EXHIBIT 10.39
AGREEMENT AND PLAN OF MERGER
by and among
▇▇▇▇▇ ▇ SYSTEMS, INC.
LEVEL 8 TECHNOLOGIES ACQUISITION CORP.
and
STARQUEST SOFTWARE, INC.
Dated as of September __, 2000
Table of Contents
Page
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ARTICLE I THE MERGER 1
Section 1.1 The Merger 1
Section 1.2 Closing 1
Section 1.3 Effective Time 2
Section 1.4 Effects of the Merger 2
Section 1.5 Certificate of Incorporation; Bylaws 2
Section 1.6 Directors; Officers 2
ARTICLE II CONSIDERATION; EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS 2
Section 2.1 Consideration 2
Section 2.2 Effect on Capital Stock 3
ARTICLE III EXCHANGE OF CERTIFICATES 7
Section 3.1 Exchange of Certificates 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES 11
Section 4.1 Representations and Warranties of Company 11
Section 4.2 Representations and Warranties of Parent and 27
Merger Sub
ARTICLE V CONDUCT OF BUSINESS OF COMPANY 30
Section 5.1 Conduct of Business of Company 30
Section 5.2 No Solicitation 32
ARTICLE VI ADDITIONAL COVENANTS 33
Section 6.1 Stockholder Approval 33
Section 6.2 Access to Information, Confidentiality 33
Section 6.3 Reasonable Best Efforts 34
Section 6.4 Public Announcements 34
Section 6.5 Consents, Approvals and Filings 34
Section 6.6 Employee Benefit Matters 34
Section 6.7 Affiliates and Certain Stockholders 35
Section 6.8 Indemnification 35
Section 6.9 Subsidiaries' Directors and Officers 36
Section 6.10 Employment Agreements 36
Section 6.11 Employee Retention Incentive Pool 36
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ARTICLE VII CONDITIONS PRECEDENT 36
Section 7.1 Conditions to Each Party's Obligation to Effect 36
the Merger
Section 7.2 Conditions to Obligations of Parent and Merger 37
Sub
Section 7.3 Conditions to Obligation of Company 38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 39
Section 8.1 Termination 39
Section 8.2 Effect of Termination 40
Section 8.3 Amendment 41
Section 8.4 Extension; Waiver 41
Section 8.5 Procedure for Termination, Amendment, Extension 41
or Waiver
ARTICLE IX GENERAL PROVISIONS 41
Section 9.1 Nonsurvival of Representations and Warranties 41
Section 9.2 Fees and Expenses 41
Section 9.3 Definitions 42
Section 9.4 Notices 45
Section 9.5 Interpretation 46
Section 9.6 Entire Agreement; Third-Party Beneficiaries 46
Section 9.7 Governing Law 46
Section 9.8 Assignment 46
Section 9.9 Enforcement 46
Section 9.10 Severability 47
Section 9.11 Counterparts 47
EXHIBIT A Agreement of Merger
EXHIBIT B Non-Accredited Stockholder Questionnaire
EXHIBIT C Accredited Stockholder Questionnaire
EXHIBIT D Registration Rights Agreement
EXHIBIT E Affiliate Letter
EXHIBIT F Opinion Letter from Powell, Goldstein, ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
EXHIBIT G Opinion Letter from Crosby, Heafey, ▇▇▇▇▇ &
May Professional Corporation
ii
Agreement and Plan of Merger
This AGREEMENT AND PLAN OF MERGER, dated as of September ___ 2000 (this
"Agreement"), is made and entered into by and among Level 8 Systems, Inc., a
Delaware corporation ("Parent"), ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Corp., a
Delaware corporation ("Merger Sub") and a wholly owned subsidiary of Level 8
Technologies, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent, and StarQuest Software, Inc., a California corporation ("Company").
Parent, Merger Sub and Company are sometimes hereinafter collectively referred
to as the "Parties." Capitalized terms as used herein shall have the meaning
set forth in Section 9.3 below.
Recitals:
WHEREAS, the respective Boards of Directors of the Parties have determined
that it would be advisable and in the best interests of their respective
corporations and their respective stockholders for Parent to acquire Company, by
means of a merger of Merger Sub with and into Company (the "Merger"), on the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Parties desire to make certain representations, warranties and
covenants in connection with the Merger and to prescribe various conditions to
the consummation of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the Parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. On the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL") and the California General Corporation Law (the "CGCL"), the Merger
shall be effected and Merger Sub shall be merged with and into Company at the
Effective Time (as defined in Section 1.3). At the Effective Time, the separate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation").
Section 1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, and subject to the satisfaction or waiver of all of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the second business day (the "Closing Date") following
satisfaction or waiver of all of the conditions set forth in Article VII, other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions, at the offices of
Crosby, Heafey, ▇▇▇▇▇ & May Professional
Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
unless another date, time or place is agreed to in writing by the Parties.
Section 1.3 Effective Time. The Parties shall file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") and the
Secretary of State of the State of California (the "California Secretary of
State") on the Closing Date (or on such other date as Parent and Company may
agree) a certificate and/or agreement of merger and any other appropriate
documents, including an agreement of merger, in the form attached hereto as
Exhibit A (the "Agreement of Merger"), executed in accordance with the relevant
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provisions of the CGCL, and make all other filings or recordings required under
the DGCL and CGCL in connection with the Merger. The Merger shall become
effective upon the filing of the Agreement of Merger with the California
Secretary of State, or at such later time as is specified in the Agreement of
Merger (the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL, the CGCL and the Agreement of
Merger. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all property of Merger Sub and Company shall vest in the
Surviving Corporation, and all liabilities of Merger Sub and Company shall
become the liabilities of the Surviving Corporation.
Section 1.5 Certificate of Incorporation; Bylaws. At the Effective Time, (a)
the articles of incorporation of Company as in effect at the Effective Time
shall, from and after the Effective Time, be the articles of incorporation of
the Surviving Corporation until thereafter changed or amended in accordance with
the provisions thereof and applicable law, and (b) the bylaws of Company as in
effect at the Effective Time shall, from and after the Effective Time, be the
bylaws of the Surviving Corporation until thereafter changed or amended in
accordance with the provisions thereof and applicable law.
Section 1.6 Directors; Officers. From and after the Effective Time, the
directors and officers of Merger Sub shall be the directors and officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE II
CONSIDERATION; EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Consideration. Subject to the terms and conditions of Section
2.2, the maximum number of shares of common stock of Parent, $.001 par value per
share (the "Parent Common Stock"), and the maximum number of Warrants to
purchase Parent Common Stock (the "Warrants") to be issued and paid by Parent in
exchange for the acquisition by Parent of all outstanding capital stock, no par
value per share, of the Company (the "Shares") shall be 450,000 shares of Parent
Common Stock (the "Aggregate Share Number") and 250,000 Warrants (the "Aggregate
Warrant Number") (collectively, the "Merger Consideration").
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Section 2.2 Effect on Capital Stock. 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 Merger Sub, the Company or the holder of any Shares,
the following shall occur (which is intended to comply fully with the
liquidation preference provisions set forth in the Articles of Incorporation of
the Company, as amended through the date hereof):
(a) Common Stock of Merger Sub. Each share of common stock, par value
$0.001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Shares and Parent-Owned Shares. Each Share
issued and outstanding immediately prior to the Effective Time that is owned by
Company or any Subsidiary (as defined in Section 9.3(q)) of Company or by
Parent, Merger Sub or any other Subsidiary of Parent (other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be canceled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
(c) Conversion of Company Preferred Stock.
(i) Series E Preferred Stock. Each share of Series E Preferred Stock
of the Company, no par value per share, ("Series E Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined and to the extent provided in Section 3.1(j)) will be
canceled and extinguished and be converted automatically into the right to
receive the following and any additional shares of Parent Common Stock and/or
Warrants as provided in Section 2.2(d):
(A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series E Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series E Quotient"), and then (2) multiplying the Series E Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series E Shares upon
surrender of the certificate representing such share of Series E Preferred in
the manner provided in Section 3.1(b); and
(B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series E Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series E Shares upon surrender of the certificate
representing such share of Series E Preferred in the manner provided in Section
3.1(b).
Notwithstanding any of the foregoing in this Section 2.2(c)(i), in the
event that the Series E Aggregate Preference Amount exceeds the Aggregate
Consideration, the results reached in each of 2.2(c)(i)(A) Parent Common Stock
and 2.2(c)(i)(B) Warrants shall be independently reduced by multiplying each
such result by the ratio of (a) the Aggregate Consideration divided by (b) the
Series E Aggregate Preference Amount.
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(ii) Series D Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series D Preferred Stock of
the Company, no par value per share, ("Series D Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):
(A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series D Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series D Quotient"), and then (2) multiplying the Series D Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series D Shares upon
surrender of the certificate representing such share of Series D Preferred in
the manner provided in Section 3.1(b); and
(B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series D Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series D Shares upon surrender of the certificate
representing such share of Series D Preferred in the manner provided in Section
3.1(b).
Notwithstanding any of the foregoing in this Section 2.2(c)(ii), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount exceeds the Aggregate Consideration, the results
reached in each of 2.2(c)(ii)(A) Parent Common Stock and 2.2(c)(ii)(B) Warrants
shall be independently reduced by multiplying each such result by the ratio of
(a) the Aggregate Consideration less the Series E Aggregate Preference Amount
divided by (b) the Secondary Aggregate Preference Amount.
(iii) Series C Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series C Preferred Stock of
the Company, no par value per share, ("Series C Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):
(A) Parent Common Stock. That number of shares of Parent Common
Stock, which shall be computed by (1) dividing the Series C Aggregate Preference
Amount by the Aggregate Consideration (such quotient shall be referred to as the
"Series C Quotient"), and then (2) multiplying the Series C Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series C Shares upon
surrender of the certificate representing such share of Series C Preferred in
the manner provided in Section 3.1(b); and
(B) Warrants. That number of Warrants, which shall be computed by
(1) multiplying the Series C Quotient by the Aggregate Warrant Number, and then
(2) dividing by the Total Series C Shares upon surrender of the certificate
representing such share of Series C Preferred in the manner provided in Section
3.1(b).
Notwithstanding any of the foregoing in this Section 2.2(c)(iii), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount
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exceeds the Aggregate Consideration, the results reached in each of
2.2(c)(iii)(A) Parent Common Stock and 2.2(c)(iii)(B) Warrants shall be
independently reduced by multiplying each such result by the ratio of (a) the
Aggregate Consideration less the Series E Aggregate Preference Amount divided by
(b) the Secondary Aggregate Preference Amount.
(iv) Series B Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series B Preferred Stock of
the Company, no par value per share, ("Series B Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):
(A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series B Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series B Quotient"), and then (2) multiplying the Series B Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series B Shares upon
surrender of the certificate representing such share of Series B Preferred in
the manner provided in Section 3.1(b); and
(B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series B Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series B Shares upon surrender of the certificate
representing such share of Series B Preferred in the manner provided in Section
3.1(b).
Notwithstanding any of the foregoing in this Section 2.2(c)(iv), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount exceeds the Aggregate Consideration, the results
reached in each of 2.2(c)(iv)(A) Parent Common Stock and 2.2(c)(iv)(B) Warrants
shall be independently reduced by multiplying each such result by the ratio of
(a) the Aggregate Consideration less the Series E Aggregate Preference Amount
divided by (b) the Secondary Aggregate Preference Amount.
(v) Series A Preferred Stock. If the Aggregate Consideration exceeds the
sum of the Series E Aggregate Preference Amount and the Secondary Aggregate
Preference Amount, each share of Series A Preferred Stock of the Company, no par
value per share, ("Series A Preferred") issued and outstanding immediately prior
to the Effective Time (other than any Dissenting Shares) will be canceled and
extinguished and be converted automatically into the right to receive the
following and any additional shares of Parent Common Stock and/or Warrants as
provided in Section 2.2(d):
(A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series A Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series A Quotient"), and then (2) multiplying the Series A Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series A Shares upon
surrender of the certificate representing such share of Series A Preferred in
the manner provided in Section 3.1(b); and
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(B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series A Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series A Shares upon surrender of the certificate
representing such share of Series A Preferred in the manner provided in Section
3.1(b).
Notwithstanding any of the foregoing in this Section 2.2(c)(v), in the
event that the sum of the Series E Aggregate Preference Amount, the Secondary
Aggregate Preference Amount and the Series A Aggregate Preference Amount exceeds
the Aggregate Consideration, the results reached in each of 2.2(c)(v)(A) Parent
Common Stock and 2.2(c)(v)(B) Warrants shall be independently reduced by
multiplying each such result by the ratio of (a) the Aggregate Consideration
less the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount, divided by (b) the Series A Aggregate Preference
Amount.
(d) Conversion of Company Common and As-Converted Preferred Stock. If the
Aggregate Consideration Exceeds the Total Liquidation Preference Amount, each
share of Common Stock and As-Converted Preferred Stock of the Company, no par
value per share, ("Company As-Converted Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares) will
be cancelled and extinguished and be converted automatically into the right to
receive the following:
(A) Parent Common Stock. That number of shares of Parent Common
Stock, which shall be computed by (1) subtracting the aggregate number of shares
of Parent Common Stock issuable under paragraphs 2.2(c)(i), 2.2(c)(ii),
2.2(c)(iii), 2.2(c)(iv) and 2.2(c)(v) from the Aggregate Share Number, and then
(2) dividing by the Total As-Converted Common Shares upon surrender of the
certificate representing such share of Company As-Converted Common Stock in the
manner provided in Section 3.1(b); and
(B) Warrants. That number of shares of Warrants, which shall be
computed by (1) subtracting the aggregate number of Warrants issuable under
paragraphs 2.2(c)(i), 2.2(c)(ii), 2.2(c)(iii), 2.2(c)(iv) and 2.2(c)(v) from the
Aggregate Warrant Number, and then (2) dividing by the Total As-Converted Common
Shares upon surrender of the certificate representing such share of Company As-
Converted Common Stock in the manner provided in Section 3.1(b).
(e) Warrants. To the extent any warrant to purchase Shares (the "Company
Warrants") remain exercisable immediately prior to the Effective Time, the
Company Warrants shall, in connection with the Merger be terminated and shall
not be assumed by Parent. After the Effective Time, any unexercised portion of
the Company Warrants shall not represent any right to purchase any Shares or any
Parent Common Stock.
(f) Debt. To the extent there is debt of the Company that is convertible
to capital stock of the Company (the "Convertible Debt") immediately prior to
the Effective Time, the Convertible Debt shall, in connection with the Merger
and pursuant to its terms, become unsecured debt of the Company equal to the
principal amount of the underlying promissory note(s). No adjustment shall be
made to the principal amount of any remaining Convertible Debt to reflect the
termination of the conversion rights. After the Effective Time, any unconverted
portion of the Convertible Debt shall not represent any right to purchase any
Shares or any Parent Common Stock.
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Section 2.3 Stock Options. To the extent any Company Options (as defined
in Section 4.1(d)) remain exercisable immediately prior to the Effective Time,
the Company Options shall, in connection with the Merger, be terminated and
shall not be assumed by Parent.
Section 2.4 Employee Retention Incentive Pool. Parent shall reserve up to
50,000 shares of Parent Common Stock in connection with the Company's Employee
Retention Incentive Pool as provided in Section 6.11 below.
ARTICLE III
EXCHANGE OF CERTIFICATES
Section 3.1 Exchange of Certificates.
(a) Exchange Agent. Prior to or concurrently with the Effective Time, Parent
shall enter into an agreement with Parent's stock transfer agent or such bank or
trust company as may be designated by Parent and approved by the Company (the
"Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
Shares, for exchange in accordance with this Article III, through the Exchange
Agent, sufficient cash payable in lieu of any fractional shares of Parent Common
Stock and certificates representing the shares of Parent Common Stock and
Warrants (such shares of Parent Common Stock and Warrants, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time, and any cash payable in lieu of any fractional shares of Parent
Common Stock, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.2 in exchange for outstanding Shares.
(b) Letters of Transmittal; Surrender of Certificates. As soon as reasonably
practicable after the Effective Time not to exceed three (3) Business days after
receipt of confirmation of the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record (other than Company or any of
its Subsidiaries or Parent, Merger Sub or any other Subsidiary of Parent) of the
Shares, (i) a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificate or certificates
that evidence outstanding Shares immediately prior to the Effective Time (the
"Certificates") shall pass, only upon proper delivery of the Certificates to the
Exchange Agent, and shall be in such form and have such other provisions as
Parent and Company may reasonably specify), and shall include (A) for those
Company non-accredited stockholders who have not previously executed and
delivered to Parent a Non-Accredited Stockholder Questionnaire, a Non-Accredited
Stockholder Questionnaire substantially in the form of Exhibit B; (B) for those
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Company accredited stockholders who have not previously executed and delivered
to Parent an Accredited Stockholder Questionnaire, a Accredited Stockholder
Questionnaire substantially in the form of Exhibit C; and (C) a Registration
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Rights Agreement substantially in the form of Exhibit D; and (ii) instructions
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for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. The letter of transmittal shall also contain a provision
pertaining to lost, destroyed or stolen Certificates. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
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required pursuant to such instructions, (including the Non-Accredited
Stockholder Questionnaire and the Accredited Stockholder Questionnaire, as
applicable, and the Registration Rights Agreement) the holder of such
Certificate shall be entitled to receive in exchange therefor the applicable
amount of the Merger Consideration, (and cash in lieu of fractional shares of
Parent Common Stock as contemplated by this Section 3.1) that the aggregate
number of Shares previously represented by such Certificate shall have been
converted into the right to receive pursuant to Section 2.2, and the Certificate
so surrendered shall forthwith be canceled, provided, however, that no holder of
a Certificate shall receive any Merger Consideration until such holder has
delivered to Parent an executed Non-Accredited Stockholder Questionnaire or
Accredited Stockholder Questionnaire, as the case may be, and an executed
Registration Rights Agreement. No interest shall be paid or accrued on any cash
payable upon the surrender of any Certificate. If payment is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the surrendered Certificate or established to the satisfaction of
Parent and the Surviving Corporation that such taxes have been paid or are not
applicable.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock issuable upon the surrender of such
Certificate pursuant to Section 3.1(b), and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 3.1(e),
and all dividends, other distributions and cash in lieu of fractional shares of
Parent Common Stock shall be paid by Parent to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such
Certificate pursuant to Section 3.1(b). Subject to the effect of applicable
escheat or similar laws, following the surrender of any such Certificate
pursuant to Section 3.1(b) there shall be paid to the holder of the Certificate
representing the whole shares of Parent Common Stock issued in exchange
therefor, without interest, in addition to such holder's shares of Parent Common
Stock and Warrants, (i) at the time of such surrender, the amount of dividends
or other distributions with respect to such whole shares of Parent Common Stock
with a record date after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock, and the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 3.1(e), and (ii) at the appropriate payment date,
the amount of dividends or other distributions with respect to such whole shares
of Parent Common Stock with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(d) Cancellation and Retirement of Shares, No Further Rights. As of the
Effective Time, all Shares (other than Dissenting Shares and Shares to be
canceled in accordance with Section 2.2(b)) issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Certificate theretofore representing any such Shares shall cease to have
any rights with respect thereto (including without limitation the right to
vote), except the right to receive the Merger Consideration, without interest,
upon surrender of such Certificate in accordance with
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Section 3.1(b), and until so surrendered, each such Certificate shall represent
for all purposes only the right to receive the Merger Consideration, without
interest. The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article III shall be deemed to
have been paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such Certificates.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates
which have been converted pursuant to Section 2.2, and such fractional share
interests shall not entitle the owner thereof to vote or to any rights of a
stockholder of Parent.
(ii) In lieu of any such fractional shares, each holder of Shares who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
upon surrender of Certificates for exchange pursuant to this Section 3.1
(after taking into account all Certificates delivered by such holders) will be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (A) the Average Closing Price of Parent's Common
Stock (as reported on The Nasdaq Stock Market) on the trading day immediately
prior to the date on which the Effective Time occurs, by (B) the fractional
interest to which such holder otherwise would be entitled. Such amount in cash
shall be deemed to be substituted for any such fractional share and constitute
a portion of the Merger Consideration with respect to the related Shares. The
fractional share interest of each holder of Shares will be aggregated, and no
holder of Shares will receive cash in an amount equal to or greater than the
value of one full share of Parent Common Stock.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, in (i) direct obligations
of the United States of America with maturities of 90 days or less, (ii)
obligations for which the full faith and credit of the United States of America
is pledged to provide for the payment of principal and interest, or (iii)
interest bearing accounts of commercial banks with capital exceeding $500
million. Any net earnings with respect to the Exchange Fund shall be the
property of and paid over to Parent twelve months after the Effective Time, and
Parent shall include any income earned by the Exchange Fund on its applicable
Returns (as defined in Section 4.1(o)(i)) and pay any Taxes (as defined in the
last paragraph of Section 4.1(o)) with respect thereto.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for twelve months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates that have not theretofore complied with this Article III shall
thereafter look only to Parent, and only as general creditors thereof, for
payment of their claim for any Merger Consideration, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock provided for in Section 3.1(c).
(h) No Liability. None of Parent, Merger Sub, the Surviving Corporation or
the Exchange Agent shall be liable to any person in respect of any payments or
distributions payable from the
9
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 4.1(c)), any amounts payable in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
(i) Withholding Rights. Parent shall be entitled to deduct and withhold, or
cause to be deducted or withheld, from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares or Certificates such amounts
as are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of applicable state, local or foreign
tax law. To the extent that amounts are so deducted and withheld, such deducted
and withheld amounts shall be treated for all purposes of this Agreement as
having been paid to such holders in respect of which such deduction and
withholding was made.
(j) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a stockholder who has demanded and perfected dissenters'
rights for such Shares in accordance with Chapter 13 of the CGCL and who has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive a portion
of the Merger Consideration pursuant to Section 2.2, but the holder thereof
shall only be entitled to such rights as are granted by CGCL. From and after the
Effective Time, a holder of Dissenting Shares shall not be entitled to exercise
any of the voting rights or other rights of a stockholder of the Surviving
Corporation.
(ii) Notwithstanding the provisions of Section 2.2 hereof, if any
holder of Shares who demands appraisal of such shares under CGCL shall
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 the Merger Consideration as provided in
Section 2.2, without interest thereon, upon surrender of the certificate
representing such shares.
(iii) The Company shall give Parent (A) prompt notice of any written
demands for appraisal of any Shares, withdrawals of such demands, and any other
instruments served pursuant to CGCL and received by the Company and (B) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under CGCL. The Company shall not, except with the prior
written consent of Parent, which will not be unreasonably withheld, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.
10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Company. Company represents and
warrants to Parent and Merger Sub that the statements contained in this Section
4.1 are true, correct and complete as of the date hereof, and will be true,
correct and complete as of the Closing Date (unless specifically made as of
another date), except as specified to the contrary in the corresponding
paragraph of the disclosure schedule prepared by the Company accompanying this
Agreement (the "Company Disclosure Schedule"). The Company Disclosure Schedule
will be arranged in paragraphs corresponding to the letter and numbered
paragraphs contained in this Section 4.1. The representations and warranties of
Company contained in this Section 4.1 shall be deemed to be made without giving
effect to the planned transfer of certain of the Company's assets pursuant to
that certain Asset Purchase Agreement to be executed immediately prior to the
Closing Date by Company and Level 8 Technologies, Inc., which is a wholly-owned
subsidiary of Parent ("Level 8 Technologies"), and, accordingly, the materiality
of the Company's representations and warranties hereunder shall not be reduced
or otherwise affected as a result of such asset transfer.
(a) Organization and Standing. Each of Company and each Subsidiary of
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Company and each Subsidiary of Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(as defined in Section 9.3(k)) on Company. Company has delivered to Parent
true, complete and correct copies of the articles of incorporation and bylaws
or comparable governing documents of Company and each Subsidiary of Company,
in each case as amended to the date of this Agreement. A true, correct and
complete list of all Subsidiaries of Company, together with the jurisdiction
of incorporation of each such Subsidiary and the percentage of each such
Subsidiary's capital stock owned by Company or another Subsidiary, is set
forth in the Company Disclosure Schedule.
(b) Authority; Noncontravention; and Corporate Power. Company has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Company and the consummation by Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Company, subject, in the case of the Merger, to the
approval of this Agreement by its stockholders as contemplated by Section 6.1.
This Agreement has been duly executed and delivered by Company and, assuming
that this Agreement constitutes a valid and binding obligation of Parent and
Merger Sub, constitutes a valid and binding obligation of Company, enforceable
against Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent
11
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity. None of
Company or its Subsidiaries is in violation of its articles of incorporation (or
the comparable governing documents) or bylaws. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, (i) conflict with any
of the provisions of the articles of incorporation or bylaws of Company or the
comparable governing documents of any Subsidiary of Company, in each case as
amended to the date of this Agreement, (ii) subject to the governmental filings
and other matters referred to in the next section, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Company or any of its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.1(c), contravene any domestic or foreign law, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award currently in effect
and applicable to the Company, which, in the case of clauses (ii) and (iii)
above could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.
(c) Consents and Approvals. No consent, approval or authorization of, or
declaration or filing with, or notice to, any domestic or foreign court,
governmental agency or regulatory authority (a "Governmental Entity") or any
other third party which has not been received or made (or has been received or
made but is not otherwise in full force and effect) is required by or with
respect to Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Company or the consummation by Company of the
transactions contemplated hereby, except for (i) the approval of the Merger by
Company's stockholders, (ii) the filing of the certificate and/or agreement of
merger with the California Secretary of State and the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which Company is qualified to do business, (iii) such other consents, approvals,
authorizations, filings or notices as are specified in the Company Disclosure
Schedule, and (iv) any other consents, approvals, authorizations, filings or
notices the failure to make or obtain which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
(d) Capital Structure. The authorized capital stock of the Company consists
solely of 10,000,000 shares of authorized Common Stock, of which 1,040,027
shares are issued and outstanding as of the date of this Agreement, and
6,000,000 shares of authorized Preferred Stock (the "Preferred Stock"). The
authorized Preferred Stock consists of 474,875 shares of authorized Series A
Preferred, of which 418,250 shares are issued and outstanding as of the date of
this Agreement, 387,423 shares of authorized Series B Preferred, all of which
shares are issued and outstanding as of the date of this Agreement, 400,000
shares of authorized Series C Preferred, all of which shares are issued and
outstanding as of the date of this Agreement, 478,866 shares of authorized
Series D Preferred, of which 341,331 shares are issued and outstanding as of the
date of this Agreement, 3,666,667 shares of authorized
12
Series E Preferred, of which 3,385,911 shares are issued and outstanding as of
the date of this Agreement, and of which 592,169 shares are undesignated and are
not issued or outstanding. The Company has delivered to Parent accurate and
complete copies of the Company's 1992 Stock Option Plan and 1995 Stock Option
Plan (collectively, the "Option Plans"). Stock options granted by Company
pursuant to the Option Plans that are currently in effect or that have been in
effect and otherwise are referred to in this Agreement are referred to herein as
"Company Options." There are no Company Options other than Company Options
outstanding under the Option Plans. The Company has delivered to Parent accurate
and complete copies of all Option Plans pursuant to which Company has ever
granted stock options, and the forms of all stock option agreements evidencing
such options. Except as otherwise contemplated in this Agreement, there are no
commitments or agreements of any nature to which Company is bound obligating
Company to accelerate the vesting of any Company Option. Except as set forth in
this Section 4.1(d), no shares of capital stock or other equity securities of
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of Company are duly authorized, validly issued, fully
paid and nonassessable and are not subject to preemptive rights. Except as
specified above, neither Company nor any Subsidiary of Company has or after the
Effective Time will have, any outstanding option, warrant, call, subscription or
other right, agreement or commitment which (A) obligates Company or any
Subsidiary of Company to issue, sell or transfer, or repurchase, redeem or
otherwise acquire, any shares of the capital stock of Company or any Subsidiary
of Company, (B) restricts the transfer of any shares of capital stock of Company
or any of its Subsidiaries (other than arising under applicable securities
laws), or (C) relates to the voting of any shares of capital stock of Company or
any of its Subsidiaries. No bonds, debentures, notes or other indebtedness of
Company or any Subsidiary of Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which the stockholders of Company or any Subsidiary of Company may vote are
issued or outstanding. All the outstanding shares of capital stock of each
Subsidiary of Company have been duly authorized and are validly issued, fully
paid and nonassessable and are owned by Company, by one or more Subsidiaries of
Company or by Company and one or more of such Subsidiaries, free and clear of
all Liens (as defined in Section 9.3(j)). Neither Company nor any of its
Subsidiaries has any contract, commitment or other obligation to repurchase,
redeem or otherwise acquire any Shares or any capital stock of any of Company's
Subsidiaries, or make any investment (whether by loan, capital contribution or
otherwise) in any person. Neither Company nor any of its Subsidiaries owns, or
has any contract, commitment or other obligation to acquire, any other
securities of any person or any direct or indirect equity or ownership interest
in any other business.
(e) [DELETED.]
12
(f) Absence of Certain Changes or Events; No Undisclosed Material Liabilities.
(i) Since December 31, 1999 (the date of the most recent audited financial
statements), Company and its Subsidiaries have conducted their businesses only
in the ordinary course, and there has not been: (A) any change, event or
occurrence which has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company; (B) any declaration,
setting aside or payment of any dividend or other distribution in respect of
shares of Company's capital stock, or any redemption or other acquisition by
Company of any shares of its capital stock; (C) any increase in the rate or
terms of compensation payable or to become payable by Company or its
Subsidiaries to their directors, officers or key employees, except increases
occurring in the ordinary course of business consistent with past practices; (D)
any entry into, or increase in the rate or terms of, any bonus, insurance,
severance, pension or other employee or retiree benefit plan, payment or
arrangement made to, for or with any such directors, officers or key employees,
except with respect to the Employee Retention Incentive Pool described in
Section 6.11, or increases occurring in the ordinary course of business
consistent with past practices or as required by applicable law; (E) any entry
into any agreement, commitment or transaction by Company or any of its
Subsidiaries which is material to Company and its Subsidiaries taken as a whole,
except for agreements, commitments or transactions entered into in the ordinary
course of business consistent with past practice; (F) any change by Company in
accounting methods, principles or practices, except as required or permitted by
generally accepted accounting principles; (G) any write-off or write-down of, or
any determination to write-off or write-down, any asset of Company or any of its
Subsidiaries or any portion thereof which write-off, write-down or determination
exceeds $25,000 individually or $50,000 in the aggregate; (H) any announcement
or implementation of any reduction in force, lay-off, early retirement program,
severance program or other program or effort concerning the termination of
employment of employees of Company or its Subsidiaries; or (I) any announcement
of or entry into any agreement, commitment or transaction by Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (A)
through (H) otherwise than as expressly provided for herein.
(ii) Except liabilities incurred in the ordinary course of business
consistent with past practice, since December 31, 1999, there are no liabilities
of Company or its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, due, to become due, determined, determinable or otherwise
required by generally accepted accounting principles ("GAAP") to be reflected on
a consolidated balance sheet of Company and its consolidated Subsidiaries or in
the notes, exhibits or schedules thereto, having, or which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company other than liabilities arising under contracts of the Company which are
identified in the Company's Disclosure Schedule.
(g) Real Property; Other Assets.
(i) The Company does not own, and has never owned, any real property.
14
(ii) Company or one of its Subsidiaries has good and marketable fee simple
title to each asset reflected in the latest audited balance sheet of Company
(other than any such other asset disposed of or consumed in the ordinary course
of business) free and clear of all Liens except (A) those reflected or reserved
against in the latest audited balance sheet of Company, (B) taxes and general
and special assessments not in default and payable without penalty and interest,
(C) those Liens set forth in the Company's Disclosure Schedule, and (D) such
other Liens and other imperfections of title, if any, as do not detract from the
value or materially interfere with the present use of the property affected
thereby.
(iii) The Company's Disclosure Schedule sets forth a true and complete
list, and Company has heretofore delivered to Parent true, correct and complete
copies of all leases, subleases and other agreements (the "Real Property
Leases") under which Company or any of its Subsidiaries uses or occupies or has
the right to use or occupy, now or in the future, real property or facility (the
"Leased Real Property"), including all modifications, amendments and supplements
thereto. Except where the failure could not reasonably be expected to have,
individually, a Material Adverse Effect on Company: (A) Company or one of its
Subsidiaries has a valid and subsisting leasehold interest in each parcel of
Leased Real Property free and clear of all Liens and each Real Property Lease is
in full force and effect; (B) all rent and other sums and charges payable by
Company or its Subsidiaries as tenants thereunder are current in all respects;
(C) no termination event or condition or uncured default on the part of Company
or any such Subsidiary or, to Company's knowledge, the landlord, exists under
any Real Property Lease; (D) to Company's knowledge, Company or one of its
Subsidiaries is the sole undisputed lessee of each Leased Real Property, is in
actual possession thereof and is entitled to quiet enjoyment thereof in
accordance with the terms of the applicable Real Property Lease; and (E) no
consent or approval from the lessor under the Real Property Leases is required
for the consummation by Company of the transactions contemplated hereby.
(iv) To Company's knowledge, Company's, or any of its Subsidiaries',
current use of the Leased Real Property and the improvements and buildings
located thereon and the presently anticipated future use by Company of the
Leased Real Property in connection with the operation of Company's, or any of
its Subsidiaries', business is in compliance in all material respects and
substantially conforms with all applicable zoning and building regulation
requirements.
(h) Software.
(i) The Company's Disclosure Schedule sets forth under the caption "Owned
Software" a true, correct and complete list (other than off-the-shelf computer
programs that are validly and properly licensed under a shrink-wrap license) of
all material computer programs (source code or object code) which were developed
for or on behalf of, or have been purchased by, Company or any Subsidiary of
Company and which are currently used internally by Company or which have been
distributed by Company or any of its Subsidiaries and all material computer
programs under development by Company or its Subsidiaries but not currently
distributed (collectively, the "Owned Software"), and the Company's Disclosure
Schedule sets forth under the caption "Licensed Software" a true,
15
correct and complete list of all material computer programs (source code or
object code) licensed to Company or any Subsidiary of Company by another person
which are currently used internally by Company or which have been distributed by
Company or any of its Subsidiaries, whether as integrated or bundled with any of
Company's or its Subsidiaries' computer programs or as a separate stand-alone
product (specifically excluding any off-the-shelf computer program that is
validly and properly licensed under a shrink-wrap license) (collectively, the
"Licensed Software" and, together with the Owned Software, the "Software").
(ii) Company, directly or through its Subsidiaries, has good, marketable
and exclusive title to, and the valid and enforceable power and unqualified
right to sell, license, lease, transfer, use, create derivative works of, or
otherwise exploit, all versions and releases of the Owned Software and all
copyrights thereof, free and clear of all Liens. Company, directly or through
its Subsidiaries, is in actual possession of the source code and object code for
each computer program included in the Owned Software, and Company, directly or
through its Subsidiaries, is in possession of all other documentation, including
without limitation all related engineering specifications, program flow charts,
installation and user manuals and know-how necessary for the effective use of
the Software as currently used in Company's business or as offered or
represented to Company's customers or potential customers. Company, directly or
through its Subsidiaries, is in actual possession of the object code and user
manuals for each computer program included in the Licensed Software. The
Software constitutes all of the computer programs necessary to conduct Company's
business as now conducted, and includes all of the computer programs licensed or
offered for license to Company's customers and potential customers or otherwise
used in the development, marketing, licensing, sale or support of the products
and the services presently offered by Company. No person other than Company and
its Subsidiaries has any right or interest of any kind or nature in or with
respect to the Owned Software or any portion thereof or any rights to sell,
license, lease, transfer, use or otherwise exploit the Owned Software or any
portion thereof.
(iii) The Company's Disclosure Schedule sets forth a true, correct and
complete list, by computer program, of (A) all persons other than Company and
its Subsidiaries that have been provided with the source code or have a right to
be provided with the source code (including any such right that may arise after
the occurrence of any specified event or circumstance, either with or without
the giving of notice or passage of time or both) for any of the Owned Software,
and (B) all source code escrow agreements relating to any of the Owned Software
(setting forth as to any such escrow agreement the source code subject thereto
and the names of the escrow agent and all other persons who are actual or
potential beneficiaries of such escrow agreement), and identifies with
specificity all agreements and arrangements pursuant to which the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby would entitle any third party or parties to
receive possession of the source code for any of the Owned Software or any
related technical documentation. No person (other than Company and its
Subsidiaries and any person that is a party to a contract referred to in clause
(F) of Section 4.1(k) that restricts such person from disclosing any information
concerning such source code) is in possession of, or has or has had access to,
any source code for any computer program included in the Owned Software.
16
(iv) There are no defects in any computer program included in the Software
that would materially adversely affect the functioning thereof in accordance
with any published specifications therefor or in accordance with any warranties
given with respect thereto. Without limiting the generality of the foregoing,
all of the Software has the following properties and capabilities: (A) the
capability to correctly recognize and accurately process dates expressed as a
four-digit number (or the binary equivalent or other machine readable iteration
thereof) (collectively, "Four-Digit Dates"); (B) the capability to accurately
execute calculations using Four-Digit Dates; (C) the functionality (both on-line
and batch), including entry, inquiry, maintenance and update, to support
processing involving Four-Digit Dates; (D) the capability to generate interfaces
and reports that support processing involving Four-Digit Dates; (E) the
capability to generate and successfully transition, without human intervention,
into the year 2000 using the correct system date and to thereafter continue
processing with Four-Digit Dates; (F) the capability to provide correct results
in forward and backward data calculations spanning century boundaries, including
the conversion of pre-2000 dates currently stored as two-digit dates; and (G)
the capability to correctly recognize leap years, including the year 2000, and
to properly process date calculations involving or spanning leap years. Each
computer program included in the Software is in machine readable form and
contains all current revisions. The Company's Disclosure Schedule sets forth a
true, correct and complete list of current claims of defects by customers of
Company or any of its Subsidiaries under warranties or support and maintenance
agreements.
(v) None of the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by Company or any Subsidiary of
Company of any version or release of any computer program included in the
Software obligates or will obligate Company or any Subsidiary of Company to pay
any royalty, fee or other compensation to any other person.
(vi) Neither Company nor any of its Subsidiaries markets, or has marketed,
and none of them have supported or is obligated to support, any Licensed
Software separate from the Owned Software.
(vii) No material agreement, license or other arrangement pertaining to any
of the Software (including, without limitation, any development, distribution,
marketing, user or maintenance agreement, license or arrangement) to which
Company or any Subsidiary of Company is a party will terminate or become
terminable by any party thereto as a result of the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. All licenses covering Licensed Software are of perpetual
duration (subject to provisions allowing Company to terminate and provisions
allowing the respective licensors to terminate in the event of a breach by
Company).
(i) Intellectual Property.
(i) The Company's Disclosure Schedule sets forth a true, correct and
complete list (including, to the extent applicable, registration, application or
file numbers) of all patents, and all material copyrights, trade dress,
trademarks, trade names, service marks, domain names and other material
intellectual property rights, including, without limitation, trade
17
secrets, processes, formulae, designs and know-how used by Company or
any Subsidiary of Company in connection with the conduct of Company's
business, and all registrations of or applications for registration of any
of the foregoing, including any additions thereto or extensions,
continuations, renewals or divisions thereof (setting forth the
registration, issue or serial number and a description of the same)
(collectively, the "Intellectual Property"). Parent has heretofore been
furnished with true, correct and complete copies of each registration or
application for registration covering any of the Intellectual Property or
Software which is registered with, or in respect of which any application
for registration has been filed with, any Governmental Entity.
(ii) The Intellectual Property includes all of the material
intellectual property rights owned by or licensed by or to Company and its
Subsidiaries that are necessary to conduct Company's business as it is now
conducted, and includes all of the material intellectual property rights
owned by or licensed by or to Company and its Subsidiaries that are used in
the development, marketing, licensing or support of the Software or are
licensed by Company to, or offered for license to, Company's customers or
potential customers. Company, directly or through its Subsidiaries, has
good, marketable and exclusive title to, and the valid and enforceable
power and unqualified right to use, the Intellectual Property free and
clear of all Liens. No person or entity other than Company and its
Subsidiaries has any right or interest of any kind or nature in or with
respect to the Intellectual Property or any portion thereof or any rights
to use, market or exploit the Intellectual Property or any portion thereof.
(j) No Infringement. Neither the existence nor the sale, license, lease,
transfer, use, reproduction, distribution, modification or other exploitation by
Company, any Subsidiary of Company or any of their respective successors or
assigns of any Owned Software or Intellectual Property (and, to Company's
knowledge, the Licensed Software), as such Software or Intellectual Property, as
the case may be, is or was, or is currently contemplated by the Company to be
sold, licensed, leased, transferred, used or otherwise exploited by such
persons, does, did or will (A) infringe on any patent, trademark, copyright or
other right of any other person,(B) constitute a misuse or misappropriation of
any trade secret, know-how, process, proprietary information or other right of
any other person or a violation of any relevant agreement governing the license
of the Licensed Software to Company or its Subsidiaries, or (C) entitle any
other person to any interest therein, or right to compensation from Company, any
Subsidiary of Company or any of their respective successors or assigns, by
reason thereof, in each case, except as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
Neither Company nor any of its Subsidiaries has received any complaint,
assertion, threat or allegation or otherwise has notice of any lawsuit, claim,
demand, proceeding or investigation involving matters of the type contemplated
by the immediately preceding sentence or has knowledge of any facts or
circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. Except as provided in the
relevant agreements governing the license of the Licensed Software to Company or
its Subsidiaries, there are no restrictions on the ability of Company, any
Subsidiary of Company or any of their respective successors or assigns to sell,
license, lease, transfer, use, reproduce, distribute, modify or otherwise
exploit any Software or Intellectual Property.
18
(k) Material Contracts. There have been made available to Parent and its
representatives true, correct and complete copies of all of the following
contracts to which Company or any of its Subsidiaries is a party or by which any
of them is bound (collectively, the "Material Contracts"): (A) contracts with
any current officer, director or employee of Company or any of its Subsidiaries;
(B) contracts pursuant to which Company or any of its Subsidiaries licenses
other persons to use any of the Software or has agreed to support, maintain,
upgrade, enhance, modify, port, or consult with respect to any of the Software,
or pursuant to which other persons license Company or any of its Subsidiaries to
use the Licensed Software; (C) contracts (1) for the sale of any of the assets
of Company or any of its Subsidiaries, other than contracts entered into in the
ordinary course of business, or (2) for the grant to any person of any
preferential rights to purchase any of its assets; (D) contracts by which
Company has agreed to design, develop, author or create any new custom, or
customized software for any third party; (E) contracts which restrict Company or
any of its Subsidiaries from competing in any line of business or with any
person in any geographical area or which restrict any other person from
competing with Company or any of its Subsidiaries in any line of business or in
any geographical area; (F) contracts which restrict Company or any of its
Subsidiaries from disclosing any information concerning or obtained from any
other person or which restrict any other person from disclosing any information
concerning or obtained from Company or any of its Subsidiaries; (G) indentures,
credit agreements, security agreements, mortgages, guarantees, promissory notes
and other contracts relating to the borrowing of money; and (H) all other
agreements, contracts or instruments entered into outside of the ordinary course
of business or which are material to Company. Except as could not reasonably be
expected to have a Material Adverse Effect on Company, all of the Material
Contracts are in full force and effect as to Company and are the legal, valid
and binding obligation of Company and/or its Subsidiaries, enforceable against
them in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Neither Company nor any of its Subsidiaries is
in breach or default (with or without notice or lapse of time, or both) in any
material respect under any Material Contract nor, to the knowledge of Company,
is any other party to any Material Contract in breach or default (with or
without notice or lapse of time, or both) thereunder in any material respect.
Neither Company nor any of its Subsidiaries is a party to any existing contract,
obligation or commitment of any type in any of the following categories: (1) any
sales contract, including any open bid or quotation, which is of an open-end or
blanket nature; (2) contracts for the purchase of materials, supplies or
equipment which have not been entered into in the ordinary course of business
and consistent with past practice or for capital expenditures in excess of
$50,000; (3) contracts with distributors, manufacturers' representatives or
sales agents, except those which are terminable at the option of Company or any
of its Subsidiaries on 60 days' notice or less without incurring any liability
in excess of $25,000; (4) contracts under which Company or any of its
Subsidiaries has, except by way of endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past practice,
become absolutely or contingently or otherwise liable for (aa) the performance
of any other person, firm or corporation under a contract, or (bb) the whole or
any part of the indebtedness or liabilities of any other person, firm or
corporation; (5) powers of attorney outstanding from
19
Company or any of it Subsidiaries other than as issued in the ordinary course of
business and consistent with past practice with respect to customs, insurance,
patent, trademark or tax matters, or to agents for service of process; (6)
contracts under which any amount payable by Company or any of its Subsidiaries
is dependent upon the revenues or profits of Company or any of its Subsidiaries
(other than employment contracts containing bonus payment provisions dependent
on Company's or any of its Subsidiaries' financial performance which are
contained in the Company's Disclosure Schedule); (7) contracts with any party
for the loan of money or availability of credit to or from Company or any of its
Subsidiaries (except trade credit extended by Company or any of its Subsidiaries
to its or their customers or travel advances to its or their employees in the
ordinary course of business and consistent with past practice); or (8) any
hedging, option, derivative or other similar transaction.
(l) Litigation.
(i) There is no suit, claim, action or proceeding (at law or in equity)
pending or, to the knowledge of Company, threatened against Company or any of
its Subsidiaries, and to the knowledge of Company, there is no investigation
pending or threatened against Company or any of its Subsidiaries, in each case,
before any court or other Governmental Entity, (ii) neither Company nor any of
its Subsidiaries is subject to any outstanding order, writ, judgement,
injunction, decree or arbitration order or award, and (iii) to the knowledge of
Company, no event, fact or circumstance which could reasonably be expected to
give rise to a suit, claim, action, or proceeding (at law or in equity) against
Company or any of its Subsidiaries exist that, in any such case described in
clauses (i), (ii) and (iii), could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company. As of the date
hereof, there are no suits, claims, actions, proceedings or investigations
pending or, to the Company's Knowledge, threatened, seeking to prevent, hinder,
modify or challenge the transactions contemplated by this Agreement.
(m) Compliance with Applicable Laws. All federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights (collectively, "Permits") necessary for
each of Company and its Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default (with or without notice or lapse of time or
both) under any such Permit, except for the lack of Permits and for defaults
under Permits which lack or default could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company. Company
and its Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity, except for
non-compliance which could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.
(n) Environmental Laws. To Company's Knowledge: (i) neither Company nor any
of its Subsidiaries has violated or is in violation of any Environmental Law (as
defined in Section 9.3(g)); (ii) none of the Leased Real Property (including
without limitation soils and surface and ground waters) has been or are
contaminated with any Hazardous Substance (as defined in Section 9.3(h)); (iii)
neither Company nor any of its Subsidiaries is potentially liable or liable for
any off-site contamination; (iv) neither Company nor any of its Subsidiaries has
any
20
notice of an actual liability, remediation obligation or reporting duty under
any Environmental Law; (v) no assets of Company or any of its Subsidiaries are
subject to pending or threatened Liens under any Environmental Law; (vi) Company
and its Subsidiaries have all Permits required under any Environmental Law
("Environmental Permits"), other than Environmental Permits where the failure to
have such permits could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company; and (vii) Company and
its Subsidiaries are in compliance with their respective Environmental Permits.
(o) Taxes.
(i) Except where the failure to do so could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company,
each of Company and each Subsidiary of Company (and any affiliated or unitary
group of which any such person was a member) has (A) timely filed all federal,
state, local and foreign returns, declarations, reports, estimates, information
returns and other statements of any kind ("Returns") required to be filed by or
for it in respect of any Taxes (as defined in the last paragraph of this Section
4.1(o)), the Company has not filed for an extension to file any Returns, and has
caused such Returns as so filed to be true, correct and complete, (B)
established reserves that are reflected in Company's December 31, 1999 audited
financial statements and that as so reflected are adequate for the payment of
all Taxes with respect to the results of operations of Company and its
Subsidiaries through the date of such financial statements, and (C) timely
withheld and paid over to the proper taxing authorities all Taxes required to be
so withheld and paid over through the date hereof. Each of Company and each
Subsidiary of Company (and any affiliated or unitary group of which any such
person was a member) has timely paid all Taxes with respect to any Returns
referred to in the immediately preceding sentence and that became due and
payable on or before the date hereof.
(ii) To the Company's Knowledge, (A) there has been no taxable period for
which a Return of Company or any of its Subsidiaries has been examined on audit
by the Internal Revenue Service (the "IRS") or an applicable state, local or
foreign taxing authority that remains open as of the date hereof, and (B) except
for alleged deficiencies which have been finally and irrevocably resolved,
Company has not received formal or informal notification that any deficiency for
any Taxes, the amount of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, has been
or will be proposed, asserted or assessed against Company or any of its
Subsidiaries by any federal, state, local or foreign taxing authority or court
with respect to any period.
(iii) Neither Company nor any of its Subsidiaries has (A) executed or
entered into with the IRS or any other taxing authority any agreement or other
document that continues in force and effect beyond the Effective Time and that
extends or has the effect of extending the period for assessments or collection
of any Taxes, (B) executed or entered into with the IRS or any other taxing
authority any closing agreement or other similar agreement (nor has Company or
any of its Subsidiaries received any ruling, technical advice memorandum or
similar determination) affecting the determination of Taxes required to be shown
on any
21
Return not yet filed, or (C) requested any extension of time to be granted
to file after the Effective Date any Return required by applicable law to
be filed by it.
(iv) Neither Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Company or any of its
Subsidiaries. None of the assets of Company or any of its Subsidiaries is
required to be treated as being owned by any other person pursuant to the
"safe harbor" leasing provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954 as formerly in effect.
(v) Neither Company nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
(vi) Company has no pending application with the IRS under Section
481(a) of the Code requesting a change in accounting method or otherwise.
(vii) Neither Company nor any of its Subsidiaries is, or has been, a
United States Real Property Holding Corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(viii) Except for the group of which Company is presently the common
parent, Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, and each of
Company's Subsidiaries has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, except where
Company was the common parent of such affiliated group.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign or other jurisdiction taxes including, but without limitation,
income, property, sales, excise, employment, payroll, franchise, withholding
and other taxes, tariffs, charges, fees, levies, imposts, duties, licenses or
other assessments of every kind and description, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
taxing authority.
(p) Benefit Plans. The Company's Disclosure Schedule sets forth a true,
correct and complete list of all the employee benefit plans (as that phrase is
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) maintained or contributed to for the benefit of
any current or former employee, officer or director of Company or any of its
Subsidiaries ("Company ERISA Plans") and any other benefit or compensation
plan, program or arrangement maintained or contributed to for the benefit of
any current or former employee, officer or director of Company or any of its
Subsidiaries (Company ERISA Plans and such other plans being referred to as
"Company Plans"). Company has delivered to Parent and its representatives a
true, correct and complete copy of every document pursuant to which each
Company Plan is established or operated (including any summary plan
descriptions), a written description of any Company Plan for which there is no
written document, and the three most recent annual reports, financial
statements and
22
actuarial valuations with respect to each Company Plan, if required. Except as
specified in the Company's Disclosure Schedule:
(i) No member of Company Group (as defined below) maintains, or has
at any time established or maintained, or has at any time obligated to
make, or made, contributions to or under any multiemployer plan (as defined
in Section 3(37) and Section 4001(a)(3) of ERISA).
(ii) None of Company Plans promises or provides retiree health or
life insurance benefits to any person (other than continuation health
coverage benefits under the Consolidated Omnibus Budget Reconciliation
Act).
(iii) None of Company Plans provides for payment of a benefit, the
increase of a benefit amount, the payment of a contingent benefit or the
acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement.
(iv) Neither Company nor any of its Subsidiaries has an obligation to
adopt, or is considering the adoption of, any new Company Plan or, except
as required by law, the amendment of an existing Company Plan.
(v) The IRS has issued favorable determination letters to the effect
that each Company ERISA Plan intended to be qualified under Section 401(a)
of the Code qualifies under Code Section 401(a) and that any related trust
is exempt from taxation under Code Section 501(a), and such determination
letters remain in effect and have not been revoked. Copies of the most
recent determination letters and any outstanding requests for a
determination letter with respect to each Company ERISA Plan have been
delivered to Parent. No Company ERISA Plan has been amended since the
issuance of each respective determination letter. The Company ERISA Plans
currently comply in all material respects in form with the requirements
under Code Section 401(a), other than changes required by statutes,
regulations and rulings for which amendments are not yet required.
No issue concerning the qualification of Company ERISA Plans is pending
before or, to the knowledge of Company, is threatened by the IRS. The Company
ERISA Plans have been administered in all material respects according to their
terms (except for those terms which are inconsistent with the changes required
by statutes, regulations, and rulings for which changes are not yet required to
be made, in which case Company ERISA Plans have been administered in accordance
with the provisions of those statutes, regulations and rulings) and in all
material respects in accordance with the requirements of Code Section 401(a), in
each case, except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Neither Company nor any
of its Subsidiaries or any other entities which now or in the past constitute a
single employer within the meaning of Code Section 414 (the "Company Group") or
any fiduciary of any Company ERISA Plan has done anything that would adversely
affect the qualified status of Company ERISA Plans or the related trusts.
23
Any Company ERISA Plan which is required to satisfy Code Section 401(k)(3)
and 401(m)(2) has been tested for compliance with, and has satisfied the
requirements of, Code Section 401(k)(3) and 401(m)(2) for each plan year ending
prior to the Closing Date.
(vi) Each Company Plan has been operated in accordance with its terms
and the requirements of all applicable law, in each case, except as could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Company.
(vii) To the Company's Knowledge, no member of Company Group (other
than the Company or any of its Subsidiaries) nor any other "disqualified
person" or "party in interest" (as defined in Code Section 4975 and ERISA
Section 3(14), respectively) with respect to Company Plans, has engaged in
any "prohibited transaction" (as defined in Code Section 4975 or ERISA
Section 406). All members of Company Group and all "fiduciaries" (as
defined in ERISA Section 3(21)) with respect to Company Plans, including
any members of Company Group which are fiduciaries as to a Company ERISA
Plan, have complied in all respects with the requirements of ERISA Section
404. To the Company's knowledge, no member of Company Group (other than the
Company or any of its Subsidiaries) and no party in interest or
disqualified person with respect to Company Plans has taken or omitted any
action which could lead to the imposition of an excise tax under the Code
or a fine under ERISA. To the Company's knowledge, no member of Company
Group (other than the Company or any of its Subsidiaries) is subject to any
material liability, tax or penalty whatsoever to any person whomsoever as a
result of any member of Company Group engaging in a prohibited transaction
under ERISA or the Code, and Company Group has no knowledge of any
circumstances which reasonably might result in any such material liability,
tax or penalty as a result of a breach of fiduciary duty under ERISA.
(viii) To the Company's Knowledge, no member of Company Group (other
than the Company or any of its Subsidiaries) maintains or has maintained an
"employee benefit pension plan" within the meaning of ERISA Section 3(2)
that is or was subject to Title IV of ERISA or has incurred any direct or
indirect liability under, arising out of or by operation of Title IV of
ERISA in connection with the termination of, or withdrawal from, any
Company ERISA Plan or other retirement plan or arrangement, and no fact or
event exists that could reasonably be expected to give rise to any such
liability.
(ix) To the Company's Knowledge, each member of Company Group (other
than the Company or any of its Subsidiaries) has made full and timely
payment of, or has accrued pending full and timely payment, all amounts
which are required under the terms of each of Company Plans and in
accordance with applicable laws to be paid as a contribution to each
Company Plan and no excise taxes are assessable as a result of any
nondeductible or other contributions made or not made to a Company Plan.
The assets of all Company Plans which are required under applicable laws to
be held in trust are in fact held in trust, and the assets of each such
Company Plan equal or exceed the liabilities of each such plan. The
liabilities of each other plan are properly and accurately reported on the
financial statements and records of Company. The assets of each Company
Plan are reported at their fair market value on the books and records of
each plan.
24
(x) There are no claims relating to Company Plans, other than routine
claims for benefits.
(xi) Each member of Company Group has complied with the continuation
coverage requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608. Each
member of Company Group has also complied with the portability, access, and
renewability provisions of Section K, Chapter 100 of the Code and Section 701
et. seq. of ERISA.
(xii) No member of Company Group is obligated, contingently or otherwise,
under any agreement to pay any amount which would be treated as a "parachute
payment," as defined in Code Section 280G(b) (determined without regard to Code
Section 280G(b)(2)(A)(ii)).
(xiii) None of Company Plans provide for benefits or other participation
therein, and Company has received no claims or demands for participation in or
benefits under any Company Plan, by any individual classified or treated by
Company as an independent contractor.
(q) Absence of Changes in Benefit Plans. Since December 31, 1999, neither
Company nor any of its Subsidiaries has adopted or agreed to adopt any
collective bargaining agreement or any Company Plan.
(r) Labor Matters.
(i) Neither Company nor any of its Subsidiaries is a party to any
employment, labor or collective bargaining agreement, and there are no
employment, labor or collective bargaining agreements which pertain to
employees of Company or any of its Subsidiaries. Company has heretofore
delivered to Parent true, complete and correct copies of the agreements
referred to in the previous sentence, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(ii) No employees of Company or any of its Subsidiaries are represented
by any labor organization and, to the knowledge of Company, no labor
organization or group of employees of Company or any of its Subsidiaries has
made a pending demand for recognition or certification. There are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority and, to the knowledge of Company, there are
no organizing activities involving Company or any of its Subsidiaries pending
with any labor organization or group of employees of Company or any of its
Subsidiaries.
(iii) There are no (A) unfair labor practice charges, grievances or
complaints pending or threatened in writing by or on behalf of any employee
or group of employees of Company or any of its Subsidiaries, or (B)
complaints, charges or claims against Company or any of its Subsidiaries
pending, or threatened in writing to be brought or filed, with any
25
Governmental Entity or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any individual by Company or any of its Subsidiaries.
(s) State Takeover Statutes; Company Rights Plan. As of the date hereof and
at all times on or prior to the Effective Time, the restrictions applicable to
business combinations contained in affiliated transactions and control share
acquisitions contained in the CGCL or any other applicable state takeover
statute, are, and will be, inapplicable to the execution, delivery and
performance of this Agreement and to the consummation of the Merger and the
other transactions contemplated by this Agreement.
(t) Brokers. No broker, investment banker, financial advisor or other
person, other ▇▇▇▇ ▇▇▇▇▇▇▇, Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Company.
(u) Voting Requirements. The affirmative vote of the (i) holders of at least
a majority of the outstanding Common Stock entitled to vote at a meeting of the
Company's stockholders with respect to the approval of this Agreement, voting
together as a single class, (ii) the holders of at least a majority of the
outstanding Preferred Stock entitled to vote at a meeting of the Company's
stockholders with respect to the approval of this Agreement, voting together as
a single class; and (iii) the holders of at least a majority of the outstanding
Common Stock and Preferred Stock entitled to vote at a meeting of the Company's
stockholders with respect to the approval of this Agreement, voting together as
a combined class, are the only votes of the holders of any class or series of
Company's capital stock or other securities required in connection with the
consummation by Company of the Merger and the other transactions contemplated
hereby to be consummated by Company.
(v) Insurance. Company has insurance policies and fidelity bonds covering
its and its Subsidiaries' assets, business, equipment, properties, operations,
employees, officers and directors of the type and in amounts customarily (to the
Company's knowledge) carried by persons conducting business similar to that of
Company. All premiums due and payable under all such policies and bonds have
been paid, and Company is otherwise in full compliance with the terms and
conditions of all such policies and bonds, except where the failure to have made
payment or to be in full compliance could not reasonably be expected to have a
Material Adverse Effect. The reserves established by Company in respect of all
matters as to which Company self-insures, including for workers' compensation
and workers' medical coverage, are adequate and appropriate. The Company's
Disclosure Schedule sets forth a true and complete list of all insurance
policies, fidelity bonds and self-insurance provisions of Company.
(w) Business Relationships. The relationships of Company and its
Subsidiaries with their significant customers, distributors, licensors,
designers and suppliers are satisfactory in all material respects to the Company
and, to Company's knowledge, the execution of this Agreement and the
consummation of the Merger and the other transactions contemplated
26
hereby will not materially adversely affect the relationships of Company and
its Subsidiaries with such customers, distributors, licensors, designers and
suppliers.
(x) HSR Compliance. The Company is not a person (nor is it included in a
person), that has total assets of $100 million or more or annual net sales of
$100 million or more, within the meaning of, and all as determined in
accordance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
Section 4.2 Representations and Warranties of Parent and Merger Sub. Parent
and Merger Sub represent and warrant to Company that the statements contained in
this Section 4.2 are true, correct and complete as of the date hereof, and will
be true, correct and complete as of the Closing Date (unless specifically made
as of another date), except as specified to the contrary in the corresponding
paragraph of the Disclosure Schedule prepared by Parent accompanying this
Agreement (the "Parent Disclosure Schedule"). The Parent Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.2.
(a) Organization and Standing. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Merger Sub is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or
Merger Sub.
(b) Authority; Noncontravention; and Corporate Power. Each of Parent and
Merger Sub has the requisite corporate power and authority to enter into this
Agreement, the Warrants and the Registration Rights Agreement (collectively,
the "Transaction Documents"), as applicable, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
the Transaction Documents by Parent and Merger Sub, as applicable, and the
consummation by Parent and Merger Sub of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub. The Agreement has been duly executed and delivered by
Parent, and the Warrants and Registration Rights Agreement will, when issued
and delivered in accordance with this Agreement, be duly executed and
delivered by Parent and, assuming that the Transaction Documents constitute a
valid and binding obligation of the other parties, constitute a valid and
binding obligation of Parent and Merger Sub, as applicable, enforceable
against each of them in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity. Neither Parent or Merger Sub is in violation of its
articles of incorporation (or the comparable governing documents) or bylaws.
The execution and delivery of the Transaction Documents do not, and the
consummation of the transactions contemplated thereby and compliance with the
provisions thereof will not, (i) conflict with any of the provisions of the
articles of
27
incorporation or bylaws of Parent or Merger Sub (ii) subject to the
governmental filings and other matters referred to in the next section,
conflict with, result in a breach of or default (with or without notice or
lapse of time, or both) under, or give rise to a material obligation, a right
of termination, cancellation or acceleration of any obligation or a loss of a
material benefit under, or require the consent of any person under, any
indenture or other agreement, permit, concession, franchise, license or
similar instrument or undertaking to which Parent or Merger Sub is a party or
by which Parent or Merger Sub or any of their respective assets is bound or
affected, or (iii) subject to the governmental filings and other matters
referred to in Section 4.1(c), contravene any domestic or foreign law, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award currently in effect and applicable to Parent or Merger Sub, which, in
the case of clauses (ii) and (iii) above could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or
Merger Sub.
(c) Consents and Approvals. No consent, approval or authorization of, or
declaration or filing with, or notice to, any Governmental Entity or any other
third party which has not been received or made (or has been received or made
but is not otherwise in full force and effect) is required by or with respect
to Parent or Merger Sub in connection with the execution and delivery of the
Transaction Documents by Parent or Merger Sub or the consummation by Parent or
Merger Sub of the transactions contemplated thereby, except for (i) the filing
of the certificate and/or agreement of merger with the California Secretary of
State and the Delaware Secretary of State, (ii) such other consents,
approvals, authorizations, filings or notices as are specified in the Parent
Disclosure Schedule, and (iii) any other consents, approvals, authorizations,
filings or notices the failure to make or obtain which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent or Merger Sub.
(d) Parent Company Stock and Warrants. The shares of Common Stock of Parent
to be issued pursuant to the Merger and upon exercise of the Warrants (in
compliance with their respective terms, including the payment of any required
additional consideration) will, when issued and delivered in accordance with
this Agreement, be duly authorized, validly issued, fully paid and non-
assessable and, based in part on the representations and warranties of the
Company's stockholders contained in the NonAccredited Stockholder
Questionnaires and Accredited Stockholder Questionnaires delivered to Parent
in connection with this Agreement, will be issued in compliance with all
applicable securities laws; provided, however, the Parent Common Stock to be
issued hereunder may be subject to restrictions on transfer under applicable
federal and state securities laws.
(e) SEC Filings; Parent Financial Statements.
(i) Parent has filed all forms, reports, registration statements and
documents with the Securities and Exchange Commission (the "SEC") since
January 1, 1998, and has made available to the Company such forms, reports
and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Parent may file subsequent to the
date hereof until the Closing) are referred to herein as the "Parent SEC
Reports"; provided, that any Parent SEC Report shall be deemed to include all
amendments
28
to such report through the date hereof. As of their respective filing dates
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), the Parent SEC Reports (A) complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent or SEC Reports and (B) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(ii) The consolidated financial statements of Parent (including, in each
case, the notes thereto), included in the Parent SEC Reports (the "Parent
Financial Statements"), including each Parent SEC Report filed after the date
hereof until the Closing, (A) complied as to form in all material respects
with the applicable rules and regulations of the SEC with respect thereto;
(B) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (other than the provision of notes to the
financial statements for quarterly periods); and (C) fairly presented the
consolidated financial position of Parent and its subsidiaries at the
respective dates thereof and the consolidated results of Patent's operations
and cash flows for the periods indicated (subject, in the case of unaudited
financial statements, to audit adjustments). There has been no change in
Parent's accounting policies except as described in the notes to the Parent
Financial Statements.
(f) Parent Capital Structure. The authorized capital stock of Parent as of
the date of this Agreement consists of 40,000,000 shares of Common Stock,
$0.001 par value per share, of which 14,883,501 shares are issued and
outstanding, and 10,000,000 shares of Preferred Stock, $0.001 par value per
share, of which 11,570 shares of Series A 4% Convertible Redeemable Preferred
Stock are issued and outstanding and 30,000 shares of Series B 4% Convertible
Redeemable Preferred Stock are issued and outstanding.
(g) Merger Sub Capital Structure. The authorized capital stock of the
Merger Sub consists of 1,000 shares of authorized Common Stock, $0.001 par
value per share, of which 1,000 shares are issued and outstanding and owned by
Level 8 Technologies.
(h) Litigation. Other than as set forth in the Parent SEC Reports, there is
no legal action, suit or proceeding of any nature pending or to the Parent's
Knowledge threatened against the Parent, its properties or any of its
officers, directors or employees, nor, to the Knowledge of the Parent, is
there any reasonable basis therefor.
(i) No Material Adverse Change. Since the date of the balance sheet
included in the Parent's most recently filed SEC Report, there has not
occurred any material adverse change in the financial condition, liabilities,
assets, business or results of operations of Parent. For purposes of this
section, changes in economic conditions or changes in the industry and markets
in which the Parent competes shall not constitute a material adverse change,
whether occurring at any time or from time to time.
29
(j) Merger Sub. All of the outstanding capital stock of Merger Sub is owned
by Level 8 Technologies free and clear of any Lien, claim or encumbrances or
any agreement with respect thereto. Since the date of its incorporation,
Merger Sub has not engaged in any activity of any nature except in connection
with or as contemplated by this Agreement and the Merger Agreement.
(k) Brokers' and Finders' Fees. Except as otherwise provided herein, the
Parent and Merger Sub have not incurred, nor will they incur, directly or
indirectly, any liability for brokerage or finders' fees or agent's
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
(l) Representations Complete. Neither this Agreement nor the information
provided by the Parent or Merger Sub (including information incorporated by
reference from Parent SEC Reports) for the purpose of making statements or
furnishing in or in connection with documents mailed or delivered to the
stockholders of the Company in connection with soliciting their consent to the
principal terms of this Agreement and the Merger (to the extent that such
documents were prepared by or include information provided by the Parent or
Merger Sub), contains any untrue statement of a material fact, or omits to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
Section 5.1 Conduct of Business of Company. Except as expressly provided for
herein, during the period from the date of this Agreement to the Effective Time,
Company shall, and shall cause each of its Subsidiaries to, act and carry on its
business only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the services of its
current key officers and employees and preserve the goodwill of those engaged in
material business relationships with Company, and to that end, without limiting
the generality of the foregoing, Company shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of Parent, which consent
shall not be unreasonably withheld:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of,
any of its outstanding capital stock (other than, with respect to a Subsidiary
of Company, to its corporate Parent), (ii) split, combine or reclassify any of
its outstanding 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
outstanding capital stock, or (iii) purchase, redeem or otherwise acquire any
shares of its outstanding capital stock or any rights, warrants or options to
acquire any such shares, except, in the case of this clause (iii), for the
acquisition of Shares from holders of Company Options in full or partial
payment of the exercise price payable by such holder upon exercise of Company
Options;
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(b) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible or exchangeable securities, other
than upon the exercise of Company Options outstanding on the date of this
Agreement;
(c) amend its articles of incorporation, bylaws or other comparable charter
or organizational documents;
(d) directly or indirectly acquire, make any investment in, or make any
capital contributions to, any person other than in the ordinary course of
business consistent with past practice;
(e) directly or indirectly sell, pledge or otherwise dispose of or encumber
any of its properties or assets that are material to its business, except for
sales, pledges or other dispositions or encumbrances in the ordinary course of
business consistent with past practice;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, other than indebtedness owing to or guarantees
of indebtedness owing to Company or any direct or indirect wholly owned
Subsidiary of Company, or (ii) make any loans or advances to any other person,
other than to Company or to any direct or indirect wholly owned Subsidiary of
Company and other than routine travel advances to employees or customer trade
credit consistent with past practice, except, in the case of clause (i), for
borrowings under existing credit facilities described in the Company's
Disclosure Schedule in the ordinary course of business consistent with past
practice;
(g) grant or agree to grant to any officer, employee or consultant any
increase in wages or bonus, severance, profit sharing, retirement, deferred
compensation, insurance or other compensation or benefits, or establish any
new compensation or benefit plans or arrangements, or amend or agree to amend
any existing Company Plans, except as may be required under existing
agreements or by law and normal, regularly scheduled increases in respect of
non-officer employees consistent with past practices;
(h) enter into or amend any employment, consulting, severance or similar
agreement with any individual, except with respect to new hires of nonofficer
employees in the ordinary course of business consistent with past practice;
(i) adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization, share
exchange or other material reorganization or any agreement involving any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of all or any
significant portions of the assets of the Company or any of its Subsidiaries,
in a single transaction or series of related transactions which could
reasonably be expected to interfere with the completion of the Merger;
(j) make any tax election or settle or compromise any income tax liability
of Company or of any of its Subsidiaries involving on an individual basis more
than $25,000;
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(k) make any change in any method of accounting or accounting practice or
policy, except as required by any changes in generally accepted accounting
principles;
(l) enter into any agreement, understanding or commitment that restrains,
limits or impedes Company's ability to compete with or conduct any business or
line of business, except for any such agreement, understanding or commitment
entered into in the ordinary course of business consistent with past practice;
(m) plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of Company or its
Subsidiaries;
(n) except as previously approved by the Board of Directors of Company prior
to the date hereof and as identified to Parent prior to the date hereof,
authorize or commit to make capital expenditures in excess of $50,000; or
(o) authorize any of, or commit or agree to take any of, the foregoing
actions in respect of which it is restricted by the provisions of this Section
5.1.
Section 5.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1,
the Company shall, and shall cause its subsidiaries and all of its or their
affiliates, officers, directors, employees, agents and representatives
(including without limitation any investment banker, financial advisor, attorney
or accountant retained by the Company or any of its subsidiaries or affiliates)
to discontinue any solicitation efforts, discussions or negotiations with
respect to any Acquisition Proposal (as hereinafter defined) with any person or
entity other than Parent and Merger Sub. The Company shall not, and shall not
authorize or permit any of its subsidiaries or any of its or their affiliates,
officers, directors, employees, agents or representatives (including without
limitations any investment banker, financial advisor, attorney or accountant
retained by the Company or any of its subsidiaries or affiliates) to, directly
or indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any action to facilitate, any inquiries, any
expression of interest or the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal, or enter into or
maintain or continue discussions or negotiate with any person in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal. For Purposes of this Agreement, "Acquisition Proposal"
means an inquiry, offer, proposal or other indication of interest (other than
the potential acquisition) regarding any of the following matters involving the
Company: (a) any merger, consolidation, share exchange, tender or exchange
offer, recapitalization, business combination or other similar transaction; (b)
any acquisitions of voting stock or other securities issued by the Company or
any of its subsidiaries; (c) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or any substantial portion of the assets of
the Company and its subsidiaries, taken as a whole, in a single transaction or
series of related transactions; or (d) any proposal, plan or intention to do any
of the foregoing or any agreement in principle or other agreement to engage in
any of the foregoing. Each of the Company, the Parent and Merger Sub
acknowledge that this Section 5.2 was a significant inducement for Parent and
Merger Sub to
32
enter into this Agreement and the absence of such provision would have resulted
in either (i) a material reduction in the Merger Consideration to be paid to the
stockholders of the Company, or (ii) a failure to induce Parent and Merger Sub
to enter into this Agreement.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Stockholder Approval. As soon as practicable following the date
hereof Parent shall take any action required to be taken under the securities
laws and applicable Blue Sky or securities laws in connection with the issuance
of the shares of Parent's Common Stock upon consummation of the Merger. The
Company shall solicit the written consent of each stockholder as soon as
reasonably practicable following the date hereof for the purpose of voting upon
approval of this Agreement and the transactions contemplated hereby, and such
other related matters as it deems appropriate. In connection with such
solicitation, (a) Parent shall prepare, and Company shall assist in the
preparation of an offering statement, satisfying the requirements set forth in
Rule 502(b)(2) under the Securities Act, and comparable, applicable state Blue
Sky or securities laws (the "Offering Statement") and Company shall cause such
Offering Statement to be mailed or otherwise delivered to the stockholders of
the Company, (b) Company shall furnish to the Parent all information concerning
it that the Parent may reasonably request in connection with the Offering
Statement, (c) the Board of Directors of the Company shall recommend to its
stockholders the approval of the matters submitted for approval, and (d) the
Board of Directors and officers of the Company shall use their reasonable
efforts to obtain such stockholders' approval. The Parties shall take all
action necessary or appropriate to cause the Merger to qualify for the exemption
from the registration requirements of the Securities Act provided by Rule 506
and comparable state Blue Sky or securities laws. The Company shall use its
reasonable best efforts to obtain executed Non-Accredited Stockholder
Questionnaires and Accredited Stockholder Questionnaires from each holder of
Preferred Stock of the Company as soon as practicable after delivery of the
Offering Statement. Parent shall make all necessary filings with respect to the
Merger under the securities laws.
Section 6.2 Access to Information, Confidentiality. Upon reasonable notice,
Company shall, and shall cause each of its Subsidiaries to, afford to Parent and
to Parent's officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all its
properties, books, contracts, commitments, Returns, personnel (with the prior
consent of the Company) and records and, during such period, Company shall, and
shall cause each of its Subsidiaries to, furnish as promptly as practicable to
Parent such information concerning its business, properties, financial
condition, operations and personnel as Parent may from time to time reasonably
request, provided, however, that Company shall not be required to disrupt its
business operations with respect to the provision of such information. Any such
investigation by Parent shall not affect the representations or warranties
contained in this Agreement. Except as required by law, Parent will hold, and
will cause its directors, officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any non-public
information obtained from Company in confidence to the extent required by, and
in accordance with the provisions of, the letter agreement(s) between Parent and
33
Company with respect to confidentiality and other matters, and Parent agrees
that, prior to the Effective Time, it will not use any such non-public
information to, directly or indirectly, divert or attempt to divert any
business, customer or employee of Company or any of its Subsidiaries.
Section 6.3 Reasonable Best Efforts. On the terms and subject to the
conditions set forth in this Agreement, each of the Parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable (a) to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII, and (b) to maintain Company's current customer
relationships.
Section 6.4 Public Announcements. Parent and Merger Sub, on the one hand, and
Company, on the other hand, shall consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press
release, SEC filing or other public statements with respect to the transactions
contemplated hereby, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, by court process or by obligations pursuant
to the rules of The Nasdaq Stock Market.
Section 6.5 Consents, Approvals and Filings. Upon the terms and subject to
the conditions hereof, each of the Parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, and assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
hereby, including without limitation using its reasonable best efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with Company and its
Subsidiaries as are necessary for the consummation of the Merger and the other
transactions contemplated hereby and to fulfill the conditions to the Merger;
provided, however, that in no event shall Parent or any of its Subsidiaries be
required to agree or commit to divest, hold separate, offer for sale, abandon,
limit its operation or similar action with respect to any material assets
(tangible or intangible) or any business interest of it or any of its
Subsidiaries (including, without limitation, the Surviving Corporation after
consummation of the Merger) in connection with or as a condition to receiving
the consent or approval of any Governmental Entity. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.
Section 6.6 Employee Benefit Matters.
(a) Any Company Plans that have been disclosed in the Company's Disclosure
Schedule and are in effect at the Effective Time will continue to be sponsored
by and maintained without material change (except as required by law) by the
Parent and Surviving Corporation until such time as those Company Plans are
merged into Parent's benefit plans or the participants in the Company Plan
otherwise become covered under the Parent's benefit plans. Parent shall, and
shall
34
cause its Subsidiaries following the Effective Time (including the Surviving
Corporation) to, honor and provide for prompt payment of all accrued obligations
and benefits under all Company Plans and employment or severance agreements
between Company and persons who are or had been employees of Company or any of
its Subsidiaries at or prior to the Effective Time ("Covered Employees") that
are specifically identified in the Company's Disclosure Schedule, all in
accordance with their respective terms.
(b) If Covered Employees are included in any benefit plan of Parent or its
Subsidiaries, Parent agrees that the Covered Employees shall receive credit
under such plan (other than any such plan providing for sabbaticals) for service
prior to the Effective Time with Company and its Subsidiaries to the same extent
such service was counted under similar Company Plans for purposes of
eligibility, vesting, eligibility for retirement (but not for benefit accrual)
and, with respect to vacation, disability and severance, benefit accrual. If
Covered Employees are included in any medical, dental or health plan other than
the plan or plans they participated in at the Effective Time, Parent agrees that
any such plans shall not include pre-existing condition exclusions, except to
the extent such exclusions were applicable under the similar Company Plan at the
Effective Time, and shall provide credit for any deductibles and co-payments
applied or made with respect to each Covered Employee in the calendar year of
the change.
(c) Notwithstanding anything in this Agreement to the contrary, from and after
the Effective Time, the Surviving Corporation will have sole discretion over the
hiring, promotion, retention, firing and other terms and conditions of the
employment of employees of the Surviving Corporation. Except as otherwise
provided in this Section 6.6, nothing herein shall prevent Parent or the
Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.
Section 6.7 Affiliates and Certain Stockholders. Prior to the Closing Date,
Company shall deliver to Parent a letter identifying all persons who are, at the
time the Merger is submitted for approval to the stockholders of Company,
"affiliates" of Company for purposes of Rule 145 under the Securities Act.
Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit E hereto.
---------
Section 6.8 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification provision under Company's articles of
incorporation or bylaws as each is in effect on the date hereof.
(b) This Section 6.8 shall survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by Company, Parent,
the Surviving Corporation and the indemnified parties, and shall be binding on
all successors and assigns of Parent and the Surviving Corporation.
35
Section 6.9 Subsidiaries' Directors and Officers. To the extent requested by
Parent, Company shall use its reasonable best efforts to obtain and deliver to
Parent prior to the Closing Date the resignation of each director and officer of
the Company and the Company's Subsidiaries.
Section 6.10 Employment Agreements. Company shall use its reasonable best
efforts to cause the persons identified by Parent to execute and deliver, prior
to the Effective Time, Employment Agreements on terms reasonably satisfactory to
Parent and such persons.
Section 6.11 Employee Retention Incentive Pool. Parent agrees to reserve up
to fifty thousand (50,000) shares of Parent Common Stock to be issued to
employees of Company who are eligible to receive such shares pursuant to the
Company's Employee Retention Incentive Pool (the "Retention Pool"). Generally,
employees of the Company who become employees of Parent following the Merger
shall be eligible to participate in the Retention Pool if such employees remain
employed by Parent at the time the Retention Pool is distributed; provided,
however, that employees of the Company who are employed by the Company as of the
Closing Date and (a) who do not become employees of Parent or (b) who are not
employed by Parent on the date of the Retention Pool is distributed and (c) who
did not voluntarily terminate their employment by Parent during such time frame
shall also be eligible to participate in the Retention Pool. On or prior to the
Closing Date, the Company shall provide Parent with a list of Company employees
who are eligible to participate in the Retention Pool, accompanied by a ledger
indicating the number of shares to be issued to each such employee. No more
than ninety (90) days following the Closing Date, Parent shall issue the shares
to such employees in accordance with the ledger; provided, however, Parent shall
have the right to issue such shares to employees of the Company who become
employees of Parent after the Effective Time in accordance with a Parent benefit
plan from which such shares may be issued. Parent shall register such shares
with the SEC by filing a Registration Statement on Form S-8 (or any successor
form) pertaining to the shares as soon as practicable following the Closing
Date, but in no event later than ninety (90) days following the Closing Date.
Any shares of Parent Common Stock to be issued pursuant to the Retention Pool
that are not issued under the Parent benefit plan and registered with the SEC
prior to the issuance of such shares shall be issued after December 31, 2000,
and registered by Parent under the terms and subject to the conditions of the
Registration Rights Agreement, which agreement shall be signed by Parent and
such persons requesting such registration.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have approved
this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger as and to the extent required by the CGCL or
by the provisions of any governing instruments.
36
(b) No action or Proceeding. No claim, action, suit or other proceeding
shall be pending or threatened by any public authority or person before
any court, agency or administrative body which would have the effect of
making illegal, materially delaying or otherwise restraining or
prohibiting the transactions contemplated hereby or allowing any
material damages to be recovered or other material relief to be
obtained as a result of the transactions contemplated hereby or as a
result of any agreement entered into in connection with, or as a
condition precedent to, the consummation of the transactions
contemplated hereby.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, provided,
however, that the party invoking this condition shall have complied
with its obligations under Section 6.5.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. Representations and warranties of
Company contained in this Agreement (other than representations and warranties
expressly made only as of a specific date, which shall be accurate as of such
date) shall have been accurate in all respects as of the date of this
Agreement and shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date, except for any such failure which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Company, and Parent and Merger Sub shall have
received a certificate signed on behalf of Company by an authorized officer of
Company to such effect.
(b) Performance of Obligations of Company. Company shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Parent and Merger Sub
shall have received a certificate signed on behalf of Company by an authorized
officer of Company to such effect.
(c) No Material Adverse Change. Since the date of this Agreement, Company
and its Subsidiaries, taken as a whole, shall not have experienced any change,
event or occurrence that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
(d) Consents. All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity or any other person
required to be obtained or made prior to the Effective Time in connection with
the execution, delivery and performance of this Agreement shall have been
obtained or made, except for the filing of the certificate/agreement of merger
pursuant to Section 1.3 and except where the failure to have obtained or made
such consents, authorizations, orders, approvals, filings or registrations
37
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or the Surviving Corporation.
(e) Affiliate Letters. Parent shall have received from each person
identified as an "affiliate" of Company pursuant to Section 6.7 an executed
copy of an agreement in the form attached as Exhibit E hereto.
---------
(f) Legal Opinion. Parent shall have received a legal opinion from Crosby,
Heafey, ▇▇▇▇▇ & May Professional Corporation, legal counsel to the Company,
substantially in the form attached hereto as Exhibit F.
---------
(g) Dissenting Shares. Holders of not more than five percent (5%) of the
outstanding Shares shall have perfected dissenters' rights of their Shares in
the manner required by the CGCL.
(h) Delivery of Questionnaires. Parent shall have received from the holders
of not less than 95% of the outstanding Preferred Stock executed NonAccredited
Stockholder Questionnaires and Accredited Stockholder Questionnaires, as
applicable.
(i) NonAccredited Stockholders. There shall be no more than thirty-five
(35) persons receiving Parent Common Stock and Warrants who are not deemed to
be "accredited investors" as that term is defined in Rule 501 of Regulation D
promulgated by the SEC, excluding Company employees who become employees of
Parent after the Effective Time or are otherwise eligible to participate in
the Retention Pool and who receive Parent Common Stock pursuant to Section
6.11 hereof.
(j) Closing of Asset Acquisition. The transactions contemplated by that
certain Asset Purchase Agreement by and between Level 8 Technologies and the
Company shall have closed to the reasonable satisfaction of the Parent.
(k) Conversion of Company Debt. The outstanding indebtedness of the Company
identified on Schedule 7.2(k) shall have been converted into shares of Parent
---------------
Common Stock; provided, however, that in connection with the conversion of such
indebtedness, Parent shall have agreed to prepare and file with the SEC a
registration statement as soon as practicable following the Closing Date and to
use its best efforts to have such registration statement declared effective not
later than ninety (90) days after the Effective Time pursuant to a registration
rights agreement containing customary terms and conditions, including
indemnification and contribution provisions..
(l) Additional Closing Documents. Company shall have furnished to Parent
and Merger Sub such additional certificates, opinions and other documents as
Parent may have reasonably requested as to any of the conditions set forth in
this Section 7.2.
Section 7.3 Conditions to Obligation of Company. The obligation of Company to
effect the Merger is further subject to satisfaction or written waiver on or
prior to the Closing Date of the following conditions:
38
(a) Representations and Warranties. Representations and warranties of
Parent and Merger Sub contained in this Agreement (other than representations
and warranties expressly made as of a certain date, which shall be accurate as
of such date) shall have been accurate in all respects as of the date of this
Agreement and shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date, except for any such failure which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Parent, and Company shall have received a
certificate signed on behalf of Parent and Merger Sub by an authorized officer
of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and Company shall have received a certificate signed on behalf of Parent
by an authorized officer of Parent to such effect.
(c) No Material Adverse Change. Since the date of this Agreement, Parent
and its Subsidiaries, taken as a whole, shall not have experienced any change,
event or occurrence that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(d) Legal Opinion. The Company shall have received a legal opinion from
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, legal counsel to Parent, substantially
in the form attached hereto as Exhibit G.
----------
(e) Registration Rights Agreement. The Parent shall have executed and
delivered to the Company on behalf of the persons listed as signatories
thereto a Registration Rights Agreement in substantially the form of Exhibit
-------
D.
-
(f) Additional Closing Documents. Parent and Merger Sub shall have
furnished to Company such additional certificates and other documents as
Company may have reasonably requested as to any of the conditions set forth in
this Section 7.3.
(g) Noteholder Registration Rights. In connection with the conversion of
the outstanding indebtedness of the Company identified on Schedule 7.2(k),
---------------
Parent shall have agreed to prepare and file with the SEC a registration
statement as soon as practicable following the Closing Date and to use its
best efforts to have such registration statement declared effective not later
than ninety (90) days after the Effective Time pursuant to a registration
rights agreement containing customary terms and conditions, including
indemnification and contribution provisions.
39
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time, notwithstanding
adoption thereof by the stockholders of the Company, in any one of the following
circumstances:
(i) By mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(ii) By Parent or Company, if the Effective Time shall not have occurred
on or before November 30, 2000, otherwise than as a result of any material
breach of any provision of this Agreement by the party seeking to effect
such termination;
(iii) By Parent or Company, if any federal or state court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and non-appealable, provided
that neither party may terminate this Agreement pursuant to this Section
8.1(a)(iii) unless such party has used its reasonable best efforts to
remove such order, decree, ruling or injunction;
(iv) By Parent, if this Agreement and the transactions contemplated
hereby shall not have been adopted by the affirmative vote of the holders
of the requisite number of shares;
(v) By Parent if any of Company's representations and warranties
contained in this Agreement shall have been materially inaccurate as of the
date of this Agreement or shall have become materially inaccurate as of the
Closing Date as if made on such date, or if any of Company's covenants and
agreements contained in this Agreement shall have been breached in any
material respect, provided, however, that Parent may not terminate this
Agreement under this Section 8.1(v) on account of an inaccuracy in
Company's representations and warranties that is curable by Company unless
Company fails to cure such inaccuracy or breach within ten (10) days after
receiving written notice from Parent of such inaccuracy or breach;
(vi) By Company if any of the Parent's representations and warranties
contained in this Agreement shall have been materially inaccurate as of the
date of this Agreement or shall have become materially inaccurate as of the
Closing Date as if made on such date, or if any of the Parent's covenants
and agreements contained in this Agreement shall have been breached in any
material respect, provided, however, that Company may not terminate this
Agreement under this Section 8.1(vi) on account of an inaccuracy in the
Parent's representations and warranties that is curable by the Parent or on
account of a
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breach of covenant or agreement by the Parent that is curable by the Parent
unless the Parent fails to cure such inaccuracy or breach within ten (10)
days after receiving written notice from Company of such inaccuracy or
breach.
Section 8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(t), the last sentence of Section 6.2,
Section 6.4, this Section 8.2 and Article IX) shall forthwith become void and
cease to have any force or effect, without any liability on the part of any
party hereto or any of its affiliates; provided, however, that nothing in this
Section 8.2 shall relieve any party to this Agreement of liability for any
willful or intentional breach of this Agreement.
Section 8.3 Amendment. Subject to applicable provisions of the DGCL and the
CGCL, at any time prior to the Effective Time, the Parties hereto may modify or
amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
adoption of this Agreement by the stockholders of Company, no amendment shall be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger. This
Agreement may not be modified or amended except by written agreement executed
and delivered by duly authorized officers of each of the respective parties.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (c) subject to
Section 8.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in a written
instrument executed and delivered by a duly authorized officer on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Merger Sub
or Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. Except as
contemplated in Section 8.2, none of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 9.1 shall not
41
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
Section 9.2 Fees and Expenses. Each party hereto shall pay its own fees and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, except
for the reasonable fees and expenses of Company's financial advisor and legal
counsel and such other fees and expenses agreed upon between Parent and the
Company.
Section 9.3 Definitions. For purposes of this Agreement:
(a) "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Aggregate Consideration" shall be equal to the sum of (A) the Aggregate
Share Number multiplied by the Average Closing Price plus (B) the Aggregate
Warrant Number multiplied by the Warrant Value.
(c) "As-Converted Preferred Stock" shall mean the number of shares of each
of the Company's Series A Preferred Stock, the Series B Preferred Stock, the
number Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock, on an as-converted into Common Stock basis taking into
account the conversion rights contained in the Articles of Incorporation of
the Company, as amended as of the date hereof.
(d) "Average Closing Price" shall mean the average of the closing prices of
the Parent Common Stock as reported on the Nasdaq National Market over the 30
day period ending three days prior to the Closing Date.
(e) "Business day" means any day other than Saturday, Sunday or any other
day on which banks in the City of New York are required or permitted to close;
(f) "Disclosure Schedule" means the disclosure schedule delivered by each
party to the other simultaneously with the execution of this Agreement;
(g) "Environmental Laws" means any federal, state or local law, rule,
regulation or decision relating to: (i) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii)
otherwise relating to pollution of the environment or the protection of human
health;
(h) "Hazardous Substances" means: (i) those substances defined as "hazardous
substances," "pollutants" or "contaminants," "hazardous waste," "hazardous
chemicals" and the like in or regulated under the following federal statutes
and their state counterparts, as each may be amended from time to time, and
all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive
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Environmental Response, Compensation and Liability Act, the Clean Water Act,
the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
Fungicide and Rodenticide Act and the Clean Air Act; (ii) petroleum and
petroleum products including crude oil and any fractions thereof; (iii)
natural gas, synthetic gas and any mixtures thereof usable for fuel, (iv)
radon; (v) asbestos; and (vi) any other substance, regardless of physical
form, that is subject to any Environmental Laws;
(i) "Knowledge" means the actual knowledge of any executive officer of
Company or Parent, as the case may be;
(j) "Liens" means, collectively, all pledges, claims, liens, charges,
mortgages, conditional sale or title retention agreements, hypothecations,
collateral assignments, security interests, easements and other encumbrances
of any kind or nature whatsoever;
(k) "Material Adverse Effect" or "Material Adverse Change" means any event,
occurrence, failure of event or occurrence, change, effect, state of affairs,
breach, default, violation, fine, penalty or failure to comply (each, a
"circumstance"), individually or taken together with all other circumstances
contemplated by or in connection with the applicable representations and
warranties made in this Agreement which could reasonably be expected to: (i)
materially adversely effect the business, properties, assets, condition
(financial or otherwise), or results of operations of Parent or Company, in
each case, including its respective Subsidiaries together with it taken as a
whole, or (ii) impair Parent or Company, as the case may be, of its ability to
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. In no event shall any of the following
constitute a Material Adverse Effect or a Material Adverse Change: (i) a
change in the trading prices of Parent's equity securities between the date of
this Agreement and the Effective Time, in and of itself; (ii) effects,
changes, events, circumstances or conditions generally affecting the business
application integration industry in which Parent and the Company operate or
arising from changes in general business or economic conditions, and not
specifically relating to Parent or Company, as the case may be; (iii) effects,
changes, events, circumstances or conditions directly attributable to (A) out-
of-pocket fees and expenses (including, without limitation, legal, accounting,
investigatory, investment banking, and other fees and expenses) incurred in
connection with the transactions contemplated by the Agreement or (B) the
payment by Parent or Company of all amounts due to any officers or employees
of Company under employment contracts, non-competition agreements, employee
benefit plans or severance arrangements as specified in the Disclosure
Schedule; (iv) any effects, changes, events, circumstances or conditions
resulting from any change in law or generally accepted accounting principles,
which affect generally entities such as Parent and Company; (v) any effects,
changes, events, circumstances or conditions resulting from compliance by
Parent or Company with the express terms of this Agreement or action taken
with the prior informed written consent of the other party; and (vi) the
default by Company of any payment obligations in favor of Parent under any
promissory notes issued by Company to Parent.
(l) "Person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity;
43
(m) "Secondary Aggregate Preference Amount" shall be equal to the sum of the
Series B Aggregate Preference Amount, the Series C Aggregate Preference Amount
and the Series D Aggregate Preference Amount.
(n) "Series A Aggregate Preference Amount" shall be equal to Total Series A
Shares multiplied by $3.00.
(o) "Series B Aggregate Preference Amount" shall be equal to Total Series B
Shares multiplied by $1.91.
(p) "Series C Aggregate Preference Amount" shall be equal to Total Series C
Shares multiplied by $5.00.
(q) "Series D Aggregate Preference Amount" shall be equal to Total Series D
Shares multiplied by $7.50.
(r) "Series E Aggregate Preference Amount" shall be equal to Total Series E
Shares multiplied by $3.00.
(s) a "Subsidiary" of any person means any other person of which (i) the
first mentioned person or any Subsidiary thereof is a general partner, (ii)
voting power to elect a majority of the board of directors or others
performing similar functions with respect to such other person is held by the
first mentioned person and/or by any one or more of its Subsidiaries, or (iii)
at least 50% of the equity interests of such other person is, directly or
indirectly, owned or controlled by such first mentioned person and/or by any
one or more of its Subsidiaries.
(t) "Total As-Converted Common Shares" shall be equal to the sum of the
number of Total Common Shares and the As-Converted Preferred Stock.
(u) "Total Liquidation Preference Amount" shall be equal to the sum of
Series A Aggregate Preference Amount, the Series B Aggregate Preference
Amount, the Series C Aggregate Preference Amount, the Series D Aggregate
Preference Amount and the Series E Aggregate Preference Amount.
(v) "Total Common Shares" shall be equal to the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to Section 2.2(b).
(w) "Total Series A Shares" shall be equal to the number of shares of Series
A Preferred outstanding immediately prior to the Effective Time (other than
any shares of Series A Preferred to be canceled pursuant to Section 2.2(b) and
any Dissenting Shares).
(x) "Total Series B Shares" shall be equal to the number of shares of Series
B Preferred outstanding immediately prior to the Effective Time (other than
any shares of Series B Preferred to be canceled pursuant to Section 2.2(b) and
any Dissenting Shares).
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(y) "Total Series C Shares" shall be equal to the number of shares of Series
C Preferred outstanding immediately prior to the Effective Time (other than
any shares of Series C Preferred to be canceled pursuant to Section 2.2(b) and
any Dissenting Shares).
(z) "Total Series D Shares" shall be equal to the number of shares of Series
D Preferred outstanding immediately prior to the Effective Time (other than
any shares of Series D Preferred to be canceled pursuant to Section 2.2(b) and
any Dissenting Shares).
(aa) "Total Series E Shares" shall be equal to the number of shares of
Series E Preferred outstanding immediately prior to the Effective Time (other
than any shares of Series E Preferred to be canceled pursuant to Section
2.2(b) and any Dissenting Shares).
(bb) "Warrant Value" shall be determined by the Company's financial advisor,
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated.
Section 9.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) or by telecopy (and confirmed by telecopy answerback) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Parent or to Merger Sub, to
Level 8 Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Company, to
StarQuest Software, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy (which shall not constitute notice) to:
Crosby, Heafey, ▇▇▇▇▇ & May Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.5 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
Section 9.6 Entire Agreement; Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the letter agreement referenced in
the last sentence of Section 6.4. Except for the provisions of Article II and
Section 6.8, this Agreement is not intended to confer upon any person (including
without limitation any employees or former employees of Company), other than the
parties hereto, any rights or remedies.
Section 9.7 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof, except to the extent the internal laws of the State of California
expressly apply to the Merger as it relates to Company.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 9.9 Enforcement. 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. Accordingly, the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in the
Court of Chancery in and for New Castle County in the State of Delaware (or, if
such court lacks subject matter jurisdiction, any appropriate state or federal
court in New Castle County in the State of Delaware), this being in addition to
any other remedy to which they are entitled at law or in equity. Each of the
parties hereto (a) shall submit itself to the personal jurisdiction of the Court
of Chancery in and for New Castle County in the State of Delaware (or, if such
court lacks subject matter jurisdiction, any appropriate state or federal court
in New
46
Castle County in the State of Delaware) in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (b) shall not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) shall not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware).
Section 9.10 Severability. Whenever possible, each provision or portion of
any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 9.11 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
47
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
LEVEL 8 SYSTEMS, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
STARQUEST SOFTWARE, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
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