1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 12, 1998
BY AND AMONG
PEOPLESOFT, INC.,
TRIMARK TECHNOLOGIES, INC.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AS SECURITYHOLDER AGENT,
AND
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS ESCROW AGENT
2
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.1. THE MERGER...........................................................................1
1.2. EFFECTIVE TIME.......................................................................2
1.3. EFFECT OF THE MERGER.................................................................2
1.4. NUMBER OF SHARES TO BE ISSUED; EFFECT ON CAPITAL STOCK; TREATMENT OF STOCK OPTIONS...2
1.5. ACCOUNTING TREATMENT.................................................................4
1.6. DISSENTING SHARES....................................................................4
1.7. SURRENDER OF CERTIFICATES............................................................5
1.8. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK..................................6
1.9. LOST, STOLEN OR DESTROYED CERTIFICATES...............................................6
1.10. TAX AND ACCOUNTING CONSEQUENCES......................................................6
1.11. TAKING OF NECESSARY ACTION; FURTHER ACTION...........................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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...................................................10
2.9. RESTRICTIONS ON BUSINESS ACTIVITIES.................................................14
2.10. TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES..............................15
2.11. INTELLECTUAL PROPERTY...............................................................15
2.12. AGREEMENTS, SCHEDULED CONTRACTS AND COMMITMENTS.....................................18
2.13. INTERESTED PARTY TRANSACTIONS.......................................................20
2.14. COMPLIANCE WITH LAWS................................................................20
2.15. LITIGATION..........................................................................20
2.16. INSURANCE...........................................................................20
2.17. MINUTE BOOKS........................................................................21
2.18. ENVIRONMENTAL MATTERS...............................................................21
2.19. BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES....................................21
2.20. EMPLOYEE MATTERS AND BENEFIT PLANS..................................................22
2.21. AFFILIATES..........................................................................25
2.22. NON-COMPETITION, NON-SOLICITATION AND NON-HIRE AGREEMENTS..........................26
2.22. VOTING AGREEMENT AND PROXIES........................................................26
2.24. POOLING OF INTERESTS................................................................26
2.25. REPRESENTATIONS COMPLETE............................................................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ENTERPRISE COMPANY, INC.
3.1. ORGANIZATION, STANDING AND POWER....................................................26
3.2. AUTHORITY...........................................................................27
3.3. CAPITAL STRUCTURE...................................................................27
i
3
3.4. SEC DOCUMENTS; ACQUIROR FINANCIAL STATEMENTS........................................27
3.5. NO MATERIAL ADVERSE CHANGE..........................................................28
3.6. LITIGATION..........................................................................28
3.7. POOLING OF INTERESTS................................................................28
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. CONDUCT OF BUSINESS OF THE COMPANY..................................................28
4.2. NO SOLICITATION.....................................................................31
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. EMPLOYEE MATTERS....................................................................32
5.2. ACCESS TO INFORMATION...............................................................33
5.3. EXPENSES............................................................................33
5.4. PUBLIC DISCLOSURE...................................................................33
5.5. CONSENTS............................................................................33
5.6. REASONABLE EFFORTS..................................................................34
5.7. NOTIFICATION OF CERTAIN MATTERS.....................................................34
5.8. POOLING ACCOUNTING..................................................................35
5.9. AFFILIATE AGREEMENTS................................................................35
5.10. ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES.........................................35
5.11. NASDAQ LISTING......................................................................35
5.12. BLUE SKY LAWS.......................................................................36
5.13. INDEMNIFICATION.....................................................................36
5.14. REGISTRATION STATEMENT ON FORM S-4; COMPANY SHAREHOLDER APPROVAL....................36
5.15. GRANT OF STOCKOPTIONS BY THE COMPANY................................................36
5.16. RECEIVABLES.........................................................................38
5.17. REGISTRATION RIGHTS.................................................................39
5.18. CONFIDENTIALITY.....................................................................39
5.19. ADDITIONAL ACTIONS..................................................................40
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER........................40
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.................................41
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR................................42
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1. INDEMNIFICATION/SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................43
7.2. ESCROW ARRANGEMENTS.................................................................44
7.3. SECURITYHOLDER AGENT................................................................50
7.4. EXCLUSIVE REMEDY....................................................................51
7.5. COMPANY EXCLUSIVE REMEDY............................................................51
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION.........................................................................51
8.2. EFFECT OF TERMINATION...............................................................52
8.3. AMENDMENT...........................................................................52
ii
4
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. TERMINATION.........................................................................52
9.2. EFFECT OF TERMINATION...............................................................53
9.3. AMENDMENT...........................................................................54
9.4. EXTENSION, WAIVER...................................................................54
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES.............................................................................54
10.2 INTERPRETATION......................................................................55
10.3 COUNTERPARTS........................................................................55
10.4 ENTIRE AGREEMENT, ASSIGNMENT........................................................56
10.5 SEVERABILITY........................................................................56
10.6 OTHER REMEDIES......................................................................56
10.7 GOVERNING LAW.......................................................................56
10.8 RULES OF CONSTRUCTION...............................................................56
10.9 SPECIFIC PERFORMANCE................................................................56
10.10 ESCROW AGENT........................................................................57
iii
5
EXHIBITS
EXHIBIT DESCRIPTION
------- ------------
Exhibit A-1 Form of Company Affiliate Agreement
Exhibit A-2 Form of Acquiror Affiliate Agreement
Exhibit B Form of Legal Opinion of Counsel to Acquiror
Exhibit C Form of Legal Opinion of Counsel to the Company
Exhibit D Form of Noncompete Agreement
Exhibit E Form of Voting Agreement and Proxy
Exhibit F Development Environment Loan Agreement
Exhibit G Marketing and Distribution Agreement
Exhibit H Software License Agreement
Exhibit I Working Capital Line of Credit
Exhibit J Porting Deliverables and Acceptance Criteria
iv
6
SCHEDULES
SCHEDULE DESCRIPTION
-------- -----------
2.2(a) Shareholder List
2.2(b) Options, Warrants, Rights
2.4 Conflicts/Other Filings and Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 Certain Transactions
2.8(b) Certain Tax Matters
2.8(c) Tax Elections and Returns
2.9 Restrictions on Business Activities
2.10(a) Leased Real Property
2.10(b) Title to Property and Liens
2.11(b) Ownership of Software
2.11(c) Certain Intellectual Property Rights
2.11(f) Intellectual Property Assets
2.12(a) Scheduled Contracts
2.12(b) Contract Breach/Default
2.12(c) Ownership Interest of Intellectual Property Assets
2.12(d) Customer Surveys
2.13 Interested Party Transactions
2.15 Litigation
2.16 Insurance
2.20(b) Employee Benefit Plans and Employees
2.20(d) Employee Plan Compliance
2.20(g) Post-Employment Obligations
2.20(j) Employees with Visas
2.20(k) Labor Matters
2.20(l) Employment at Will
2.21 Company Affiliates
2.23 Voting Agreement and Proxy Signatories
4.1 Disclosed Actions
6.2(e) Acquiror Affiliates
6.3(c) Third Party Consents Required of Company
v
7
INDEX OF DEFINED TERMS
Defined Term Section Defined
------------ ---------------
"Acquiror" Introduction
"Acquiror Common Stock" Recitals
"Acquiror Employee Plans" Section 5.1(b)
"Acquiror Financial Statements" Section 3.4
"Acquiror Indemnitees" Section 7.1(a)
"Affiliate" Appendix A
"Applicable Law" Appendix A
"Agreement" Introduction
"Average Stock Price" Appendix A
"Balance Sheet" Section 2.5
"Basket" Section 7.2(a)
"Business Day" Appendix A
"Certificate of Merger" Section 1.2
"Certificates" Section 1.7(a)
"Closing" Section 1.2
"Closing Date" Section 1.2
"Code" Section 1.4(b)(1)
"Collar Adjustment Factor" Appendix A
"Company" Appendix A
"Company Common Stock" Appendix A
"Company Employee Plan" Section 2.20(a)(iii)
vi
8
"Company Financials" Section 2.5
"Company Indemnitees" Section 7.1(b)
"Company Option" Section 1.4(b)(1)
"Continuing Employee" Section 5.1(b)
"Copyrights" Section 2.11(a)(i)(3)
"Damages" Appendix A
"Delaware Law" Section 1.1
"Demand" Section 7.2(f)(ii)
"Development Environments" Section 2.11(m)
"Disclosure Schedules" Section 2
"Dissenting Shares" Section 1.6(a)
"DofJ" Section 5.5
"DOL" Section 2.20(c)
"Effective Time" Section 1.2
"Employee" Section 2.20(a)(iv)
"Employee Agreement" Section 2.20(a)(v)
"Environmental Laws" Appendix A
"Environmental Liabilities" Appendix A
"ERISA" Section 2.20(a)(ii)
"Escrow Agent" Section 7.2(a)
"Escrow Amount" Section 1.4(a)(3)(ii)
"Escrow Fund" Section 7.2(a)
"Escrow Period" Section 7.2(b)
"Exchange Act" Section 3.4
"Exchange Ratio" Section 1.4(a)(3)(i)
vii
9
"Expiration Date" Section 7.1(c)
"FTC" Section 5.5
"GAAP" Appendix A
"Governmental Authority" Appendix A
"Gross Adjusted Base Price" Appendix A
"HSR Act" Appendix A
"Hazardous Substance" Appendix A
"Holder" Section 5.15(a)
"Illinois Articles" Section 1.2
"Illinois Law" Section 1.1
"Incentive Plan" Section 5.1(c)
"Intellectual Property Assets" Section 2.11(a)(ii)
"Intellectual Property Rights" Section 2.11(a)(i)
"IRS" Section 2.20(a)(vi)
"ISOs" Section 2.8(c)(xxiii)
"Key Employees" Appendix A
"Knowledge" or "knowledge" Appendix A
"Liability" Appendix A
"Lien" Appendix A
"Marks" Section 2.11(a)(i)(1)
"Material Adverse Change" Appendix A
"Materials" Section 2.11(m)
"Measurement Period" Appendix A
"Merger" Recitals
"Merger Price" Appendix A
viii
10
"Multiemployer Plan" Section 2.20(a)(vii)
"New Shares" Section 7.2(c)(ii)
"Noncompete Agreements" Section 2.22
"Officer's Certificate" Section 7.2(d)(i)
"Option Plan" Section 1.4(b)
"Patents" Section 2.11(a)(i)(2)
"PBDAT" Appendix A
"Pension Plan" Section 2.20(a)(viii)
"Person" Appendix A
"Pro Rata Escrow Amount" Section 1.4(3)(ii)
"Proceeding" Appendix A
"Registrable Securities" Section 5.15(a)
"Return" Section 2.8(a)(ii)
"Rule 145" Section 2.21
"Scheduled Contract" Section 2.12(b)
"Securities Act" Section 3.4
"Shareholders" Section 2.23
"SEC" Section 3.4
"SEC Documents" Section 3.4
"Securityholder Agent" Section 7.3(a)(i)
"Signing Date Average Stock Price" Appendix A
"Software" Section 2.11(b)
"Subsidiary" Appendix A
"State Taxes" Section 5.19
"Tax" Section 2.8(a)(i)
ix
11
"Taxes" Section 2.8(a)(i)
"Technology" Section 2.11(a)(i)(5)
"Third Party Expenses" Section 5.3
"Trade Secrets" Section 2.11(a)(i)(4)
"Total Company Shares" Section 1.4(a)(3)(iii)
"Voting Agreement and Proxy" Section 2.23
"Welfare Plan" Section 2.20(a)(ix)
x
12
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of June 12, 1998, by and among PeopleSoft, Inc., a Delaware
corporation ("Acquiror"), TriMark Technologies, Inc., an Illinois corporation,
("Company"), and, with respect to Article VII only, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as
Securityholder Agent and State Street Bank and Trust Company of California, N.A.
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in Appendix A hereto, which is incorporated herein by
this reference.
RECITALS
A. The Boards of Directors of the Company and Acquiror believe it is in
the best interests of each company and their respective shareholders that
Acquiror acquire the Company through the statutory merger of the Company with
and into Acquiror (the "Merger") and, in furtherance thereof, have approved the
Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
Company Common Stock shall be converted into the right to receive shares of
Common Stock of Acquiror ("Acquiror Common Stock"), and all outstanding Company
Options shall be assumed by Acquiror and be converted into options to acquire
Acquiror Common Stock.
C. A portion of the shares of Acquiror Common Stock to be issued by
Acquiror in connection with the Merger shall be placed in escrow by Acquiror,
the release of which shares shall be contingent upon certain events and
conditions, all as set forth in Article VII hereof.
D. The Company and Acquiror desire to make certain representations and
warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants, promises and representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law")
and the Illinois Business Corporations Act ("Illinois Law"), the Company shall
be merged with and into Acquiror, the separate corporate existence of the
Company shall cease, and Acquiror shall continue as the surviving corporation.
13
1.2. Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than five (5) Business Days,
following satisfaction or waiver of the conditions set forth in Article VI
(subject to Section 8.2), at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place
or time is agreed to by Acquiror and the Company. The date upon which the
Closing actually occurs is herein referred to as the "Closing Date." On the
Closing Date, the parties hereto shall cause the Merger to be consummated by (i)
executing and filing a Certificate of Merger (or like instrument) with the
Secretary of State of the State of Delaware (the "Certificate of Merger"), in
accordance with the relevant provisions of Delaware Law (the time of acceptance
by the Secretary of State of the State of Delaware of such filing being referred
to herein as the "Effective Time"), (ii) executing and filing with the Secretary
of State of the State of Illinois articles of merger required by Sections 11.25
and 11.35 of Illinois Law (the "Illinois Articles"), and (iii) executing and
filing such other documents as shall be necessary or appropriate to effect the
Merger.
1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law and
Illinois 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 shall vest in Acquiror, and all debts, liabilities and
duties of the Company shall become the debts, liabilities and duties of
Acquiror.
1.4. Maximum Number of Shares to Be Issued; Effect on Capital Stock;
Treatment of Stock Options.
(a) Maximum Number of Shares to Be Issued; Effect on Capital Stock.
The number of shares of Acquiror Common Stock to be issued in connection with
the Merger, including Acquiror Common Stock to be reserved for issuance upon
exercise of any of the Company Options to be assumed by Acquiror pursuant to
Section 1.4 (b), shall equal the Merger Share Amount. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of the Merger
and without any action on the part of Acquiror, the Company or the holder of any
shares of Company Common Stock, the following shall occur:
(1) Conversion of Company Common Stock. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares (as defined and to the extent provided in Section
1.6(a)) will be canceled and extinguished and be converted automatically into
the right to receive that number of shares of Acquiror Common Stock equal to the
Exchange Ratio (as defined in Section 1.4(3)(i))).
(2) Fractional Shares. No fraction of a share of Acquiror
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
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall be entitled to receive from
Acquiror an amount of cash (rounded to the nearest whole cent)
2
14
equal to the product of (i) such fraction, multiplied by (ii) the Average Stock
Price.
(3) Definitions.
(i) Exchange Ratio. Means the quotient obtained by dividing
(x) the Merger Share Amount by (y) the Total Company Shares.
(ii) Escrow Amount. Means ten percent (10%) of the number
of shares of Acquiror Common Stock issued at the Closing to the holders of
Company Common Stock pursuant to Section 1.4(a), which shares shall be delivered
to the Escrow Agent and held in accordance with Article VII. The portion of the
Escrow Amount deposited on behalf of each such shareholder (the "Pro Rata Escrow
Amount") shall be equal ten percent (10%) of the aggregate number of shares of
Acquiror Common Stock that such shareholder would otherwise be entitled to
receive under Section 1.4.
(iii) Total Company Shares. Means the aggregate number of
shares of the Company Common Stock outstanding immediately prior to the
Effective Time, plus the aggregate number of shares of Company Common Stock
issuable upon the exercise of all outstanding Company Options (vested and
unvested) immediately prior to the Effective Time.
(b) Treatment of Options. At the Effective Time, all options to
purchase shares of the Company Common Stock then outstanding under any of the
Company's 1998 Director and Executive Officer Non-Statutory Stock Option Plan,
the 1995 Director and Executive Officer Stock Option Plan (as amended), the 1995
Employees and Consultants Stock Option Plan, and the 1993 Stock Option Plan, as
amended (collectively referred to as the "Option Plans"), shall be assumed by
Acquiror in accordance with the provisions described below.
(1) At the Effective Time, each outstanding option to purchase
shares of the Company Common Stock (a "Company Option") under the Option Plans
or otherwise, whether vested or unvested, shall be, as a consequence of the
Merger, assumed by Acquiror. Each Company Option so assumed under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Option Plan and/or as provided in the respective option agreements
governing such Company Option immediately prior to the Effective Time, except
that (i) such Company Option shall be exercisable for that number of whole
shares of Acquiror Common Stock equal to the number of shares of Company Common
Stock underlying such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded to the nearest whole number of shares
of Acquiror Common Stock, and (ii) the per share exercise price for the shares
of Acquiror Common Stock issuable upon exercise of such assumed Company Option
shall be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded to the
nearest whole
3
15
cent; provided, however, that Acquiror may make but is not required to make such
adjustments to the number of shares of Acquiror Common Stock or the exercise
price of such assumed Company Option, as Acquiror reasonably deems necessary, in
order to prevent any such Company Option that is characterized by the Company as
an "incentive stock option" immediately prior to Closing from failing to so
qualify solely by reason of Sections 424(a)(1) or 424(a)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
(2) Promptly following the Effective Time, Acquiror shall issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option.
(c) Treatment of Treasury Stock. Each share held by the Company as
treasury stock immediately prior to the Effective Time shall be canceled and
returned to the Company's authorized but unissued capital stock, and no Acquiror
share issuance shall be made with respect thereto.
(d) Adjustments. The Signing Date Average Stock Price, the Average
Stock Price and all other similar and related items shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Acquiror
Common Stock or Company Common Stock), or other distribution in respect of
Acquiror Common Stock or Company Common Stock, reorganization, recapitalization
or other like change with respect to Acquiror Common Stock or Company Common
Stock occurring after the date hereof and prior to the Effective Time.
1.5. Accounting Treatment. Notwithstanding any provision of this
Agreement to the contrary, it is the intention of the parties that the Merger
qualify for treatment as, and be accounted for as, a pooling-of-interests under
Accounting Principles Board Opinion No. 16. In connection therewith, (1) the
Company shall use its best efforts to obtain the approval of this Agreement, the
Merger and the transactions to be consummated in connection therewith, by
ninety-five percent (95%) of the outstanding shares of capital stock of the
Company; and (2) the Company shall not take any action, or omit to take action,
the result of which action or omission would be for the Merger to fail to
qualify for "pooling-of-interests" accounting treatment.
1.6. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
the applicable requirements of Illinois Law and who, as of the Effective Time,
has not effectively withdrawn or lost such appraisal or dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Acquiror Common Stock pursuant to Sections 1.4 and 1.7, but the holder
thereof shall only be entitled to such rights as are granted by Illinois Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Common Stock who demands appraisal of such shares under
Illinois Law shall at any
4
16
time effectively withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the later of the Effective Time and the
occurrence of such event, such holder's shares shall automatically be converted
into and represent only the right to receive Acquiror Common Stock and Rights as
provided in Section 1.4, without interest thereon, upon surrender of the
certificate representing such shares.
(c) The Company shall give Acquiror (i) prompt notice of any
written demands for appraisal of any shares of Company Common Stock, withdrawals
of such demands, and any other instruments served pursuant to Illinois Law and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under
Illinois Law. The Company shall not, except with the prior written consent of
Acquiror, voluntarily make any payment with respect to any demands for appraisal
of Company Common Stock or offer to settle or settle any such demands.
1.7. Surrender of Certificates and Issuance of New Certificates.
(a) Surrender of Certificates. At the Closing, the Company shall
deliver to Acquiror original stock certificates ("Certificates") representing
all of the issued and outstanding Company Common Stock as of the Closing other
than any Dissenting Shares. All Certificates shall be duly endorsed in blank or
accompanied by a stock power in a form acceptable to Acquiror.
(b) Instructions to Issue New Certificates. Immediately upon the
Effective Time, Acquiror shall instruct the transfer agent for its Common Stock
(the "Transfer Agent") to issue and deliver to each shareholder of the Company
who has surrendered Certificates pursuant hereto, at an address designated by
such shareholder, a stock certificate representing a number of shares of
Acquiror Common Stock equal to the number of shares of Company Common Stock so
surrendered by such shareholder, multiplied by the Exchange Ratio, and less the
Pro Rata Escrow Amount for such shareholder. In addition, Acquiror shall
instruct the Transfer Agent to issue and deliver to the Escrow Agent a stock
certificate representing the Escrow Amount, to be held in accordance with the
provisions hereof. Such shares shall be beneficially owned by the holders on
whose behalf such shares were deposited in the Escrow Fund and shall be
available to compensate Acquiror as provided in Article VII. At the Closing,
Acquiror shall provide the Company with a copy of its written instructions to
the Transfer Agent.
(c) Transfers of Ownership. If any certificate for shares of
Acquiror 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 Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or any agent designated by it that such tax has been
paid or is not payable.
5
17
1.8. No Further Ownership Rights in Company Common Stock. The shares of
Acquiror Common Stock into which Company Common Stock is converted 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
Company Common Stock, and there shall be no further registration of transfers on
the records of Acquiror or the Company of shares of Company Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Acquiror for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.9. Lost, Stolen or Destroyed Certificates. In the event any
Certificates are lost, stolen or destroyed, the Transfer 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 Acquiror Common
Stock and cash for fractional shares, if any, as may be required pursuant to
Section 1.4; provided that, as a condition precedent to the issuance thereof,
the owner of such lost, stolen or destroyed Certificates shall enter into an
indemnification agreement satisfactory to Acquiror as indemnity against any
claim that may be made against Acquiror or the Transfer Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
1.10. Tax Consequences. The parties to this Agreement hereby adopt this
Agreement as a "Plan of Reorganization" within the meaning of sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. No party to
this Agreement shall take any action inconsistent with such treatment.
1.11. 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 in Acquiror full right and title to
and possession of all assets, property, rights, privileges, powers and
franchises of the Company, the officers and directors of Acquiror are hereby
fully authorized in the name of Acquiror, the Company and otherwise to take all
such lawful action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror, subject to such
exceptions as are disclosed in the separate Disclosure Schedule of even date
herewith (collectively the "Disclosure Schedules") as follows:
2.1. Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. The Company has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would result in a Material Adverse Change on the
Company. The Company has delivered a true and correct copy of its Articles of
Incorporation and Bylaws, each as amended to date, to Acquiror.
6
18
2.2. Company Capital Structure.
(a) The authorized capital stock of the Company consists solely of
Ten Million (10,000,000) shares of authorized Company Common Stock, of which SIX
MILLION ONE HUNDRED SIXTY THOUSAND (6,160,000) shares are outstanding on the
date hereof. No other shares have been authorized or designated as a series or
are issued and outstanding as of the date hereof. On the date hereof, the
Company Common Stock is held of record and beneficially by the persons, with the
addresses of record and in the amounts with the corresponding certificate
numbers set forth on Schedule 2.2(a). 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, any agreement to which the Company is a party or by
which it is bound or otherwise. None of the shares of Company Common Stock is
subject to any right of repurchase by the Company, except as set forth in
Schedule 2.2(a).
(b) Except as set forth on Schedule 2.2(b) and except as otherwise
permitted by the terms of this Agreement, on the date hereof there are not
outstanding, and on the Closing Date there will not be outstanding (i) any
options, warrants or other rights to purchase from the Company any capital stock
or other securities of the Company, (ii) any securities convertible into or
exchangeable for shares of such capital stock or securities or (iii) any other
commitments or rights of any kind for the Company to issue additional shares of
capital stock, options, warrants or other securities. Such schedule sets forth a
correct and complete list of each of the foregoing as of the date hereof,
including the record and beneficial holder thereof, a description of the nature
of such security, the amount of securities held, the exercise, conversion or
exchange rights relating thereto, including a schedule of vesting, and the type
and amount of securities into which such securities are exercisable, convertible
or exchangeable. No Company Option shall accelerate solely as a consequence of
the Merger or the other transactions contemplated by this Agreement.
2.3. Subsidiaries. The Company has no Subsidiaries and does not have any
ownership interest in any securities of any kind in any Person.
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 vote required of the Company's shareholders to duly
approve the Merger and this Agreement is that number of shares as would
constitute a majority of the outstanding shares of each class of the Company
Common Stock. Other than obtaining the requisite shareholder vote, 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. The Company's Board of Directors has unanimously
approved the Merger, this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
due execution and delivery by the other parties hereto, constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by principles of public policy and
subject to laws relating to bankruptcy, insolvency and the relief of debtors and
to rules of law governing specific performance, injunctive relief and other
equitable remedies. Except as set forth on Schedule 2.4,
7
19
the execution and delivery of this Agreement by the Company does not, and, as of
the Effective Time, the consummation of the transactions contemplated hereby
will not materially (except with respect to clause (i) immediately below),
conflict with, or result in any material (except with respect to clause (i)
immediately below) violation of, or default under (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 loss of any material benefit under (i) any
provision of the Articles of Incorporation or Bylaws of the Company or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree or Applicable Law
applicable to the Company or its properties or assets. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, or notice to, any court, administrative agency or commission or other
Governmental Authority or any third party 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 Certificate of Merger with the Delaware Secretary of State, (ii) the
filing with the Secretary of State of the State of Illinois of the Illinois
Articles, (iii) the respective filings of the Company and Acquiror under the HSR
Act, (iv) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, (v) such other consents, waivers,
authorizations, filings, approvals and registrations that are set forth on
Schedule 2.4, and (vi) where the failure to obtain any other consent, waiver,
authorization, approval or registration would not result in a Material Adverse
Change to the Company or in any way prevent the Company from consummating the
Merger or performing its obligations under this Agreement.
2.5. Company Financial Statements. Schedule 2.5 sets forth the Company's
audited balance sheet as of December 31, 1997 and the related audited statements
of operations and cash flows for the year then ended and the Company's unaudited
balance sheet as of April 30, 1998 (the "Balance Sheet") and the related
unaudited statements of operations and cash flows for the four-month period then
ended (collectively, all such financial statements are referred to as the
"Company Financials"). The Company Financials are correct in all material
respects and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other. The
Company Financials present fairly the financial condition and operating results
of the Company as of the dates and during the periods indicated therein,
subject, in the case of the Balance Sheet and other Company Financials for the
four month period ended April 30, 1998, to normal year-end adjustments, which
will not be material in amount or significance for such period. Without limiting
the foregoing, for any period after December 31, 1997, the Company has or will
comply in all material respects with Statement of Position 97-2 (Software
Revenue Recognition) as amended by Statement of Position 98-4.
2.6. No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
the Company does not have any Liability in excess of Five Thousand Dollars
($5,000) that (i) has not been reflected in the Balance Sheet or (ii) has not
arisen in the ordinary course of the Company's business since April 30, 1998,
consistent with past practices. Except as disclosed in Schedule 2.6, no customer
of the Company has a right of refund or set off from the Company.
2.7. No Changes. Except as set forth in Schedule 2.2(b), Schedule 2.7
and Schedule 2.12(a), since April 30, 1998, there has not been, occurred or
arisen any:
8
20
(a) material transaction (other than the transactions contemplated
by this Agreement) by the Company except in the ordinary course of business as
conducted on that date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company of Fifteen
Thousand Dollars ($15,000) in any individual case or Fifty Thousand Dollars
($50,000) in the aggregate;
(d) destruction of, damage to or loss of any asset, business or
customer of the Company (whether or not covered by insurance) that resulted or
could reasonably be expected to result in losses to the Company of more than Ten
Thousand Dollars ($10,000);
(e) claim of wrongful discharge or other unlawful labor practice or
action or significant labor trouble;
(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 in the amount
of Ten Thousand Dollars ($10,000) in any individual case or Fifty Thousand
Dollars ($50,000) in the aggregate;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock other than pursuant to the exercise of repurchase rights under
stock option agreements;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any Scheduled Contract (as defined
in Section 2.12);
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for (1) advances to employees for travel and
business expenses, (2) loans from Acquiror to the Company, and (3) advances
under the Company's existing line of credit, any of which occur in the ordinary
course of business, consistent with past practices;
9
21
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, where such waiver, release, write-off or compromise involves an amount
in excess of Five Thousand Dollars ($5,000);
(n) commencement or notice or, to the Company's knowledge, threat
of commencement of any Proceeding against or investigation of the Company or its
affairs;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property Rights (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property Rights;
(p) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(q) change in pricing or royalties set or charged by the Company to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to the Company;
(r) event or condition of any character, or group of the foregoing,
that has or is reasonably likely to have a Material Adverse Change on the
Company;
(s) material mortgage, pledge, Lien, charge, security interest or
any other encumbrance or restriction relating to any of the Company's property,
business or assets, tangible or intangible;
(t) agreement to enter into a strategic alliance, including
marketing or distribution arrangements or other similar arrangements, or grant
of third party royalty rights or development agreements, or sub-licensing of any
rights; or
(u) agreement by the Company to do any of the things described in
the preceding clauses (a) through (t) (other than negotiations with Acquiror and
its representatives regarding the transactions contemplated by this Agreement).
The Company shall not be deemed to be in breach of the representations and
warranties of this Section 2.7 for any matters arising after the date hereof so
long as such matters are permitted by Section 4.1, and the Company provides
Acquiror with written notice of all such matters at least three (3) Business
Days prior to the Closing.
2.8. Tax and Other Returns and Reports.
(a) For purposes of this Agreement:
(i) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, value added, intangible, unitary, capital gain, transfer, franchise,
profits, withholding, backup withholding, payroll, employment, estimated,
10
22
alternative minimum, excise, severance, stamp, occupation, premium, property,
environmental, self-dealing, prohibited transactions, windfall or excess
profits, customs duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, (B) any Liability for payment of
amounts described in clause (A) whether as a result of transferee Liability, of
being a member of an affiliated, consolidated, combined or unitary or other
similar group for any period, or otherwise through operation of Applicable Law
and (C) any Liability for the payment of amounts described in clauses (A) or (B)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other person; and the term
"Tax" means any one of the foregoing Taxes; and
(ii) the term "Returns" means all returns, declarations,
reports, statements and other documents filed or required to be filed in respect
of Taxes; and the term "Return" means any one of the foregoing Returns.
(b) Schedule 2.8(b) sets forth a list of the taxable years of the
Company for which examinations of income or franchise tax returns by the IRS and
the state, local or foreign taxing authority have been completed, those years
for which examinations by such agencies are presently being conducted, those
years for which notice of pending or threatened examination or adjustment has
been received. Except to the extent indicated in Schedule 2.8(b), all
deficiencies asserted or assessments made as a result of any examinations by the
IRS or state, local or foreign Tax authority have been fully paid, or are fully
described in Schedule 2.8(b), are being contested in good faith and an adequate
reserve therefor has been established and are fully reflected in the Balance
Sheet. Except as described in Schedule 2.8(b), to the Company's Knowledge, there
are no Returns that are presently under examination with respect to Taxes, there
are no proposed (whether oral or written) or final adjustments, assessments or
deficiencies with respect to Taxes currently pending, and there are no
outstanding notices of proposed or actual audit, examination or investigation
with respect to Taxes.
(c) Except as described in Schedule 2.8(c):
(i) The Company has properly filed, or has had properly filed
on its behalf, on a timely basis, all Returns required to have been filed and
all Taxes required to be shown thereon as due have been paid on a timely basis
or an adequate reserve therefor has been established in accordance with GAAP.
All such Returns were, when filed, and continue to be, true, complete and
correct in all material respects. No Liability for Taxes has been incurred, and
no taxable income has been realized, by the Company since January 1, 1998 other
than in the ordinary course of business. No director, officer or employee of the
Company or any Affiliate or thereof having responsibility for Tax matters is in
discussions with Tax authorities or has reason to believe that any Tax authority
has valid grounds to claim or assess any additional Tax with respect to the
Company materially in excess of the amounts shown on the Balance
11
23
Sheet for the period ending on such date and amounts incurred in the ordinary
course of business since that date;
(ii) The Company is not, and has not been at any time, a
member of an affiliated group as defined in Section 1504 of the Code. The
Company has no Liability for Taxes of any other Person;
(iii) With respect to all amounts in respect of Taxes and with
respect to all taxable periods or portions of periods ending on or before the
Closing, all applicable Tax laws and agreements have been fully complied with,
and all amounts required to be paid by the Company to Tax authorities or others
have been paid;
(iv) None of the Returns contains, or was required to contain
(in order to avoid the imposition of a penalty), a disclosure statement under
Section 6662 (or any predecessor provision) of the Code, or any similar
provision of state, local or foreign law, with respect to the income, gain,
loss, deduction or credit of the Company;
(v) All amounts that were required to be collected or
withheld by or in respect of the Company in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party have been duly collected or withheld, and all amounts that were
required to be remitted to any Governmental Authority by or in respect of the
Company have been duly remitted;
(vi) The Company has not requested an extension of time to
file any Company Return not yet filed, and has not granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. No power of attorney with respect to Taxes is in force;
(vii) The Company has not taken any action not in accordance
with past practice that would have the effect of deferring any material Tax
Liability of the Company from any taxable period or portion thereof ending on or
before Closing to any subsequent taxable period or portion thereof;
(viii) There are no actual or deemed elections under Section
338 of the Code, protective carryover basis elections, offset prohibition
elections or similar elections applicable to the Company;
(ix) The Company is not required to include in its income
any adjustment pursuant to Sections 481 or 263A of the Code (or similar
provisions of other Applicable Law) by reason of a change in accounting method
or otherwise, following the Closing, and to Company's knowledge the IRS (or
other Governmental Authority) has not proposed, and is not considering
proposing, any such change in accounting method or other adjustment;
12
24
(x) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company;
(xi) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code, whether by reason of the Closing or otherwise;
(xii) The Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country; the
Company has not engaged in a trade or business within any foreign country;
(xiii) The Company is not party to any joint venture,
partnership, or other arrangement or contract that could be treated as a
partnership for federal income Tax purposes;
(xiv) The Company has never filed an election pursuant to
Section 1361 of the Code (or any similar provision for state or local tax
purposes). The Company has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local or foreign income Tax law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state, local or foreign
income Tax law) apply to any disposition of any asset owned by the Company;
(xv) The Company has not participated in an international
boycott within the meaning of Section 999 of the Code;
(xvi) The Company is not, and has not been, a party to a Tax
sharing agreement. The Company has no current or contingent contractual
obligation to indemnify any Person with respect to Taxes, other than obligations
to indemnify a lessor for property taxes, sales/use taxes or gross receipts
taxes (but not income or franchise Taxes) imposed on lease payments arising from
terms that are customary for leases of similar property;
(xvii) The Company is not a party to or bound by any closing
agreement, offer in compromise or other contractual or similar arrangement with
any Tax Governmental Authority;
(xviii) No material election with respect to Taxes incurred by
the Company has been made from and after the date of this Agreement;
(xix) The Company currently has a cumulative net operating
loss. On or before June 30, 1998, the Company will provide Acquiror
13
25
with a schedule that sets forth, with respect to the Company, as of December 31,
1997, the tax basis in its assets (by type), and the amount of any net operating
loss, net capital loss, and unused tax credit carryovers (and type thereof), for
federal and applicable state income tax purposes;
(xx) The Company currently uses the accrual method of
accounting for United States federal and state income Tax purposes and has not
changed to or from such method of accounting during the preceding five years;
(xxi) The Company has provided to representatives of Acquiror
copies of all federal and state income and franchise Returns for all taxable
years beginning with the taxable year ended December 31, 1994, and other written
correspondence, filed or submitted by the Company with or to the relevant Tax
authorities in connection with any audit, examination or accounting method or
tax year change, and has produced for Acquiror's inspection all sales Tax, use
Tax, property Tax, and other Tax and information returns filed by the Company;
(xxii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code;
(xxiii) All outstanding options to acquire equity of the
Company that purport to be or were otherwise intended (when issued) to be
treated as "incentive stock options" ("ISOs") within the meaning of Section 422
of the Code (and any predecessor provision and any similar provision applicable
under state, local or other Tax law) were issued in compliance with such
section. All such outstanding options currently qualify for treatment as ISOs,
and are held by persons who are employees of the Company;
(xxiv) None of the assets of the Company is property that the
Company is required to treat as being owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended; none of the assets of the Company
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code; none of the assets of the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; and
(xxv) The Company has not redeemed Company Common Stock
(except as set forth in Schedule 2.8 (c)) or made an "extraordinary
distribution" within the meaning of Treasury Regulation Section
1.368-1T(e)(1)(ii).
2.9. Restrictions on Business Activities. Except as set forth on
Schedule 2.9, there is no agreement (noncompete or otherwise), judgment,
injunction, order or decree to which the
14
26
Company is a party or otherwise binding upon the Company that has or is
reasonably likely to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products or providing related services to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
2.10. Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property currently
leased by the Company, the name of the lessor and the date of the lease and each
amendment thereto. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing material default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
Complete and correct copies of such leases have been delivered to Acquiror.
(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
properties and assets, tangible and intangible (including Intellectual Property
Assets), real, personal and mixed, used or held for use in its business, free
and clear of any Liens, except as reflected in the Company Financials except for
Liens for Taxes not yet due and payable and such imperfections of title, if any,
that do not materially interfere with the present value of the subject property
or as may be reflected in Schedule 2.10(b).
2.11. Intellectual Property.
(a) Certain Definitions.
(i) The term "Intellectual Property Rights" means all United
States and foreign:
(1) fictional business names, trade names, registered and
unregistered trademarks and service marks, and
applications therefor (collectively, "Marks");
(2) patents, patent rights and patent applications
(collectively, "Patents");
(3) copyrights in both published works and unpublished
works and all registrations and applications therefor
(collectively, "Copyrights");
(4) know-how, trade secrets, confidential information and
other proprietary information, including customer
lists (collectively, "Trade Secrets"); and
15
27
(5) rights in and to any and all inventions, discoveries,
concepts, ideas, drawings, designs, refinements,
extensions, improvements, software (including object
and source code), computer software programs or
applications (in both source code and object code
form), data, databases, mask works, know-how, research
and development, techniques, modifications, and other
proprietary and intellectual property rights (whether
or not patentable or subject to copyright, mask work
or trade secret protection) not included in the
foregoing subparagraphs (2), (3) or (4) (collectively,
"Technology").
(ii) The term "Intellectual Property Assets" means all
Intellectual Property Rights owned or licensed by the Company and used in or
necessary to the conduct of the Company's business and all further uses of the
terms Marks, Patents, Copyrights, Trade Secrets and Technology in this Section
shall mean Marks, Patents, Copyrights, Trade Secrets and Technology that are
Intellectual Property Assets.
(b) Ownership of Software. The term "Software" means all of the
Company's software, modules, design documents, flow charts and other related
development documents, and all patents and copyrights to each of those items and
specifically excluding those items prepared for customers in the operation of
the Company's business for which the customer contractually has vested title.
The Company's Software (excluding software that is available through commercial
distributors or in consumer retail stores and are subject to "shrink-wrap"
agreements) is listed on Schedule 2.11(b) . The Company has not assigned,
transferred or encumbered any of its rights to the Software.
(c) Certain Intellectual Property Assets. The Company does not own
any Marks or Patents, except as set forth on Schedule 2.11(c).
(d) Copyrights. The Company is the owner of all right, title and
interest in and to each of the Copyrights in the Software, free and clear of all
Liens and other adverse claims. None of the Copyrights has been registered with
the U.S. Copyright Office or, if foreign, with the appropriate foreign
Governmental Authority.
(e) Trade Secrets. The Company has taken all reasonable
precautions to protect the secrecy, confidentiality and value of all Trade
Secrets relating to the Company's business.
(f) Intellectual Property Scheduled Contracts. Schedule 2.11(f)
contains a complete and accurate list of all material contracts and their
expiration dates (if any) relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for any license
for common publicly retailed software programs that are currently distributed
with a value of less than Five Thousand Dollars ($5,000). There are no
outstanding and, to the Company's knowledge, no threatened disputes or
disagreements with respect to any such contract. The expiration dates of all
Scheduled Contracts which are deemed material to the Company's' products and
their related functionality are sufficiently distant from the date hereof
16
28
that no potential impairment of the value of any of the Company's products could
reasonably be imputed by virtue of an inability of the Company to respond to a
non-extension notice.
(g) Ownership of Intellectual Property Assets. The Company has the
right to use, or is the owner of all right, title, and interest in and to, each
of the Intellectual Property Assets, free and clear of all Liens, and has the
right to use without payment to a third party all of the Intellectual Property
Assets.
(h) Employee Agreements. All employees and independent contractors
of the Company involved with the development of products or the Software for the
Company have executed written agreements with the Company that appropriately
protect the Intellectual Property Assets. To the knowledge of the Company, no
employee of the Company has entered into any contract or other agreement with
any Person (other than the Company) that restricts or limits in any way the
scope or type of work in which the employee may be engaged for the Company or
requires the employee to transfer, assign, or disclose information concerning
the employee's work with the Company to anyone other than the Company.
(i) Infringement Generally. The Company is not, nor has it during
the three (3) years preceding the date of this Agreement been, a party to any
Proceeding, nor is any Proceeding threatened, that involves or involved a claim
of infringement by the Company or any other Person of any Intellectual Property
Asset. No Intellectual Property Asset of the Company is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or, in the case of any Intellectual Property Asset
licensed to others, restricting the sale, transfer, assignment or licensing
thereof by the Company to any Person. To the Company's knowledge, its use of any
Intellectual Property Assets does not conflict with, infringe upon or violate
any Intellectual Property Right or other right of any Person.
(j) Use of Intellectual Property. The Company owns, or is licensed
or otherwise possesses legally enforceable rights to use, all Intellectual
Property Assets that are used in the business of the Company as currently
conducted.
(m) Software. The portion of the Software developed by the Company
does not contain any Materials or Development Environments (each as defined
below) that embody Intellectual Property Rights of any Person other than the
Company, except for such Materials or Development Environments obtained by the
Company from other Persons who make such Materials or Development Environments
generally available to all interested purchasers or end-users on standard
commercial terms, other than Intellectual Property Rights obtained from
Acquiror. For purposes of this Agreement, (i) the term "Materials" means
computer programming code (including both object code and source code versions
thereof), databases, documentation (including user manuals and other written
materials that relate to particular code or databases), and other materials
useful for design (for example, logic manuals, flow charts, and principles of
operation), and (ii) the term "Development Environments" means any device,
programming, documentation, media and other objects, including compilers,
"workbenches," tools, and higher-level or "proprietary" languages, used by the
Company for the development, maintenance and implementation of the Materials, to
the extent such objects may be necessary for any subsequent maintenance or
enhancement of the same, similar or related Materials by
17
29
Acquiror after the Closing or the comprehension by reasonably competent
programmers of the operation of such Materials in their business context.
2.12. Agreements, Scheduled Contracts and Commitments.
(a) Except as set forth on Schedule 2.12(a), the Company does not
have, is not a party to nor is it bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, sales compensation
plan, pension, profit sharing or retirement plans, or any other employee benefit
plans or arrangements or agreements to change any such plans whether written or
oral;
(iv) any employment or consulting agreement with an employee
or individual consultant, or any consulting or sales agreement under which a
firm or other organization provides services to the Company in any case
involving aggregate payments in excess of $10,000 in one year;
(v) any agreement or plan, including any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a value
individually in excess of Twenty-Five Thousand Dollars ($25,000);
(viii) any agreement of indemnification or guaranty other than
in Scheduled Contracts or customary intellectual property indemnifications made
in the ordinary course of business;
(ix) any agreement pursuant to which the Company has granted
or may grant in the future, to any party a source-code license or option or
other right to use or acquire source-code, other than the license agreements for
"LANMark" and "Transcend" (where the source code is escrowed in certain
circumstances);
(x) any agreement relating to capital expenditures and
involving future payments in excess of Fifteen Thousand Dollars ($15,000);
18
30
(xi) any agreement relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's business;
(xii) 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
(viii) of this Section 2.12;
(xiii) any purchase order or contract for the purchase of raw
materials or services involving Fifteen Thousand Dollars ($15,000) or more;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any other agreement that involves Twenty-Five Thousand
Dollars ($25,000) or more or is not cancelable without penalty upon notice of
thirty (30) days or less; and
(xvii) each other material agreement or commitment, whether
written or oral; without in any way limiting the foregoing, Schedule 2.12(a)
lists all agreements, amendments, supplements, addenda, modifications and side
letters.
The Company shall not be deemed to be in breach of the representations and
warranties of this Section 2.12(a) for any matters arising after the date hereof
so long as such matters are permitted by Section 4.1, and the Company provides
Acquiror with written notice of all such matters at least five (5) Business Days
prior to the Closing.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, as are all noted in Schedule 2.12(b), the
Company has not in any material respect breached, violated or defaulted under,
or received notice that it has materially breached, violated or defaulted under,
any of the terms or conditions of any agreement, contract or commitment required
to be set forth on Schedule 2.9, Schedule 2.12(a) or Schedule 2.11(f) (any such
agreement, contract or commitment, regardless of whether it is set forth on such
schedule, a "Scheduled Contract"). Each Scheduled Contract is in full force and
effect and, except as otherwise disclosed in Schedule 2.12(b), is not subject to
any default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto.
(c) With respect to the consulting agreements of the Company
listed on Schedule 2.12(a), (i) all of the agreements and understandings of the
Company and each of the respective third parties are set forth in the copies of
such agreements provided to Acquiror, (ii) there are no other agreements,
written or oral, changing the rights or obligations of Acquiror
19
31
thereunder and (iii) except as set forth in Schedule 2.12(c), the Company has
retained all rights to its Intellectual Property Assets related to such
agreements and the third parties do not have any ownership interest, jointly or
otherwise, in the Intellectual Property Assets. Except as set forth in Schedule
2.12(c), there are no consulting or other agreements with customers, the cost to
perform of which is expected, or is already in excess of, the total receipts
expected to be generated from said customer under such agreement.
2.13. Interested Party Transactions. Except as set forth on Schedule
2.13, to the Company's knowledge, no officer, director or Affiliate of the
Company (nor any ancestor, sibling, descendant or spouse of any of such persons,
or any trust, partnership or corporation in which any of such persons has or has
had an economic interest), has or has had, directly or indirectly, (i) an
economic interest in any entity which furnished or sold, or furnishes or sells,
services or products that the Company furnishes or sells, or proposes to furnish
or sell, or (ii) an economic interest in any entity that purchases from or sells
or furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any Scheduled Contract; provided, that ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation
shall not be deemed an "economic interest in any entity" for purposes of this
Section 2.13.
2.14. Compliance with Laws. The Company has complied in all material
respects with, is not in any material respect in violation of, and has not
received any notices of violation with respect to, any Applicable Law.
2.15. Litigation. Except as set forth in Schedule 2.15, there is no
Proceeding of any nature pending or, to the Company's knowledge, threatened
against the Company, its properties or any of its officers, directors or
employees, in their respective capacities as such. Except as set forth in
Schedule 2.15, to the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers, directors
or employees by or before any Governmental Authority. Schedule 2.15 sets forth,
with respect to any such pending or threatened Proceeding or investigation, the
forum, the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Authority 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. There is no
Proceeding pending, or as to which the Company has received any notice of
assertion against the Company, that in any manner challenges or seeks, or
reasonably could be expected, to prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement.
2.16. Insurance. Schedule 2.16 sets forth a list and description of each
insurance policy currently in effect where the Company is the beneficiary. Such
schedule lists the name of the insurer, policy coverage, coverage amounts and
premiums payable. With respect to the insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
is otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar
20
32
insurance coverage). The Company has no knowledge of any threatened termination
of, or premium increase with respect to, any of such policies. The Company does
not have any key-man life insurance policies or any other policies under which
the Shareholders are beneficiaries, other than any policies set forth on
Schedule 2.16 under which the Shareholders may be beneficiaries in their
capacities as employees of the Company.
2.17. Minute Books. The minute books of the Company made available to
counsel for Acquiror are the only minute books of the Company and contain a
reasonably accurate summary of all actions taken at meetings of directors (or
committees thereof) and shareholders or actions by written consent since the
time of incorporation of the Company.
2.18. Environmental Matters.
(a) No approval, authorization, certificate, consent, license,
order, permit and any other similar authorization of any Governmental Authority,
or from any other Person, is required under any Environmental Laws applicable to
the Company or any of its assets or operations. The Company is in compliance in
all material respects with all limitations, restrictions, conditions, standards,
requirements, schedules and time tables required or imposed under all
Environmental Laws.
(b) There is no Proceeding, citation or notice of violation under
any Environmental Law actually pending or, to the Company's knowledge,
threatened, relating to the Company or any of its assets or operations.
(c) There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions or plans
that are reasonably likely to interfere with or prevent continued compliance
with any Environmental Law by the Company, or that are reasonably likely to give
rise to any Environmental Liability to the Company or that otherwise may form
the basis of any Proceeding, hearing, study or investigation relating to the
Company or any of its assets or operations (1) under any Environmental Law, (2)
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release, of any Hazardous Substance, or (3) resulting from
exposure to work place hazards. No survey, analysis or review relating to the
Company and any of its assets or operations has been performed or prepared at
any time by or for the Company, or of which the Company has a copy, that discuss
or relate to any existing or potential Environmental Liability.
(d) The Company is not required or obligated to make any capital
or other expenditure in excess of Ten Thousand Dollars ($10,000) to comply with
any Environmental Law nor is there any reasonable basis on which any
Governmental Authority would take any action that would require any such capital
or other expenditure.
2.19. Brokers' and Finders' Fees; Third Party Expenses. 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.
21
33
2.20. Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (such definition shall only
apply to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, written or
unwritten, including each "employee benefit plan," within the meaning of Section
3(3) of ERISA that is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any Liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(ix) "Welfare Plan" shall refer to each Company Employee
Plan which is a welfare plan as defined in ERISA Section 3(1).
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement, together with a
schedule of all
22
34
liabilities, whether or not accrued, under each such Company Employee Plan or
Employee Agreement. The Company does not have any stated plan or commitment to
establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
Applicable Law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any Applicable Law or as required by this
Agreement), or to enter into any additional Company Employee Plan or Employee
Agreement.
(c) Documents. The Company has made available to Acquiror (i)
correct and complete copies of all documents embodying or relating to each
Company Employee Plan (including a written description of each Company Employee
Plan which is not otherwise set forth in writing) and each Employee Agreement
(or standard forms thereof which do not differ in any material respect from the
final versions of such Employment Agreements) including all amendments thereto
and any written communications provided to Employees in connection therewith;
(ii) the most recent annual actuarial valuations, if any, prepared for each
Company Employee Plan; (iii) the three most recent annual reports (Series 5500
and all schedules thereto), if any, required under ERISA or the Code in
connection with each Company Employee Plan or related trust; (iv) if Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan description
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination letters and rulings received by the Company relating to Company
Employee Plans and copies of all applications and correspondence to or from the
IRS or the Department of Labor ("DOL") with respect to any Company Employee
Plan; (vii) all communications material to any Employee or Employees relating to
any Company Employee Plan and any proposed Company Employee Plan, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any Liability to the Company; and (viii) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company and its Affiliates have performed in all material
respects all obligations required to be performed by it under each Company
Employee Plan and each Company Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with all
Applicable Laws, including ERISA and the Code; (ii) no "prohibited transaction,"
within the meaning of Section 4975 of the Code or Section 406 of ERISA, has
occurred with respect to any Company Employee Plan; (iii) there are no
Proceedings pending, or, to the Knowledge of the Company or its Affiliates,
threatened or anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; (iv)
each Company Employee Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without Liability to the
Company, Acquiror or any of its Affiliates (other than amounts accrued to be
paid to the plan in the Company Financials and ordinary administration expenses
incurred in a termination event); (v) there are no inquiries or Proceedings
pending or, to the Knowledge of the Company or any Affiliates, threatened by the
IRS or DOL with respect to any Company Employee Plan; (vi) neither the Company
nor any Affiliate is subject to any penalty or tax with respect to any
23
35
Company Employee Plan under Section 4975 through 4980 of the Code; and (vii)
each Company Employee Plan that is intended to be qualified under Section 401(a)
of the Code is and has always been so qualified and has received a favorable
determination letter with respect to such status from the IRS, and no act or
omission has occurred since the date of the most recent favorable determination
issued with respect to a Company Employee Plan which resulted or is likely to
result in the revocation of the Company Employee Plan's qualified status.
(e) Pension Plans. The Company and its Affiliates do not now, nor
have they ever, maintained, established, sponsored, participated in, or
contributed to, any Pension Plan that is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time have the Company or its
Affiliates contributed to or been requested to contribute to any Multiemployer
Plan.
(g) Post-Employment Obligations. Except as set forth in Schedule
2.20(g), no Company Employee Plan provides, or has any Liability to provide,
life insurance, medical or other employee welfare benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, benefits the full cost of which are borne by Employees
of the Company (or such Employees' beneficiaries or dependents), death or
disability benefits under any of the Company Employee Plans, and life insurance
benefits for any Employee who dies while in service with the Company. The
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute.
(h) Welfare Plans With respect to any Welfare Plans maintained by
the Company or its Affiliates, whether or not for the benefit of the Company's
employees, the Company and its Affiliates have complied in all material respects
with the provisions of Sections 4980B and 9801 of the Code.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by the
Company or Acquiror or any of their respective affiliates with respect to any
Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
24
36
(j) Employment Matters. The Company (i) is in compliance in all
material respects with all Applicable Laws respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees; (ii) has withheld all amounts required by Applicable
Law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages, commissions, bonuses
or any other type of compensation or any taxes or any penalty for failure to
comply with any of the foregoing; (iv) is not liable for any payment to any
trust or other fund or to any Governmental Authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice) and (v) is not liable for
nor has been threatened with any claim for discrimination or sexual harassment.
Schedule 2.20(j) sets forth a complete and correct list of all employees holding
visas issued by the United States, listing each such employee by name and type
of visa. Except as set forth on Schedule 2.20(j), all other employees of the
Company are citizens of the United States. With respect to the two immediately
preceding sentences, the Company shall not be deemed to be in breach of such
representations and warranties for any matters arising after the date hereof so
long as such matters are permitted by Section 4.1, and the Company provides
Acquiror with written notice of all such matters at least three (3) Business
Days prior to the Closing.
(k) Labor Matters. No work stoppage or labor strike against the
Company is pending or, to the Knowledge of the Company, threatened. Except as
set forth in Schedule 2.20(k), the Company is not involved in or, to the
Knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in Liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a Liability to the Company. Except
as set forth in Schedule 2.20(k), the Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
(l) Employment at Will. Except as set forth in Schedule 2.20(l),
the Company is not bound by any agreement, nor has it taken or omitted to take
any action, that restricts its ability to terminate the employment of any of its
employees at any time without payment or other Liability.
2.21. Company Affiliates. Schedule 2.21 sets forth those persons who, in
the Company's reasonable judgment, are "affiliates" of the Company as such term
is used in Rule 145 promulgated under the Securities Act ("Rule 145") and such
other persons who Acquiror has requested. Each person who is an "affiliate" of
the Company has delivered an executed Affiliate Agreement in the form of Exhibit
A-1 that, to the Company's knowledge (without any independent inquiry), is in
full force and effect and is enforceable in accordance with its terms against
each such person.
25
37
2.22. Non-competition, Non-solicitation and Non-hire Agreements. Each
Key Employee has executed and delivered to Acquiror a Non-competition,
Non-solicitation and Non-hire Agreement in substantially the form of Exhibit D
(the "Noncompete Agreements") with a term of two years and, to the Company's
knowledge (without any independent inquiry), all of the Noncompete Agreements
are in full force and effect and are enforceable in accordance with their terms
against each Key Employee, except as such enforceability may be limited by
principles of public policy and subject to laws relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.23. Voting Agreement and Proxies. Each of the persons listed on
Schedule 2.23, all of whom are shareholders of the Company (the "Shareholders")
has executed and delivered to Acquiror a Voting Agreement and Proxy in
substantially the form of Exhibit E (the "Voting Agreement and Proxy"), and, to
the Company's knowledge (without any independent inquiry), each Voting Agreement
and Proxy is in full force and effect and is enforceable in accordance with its
terms against each such Shareholder, except as such enforceability may be
limited by principles of public policy and subject to laws relating to
bankruptcy, insolvency and the relief of debtors and to rules of law governing
specific performance, injunctive relief and other equitable remedies.
2.24. Pooling of Interests. Neither the Company, nor to its knowledge,
any of its officers, directors, affiliates or stockholders, has taken any action
that the Company believes would render the Company ineligible to participate in
a transaction accounted for as a pooling-of-interests.
2.25. Representations Complete. To the Company's Knowledge, none of the
representations or warranties made by the Company nor any statement made in any
Schedule or certificate furnished by the Company pursuant to this Agreement, or
furnished in or in connection with documents mailed or delivered to the
shareholders in connection with soliciting their consent to this Agreement and
the Merger, contains or will contain at the Effective Time, any untrue statement
of a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading;
provided however, that the financial projections delivered by the Company
represent only the Company's good faith estimate of what it reasonably believes
to be true and are based on assumptions that appeared reasonable at the time
such projections were made. The Company further believes that such assumptions
are reasonable as of the date hereof. The Company does not make any other
representation or warranty regarding such projections other than as set forth in
this Section 2.25.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
3.1. Organization, Standing and Power. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Acquiror has the
26
38
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 result in a Material
Adverse Change on Acquiror.
3.2. Authority. Acquiror has all requisite corporate power and authority
to enter into this Agreement and 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 Acquiror. This Agreement has been duly executed
and delivered by Acquiror and, assuming due execution and delivery by the
Company, constitutes the valid and binding obligation of Acquiror, enforceable
in accordance with its terms, except as such enforceability may be limited by
principles of public policy and subject to laws relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief and other equitable remedies. The execution and
delivery of this Agreement by Acquiror does not, and, as of the Effective Time,
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 rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit under (i) any
provision of the Certificate of Incorporation or Bylaws of Acquiror or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree or Applicable Law
applicable to Acquiror or its properties or assets that could reasonably be
expected to have a Material Adverse Change on Acquiror. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other Governmental
Authority or any third party is required by or with respect to Acquiror in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State, (ii) the filing with
the Secretary of State of the State of Illinois of the Illinois Articles, (iii)
the respective filings of the Company and Acquiror under the HSR Act, and (iv)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws.
3.3. Capital Structure.
(a) The authorized stock of Acquiror consists of seven hundred
million (700,000,000) shares of Common Stock, of which Two Hundred Twenty-Seven
Million Six Hundred Eighty-Eight Thousand Ninety-Seven (227,688,097) shares were
issued and outstanding as of April 30, 1998, and Two Million (2,000,000) shares
of Preferred Stock, none of which is issued or outstanding. All outstanding
shares of Acquiror are duly authorized, validly issued, fully paid and
nonassessable.
(b) The shares of Acquiror Common Stock to be issued pursuant to
the Merger will be, upon issuance in accordance with this Agreement, duly
authorized, validly issued, fully paid and non-assessable.
3.4. SEC Documents; Acquiror Financial Statements. Acquiror has
furnished or made available to the Company true and complete copies of all
reports, definitive proxy materials or
27
39
registration statements filed by it with the U.S. Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934 (the "Exchange
Act") for all periods ending on or subsequent to December 31, 1997, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"), which are all such documents (other than preliminary proxy
materials) that Acquiror was required to file with the SEC since that date. As
of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act, 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 document
with the SEC. The financial statements of Acquiror, including the notes thereto,
included in the SEC Documents (the "Acquiror Financial Statements") 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, have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of Acquiror at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments,
which are not expected to be material in amount). There has been no change in
Acquiror accounting policies except as described in the notes to the Acquiror
Financial Statements. Acquiror represents and warrants that it is eligible as of
the date hereof to use Form S-3 under the Securities Act of 1933, as amended
(the "Securities Act"), and will use commercially reasonable efforts to maintain
such eligibility.
3.5. No Material Adverse Change. Since the date of the balance sheet
included in Acquiror's most recently filed report on Form 10-Q, Acquiror has
conducted its business in the ordinary course and there has not occurred any
amendment or change in the Certificate of Incorporation or Bylaws of Acquiror.
3.6. Litigation. There is no Proceeding pending, or as to which Acquiror
has received any notice of assertion against Acquiror, that in any manner
challenges or seeks, or reasonably could be expected, to prevent, enjoin, alter
or materially delay any of the transactions contemplated by this Agreement, or
reasonably could be expected, to result in a Material Adverse Change in
Acquiror.
3.7. Pooling of Interests. Neither Acquiror, nor to its knowledge, any
of its officers, directors, affiliates or stockholders, has taken any action
that Acquiror believes would render Acquiror ineligible to participate in a
transaction accounted for as a pooling-of-interests.
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 and the Effective Time, the Company agrees (except as contemplated by
this Agreement and except to the extent that Acquiror shall otherwise consent in
writing, which consent will not be unreasonably
28
40
withheld) 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, to pay or perform other obligations when due, and, to the extent
consistent with such business, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization,
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, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Acquiror of any Material Adverse Change or
materially negative event related to the Company or its business. Except as
expressly contemplated by this Agreement or disclosed in Schedule 4.1, the
Company shall not, without the prior written consent of Acquiror (which consent
shall not be unreasonably withheld):
(a) Enter into any material commitment or transaction (other than
pursuant to or as contemplated by this Agreement) not in the ordinary course of
business consistent with past practice;
(b) Convey, transfer or assign to any Person any rights to the
Intellectual Property Rights, except in the ordinary course of business
consistent with past practice;
(c) Enter into or amend any agreements pursuant to which any Person
is granted marketing, distribution or similar rights of any type or scope or any
third party royalty rights with respect to any products of the Company, or enter
into or amend any strategic alliance, license or sub-license agreement, joint
marketing agreement or joint development agreement, except for agreements:
(i)which have an expiration date of June 30, 1999 or earlier (with no automatic
or unilateral renewal option) or (ii) that are terminable for convenience by the
Company upon sixty (60) days notice or less (which notice may be given anytime
within sixty (60) days of the Closing Date), provided in either case that the
Company shall have no further obligation under any of such contracts following
their termination other than obligations to maintain confidential information.
(d) Amend or otherwise modify, except in the ordinary course of
business consistent with past practice, any of the Scheduled Contracts;
(e) Violate the terms of any of the Scheduled Contracts in any
material manner;
(f) Commence any litigation or any binding dispute resolution
process (other than in respect of any breach of or claim arising under this
Agreement);
(g) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock, or repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock,
except repurchases of
29
41
unvested shares in connection with terminations of employment in the ordinary
course of business consistent with past practice;
(h) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire (including but not limited
to Company Options), or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities, except
(i) the issuance of Company Common Stock upon the exercise of Company Options,
and (ii) the grant of Company Options to new hires or existing employees in the
ordinary course of business and in accordance with written guidelines approved
by Acquiror;
(i) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets (other than assets, immaterial in amount, in the
ordinary course of business consistent with past practice) or equity securities
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 in an amount in excess of Fifteen
Thousand Dollars ($15,000) in the case of a single transaction or in excess of
Fifty Thousand Dollars ($50,000) in the aggregate in any 90 day period;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(l) Incur any indebtedness for borrowed money other than from
Acquiror or guarantee any such indebtedness or issue or sell any debt securities
of the Company or guarantee any debt securities of others;
(m) Enter into or amend any employment agreements, oral or written,
increase the compensation payable or to become payable by it to any of its
officers, directors, or consultants over the amount payable as of April 30,
1998, or adopt or amend any employee benefit plan or arrangement (oral or
written) (including any amendment to the Option Plan or the agreements
thereunder), or increase the salaries or wage rates of its employees;
(n) Terminate the employment of any executive officer or vice
president (including any Key Employee) or grant any severance or termination pay
to any director, officer or any other employee, except payments made pursuant to
written agreements or other legally binding commitments disclosed to Acquiror in
writing outstanding on the date hereof;
(o) Revalue any of its assets, including 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 $25,000
(in any one case) or $50,000 (in the aggregate), any Liability, other than the
payment, discharge or satisfaction in the ordinary course of business of
Liabilities (1) reflected or reserved against in the
30
42
Company Financials (or the notes thereto) or (2) that arose in the ordinary
course of business consistent with past practice subsequent to April 30, 1998
and which are expenses are consistent with the provisions of this Agreement;
(q) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any material 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;
(r) Amend or otherwise take any action that would permit or cause
any Company Option to accelerate in contemplation of or as a consequence of the
Merger or the other transactions contemplated by this Agreement;
(s) Enter into or modify any new or existing agreements for the
lease or purchase of real property; or
(t) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (s) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2. No Solicitation. Until the earlier of the Effective Time or the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, employees, agents, representatives or Affiliates to)
directly or indirectly, take any of the following actions with any party other
than Acquiror and its designees: (a) solicit, conduct discussions with or engage
in negotiations with any person, relating to the possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any portion of its or their
capital stock or assets, (b) provide information with respect to it to any
Person, other than Acquiror, relating to the possible acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any portion of its or their capital stock or assets, (c) enter
into an agreement with any Person, other than Acquiror, providing for the
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any portion of its or their capital stock or
assets or (d) make or authorize any statement, recommendation or solicitation in
support of any possible acquisition of the Company or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any portion of its or their capital stock or assets by any Person,
other than by Acquiror. In addition to the foregoing, if the Company receives
prior to the Effective Time or the termination of this Agreement any offer or
proposal relating to any of the above, the Company shall promptly notify
Acquiror thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Acquiror may reasonably request.
31
43
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Employee Matters.
(a) Employees. The parties currently contemplate that substantially
all employees of the Company as of the Closing Date will be offered employment
with Acquiror on terms to be proposed by Acquiror, subject to execution of
Acquiror's standard forms of offer letters and non-disclosure agreements. All
such employees of the Company desirous of becoming employees of Acquiror will be
subject to employment at the will of Acquiror. Employees who do not receive an
offer of employment from Acquiror shall be eligible for the severance benefits
agreed upon in writing by Acquiror and the Company; provided, however, that in
order to be eligible for receipt of such severance benefits, each such employee
must first execute a written release, in form and substance reasonably
acceptable to Acquiror releasing Acquiror and the Company from all claims
arising out of their employment with the Company or with Acquiror.
Notwithstanding the foregoing, nothing contained herein shall be interpreted or
construed to create a contract of employment between such employee and Acquiror.
(b) Eligibility for Acquiror Employee Plans. Upon the Closing, each
of the employees of the Company who becomes an employee of Acquiror upon the
Effective Time of the Merger ("Continuing Employee") shall cease to participate
in or accrue benefits under the Company Employee Plans (except to the extent
contemplated by Section 1.4(b) under the Option Plan) and shall be eligible to
participate in the Acquiror employee benefit plans generally applicable to
employees of Acquiror, and such enhanced plans appropriate to such employee's
position with Acquiror (the "Acquiror Employee Plans") in accordance with the
terms of each such plan. For purposes of the Acquiror Employee Plans (with the
exception of the Acquiror vision plan) the years of service of each Continuing
Employee that were recognized by the Company as of the Effective Time of the
Merger for a Company Employee Plan shall be recognized by Acquiror for purposes
of each Acquiror Employee Plan that Acquiror reasonably determines to be a
corresponding plan, in each case to the extent allowed under the provisions of
each of the applicable Acquiror Employee Plans. Pursuant to the terms of
Acquiror's 401(k) plan, any matching contributions by Acquiror under the 401(k)
plan for any Continuing Employee shall be only with respect to such Continuing
Employee's contributions after the Effective Time and not with respect to
contributions made by the Continuing Employee to the Company's 401(k) plan prior
to the Effective Time.
(c) Eligibility for Acquiror Incentive Compensation Plans. Acquiror
shall take all actions necessary to cause all Continuing Employees whose date of
hire by the Company is on or before January 1, 1999 to become eligible to
participate in Acquiror's Employee Incentive Bonus Plan (the "Incentive Plan")
commencing on April 1, 1999 or July 1, 1999, whichever date shall first occur
after the Closing, and to cause all Continuing Employees whose date of hire by
the Company is after January 1, 1999 to become eligible to participate in
Acquiror's incentive compensation plan commencing on July 1, 1999. This Section
5.1(c) shall not apply with respect to any Continuing Employee who participates
in any variable compensation plan of Acquiror other than the Incentive Plan.
32
44
(d) Company Employee Plans. At Acquiror's request, the Company
shall take all necessary actions so that the Company Employee Plans are frozen
or terminated immediately prior to the Closing Date.
5.2. Access to Information. The Company shall afford to Acquiror and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, agreements and records, and (b) all
other information concerning the business, properties and personnel (subject to
restrictions imposed by Applicable Law) of it as Acquiror may reasonably
request. 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. Acquiror shall provide the Company and the Shareholders
copies of such publicly available information about Acquiror as the Company may
reasonably request and shall provide the Company and the Shareholders with
reasonable access to appropriate members of management in this regard. Between
the date hereof and the Closing Date, the Company shall also provide Acquiror
with updated Company financial statements within ten (10) Business Days of the
end of each month.
5.3. Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby ("Third Party Expenses"), shall be the obligation of the
respective party incurring such fees and expenses; provided, however, that if
the Merger is consummated, the Company shall use best efforts to cause its Third
Party Expenses, and any Third Party Expenses incurred on behalf of any
shareholders, not to exceed One Hundred Thousand Dollars ($100,000). Such Third
Party Expenses (up to $100,000 in the aggregate), to the extent they are accrued
or paid prior to the Effective Time and negatively impact the calculation of
PBDAT, shall be credited to the PBDAT Amount.
5.4. Public Disclosure. Unless otherwise required by Applicable Law
(including securities laws) or, as to Acquiror, by the rules and regulations of
the Nasdaq National Market, prior to the Effective Time, Acquiror and the
Company shall consult with each other before making any disclosure (whether or
not in response to an inquiry) of the subject matter of this Agreement or the
transactions contemplated hereby, and no public announcement or press release
regarding the subject matter of this Agreement or the transactions contemplated
thereby shall be made by any party hereto unless approved by Acquiror and the
Company prior to release, provided that such approval shall not be unreasonably
withheld. Acquiror and the Company shall cooperate in good faith to prepare and
agree upon any press release or other public announcement that either of them
may determine is necessary or in its best interests.
5.5. Consents. The Company on the one hand, and Acquiror, on the other
hand, shall cooperate with one another in determining whether any action by or
in respect of, or filing with, or notice, to any Governmental Authority is
required or reasonably appropriate, or any action, consent, approval or waiver
from any party to any Contract is required or reasonably appropriate, in
connection with the consummation of the transactions contemplated by this
Agreement, and
33
45
shall take all actions necessary or reasonably requested by the Company or
Acquiror, as the case may be, in connection therewith. Without limiting the
generality of the foregoing, the Company (including any "ultimate parent
entity," as defined in the HSR Act), and Acquiror (including any "ultimate
parent entity," as defined in the HSR Act) shall promptly prepare and make their
respective filings and, unless this Agreement shall have been terminated in
accordance with its terms, thereafter shall make all required or requested
submissions, under the HSR Act or any analogous Applicable Law, if required.
Subject to the terms and conditions of this Agreement, in taking such actions or
making any such filings, the parties hereto shall furnish all information
required in connection therewith and seek timely to obtain any such actions,
consents, approvals or waivers; provided, however, that the parties hereto shall
cooperate with each other in connection with the making of all such filings,
including, to the extent the following is permitted under Applicable Law, by (a)
providing copies of all such documents to the non-filing parties and their
advisors prior to filing and, if requested, to accept reasonable additions,
deletions or changes suggested in connection therewith and (b) providing to each
other party copies of all correspondence from and to any Governmental Authority
in connection with any such filing. Notwithstanding the foregoing, neither the
Company nor Acquiror (nor any of their respective Affiliates) shall be under any
obligation to comply with any request or requirement imposed by the Federal
Trade Commission (the "FTC"), the Department of Justice (the "DofJ") or any
other Governmental Authority in connection with the compliance with the HSR Act
if such party, in the exercise of such entity's reasonable discretion, deems
such request or requirement unduly burdensome. Without limiting the generality
of the foregoing, neither the Company nor Acquiror (nor any of their respective
Affiliates) shall be obligated to comply with any request by, or any requirement
of, the FTC, the DofJ or any other Governmental Authority: (i) to publicly
disclose information such party reasonably deems it in its best interests to
keep confidential; (ii) to dispose of any assets or operations; or (iii) to
comply with any restriction on the manner in which it conducts its operations.
5.6. Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under Applicable Laws to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals, to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement and the satisfaction
of the conditions herein; provided that Acquiror shall not be required to agree
to any divestiture by Acquiror or the Company or any of Acquiror's Affiliates of
shares of capital stock or of any business, assets or property of Acquiror or
its Affiliates or the Company or its Affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock.
5.7. Notification of Certain Matters. The Company shall give prompt
notice to Acquiror, and Acquiror shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of the Company and
Acquiror, respectively, contained in this
34
46
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time except as contemplated by this Agreement (including the
Disclosure Schedules) and (ii) any failure of the Company or Acquiror, as the
case may be, to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect any remedies available to the party
receiving such notice.
5.8. Pooling Accounting and Tax Treatment. Acquiror and the Company
shall each use their best efforts to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests. Each of
Acquiror and the Company shall use its reasonable efforts to cause its
respective employees, directors, shareholders and Affiliates not to take any
action that would adversely affect the ability of Acquiror to account for the
business combination to be effected by the Merger as a pooling of interests.
Neither Acquiror nor the Company shall take any action, including the
acceleration of vesting of any options, warrants, restricted stock or other
rights to acquire shares of the capital stock of the Company, which reasonably
would be expected to (i) interfere with Acquiror's ability to account for the
Merger as a pooling of interests or (ii) jeopardize the nature of the Merger as
a reorganization within the meaning of Section 368 of the Code.
5.9. Affiliate Agreements. Schedule 2.21 sets forth those persons who,
in the Company's reasonable judgment, are "affiliates" of the Company within the
meaning of Rule 145 (each such person an "Affiliate") promulgated under the
Securities Act ("Rule 145"). The Company has delivered or shall cause to be
delivered to Acquiror, concurrently with the execution of this Agreement, from
each of its Affiliates (including without limitation, each of the Shareholders),
an executed Affiliate Agreement in the form attached hereto as Exhibit A-1.
(a) The Company shall provide to Acquiror such information and
documents as Acquiror shall reasonably request for purposes of reviewing
Schedule 2.21. Acquiror shall be entitled to place appropriate legends on the
certificates evidencing any Acquiror Common Stock to be received by Affiliates
of the Company pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Acquiror Common Stock,
consistent with the terms of the Affiliate Agreements.
(b) Acquiror shall provide to the Company such information and
documents as the Company shall reasonably request for purposes of reviewing
Schedule 6.2(e).
5.10. Additional Documents and Further Assurances. Each party hereto, at
the request of any other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
reasonably requested for effecting completely the consummation of this Agreement
and the transactions contemplated hereby.
5.11. Nasdaq Listing. Acquiror shall authorize for listing on the Nasdaq
Stock Market the shares of Acquiror Common Stock to be issued, and those
required to be reserved for issuance (including those shares issuable under
assumed Company Options), in connection with the Merger, upon official notice of
issuance.
35
47
5.12. Blue Sky Laws. Acquiror 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 Acquiror Common Stock pursuant hereto. The Company
shall use its best efforts to assist Acquiror 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 Acquiror Common Stock pursuant hereto.
5.13. Indemnification. Upon the consummation of the Merger, Acquiror
shall indemnify the officers and directors of the Company on the date hereof on
the same terms as provided in the Articles of Incorporation and Bylaws of the
Company as they are currently in effect for action or inaction by any such
person prior to the Merger.
5.14. Company Shareholder Approval. As promptly as practicable after the
execution of this Agreement, the Company shall submit this Agreement and the
transactions contemplated hereby to its shareholders for approval and adoption
in accordance with the provisions of Illinois Law and its Articles of
Incorporation and Bylaws. The Company shall use reasonable commercial efforts to
solicit and obtain the unanimous consent of its shareholders to this Agreement
and the transactions contemplated hereby. The materials submitted to the
Company's shareholders shall be subject to review and reasonable approval by
Acquiror and include information regarding the Company, the terms of the
Acquisition and this Agreement and the unanimous recommendation of the Board of
Directors of the Company in favor of the Acquisition and this Agreement;
provided, however, that such recommendation need not be included, or may be
withdrawn, to the extent that the Board of Directors of the Company deems it
necessary to do so in the exercise of its fiduciary obligations to its
shareholders after being so advised by counsel.
5.15. Registration Rights.
(a) Acquiror shall use all reasonable commercial efforts to cause
to be registered under the Securities Act so as to permit the resale thereof,
and in connection therewith shall use all reasonable commercial efforts to
prepare and file with the SEC within sixty (60) days following the Closing and
shall use all reasonable commercial efforts to cause to become effective as soon
as practicable thereafter, a registration statement on Form S-3 or on such other
form as is then available under the Securities Act covering the shares of
Acquiror Common Stock issued pursuant to this Agreement (the "Registrable
Securities"); provided, however, that each holder of Registrable Securities
("Holder") shall provide all such information and materials to Acquiror and take
all such action as may be required in order to permit Acquiror to comply with
all applicable requirements of the SEC and to obtain any desired acceleration of
the effective date of such registration statement. Such provision of information
and materials is a condition precedent to the obligations of Acquiror pursuant
to this Section. Acquiror shall not be required to effect more than one (1)
registration under this Section. The offering made pursuant to such registration
shall not be underwritten.
(b) Notwithstanding Section 5.15(a), Acquiror shall be entitled to
postpone the declaration of effectiveness of the registration statement prepared
and filed pursuant to Section 5.15(a) for a reasonable period of time, but not
in excess of forty-five (45) calendar days
36
48
after the applicable deadline, if the Board of Directors of Acquiror, acting in
good faith, determines that there exists material nonpublic information about
Acquiror which the Board does not wish to disclose in a registration statement
which information would otherwise be required by the Securities Act to be
disclosed in the registration statement to be filed pursuant to Section 5.15(a)
above.
(c) Subject to the limitations of Section 5.15(a) above, Acquiror
shall (i) prepare and file with the SEC the registration statement in accordance
with Section 5.15(a) hereof with respect to the shares of Registrable Securities
and shall use all reasonable commercial efforts to cause such registration
statement to become effective as promptly as practicable after filing and to
keep such registration statement effective until one (1) year after the Closing
Date (provided that Acquiror's obligation to keep the registration statement
effective shall be extended by such period of time, if any, that Acquiror elects
to delay declaration of effectiveness under Section 5.15(b) or suspend the use
of a prospectus under Section 5.15(d)); (ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities proposed to be registered in such registration statement until
one (1) year after the Closing Date (provided that such period shall be extended
by the period of time, if any, that Acquiror elects to delay declaration of
effectiveness under Section 5.15(b) or suspend the use of a prospectus under
Section 5.15(d)); (iii) furnish to each Holder such number of copies of any
prospectus (including any preliminary prospectus and any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as each Holder may reasonably request in order to effect the
offering and sale of the shares of the Registrable Securities to be offered and
sold, but only while Acquiror shall be required under the provisions hereof to
cause the registration statement to remain effective; and (iv) use its
commercially reasonable efforts to register or qualify the shares of the
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request (provided that Acquiror shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such jurisdiction where it has not
been qualified).
(d) Acquiror shall notify each Holder, (i) when a prospectus or
any prospectus supplement or post-effective amendment has been filed, and, with
respect to the registration statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the SEC or any other federal
or state governmental authority during the period of effectiveness of the
registration statement for amendments or supplements to the registration
statement or related prospectus or for additional information relating to the
registration statement, (iii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by Acquiror of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (v) of the happening of any
event which makes any statement made in the registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes
37
49
in the registration statement or prospectus so that, in the case of the
registration statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Acquiror may, upon
the happening of any event of the kind described in clauses (ii), (iii), (iv),
or (v) hereof or, that, in the judgment of Acquiror's Board of Directors,
renders it advisable to suspend use of the prospectus for no more than
forty-five (45) days in the aggregate in any twelve (12) month period of time
due to pending corporate developments, public filings with the SEC or similar
events, suspend use of the prospectus on written notice to each Holder, in which
case each Holder shall discontinue disposition of Registrable Securities covered
by the registration statement or prospectus until copies of a supplemented or
amended prospectus are distributed to the Holders or until the Holders are
advised in writing by the Company that the use of the applicable prospectus may
be resumed. Acquiror shall use its reasonable efforts to ensure that the use of
the prospectus may be resumed as soon as practicable. Acquiror shall use every
reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the securities for
sale in any jurisdiction, at the earliest practicable moment. Acquiror shall,
upon the occurrence of any event contemplated by clause (v) above, prepare a
supplement or post-effective amendment to the registration statement or a
supplement to the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(e) Prior to the filing of a registration statement, Acquiror and
any Holder wishing to sell Registrable Securities pursuant to the registration
statement shall enter into an agreement containing customary indemnification
provisions with respect to misstatements or omissions of material fact contained
in the registration statement.
(f) Acquiror shall pay all of the out-of-pocket expenses incurred,
other than underwriting discounts and commissions, in connection with any
registration of Registrable Securities pursuant to this Section 5.15, including,
without limitation, all SEC, NASD and blue sky registration and filing fees,
printing expenses, transfer agents' and registrars' fees, and the reasonable
fees and disbursements of Acquiror's outside counsel and independent
accountants.
(g) Upon the filing of the registration statement, the shares of
Acquiror Common Stock issuable to shareholders of the Company pursuant to this
Agreement and such other shares required to be reserved for issuance in
connection with the Acquisition shall have been authorized for listing on the
Nasdaq Stock Market upon official notice of issuance.
5.16. Confidentiality. Each party hereto shall maintain the confidential
nature of, and shall not use in any way detrimental to any other party,
including directly or indirectly in the conduct of such party's business, all
confidential financial, technical, marketing, research,
38
50
commercial or other information concerning the other parties hereto. In the
event of the termination of this Agreement for any reason, upon written request
of any party, each party receiving such request agrees to return to the
requesting party any and all materials containing any such confidential
information relating to such requesting party. The restrictions contained herein
and in any Schedules and Exhibits hereto shall not apply to any information that
(a) is or becomes generally available to the public other than as a result of a
disclosure in violation of the provisions hereof, (b) is or becomes available to
such party that has received such request on a non-confidential basis from a
source other than the requesting party, (c) is independently derived by the
party to whom such information was disclosed, or (d) is derived from information
that is not confidential and does not contain any confidential information. In
the event that any party hereto receives a request to disclose all or any part
of any confidential information under the terms of a subpoena, order, civil
investigative demand or similar process issued by a court of competent
jurisdiction or by another Governmental Authority, such party agrees to: (i)
immediately notify the party to whom such confidential information relates of
the existence, terms and circumstances surrounding such request, (ii) consult
with such party to whom the information relates on the advisability of taking
legally available steps to resist or narrow such request and (iii) if disclosure
of such information is required, furnish only that portion of the confidential
information that, in the opinion of counsel to the party who has received the
request, such party is legally compelled to disclose and advise the party to
whom such confidential information relates as far in advance of such disclosure
as possible so that such party to whom the confidential information relates may
seek an appropriate protective order or other reliable assurance that
confidential treatment will be accorded such confidential information. In any
event, the party who receives the request shall not oppose actions by the party
to whom the confidential information relates to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
such confidential information.
5.17. Registration Statement on Form S-8. Acquiror shall file a
registration statement on Form S-8 for the shares of Acquiror Common Stock
issuable with respect to assumed Company Options promptly after the Effective
Time, if such shares are not otherwise covered by an effective registration
statement on Form S-8.
5.18. Effectiveness of Certain Agreements. Each of the Development
Environment Loan Agreement between Acquiror and the Company attached hereto as
Exhibit F, the Marketing and Distribution Agreement between Acquiror and the
Company attached hereto as Exhibit G, the Software License Agreement between
Acquiror and the Company attached hereto as Exhibit H, and the Working Capital
Line of Credit between Acquiror and the Company attached hereto as Exhibit I,
shall remain in full force and effect from and after the date hereof (subject to
termination in accordance with each such agreement's respective terms), and
neither the Company nor Acquiror shall have materially breached or failed to
perform its obligations thereunder. The Company and the Acquiror hereby
acknowledge and agree that any such material breach or non-performance by a
party shall constitute a material breach of this covenant and this Agreement by
such party.
39
51
5.19. Additional Actions.
(a) With respect to any periods for which the Sales Tax statute of
limitations has not expired, the Company shall contact all licensed customers
through the Closing Date to determine whether such customers have paid all state
sales or use tax ("State Taxes") due to such state sales tax authorities for the
customer's acquisition of Company software licenses or for services performed by
Company for the customer. If such State Taxes have been paid, Company shall
obtain written evidence of payment, waiver or exemption by the state tax
authority. In the event such written evidence is unavailable, or such customers
indicate that they have not paid all State Taxes due, the Company shall accrue a
reasonable estimate of such unpaid State Taxes and all interest and penalties in
respect thereof, and such accrued amount shall be included in the calculation of
PBDAT.
(b) The Company shall fully reserve the amount of any and all
accounts receivable outstanding more than ninety (90) days as of the Closing
Date, and such reserved amount shall be included in the calculation of PBDAT.
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 Closing of the following
conditions:
(a) Closing Date. The Closing Date may not take place earlier than
December 31, 1998, unless Acquiror shall specifically approve an earlier date in
writing. The Closing Date may not take place later than May 28, 1999.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(c) Shareholder Approval. This Agreement and the Merger shall have
been approved by the shareholders of the Company by the requisite votes under
Illinois Law.
(e) HSR Filings. The applicable waiting period for the HSR Act
shall have expired or been terminated or clearance from the applicable federal
Governmental Authority shall have been received.
(f) Other Government Approvals. All government and third party
approvals for the acquisition shall have been received.
(g) Merger Filings. The Certificate of Merger shall have been
accepted for filing by the Secretary of State of the State of Delaware and the
Illinois Articles shall have been
40
52
accepted for filing by the Secretary of State of the State of Illinois. The
Merger shall be effective under the laws of the States of Illinois and Delaware.
(h) Tax Opinion. Each party shall have received from their
respective legal counsel an opinion that the Merger qualifies as a
"reorganization" within the meaning of Section 368 of the Code.
6.2. Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Acquiror contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except for changes contemplated
by this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct in all material respects as of such date), as of the Closing Date with
the same force and effect as if made on and as of the Closing Date; and the
Company shall have received a certificate to such effect signed on behalf of
Acquiror by a duly authorized officer of Acquiror.
(b) Agreements and Covenants. Acquiror shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and the Company shall have received a certificate to such effect signed on
behalf of Acquiror by a duly authorized officer of Acquiror.
(c) Legal Opinion. The Company shall have received a legal opinion
from ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to Acquiror, in substantially the form
attached hereto as Exhibit B.
(d) Intentionally omitted.
(e) Affiliates. Schedule 6.2(e) sets forth those persons who, in
Acquiror's reasonable judgment, are "affiliates" of Acquiror within the meaning
of Rule 145 and such other persons who the Company has requested. Each person
who is an "affiliate" of Acquiror will have delivered an executed Affiliate
Agreement in the form of Exhibit A-2 which will be in full force and effect and
enforceable in accordance with its terms against each such person, except as
such enforceability may be limited by principles of public policy and subject to
laws relating to bankruptcy, insolvency and the relief of debtors and to rules
of law governing specific performance, injunctive relief and other equitable
remedies.
(f) Additional Actions. Acquiror shall take such additional
actions, including the execution of such additional documents, as shall be
reasonably requested by the Company in connection with the consummation of the
transactions contemplated by this Agreement.
41
53
(g) Nasdaq Listing. The shares of Acquiror Common Stock issuable to
the Company pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the Nasdaq National Market upon official notice of issuance.
6.3. Additional Conditions to the Obligations of Acquiror. The
obligations of Acquiror to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Acquiror:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (as modified by the
Disclosure Schedules) shall be true and correct in all material respects as of
the date hereof and, except for changes contemplated by this Agreement
(including the Disclosure Schedules) and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct in all material respects as of such date), with the same
force and effect as if made on and as of the Closing Date, and Acquiror shall
have received a certificate to such effect signed on behalf of the Company by a
duly authorized officer of the Company; provided, however, that any failure of
the Company's representations and warranties to be true and correct in all
material respects proximately caused by an action or omission by the Company
which was requested, required or otherwise necessitated in writing by Acquiror
shall not constitute failure of a condition to Acquiror's obligation to
consummate the Merger or any of the other transactions contemplated by this
Agreement. Notwithstanding the foregoing, in the case of any failure to the
foregoing condition to be satisfied as a result of facts and circumstances
arising after the date hereof of which the Company has no knowledge on the date
hereof, the foregoing condition shall be deemed to be satisfied unless the
failure of any representation or warranty, or group of representations or
warranties, to be correct would, in Acquiror's good faith judgment, materially
have affected Acquiror's decision to enter into this Agreement on the date
hereof if Acquiror had been aware of such facts and circumstances; provided,
however, that nothing set forth in this sentence shall affect Acquiror's ability
to seek indemnification under Article VII as a result of the failure of any such
representation or warranty, or group of representations or warranties, to remain
true and correct after the date hereof.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and Acquiror shall have received a certificate to such effect signed on
behalf of the Company by a duly authorized officer of the Company; provided,
however, that any failure by the Company to perform or comply in all material
respects with any of such agreements or covenants proximately caused by an
action or omission by the Company which was requested, required or otherwise
necessitated in writing by Acquiror shall not constitute failure of a condition
to Acquiror's obligation to consummate the Merger or any of the other
transactions contemplated by this Agreement.
(c) Third Party Consents. Acquiror shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
42
54
(d) Legal Opinion. Acquiror shall have received legal opinions from
counsel to the Company (which counsel shall be reasonably acceptable to
Acquiror) covering the items contained in the form opinion attached hereto as
Exhibit C.
(e) Noncompete Agreements. Each Key Employee shall have executed
and delivered to Acquiror a Noncompete Agreement in substantially the form of
Exhibit D and all of the Noncompete Agreements shall be in full force and
effect.
(f) Secretary's Certificate. The Company shall have delivered to
Acquiror a duly executed Certificate of the Secretary of the Company certifying
and attaching (i) the Articles of Incorporation of the Company as in effect as
of the Closing Date, (ii) the Bylaws of the Company as in effect as of the
Closing Date, and (iii) the resolutions of the Board of Directors and
shareholders of the Company approving the transactions contemplated hereby.
(g) Company Shareholder Approval. This Agreement and the
Acquisition shall have been approved and adopted by a ninety percent (90%) vote
of the shareholders of the Company.
(h) Dissenters' Rights. Holders of more than five percent (5%) of
the Company Common Stock shall not have exercised, nor shall they have any
continued right to exercise, appraisal, dissenters' or similar rights under
Applicable Law with respect to their shares by virtue of the Merger.
(i) Tax Certifications. Acquiror shall have received from the
Company (A) a certification of non-foreign status described in Treasury
Regulation Section 1.1445-2(b)(2)(i) and (B) a certification pursuant to
Treasury Regulation Section 1.1445-2(c)(3)(i) that the Company Common Stock is
not a U.S. real property interest, in each case in form and substance reasonably
satisfactory to Acquiror.
(j) Additional Actions. The Company shall take such additional
actions, including the execution of such additional documents, as shall be
reasonably requested by Acquiror in connection with the consummation of the
transactions contemplated by this Agreement.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1. Indemnification/Survival of Representations and Warranties.
(a) (1) From and after the Effective Time, Acquiror and each of its
Affiliates, officers, employees, directors and representatives (collectively,
the "Acquiror Indemnitees") shall be indemnified and held harmless by the
shareholders of the Company, in accordance with this Article VII, in respect of
any and all Damages reasonably and proximately incurred by any Acquiror
Indemnitee as a result of any misrepresentation and/or breach of any
representation, warranty, covenant or agreement made by the Company in this
Agreement, as modified by the Disclosure Schedules. From and after the Effective
Time, the shareholders shall have no rights
43
55
of contribution or otherwise from the Company (or Acquiror as the successor to
the Company) with respect to any indemnification obligations such shareholders
may have.
(b) From and after the Effective Time, the Company's shareholders
and each of their Affiliates, officers, employees, directors and representatives
(collectively, the "Company Indemnitees") shall be indemnified and held harmless
by Acquiror in respect of any and all Damages reasonably and proximately
incurred by any Company Indemnitee as a result of any misrepresentation and/or
breach of any representation, warranty, covenant or agreement made by Acquiror
in this Agreement.
(c) All of the covenants, representations and warranties in this
Agreement shall survive the Merger and continue until 5:00 p.m., Illinois time,
on the earlier of the date that is: (i) one year following the Closing Date (the
"Expiration Date"), or for matters specifically resolved by the audit, the date
of completion of the audit of the combined financial statements for Acquiror and
the Company for December 31, 1998 and the fiscal year then ended.
(d) The amount of any indemnification payment required to be made
pursuant to Section 7.1(a) of this Agreement with respect to a particular claim
for indemnification shall be reduced by: (i) the after-tax amount of insurance
proceeds or recoveries from third parties actually received as a result of the
events giving rise to such claim; provided that if such proceeds or recoveries
will be (or are) received after the date on which such indemnification payment
is due, such indemnification payment shall be paid when due from the Escrow Fund
and, when such proceeds are received, the Acquiror Indemnitees shall pay to the
Securityholder Agent the amount of such proceeds promptly following receipt, and
(ii) the amount of any tax savings actually realized by the Acquiror Indemnitees
prior to the receipt of such indemnification payment, either in the form of a
refund of taxes previously paid or a reduction in tax that otherwise would have
become payable prior to such time (in each case net of the present value of any
tax cost of the indemnification payment and any costs (including but not limited
to professional fees) incurred in obtaining such savings). For purposes of this
clause (ii), tax savings shall only be taken into account to the extent they are
not otherwise required to be paid to the Company Indemnitees and would not have
arisen but for the event giving rise to the indemnification obligation.
7.2. Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the Shareholders will be
deemed to have received and deposited with the Escrow Agent (as defined below)
the Escrow Amount (plus any additional shares as may be issued after the
Effective Time with respect to the shares constituting the Escrow Amount upon
any stock split, stock dividend or recapitalization effected by Acquiror after
the Effective Time) without any act of any such Shareholder. As soon as
practicable after the Effective Time, the Escrow Amount, without any act of any
Shareholder, will be deposited by Acquiror with State Street Bank and Trust
Company of California, N.A. (or other institution acceptable to Acquiror and the
Securityholder Agent (as defined in Section 7.3 below)) as Escrow Agent (the
"Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow Fund")
to be governed by the terms set forth herein. The establishment and maintenance
of the Escrow Fund shall be at Acquiror's sole cost and expense. The Escrow Fund
44
56
shall be available to compensate Acquiror Indemnitees for any Damages incurred
by any Acquiror Indemnitee for which such indemnitee is entitled to
indemnification under Section 7.1. Nothing herein shall limit the Liability of
the Company for any breach of any representation, warranty or covenant if the
Merger does not close. The Acquiror Indemnitees may not receive any shares from
the Escrow Fund unless and until Officer's Certificates (as defined in paragraph
(d) below) identifying Damages, the aggregate amount of which exceed One Hundred
Thousand Dollars ($100,000) (the "Basket"), have been delivered to the Escrow
Agent as provided in paragraph (e). If the aggregate amount of Damages for which
indemnification is sought by the Acquiror Indemnitees exceeds the Basket, such
Acquiror Indemnitees may recover from the Escrow Fund all of their Damages,
including the amount of the Basket.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
Illinois time, on the Expiration Date (the "Escrow Period"); provided that the
Escrow Period shall not terminate with respect to such amount (or any portion
thereof) remaining in the Escrow Fund that is necessary in the reasonable
judgment of Acquiror, subject to subsequent arbitration of the matter in the
manner provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the termination of such
Escrow Period specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. As soon as all such claims
have been resolved and written notice of such resolution specified in an
Officer's Certificate is received by the Escrow Agent, the Escrow Agent shall
deliver to the Shareholders the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of Escrow Amounts to the
Shareholders pursuant to this Section 7.2(b) shall be made in proportion to
their respective original deposits to the Escrow Fund.
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat the Escrow Fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Acquiror
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Acquiror Common Stock or other equity
securities issued or distributed by Acquiror (including shares issued upon a
stock split) ("New Shares") in respect of Acquiror Common Stock in the Escrow
Fund that have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of shares of
Acquiror Common Stock that have been released from the Escrow Fund shall not be
added to the Escrow Fund but shall be distributed to the recordholders thereof.
Cash dividends on Acquiror Common Stock shall not be added to the Escrow Fund
but shall be distributed to the recordholders thereof.
(iii) Each shareholder shall have voting rights with respect to
the shares of Acquiror Common Stock deposited to the Escrow Fund by or
45
57
on behalf of such shareholder (and on any voting securities added to the Escrow
Fund in respect of such shares of Acquiror Common Stock) unless paid pursuant to
an indemnification claim.
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Acquiror (an "Officer's Certificate"): (A) stating that Acquiror has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Damages, and (B) specifying in reasonable detail the individual items of Damages
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated Liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(e) hereof,
deliver to Acquiror out of the Escrow Fund, as promptly as practicable, shares
of Acquiror Common Stock held in the Escrow Fund having a value, determined in
accordance with Section 7.2(d)(ii), equal to the amount of such Damages.
(ii) For the purposes of determining the number of shares of
Acquiror Common Stock to be delivered to Acquiror out of the Escrow Fund
pursuant to Section 7.2(d)(i) hereof, the shares of Acquiror Common Stock shall
be valued at the Average Stock Price. Acquiror shall certify such value in an
Officer's Certificate and shall deliver such Officer's Certificate to the Escrow
Agent and the Securityholder Agent.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent as described in Section 7.2(d)(i), a duplicate
copy of such Officer's Certificate shall be delivered to the Securityholder
Agent (as defined in Section 7.3), and for a period of thirty (30) days after
such delivery the Escrow Agent shall make no delivery to Acquiror of any Escrow
Amounts pursuant to Section 7.2(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Acquiror Common Stock from the Escrow Fund in
accordance with Section 7.2(d) hereof, provided that no such payment or delivery
may be made if the Securityholder 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. The Securityholder Agent shall concurrently deliver a copy of such
written statement to Acquiror.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall properly object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Acquiror shall attempt in good faith to agree upon
46
58
the rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Acquiror 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 Acquiror Common Stock from the Escrow
Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Securityholder Agent may, by written notice
to the other (the "Demand"), demand arbitration of the matter unless the amount
of the Damages is at issue in pending litigation with a third party, in which
event arbitration shall not be commenced until such amount is ascertained or
both parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Acquiror and the
Securityholder Agent shall each select one arbitrator within fifteen (15)
Business Days following the Demand, and the two arbitrators so selected shall
select a third arbitrator within fifteen (15) Business Days thereafter, each of
which arbitrators shall be independent. In the event that either Acquiror or the
Securityholder Agent fails to appoint an arbitrator within the period
prescribed, or such appointed arbitrators fail to appoint the third arbitrator
within the period prescribed, any such arbitrators that have not been so
appointed shall be appointed by the American Arbitration Association following
written request of either Acquiror or the Securityholder Agent. The arbitrators
shall set a limited time period (not to exceed 90 days) and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys fees and
costs, to the same extent as a competent court of law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and notwithstanding anything
in Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be held
in Contra Costa County, California under the rules then in effect of the
Judicial Arbitration and Mediation Services, Inc. For purposes of this Section
7.2(f), in any arbitration hereunder in which any claim or the amount
47
59
thereof stated in the Officer's Certificate is at issue, Acquiror shall be
deemed to be the Non-Prevailing Party in the event that the arbitrators award
Acquiror less than the sum of one-half (1/2) of the disputed amount; otherwise,
the Shareholders, as represented by the Securityholder Agent, shall be deemed to
be the "Non-Prevailing Party." The "Non-Prevailing Party" to an arbitration
shall pay its own expenses, the fees of each arbitrator, the administrative
costs of the arbitration, and the expenses, including reasonable attorneys' fees
and costs, incurred by the other party to the arbitration.
(g) Escrow Agent's Duties.
(i) Acquiror and the Company acknowledge and agree that the
Escrow Agent (i) shall be obligated only for performance of such duties as are
specifically set forth in this Agreement; (ii) shall not be obligated to take
any legal or other action hereunder that might in its judgment involve any
expense or Liability unless it shall have been furnished with acceptable
indemnification; (iii) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper person, and shall
have no responsibility for determining the accuracy thereof, and (iv) may
consult counsel satisfactory to it, including house counsel, and the opinion of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(ii) Neither the Escrow Agent nor any of its directors,
officers or employees shall be liable to anyone for any action taken or omitted
to be taken by it or any of its directors, officers or employees hereunder
except in the case of gross negligence or willful misconduct. Acquiror and the
Shareholders, jointly and severally, covenant and agree to indemnify the Escrow
Agent and hold it harmless without limitation from and against any loss,
Liability or expense of any nature incurred by the Escrow Agent arising out of
or in connection with this Agreement or with the administration of its duties
hereunder, including but not limited to legal fees and other costs and expenses
of defending or preparing to defend against any claim or Liability in the
premises, unless such loss, Liability or expense shall be caused by the Escrow
Agent's willful misconduct or gross negligence. In no event shall the Escrow
Agent be liable for indirect, punitive, special or consequential damages.
(iii) Acquiror and the Shareholders, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable Tax law with respect to the payment of the Escrow Fund under this
Agreement, and to indemnify and hold the Escrow Agent harmless from and against
any taxes, additions for late payment, interest, penalties and other expenses,
that may be assessed against the Escrow Agent on any such
48
60
payment or other activities under this Agreement. Acquiror and the Shareholders
undertake to instruct the Escrow Agent in writing with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. Acquiror and the
Shareholders, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any Liability on account of Taxes, assessments or other
governmental charges, including the withholding or deduction or the failure to
withhold or deduct same, and any Liability for failure to obtain proper
certifications or to properly report to Governmental Authorities, to which the
Escrow Agent may be or become subject in connection with or which arises out of
this Agreement, including costs and expenses (including reasonable legal fees),
interest and penalties. Notwithstanding the foregoing, no distributions will be
made unless the Escrow Agent is supplied with an original, signed W-9 form or
its equivalent prior to distribution.
(iv) The Escrow Agent shall have no more or less responsibility
or Liability on account of any action or omission of any book-entry depository
or subescrow agent employed by the Escrow Agent than any such book-entry
depository or subescrow agent has to the Escrow Agent, except to the extent that
such action or omission of any book-entry depository or subescrow agent was
caused by the Escrow Agent's own willful misconduct, gross negligence or bad
faith.
(v) Acquiror agrees to pay or reimburse the Escrow Agent for
any legal fees incurred in connection with the preparation of this Agreement and
to pay the Escrow Agent's reasonable compensation for its normal services
hereunder in accordance with Escrow Agent's standard charges, which may be
subject to change on an annual basis. The Escrow Agent shall be entitled to
reimbursement on demand for all expenses reasonably incurred in connection with
the administration of the escrow created hereby which are in excess of its
compensation for normal services hereunder, including payment of any legal fees
incurred by the Escrow Agent in connection with resolution of any claim by any
party hereunder.
(vi) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving thirty (30) days' prior written notice of resignation to
Acquiror and the Securityholder Agent. Prior to the effective date of the
resignation as specified in such notice, Acquiror will issue to the Escrow Agent
a written instruction authorizing redelivery of the Escrow Fund to a bank or
trust company that it selects subject to the reasonable consent of the
Securityholder Agent. Such bank or trust company shall have capital, surplus and
undivided profits in excess of $50,000,000. If, however, Acquiror shall fail to
name such a successor agent within forty-five (45) days after the notice of
resignation from the Escrow Agent, the Securityholder Agent shall be entitled to
name such successor Escrow Agent. If no successor Escrow Agent is named
49
61
by Acquiror or the Securityholder Agent, the Escrow Agent may apply to a court
of competent jurisdiction for appointment of a successor Escrow Agent. The
provisions of paragraphs 7.2(j)(i) and (ii) shall survive the termination of
this Agreement.
7.3. Securityholder Agent.
(a) Securityholder Agent of the Shareholders; Power of Attorney.
(i) ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall serve as the initial agent and
attorney-in-fact (the "Securityholder Agent") for the Shareholders to give and
receive notices and communications, to authorize delivery to Acquiror of shares
of Acquiror Common Stock from the Escrow Fund in satisfaction of claims by
Acquiror, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed from time to time by
Shareholders holding beneficial interests in the majority of the shares
comprising the Escrow Fund upon not less than thirty (30) days prior written
notice to Acquiror and the Escrow Agent. Any vacancy in the position of
Securityholder Agent may be filled by approval of Shareholders holding
beneficial interests in the majority of the shares comprising the Escrow Fund.
No bond shall be required of the Securityholder Agent, and the Securityholder
Agent shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from each of the Shareholders.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith.
The Shareholders on whose behalf the Escrow Amount was deposited to the Escrow
Fund shall severally indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, Liability or expense incurred
without bad faith on the part of the Securityholder Agent and arising out of or
in connection with the acceptance or administration of the Securityholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Securityholder Agent.
(b) Actions of the Securityholder Agent. A decision, act, consent
or instruction of the Securityholder Agent shall constitute a decision, act,
consent or instruction on behalf of all the Shareholders and shall be final,
binding and conclusive upon each Shareholder, and the Escrow Agent and Acquiror
may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of every
such Shareholder. The Escrow Agent and Acquiror 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 Securityholder Agent.
50
62
(c) Third-Party Claims. If Acquiror becomes aware of a third-party
claim that Acquiror believes, in good faith, may result in a demand by it
against the Escrow Fund, Acquiror shall notify the Securityholder Agent of such
claim, and the Securityholder Agent, as representative for the Shareholders,
shall be entitled to participate in any defense of such claim. The reasonable
costs of the defense of any third party action or claim incurred by Acquiror and
the Securityholder Agent shall be paid from the Escrow Fund. Notwithstanding the
immediately preceding sentence, Acquiror shall conduct such defense but shall
not settle any such claim without the consent of the Securityholder Agent, such
consent not to be unreasonably withheld; provided, however, that, if the consent
of the Securityholder Agent is so obtained, such settlement of that portion of
any such claim shall alone be determinative of the amount of the claim against
the Escrow Fund, and neither the Securityholder Agent nor any person who has a
beneficial interest in the Escrow Fund shall have any power or authority to
object under any provision of this Article VII to the amount of any demand by
Acquiror against the Escrow Fund with respect to such settlement.
7.4. Acquiror Exclusive Remedy. The Escrow Fund shall be the sole and
exclusive remedy of the Acquiror Indemnitees from and after the Effective Time
for claims of breach of any representation, warranty or covenant in this
Agreement, other than claims arising out of actual fraud or intentional
misrepresentation.
7.5. Company Exclusive Remedy. This Article VII sets forth the sole and
exclusive remedy of the Company Indemnitees from and after the Effective Time
for claims of breach of any representation, warranty or covenant in this
Agreement, other than claims arising out of actual fraud or intentional
misrepresentation. Such remedy shall in no case be greater than ten percent
(10%) of the Merger Price.
ARTICLE VIII
PORT OF TRANSCEND AND ACQUISITION PRICE
8.1. Initiation of Port. Immediately upon the execution of this
Agreement, the Company shall initiate a port of Transcend to PeopleTools (the
"Port"). This porting effort would continue throughout the period between the
date hereof and the Closing Date (as more completely described in Exhibit J). It
is the intent of the parties to this Agreement that all deliverables specified
in Exhibit J be completed and submitted to Acquiror for approval no later than
March 31, 1999. If the Company fails to complete and submit for approval all
deliverables by March 31, 1999, it shall be obligated to submit all work
completed to that date to Acquiror along with a description of the remaining
work required to complete the deliverables. Provided the Company represents the
remaining work can be properly and timely completed, the Company will have a
single thirty-one (31) day extension ("Cure Period") in which to complete and
submit all deliverables. The Cure Period shall finally expire at 5 p.m.
California time on May 1, 1999, and the parties agree that no additional
extension of this deadline shall be warranted under any circumstances, unless
Acquiror, in its sole discretion, so agrees in writing. Nothing in this
Agreement shall be construed as granting to Acquiror any legal or beneficial
right, title or interest in or to the Port or any materials submitted to
Acquiror in connection therewith as required pursuant to this Section 8.1 prior
to the Effective Time. The Port and such materials shall remain
51
63
the sole property of the Company at all times until acquired by Acquiror by
virtue of the Merger except for PeopleTools.
8.2. Timing of Closing. Assuming all other conditions set forth in this
Agreement have been satisfied, the Company may, in its sole discretion, require
e the Merger to close by delivering to Acquiror an irrevocable notice ("Closing
Notice") which notice shall: (i) indicate to Acquiror that the Company is unable
to deliver the Port by May 1, 1999; and (ii) specify a date for the Closing of
the Merger (the "Company Closing Date"); provided, that the Company Closing Date
shall be a Business Day falling after December 31, 1998 and prior to May 1,
1999; and provided, further, that the Company Closing Date shall be a date at
least ten (10) Business Days from the date the Closing Notice is delivered to
Acquiror. If the Company elects to deliver a Closing Notice pursuant to this
Section 8.2, Acquiror shall be required to close the Merger and the other
transactions contemplated hereby on the Company Closing Date, in the manner
specified in Section 1.2 and subject to the satisfaction of the conditions set
forth in Article VI. In such event, the Company shall not be entitled to the
increase in the Gross Base Merger Price specified in the first sentence of
Section 8.3. Notwithstanding anything in this Section 8.2 to the contrary, the
Company shall not be required to deliver a Closing Notice and may instead elect
to deliver the Port in accordance with Section 8.1
8.3. Gross Base Merger Price. If the Company completes the Port and
submits the Port to Acquiror for approval on or prior to May 1, 1999 and it is
accepted by Acquiror in accordance with the specifications set forth in Exhibit
J in the exercise of its reasonable judgment, the Gross Base Merger Price would
be twenty-five million dollars ($25,000,000). Otherwise, the Gross Base Merger
Price would be fifteen million dollars ($15,000,000).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. Except as provided in Section 9.2 below, 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 Acquiror;
(b) by Acquiror or the Company if: (i) the Closing has not occurred
by May 28, 1999 (provided that the right to terminate this Agreement under this
clause 9.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Authority that would make consummation of the Merger
illegal;
(c) by Acquiror if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Authority that would: (i) prohibit Acquiror's or
the Company's ownership or
52
64
operation of any material portion of the business of the Company or (ii) compel
Acquiror or the Company to dispose of or hold separate, as a result of the
Merger, any material portion of the business or assets of the Company or
Acquiror;
(d) by Acquiror if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company within thirty (30) days
through the exercise of its commercially reasonable efforts, then for so long as
the Company continues to exercise such commercially reasonable efforts Acquiror
may not terminate this Agreement under this Section 9.1(d) unless such breach is
not cured within thirty (30) days (but no cure period shall be required for a
breach which by its nature cannot be cured);
(e) 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 Acquiror and as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Acquiror within thirty (30)
days through the exercise of its commercially reasonable efforts, then for so
long as Acquiror continues to exercise such commercially reasonable efforts the
Company may not terminate this Agreement under this Section 8.1(e) unless such
breach is not cured within thirty (30) days (but no cure period shall be
required for a breach which by its nature cannot be cured);
(f) by Acquiror, in its sole and absolute discretion, if holders of
more than five percent (5%) of the Company Common Stock have exercised
appraisal, dissenters' or similar rights under Applicable Law with respect to
their shares in connection with the Merger; and
(g) by Acquiror, on or before June 30, 1998, if Acquiror's board of
directors has determined in good faith that it is not reasonably satisfied with
the results of its legal or accounting due diligence investigation of the
Company.
9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no Liability or obligation on the part of Acquiror or the
Company, or their respective officers, directors or shareholders under this
Agreement, provided that each party hereto shall remain liable for any Damages
arising out of any breaches of this Agreement prior to such termination or for
the wrongful termination of this Agreement. Without limiting the generality of
the foregoing, to the extent that any such termination results from the breach
by any party hereto of any of its representations, warranties, or covenants set
forth in this Agreement, the non-breaching party shall be entitled to receive
from the breaching party all of its Third Party Expenses, any expenses incurred
in connection with any dispute arising from such willful breach and any other
Damages incurred as a result of such breach. Notwithstanding the foregoing, the
provisions of Section 5.3, 5.4, and 5.16 and Article IX of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
53
65
9.3. Amendment. This Agreement may be amended by the parties hereto at
any time prior to the Effective Time by execution of an instrument in writing
signed on behalf of each of the parties hereto. Notwithstanding any provision of
this Agreement to the contrary, no party to this Agreement shall be required to
enter into any amendment, consent, waiver or modification of this Agreement in
order to preserve the pooling of interests accounting treatment, or the tax free
nature, of the Merger, and each party reserves the right to approve or
disapprove any proposed amendment, consent, waiver or modification of this
Agreement in its sole and absolute discretion.
9.4. Extension; Waiver. At any time prior to the Effective Time,
Acquiror, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1. Notices. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the addresses set forth below or to such other address as the party
to whom notice is to be given may have furnished to the other parties hereto in
writing in accordance herewith. Any such notice or communication shall be deemed
to have been delivered and received (A) in the case of personal delivery or
delivery by telecopier, on the date of such delivery, (B) in the case of a
nationally-recognized overnight courier, on the next Business Day after the date
when sent and (C) in the case of mailing, on the third Business Day following
that on which the piece of mail containing such communication is posted:
(a) IF TO ACQUIROR OR, AFTER THE EFFECTIVE TIME,
TO THE COMPANY, TO:
PeopleSoft, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
54
66
(b) IF TO THE COMPANY PRIOR TO THE EFFECTIVE TIME, TO:
TriMark Technologies, Inc.
▇▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, President & CEO
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) IF TO THE ESCROW AGENT, TO:
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) IF TO THE SECURITYHOLDER AGENT, TO:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇.▇▇▇.▇▇▇▇
Facsimile No.: ▇▇▇.▇▇▇.▇▇▇▇
10.2. Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "agreement" when used herein shall be deemed in
each case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. 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.
10.3. 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 each of the other parties, it being understood that
all parties need not sign the same counterpart.
55
67
10.4. Entire Agreement; Assignment. This Agreement, the schedules and
exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein and the existing confidentiality agreement
between Acquiror and the Company: (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, except
that Acquiror may assign its rights but not delegate its obligations hereunder
to a wholly-owned subsidiary of Acquiror.
10.5. Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6. Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon them
in any manner authorized by the laws of the State of California for such Persons
and waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction and such process.
10.8. 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.
10.9. Specific Performance. Notwithstanding Sections 7.4 and 7.5 of this
Agreement, the parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
56
68
10.10. Escrow Agent as Party. This Agreement shall be effective as among
all of the parties hereto other than the Escrow Agent even if the Escrow Agent
has not executed this Agreement. It is anticipated that the Escrow Agent may not
execute this Agreement at the same time that the other parties execute this
Agreement, and the parties agree to make such amendments to the provisions of
Article VII as the Escrow Agent reasonably may request to the extent that such
changes do not materially affect the rights of the parties.
57
69
IN WITNESS WHEREOF, Acquiror and the Company, and as to Article VII
only, Securityholder Agent and the Escrow Agent, have caused this Agreement to
be duly executed or signed by their duly authorized respective officers, all as
of the date first written above.
PEOPLESOFT, INC. TRIMARK TECHNOLOGIES, INC.
BY: _________________________________ BY: _________________________________
NAME: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇ NAME: ▇▇▇▇ ▇▇▇▇▇▇
TITLE: SENIOR VICE PRESIDENT AND TITLE: PRESIDENT & CEO
CHIEF FINANCIAL OFFICER
BY: _________________________________ BY: _________________________________
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: ASSISTANT SECRETARY TITLE: SECRETARY
SECURITYHOLDER AGENT
BY: _________________________________
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
58
70
ESCROW AGENT
_____________________________________
BY: _________________________________
NAME:
TITLE:
59
71
APPENDIX A
DEFINITIONS
The following terms, as used in the Agreement, have the following
meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, regulation,
order, writ, injunction, judgment, decree or other requirement of any
Governmental Authority existing as of the date hereof or as of the Closing Date
applicable to such Person or any of its respective properties, assets, officers,
directors, employees, consultants or agents.
"Average Stock Price" means the arithmetic average of the closing prices
of Acquiror Common Stock on the Nasdaq National Market for the ten trading days
ending on the date immediately prior to the Closing Date.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in San Francisco, CA are authorized or required by law to
close.
"Collar Adjustment Factor" shall be a number equal to the quotient
obtained by dividing the Average Stock Price by the Signing Date Average Stock
Price, provided that if the adjustment factor is less than one it shall be
deemed to equal one, or if the adjustment factor is greater than 1.2, it shall
be deemed to equal 1.2.
"Company" means TriMark Technologies, Inc.
"Company Common Stock" means the class of the Company's capital stock
designated as its Common Stock, no par value.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including
(y) interest on cash disbursements in respect of any of the foregoing at a rate
per annum equal to the prime rate as published by Bank of America, NT&SA,
compounded quarterly, from the later to occur of (i) ninety (90) days from the
date of demand for payment hereunder, or (ii) the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (z) reasonable costs, fees and expenses of
attorneys (including allocation costs of in house counsel), experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents of such Person.
"Environmental Laws" means all Applicable Laws relating to the
protection of human health, safety or the environment from Hazardous Substances
including: (i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
60
72
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public from exposure to Hazardous
Substances.
"Environmental Liabilities" means all Liabilities of a Person, whether
such Liabilities are owed by such Person to Governmental Authorities, third
parties or otherwise, whether presently in existence or arising hereafter, that
arise under or relate to any Environmental Law.
"GAAP" means the United States generally accepted accounting principles.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Gross Adjusted Base Price" means the applicable Gross Base Merger Price
as determined in accordance with Section 8.3 multiplied by the Collar Adjustment
Factor.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hazardous Substance" means any chemical substance: (i) the presence of
which requires investigation or remediation under any Environmental Law; (ii)
which is defined as a "hazardous waste" or "hazardous substance" under any
Environmental Law; (iii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous and is
regulated by any Governmental Authority having or asserting jurisdiction over
the business or any assets of the Company; or (iv) without limitation, that
contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated
biphenols (PCBs) or asbestos.
"Key Employees" means ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, Art
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Than.
"Knowledge" or "knowledge" means (i) with respect to the Company, at any
given date of determination, the knowledge of all executive officers, vice
presidents, director level managers and members of the Board of Directors,
including all Key Employees of the Company, and (ii) with respect to Acquiror,
at any given date of determination, the knowledge of any executive officer,
officer, or director of Acquiror. For purposes hereof, a Person shall be deemed
to have knowledge of the contents of all books and records with respect to which
such Person has reasonable access and all facts and circumstances to which such
Person reasonably should have been aware or was aware in the performance of such
Person's duties as an employee, officer or director.
"Liability" means, with respect to any Person, any liability or
obligation of, or claims against, such Person of any kind, character or
description, absolute or contingent, known or
61
73
unknown, accrued or unaccrued, liquidated or unliquidated, secured or unsecured,
joint or several, due or to become due, vested or unvested, executory,
determined, determinable or otherwise and whether or not the same is required to
be accrued on the financial statements of such Person.
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, easement, security interest, hypothecation,
encumbrance, adverse claim or charge of any kind in respect of such asset.
"Material Adverse Change" means, with respect to any entity, a change
in, or effect on, the operations, affairs, prospects, financial condition,
assets, Liabilities, reserves or any other aspect of such entity that results,
or will result, in a material adverse effect on, or a material adverse change
in, such entity or its operations.
"Measurement Period" shall be the period commencing on May 1, 1998 and
ending on the last month of reported results of the Company immediately prior to
the Closing Date. If more than eight Business Days have elapsed between the most
recent month end and the Closing Date, the Company shall have reported results
for that most recent month end, or Acquiror shall be entitled to delay the
Closing pending the release of such results.
"Merger Price" means an amount equal to the Gross Adjusted Base Price
(i) plus the PBDAT Amount if such amount is greater than zero, or (ii) minus the
absolute value of the PBDAT Amount if the PBDAT Amount is less than zero.
"Merger Share Amount" means the number of shares obtained by dividing
the Merger Price by the Average Stock Price.
"PBDAT Amount" shall be the Company's cumulative Earnings (or loss)
before Depreciation, Amortization and Taxes for the duration of the Measurement
Period. Acquiror shall have the right to review the compilation of the PBDAT
Amount and/or have its accountants audit the PBDAT Amount. The PBDAT Amount
shall be determined in accordance with GAAP with consistent application of the
accounting principles in effect for the financial statements prepared for the
four month period ending April 30, 1998.
"Person" means an individual, corporation, partnership, association,
trust, limited liability company, limited liability partnership, estate or other
entity or organization, including a Governmental Authority.
"Proceeding" means any action, suit, hearing or arbitration,
investigation or other proceeding (whether public or private).
"Signing Date Average Stock Price" means $44.69.
"Subsidiary" means a corporation, partnership, joint venture, limited
liability company or other Person the majority of the shares of the capital
stock or other equivalent ownership interests of which are directly or
indirectly owned of record or beneficially by the Company, or any corporation,
partnership, joint venture, limited liability company or other Person for which
the
62
74
Company has the ability to direct or control voting with respect to fifty
percent (50%) or more of the capital stock or other equivalent ownership
interests.
63
75
SCHEDULE 6.2(f)
ACQUIROR AFFILIATES
DIRECTORS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. Still, Jr.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ "Skip" Battle
OFFICERS AND OTHER AFFILIATES
▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
76
AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 12, 1998
BY AND AMONG
PEOPLESOFT, INC. AND TRIMARK TECHNOLOGIES, INC.
Whereas, PeopleSoft, Inc. ("PeopleSoft") and TriMark Technologies, Inc.
("TriMark") have previously executed an Agreement and Plan of Reorganization
dated June 12, 1998 (the "Agreement");
Whereas, both parties desire to have ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ remain an employee of
TriMark through the Closing Date of the Merger contemplated in the Agreement;
Whereas, PeopleSoft, at its discretion, is willing to provide up to two (2)
additional PeopleSoft consultants to assist TriMark in the porting of the
Transcend product to PeopleTools (the "Port") at a maximum hourly rate of $150
per hour; such consultants are in addition to the senior level consultant that
PeopleSoft is providing TriMark throughout the Port at no cost to TriMark as
provided under the terms of the Agreement;
Whereas both parties desire to amend the Agreement to define how costs related
to: (i) employing ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ at TriMark after September 1, 1998; and
(ii) retaining the second and third PeopleSoft consultants for the Port will be
treated under the definition of profit before depreciation, amortization and
taxes ("PBDAT");
Accordingly, both parties hereby agree to modify the definition of PBDAT Amount
to the following definition as follows:
"PBDAT Amount" shall be the Company's cumulative Earnings (or loss) before
Depreciation, Amortization and Income Taxes for the duration of the Measurement
Period. In addition, the direct costs of employing ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
subsequent to September 30, 1998 and all professional services fees paid by
TriMark related to work performed by the second and third PeopleSoft consultants
on the Port shall not be included in TriMark's operating costs when determining
PBDAT. Acquiror shall have the right to review the compilation of the PBDAT
Amount and/or have its accountants audit the PBDAT Amount. The PBDAT Amount
shall be determined in accordance with GAAP with consistent application of the
accounting principles in effect for the financial statements prepared for the
four month period ending April 30, 1998.
This Amendment No. 1 to the Agreement shall be effective October 1, 1998.
TRIMARK TECHNOLOGIES, INC. SECURITY AGENT HOLDER PEOPLESOFT, INC.
-------------------------- -------------------------- --------------------------
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By
-------------------------- -------------------------- --------------------------
Date Date Date
77
AMENDMENT NO. 2 TO THE
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 12, 1998
BY AND AMONG
PEOPLESOFT, INC. AND TRIMARK TECHNOLOGIES, INC.
Whereas, PeopleSoft, Inc. ("PeopleSoft") and TriMark Technologies, Inc.
("TriMark") have previously executed an Agreement and Plan of Reorganization
dated June 12, 1998 (the "Agreement"), as amended;
Whereas, both parties desire to have ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇
participate in a "proof of concept" review for a new suite of products targeting
the property and casualty insurance market, and such review is contemplated to
take up to two weeks in January 1999;
Whereas, the use of said TriMark personnel on this review may cause delays to
the completion of the port of TriMark's Transcend product to PeopleSoft's
PeopleTools development environment as provided under the terms of the
Agreement;
Whereas both parties desire to amend the Agreement to (i) define how costs
related to a delay in the Transcend port will be treated under the definition of
profit before depreciation, amortization and taxes ("PBDAT") and (ii) provide
for extending certain dates under the Agreement;
Accordingly, both parties hereby agree to modify the definition of PBDAT Amount
to the following definition and extend certain dates as follows:
"PBDAT Amount" shall be the Company's cumulative earnings (or loss) before
Depreciation, Amortization and Income Taxes for the duration of the Measurement
Period. In addition, the direct costs of employing ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
subsequent to September 1, 1998 and all professional services fees paid by
TriMark related to work performed by the second and third PeopleSoft consultants
on the Port shall not be included in TriMark's operating costs when determining
PBDAT. If completing the Transcend port is delayed as a result of the use of
TriMark personnel in the review of future property and casualty insurance
products, PBDAT shall also exclude the additional costs incurred by TriMark
resulting from this delay subject to a maximum adjustment to PBDAT of $175,000.
Acquiror shall have the right to review the compilation of the PBDAT Amount
and/or have its accountants audit the PBDAT Amount. The PBDAT Amount shall be
determined in accordance with GAAP with consistent application of the accounting
principles in effect for the financial statements prepared for the four month
period ending April 30, 1998.
Under Article VIII of the Agreement, all references to March 31, 1999 and May 1,
1999 shall be changed to April 15, 1999 and May 15, 1999, respectively.
This Amendment No. 2 to the Agreement shall be effective January 8, 1999.
TRIMARK TECHNOLOGIES, INC. SECURITY AGENT HOLDER PEOPLESOFT, INC.
-------------------------- -------------------------- --------------------------
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By
-------------------------- -------------------------- --------------------------
Date Date Date
2
78
AMENDMENT NO. 3 TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 3 to Agreement and Plan of Reorganization (this
"Amendment") is made as of April ___, 1999, by and among PeopleSoft, Inc., a
Delaware corporation ("Acquiror"), TriMark Technologies, Inc., an Illinois
corporation, ("Company"), and, with respect to Article VII of the Reorganization
Agreement only, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Securityholder Agent and State Street
Bank and Trust Company of California, N.A. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in the
Reorganization Agreement (as defined below).
RECITALS
A. The parties hereto have entered into that certain Agreement and Plan
of Reorganization, dated as of June 12, 1998, as amended as of October 1, 1998
and January 8, 1999 (the "Reorganization Agreement"), pursuant to which, among
other things, all of the issued and outstanding shares of Company Common Stock
shall be converted into the right to receive shares of Acquiror Common Stock,
and all outstanding Company Options shall be assumed by Acquiror and converted
into options to acquire Acquiror Common Stock.
B. The parties hereto desire to amend certain sections of the
Reorganization Agreement on the terms and subject to the conditions set forth in
this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Reorganization Agreement be amended as follows:
AGREEMENT
Unless otherwise indicated, the section numbers referred to below
correspond to section numbers in the Reorganization Agreement.
1. Registration Statement on Form S-3. Section 5.15(a) is amended to read
in its entirety as follows:
"Acquiror shall use all reasonable commercial efforts to cause to be
registered under the Securities Act so as to permit the resale
thereof, and in connection therewith shall use all reasonable
commercial efforts to prepare and file with the SEC within five (5)
Business Days following the Closing and shall use all reasonable
commercial efforts to cause to become effective as soon as practicable
thereafter, a registration statement on Form S-3 or on such other form
as is then available under the Securities Act covering the shares of
Acquiror Common Stock issued pursuant to this Agreement (the
"Registrable Securities"); provided, however, that each holder of
Registrable Securities ("Holder") shall provide all
3
79
such information and materials to Acquiror and take all such action as
may be required in order to permit Acquiror to comply with all
applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement.
Such provision of information and materials is a condition precedent
to the obligations of Acquiror pursuant to this Section. Acquiror
shall not be required to effect more than one (1) registration under
this Section. The offering made pursuant to such registration shall
not be underwritten."
2. Registration Statement on Form S-8. Section 5.17 is amended to read in
its entirety as follows:
"Acquiror shall use all reasonable commercial efforts to prepare and
file with the SEC, within five (5) Business Days following the
Closing, a registration statement on Form S-8 for the shares of
Acquiror Common Stock issuable with respect to assumed Company
Options, if such shares are not otherwise covered by an effective
registration statement on Form S-8."
3. Deletion and Amendment of Certain Closing Conditions.
(a) Sections 6.1(e) and 6.3(g) are deleted in their entirety.
(b) The first sentence of Section 6.3(a) of the Agreement is hereby
amended to read in its entirety as follows:
"The representations and warranties of the Company contained in this
Agreement (as modified by the Disclosure Schedules, and as further
modified by the amended disclosure schedules delivered by the Company
to Acquiror as of April ___, 1999 (the "Amended Disclosure
Schedules")) shall be true and correct in all material respects as of
the date hereof and, except for changes contemplated by this Agreement
(including the Disclosure Schedules and the Amended Disclosure
Schedules) and except for those representations and warranties which
address matters only as of a particular date (which shall remain true
and correct in all material respects as of such date), with the same
force and effect as if made on and as of the Closing Date, and
Acquiror shall have received a certificate to such effect signed on
behalf of the Company by a duly authorized officer of the Company;
provided, however, that any failure of the Company's representations
and warranties to be true and correct in all material respects
proximately caused by an action or omission by the Company which was
requested, required or otherwise necessitated in writing by Acquiror
shall not constitute failure of a condition to Acquiror's obligation
to consummate the Merger or any of the other transactions contemplated
by this Agreement."
4. Survival of Escrow, Representations and Warranties. In Section 7.1(c),
the date "December 31, 1998" is deleted and replaced with "December 31, 1999."
4
80
5. Liquidation of Escrow Shares.
(a) Definition of Escrow Amount. Section 1.4(a)(3)(ii) is amended to
read in its entirety as follows:
"Escrow Amount. Means ten percent (10%) of the number of shares
of Acquiror Common Stock issued at the Closing to the holders of
Company Common Stock pursuant to Section 1.4(a) or any funds
received upon a sale of Escrow Shares (as defined in Section
7.2(c)(iv)), which shares or funds shall be delivered to the
Escrow Agent and held in accordance with Article VII. The portion
of the Escrow Amount deposited on behalf of each such shareholder
(the "Pro Rata Escrow Amount") shall be equal to ten percent
(10%) of the aggregate number of shares of Acquiror Common Stock
that such shareholder would otherwise be entitled to receive
under Section 1.4 and, if applicable, ten percent (10%) of the
funds received upon any sale of such Escrow Shares pursuant to
Section 7.2(c)(iv)."
(b) The heading in Section 7.2(c), "Protection of Escrow Fund," is
amended to read "Protection of Escrow Fund; Sale of Shares During Escrow
Period."
(c) The following new Section 7.2(c)(iv) is added immediately after
Section 7.2(c)(iii):
"(iv) At any time during the Escrow Period, upon the request and
in accordance with the instructions of the Securityholder Agent,
the Escrow Agent shall sell all or a part of the Acquiror Common
Stock then held in the Escrow Fund (the "Escrow Shares"). The
proceeds from any sale of Escrow Shares shall remain a part of
the Escrow Amount and be held by the Escrow Agent in accordance
with the terms hereof."
(d) The first sentence of Section 7.3(a)(i) of the Reorganization
Agreement is hereby amended to read in its entirety as follows:
"▇▇▇▇▇▇ ▇▇▇▇▇▇ shall serve as the initial agent and
attorney-in-fact (the "Securityholder Agent") for the
Shareholders to give and receive notices and communications, to
authorize delivery to Acquiror of shares of Acquiror Common Stock
from the Escrow Fund in satisfaction of claims by Acquiror, to
object to such deliveries, to authorize the sale of shares of
Acquiror Common Stock pursuant to Section 7.2(c)(iv), to agree
to, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Securityholder Agent
for the accomplishment of the foregoing."
5
81
(e) The first sentence of Section 7.3(a)(ii) of the Reorganization
Agreement is hereby amended to read in it entirety as follows:
"The Securityholder Agent shall not be liable for any act done or
omitted hereunder as Securityholder Agent (including any action
or omission with respect to the sale of shares of Acquiror Common
Stock pursuant to Section 7.2(c)(iv)) while acting in good
faith."
6. Gross Base Merger Price.
(a) Article VIII is amended to read in its entirety as follows:
"ARTICLE VIII
PORT OF TRANSCEND AND GROSS BASE MERGER PRICE
Acquiror hereby approves and accepts the Company's port of
Transcend to PeopleTools (the "Port"). Accordingly, for purposes
of this Agreement, the Gross Base Merger Price means twenty-five
million dollars ($25,000,000). Notwithstanding the foregoing,
nothing in this Agreement shall be construed as granting to
Acquiror any legal or beneficial right, title or interest in or
to the Port or any materials submitted to Acquiror in connection
therewith as required pursuant to this Article VIII prior to the
Effective Time. The Port and such materials shall remain the sole
property of the Company at all times until acquired by Acquiror
by virtue of the Merger except for PeopleTools."
(b) The definition of "Gross Adjusted Base Price" in Appendix A is
amended by replacing the reference to "Section 8.3" with a reference to
"Article VIII."
7. Amendments Regarding PBDAT.
(a) Expenses. The last sentence of Section 5.3 is deleted in its
entirety.
(b) State Taxes. The last sentence of Section 5.19(a) is amended to
read as follows:
"In the event such written evidence is unavailable, or such
customers indicate that they have not paid all State Taxes due,
the Company shall accrue a reasonable estimate of such unpaid
State Taxes and all interest and penalties in respect thereof."
(c) Accounts Receivable. Section 5.19(b) is amended to read in its
entirety as follows:
"The Company shall fully reserve the amount of any and all
accounts receivable outstanding more than ninety (90) days as of
the Closing Date."
6
82
(d) Definition of Merger Price. The definition of "Merger Price" in
Appendix A is amended to read in its entirety as follows:
"'Merger Price' means an amount equal to the Gross Adjusted Base
Price plus the PBDAT Amount."
(e) PBDAT Amount Calculation.
(i) The definition of "PBDAT Amount" in Appendix A shall remain
unchanged. However, the parties hereto agree that the PBDAT Amount for the
Measurement Period ending March 31, 1999 shall be an amount equal to $985,215.
(ii) Notwithstanding the agreed-upon calculation in paragraph (i)
above, the parties hereto agree that if Acquiror's accountants determine, after
the Closing, that the PBDAT Amount, the Company's financial statements for the
Measurement Period or any of the matters referred to in subsections (a) through
(c) of this Section 7 were not determined in accordance with GAAP, Acquiror
shall be entitled to recover from the Escrow Fund the difference between (i) the
PBDAT Amount used at the Closing to calculate the Merger Price and (ii) the
PBDAT Amount as determined in accordance with GAAP by Acquiror's accountants.
Any disputes regarding calculation of the PBDAT Amount shall be resolved in
accordance with Section 7.2(f).
8. Amendments Regarding Pooling of Interests.
(a) Section 1.5 is deleted in its entirety.
(b) Section 2.24 is deleted in its entirety.
(c) Section 3.7 is deleted in its entirety.
(d) Section 5.8 is amended to read in its entirety as follows:
"Tax Treatment. Neither Acquiror nor the Company shall take any
action, including the acceleration of vesting of any options,
warrants, restricted stock or other rights to acquire shares of
the capital stock of the Company, which reasonably would be
expected to jeopardize the nature of the Merger as a
reorganization within the meaning of Section 368 of the Code."
(e) The last sentence of Section 9.3 is amended to read as follows:
"Notwithstanding any provision of this Agreement to the contrary,
no party to this Agreement shall be required to enter into any
amendment, consent, waiver or modification of this Agreement in
order to preserve the tax free nature of the Merger, and each
party reserves the right to approve or disapprove any proposed
amendment, consent, waiver or modification of this Agreement in
its sole and absolute discretion."
7
83
9. Closing. The first sentence of Section 1.2 is amended to read as
follows:
"Unless this Agreement is earlier terminated pursuant to Section 9.1,
the closing of the Merger (the "Closing") will take place on April 30,
1999, at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to
by Acquiror and the Company."
10. Average Stock Price. The definition of "Average Stock Price" in
Appendix A is amended to read in its entirety as follows:
"'Average Stock Price' means the arithmetic average of the closing
prices of Acquiror Common Stock on the Nasdaq National Market for the
five (5) trading days ending on the date immediately prior to the
Closing Date."
11. Definition of Total Company Shares. The definition of "Total Company
Shares" in Section 1.4(a)(3)(iii) is amended to read in its entirety as follows:
"Total Company Shares. Means the aggregate number of shares of the
Company Common Stock outstanding immediately prior to the Effective
Time (i) plus the aggregate number of shares of Company Common Stock
issuable upon the exercise of all outstanding Company Options (vested
and unvested) immediately prior to the Effective Time, (ii) minus the
aggregate number of shares of Company Common Stock issuable upon the
exercise of the options listed on Schedule 1.4(a)(3)(iii)."
12. Survival of Reorganization Agreement. Except as modified and amended
by the terms of this Amendment, all terms and provisions of the Reorganization
Agreement are hereby ratified and affirmed and shall remain in full force and
effect.
13. Miscellaneous. The provisions of this Amendment shall be binding upon
and inure to the benefit of the successors and assigns of each of the parties
hereto. This Amendment shall be governed by and construed in accordance with the
internal laws of the State of California without reference to conflicts of law
principles. This Amendment may be executed in counterparts, each of which shall
be an original, and all of which taken together shall constitute one instrument.
[SIGNATURE PAGE FOLLOWS]
8
84
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first written above.
PEOPLESOFT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TRIMARK TECHNOLOGIES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SECURITYHOLDER AGENT
By:
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title:
-----------------------------
ESCROW AGENT
-----------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
9
85
AMENDMENT NO. 4 TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 4 to Agreement and Plan of Reorganization (this
"Amendment") is made as of April 30, 1999, by and among PeopleSoft, Inc., a
Delaware corporation ("Acquiror"), TriMark Technologies, Inc., an Illinois
corporation (the "Company"), and, with respect to Article VII of the
Reorganization Agreement (as defined below) only, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as
Securityholder Agent and State Street Bank and Trust Company of California, N.A.
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Reorganization Agreement (as defined below).
RECITALS
A. The parties hereto have entered into that certain Agreement and Plan
of Reorganization, dated as of June 12, 1998, as amended as of October 1, 1998,
January 8, 1999 and April 22, 1999 (as amended, the "Reorganization Agreement"),
pursuant to which, among other things, all of the issued and outstanding shares
of Company Common Stock will be converted into the right to receive shares of
Acquiror Common Stock, and all outstanding Company Options shall be assumed by
Acquiror and converted into options to acquire Acquiror Common Stock.
B. The parties hereto desire to further amend certain sections of the
Reorganization Agreement on the terms and subject to the conditions set forth in
this Amendment No. 4.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Reorganization Agreement be further amended as follows:
AGREEMENT
Unless otherwise indicated, the section numbers referred to below
correspond to section numbers in the Reorganization Agreement.
1. Amendments Regarding Escrow. The following sections are added to
Section 7.2 immediately after Section 7.2(g)(vi):
(h) Establishment of Expiration Date. With the initial deposit of the
Escrow Amount, Acquiror shall deliver to the Escrow Agent an Officer's
Certificate setting forth the Effective Time, the Expiration Date and the Escrow
Period, on which certificate (and all other certificates delivered to the Escrow
Agent by the Acquiror, the Company or the Securityholder Agent) the Escrow Agent
may rely without inquiry.
(i) Initial and Subsequent Deposits of the Escrow Amount. The shares
of Acquiror Common Stock initially deposited with the Escrow Agent, and any New
Shares that may subsequently be delivered to the Escrow Agent for incorporation
into the Escrow ▇▇▇▇▇▇,
▇▇
▇▇
▇▇▇▇▇ ▇▇ registered in the name of the "▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇, as Securityholder
Agent," on behalf of the Shareholders who otherwise would be entitled to receive
them pursuant to the Merger. Each stock certificate shall be accompanied by
three fully executed blank stock powers.
(j) Establishment of Shareholders' Pro Rata Escrow Amounts. With the
initial deposit of Acquiror Common Stock with the Escrow Agent, Acquiror shall
deliver to the Escrow Agent an Officer's Certificate (a "Shareholders' Pro Rata
Share Certificate") setting forth (a) the name and address of each Shareholder,
(b) such Shareholder's tax identification number (if it is known), (c) the
number of shares of Acquiror Common Stock delivered to the Escrow Agent to which
such Shareholder would otherwise have been entitled pursuant to the Merger, and
(d) such Shareholder's pro rata share of the Escrow Fund (such Shareholder's
"Pro Rata Share"). If New Shares are later delivered to the Escrow Agent for
incorporation into the Escrow Fund, the Acquiror shall recompute each
Shareholder's Pro Rata Share, if necessary, and provide a revised Shareholders'
Pro Rata Share Certificate to the Escrow Agent.
(k) Knowledge of Escrow Agent. Unless and until the Escrow Agent
shall receive stock certificates representing New Shares, the Escrow Agent may
assume without inquiry that no such shares have been or are required to be
issued and that all Acquiror Common Stock required to be delivered into the
Escrow Fund pursuant to the Reorganization Agreement have been so delivered.
Furthermore, unless and until the Escrow Agent shall receive written notice of
the appointment of a successor Securityholder Agent, the Escrow Agent may assume
without inquiry that the last Securityholder Agent of which it has received such
notice continues in that capacity and has all of the powers contemplated by the
Reorganization Agreement.
(l) Sales of Acquiror Common Stock at the Direction of the
Securityholder Agent. If the Securityholder Agent requests that the Escrow Agent
sell shares of Acquiror Common Stock held in the Escrow Fund, as contemplated by
Section 7.2(c)(iv) of the Reorganization Agreement, the Securityholder Agent
shall allocate such sales among the Shareholders in accordance with each
Shareholder's Pro Rata Shares, so that the Shareholders' Pro Rata Shares shall
remain unchanged. Following such sale, the Escrow Agent shall furnish to the
Securityholder Agent and to the Acquiror the details of such sale and, on the
basis of such information, the Acquiror shall prepare and provide to the Escrow
Agent a revised Pro Rata Share Certificate indicating for each Shareholder (a)
the remaining shares of Acquiror Common Stock attributable to such Shareholder
and (b) the net proceeds of such sale attributable to such Shareholder. In
effecting any sale of Acquiror Common Stock at the direction of the
Securityholder Agent, the Escrow Agent need not maximize the price obtained or
shop for the best commission rate or other terms and shall not be responsible
for realizing a particular price or for any loss occasioned upon such sale. The
Escrow Agent may deduct its actual costs of effecting any sales and may charge
the Acquiror such reasonable fees, if any, as the Escrow Agent may determine
fairly compensate it for the extra burdens such sale imposes on it, which fees
the Acquiror agrees to pay.
(m) Investment of Cash in the Escrow Fund. Any cash held in the
Escrow Fund, whether received by the Escrow Agent following sales of Escrow
Shares at the direction of the Securityholder Agent or otherwise, shall be
invested pending distribution in accordance with
12
87
the written instructions of the Securityholder Agent, or in the SSGA Fund if the
Securityholder Agent provides no such investment instructions to the Escrow
Agent.
(n) Tax Reporting Matters. The Acquiror and the Securityholder Agent
on behalf of the Shareholders agree to provide the Escrow Agent with certified
tax identification numbers for each of them by furnishing appropriate forms W-9
(or Forms W-8, in the case of non-U.S. persons) and other forms and documents
that the Escrow Agent may reasonably request (collectively, "Tax Reporting
Documentation") to the Escrow Agent within 30 days after the date hereof. The
parties hereto understand that, if such Tax Reporting Documentation is not so
certified to the Escrow Agent, the Escrow Agent may be required by the Internal
Revenue Code, as it may be amended from time to time, to withhold a portion of
taxable income, attributable to the Holders, it may receive with respect to the
Escrow Fund. The Escrow Agent need not make any distribution of all or any
portion of any taxable income in the Escrow Fund to any person until such person
has furnished to the Escrow Agent such Tax Reporting Documentation as the Escrow
Agent may reasonably require.
(o) Notice Address of Escrow Agent. Notices and deliveries of
Officer's Certificates and other documents to the Escrow Agent shall be
addressed to the Escrow Agent at State Street Bank and Trust Company of
California, N.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention:
Corporate Trust Department (PeopleSoft/TriMark Technologies 1999 Escrow), Fax
number (▇▇▇) ▇▇▇-▇▇▇▇, and shall be effective only upon receipt.
(p) Further Actions. The parties agree to take any actions as may be
necessary to enable the Escrow Agent to perform its duties under this Article 7.
2. Amendment Regarding Notices to Escrow Agent. Section 10.1(c) is hereby
amended to read in its entirety as follows:
IF TO THE ESCROW AGENT, TO
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
(PeopleSoft/TriMark Technologies 1999 Escrow)
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE PAGE FOLLOWS]
13
88
IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 as of
the day and year first written above.
PEOPLESOFT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TRIMARK TECHNOLOGIES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SECURITYHOLDER AGENT
By:
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title:
-----------------------------
ESCROW AGENT
-----------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
14