and except for Liens for Taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not detract from the value, or
interfere with the present use, of the property subject thereto or affected
thereby.
(c) Section 2.12(c) of the Disclosure Schedule lists all material items of
equipment (the "Equipment") owned or leased by the Company and such Equipment
is, (i) adequate for the conduct of the business of the Company as currently
conducted and (ii) in acceptable operating condition, regularly and properly
maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and clear of any
Liens, of all customer and end-user files and other customer and end-user
information it compiles relating to customers or end-users of the Company's
current and former customers or end-users (the "Customer Information"). To the
Company's Knowledge, no person other than the Company possesses any claims or
rights with respect to use of the Customer Information.
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
(i) "Intellectual Property" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating
to any of the foregoing; (iii) all copyrights, copyrights registrations and
applications therefor and all other rights corresponding thereto throughout
the world; (iv) all mask works, mask work registrations and applications
therefor; (v) all industrial designs and any registrations and applications
therefor throughout the world; (vi) all trade names, logos, common law
trademarks and service marks; trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (vii) all databases and data collections and all rights therein
throughout the world; and (viii) all computer software including all source
code, object code, firmware, development tools, files, records and data, all
media on which any of the foregoing is recorded, all Web addresses, sites and
domain names, and (ix) any similar, corresponding or equivalent rights to any
of the foregoing and (x) all documentation related to any of the foregoing.
(ii) "Company Intellectual Property" shall mean any Intellectual
Property that is owned by or exclusively licensed to the Company.
(iii) "Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations and
applications to register mask works; and (v) any other Company Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any
state, government or other public legal authority.
17
(b) Section 2.13(b) of the Disclosure Schedule lists all Registered
Intellectual Property owned by, or filed in the name of, the Company (the
"Company Registered Intellectual Property") and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property Rights.
(c) Except as set forth in Section 2.13(c) of the Disclosure Schedule, each
item of Company Intellectual Property, including all Company Registered
Intellectual Property listed in Section 2.13(b) of the Disclosure Schedule and
all Intellectual Property licensed to the Company, is free and clear of any
Liens. To the Company's Knowledge, the Company is the exclusive owner of all
trademarks and trade names used in connection with the operation or conduct of
the business of the Company, including the sale of any products or technology
or the provision of any services by the Company (other than with respect to
products acquired from third parties). The Company owns exclusively, and has
good title to, all copyrighted works that are Company products or other works
of authorship that the Company otherwise purports to own.
(d) To the extent that any Intellectual Property has been developed or
created by any person other than the Company for which the Company has,
directly or indirectly, paid, the Company has a written agreement with such
person with respect thereto and the Company thereby has obtained ownership of,
and is the exclusive owner of, by operation of law or by valid assignment, all
such Intellectual Property.
(e) Except as set forth in Section 2.13(e) of the Disclosure Schedule, the
Company has not transferred ownership of or granted any license of or right to
use or authorized the retention of any rights to use any Intellectual Property
that is or was Company Intellectual Property, to any other person.
(f) The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of its business as it
currently is conducted, including, without limitation, the design,
development, manufacture, use, import and sale of the products, technology and
services of the Company (including products, technology or services currently
under development).
(g) Other than "shrink-wrap" and similar widely available commercial end-
user licenses, the contracts, licenses and agreements listed in Section
2.13(g) of the Disclosure Schedule include all contracts, licenses and
agreements to which the Company is a party with respect to any license or
assignment of Intellectual Property. Except as listed in Section 2.13(g) of
the Disclosure Schedule, no person who has licensed Intellectual Property to
the Company has ownership rights or license rights to improvements made by the
Company in such Intellectual Property which has been licensed to the Company.
(h) Section 2.13(h) of the Disclosure Schedule lists all contracts,
licenses and agreements between the Company and any other person wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with
respect to the infringement or misappropriation by the Company or such other
person of the Intellectual Property of any person other than the Company.
18
(i) (A) The operation of the business of the Company as it currently is
conducted, including but not limited to the Company's design, development,
use, import, manufacture and sale of the products, technology or services
(including products, technology or services currently under development) of
the Company does not infringe or misappropriate any Intellectual Property
(other than trademarks, trade names and service marks) of any person, violate
the rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction. The Company has not received any notice from any person that the
operation of the business of the Company as it currently is conducted,
including but not limited to the Company's design, development, use, import,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company
infringes or misappropriates the Intellectual Property (other than trademarks,
trade names and service marks) of any person or constitutes unfair competition
or trade practices under the laws of any jurisdiction (nor is the Company
aware of any basis therefor).
(B) To the Knowledge of the Company, the operation of the business of
the Company as it currently is conducted, including but not limited to the
Company's design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company does not infringe or
misappropriate any trademark, trade name and service ▇▇▇▇ of any person.
(j) Each item of Company Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Except as set forth in Disclosure Schedule
2.13(j), to the Company's Knowledge, there are no actions that must be taken
by the Company within sixty (60) days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Intellectual Property. In
each case in which the Company has acquired any Intellectual Property rights
from any person, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property
(including the right to seek past and future damages with respect to such
Intellectual Property) to the Company and, to the maximum extent provided for
by, and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective equivalents
in any relevant foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between the Company and
any other person with respect to Company Intellectual Property under which
there is any dispute known to the Company regarding the scope of such
agreement, or performance under such agreement including with respect to any
payments to be made or received by the Company thereunder.
(l) To the Company's Knowledge, no person is infringing or misappropriating
any Company Intellectual Property.
19
(m) The Company has taken all steps that are reasonably necessary to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other person to the Company. Without limiting
the foregoing, the Company has, and enforces, a policy requiring each
employee, consultant and contractor to execute proprietary information,
confidentiality and assignment agreements substantially in the Company's
standard forms, and all current and former employees, consultants and
contractors of the Company have executed such an agreement.
(n) To the Company's Knowledge, after reasonable inquiry, no Company
Intellectual Property or product, technology or service of the Company is
subject to any proceeding or outstanding decree, order, judgment, agreement or
stipulation that restricts in any manner the use, transfer or licensing
thereof by the Company or may affect the validity, use or enforceability of
such Company Intellectual Property.
(o) To the Company's Knowledge, no: (i) product, technology, service or
publication of the Company, (ii) material published or distributed by the
Company, or (iii) conduct or statement of Company constitutes obscene
material, a defamatory statement or material, false advertising or otherwise
violates any law or regulation.
(p) Except as set forth in Disclosure Schedule 2.13(p), all of the
Company's products (including products currently under development) will
record, store, process, calculate and present calendar dates falling on and
after (and if applicable, spans of time including) January 1, 2000, and will
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as
the products record, store, process, calculate and present calendar dates on
or before December 31, 1999, or calculate any information dependent on or
relating to such dates.
2.14 Agreements, Contracts and Commitments.
(a) Except as set forth in Sections 2.13(g), 2.13(h) or 2.14(a) of the
Disclosure Schedule, the Company is not a party to nor is it bound by:
(i) any employment or consulting agreement, contract or commitment with
an employee or individual consultant or salesperson or consulting or sales
agreement, contract or commitment with a firm or other organization;
(ii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights 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;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property with fixed annual rental payments in
excess of $10,000;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any person;
20
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000 either
individually or $25,000 in the aggregate;
(vii) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside
the ordinary course of the Company's business;
(viii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit;
(ix) any purchase order or contract for the purchase of materials
involving in excess of $10,000 individually or $25,000 in the aggregate;
(x) any construction contracts;
(xi) any dealer, distribution, joint marketing or development agreement;
(xii) any sales representative, original equipment manufacturer, value
added reseller, remarketer or other agreement for distribution of the
Company's products or services; or
(xiii) any other agreement, contract or commitment that involves $10,000
or more or is not cancelable without penalty within thirty (30) days.
(b) The Company is in compliance with and has not breached, violated or
defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment to which the Company is a
party or by which it is bound (collectively a "Contract"), nor is the Company
aware of any event that would constitute such a breach, violation or default
with the lapse of time, giving of notice or both. Each Contract is in full
force and effect and is not subject to any default thereunder by any party
obligated to the Company pursuant thereto. The Company has obtained, or will
obtain prior to the Closing Date, all necessary consents, waivers and
approvals of parties to any Contract as are required thereunder in connection
with the Merger or for such Contracts to remain in effect without modification
after the Closing. Following the Effective Time, the Company will be permitted
to exercise all of the Company's rights under the Contracts without the
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which the Company would otherwise be required to pay had
the transactions contemplated by this Agreement not occurred.
2.15 Interested Party Transactions. No officer, director or Shareholder of
the Company (nor any ancestor, sibling, descendant or spouse of any of such
persons, or any trust, partnership or corporation in which any of such persons
has or has had an interest), has or has had, directly or indirectly, (i) an
interest in any entity which furnished or sold, or furnishes or sells,
services, products or technology that the Company furnishes or sells, or
proposes to furnish or sell, or (ii) any interest in any entity that purchases
from or sells or furnishes to the Company any goods or services, or (iii) a
beneficial interest in any Contract; provided, that ownership of no more than
one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "interest in any entity" for purposes of
this Section 2.15.
2.16 Governmental Authorization. Section 2.16 of the Disclosure Schedule
accurately lists each consent, license, permit, grant or other authorization
issued to the Company by a Governmental
21
Entity (i) pursuant to which the Company currently operates or holds any
interest in any of their properties or (ii) which is required for the
operation of its business or the holding of any such interest (herein
collectively called "Company Authorizations"). The Company Authorizations are
in full force and effect and constitute all Company Authorizations required to
permit the Company to operate or conduct its business or hold any interest in
its properties or assets.
2.17 Litigation. There is no action, suit or proceeding of any nature
pending nor has the Company received notice (oral or written) of any actions,
suits or proceedings threatened against the Company, its properties or any of
its officers or directors, nor to the Knowledge of the Company, is there any
reasonable basis therefor. There is no investigation pending or threatened
against the Company, its properties or any of its officers or directors (nor
to the Knowledge of the Company is there any reasonable basis therefor) by or
before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted.
2.18 Accounts Receivable.
(a) The Company has made available to Parent a list of all accounts
receivable of the Company ("Accounts Receivable") as of June 30, 1998, and
will provide to Parent a list of all Accounts Receivable of the Company as of
the Closing Date, along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the ordinary course of
business, are carried at values determined in accordance with GAAP
consistently applied and are collectible except to the extent of reserves
therefor set forth in the Current Balance Sheet. No person has any lien,
encumbrance or other similar right with respect to any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable.
2.19 Minute Books. The minutes of the Company made available to counsel for
Parent are the only minutes of the Company and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees thereof) of
the Company and its shareholders or actions by written consent since the
incorporation of the Company.
2.20 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any underground
storage tanks at any property that the Company has at any time owned,
operated, occupied or leased; or (ii) illegally released any material amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
or defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present as a result of the deliberate actions of the Company in,
on or under
22
any property, including the land and the improvements, ground water and
surface water thereof, that the Company has at any time owned, operated,
occupied or leased.
(b) Hazardous Materials. The Company has not transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the
Effective Time, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities,
respectively, and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. To the Company's Knowledge, no action,
proceeding, revocation proceeding, amendment procedure, writ, injunction or
claim is pending nor has the Company received notice (oral or written) of any
action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is
not aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental
liability.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except as set forth
in Section 2.21 of the Disclosure Schedule, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with the
Agreement or any transaction contemplated hereby. Section 2.21 of the
Disclosure Schedule sets forth the principal terms and conditions of any
agreement, written or oral, with respect to such fees. Section 2.21 of the
Disclosure Schedule sets forth the Company's current reasonable estimate of
all Third Party Expenses (as defined in Section 5.4) expected to be incurred
by the Company in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated
hereby.
2.22 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.22(a)(i) below (which definition shall apply only to this
Section 2.22), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock
or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded or
23
unfunded, including without limitation, each "employee benefit plan," within
the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the
Company or any Affiliate has or may have any liability or obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current or former employee, consultant or
director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between the Company or
any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by the Company or any Affiliate, whether
informally or formally, or with respect to which the Company or any Affiliate
will or may have any liability, for the benefit of Employees who perform
services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.22(b) contains an accurate and complete list of
each Company Employee Plan and each Employee Agreement under each Company
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment to establish any new Company Employee Plan or Employee Agreement,
to modify any Company Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement),
or to enter into any Company Employee Plan or Employee Agreement.
(c) Documents. The Company has provided to Parent: (i) correct and complete
copies of all documents embodying each Company Employee Plan and each Employee
Agreement including (without limitation) all amendments thereto and all
related trust documents; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee
24
Plan; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and all applications and correspondence to or from the IRS
or the DOL with respect to any such application or letter; (vii) all material
written agreements and contracts relating to each Company Employee Plan,
including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all communications
material to any Employee or Employees relating to any Company Employee Plan
and any proposed Company Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any liability to the Company; (ix) all correspondence to or from any
governmental agency relating to any Company Employee Plan; (x) all COBRA forms
and related notices; (xi) all policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Company Employee Plan; (xii) all
discrimination tests for each Company Employee Plan for the most recent plan
year; and (xiii) all registration statements, annual reports (Form 11-K and
all attachments thereto) and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed all obligations
required to be performed by it under, is not in default or violation of, and
has no knowledge of any default or violation by any other party to each
Company Employee Plan, and each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination, opinion,
notification or advisory letter from the IRS with respect to each such Plan as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of
each such Company Employee Plan; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan; (iv) there are no actions, suits or claims pending or
threatened or reasonably anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company
Employee Plan; (v) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Parent, Sub, the Company or any Affiliate (other than
ordinary administration expenses); (vi) there are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vii) neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
25
(f) Multiemployer Plans. At no time has the Company or any Affiliate
contributed to or been required to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for
any reason, except as may be required by COBRA or other applicable statute,
and the Company has never represented, promised or contracted (whether in oral
or written form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(h) COBRA. Neither the Company nor any Affiliate has, prior to the
Effective Time, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of state law
applicable to its Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by the Company or
its Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement or otherwise will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code (but
without regard to clause (ii) thereof).
(j) Employment Matters. The Company: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions
of employment and wages and hours, in each case, with respect to Employees;
(ii) has withheld and reported all amounts required by law or by agreement to
be withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, or to the
Knowledge of the Company, threatened or reasonably anticipated claims or
actions against the Company under any worker's compensation policy or long-
term disability policy.
(k) Labor. No work stoppage or labor strike against the Company is pending,
threatened or reasonably anticipated. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending or
threatened or reasonably anticipated against the Company relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
26
aggregate, result in any liability to the Company, Parent, Sub or any
Affiliate. Neither the Company nor any of its subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
The Company is not presently, nor has it been in the past, a party to, or
bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) No Interference or Conflict. No shareholder, officer, employee or
consultant of the Company is obligated under any contract or agreement subject
to any judgement, decree or order of any court or administrative agency that
would interfere with such person's efforts to promote the interests of the
Company or that would interfere with the Company's business. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business as presently conducted or proposed to be conducted nor any activity
of such officers, directors, employees or consultants in connection with the
carrying on of the Company's business as presently conducted or proposed to be
conducted, will conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract or agreement
under which any of such officers, directors, employees or consultants is now
bound.
2.23 Insurance. Section 2.23 of the Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. To
the Company's Knowledge, there is no claim pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid, and the Company and any covered
parties are otherwise in compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). To the Company's Knowledge, there is no threatened termination of,
or premium increase with respect to, any of such policies.
2.24 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any foreign, federal, state or local statute, law or regulation.
2.25 Warranties; Indemnities. Except for the warranties and indemnities
contained in those contracts and agreements set forth in Section 2.13(h) of
the Disclosure Schedule, the Company has not given any warranties or
indemnities relating to products or technology sold or licensed or services
rendered by the Company.
2.26 Pooling of Interests. To the Knowledge of the Company, based on
consultation with its independent accountants, neither the Company nor any of
its directors, officers, affiliates or shareholders has taken any action which
would preclude the Parent's and Company's ability to account for the Merger as
a pooling of interests.
2.27 Proxy Statement and Shareholder Information Statement. The information
supplied by the Company for inclusion in the Proxy Statement or the
Shareholder Information Statement (each as defined below) will not on the date
it (or any amendment or supplement thereto) is first sent to Shareholders, at
the time of the Company Shareholders Meeting and at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it is made, is false
27
or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading. If at any time prior to the Effective Time any event relating to
the Company or any of its respective affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment or a
supplement to the Proxy Statement or the Shareholder Information Statement,
the Company will promptly inform the Parent and Sub. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Parent or Sub that is contained in any of the
foregoing documents.
2.28 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same)
that has been reasonably requested by Parent or its counsel.
2.29 Representations Complete. None of the representations or warranties
made by the Company (as modified by the Disclosure Schedule), nor any
statement made in any Schedule or certificate furnished by the Company
pursuant to this Agreement or furnished in or in connection with documents
mailed or delivered to the Shareholders for use in soliciting their consent to
this Agreement and the Merger contains or will contain at the Effective Time
(when read together with the Proxy Statement and Shareholder Information
Statement (as amended or supplemented) at the Effective Time), any untrue
statement of a material fact, or omits or will omit at the Effective Time
(when read together with the Proxy Statement and Shareholder Information
Statement (as amended or supplemented) at the Effective Time), to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company
that on the date hereof (except as expressly provided otherwise below and
except as may be modified to appropriately reflect the Parent's planned
reorganization into a Delaware corporation or a subsidiary of a Delaware
corporation) and as of the Effective Time as though made at the Effective Time
as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oregon. Each of Parent and Sub
has the corporate power to own its properties and to carry on its business as
now being 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 the ability of Parent
and Sub to consummate the Merger or the other transactions contemplated
hereby.
3.2 Charter and Bylaws. Parent has heretofore furnished to the Company a
complete and correct copy of its Articles of Incorporation and Bylaws, as
amended to date. Such Articles of Incorporation and Bylaws are in full force
and effect. Neither parent nor Sub is in violation of any of the provisions of
its Articles of Incorporation or Bylaws.
28
3.3 Authority. Each of Parent and Sub has all requisite power and authority
to enter into this Agreement and any Related Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and any Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of Parent and Sub, and no further action is required on the part of
Parent or Sub to authorize this Agreement, any Related Agreements to which it
is a party and the transactions contemplated hereby and thereby. This
Agreement has been, and any Related Agreements to which Parent or Sub is a
party have been or will have been prior to the Effective Time, duly executed
and delivered by Parent and Sub and, assuming the due authorization, execution
and delivery by the other parties hereto, constitute the valid and binding
obligations of Parent and Sub, enforceable in accordance with their respective
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.4 Merger Shares. The shares of Parent Common Stock to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid, non-
assessable and will be issued in compliance with all applicable federal and
state securities laws.
3.5 No Conflict. The execution and delivery of this Agreement and any
Related Agreement to which Parent or Sub is a party by Parent or Sub, as the
case may be, do not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a Conflict under (i) any provision of the Articles of Incorporation, as
amended, and Bylaws of Parent or Sub, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license to which Parent or Sub or any of their respective properties or assets
are subject and that has been filed as an exhibit to Parent's filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Sub or their respective
properties or assets, except for a Conflict under subsection (ii) or (iii)
above that would not have a Material Adverse Effect on the ability of the
parties to consummate the Merger or the other transactions contemplated by
this Agreement.
3.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required, including a party to any agreement with Parent or Sub (so
as not to trigger any Conflict) by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement and any Related
Agreements to which Parent or Sub is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings that have been obtained or made or will be obtained
or made prior to the Effective Time, (iii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not have a Material Adverse Effect on the Parent, Sub
and Parent's other subsidiaries taken as a whole, or on the ability of the
parties to consummate the Merger or the other
29
transactions contemplated by this Agreement, and (iv) the filing of the Merger
Agreement with the Secretary of State of the State of Oregon.
3.7 Proxy Statement and Shareholder Information Statement. The information
supplied by Parent for inclusion in the Proxy Statement and Shareholder
Information Statement will not, on the date it (or any amendment or supplement
thereto) is first mailed to Shareholders, at the time of the Company
Shareholders Meeting and at the Effective Time, contain any statement which,
at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or will omit to state
any material fact necessary in order to make the statements therein not false
or misleading. If at any time prior to the Effective Time any event relating
to Parent, Sub or any of their respective affiliates, officers or directors
should be discovered by Parent or Sub which should be set forth in an
amendment or a supplement to the Proxy Statement or Shareholder Information
Statement, Parent or Sub will promptly inform the Company. Notwithstanding the
foregoing, Parent and Sub make no representation or warranty with respect to
any information supplied by the Company or the Shareholders that is contained
in any of the foregoing documents.
3.8 Other Matters. Sub has been formed for the sole purpose of effecting the
Merger and, except as contemplated by this Agreement, Sub has not conducted
any business activities and does not have any material liabilities or
obligations.
3.9 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed with the SEC (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (i) at the time they were filed, complied as to form in all material
respects with the requirements of the Securities Act or 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 require to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Parent and Sub make no representation or warranty
whatsoever concerning the Parent SEC Reports as of any time other than the
time they were filed. None of the Parent'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 thereto) (the "Parent Financial Statements") contained
in the Parent SEC Reports has been prepared in accordance with GAAP applied on
a consistent basis throughout the period involved (except as may be indicated
in the notes thereto) and each fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be, individually or in the
aggregate, materially adverse to Parent and its subsidiaries taken as a whole.
30
ARTICLE IV.
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on the Company's business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to
pay or perform other obligations when due consistent with the past practices
of the Company, and, to the extent consistent with such business, use its
reasonable best efforts consistent with past practice and policies to preserve
intact the Company's present business organizations, keep available the
services of the Company's present officers and Key Employees and preserve the
Company's relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it (although the Company
is not required to continue any commercial agreements with any of its
customers other than Parent), all with the goal of preserving unimpaired the
Company's goodwill and ongoing businesses at the Effective Time. The Company
shall promptly notify Parent of any event or occurrence or emergency not in
the ordinary course of business of the Company and any material event
involving the Company. Except as expressly contemplated by this Agreement as
set forth in Section 4.1 of the Disclosure Schedule, the Company shall not,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed (provided, however, that with respect to the
items (c), (d), (m), (n), (o), (q), (s) and (u), and with respect to item (g)
to the extent the Company has issued options to purchase less than 200,000
shares of Company Capital Stock since the date of this Agreement, and with
respect to (x) as it applies to any of the aforementioned items, if Parent
does not respond within five (5) business days of a written request (in
accordance with Section 9.1) from Company for consent to an action described
in such item, such consent shall be deemed to have been given):
(a) Except in the ordinary course of business and consistent with past
practice, (i) sell or enter into any license agreement with respect to the
Company Intellectual Property with any person or entity or (ii) buy or enter
into any license agreement with respect to the Intellectual Property of any
person or entity;
(b) Transfer to any person or entity any rights to the Company
Intellectual Property;
(c) Enter into or amend: (i) any Contract with a customer, (ii) any single
Contract (or series of related Contracts) with a potential obligation of
$25,000 or more or (iii) multiple Contracts in any calendar month with
aggregate potential obligation of $100,000 or more;
(d) Amend or otherwise modify (or agree to do so), except in the ordinary
course of business, or violate the terms of, any of the Contracts set forth or
described in the Disclosure Schedule;
(e) Commence any litigation or settle: (i) any litigation for $25,000 or
more or (ii) any litigation relating to intellectual property rights;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its
31
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of the
Company, or repurchase, redeem or otherwise acquire, directly or indirectly,
any shares of the capital stock of the Company or options, warrants or other
rights exercisable therefor (except for the Company's repurchase of Company
Capital Stock from its employees at the purchase price paid by such employees
for such stock);
(g) Issue, grant, deliver or sell, contract to issue, grant, deliver or
sell, or authorize or propose the issuance, grant, delivery or sale of, or
purchase or propose the purchase of, any shares of its capital stock (other
than upon the exercise of currently outstanding stock options) or securities
convertible into or exchangeable for, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase any such shares or other convertible
securities;
(h) Cause or permit any amendments to its Articles of Incorporation or
Bylaws or other organizational documents;
(i) Propose or discuss acquiring or acquire or agree to acquire by merging
or consolidating with, or by purchasing any assets or equity securities of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof other than Parent, Sub or
any other Parent subsidiary, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;
(j) Sell, lease, license or otherwise dispose of any of its properties or
assets, except in the ordinary course of business and consistent with past
practices;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(l) Incur liabilities in excess of $390,000 (other than amounts borrowed
under the Company Loan (defined below));
(m) Grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement;
(n) Grant any severance or termination pay: (i) to any director or officer
or (ii) to any other employee except payments made pursuant to standard
written agreements outstanding on the date hereof and disclosed in the
Disclosure Schedule;
(o) Adopt any employee benefit plan, or enter into any employment contract
(other than a contract expressly providing for at-will employment), or pay or
agree to pay any special bonus or special remuneration to any director;
(p) Revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other than
in the ordinary course of business;
(q) Pay, discharge or satisfy, in an amount in excess of $10,000 (in any
one case) or $25,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
of liabilities reflected or reserved against in the Current Balance Sheet;
32
(r) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(s) Enter into any strategic alliance or joint marketing arrangement or
agreement;
(t) Accelerate the vesting schedule of any of the outstanding Company
Options or Company Capital Stock;
(u) (i) Terminate any Key Employee, (ii) encourage any employee to resign,
(iii) hire an employee with an annual salary and bonus in excess of $60,000 or
(iv) hire an officer;
(v) Take any action that would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests whether
or not otherwise permitted under this Section 4.1;
(w) Take any other action inconsistent with past practice or outside the
ordinary course of business; or
(x) Agree in writing or otherwise to take, any of the actions described in
Sections 4.1(a) through (w) above;
(y) Take, or agree in writing or otherwise to take, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
4.2 No Solicitation.
(a) For purposes of this Section 4.2, the following terms shall have the
following meanings:
(i) "Acquisition Proposal" shall mean any offer or proposal (other than
an offer or proposal by Parent) contemplating or otherwise relating to any
Company Acquisition Transaction.
(ii) A party's "Associates" shall include such party's subsidiaries and
other affiliates and the respective directors, officers, employees, agents,
representatives, consultants, accountants, attorneys and advisors of such
party and its affiliates;
(iii) "Company Acquisition Transaction" shall mean any transaction not
contemplated by this Agreement involving:
(A) any sale, lease, exchange, transfer or other disposition of the
assets of the Company or any subsidiary of the Company constituting more than
50% of the consolidated assets of the Company or accounting for more than 50%
of the consolidated revenues of the Company in any one transaction or in a
series of related transactions; or
(B) any offer to purchase, tender offer, exchange offer or any similar
transaction or series of related transactions made by any person, group or
entity involving more than 50% of the outstanding shares of capital stock of
the Company; or
(C) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction or series of related transactions
involving the Company other
33
than any transaction which results in the Shareholders of the Company before
the transaction continuing to hold at least 50% of the outstanding voting
securities of the Company after such transaction.
(iv) For purposes of this Section 4.2, "Termination Date" shall mean the
earlier of (i) December 31, 1998, (ii) the Closing Date, (iii) the date Parent
terminates this Agreement, or (iv) the date Parent terminates the commercial
agreement between Parent and Company for any reason other than the
Shareholders of the Company voting against the Merger at the Company
Shareholders Meeting (as defined below).
(b) The Company agrees that prior to and through the Termination Date, it
shall not, directly or indirectly, and shall not authorize or permit any
Associate of the Company to (i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal or take any
action that could reasonably be expected to lead to an Acquisition Proposal,
(ii) furnish any information regarding the Company or any subsidiary of the
Company to any person, group or entity in connection with or in respect to any
Acquisition Proposal, (iii) continue or engage in discussions with any person,
group or entity with respect to any Acquisition Proposal, (iv) approve,
endorse or recommend any Acquisition Proposal or (v) enter into any letter of
intent, term sheet or similar document or any contract, commitment or other
obligation of any kind contemplating or otherwise relating to any Company
Acquisition Transaction (other than with Parent and Sub). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by an
Associate of the Company shall be deemed to constitute a breach of this
Section 4.2. In addition, the Company agrees that any negotiations with
respect to any of the above activities (other than negotiations with Parent
and Sub) in progress as of the date hereof will be suspended during the period
from the date hereof through the Termination Date. In the event that the
Company receives, directly or indirectly, any Acquisition Proposal, the
Company shall immediately notify Parent thereof, including information as to
the identity of the offeror or the party making any such Acquisition Proposal
and the specific terms of such Acquisition Proposal. The Company agrees that
its obligations under this Section 4.2 are necessary and reasonable in order
to protect Parent and its business, and expressly agrees that monetary damages
would be inadequate to compensate Parent for any breach of this Section 4.2.
Accordingly, the Company agrees and acknowledges that any such violation of
threatened violation will cause irreparable injury to Parent and that, in
addition to any other remedies that may be available, in law, in equity or
otherwise, Parent shall be entitled to obtain injunctive relief against the
threatened breach of this Agreement or the continuation of any such breach,
without the necessity of proving damages.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 Proxy Statement and Shareholder Information Statement.
(a) The parties hereto acknowledge and agree that the shares of Parent
Common Stock issuable to the Shareholders pursuant to Section 1.7 shall
constitute "restricted securities" within the meaning of Rule 144 under the
Securities Act. The certificates for the shares of Parent Common
34
Stock to be issued in the Merger shall bear appropriate legends to identify
such privately placed shares as being restricted under the Securities Act, to
comply with applicable state securities laws and, if applicable, to notice the
restrictions on transfer of such shares. It is acknowledged and understood
that Parent is relying upon certain written representations made by the
Shareholders in the Shareholder Certificate. In order to provide for the
registration of the shares of Parent Common Stock to be issued in the Merger,
the parties hereto shall enter into a separate registration rights agreement
("Registration Rights Agreement") in the form attached hereto as Exhibit D. As
provided in the Registration Rights Agreement, Parent shall file a
Registration Statement on Form S-3 (to provide for the registered resales of
such shares).
(b) Within 30 days prior to the Company Shareholders Meeting, the Company
shall have completed, with the cooperation of Parent, a proxy statement (the
"Proxy Statement"), and Parent shall have completed, with the cooperation of
the Company, a shareholder information statement (the "Shareholder Information
Statement"). Each of Parent and the Company shall provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Proxy Statement and the
Shareholder Information Statement, or in any amendments or supplements
thereto, and to cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Proxy Statement and Shareholder
Information Statement. The Proxy Statement and the Shareholder Information
Statement shall include information regarding the Company, the terms of the
Merger and this Agreement and the unanimous recommendation of the Board of
Directors of the Company in favor of the Merger. The Company will cause the
Proxy Statement and the Shareholder Information Statement to be delivered to
the Shareholders, at the earliest practicable time after such documents are
completed and in no event later than 20 days prior to the date of the Company
Shareholders Meeting (as defined below).
(c) The Company and Parent will prepare and file any other filings
required under any Blue Sky laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each of the Company and
Parent will notify the other promptly upon the receipt of any correspondence
or communications from any government officials concerning the Shareholder
Information Statement, the Proxy Statement or any Other Filing and will supply
the other with copies of all correspondence between such party or any of its
representatives, on the one hand, and any other government officials, on the
other hand, with respect to the Shareholder Information Statement, the Proxy
Statement, the Merger or any Other Filing. The Proxy Statement, the
Shareholder Information Statement and the Other Filings will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement,
the Shareholder Information Statement or any Other Filing, the Company or
Parent, as the case may be, will promptly inform the other of such occurrence
and cooperate in preparing, and mailing to the Shareholders, such amendment or
supplement.
(d) The Company shall, pursuant to Oregon Law, and its Articles of
Incorporation and Bylaws, properly notice, convene and hold a shareholder's
meeting to vote on this Agreement and the transactions contemplated hereby on
October 9, 1998 (the "Company Shareholders Meeting"), provided, however, that
such date may be delayed up to sixty (60) days by Parent in the event Parent
or the Company reasonably requires additional time to complete, amend or
supplement the Proxy
35
Statement or Shareholder Information Statement or to close the transactions
contemplated by the Agreement and Plan of Reorganization between the Parent,
Starwave Corporation and Disney Enterprises, Inc., as publicly announced on or
about June 18, 1998 (the "Disney Transaction"); provided, further, that the
Company Shareholders Meeting may be held on such other date as Parent and
Company mutually agree. The Company shall use its best efforts to obtain the
vote of its Shareholders sufficient to approve the Merger and this Agreement
and to enable the Closing.
5.2 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during
normal business hours and upon reasonable notice during the period prior to
the Effective Time to (a) all of the Company's properties, books, contracts,
commitments and records, (b) all other information concerning the business,
properties and personnel (subject to restrictions imposed by applicable law)
of the Company as Parent may reasonably request and (c) all Key Employees of
the Company. The Company agrees to provide to Parent and its accountants,
counsel and other representatives copies of internal financial statements
(including by returns and supporting documentation) promptly upon request.
Parent shall, at the Company's request, provide the Company with all documents
filed by Parent with the SEC on a nonconfidential basis prior to the Closing
Date and will respond to other reasonable requests from the Company for other
specific, relevant, nonconfidential information concerning Parent. No
information or knowledge obtained in any investigation pursuant to this
Section 5.2 shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.3 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.2, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transaction contemplated hereby shall be governed by the terms of the
Standstill Agreement effective as of July 10, 1998 between the Company and
Parent.
5.4 Expenses.
(a) Whether or not the Merger is consummated, except as set forth in
Section 5.4(b), all fees and expenses incurred in connection with the Merger
including, without limitation, all legal, accounting, investment banking,
broker, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such fees and expenses.
(b) In the event that the Merger is consummated, Parent agrees to pay
those Third Party Expenses incurred by the Company and paid by or payable to
▇▇▇▇ ▇▇▇▇▇▇, the Company's legal counsel and the Company's accountants, and
Parent shall have full recourse to the Escrow Fund (as defined herein) for
payment of all Third Party Expenses incurred by the Company exceeding the
Estimated Third Party Expenses (but only to the extent the actual Third Party
Expenses exceed $310,000). The Company shall not, however, be obligated to
refund or otherwise pay any amounts into the Escrow Fund or to the
Shareholders in the event that the actual Third Party Expenses are less than
the Estimated Third Party Expenses and/or less than $310,000.
(c) In the event that the Merger is consummated, the Parent agrees to pay
the Third Party Expenses incurred by the Company in connection with the audit
of the Company's financial statements and preparation of the letter described
in Section 6.3(p) (if requested).
36
5.5 Public Disclosure. Unless otherwise required by law, prior to the
Effective Time, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto unless
approved by Parent regarding the subject matter of this Agreement prior to
release. Any public announcement by Parent regarding the subject matter of
this Agreement shall be delivered to the Company prior to release.
5.6 Consents. The Company shall use its best efforts to obtain the consents,
waivers, assignments and approvals under any of the Contracts as may be
required in connection with the Merger (all of such consents, waivers and
approvals are set forth in the Disclosure Schedule) so as to preserve all
rights of, and benefits to, the Company thereunder.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement; provided that Parent shall not be required to
agree to any divestiture by Parent or the Company or any of Parent's
subsidiaries or affiliates of shares of capital stock or of any business,
assets or property of Parent or its subsidiaries or affiliates or of the
Company, its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock.
5.9 Notification of Certain Matters. The Company shall give prompt notice to
Parent of: (i) the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which is likely to cause any representation or warranty of
the Company or the Principal Shareholders contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any failure of
the Company or the Principal Shareholders, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.9 shall not limit or otherwise affect any remedies
available to the party receiving such notice. No disclosure by the Company
pursuant to this Section 5.9, however, shall be deemed to amend or supplement
the Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant.
5.10 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions contemplated hereby.
5.11 Termination of Employment Agreements. The Company agrees to terminate
all employment agreements immediately prior to the Closing Date (other than
the employment
37
agreements contemplated by this Agreement); provided, however, that all
provisions of such agreements relating to confidentiality and invention
assignment shall not be terminated and shall survive the termination of such
agreements indefinitely and provided that the Company shall not be required to
terminate any employment agreement with any at-will employee.
5.12 Non-Disclosure Agreements. Company agrees to use its best efforts to
cause all of its current employees and consultants to execute, to the extent
they have not already done so, a Non-Disclosure Agreement (with Intellectual
Property assignment provisions) in substantially the form currently used by
the Company.
5.13 Employee Compensation; Relocation. Each employee of the Company who
remains an employee of Parent after the Effective Time shall be eligible, upon
completion of Parent's standard employee background and reference check, to
receive salary and benefits (such as medical benefits, bonuses, 401(k) and
stock options) consistent with Parent's standard human resource policies. The
expected total employee compensation package to be given to each employee of
the Company after the Merger shall be substantially as described on Schedule A
hereto. In the event that Parent relocates the Company's operations to the Bay
Area within two (2) years after the Closing Date, Parent will pay the
reasonable and properly documented relocation expenses of all current
employees of the Company that relocate to the Bay Area with the Company and/or
Surviving Corporation; provided, however, that the Parent's aggregate
obligation to pay relocation expenses under this section shall not exceed
$100,000.
5.14 Affiliate Agreements. Schedule 5.14 sets forth those persons who, in
the Company's reasonable judgment, are or may be "affiliates" of the Company
within the meaning of Rule 145 (each such person a "Rule 145 Affiliate")
promulgated under the Securities Act ("Rule 145"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement (and in
any case prior to the Closing Date) from each of the Rule 145 Affiliates of
the Company, an executed Affiliate Agreement ("Affiliate Agreement") in the
form attached hereto as Exhibit E, each of which will be in full force and
effect as of the Effective Time. Parent and Sub shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to
be received by such Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for Parent
Common Stock, consistent with the terms of such Affiliate Agreements.
5.15 Tax-Free Reorganization. The parties intend to adopt this Agreement and
the Merger as a tax-free plan of reorganization under Section 368(a)(1)(A) of
the Code by virtue of the provisions of Section 368(a)(2)(E) of the Code. The
Parent Common Stock issued in the Merger will be issued solely in exchange for
the Company Capital Stock, and no other transaction other than the Merger
represents, provides for or is intended to be an adjustment to the
consideration paid for the Company Capital Stock. No consideration that could
constitute "other property" within the meaning of Section 356(b) of the Code
is being transferred by Parent for the Company Capital Stock in the Merger.
The parties shall not take a position on any tax return inconsistent with this
Section 5.15. From and after the Closing, neither Parent, Sub nor the Company
shall take any action that could reasonably be expected to cause the Merger
not to be treated as a reorganization within the meaning of Section 368 of the
Code.
38
5.16 Pooling Accounting. Company shall, to the extent possible, cause the
business combination to be effected by the Merger to be accounted for as a
pooling of interests. Company shall, to the extent possible, cause its
Affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as
a pooling of interests.
5.17 Loan. Upon the execution of this Agreement Parent shall loan $360,000
to the Company (the "Company Loan") in the form of a check payable to the
Company. The Company Loan shall be evidenced by a secured promissory note
substantially in the form of Exhibit H (the "Promissory Note").
5.18 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, Parent shall: (i) assume, as of
the Effective Time, all obligations of the Company under Article 7 of the
Company's Articles of Incorporation, as currently in effect, and (ii) to pay
all amounts that become due and payable under such provisions.
(b) This Section 5.18 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Company and each indemnified
party, shall be binding, jointly and severally, on all successors and assigns
of the Surviving Corporation and Parent, and shall be enforceable by the
indemnified parties.
5.19 S-8 Registration. Not later than thirty (30) days after the Closing
Date, Parent shall prepare and file with the Securities and Exchange
Commission a registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Parent Common Stock equal to the number of
shares of Parent Common Stock subject to Assumed Options. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at least for so long as any
Assumed Options may remain outstanding.
ARTICLE VI.
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) No Injunction or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect, nor shall any proceeding
brought by an administration, agency or commission or other governmental
authority or instrumentality, domestic or foreign, 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.
(b) Governmental Approval. Approvals from Governmental Entities (if any)
deemed appropriate or necessary by any party to this Agreement shall have been
timely obtained.
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(c) Litigation. There shall be no bona fide action, suit, claim or
proceeding of any nature pending, or overtly threatened, against Parent, Sub,
the Company or the Principal Shareholders, their respective properties or any
of their officers, directors, arising out of, or in any way connected with,
the Merger or the other transactions contemplated by the terms of this
Agreement.
(d) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods under the HSR Act relating to the transactions contemplated hereby (if
any) will have expired or terminated early.
(e) Tax Opinions. Parent and the Company shall each have received written
opinions from their respective tax counsel (▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C. and Pillsbury Madison & Sutro LLP, respectively), in form and substance
reasonably satisfactory to them, to the effect that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn; provided, however, that if counsel to
either Parent or the Company does not render such opinion, this condition
shall nonetheless be deemed to be satisfied with respect to such party if the
other party's counsel renders such opinion to such party. The parties to this
Agreement agree to make reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
6.2 Additional Conditions to Obligations of Company and the Principal
Shareholders. The obligations of the Company and the Principal Shareholders to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing Date of each
of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations, Warranties and Covenants. The representations and
warranties of Parent and Sub in this Agreement shall be true and correct in
all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and each of
Parent and Sub shall have performed and complied in all material respects with
all covenants and obligations of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Legal Opinion. Company shall have received a legal opinion from
Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, in form and
substance reasonably satisfactory to the Company, concerning Parent's issuance
of the Parent Common Stock in the Merger.
(c) Registration Rights Agreement. The Parent shall have executed and
delivered the Registration Rights Agreement to the Shareholder Representative.
(d) Employment and Noncompetition Agreements. The Parent shall have
executed and delivered to each Key Employee his or her Employment Agreement
and all of such Employment Agreements shall be in full force and effect.
(e) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made, by Parent and Sub for the due authorization, execution and delivery
of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Parent and Sub.
40
(f) Employee Offers. Parent shall have made offers of employment as set
forth in Section 5.13 and shall not have withdrawn such offers of employment.
(g) Certificate of Parent. The Company shall have been provided with a
certificate executed on behalf of Parent by a Vice President of Parent to the
effect that, as of the Effective Time:
(i) all representations and warranties made by Parent and Sub in this
Agreement are true and correct in all material respects on and as of the
Effective Time as though such representations and warranties were made on and
as of such time; and
(ii) all covenants and obligations of this Agreement to be performed by
Parent on or before such date have been so performed in all material respects.
6.3 Additional Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Company and the Principal Shareholders (as modified by the
Disclosure Schedule) in this Agreement shall be true and correct in all
material respects on and as of the Effective Time as though such
representations and warranties were made on and as of the Effective Time
(except to the extent such representations and warranties have been modified
by actions of the Company not prohibited by Section 4.1) and the Company and
the Principal Shareholders shall have performed and complied in all material
respects with all covenants and obligations of this Agreement required to be
performed and complied with by it as of the Effective Time.
(b) Claims. There shall not have occurred any claims (whether or not
asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a Material
Adverse Effect on the Company.
(c) Third Party Consents. Any and all consents, waivers, assignments and
approvals listed in the Disclosure Schedule shall have been obtained.
(d) Legal Opinion. Parent shall have received a legal opinion from
counsel to the Company in form and substance reasonably satisfactory to
Parent.
(e) Registration Rights Agreement. Each Shareholder shall have executed
and delivered the Registration Rights Agreement to Parent.
(f) Employment and Noncompetition Agreements. Each of the Key Employees
shall each have executed and delivered to Parent their respective Employment
Agreement in the forms attached hereto as Exhibits G-1 and G-2 (the
"Employment Agreements") and all of such Employment Agreements shall be in
full force and effect. In addition, each of the Key Employees shall be an
employee of the Company on the Closing Date.
(g) Shareholder Certificate. Each Shareholder and holder of Company
Options shall have executed and delivered to Parent a Shareholder Certificate.
41
(h) No Material Adverse Changes. Except as set forth in the Disclosure
Schedule, there shall not have occurred any material adverse change in the
business, assets (including intangible assets), results of operations,
liabilities (contingent or accrued) or financial condition of the Company
since the date of this Agreement.
(i) Shareholder Approval. Shareholders holding at least ninety percent
(90%) of the Company's Capital Stock shall have approved this Agreement, the
Merger and the transactions contemplated hereby and thereby, and holders of
not more than ten percent (10%) of Company Capital Stock shall continue to
have a right to exercise appraisal, dissenters or similar rights under
applicable law with respect to their Company Capital Stock by virtue of the
Merger.
(j) Affiliate Agreements. Each of the persons listed in Section 5.14 of
the Disclosure Schedule shall have executed an Affiliate Agreement.
(k) Contracts. Except as set forth in paragraphs (1), (m), and (n) of
this Section 6.3 below and Schedule 6.3(k), each Contract listed in Sections
2.13(g) and 2.14(a) of the Disclosure Schedule shall be in full force and
effect and the Company shall not have received notice of termination of any
such Contract.
(l) Termination of Registration Rights and Covenants, Warrants and
Convertible Debt. All registration rights relating to the Company Capital
Stock and all covenants of the Company contained in the Series A Preferred
Stock Purchase Agreement(s) between the Company and certain investors and the
Series B Stock Purchase Agreement(s) between the Company and certain investors
shall have been terminated. All warrants and other rights to purchase Company
Capital Stock (other than assumed Company Options) shall have been exercised
or otherwise terminated and all debt of the Company convertible into Company
Capital Stock shall have been converted. Parent shall have received evidence
that as of the Effective Time each unexercised Company warrant shall have been
exercised or terminated and all convertible securities (debt or equity) shall
have been exercised or converted into Company Common Stock to the satisfaction
of Parent.
(m) Termination of Employment Agreements. All employment agreements
between the Company and any other person shall have been terminated as
contemplated in Section 5.11.
(n) Closing Balance Sheet. Parent shall have received from the Company at
least three business days prior to the Closing Date the Estimated Balance
Sheet.
(o) Estimated Third Party Expenses. Parent shall have received from the
Company at least three business days prior to the Closing Date a detailed
schedule of the Estimated Third Party Expenses paid or payable by the Company
certified as to correctness by the Company and the Principal Shareholders and
in a form reasonably satisfactory to Parent.
(p) Opinion of Accountants. If Parent determines that it is appropriate
to characterize the Merger as a pooling of interests, Parent and the Company
shall have received a letter from Ernst & Young LLP, dated within two (2)
business days prior to the Closing Date, regarding its concurrence with
Parent's and the Company's managements' conclusions as to the appropriateness
of pooling of interest accounting for the Merger under Accounting Principles
Board Opinion No. 16, if the Merger is consummated in accordance with this
Agreement.
42
(q) Certificate of the Company. Parent shall have been provided with a
certificate executed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by the Company and the
Principal Shareholders in this Agreement are true and correct in all material
respects on and as of the Effective Time as though such representations and
warranties were made on and as of such time;
(ii) all covenants and obligations of this Agreement to be performed by
the Company on or before such date have been so performed in all material
respects; and
(iii) the provisions set forth in Sections 6.3(b), (c), (h), (i), (k),
(l) and (m) have been satisfied.
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. All of the Company's and
Shareholder's representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger and
continue until the earlier of: (a) the date which is the date of the auditor's
report for the first audit of Parent's financial statements after the Closing
Date or (b) the date which is one year following the Closing Date (the
"Expiration Date"). All of Parent's and Sub's representations and warranties
contained herein or in any instrument delivered pursuant to this Agreement
shall survive for one (1) year following the Closing.
7.2 Indemnification; Escrow Arrangements.
(a) Indemnification. Each Shareholder jointly and severally agrees to
indemnify and hold Parent, Sub and their officers, directors and affiliates
(the "Indemnified Parties") harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys'
fees and expenses of investigation (hereinafter individually a "Loss" and
collectively "Losses") incurred by the Indemnified Parties directly or
indirectly as a result of: (i) any inaccuracy or breach of a representation or
warranty of the Company a certificate of any officer of the Company delivered
pursuant to this Agreement, or a Shareholder Certificate, (ii) any failure by
the Company or a Shareholder to perform or comply with any covenant contained
in this Agreement, (iii) any dispute between the Company and the individual
named in Section 2.9(n) of the Disclosure Schedule, (iv) the Net Liabilities
exceeding the greater of the Estimated Net Liabilities or $405,739, or (v) the
Third Party Expenses incurred by the Company exceeding the greater of the
Estimated Third Party Expenses or $310,000; provided, however, that, except as
set forth in Sections 7.2(b) and 7.5, the aggregate amount for which the
Shareholders are required to indemnify the Indemnified Parties shall not
exceed the amount deposited in the Escrow Fund (as defined below). The Escrow
Fund shall be available to compensate the Indemnified Parties for any such
Losses. The Shareholders shall not have any right of contribution from the
Company with respect to any Loss claimed by Parent after the Effective Time.
Nothing herein shall limit the liability of the Company or either of the
Principal Shareholders for any breach of any representation, warranty or
covenant if the Merger is not consummated.
43
(b) Principal Shareholder's Indemnification Cap. In addition to the
amounts contained in the Escrow Fund, but only to the extent certain Losses
(as specified below) have not been satisfied by the Escrow Fund, each of the
Principal Shareholders shall severally but not jointly indemnify the
Indemnified Parties during the Escrow Period for Losses incurred directly or
indirectly as a result of: (i) any inaccuracy or breach of a representation or
warranty of the Company relating to Capital Structure (Section 2.3), Tax
Matters (Section 2.10) and Intellectual Property (Section 2.13) or such
Principal Shareholder's Affiliate Agreement, (ii) any dispute between the
Company and the individual named in Section 2.9(n) of the Disclosure Schedule,
up to an amount equal to ten percent (10%) of their respective portions of the
Merger Consideration (the "Principal Shareholders' Indemnification Cap"). At
the election of each individual Principal Shareholder, such indemnity may be
paid in cash or Parent Common Stock, which shall be valued at the Trading
Price.
(c) Escrow Fund. As partial security for the indemnity provided for in
Section 7.2(a) and by virtue of this Agreement, the Shareholders will be
deemed to have received and deposited with the Escrow Agent (as defined below)
the Escrow Amount (plus any additional shares as may be issued upon any stock
split, stock dividend or recapitalization effected by Parent after the
Effective Time with respect to the Escrow Amount) without any act of any
Shareholder. As soon as practicable after the Effective Time, the Escrow
Amount, without any act of any Shareholder, will be deposited with U.S. Bank
Trust, N.A. (or other institution acceptable to Parent and the Shareholder
Representative (as defined in Section 7.4) as Escrow Agent (the "Escrow
Agent"), such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein. The Escrow Agent may execute this
Agreement following the date hereof and prior to the Effective Time, and such
later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto. The portion of the Escrow Amount contributed on behalf of
each Shareholder shall be in proportion to the aggregate Parent Common Stock
which such holder would otherwise be entitled under Section 1.7.
(d) Escrow Period; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., Sunnyvale, California local time on the Expiration Date (the "Escrow
Period"); provided, however, that the Escrow Period shall not terminate with
respect to any amount which, in reasonable judgement of Parent, is necessary
to satisfy any unsatisfied claims specified in any Officer's Certificate (as
defined below) delivered to the Escrow Agent prior to termination of such
Escrow Period with respect to facts and circumstances existing prior to the
termination of such Escrow Period. As soon as all such claims have been
resolved, the Escrow Agent shall deliver to the Shareholders the remaining
portion of the Escrow Fund not required to satisfy such claims. Deliveries of
Escrow Amounts to the Shareholders pursuant to this Section 7.2 shall be made
in proportion to their respective original contributions to the Escrow Fund.
(e) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of this Agreement and not as the property of Parent and shall hold
and dispose of the Escrow Fund only in accordance with the terms hereof.
44
(ii) Any shares of Parent Common Stock or other equity securities issued
or distributed by Parent (including shares issued upon a stock split) ("New
Shares") in respect of Parent Common Stock in the Escrow Fund which have not
been released from the Escrow Fund shall be added to the Escrow Fund and
become a part thereof. New Shares issued in respect of shares of Parent Common
Stock which have been released from the Escrow Fund shall not be added to the
Escrow Fund but shall be distributed to the record holders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but
shall be distributed to the record holders thereof.
(iii) Each Shareholder shall have voting rights and the right to
distributions of cash dividends with respect to the shares of Parent Common
Stock contributed to the Escrow Fund by such Shareholder (and on any voting
securities added to the Escrow Fund in respect of such shares of Parent Common
Stock). As the record holder of such shares, the Escrow Agent shall vote such
shares in accordance with the instructions of the Shareholders having the
beneficial interest therein and shall promptly deliver copies of all proxy
solicitation materials to such Shareholders.
(f) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before the last
day of the Escrow Period of a certificate signed by any officer of Parent (an
"Officer's Certificate"): (A) stating that Parent has paid or properly accrued
or, with respect to third-party claims of which Parent, the Company or the
Surviving Corporation has received notice, reasonably anticipates that it will
have to pay or accrue Losses, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each
such item was paid or properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related, the Escrow Agent shall, subject to the
provisions of Section 7.2(e) hereof, deliver to Parent out of the Escrow Fund,
as promptly as practicable, shares of Parent Common Stock held in the Escrow
Fund with a value equal to such Losses; provided, however, that in the event
of a third party claim that is the subject of the demand on the Escrow Fund,
no shares shall be delivered out of the Escrow Fund until the claim is settled
or adjudicated.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to Parent out of the Escrow Fund as indemnity
pursuant to Section 7.2(f)(i) hereof, the shares of Parent Common Stock shall
be valued at the Trading Price.
(g) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Shareholder Representative, and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery to Parent of
any Escrow Amounts pursuant to Section 7.2(d) hereof unless the Escrow Agent
shall have received written authorization from the Shareholder Representative
to make such delivery. After the expiration of such thirty (30) day period,
the Escrow Agent shall make delivery of shares of Parent Common Stock from the
Escrow Fund in accordance with Section 7.2(d) hereof; provided, however, that
no such payment or delivery may be made if the Shareholder Representative
shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.
45
(h) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Representative shall object in writing to
any claim or claims made in any Officer's Certificate, the Shareholder
Representative and Parent shall attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims. If the
Shareholder Representative and Parent should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute shares of Parent Common Stock from the
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Parent or the Shareholder Representative may demand arbitration of the
matter unless the amount of the damage or Loss is at issue in pending
Litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by one arbitrator mutually agreeable to Parent and the
Shareholder Representative. In the event that within forty-five (45) days
after submission of any dispute to arbitration, Parent and the Shareholder
Representative cannot mutually agree on one arbitrator, Parent and the
Shareholder Representative shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing
the parties an opportunity, adequate in the sole judgement of the arbitrator
or majority of the three arbitrators, as the case may be, to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrator or a majority of the three arbitrators, as the case may be,
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to the
extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision of the
arbitrator or a majority of the three arbitrators, as the case may be, as to
the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement. Such decision shall
be written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Any such arbitration shall be held
in Santa ▇▇▇▇▇ County, California, under the rules then in effect of the
American Arbitration Association. The arbitrator(s) shall determine how all
expenses relating to the arbitration shall be paid, including without
limitation, the respective expenses of each party, the fees of each arbitrator
and the administrative fee of the American Arbitration Association.
(i) Third-Party Claims. In the event Parent becomes aware of a third-
party claim which Parent believes may result in a demand against the Escrow
Fund, Parent shall notify the Shareholder Representative of such claim, and
the Shareholders shall be entitled, at their expense, to participate in any
defense of such claim. Parent may not settle any such claim without the
consent of the Shareholder Representative, which consent shall not be
unreasonably withheld or delayed. In the event that the Shareholder
Representative has consented to any such settlement, the Shareholders
46
shall have no power or authority to object under any provision of this Article
VII to the amount of any claim by Parent against the Escrow Fund with respect
to such settlement.
7.3 Escrow Agent.
(a) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent and
the Shareholder Representative, and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed to be genuine
and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law or of the arbitrator(s)
appointed pursuant to Schedule 7.3(a)(ii), and is hereby expressly authorized
to comply with and obey orders, judgments or decrees of any court or of the
arbitrator(s) appointed pursuant to Schedule 7.3(a)(ii). In case the Escrow
Agent obeys or complies with any such order, judgment or decree of any court
or of the arbitration panel appointed by Schedule 7.3(a)(ii), the Escrow Agent
shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found
to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow Agent shall
not be liable to any party for damages, losses, or expenses, except for
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with the
legal counsel in connection with Escrow Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by
him/her in good faith in accordance with the advice of counsel. The Escrow
Agent is not responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to this Agreement.
47
(vi) If any controversy arises between the parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement, its
terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and shares of Parent Common Stock and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, the Escrow Agent may be required, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon
initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, including allocated costs of
in-house counsel and disbursements that may be imposed on Escrow Agent or
incurred by Escrow Agent in connection with the performance of his/her duties
under this Agreement, including but not limited to any Litigation arising from
this Agreement or involving its subject matter other than arising out of its
negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use
their best efforts to mutually agree on a successor escrow agent within thirty
(30) days after receiving such notice. If the parties fail to agree upon a
successor escrow agent within such time, the Escrow Agent shall have the right
to appoint a successor escrow agent authorized to do business in the State of
California. The successor escrow agent shall execute and deliver an instrument
accepting such appointment and it shall, without further acts, be vested with
all the estates, properties, rights, powers, and duties of the predecessor
escrow agent as if originally named as escrow agent. Upon appointment of a
successor escrow agent, the Escrow Agent shall be discharged from any further
duties and liability under this Agreement.
(b) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with the standard fee schedule
of the Escrow Agent. It is understood that the fees and usual charges agreed
upon for services of the Escrow Agent shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow
Agent renders any service not provided for in this Agreement, or if the
parties request a substantial modification of its terms, or if any controversy
arises, or if the Escrow Agent is made a party to, or intervenes in, any
Litigation pertaining to the Escrow Fund or its subject matter, the Escrow
Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs, attorney's fees, including allocated costs of in-
house counsel, and expenses occasioned by such default, delay, controversy or
Litigation.
48
(c) Consequential Damages. In no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
(d) Successor Escrow Agents. Any corporation into which the Escrow Agent
in its individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
7.4 Shareholder Representative.
(a) In the event that the Merger is approved, effective upon such vote,
and without further act of any Shareholder, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ shall be appointed
as agent and attorney-in-fact (the "Shareholder Representative") for each
Shareholder, for and on behalf of the Shareholders, to give and receive
notices and communications, to authorize delivery to Parent of shares of
Parent Common Stock from the Escrow Fund in satisfaction of claims by Parent,
to object to such deliveries, to 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 claims, and to take all actions
necessary or appropriate in the judgment of the Shareholder Representative for
the accomplishment of the foregoing. Such agency may be changed by the
Shareholders from time to time upon not less than thirty (30) days prior
written notice to Parent; provided, however, that the Shareholder
Representative may not be removed unless holders of a majority in interest in
the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Shareholder Representative may be filled
by approval of the holders of a majority in interest in the Escrow Fund. No
bond shall be required of the Shareholder Representative, and the Shareholder
Representative shall not receive compensation for his or her services. Notices
or communications to or from the Shareholder Representative shall constitute
notice to or from each of the Shareholders.
(b) The Shareholder Representative shall not be liable for any act done
or omitted hereunder as Shareholder Representative while acting without gross
negligence, bad faith and willful misconduct. The Shareholders on whose behalf
the Escrow Amount was contributed to the Escrow Fund shall severally indemnify
the Shareholder Representative and hold the Shareholder Representative
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Shareholder
Representative and arising out of or in connection with the acceptance or
administration of the Shareholder Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Shareholder Representative.
(c) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all Shareholders for whom a
portion of the Escrow Amount otherwise issuable to them are deposited in the
Escrow Fund and shall be final, binding and conclusive upon each of such
Shareholders, and the Escrow Agent and Parent may rely upon any such decision,
act, consent or instruction of the Shareholder Representative as being the
decision, act, consent or instruction of each and every such Shareholder. The
Escrow Agent and Parent are hereby relieved from any liability to
49
any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholder Representative.
7.5 Maximum Payments; Remedy; Violation of Third Party Patent Rights. Except
as otherwise provided in this Section 7.5, from and after the Effective Time
this Article VII shall provide the sole and exclus ive remedy for any and all
damages or other liability sustained or incurred by the Indemnified Parties or
their successors and assigns as the result of any breach of any
representation, warranty or covenant contained in this Agreement or any claim
of negligent misrepresentation against the Company or the Principal
Shareholders in connection with this Agreement or the Merger. Notwithstanding
anything to the contrary herein, the existence of this Article VII and of the
rights and restrictions set forth herein do not limit any (i) equitable
remedies or (ii) any type of statutory or common law remedy (i.e., not based
on any indemnity right provided in this Article VII) with respect to any
knowing (meaning actual knowledge) or intentional breaches of the
representations and warranties or covenants of the Company or the Principal
Shareholders contained in this Agreement or a certificate of any officer of
the Company delivered pursuant to this Agreement, or of any Shareholder
contained in a Shareholder Certificate or in the event of fraud, provided such
remedy may only be pursued against the person who committed or authorized such
knowing (meaning actual knowledge) or intentional breaches of such
representations, warranties or covenants. No Shareholder shall have any right
to contribution from the Company for any claim made by Parent after the
Effective Time. Notwithstanding anything to the contrary in this Article VII,
in the event that an Indemnified Party incurs Losses as a result of a claim
that the Company Intellectual Property violated a third party's patent rights,
only 75% of such Losses shall be subject to recovery pursuant to the escrow
and indemnification provisions of Section 7.2
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2, this Agreement may be
terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if the Effective Time has not occurred by
December 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by Parent or the Company if (i) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (ii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity that would make consummation of the Merger illegal;
(d) by Parent if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity, which would: (i) prohibit Parent's or Sub's
ownership or operation of any portion of the business of
50
the Company or (ii) compel Parent or the Company to dispose of or hold
separate all or a portion of the business or assets of the Company or Parent
as a result of the Merger;
(e) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and such breach has not been cured within ten (10) calendar days after
written notice to the Company; provided, however, that no cure period shall be
required for a breach which by its nature cannot be cured;
(f) by the Company if a majority of the Shareholders of the Company vote
against the Merger at the Company Shareholders Meeting;
(g) by Parent or Sub if a majority of the Shareholders of the Company
vote against the Merger at the Company Shareholders Meeting; or
(h) by Parent or Sub if an event having a Material Adverse Effect on the
Company shall have occurred after the date of this Agreement.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Sub, the Company or
any Principal Shareholder, or their respective officers, directors or
shareholders, provided that each party shall remain liable for any breaches of
this Agreement prior to its termination; provided further that the provisions
of Sections 4.2, 5.3, 5.4, 5.5, Article IX and this Section 8.2 shall remain
in full force and effect and survive any termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent and
Sub, on the one hand, and the Company and the Shareholder Representative, on
the other hand, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii)
waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
51
ARTICLE IX.
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Parent or Sub, to:
Infoseek Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
(with separate copies in separate envelopes to each)
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
Quando, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (503) [▇▇▇-▇▇▇▇]
Facsimile No.: (503) [225-1987]
with a copy to:
Pillsbury Madison & Sutro LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ del ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
52
(c) if to the Principal Shareholders, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.:503/▇▇▇-▇▇▇▇
Facsimile No.:503/225-1987
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: 503/▇▇▇-▇▇▇▇
Facsimile No.: 503/225-1987
(d) if to the Shareholder Representative, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: 206/▇▇▇-▇▇▇▇
Facsimile No.: 206/323-1418
(e) if to the Escrow Agent, to:
U.S. Bank Trust N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
Telephone No.: 415/▇▇▇-▇▇▇▇
Facsimile No.: 415/273-4593
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." 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.
9.3 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 party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Disclosure Schedule, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings both written and oral, among
the parties with respect to the subject matter hereof; (b) except as
specifically provided herein, are not intended to confer upon any other person
any rights or remedies hereunder; and (c) shall not be
53
assigned (other than by operation of law), except that Parent and Sub may
assign their respective rights and delegate their respective obligations
hereunder to their respective affiliates (including any successor to Parent
resulting from its planned reorganization into a Delaware corporation or a
subsidiary of a Delaware corporation).
9.5 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.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Santa ▇▇▇▇▇ County, State of
California, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California for such persons and waives and covenants not to assert or plead
any objection which they might otherwise have to such jurisdiction, venue and
such process.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
[The remainder of this page is intentionally left blank.]
54
IN WITNESS WHEREOF, Parent, Sub, the Company, the Principal Shareholders,
the Shareholder Representatives and the Escrow Agent have caused this
Agreement to be signed, all as of the date first written above.
INFOSEEK CORPORATION QUANDO, INC.
By___________________________________ By___________________________________
Name: Name:
Title: Title:
STEELHEAD ACQUISITION CORP. PRINCIPAL SHAREHOLDERS
By___________________________________
Name: _____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SHAREHOLDER REPRESENTATIVE ESCROW AGENT (AS TO THE PROVISIONS
(AS TO THE PROVISIONS OF OF ARTICLE VII ONLY)
ARTICLE VII ONLY) (AS TO THE PROVISIONS OF ARTICLE VII
ONLY)
_____________________________________ By___________________________________
Name
Name:
Title:
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
55