1
EXHIBIT 10.18
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CYBERMEDIA, INC.,
WS ACQUISITION CORP.,
WALK SOFTLY, INC.
AND
CERTAIN SHAREHOLDERS
OF WALK SOFTLY, INC.
Dated as of April 1, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 No Further Ownership Rights in Company Common Stock . . . . . . . . . . . . . . . . . . . . . 5
1.10 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Tax and Accounting Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Organization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Company Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Tax and Other Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment . . . . . . . . 10
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.13 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.16 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.17 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.20 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 Binding Agreements; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.22 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.23 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.24 Investment Representations and Covenants of Shareholders . . . . . . . . . . . . . . . . . . . 15
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TABLE OF CONTENTS
(continued)
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 SEC Documents; Parent Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.8 Broker's and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.9 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Conduct of Business of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Resolutions of Company Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.9 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Best Efforts; Additional Documents and Further Assurances . . . . . . . . . . . . . . . . . . 24
5.11 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.13 Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Conditions to Obligations of Each Party to Effect the Merger. . . . . . . . . . . . . . . . . 26
6.2 Additional Conditions to Obligations of Company. . . . . . . . . . . . . . . . . . . . . . . . 27
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TABLE OF CONTENTS
(continued)
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. . . . . . . . . . . . . . . 27
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 29
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Expiration of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Termination of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Protection of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7 Distributions; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Claims Upon Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.9 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10 Resolution of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.11 Distribution Upon Termination of Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Agent of the Shareholders; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.13 Actions of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.14 Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.15 Escrow Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.16 No Joint Liability; Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.17 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.18 Exchange of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.6 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.7 Resolution of Disputes; Stipulation Regarding Confidentiality . . . . . . . . . . . . . . . . 39
9.8 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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INDEX OF EXHIBITS
Exhibit Description
Exhibit A List of Shareholders Who Are Party to this Agreement
Exhibit B Form of Stock Restriction Letter
Exhibit C Form of Merger Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E-1 Form of Employment and Non-Confidentiality Agreement
Exhibit E-2 Form of Employment and Non-Confidentiality Agreement
with ▇▇▇▇ ▇▇▇▇▇
Exhibit F Form of Walk Softly Affiliate Agreement
Exhibit G Form of Continuity of Interest Representation Letter
Exhibit H Form of Legal Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation
Exhibit I Form of Legal Opinion of Fenwick & West LLP
Exhibit J Company Disclosure Schedule
Exhibit K Tax Representation Certificate
Schedules
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of April 1, 1997 among CyberMedia, Inc., a Delaware
corporation ("Parent"), WS Acquisition Corp., a Delaware corporation ("Merger
Sub") and a wholly owned subsidiary of Parent, Walk Softly, Inc., a California
corporation (the "Company") and certain shareholders (the "Shareholders") of
the Company listed on Exhibit A attached hereto. The Shareholders are parties
to this Agreement solely to the extent of Article VII and for no other purpose.
The representations, warranties and covenants of the Company set forth in
Articles II, IV and V are not representations, warranties or covenants of any
of the Shareholders. In addition to signing this Agreement as a Shareholder,
▇▇▇▇ ▇▇▇▇▇▇▇ is signing on behalf of the Company and as Agent for the
Shareholders.
RECITALS
A. The Boards of Directors of each of the Company, Parent and
Merger Sub believe it is in the best interests of each company and their
respective stockholders and shareholders that the Company and Merger Sub
combine into a single company through the statutory merger of Merger Sub with
and into the Company (the "Merger") and, in furtherance thereof, have approved
the Merger.
B. Pursuant to the Merger, among other things, the outstanding
shares of Common Stock of the Company ("Company Common Stock") shall be
converted into shares of Common Stock of Parent ("Parent Common Stock") at the
rate determined herein.
C. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
E. Concurrently herewith, the Shareholders have agreed to enter
into, execute and deliver to Parent stock restriction agreements, substantially
in the form attached hereto as Exhibit B, pursuant to which each Shareholder
agrees to place such restrictions on the shares of Parent Common Stock to be
received by such Shareholder pursuant to this Agreement as currently exists on
the shares of Company Common Stock owned by such Shareholder prior to the
Closing Date.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
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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, the Merger
Agreement attached hereto as Exhibit C (the "Merger Agreement") the applicable
provisions of the California Corporations Code ("California Law"), and the
applicable provision of Delaware Law ("Delaware Law;" Delaware Law and
California Law, collectively, "Applicable Law") Merger Sub shall be merged with
and into the Company, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing the Merger Agreement
with the Secretaries of State of the States of California and Delaware, in
accordance with the relevant provisions of Applicable Law (the time of the
later of such filing being the "Effective Time"). The Closing of the
transaction contemplated hereby (the "Closing") shall take place at 7:00 p.m.
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. on April 1, 1997, or
at such other time, date and location as the parties hereto agree (the "Closing
Date").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Merger Agreement and the
applicable provisions of Applicable 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 Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time the Articles of Incorporation
of Company, as in effect immediately prior to the Effective Time, 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 Company, 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 initial directors of the
Surviving Corporation shall be ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ provided however, that the
Bylaws shall be deemed amended effective as of the Effective Time to provide
that the authorized number of directors shall be one (1), to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation. The initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected
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or appointed and qualified, shall be: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive
Officer; ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer; and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇,
Secretary.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of
common stock, no par value, of the Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares (as defined and to the extent provided in Section 1.7(a))
will be canceled and extinguished and be converted automatically into the right
to receive [ ] shares (the "Exchange Ratio") of common stock, par value
$0.01 per share, of the Parent (the "Parent Common Stock").
(b) Stock Options. At the Effective Time, all options to
purchase Company Common Stock then outstanding under the Company's 1996 Equity
Incentive Plan (the "Company Stock Option Plan") shall be assumed by Parent in
accordance with Section 5.11.
(c) Capital Stock of Merger Sub. Each share of common
stock, $0.001 par value, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock, no par value, of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation.
(d) Adjustments to Exchange Ratio. The Exchange Ratio
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 Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock or
Company Common Stock occurring after the date hereof and prior to the Effective
Time.
(e) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) shall receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the ten most recent days that Parent Common Stock has traded
ending on the trading day immediately prior to the Effective Time, as reported
on the NASDAQ National Market System.
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1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to
the contrary, any shares of capital stock of the Company held by a holder who
has exercised dissenters' rights for such shares in accordance with California
Law and who, as of the Effective Time, has not effectively withdrawn or lost
such dissenters rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Parent Common Stock pursuant to Section 1.6, but
the holder thereof shall only be entitled to such rights as are granted by
California Law.
(b) Notwithstanding the provisions of subsection (a), if
any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) his or her dissenters' rights, then, as of the
later of the Effective Time or the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock and payment for fractional shares as provided in
Section 1.6, without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of
any written demand received by the Company to require the Company to purchase
shares of the Company's Common Stock pursuant to the applicable provisions of
California 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.
1.8 Surrender of Certificates.
(a) Exchange Agent. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as Parent
may adopt, the shares of Parent Common Stock issuable pursuant to Section 1.6
in exchange for outstanding shares of Company Common Stock.
(c) Exchange Procedures. At or before the Effective
Time, each holder of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock shall surrender to the Exchange Agent for cancellation the
Certificates, duly endorsed to Parent or accompanied by duly executed stock
powers and assignments separate from certificate transferring title to such
shares to Parent. Promptly after the Effective Time, and against receipt of
such Certificates, the Exchange Agent shall issue to each tendering holder of a
Certificate a certificate for the number of shares of Parent Common Stock to
which such holder is entitled and payment in lieu of fractional shares pursuant
to Section 1.6 hereof and the Certificate so surrendered shall forthwith be
cancelled.
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To the extent that any holder of a Certificate does not so surrender
such Certificate at or before the Effective Time, then promptly after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a Certificate or Certificates, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent after the Effective Time, or to such other agent or agents
as may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock and
payment in lieu of fractional shares which such holder has the right to receive
pursuant to Section 1.6, 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 Common Stock will be deemed
from and after the Effective Time, for all corporate purposes, other than the
payment of dividends, to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Common Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the 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 of 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.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.8, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares of Parent
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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1.9 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof (including any cash
paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which 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.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common 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, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6;
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 as indemnity 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.
1.11 Tax and Accounting Consequences. It is intended by the
parties hereto that the Merger shall (a) constitute a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended and (b)
qualify for accounting treatment as a pooling of interests. The parties shall
not take a position on any tax returns inconsistent with this Section 1.11. In
addition, Parent and Merger Sub agree to execute a tax representation
certificate consistent with this treatment of the Merger in the form attached
hereto as Exhibit K.
1.12 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable 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 Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful
and necessary action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions set forth in the Company Disclosure Schedule attached hereto
as Exhibit J (the "Disclosure Schedule"), as follows:
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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 California. The Company has the corporate power to own its property
and to carry on its business as now being conducted and as proposed to be
conducted by the Company. 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 would have a material adverse effect on the
business, assets (including intangible assets), financial condition, results of
operations or prospects ("Material Adverse Effect") of the Company. The
Company has delivered a true and correct copy of its Articles of Incorporation
and Bylaws, each as amended to date, to counsel for Parent.
2.2 Company Capital Structure. The authorized capital stock of
the Company consists of 10,000,000 shares of Common Stock, no par value, and
2,000,000 shares of Preferred Stock, no par value. There are 1,796,250 shares
of the Company Common Stock issued and outstanding held by the persons, and in
the amounts, set forth on Exhibit A-1. There are no shares of the Company
Preferred Stock issued and outstanding. At the time of the Closing, such list
shall have been appropriately adjusted to reflect option exercises and stock
repurchases since the date hereof. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and non-assessable 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. The Company has reserved 500,000 shares of
Common Stock for issuance to employees and consultants pursuant to the Company
Stock Option Plan, of which no shares have been exercised, and 365,000 shares
are subject to outstanding, unexercised options (the "Options"). The holders
of the Options are listed on Exhibit A-1 hereto. There are no other options,
warrants, calls, rights, commitments or agreements of any character 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, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture or
business entity.
2.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's shareholders as contemplated by
Section 6.1(a). This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company. The
execution and delivery of this Agreement by the Company does not, and the
consummation of the transactions contemplated hereby 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
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rise to a right of termination, cancellation or acceleration of any obligation
or loss of any benefit under (i) any provision of the Articles of
Incorporation, as amended, or Bylaws of the Company or (ii) any other material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity"), is
required by or with respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Merger Agreement with the California
Secretary of State, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and (iii)
such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on the
Company.
2.5 Company Financial Statements. Section 2.5 of the Company
Disclosure Schedule includes the Company's unaudited balance sheet as of March
24, 1997 (the "Company Balance Sheet").
2.6 No Undisclosed Liabilities. The Company does not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are material and (i) have not been reflected in the Company
Balance Sheet, (ii) have not been specifically described in this Agreement or
in the Company Schedules or (iii) are not normal or recurring liabilities
incurred since March 24, 1997 in the ordinary course of business consistent
with past practices.
2.7 No Changes. Since the date of the Company Balance Sheet there
has not been, occurred or arisen any:
(a) material adverse change in the financial condition,
liabilities, assets, business, or prospects of the Company;
(b) amendments or changes in the Articles of
Incorporation or Bylaws of the Company;
(c) capital expenditure by the Company, either
individually or in the aggregate, exceeding $50,000.
(d) destruction, damage to, or loss of any assets of the
Company (whether or not covered by insurance) that constitutes a Material
Adverse Effect on the Company;
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(e) labor trouble or claim of wrongful discharge of which
the Company has received written notice or of which the Company is aware, or
other unlawful labor practice or action;
(f) change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside, or payment of a dividend
or other distribution with respect to the shares of the Company, or any direct
or indirect redemption, purchase or other acquisition by the Company of any of
its shares;
(i) increase in the salary or other compensation payable
or to become payable by the Company to any of its officers, directors or
employees, 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;
(j) acquisition, sale or transfer of any material asset
of the Company other than in the ordinary course of business;
(k) amendment or termination of any material contract,
agreement or license to which the Company is a party;
(l) loan by the Company to any person or entity, or
guaranty by the Company of any loan;
(m) waiver or release of any material 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 of commencement
of any governmental proceeding against or investigation of the Company or its
affairs, to the best of the Company's knowledge;
(o) other event or condition of any character that has or
might reasonably be expected to have a Material Adverse Effect on the Company;
(p) issuance or sale by the Company of any of its shares
or of any other of its securities except for issuances or sales as a result of
exercises of stock options granted under the Company Stock Option Plan or
rights previously granted to purchase shares of the Company's capital stock;
(q) change in pricing or royalties set or charged by the
Company; or
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(r) negotiation or agreement by the Company to do any of
the things described in the preceding clauses (a) through (p) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this
Agreement, "Tax" or, collectively, "Taxes," means 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 and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company as of the Closing Date will have
prepared and timely filed or made a timely request for extension for all
required federal, state, local and foreign returns, estimates, information
statements and reports (collectively the "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) The Company as of the Closing Date: (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B) will
have withheld and timely remitted with respect to its employees all federal and
state income taxes, FICA, FUTA and other Taxes required to be withheld and
remitted.
(iii) To the best of the Company's knowledge, there
are no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("Liens") on the assets of the Company relating to or
attributable to Taxes other than Liens for taxes not yet due and payable.
(iv) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is properly reflected on the Company's tax books and
records.
2.9 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon the Company which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as currently
conducted or as currently proposed to be conducted.
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2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) The Company neither owns nor leases any real
property.
(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
material tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens, charges, pledges, security interests or
other encumbrances except for such imperfections of title and encumbrances, if
any, which are not substantial in character, amount or extent, and which do not
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
(c) Section 2.10(c) set forth all equipment (the
"Equipment") owned or leased by the Company except equipment with an aggregate
value of less than $50,000. The Equipment is, taken as a whole, (i) adequate
for the conduct of the business of the Company consistent with its past
practice, (ii) suitable for the uses to which it is currently employed, (iii)
in good operating condition, (iv) regularly and properly maintained, and (v)
not obsolete, dangerous or in need of renewal or replacement, except for
renewal or replacement in the ordinary course of business.
2.11 Intellectual Property. The Company owns, or is licensed or
otherwise entitled to use rights to, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, computer software programs or applications
and tangible or intangible proprietary information or material that are used or
currently proposed to be used in the business of the Company as currently
conducted (the "Company Intellectual Property Rights"). Section 2.11 of the
Company Disclosure Schedule sets forth and and all patents, trademarks,
registered and material unregistered copyrights, trade names and service marks,
and any applications therefor, included in the Company Intellectual Property
Rights, and specifies the jurisdictions in which each such Company Intellectual
Property Right has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners,
together with a list of all of the Company's currently marketed software
products and an indication as to which, if any, of such software products have
been registered for copyright protection with the United States Copyright
Office and any foreign offices and by whom such items have been registered.
The Company has received no requests to make any such registration and the
Company is not a party to any material licenses, sublicenses and other
agreements and pursuant to which the Company or any other person is authorized
to use any Company Intellectual Property Right or other trade secret material
to the Company. The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any license, sublicense or agreement described in
Section 2.11 of the Company Disclosure Schedule. The Company is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), the Company Intellectual
Property Rights, and has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof) to the
use thereof or the material covered thereby in connection with the services or
products in respect of which the Company Intellectual Property Rights are being
used.
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To the best of the Company's knowledge, no claims with respect to the Company
Intellectual Property Rights have been asserted or, to the knowledge of the
Company, are threatened by any person, nor does the Company know of any valid
grounds for any bona fide claims (i) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or proposed for
use, sale or license by the Company infringes on any copyright, patent, trade
▇▇▇▇, service ▇▇▇▇ or trade secret, (ii) against the use by the Company of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the Company's
business as currently conducted or as proposed to be conducted, or (iii)
challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights. To the Company's knowledge, all registered
trademarks, service marks and copyrights held by the Company are valid and
subsisting. To the Company's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including any employee or former employee of the
Company. The Company (i) has not, to its best knowledge, been sued or charged
in writing as a defendant in any claim, suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary right of any
third party and which has not been finally terminated prior to the date hereof,
(ii) has no knowledge of any such charge or claim or (iii) has no knowledge of
any infringement liability with respect to, or infringement or violation by,
the Company of any patent, trademark, service ▇▇▇▇, copyright, trade secret or
other proprietary right of another. To the best of the Company's knowledge, no
Company Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by the Company. The Company has not entered into any
agreement to indemnify any other person against any charge of infringement of
any Company Intellectual Property Right. Each employee of and consultant to
the Company has signed a Proprietary Rights and Confidentiality Agreement in
the Company's standard form as certified by the Company and delivered to
Parent.
2.12 Agreements, Contracts and Commitments. Except as disclosed in
Section 2.12 of the Company Disclosure Schedule, the Company does not have and
is not a party to:
(a) any collective bargaining agreements,
(b) any agreements that contain any unpaid severance
liabilities or obligations,
(c) any bonus, deferred compensation, incentive
compensation, pension, profit-sharing or retirement plans, or any other
employee benefit plans or arrangements,
(d) 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, not terminable by the Company on thirty days notice without
liability, except to the extent general principles of wrongful termination law
may limit the Company's ability to terminate employees at will,
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(e) agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(f) any fidelity or surety bond or completion bond,
(g) any lease of personal property having a value
individually in excess of $50,000,
(h) any agreement of indemnification or guaranty not
entered into in the ordinary course of business,
(i) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or compete with any person,
(j) any agreement, contract or commitment relating to
capital expenditures and involving future obligations in excess of $50,000,
(k) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise,
(l) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (h) hereof,
(m) any purchase order or contract for the purchase of
raw materials or acquisition of assets involving $50,000 or more,
(n) any construction contracts,
(o) any distribution, joint marketing or development
agreement,
(p) any other agreement, contract or commitment which
involves $50,000 or more and is not cancelable without penalty within thirty
(30) days, or
(q) any agreement which is otherwise material to the
Company's business.
The Company has not breached, or received in writing any claim or
threat that it has breached, any of the terms or conditions of any material
agreement, contract or commitment to
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which it is bound (including those set forth in any of the lists separately
certified by the Company) in such manner as would permit any other party to
cancel or terminate the same.
2.13 Interested Party Transactions. Except as disclosed in Section
2.13 of the Company Disclosure Schedule, no officer or director of the Company
or person who owns at least ten percent (10%) of the outstanding stock of the
Company (nor any parent, child 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 or products
which the Company furnishes or sells, or proposes to furnish or sell, or (ii)
any interest in any entity which purchases from or sells or furnishes to, the
Company, any goods or services, or (iii) a beneficial interest in any contract
or agreement described in Section 2.12; 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 2.13.
2.14 Governmental Authorization. Section 2.14 of the Company
Disclosure Schedule accurately lists each material federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization issued to the Company (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
(herein collectively called "Company Authorizations"), which 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.
2.15 Litigation. To the best of the Company's knowledge, there is
no action, suit, claim or proceeding of any nature pending, or to the Company's
knowledge, threatened against the Company, its properties or any of its
officers or directors, in their capacities as agents of the Company. To the
best of the Company's knowledge, there is no investigation pending or, to the
Company's knowledge, threatened against the Company, its properties or any of
its officers or directors, in their capacities as agents of the Company by or
before any governmental entity. To the best of the Company's knowledge, no
governmental entity has at any time challenged or questioned the legal right of
the Company to manufacture, offer or sell any of its products in the present
manner or style thereof.
2.16 Minute Books. The minute books of the Company made available
to counsel for Parent contain complete and accurate minutes of all meetings of
directors and shareholders or actions by written consent since the time of
incorporation of the Company.
2.17 Brokers' and Finders' Fees. 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 this
Agreement or any transaction contemplated hereby.
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2.18 Insurance. The Company has no insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company.
2.19 Compliance With Laws. Except as disclosed in Section 2.19 of
the Company Disclosure Schedule, and except as to matters of which the Company
is not aware and which do not either individually or in the aggregate result in
a Material Adverse Effect with respect to the Company, the Company has complied
with, is not in violation of, and has not received any notices of violation
with respect to, any federal, state or local statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business.
2.20 Complete Copies of Materials. The Company has delivered or
made available true and complete copies of each document (or summaries of same)
which has been requested by Parent or its counsel.
2.21 Binding Agreements; No Default. Each of the contracts,
agreements and other instruments shown on the Exhibits or on any lists or
statements set forth in the Company Disclosure Schedule to which the Company is
a party is a legal, binding, and enforceable obligation by or against the
Company (assuming such contract, agreement or instrument has been duly
authorized, executed and delivered by the other party(ies) thereto and except
to the extent that its non-enforceability would not have a Material Adverse
Effect on the Company), and no party with whom the Company has an agreement or
contract is, to the Company's knowledge, in material default thereunder or has
breached any material terms or provisions thereof (subject to all applicable
bankruptcy, insolvency, reorganization and other laws applicable to creditors'
rights and remedies and to the exercise of judicial discretion in accordance
with general principles of equity).
2.22 Representations Complete. None of the representations or
warranties made by the Company, nor any statement made in any list or other
statement separately certified by the Company, Exhibit or certificate furnished
by the Company pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain any untrue statement of a
material fact at the Effective Time, or omits or will omit 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.
2.23 Third Party Consents. No consent or approval is needed from
any third party in order to effect the Merger, this Agreement or any of the
transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions previously certified in writing by Parent or Merger Sub, 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 Delaware. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Parent and Merger 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 in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on Parent and Merger Sub
taken as a whole. Parent has delivered a true and correct copy of the
Certificate or Articles of Incorporation and Bylaws of each of Parent and
Merger Sub, as amended to date, to counsel for the Company.
3.2 Capital Structure.
(a) The authorized stock of Parent consists of 60,000,000
shares of Common Stock, $.01 per share par value of which 11,882,140 shares
were issued and outstanding as of March 20, 1997, and 2,000,000 shares of
Preferred Stock, none of which are issued or outstanding as of March 20, 1997.
The authorized capital stock of Merger Sub consists of 1,000 shares of Common
Stock, no par value, 1,000 shares of which, as of the date hereof, are issued
and outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly
issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon
the holders thereof. Parent has also reserved (i) 3,902,000 shares of Common
Stock for issuance to employees and consultants pursuant to the Parent's
Amended 1993 Stock Plan, (ii) 50,000 shares of Common Stock for issuance to
directors under its 1996 Director Stock Option Plan and, (iii) an aggregate of
100,000 shares of Common Stock for issuance under the 1996 Employee Stock
Purchase Plan There are no other options, warrants, calls, rights, commitments
or agreements of any character to which Parent is a party or by which it is
bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of Parent or obligating Parent to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement.
(b) The shares of Parent Common Stock to be issued
pursuant to the Merger will be duly authorized, validly issued, fully paid,
non-assessable.
3.3 Authority. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
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been duly authorized by all necessary corporate action on the part of Parent
and Merger Sub. The stockholders of Parent are not required to approve the
Merger, the Agreement or the transactions contemplated hereby under applicable
law or NASD rules or regulations. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligations of Parent and Merger Sub. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under (i) any provision of the Certificates of Incorporation or Bylaws
of Parent and Merger Sub or (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Parent and Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation by Parent and Merger Sub of the transactions contemplated
hereby, except for (i) the filing of the Merger Agreement with the California
and Delaware Secretaries of State, (ii) any filings as may be required under
applicable state and federal securities laws and the laws of any foreign
country, and (iii) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect on Parent.
3.4 SEC Documents; Parent Financial Statements. Parent has
furnished the Company with a true and complete copy of the following documents
(collectively, the "SEC Documents"): (i) Form S-1/A, filed with the Securities
and Exchange Commission (the "SEC") on October 22 1996; (ii) Form 424B4, filed
with the SEC on October 23, 1996; (iii) Form 10-Q, filed with the SEC on
November 12, 1996; (iv) Form S-8, filed with the SEC on January 21, 1997; and
(v) Form 10-K, filed with the SEC on March 31, 1997. As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act of 1934, as amended or the Securities Act of
1933, as amended (the "Act") when filed, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading, except to the extent corrected by a subsequently filed SEC
Document. The financial statements of Parent, including the notes thereto,
included in the SEC Documents (the "Parent Financial Statements") are complete
and correct in all material respects, comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC). The Parent Financial
Statements fairly present the consolidated financial condition and operating
results of Parent at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, year-end adjustments,
which will not be material in the aggregate). There has been no change in
Parent accounting policies except as described in the notes to the Parent
Financial Statements. Parent has no material obligations other than (i) those
set forth in the Parent Financial
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Statements and (ii) those not required to be set forth in the Parent Financial
Statements under generally accepted accounting principles.
3.5 No Material Adverse Change. Since the date of the balance
sheet included in the Parent's most recently filed report on Form 10-K or Form
10-Q furnished to the Company as set forth in Section 3.4, Parent has conducted
its business in the ordinary course and there has not occurred: (a) any
material adverse change in the financial condition, liabilities, assets,
business, or prospects of Parent; (b) any amendments or changes in the
Certificate of Incorporation or Bylaws of Parent; (c) any damage to,
destruction or loss of any assets of the Parent, (whether or not covered by
insurance) that materially and adversely affects the financial condition,
business or prospects of Parent; or (d) any sale of a material amount of
property of Parent, except in the ordinary course of business.
3.6 Representations Complete. None of the SEC Documents and none
of the representations or warranties made by Parent herein, nor any statement
made in any list or other statement separately certified by Parent, or in any
Exhibit or certificate furnished by Parent pursuant to this Agreement, when all
such documents are read together in their entirety, contains or will contain
any untrue statement of a material fact at the Effective Time, or omits or will
omit 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.
3.7 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion or as to which Parent has a reasonable basis to expect such
notice of assertion, against Parent which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement or which could reasonably be anticipated to have a Material
Adverse Effect on Parent.
3.8 Broker's and Finders' Fees. Parent has not incurred, and will
not incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this
Agreement, the Merger or any transaction contemplated hereby.
3.9 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Parent or any of
its subsidiaries which has or could reasonably be expected to materially limit
Parent's ability to exploit for commercial purposes the Company's products and
technology.
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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 its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay its debts and taxes when due subject (i)
to good faith disputes over such debts or taxes and (ii) in the case of taxes,
to Parent's consent to the filing of material Returns if applicable, to pay or
perform other obligations when due, and, to the extent consistent with such
business, use all reasonable efforts consistent with past practice and policies
to preserve intact the Company's present business organizations, keep available
the services of its present officers and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, to the end that the Company's
goodwill and ongoing businesses shall be unimpaired at the Effective Time. The
Company shall promptly notify Parent of any event or occurrence not in the
ordinary course of business of the Company which could have a Material Adverse
Effect on the Company. Except as expressly contemplated by this Agreement, the
Company shall not, without the prior written consent of Parent:
(a) Except pursuant to existing contractual provisions of
options outstanding on the date hereof and which are disclosed in writing
pursuant to Section 2.2, accelerate, amend or change the period of
exercisability of options or restricted stock granted under the employee stock
plans of the Company or authorize cash payments in exchange for any options
granted under any of such plans;
(b) Enter into any commitment or transaction (i) which
requires performance over a period longer than six months in duration except
transactions in the ordinary course of business, or (ii) to purchase fixed
assets for a purchase price in excess of $50,000; except as mutually agreed by
Parent and the Company and set forth on a separate certificate;
(c) Grant any severance or termination pay (i) to any
director or officer or (ii) to any other employee except (x) payments made
pursuant to standard written agreements outstanding on the date hereof and as
disclosed on Schedule 2.12 or (y) in the case of employees who do not have
standard written agreements, payments of up to two months salary;
(d) Transfer to any person or entity any rights to the
Company's Intellectual Property other than nonexclusive object code licenses
except as mutually agreed by Parent and the Company and set forth on a separate
certificate;
(e) Enter into or amend any agreements pursuant to which
any other party is granted marketing or other rights of any type or scope with
respect to any products or technology of
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the Company, except as mutually agreed by Parent and the Company and set forth
on a separate certificate;
(f) Violate, amend or otherwise modify the terms of any
of the contracts set forth in the Company Disclosure Schedule;
(g) Commence any litigation;
(h) Declare 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 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
or otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to the Company;
(i) Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, other than the repurchase of shares of the Company's Common Stock
from terminated employees pursuant to the terms of restricted stock purchase
agreements and the issuance of shares of the Company's Common Stock pursuant to
the exercise of Company Incentive Options (as defined below) outstanding as of
the date of this Agreement;
(j) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(k) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of the Company;
(l) Sell, lease, license or otherwise dispose of any of
its properties or assets which are material, individually or in the aggregate,
to the business of the Company, except in the ordinary course of business,
except as mutually agreed by Parent and the Company and set forth on a separate
certificate;
(m) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or guarantee any debt securities of others except with respect to an
existing lease line in an amount not more than $50,000;
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(n) Adopt or amend any employee benefit plan, or enter
into any employment contract except for offer letters in the Company's standard
form for newly hired employees, pay any special bonus or special remuneration
to any director or employee, or increase the salaries or wage rates of its
employees;
(o) 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;
(p) Pay, discharge or satisfy in an amount in excess of
$50,000 in any one case 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 Company Financial Statements (or the notes
thereto);
(q) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, file any
material Return or any amendment to a material Return, 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; or
(r) Take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (q) above, or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect or prevent the Company from
performing or cause the Company not to perform its covenants hereunder.
4.2 No Solicitation. After the date of this Agreement and prior
to the Effective Date, the Company will not (nor will the Company permit any of
the Company's officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees:
(a) solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or proposal to acquire
all or substantially all of the Company's business and properties or to
purchase or acquire capital stock of the Company whether by merger, purchase of
assets, tender offer or otherwise (an "Acquisition"),
(b) disclose any information not customarily disclosed to
any person other than its attorneys or financial advisors concerning the
Company's business and properties or afford to any person or entity access to
its properties, books or records, or
(c) assist or cooperate with any person to make any
proposal to purchase all or any part of the Company's capital stock or assets,
other than licensing of software in the ordinary course of business (a
"Purchase"), provided, however, that the Company may participate in
negotiations with, or furnish information to, a party other than Parent or its
designees who has made a written Acquisition or Purchase offer or proposal if
the Company's Board of Directors, upon
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receipt of a written opinion from its outside counsel, determines that failure
to do so would constitute a breach of the Board's fiduciary duty under
applicable law.
In the event the Company shall receive any such written offer or
proposal, directly or indirectly, of the type referred to in clause (a) or (c)
above, or any request for disclosure or access pursuant to clause (b) above,
the Company party shall immediately inform Parent as to all material facts
relating to any such offer or proposal (including the identity of the party
making such offer or proposal and the specific terms thereof) and will
cooperate with Parent by furnishing any information it may reasonably request.
4.3 Conduct of Business of Parent. 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 Parent agrees (except to the extent
that the Company shall otherwise consent in writing), that Parent shall
promptly notify the Company of any event or occurrence or emergency which is
not in the ordinary course of business of Parent and which is material and
adverse to the business of Parent. Parent shall not without the prior consent
of the Company (i) amend its Certificate of Incorporation in any manner which
would materially adversely affect the rights of holders of Parent Common Stock,
or (ii) issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, or purchase or propose the purchase of, any shares of its capital
stock of any class or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, except for the issuance or proposed issuance of shares of its
capital stock or options to purchase shares of its capital stock (A) in
connection with a proposed business combination, (B) in connection with
privately negotiated sales of stock pursuant to corporate partnering
arrangements or (C) pursuant to stock option grants or exercises or other
employee stock benefit plans. Parent shall not take or agree in writing or
otherwise to take any action which would make any of the representations or
warranties of Parent contained in this Agreement untrue or incorrect or prevent
Parent from performing or cause Parent not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Resolutions of Company Shareholders. The Company shall
promptly after the date hereof take all action necessary in accordance with
California Law, and the Company's Articles of Incorporation and Bylaws to
prepare and solicit an Action By Written Consent of the Company Shareholders.
The Company shall use its best efforts to obtain the approval of the
shareholders of the Company for the Merger and shall take all other action
necessary or advisable to secure the vote or consent of its shareholders
required by California Law to effect the Merger.
5.2 Access to Information. The Company shall afford Parent and
its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to
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the Effective Time to (a) all of the Company's properties, books, contracts,
commitments and records, and (b) all other information concerning the business,
properties and personnel of the Company as Parent may reasonably request. The
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
Parent shall provide the Company with copies of such publicly available
information about Parent as the Company may request and shall provide the
Company with reasonable access to its Chief Executive Officer, Vice President,
Marketing and Treasurer in this connection. 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 Expenses. In the event the Merger is not consummated, all
expenses incurred in connection with the Merger and this Agreement shall be the
obligation of the party incurring such expenses.
5.4 Public Disclosure. Unless otherwise required by law, prior to
the Effective Time no disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby
shall be made by any party hereto unless approved by Parent and the Company
prior to release, provided that such approval shall not be unreasonably
withheld, subject, in the case of Parent, to Parent's obligation to comply with
applicable securities laws.
5.5 Pooling Accounting. Parent and the Company shall each use its
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. Each of Parent and the Company
shall use its best efforts to cause its Affiliates (as defined in Section 5.8)
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.
5.6 Consents. Each of Parent and the Company shall promptly apply
for or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger, and
the Company shall use its best efforts to obtain all necessary consents,
waivers and approvals under any of the Company's material agreements,
contracts, licenses or leases in connection with the Merger. All such
necessary consents are set forth in Section 5.6 of the Company Disclosure
Schedule.
5.7 FIRPTA. Upon request by Parent after the Effective Time, the
Company shall use its best efforts to deliver to the Internal Revenue Service a
notice that it is not a "United States Real Property Holding Corporation" as
defined in and in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2).
5.8 Legal Requirements. Each of Parent, Merger Sub and the
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary
in connection
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with any such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any Governmental Entity or
other person, required to be obtained or made in connection with the taking of
any action contemplated by this Agreement.
5.9 Blue Sky Laws. Parent shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Parent Common Stock pursuant
hereto. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock
pursuant hereto.
5.10 Best Efforts; Additional Documents and Further Assurances.
Each of the parties to this Agreement shall each use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto,
at the reasonable 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 Stock Options.
(a) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each a "Company Incentive Option")
under the Company Stock Option Plan, whether vested or unvested, will be
assumed by Parent. Each Company Incentive Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plan and applicable stock
option agreements immediately prior to the Effective Time, except that (i) such
Company Incentive Option will be exercisable for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Incentive Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Incentive Option will be equal
to the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Incentive Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent.
(b) After the Effective Time, Parent will issue to each
holder of an outstanding Company Incentive Option a document evidencing the
foregoing assumption of such Company Incentive Option by Parent.
(c) It is the intention of the parties that the Company
Incentive Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422
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of the Code to the extent the Company Incentive Options qualified as incentive
stock options prior to the Effective Time.
5.12 Indemnification. Parent shall either (i) cause the Company to
continue to indemnify or (ii) directly indemnify the persons who are currently
officers and directors of the Company substantially in accordance with the
Bylaws of the Company as they are currently in effect for action or inaction by
such person prior to the Merger. For so long as the insurer under the
Company's officer and director indemnification insurance policy is willing to
continue such insurance policy after the Merger at approximately the same
premium as currently in effect, the Parent shall continue such policy in effect
until the third anniversary of the Closing.
5.13 Option Agreements. The Company will use its best efforts to
obtain, prior to Closing, option agreements signed by the grantees of all
options granted under the Company Incentive Option Plan.
5.14 Registration Rights Agreement. Concurrently herewith, Parent
and the Shareholders are entering into the Registration Rights Agreement
substantially in the form attached hereto as Exhibit D.
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) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the shareholders
of the Company and the sole shareholder of Merger Sub.
(b) Board Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the Board of Directors
of the Company, Parent and Merger Sub.
(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger or limiting or
restricting the operation of the business of the Company following the Merger
shall be in effect, nor shall any proceeding brought by an administrative
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.
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(d) Employment and Non-Competition Agreements. Parent
shall have entered into employment and non-competition agreements with ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ Tu substantially in
the forms attached hereto as Exhibit E-1 and with ▇▇▇▇ ▇▇▇▇▇▇▇ substantially in
the form attached hereto as Exhibit E-2.
(e) Approval. Parent, Company and Merger Sub shall have
timely obtained all necessary approvals from Governmental Entities.
(f) Affiliate Agreements. Each party shall have received
from each of the Affiliates of the Company an executed Affiliate Agreement in
the form attached hereto as Exhibit F.
(g) Tax Representations. The parties shall have received
from the Company's Shareholders continuity of interest representation letters
substantially in the form attached hereto as Exhibit G covering an aggregate of
50% of the shares of Parent Common Stock to be issued in the Merger.
6.2 Additional Conditions to Obligations of Company. The
obligations of the Company 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 the Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent 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 Parent
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Certificate of Parent. The Company shall have been
provided with a certificate executed on behalf of Parent by its President or
its Chief Financial Officer or Treasurer to the effect that, as of the
Effective Time:
(i) all representations and warranties made by
Parent and Merger Sub under this Agreement are true and complete in all
material respects;
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Parent and Merger Sub on or before such date
have been so performed in all material respects; and
(iii) the transactions contemplated by this
Agreement have been approved by the Board of Directors of Parent.
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(c) Legal Opinion. The Company shall have received a
legal opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation,
counsel to Parent, substantially in the form of Exhibit H hereto.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the business, properties, results of
operations or financial condition of Parent since the date hereof.
(e) Tax Representation Certificate. The Company shall
have received from Parent and Merger Sub an executed tax representation
certificate in the form attached hereto as Exhibit K.
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger 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 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 the
Company shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be
performed and complied with by it as of the Effective Time.
(b) Certificate of the Company. Parent shall have been
provided with a certificate executed on behalf of the Company by its President
to the effect that, as of the Effective Time:
(i) all representations and warranties made by
the Company under this Agreement are true and complete in all material
respects;
(ii) all covenants, obligations and conditions of
this Agreement to be performed by the Company on or before such date have been
so performed in all material respects; and
(iii) attached to such certificate are true and
correct copies of the Company's Articles of Incorporation, as certified by the
California Secretary of State, Bylaws and resolutions of the Company's Board of
Directors and Shareholders approving the transactions contemplated by this
Agreement.
(c) Third Party Consents. Parent shall have been
furnished with evidence satisfactory to it of the consent or approval of those
persons whose consent or approval shall be required in order to assign the
agreements listed pursuant to Section 5.7.
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(d) Legal Opinion. Parent shall have received a legal
opinion from Fenwick & West LLP, legal counsel to the Company, in substantially
the form of Exhibit I.
(e) No Material Adverse Changes. There shall not have
occurred any material adverse change in the business, properties, results of
operations or financial condition of the Company since March 24, 1997;
(f) Dissenters. Holders of not more than 5% of the
outstanding Company Common Stock shall have exercised, or shall continue to
have the right to exercise, dissenters' rights with respect to the transactions
contemplated by this Agreement.
(g) Stock Restriction Agreement. Each Shareholder shall
have executed a Stock Restriction Agreement substantially in the form attached
hereto as Exhibit B.
(h) Resignation of Current Directors and Officers of the
Company. Parent shall have received letters of resignation of all of the
directors and officers of the Company effective as of the Effective Time.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. All
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger and continue for a period
of six (6) months after the Effective Time, subject to Section 7.3 hereof;
provided, however, that as to the Shareholders the representations and
warranties relating or pertaining to Taxes set forth in Section 2.8 hereof,
shall survive until ninety (90) days following the expiration of all applicable
statutes of limitations governing the Company's Taxes or Returns.
7.2 Agreement to Indemnify. The Shareholders, severally but not
jointly, hereby agree to indemnify and hold Parent and its affiliates 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"), in excess of
$25,000 in the aggregate incurred by Parent as a result of any breach of a
representation or warranty of the Company contained in Article II herein, or
any failure by the Company to perform or comply with any covenant contained
herein; provided, that no such representation or warranty shall be deemed
breached (for purposes of this Article VII only and not for purposes of the
conditions to the obligations of Parent to effect the Merger under Article VI)
with respect to information disclosed in the Company Disclosure Schedule
delivered by the Company at the Closing to the extent such schedule provides
exceptions to any representation or warranty. Parent shall be entitled to
recover from the Escrow Fund as defined in Section 7.4 hereof, for any Loss
pursuant to the terms hereof.
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7.3 Expiration of Indemnification.
(a) Except as otherwise provided in Section 7.3(b), the
indemnification obligations of the Shareholders under Section 7.2 shall
terminate at 5:00 p.m., Pacific Standard Time on the six month anniversary of
the Effective Time but shall not terminate as to any Loss asserted in good
faith pursuant to Section 7.8 prior to such date.
(b) The indemnification obligations of the Shareholders
under Section 7.2 related to Taxes or a breach of the representations and
warranties contained in Section 2.8 shall terminate 90 days following the
expiration of all applicable statutes of limitations relating to Taxes subject
to the claim of indemnification hereunder, but shall not terminate as to a Loss
(or a potential claim by an appropriate party) asserted in good faith prior to
such date; provided however that no claim for indemnification with regard to
the Shareholders shall terminate with respect to any Loss arising due to any
willful or grossly negligent breach of any representation or warranty contained
in Section 2.8.
7.4 Escrow Fund.
(a) As security for the indemnity provided for in Section
7.2 hereof and by virtue of this Agreement and the Merger Agreement the
Shareholders will be deemed to have received and deposited with the Escrow
Agent (as defined below) [ ] shares of Parent Common Stock issued in the
Merger (plus any additional shares as may be issued upon any stock split
effected after the Closing) ("Escrow Shares"), without any act of any
Shareholder. Such shares will be registered in the name of ▇▇▇▇ ▇▇▇▇▇▇▇, and
will be deposited with, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation, (or other mutually acceptable institution) 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 and at Parent's sole cost and
expense. The number of shares of Parent Common Stock in the Escrow Fund
contributed by each Shareholder is listed opposite such Shareholder's name on
Exhibit A-1.
(b) Upon compliance with and subject to the terms hereof,
Parent shall be entitled to indemnity for all Losses incurred by Parent from
the Escrow Fund. Each such indemnity will be allocated among the Shareholders
in the same proportion as the number of Escrow Shares set forth opposite such
Shareholder's name on Exhibit A. Such indemnity shall result in a forfeiture
of Escrow Shares as set forth in this Article VII.
7.5 Termination of Escrow Fund. Subject to the resolution of
pending claims asserted pursuant to Section 7.8 prior to the expiration of the
Escrow Fund and the resolution of conflicts arising from such claims under
Section 7.10(c) hereof, the Escrow Fund shall remain in existence during the
period of time (the "Escrow Period") between the effectiveness of the Merger
and 5:00 p.m. Pacific Standard Time on the six month anniversary of the
Effective Date.
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7.6 Protection of Escrow Fund. 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.
7.7 Distributions; Voting.
(a) 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 pursuant to Section 7.11
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 holders thereof. Cash dividends on Parent Common Stock shall not be added
to the Escrow Fund.
(b) Each Shareholder shall have voting rights 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).
7.8 Claims Upon Escrow Fund.
(a) 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"):
(i) stating that Parent has paid or properly
accrued or reasonably anticipates that it will have to pay Losses in an
aggregate stated amount to which Parent is entitled to indemnity pursuant to
this Agreement, and
(ii) 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 claim to which
such item is related, the Escrow Agent shall, subject to the provisions of
Sections 7.9 and 7.10 hereof, deliver to Parent out of the Escrow Fund, as
promptly as practicable, shares of Parent Common Stock held in Escrow Fund in
an amount equal to such Losses as indemnity; provided, however, that with
respect to Losses Parent reasonably anticipates it will have to pay, Escrow
Shares shall not be delivered to Parent by the Escrow Agent until such time as
Parent actually must pay such Losses.
(b) 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 7.8(a), the shares of Parent Common Stock shall
be valued at the fair market value as of the Effective Time. "Fair market
value" shall be the average of the closing prices of Parent's Common Stock on
the principal securities exchange on which Parent's Common Stock is then
traded, or if not so traded, the
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National Market System of the National Association of Securities Dealers
Automated Quotation system, in either case as reported in The Wall Street
Journal for the twenty trading days ending the day before the Effective Time.
Parent and the Company shall certify such fair market value in a certificate
signed by both Parent and the Company at the Closing, and shall deliver such
certificate to the Escrow Agent.
7.9 Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
simultaneously shall be delivered to each Agent (defined in Section 7.12 below)
and for a period of thirty (30) days after such delivery to the Agent, the
Escrow Agent shall make no delivery of shares of Parent Common Stock pursuant
to Section 7.8 hereof unless the Escrow Agent shall have received written
authorization from the Agent to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of the shares
of Parent Common Stock in the Escrow Fund required pursuant to Section 7.8,
provided that no such payment, delivery or reduction may be made if the Agent
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.
7.10 Resolution of Conflicts.
(a) In case the Agent shall so object in writing to the
indemnity of Parent in respect of any claim or claims made in any Officer's
Certificate, the Agent 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
Agent 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.
(b) If no such agreement can be reached after good faith
negotiation, attempts at resolution will be made by a person to person meeting
between the president of Parent and the Agent. If the Parents and the Agent
cannot reach agreement within two (2) business days after such meeting, Parent
shall within five (5) additional business days submit the claims at issue to
binding arbitration under the then effective rules of commercial arbitration of
the American Arbitration Association ("AAA"). If Parent does not timely submit
such dispute to AAA then, after the expiration of the five (5) business day
period, the applicable Officer's Certificate(s) will be deemed withdrawn by
Parent and shall not be the basis for the Escrow Agent withholding any Escrow
Shares at the end of the Escrow Period. Any arbitration initiated under this
Section 7.10(b) shall be concluded within sixty (60) calendar days from the
date that it is submitted to AAA.
Notwithstanding the foregoing, either or Parent or the Agents are free
to initiate litigation in court, but only to the extent necessary to seek a
temporary restraining order or other equivalent emergency injunction relief.
Thereafter, the matter shall be stayed and resolved in the arbitration as set
forth above. In the event any litigation is initiated in compliance with this
Section, the parties agree jointly to stipulate to the arbitration or court
that all proceedings in such action be kept
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confidential. The Escrow Agent shall be entitled to act in accordance with any
final decision of the arbitrator or court and make or withhold payments out of
the Escrow Fund in accordance therewith.
(c) Any litigation initiated pursuant to Section 7.10(b)
shall be brought in the state or federal courts of Santa ▇▇▇▇▇ County,
California. The non-prevailing party to any arbitration or litigation shall
pay its own expenses and the reasonable expenses, including without limitation,
reasonable attorneys' fees and costs, incurred by the other party to the
arbitration or litigation. If the Shareholders are the non-prevailing party,
the Parent shall be entitled to recover such expenses solely from the Escrow
Fund pursuant to the allocation provisions of Section 7.4(c). Unless the
Escrow Fund is otherwise exhausted, the Agent shall also be entitled to recover
the reasonable expenses, including without limitation reasonable attorney's
fees and costs, actually incurred by him on behalf of the Shareholders in the
event that the Shareholders are the non-prevailing party after the expiration
of the Escrow Period and subject to any outstanding but unresolved claims
asserted pursuant to the provisions of Section 7.8. In such event, Agent shall
deliver a written notice ("Expense Notice") concurrently to Escrow Agent and
each Shareholder on the date the Escrow Period expires (the "Expiration Date"),
indicating the amount and nature of expenses incurred by Agent. Escrow Agent
shall be entitled to rely on such Expense Notice, and each Shareholder
acknowledges and agrees that Escrow Agent is directed and authorized to deliver
to Agent such number of Escrow Shares (or an equivalent amount of Escrow Cash,
as defined in Section 7.18 below, or any combination thereof), valued at fair
market value, as defined in Section 7.8(b) above, to cover Agent's expenses
promptly upon receipt of the Expense Notice. In the event that the Escrow Fund
is exhausted before the Agent can recover all such expenses, the other
Shareholders agree to contribute their pro rata share (calculated based on the
respective percentages of Escrow Shares they have).
7.11 Distribution Upon Termination of Escrow Period. Subject to
the resolution of pending claims asserted pursuant to Section 7.8 and the
resolution of conflicts arising from such claims under Section 7.10(c) hereof
promptly following termination of the Escrow Period, the Escrow Agent shall
deliver to the Shareholders all of the Parent Common Stock in the Escrow Fund.
As soon as all such claims have been resolved in accordance with the provisions
of this Article VII, the Escrow Agent shall deliver to the Shareholders all
Parent Common Stock remaining in the Escrow Fund; provided, however, that to
the extent that such claims are for amounts that are less than the amounts
represented by the remaining Escrow Shares, then at the expiration of the
Escrow Period, the Escrow Agent shall deliver to the Shareholders that number
of shares of Parent Common Stock remaining in the Escrow Fund in excess of the
number necessary to secure Parent's indemnification rights against the Escrow
Shares arising from such claims.
7.12 Agent of the Shareholders; Power of Attorney.
(a) At the Effective Time ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ (the
"Agent") shall be constituted and appointed as agent and attorney-in- fact for
each Shareholder for purposes of this Article VII only to give and receive
notices and communications, to authorize delivery to Parent of Parent Common
Stock, cash or other property from the Escrow Fund in satisfaction of claims by
Parent, to object to
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such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand dispute resolution pursuant to Section 7.10 and comply with
orders of courts with respect to such claims, and to take all actions necessary
or appropriate in the judgment of the Agent for the accomplishment of the
foregoing. No bond shall be required of the Agent, and the Agent shall receive
no compensation for his services. Notices or communications to or from the
Agent shall constitute notice to or from each of the Shareholders. If ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ shall die or otherwise become incapable of fulfilling his
obligations as Agent hereunder, ▇▇▇▇ ▇▇▇▇▇, or another person designated by
such holders of a majority in interest of the Escrow Shares, voting together,
shall be the Agent.
(b) The Agent shall not be liable for any act done or
omitted hereunder as Agent while acting in good faith and in the exercise of
reasonable judgment. The Shareholders shall jointly and severally indemnify
the Agent and hold the Agent harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the Agent and arising
out of or in connection with the acceptance or administration of the Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Agent.
7.13 Actions of the Agent. A decision, act, consent or instruction
of the Agent with regard to the Article VII only shall constitute a decision of
all the Shareholders, and shall be final, binding and conclusive upon each of
the Shareholders, and the Escrow Agent and Parent may rely upon any decision,
act, consent or instruction of Agent as being the decision, act, consent or
instruction of each and all of the Shareholders. The Escrow Agent and Parent
are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of the Agent.
7.14 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 pursuant to Section 7.8, Parent shall notify the Agent of such
claim, and the Agent and the Shareholders shall be entitled, at their expense,
to participate in any defense of such claim. Parent shall have the right in
its sole discretion to settle any such claim; provided, however, that except
with the consent of Agent, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of liability of the
Shareholders. In the event that Agent has consented pursuant to Section 7.13
to any such settlement and agreed in writing that a specified amount of the
claim may be applied against the Escrow Fund, the Agent shall have no power or
authority to object under Section 7.8 or any other provision of this Article
VII to the amount of such claim by Parent against the Escrow Fund under Section
7.8 for indemnity with respect to such settlement.
7.15 Escrow Agent's Duties.
(a) 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 Agent, and may rely and shall be protected in relying or
refraining from acting on
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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.
(b) 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, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, 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.
(c) 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.
(d) 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.
7.16 No Joint Liability; Maximum Liability. The liability of the
Shareholders under this Article VII shall be several and not joint, and
liability for any indemnification to which Parent may be entitled under this
Article VII shall be apportioned among the Shareholders in the proportions set
forth on Exhibit A. Except as provided in Section 7.17, the total liability of
the Shareholders under this Article VII for Losses shall not exceed the fair
market value of the shares of Parent Common Stock constituting the Escrow Fund.
For purposes of this Section 7.16, "fair market value" shall have the same
meaning as in Section 7.8. Except as set forth in Section 7.17, Parent agrees
that it will look solely to the Escrow Fund for the satisfaction of its claims
under the indemnity provided in Section 7.2 and agrees that no Shareholder
shall be personally liable with respect to such claims beyond the interest of
such Shareholder in the Escrow Fund; provided, however, that if Parent suffers
a Loss for which it is entitled to indemnification under Section 7.3(b) after
the termination and distribution of the Escrow Fund pursuant to Section 7.11,
each Shareholder shall remain severally, but not jointly, liable for such
Shareholder's proportionate share of such Loss, to the extent (but only to the
extent) of the fair market value of the shares of Parent Common Stock
previously distributed to such Shareholder from the Escrow Fund pursuant to
Section 7.11.
7.17 Remedies. The indemnity set forth in this Article VII and the
Escrow Fund provided for herein are intended by the parties to this Agreement
to apply only to those items for which indemnity is specifically provided in
Section 7.2 and except as otherwise provided in this Section 7.17, resort to
the Escrow Fund shall be the exclusive remedy of Parent for any Losses. The
existence of this Article VII and of the rights and restrictions set forth
herein do not limit any other
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potential remedies of Parent with respect to any knowing, intentional and
material misrepresentations of the Company, made in or pursuant to Article II
or Article III hereof, respectively on which Parent reasonably relied to its
detriment.
7.18 Exchange of Collateral. A Shareholder may, at his or her
option at any time before Escrow Shares are delivered to Parent out of the
Escrow Fund pursuant to a claim made under Section 7.8, deposit with the Escrow
Agent an equivalent value, based upon the "fair market value" of such Escrow
Shares as defined in Section 7.8, of cash, U.S. Treasury securities or triple-A
rated state and local government general obligation bonds ("Escrow Cash") in
exchange for all of the Escrow Shares held for such Shareholder in the Escrow
Fund. In any such case, all references to the Escrow Shares and distributions
thereof in this Article VII shall, as to such Shareholder, be deemed to refer
instead to such Shareholder's Escrow Cash and distributions thereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. 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 if (i) 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 five business
days after written notice to the Company or (ii) there shall be any final
action taken, or any statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the Merger by any Governmental Entity, which
would prohibit Parent's or the Company's ownership or operation of all or a
material portion of the business of the Company, or compel Parent or the
Company to dispose of or hold separate all or a material portion of the
business or assets of the Company or Parent as a result of the Merger.
(c) by the Company 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 Parent or Merger Sub and such breach has not been cured within five
days after written notice to Parent;
(d) by any party hereto if: (i) the Closing has not
occurred by May 31, 1997; (ii) there shall be a final, non-appealable order of
a federal or state court in effect preventing consummation of the Merger; (iii)
there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
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Governmental Entity which would make consummation of the Merger illegal; or
(iv) if the Company's Shareholders do not approve the Merger.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination.
(a) 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, Merger Sub, the
Company or the Shareholders or their respective officers, directors or
Shareholders, except to the extent that such termination results from the
breach by a party hereto of any of its representations, warranties, covenants
or agreements set forth in 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
any party hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
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.
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 delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via telecopy to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to:
CyberMedia, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
(b) if to the Company, to:
Walk Softly, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Fenwick & West LLP
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(c) if to a Shareholder, to the address of such
Shareholder listed on Exhibit A:
(d) if to the Agent:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(e) if to the Escrow Agent, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
9.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The 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.
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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 Miscellaneous. This Agreement and the documents and
instruments and other agreements among the parties hereto including all lists
and statements separately certified in writing by the Company or Parent (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) are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise
except as otherwise specifically provided.
9.5 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California. All parties hereto agree to submit to the jurisdiction of
the federal and state courts of the State of California, and further agree that
service of documents commencing any suit therein may be made as provided in
Section 9.1.
9.6 Attorneys' Fees. Except as otherwise provided in Article VII,
if any party to this Agreement brings an action against another party to this
Agreement to enforce its rights under this Agreement, the prevailing party
shall be entitled to recover its reasonable costs and expenses, including
attorneys' fees and costs, incurred in connection with such action, including
any appeal of such action.
9.7 Resolution of Disputes; Stipulation Regarding Confidentiality.
Except as otherwise provided in Article VII, the parties hereto each agree to
work together in good faith to resolve any disputes which may arise under this
Agreement. Such attempts at resolution will be made at the level of a person
to person meeting between the presidents of Parent and the Company, the
Shareholders and the Agent. Each party agrees that it will not initiate any
litigation against any other party hereto regarding the subject matter of this
Agreement for at least sixty (60) days following such person to person meeting
between the presidents of Parent and the Company, the Shareholders and the
Agent except for (i) motions for a temporary restraining order or other
preliminary equitable relief and (ii) circumstances in which a delay for such
period would result in such action being barred as a result of the relevant
statute of limitations expiring. In the event any litigation is initiated in
compliance with this Section, the parties agree jointly to stipulate to the
court that all proceedings in such action be kept confidential.
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, therefore, 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.
-38-
44
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Shareholders
(as to Article VII only), the Agent and the Escrow Agent (as to matters set
forth in Article VII only) have caused this Agreement to be signed by
themselves or their duly authorized respective officers, all as of the date
first written above.
CYBERMEDIA, INC.
By:__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and
Chief Executive Officer
WALK SOFTLY, INC.
By:__________________________________
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, President
WS ACQUISITION CORP.
By:__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and
Chief Executive Officer
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
_____________________________________
▇▇▇▇ ▇▇▇▇
45
_____________________________________
▇▇▇▇▇ TU
_____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
FENWICK & WEST LLP
By:__________________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
as Escrow Agent
By:__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
AGENT OF SHAREHOLDERS
By:__________________________________
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇