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Exhibit 2.4
AGREEMENT AND PLAN OF MERGER
dated as of June 7, 2000
by and between
WEBGAIN, INC., a Delaware corporation,
ZAT Acquisition Corporation, a Delaware corporation,
ZAT, INC., an Oregon corporation,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (the "Principal Shareholders"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable Trust Dtd. 11/19/96,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
(together with the Principal Shareholders, the "Shareholders").
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of June 7,
2000, by and among WebGain, Inc., a Delaware corporation ("WebGain"), ZAT
Acquisition Corporation, a Delaware corporation ("Acquisition Subsidiary") ZAT,
Inc., an Oregon corporation (the "Company"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "Principal Shareholders") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable Trust Dtd. 11/19/96, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
(together with the Principal Shareholders, the "Shareholders").
RECITALS
A. Company is in the business of developing Internet
application-authoring tools (the "Business").
B. WebGain and Company desire to merge (the "Merger") Company with and
into Acquisition Subsidiary with Acquisition Subsidiary being the surviving
corporation (the "Surviving Corporation") of the Merger.
C. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(e) of the
Internal Revenue Code of 1986, as amended (the "Code"), and for financial
accounting purposes shall be accounted for as a purchase transaction.
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
ARTICLE 1
MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement and
in accordance with the Delaware General Corporation Law (the "DGCL") and Oregon
Business Corporation Act (the "OBCA"), at the Effective Time (as defined
hereinafter), Company will be merged with and into Acquisition Subsidiary, with
Acquisition Subsidiary being the Surviving Corporation of the Merger, and the
separate corporate existence of the Company shall cease.
1.2 THE CLOSING. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, concurrently with the
execution of this Agreement and the date of the Closing is referred to herein
as the "Closing Date."
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1.3 FILING OF MERGER DOCUMENTS; EFFECTIVE TIME. At the Closing, the
parties shall cause the Merger to be consummated by executing and filing
agreements or certificates of merger as contemplated by the DGCL and OBCA in
the forms of Exhibit A-1 and A-2 attached hereto, together with any other
required certificates (the "Certificates of Merger"), with the Secretary of
State of the State of Delaware and Secretary of State of the State of Oregon,
in such form as WebGain and the Company reasonably determine is required by and
in accordance with the relevant provisions of the DGCL and OBCA. The time upon
which such filing is effective in accordance with the DGCL and OBCA shall be
referred to herein as the "Effective Time."
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the DGCL and OBCA. Without limiting the generality of
the foregoing, at the Effective Time:
(a) The Certificate of Incorporation and the Bylaws of Acquisition
Subsidiary, as in effect immediately prior to the Closing Date, shall become
the Certificate of Incorporation of the Surviving Corporation, unless and until
amended in accordance with their terms and as provided by law.
(b) The officers and directors of Acquisition Subsidiary shall
become the officers and directors of the Surviving Corporation, each to hold
their respective positions in accordance with the Certificate of Incorporation
and Bylaws of the Surviving Corporation until his successor is duly elected and
qualified.
(c) All the property rights, privileges, powers and franchises of
the Company and the Acquisition Subsidiary shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the
Acquisition Subsidiary shall become the debts, liabilities and duties of the
Surviving Corporation.
1.5 TAX AND ACCOUNTING TREATMENT. The parties acknowledge and agree
that the Merger contemplated hereby shall be treated as a purchase transaction
for accounting purposes. The parties also acknowledge and agree that the Merger
is intended to be a reorganization under Section 368(a) of the Code; each party
shall use all commercially reasonable efforts to cause the Merger to be treated
as a reorganization; and neither party shall take any action which is
inconsistent with such treatment. Notwithstanding the foregoing, each party
represents that it has received its own tax advice and neither party is relying
on tax advice provided by the other party or the other party's counsel
concerning the tax treatment of this transaction. The parties to this
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368(g) and 1.368-3(a) of the United States Treasury
Regulations.
ARTICLE 2
CONVERSION OF STOCK
2.1 CONSIDERATION; CONVERSION OF STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
and subject to Section 2.3.2, each share of common stock, $0.001 par value per
share, of the Company ("Company Stock")
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that is issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive, upon surrender of the certificate formerly
representing such share of Company Stock (the "Certificate"), that number of
shares of the Class A Common Stock of WebGain, $0.001 par value per share
("WebGain Common Stock"), as equals the Exchange Ratio (the "Stock
Consideration"), and a cash amount equal to the quotient obtained by dividing
7,500,000 by the total number of outstanding shares of Company Stock,
immediately prior to the Closing (the "Cash Consideration," together with the
Stock Consideration. the "Consideration"), provided, however, that any shares
of Company Stock that are held in the treasury of the Company or by any
subsidiary of the Company immediately prior to the Effective Time shall not be
so converted but shall be canceled and retired, and no consideration shall be
delivered in exchange therefor. The "Exchange Ratio" shall be equal to the
quotient obtained by dividing 9,000,000 by the total number of outstanding
shares of Company Stock, immediately prior to the Closing. The Consideration
shall be allocated in proportion to the respective ownership percentages of the
Company among the holders of Company Stock as of the Closing as set forth on
Schedule 2.1. At the Effective Time any shares of Company Stock held by Company
as treasury stock or held by WebGain or Acquisition Subsidiary shall be
canceled and no payment shall be made with respect thereto.
2.2 ADJUSTMENTS FOR CERTAIN DILUTIVE ISSUANCES
2.2.1 If, during the period commencing on the Effective Date and
ending on the five (5) year anniversary of the Effective date, WebGain issues
(or is deemed to issue pursuant to Section 2.2.4) shares of Class A Common
Stock or shares of any other class of Common Stock ("Additional Shares") to an
Independent Investor without consideration or for consideration per share of
less than $2.8125 (appropriately adjusted for any stock dividends, splits,
recapitalizations or similar events), WebGain shall promptly thereafter issue
such number of additional shares of Class A Common Stock (the "Antidilution
Adjustment Shares") as is equal to the difference between (i) $25,312,500
divided by the Effective Dilutive Price and (ii) 9,000,000 (appropriately
adjusted for any stock dividends, splits, recapitalizations or similar events).
In no event shall the number of Antidilution Adjustment Shares exceed 7,000,000
(appropriately adjusted for any stock dividends, splits, recapitalizations or
similar events).
For the purposes of this Agreement the term "Effective Dilutive
Price" shall mean the higher of (a) $1.582031 and (b) the quotient obtained by
dividing (i) the consideration, if any, received by WebGain as consideration
for the Additional Shares by (ii) the number of Additional Shares issued (or
deemed to be issued pursuant to Section 2.2.4) in the transaction to an
Independent Investor. For the purposes of this Agreement the term "Independent
Investor" shall mean any person or entity other than BEA Systems, Inc., a
Delaware corporation ("BEA"), Warburg Pincus Equity Partners, L.P., a Delaware
limited partnership ("WPEP"), Warburg Pincus Ventures, L.P., a Delaware limited
partnership ("WPV"); or any Affiliate of BEA, WPEP or WPV.
Notwithstanding any other provision herein, for the purposes of
this Agreement the term "Additional Shares" shall not include (and the
preceding antidilution adjustment shall not apply with respect to) securities
issued or issuable: (i) in connection with an
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acquisition, merger, asset purchase or stock purchase (an "Acquisition") where
the purpose of such Acquisition is to acquire a business, business division,
product or technology line, service group or other substantially similar entity
or enterprise; (ii) to employees, consultants, directors or vendors of WebGain
directly or pursuant to a stock option plan, stock plan, option agreement or
purchase agreement approved by the Board of Directors of WebGain where the
primary purpose of such issuance is a purpose other than raising capital; (iii)
upon conversion or exercise of convertible shares, convertible notes or options
issued by WebGain which are outstanding as of the date hereof, (iv) in
connection with joint development agreements, technology licensing agreements,
distribution agreements or corporate partnerships approved by the Board of
Directors where the primary purpose of such issuance is a purpose other than
raising capital; (v) in connection with loan agreements or similar debt
financings with commercial lending institutions; (vi) pursuant to stock splits,
stock dividends, recapitalizations and the like; (vii) in connection with an
initial public offering by WebGain with gross proceeds to WebGain of at least
$20,000,000 pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "IPO"); or (viii) by way of dividend or
other distribution on securities issued pursuant to subsections (i) through
(vii) or this subsection (viii). The Antidilution Adjustment Shares shall be
allocated in proportion to the respective ownership percentages of the Company
among the holders of Company Stock as of the Closing as set forth on Schedule
2.1. The rights to receive any Antidilution Adjustment Shares pursuant to this
Agreement shall terminate upon the earlier of (i) the five (5) year anniversary
of the Effective Date; and (ii) the IPO.
2.2.2 In the case of the issuance of Class A Common Stock or shares
of any other Common Stock for issued for cash consideration, for the purposes
of this Section 2.2, the consideration shall be deemed to be the amount of cash
paid therefor before deducting any discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
2.2.3 In the case of the issuance of Class A Common Stock or shares
of any other Common Stock issued for consideration in whole or in part other
than cash, for the purposes of this Section 2.2, the consideration other than
cash shall be deemed to be the fair value thereof as reasonably determined in
good faith by the Board of Directors irrespective of any accounting treatment.
2.2.4 In the case of the issuance (whether before, on or after the
Effective Date) of (i) options to purchase, or rights to subscribe for, Class A
Common Stock or shares of any other Common Stock, (ii) securities by their
terms convertible into or exchangeable for Class A Common Stock or shares of
any other Common Stock, (iii) options to purchase, or rights to subscribe for,
such convertible or exchangeable securities, and (iv) securities by their terms
convertible into or exchangeable for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
Section 2.2:
(a) The aggregate maximum number of shares of Class A Common
Stock or shares of any other Common Stock deliverable upon exercise (to the
extent then exercisable) of such options to purchase or rights to subscribe for
Class A Common Stock or shares of any other
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Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 2.2.2 and 2.2.3), if any,
received by the corporation upon the issuance of such options or rights plus
the minimum effective exercise price provided in such options or rights for the
Class A Common Stock or shares of any other Common Stock covered thereby.
(b) The aggregate maximum number of shares of Class A Common
Stock or shares of any other Common Stock deliverable upon conversion of or in
exchange (to the extent then convertible or exchangeable) for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received
by the corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subsections 2.2.2 and 2.2.3).
(c) For avoidance of doubt, the following provisions apply to
this Section 2.2, (i) if such options, rights or convertible or exchangeable
securities described in this Section 2.2.4 by their terms provide, with the
passage of time or otherwise, that additional shares of Class A Common Stock or
shares of any other Common Stock are deliverable upon exercise, conversion or
exchange, the Antidilution Adjustment Shares, shall, upon such additional
shares deliverable upon exercise, conversion or exchange, be recomputed to
reflect such change, and (ii) the provisions of Section 2.2 shall survive for
the 5 year period after the Effective Date; provided, however, that such
provisions shall terminate upon the IPO.
2.3 EXCHANGE CERTIFICATES.
2.3.1 Prior to the Closing Date, WebGain shall authorize one or more
persons to act or shall itself act as Exchange Agent hereunder (the "Exchange
Agent"). Prior to the Closing Date, WebGain shall cause the Exchange Agent to
mail to Shareholders a letter of transmittal substantially in the form set
forth in Exhibit B ("Letter of Transmittal") and instructions for surrendering
their certificates representing Company Stock in exchange for a certificate or
certificates representing shares of WebGain Common Stock. Upon surrender of a
Company Stock certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by WebGain, the holder of such
certificate shall be entitled to receive at the Closing in exchange therefor a
certificate representing that number of whole shares of WebGain Common Stock
into which the shares of Company Stock theretofore represented by such
certificate so surrendered shall have been converted pursuant to the provisions
of this Agreement, and the certificate so surrendered shall forthwith be
canceled. Except as set forth in Section 2.6, the Cash Consideration shall, at
Closing, be wired to the accounts designated in the Letters of Transmittal to
the Shareholders in the amounts set forth on Schedule 2.3.1 attached hereto.
Except as set forth in Section 2.6, the Stock Consideration shall be delivered
promptly after the Closing Date
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to the addresses of the Shareholders set forth in the Letters of Transmittal.
Until surrendered in accordance with the provisions of this Section, each
Company Stock certificate shall represent for all purposes shares of WebGain
Common Stock. WebGain Common Stock into which Company Stock shall be converted
in the Merger shall be deemed to have been issued at the Effective Time. If any
cash is to be paid and WebGain Common Stock certificates are to be issued in a
name other than that in which the Company Stock certificate surrendered is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall deliver to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such shares of WebGain
Common Stock in a name other than that of the registered holder of the
certificate so surrendered or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
2.3.2 No certificates representing fractional shares of WebGain
Common Stock shall be issued upon the surrender or exchange of Company Stock
certificates. No fractional interest shall entitle the owner to vote or to any
rights of a security holder. In lieu of fractional shares, each holder of
shares of Company Stock who would otherwise have been entitled to a fractional
share of WebGain Common Stock, will receive upon surrender of a Company Stock
certificate or certificates, as the case may be, one additional share of
WebGain Common Stock.
2.4 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of Company Stock thereafter on the records of the Company.
2.5 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The amount of cash and
the WebGain Common Stock delivered upon the surrender for exchange of shares of
Company Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares, and there
shall be no further registration of transfers on the records of the Surviving
Corporation of shares of Company Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates for shares of
Company Stock are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article 2.
2.6 ESCROW. As security for the indemnification obligations set forth in
Article 10, WebGain will deliver to an escrow agent selected by WebGain and
reasonably satisfactory to Company (the "Escrow Agent") under an Escrow
Agreement in the form attached hereto as Exhibit C dated as of the date hereof
by and among WebGain, the Representative and the Escrow Agent (the "Escrow
Agreement"), ten percent (10%) of the aggregate number of shares of WebGain
Common Stock to be issued and cash representing ten percent (10%) of the Cash
Consideration to be paid pursuant to Section 2.1 in respect of Company Stock
(the "Escrow Fund"). Such shares and cash shall be held in escrow on behalf of
the Shareholders, on a pro rata basis, in accordance with each such
Shareholder's percentage ownership ("Pro Rata Portion") of Company Stock
immediately prior to the Merger. Such shares ("Escrow Shares") and cash
("Escrow Cash") shall be held as security for the indemnification obligations
under Article 10.
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2.7 OPTIONS. All options and other rights to purchase shares of the
Company's capital stock outstanding immediately prior to the Effective Time
shall be (i) cancelled by the Company and the rights thereunder waived by the
holders thereof, or (ii) exercised by the holders thereof, WebGain shall not
assume any options to purchase shares of the Company's capital stock
outstanding immediately prior to the Effective Time.
2.8 TAXES AND CLOSING COSTS. All transfer, sales and use taxes imposed by
any governmental entity or with respect to or as the result of the Merger shall
be paid by the Company and accrued prior to the Closing Date. Each party shall
bear their own costs in connection with the transactions contemplated hereby.
2.9 SUPPLEMENTARY ACTION. If, at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of the Company, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
Company in the name of and on behalf of the Company to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving Corporation, and otherwise to carry
out the purposes and provisions of this Agreement.
2.10 DISSENTER RIGHTS. If holders of any shares of Company Stock (i) are
entitled to dissent from the Merger and demand dissenter's rights of any such
Company Stock in accordance with the provisions of the OBCA concerning the
right of such holders to dissent from the Merger and demand appraisal of their
Company Stock or (ii) have properly exercised dissenter's rights with respect
to their Company Stock in accordance with Section 60.554 of the OBCA
("Dissenting Holders"), any Company Stock held by a Dissenting Holder as to
which dissenter's rights have been so demanded or for which such dissenter's
rights have been properly exercised ("Dissenting Rights") shall not be
converted as described in Section 2.1, but shall, from and after the Closing,
represent only the right to receive such consideration as may be determined to
be due to such Dissenting Holder pursuant to the OBCA; provided, however, that
each share of Company Stock held by a Dissenting Holder who shall, after the
Closing, withdraw his demand for dissenter's rights or lose his right of
appraisal with respect to such shares of Company Stock, in either case pursuant
to the OBCA, shall not be deemed Dissenting Shares but shall be deemed to be
converted, as of the Effective Time, into the right to receive WebGain Common
Stock and cash in accordance with Section 2.1 hereof. The Company shall give
WebGain (i) prompt notice of any written demands under Section 60.554 of the
OBCA with respect to any shares of capital stock of the Company, any withdrawal
of any such demands and any other instruments served pursuant to the OBCA and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to any demands under Section 60.554 of the OBCA with
respect to any shares of capital stock of the Company. The Company shall
cooperate with WebGain concerning, and shall not voluntarily make any payments
with respect to, or offer to settle or settle, any such demands.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
AND THE PRINCIPAL SHAREHOLDERS
Except as specifically set forth in the disclosure schedule delivered by
the Company to WebGain on or prior to the execution of this Agreement (the
"Company Disclosure Schedule"), the Company and the Principal Shareholders
jointly and severally represent and warrant to WebGain as follows:
3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing under the laws of its jurisdiction of
incorporation and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted and as contemplated to be conducted by the Company.
The Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdictions where such qualification is necessary,
except for those jurisdictions where failure to be so qualified, individually or
in the aggregate, would not have a Material Adverse Effect. The Company has
heretofore delivered to WebGain true and complete copies of the Articles of
Incorporation and Bylaws of the Company as currently in effect.
3.2 CORPORATE AUTHORIZATION AND AUTHORITY. The Company has the corporate
power and authority to execute, deliver and perform this Agreement and the
other Transaction Documents to which it is a party. This Agreement, and the
other Transaction Documents to which it is a party, have been duly authorized
and approved by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company (assuming that it
has been duly executed and delivered by WebGain), constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
liquidation, conservatorship, bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally from time to time in effect and except that equitable remedies are
subject to judicial discretion. Each of the Transaction Documents to which the
Company is a party, when executed and delivered in accordance with the terms
hereof (and assuming that each such Transaction Document has been duly executed
and delivered by the other parties thereto), will constitute the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
liquidation, conservatorship, bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally from time to time in effect and except that equitable remedies are
subject to judicial discretion.
3.3 GOVERNMENTAL AUTHORIZATION. Except as set forth in Schedule 3.3, the
execution, delivery and performance by the Company of this Agreement requires
no action by or in respect of, or filing with, any Taxing Authority, agency, or
official.
3.4 EFFECT OF AGREEMENT ON THE COMPANY. Except as set forth in Schedule
3.4, neither the execution and delivery of this Agreement or the Transaction
Documents to which it is a party nor the consummation of the transaction
contemplated hereby or thereby will (i) result in the
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acceleration, breach or termination of, or the creation in any party of the
right to accelerate, terminate, modify, cancel or require any notice under, any
material contract, lease, license, instrument or other arrangement, or other
material obligation or liability to which the Company is a party or is bound or
to which the Company's assets are subject, (ii) conflict with, violate or
result in a breach of any provision of the Articles of Incorporation or bylaws
of the Company, (iii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction or decree applicable to the Company or by
which any of their respective properties or assets is bound or affected, except
where such conflict or violation could not reasonably be expected to have a
Material Adverse Effect, or (iv) result in the creation of any Lien upon the
Company Stock or any assets, tangible or intangible, of the Company.
3.5 CAPITALIZATION.
3.5.1 The authorized capital stock of the Company consists of (i)
Ten Million (10,000,000) shares of Common Stock, $0.001 par value per share,
and (ii) Five Million (5,000,000) shares of Preferred Stock, $0.001 par value
per share, of which One Hundred Thousand (100,000) shares are designated Series
A Convertible Preferred Stock. Immediately prior to the Effective Time, the
outstanding capital of the Company shall consist of (i) Nine Hundred Fifteen
Thousand Seventy (915,070) shares of Common Stock. All of the issued and
outstanding shares of Common Stock of the Company are held of record by the
Shareholders in the amounts set forth opposite each Shareholder's name in
Schedule 3.5.1, free and clear of all Liens. There are no shares of Common
Stock held in the Company's corporate treasury.
3.5.2 The Common Stock outstanding immediately prior to the
Effective Time will have been duly authorized and validly issued, is fully paid
and non-assessable shares of Common Stock and the holders thereof are not, or
will not be, entitled to any preemptive or other similar rights. Except as set
forth in this Section 3.5.2 and except as set forth in Schedule 3.5.2,
immediately prior to the Effective Time, there will be no outstanding or
authorized (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (iii) options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, stock
appreciation, phantom stock, profit participation, or similar rights to acquire
from the Company, or similar obligations of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company. Immediately prior to the
Effective Time, there will be no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Stock. Except as set forth
on Schedule 3.5.2, immediately prior to the Effective Time, there will be no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
3.6 SUBSIDIARIES. The Company does not own, and has never owned, any
interest in any corporation or other business entity and, except as set forth
in Schedule 3.6, the Company is not a participant, and has never been a
participant, in any partnership or any joint venture with any third party.
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3.7 FINANCIAL STATEMENTS. The Company has delivered to WebGain (i) the
unaudited (a) balance sheet for each of the years ended December 31, 1998 and
December 31, 1999, (b) related statements of income; (ii) the unaudited (x)
Balance Sheet dated as of March 31, 2000 ("Balance Sheet Date"), and (y)
related statement of income for the three-month period ended March 31, 2000
(collectively, the "Financial Statements"). Except as set forth on Schedule
3.7, the Financial Statements present fairly, in all material respects, the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, include all adjustments that are
necessary for a fair, presentation of the information shown, are correct and
complete in all material respects, and are consistent with the books and
records of the Company (which books and records are true and complete in all
material respects). The Financial Statements reflect reserves appropriate and
adequate for all material liabilities and reasonably anticipated losses
(including appropriate and adequate reserves for inventory, bad debt and
accrued liabilities.) The Company has disclosed to WebGain all material facts
relating to the preparation of the Financial Statements, including the basis of
accounting for affiliated transactions, and the Company has delivered to
WebGain complete and correct copies of any letters of representation from the
Company to its accountants and any management letters from the accountants to
the Company.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 3.8,
since the Balance Sheet Date, the Company has conducted its business in the
ordinary course consistent with past practices and, except pursuant to or as
specifically contemplated under any Transaction Documents, there has not been
any Material Adverse Effect and there is no condition or development or
contingency of any kind existing that could reasonably be expected to result in
any such Material Adverse Effect in the business or future prospects of the
Company. Without limiting the foregoing, except as set forth in Schedule 3.8,
since the Balance Sheet Date, there has not been, occurred or arisen:
(a) any issuance or sale or authorization of the issuance or sale of
any shares of capital stock or other securities of the Company or Company Stock
relating to shares of capital stock or other securities of the Company.
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or any direct or indirect repurchase, redemption, retirement, purchase or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company;
(c) any amendment of any material term of any outstanding security
of the Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money, other than in the ordinary course of business,
exceeding $10,000;
(e) any creation or assumption by the Company of any Lien on any
material asset of the Company;
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(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any material damage, destruction or other casualty loss
affecting the business or assets of the Company not covered by insurance;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
of any contract or other right (direct or indirect, whether alleged, contingent
or otherwise), in either case, material to the Company, taken as a whole, other
than transactions and commitments in the ordinary course of business consistent
with past practices;
(i) any sale, assignment, transfer or grant of any license or
sublicense with respect to any Intellectual Property Right or other intangible
asset used in the business of the Company as it is currently conducted or
proposed to be conducted;
(j) any incurrence or payment of any material obligation or
liability (absolute, accrued or contingent) other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practice;
(k) any change in any method of accounting or accounting practice by
the Company;
(l) any (i) employment, deferred compensation, severance, retirement
or other similar agreement entered into with any director, officer or employee
of the Company (or any amendment to any such existing agreement), (ii) grant of
any severance or termination pay to any director, officer or employee of the
Company, or (iii) change in compensation or other benefits payable to any
director, officer or employee of the Company pursuant to any severance or
retirement plans or policies thereof;
(m) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company, which employees were not subject to a
collective bargaining agreement at the Balance Sheet Date, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to any
employees of the Company;
(n) any other material occurrence, event, incident, action, failure
to act, or transaction outside the ordinary course of business involving the
Company; and
(o) the Company has not committed in writing or otherwise to any of
the foregoing.
3.9 NO UNDISCLOSED MATERIAL LIABILITIES. There are no material
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined,
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determinable or otherwise, and, to the knowledge of the Company and the
Principal Stockholders, there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability,
other than:
(a) liabilities provided for in the Balance Sheet or disclosed in
any notes thereto;
(b) liabilities disclosed on Schedule 39; and
(c) liabilities incurred for accounts payable and any accruals of
current liabilities since the Balance Sheet Date in each case in type and
amounts which are accrued in the ordinary course of the Company's business.
3.10 RELATED PARTY TRANSACTIONS. Schedule 3 10 contains a complete list of
all transactions and agreements between the Company, on the one hand, and any
shareholders, suppliers, customers or other parties ("Related Parties"), on the
other hand, where an officer, director, employee or holder of 5% or more of the
outstanding equity of such Related Party is an Immediate Family Member of an
officer, director, employee or holder of 5% or more of the outstanding capital
stock of the Company.
3.11 MATERIAL CONTRACTS.
3.11.1 Except as disclosed in Schedule 3.11.1 and except pursuant
to or as contemplated under any of the Transaction Documents, the Company is
not currently a party to or bound by:
(a) any lease (whether of real or personal property) providing for
annual rentals of $10,000 or more;
(b) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments by the Company of $5,000 or more or (B) aggregate payments by the
Company of $10,000 or more;
(c) any consulting services, sales, distribution or other similar
agreement providing for the sale by the Company of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments to the Company of $50,000 or more or (B) aggregate payments to the
Company of $100,000 or more;
(d) any partnership; joint venture or other similar agreement or
arrangement;
(e) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(f) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether incurred, assumed,
guaranteed or secured by any asset), except any such agreement (A) with an
aggregate outstanding principal amount not exceeding $10,000 and (B) which may
be prepaid on not more than 30 days notice without the payment of any penalty;
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(g) any license, franchise or similar agreement that provides for
either (A) annual payments to or from the Company of $10,000 or more or (B)
aggregate payments to or from the Company of $10,000 or more;
(h) any agency, dealer, sales representative, marketing or other
similar agreement for that provides for either (A) annual payments by the
Company of $25,000 or more or (B) aggregate payments by the Company of $50,000
or more;
(i) any agreement that limits the freedom of the Company to compete
in any line of business or with any Person or in any area or which would so
limit the freedom of the Company;
(j) any agreement with any other Person directly or indirectly
owning, controlling or holding with power to vote 5% or more of the outstanding
voting securities of any Affiliate;
(k) any agreement with any director, officer or employee of the
Company or with any "associate" or any member of the "immediate family" (as
such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director, officer or employee;
(l) any other agreement, commitment, arrangement or plan whether or
not made in the ordinary course of business that is material to the Company,
taken as a whole; or
(m) any agreement under which the consequences of a default or
termination would have a Material Adverse Effect.
3.11.2 The Company has paid in full all amounts due and required to
be paid as of the date hereof under each agreement identified in Schedule
3.11.1 (a "Material Agreement") and has satisfied in full all of its respective
liabilities and obligations thereunder due and required to be paid. All of the
Material Agreements listed are in full force and effect. The Company and each
other party thereto have performed all of the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any Material Agreement
except where such failures to perform and defaults could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. The
Company has no present expectation or intention of not fully performing all of
its obligations under each Material Agreement, and the Principal Shareholders
have no knowledge of any breach or anticipated breach by the other party to any
contract or commitment to which the Company is a party. There exists no actual
or to the knowledge of the Principal Shareholders, threatened termination,
cancellation or limitation of the business relationship of the Company with any
party to any such Material Agreement.
3.12 LITIGATION.
3.12.1 There is no action, suit, investigation or proceeding pending
against (or to the knowledge of the Principal Shareholders, any basis therefor)
or, to the knowledge of the Principal Shareholders, threatened against or
affecting, the Company or any of its properties before any court or arbitrator
or any Taxing Authority, agency or official. None of the Company,
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the Principal Shareholders or any director or officer is aware of any facts or
circumstances that would cause a reasonable person to believe that any such
action, suit, investigation or proceeding will be brought against the Company.
3.12.2 Except as disclosed on Schedule 3.12.2, no director or
officer has been convicted in a criminal proceeding, is a named subject of a
criminal proceeding which is presently pending (excluding traffic violations
and other minor offenses) or is to the knowledge of such Person the subject of
a criminal investigation.
3.13 COMPLIANCE WITH LAWS AND COURT ORDERS; NO DEFAULTS. The Company is
not in violation of, and has not, since the Balance Sheet Date, violated any
provisions of any laws, statutes, ordinances, regulations, administrative
interpretations, judgements, injunctions, orders, policies or decrees of any
court or governmental or administrative authority that are applicable to the
Company, except for violations that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
3.14 PROPERTIES.
3.14.1 Except as set forth on Schedule 3.14.1, the Company has good
title to, or in the case of leased property has valid leasehold interests in,
all personal property and assets (whether tangible or intangible) (other than
Company Intellectual Property Assets which is separately discussed under Section
3.16) reflected on the Balance Sheet or acquired after the Balance Sheet Date,
except for property and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices. The Company has a valid and
insurable fee simple title to, or in the case of leased real property has valid
leasehold interests in, all real property reflected on the Balance Sheet or
acquired after the Balance Sheet Date. None of such property or assets (whether
real or personal) is subject to any Liens, except:
(a) Liens disclosed on the Balance Sheet;
(b) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Balance Sheet);
(c) Statutory Liens of landlords for amounts not yet due and
payable (and for which adequate accruals or reserves have been established on
the Balance Sheet); or
(d) Liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for amounts not yet due and payable
(and for which adequate accruals or reserves have been established on the
Balance Sheet).
3.14.2 To the knowledge of the Principal Shareholders, there are
no developments affecting any such property or assets (whether real or
personal) pending or threatened, which might materially detract from the value
of such property or assets, or materially interfere with any present use of any
such property or assets.
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3.14.3 Except as set forth in Schedule 3.14.3, the plant and
equipment owned by the Company has been reasonably maintained consistent with
standards generally followed in the industry (giving due account to the age and
length of use of same, ordinary wear and tear excepted) and are adequate and
suitable for their present uses and, in the case of plants, buildings and other
structures (including the roof's thereof), are structurally sound.
3.14.4 Except as disclosed in Schedule 3.14.4, the property and
assets owned or leased by the Company, or which it otherwise has the right to
use, constitutes all of the property and assets held for use or used in
connection with the business of the Company and is generally adequate to
conduct such business as currently conducted by the Company.
3.15 PRODUCTS.
3.15.1 Schedule 3.15.1 contains a list of all proprietary software
developed by the Company and currently sold, licensed or otherwise used by the
Company in its business, and any and all enhancements, upgrades,
customizations, modifications and maintenance thereof (the "Software"). The
Software containing or calling on a calendar function including without
limitation, any function indexed to the CPU clock, and any function providing
specific dates or days, or calculating spans of dates or days, shall record,
store, process, provide, and, where appropriate, insert true and accurate dates
and calculations for dates and spans including January 1, 2000.
3.15.2 Except as set forth on Schedule 3.15.2, the Software and, to
the knowledge of the Principal Shareholders, any non-proprietary software used
by the Company, is free from significant programming errors and operates in
substantial conformity with its user documentation and other descriptions and
standards applicable thereto provided by the Company, and the Software does not
contain any known virus, timer, clock, counter or other limiting design,
instruction or routine, that would erase data, programming or become inoperable
or otherwise incapable of being used in the full manner for which it was
designed and created nor have the Principal Shareholders been informed that the
non-proprietary software has any such problems.
3.16 INTELLECTUAL PROPERTY.
3.16.1 Paragraph (a) of Schedule 3.16.1 contains an accurate and
complete list of all Schedule 3.16.1 Rights, specifying as to each the nature
of such right, any jurisdiction that has issued a registration with respect
thereto or in which an application for such a registration is pending, and any
applicable registration or application number. Paragraph (b) of Schedule 3.16.1
contains an accurate and complete list of all other Company Intellectual
Property Assets that are material to the conduct of the business of the Company
as presently conducted or proposed to be conducted. Paragraph (c) of Schedule
3.16.1 contains an accurate and complete list of all licenses, sublicenses, and
other agreements as to which the Company is a party and pursuant to which any
person other than the Company is authorized to use any Intellectual Property
Right or Technology owned by the Company. Paragraph (d) of Schedule 3.16.1
contains an accurate and complete list of all licenses, sublicenses, and other
agreements as to which the Company is a party and pursuant to which the Company
is authorized to use any
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Intellectual Property Rights or Technology owned by any third party other than
end-user licenses granted to the Company relating to "off the shelf" personal
computer software that is generally available on commercially reasonable terms
from persons that are unaffiliated with the Company and that is not
incorporated into any product marketed, sold, or licensed by, or used in the
provision of any service provided by the Company.
3.16.2 The Company owns or has the right to use, and at Closing will
assign and transfer to the Surviving Corporation to the full extent of such
ownership or use interest, all the Company Intellectual Property Assets. Upon
Closing, each of the Company Intellectual Property Assets will be owned by the
Surviving Corporation or will be immediately available for use by the Surviving
Corporation on terms and conditions substantially identical to those under
which the Company presently uses such Company Intellectual Property Assets,
without any affirmative act by the Surviving Corporation or any other person.
Such ownership and right to use are free and clear of, and without liability
under, all liens and security interests of any person. Except for the breaches
and events described in Schedule 3.16.2, no party to any license, sublicense,
or agreement listed in Schedule 3.16.2 is in breach or default and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder. Except
for licenses listed in Schedule 3.16.2 as royalty-bearing, there are no
royalties, honoraria, fees, or other payments payable by the Company to any
person by reason of the ownership, use, license, sale, or disposition of any
Company Intellectual Property Asset.
3.16.3 Neither the Company Intellectual Property Assets, nor the
conduct the Business as presently conducted or proposed to be conducted by
Company, uses or discloses in an unauthorized manner, infringes, or constitutes
a misappropriation of any Intellectual Property Right of any person. The
Company: (i) has no knowledge that any Company Intellectual Property Asset is
involved in any interference, reexamination, cancellation, or opposition
proceeding, or any currently pending or threatened suit, action, or proceeding
arising out of a right or claimed right of any person with respect to any
Intellectual Property Right; (ii) has not received any oral, written, or other
communication that the Company is using or disclosing in an unauthorized
manner, infringing, or misappropriating in the conduct of the Business as
presently conducted or as proposed to be conducted by the Company the right or
claimed right of any person with respect to any Intellectual Property Right;
(iii) has no knowledge that any of the Company Intellectual Property Assets
listed in Paragraphs (a) or (b) of Schedule 3.16.1 is being used or disclosed
in an unauthorized manner, infringed, or misappropriated by any person; or
(v) except pursuant to a license listed in Paragraph (c) of Schedule 3.16.1,
has entered into any agreement to indemnify any person against any charge of
unauthorized use or disclosure, infringement, or misappropriation of any
Intellectual Property Right. All patents, registered trademarks, service marks,
collective marks, certification marks, and registered copyrights listed in
Paragraph (a) of Schedule 3.16.1 are valid and in full force and were
prosecuted in good faith.
3.16.4 The Company has taken reasonable steps sufficient to
safeguard and maintain the secrecy and confidentiality of and its proprietary
rights in all of the Company Intellectual Property Assets not otherwise
protected by patents, patent applications, or copyright or trademark law.
Without limitation on the generality of the foregoing, the Company has
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obtained confidentiality and inventions assignment agreements, in one or more
forms that have protections and conditions substantially similar in effect to
those included in the forms set forth in Schedule 3.16.4, from all of the past
and present employees and independent contractors of the Company involved in the
creation or development of the Company Intellectual Property Assets. No
independent contractor who has performed services related to the Business has
(or upon Closing, will have) any right, title, or interest in any Company
Intellectual Property Asset.
3.16.5 Except as listed in Schedule 3.16.5, the Company has not (i)
disclosed the source code for any of the software owned by the Company that is
used or proposed to be used in the business of the Company (the "Software") or
other information relating to the detailed design, structure, or organization of
the Software to any person other than past or present employees and independent
contractors of the Company; (ii) entered into any agreement requiring the
Company to license or otherwise provide future versions, upgrades, or
enhancements of the any software in source code form; or (iii) entered into any
agreements granting any exclusive right to any Company Intellectual Property
Asset.
3.16.6 The execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated hereby, will not breach,
violate, or conflict with any agreement governing any Company Intellectual
Property Asset, will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of any Company Intellectual Property Asset,
or in any way impair the right of the Surviving Corporation to use or bring any
action for the unauthorized use or disclosure, infringement, or misappropriation
of any Company Intellectual Property Asset.
3.16.7 For purposes of this Section 3.16, "use," includes, without
limitation, make, have made, reproduce, display or perform (publicly or
otherwise), prepare derivative works based on, offer for sale, sell,
distribute, import, disclose, license, sublicense, dispose of, and otherwise
exploit.
3.16.8 The Company has entered into non-disclosure agreements with
all persons and entities (including, without limitation, employees and
customers of the Company) to whom the Company has provided or access to or
disclosed the Company's Intellectual Property Rights, under which such parties
have agreed to hold such information in confidence and not disclose the same,
directly or indirectly, to any person not having authorized access to such
information without the express authorization of the Company. The Company has
taken all actions reasonably necessary to protect the Company's Intellectual
Property Rights.
3.17 INSURANCE COVERAGE. Schedule 3.17 correctly describes each insurance
policy and fidelity bond relating to the assets, business, operations,
employees, officers or directors of the Company. There is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds or in respect of which such underwriters have reserved their rights. All
premiums payable under all such policies and bonds have been paid timely and
the Company has otherwise complied fully with the terms and conditions of all
such policies and bonds. Such policies and bonds are of the type and in amounts
customarily carried by Persons conducting businesses
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similar to those of the Company. The Company does not know of any threatened
termination of, premium increase with respect to, or material alteration of
coverage under, any of such policies or bonds. Except as disclosed in Schedule
3.17, the Company shall after the Closing continue to have coverage under such
policies and bonds with respect to events occurring prior to the Closing.
3.18 LICENSES AND PERMITS.
3.18.1 Schedule 3.18.1 correctly describes each license, franchise,
permit or other similar authorization affecting, or relating in any way to, the
assets or business of the Company which are material to the Company taken as a
whole (the "Permits") together with the name of the government agency or entity
issuing such Permit. Except as set forth on the Schedule 3.18.1, such Permits
are valid and in full force and effect and none of the Permits will be
terminated or impaired or become terminable, in whole or in part, as a result
of the transactions contemplated hereby.
3.18.2 The Company has all licenses, franchises, permits or other
similar authorizations, and all approvals of governmental or regulatory
authorities as are required to operate its business as presently conducted in
each state of the Untied States where it is engaged in such activity.
3.19 INVENTORIES. The Company has no inventory.
3.20 LOANS, NOTES, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Schedule 3.20
provides an accurate and complete breakdown and aging of all accounts
receivable, notes receivable and other receivables of the Company as of the
Balance Sheet Date. The Company has no accounts receivable. Accounts payable of
the Company reflected on the Balance Sheet and all accounts payable arising
after the Balance Sheet Date arose, and have arisen, from bona fide
transactions.
3.21 FINDER'S FEES. No investment banker, broker, finder or other
intermediary is entitled to any fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.22 EMPLOYEES. Schedule 3.22 sets forth a true and complete list of the
names, titles, annual salaries and other compensation of all officers of the
Company and all other employees of the Company, and none of such employees of
the Company has provided notice, written or oral, to the Company or the
Principal Shareholders that he or she intends to resign or retire as a result
of the transactions contemplated by this Agreement or otherwise within three
years after the Closing. No employee of the Company is subject to any secrecy
or noncompetition agreement or any agreement or restriction of any kind that
would impede in any material way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of the
Company as currently operated after the Closing Date. To the Company's and each
Principal Shareholder's knowledge after due inquiry, no third party has claimed
that any person employed by or affiliated with the Company has violated or may
be violating any of the terms or conditions of his past employment,
noncompetition or
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nondisclosure agreement with such third party, or disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees.
3.23 LABOR MATTERS. The Company is in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the
case may be, would reasonably be expected to have a Material Adverse Effect.
There is no unfair labor practice complaint pending or, to the knowledge of the
Principal Shareholders, threatened against the Company before the National
Labor Relations Board.
3.24 ENVIRONMENTAL MATTERS. The Company is no in material violation of
any federal, state, or local Environmental Laws applicable to it or its
properties, or any material limitations, restrictions, conditions, standards,
obligations or timetables contained in any Environmental Law. No notice or
action alleging such violation is pending or, to the Company's knowledge,
threatened, and no past or present condition or practice of the businesses
conducted by the Company would prevent continued compliance with any
Environmental Permits or give rise to any common law or statutory liability or
otherwise from the basis of any claim, action or proceeding with respect to the
Company involving any Hazardous Substances. To the Company's knowledge, the
Company has no Environmental Liability.
3.25 CERTAIN PRACTICES. To the Knowledge of the Principal Shareholders,
neither the Company nor any of its directors, officers or employees has,
directly or indirectly, illegally given nor agreed to give any significant
rebate, gift or similar benefit to any supplier, customer, governmental
employee or other person who was, is or may be in a position to help or hinder
the Company (or assist in connection with any actual or proposed transaction).
3.26 RECORDS. The minute books, stock certificate books and stock
transfer ledgers of the Company are complete and correct in all material
respects with respect to the matters set forth therein.
3.27 NO INDEMNIFICATION LIABILITIES. There are no known existing
liabilities that require the Company to indemnify its officers or directors for
acts or omissions by such persons acting on behalf of the Company or, except
for the Company's Articles of Incorporation and Bylaws, existing agreements to
provide indemnification for such liabilities.
3.28 FULL DISCLOSURE. No representation or warranty of the Company made
in this Agreement contains any statement which constitutes an untrue statement
of a material fact or fails to state a material fact which was necessary to
make the statements or facts contained herein or therein in the light of the
circumstances in which they were made not misleading.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to
WebGain, as to himself or herself only, as follows:
4.1 TITLE TO SHARES. Such Shareholder owns the shares of Company Stock set
forth opposite its name in column B of Schedule 3.5.1 hereto (which in the
aggregate represent all of the issued and outstanding shares of capital stock
of the Company) free and clear of any Lien, restriction on sale or transfer
(other than restrictions imposed by applicable securities laws), preemptive
right, limitations on voting rights or option and has the authority to dispose
of such Company Stock pursuant to this Agreement.
4.2 SHAREHOLDER POWER AND AUTHORITY. Such Shareholder has the power and
authority to execute, deliver and perform this Agreement and the other
Transaction Documents to which such Shareholder is a party. This Agreement has
been duly executed and delivered by such Shareholder, constitutes a legal,
valid and binding obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms, except as enforcement thereof may be
limited by liquidation, conservatorship, bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally from time to time in effect and except that
equitable remedies are subject to judicial discretion. Each of the Transaction
Documents to which such Shareholder is a party, when executed and delivered in
accordance with the terms hereof, will constitute the legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as enforcement thereof may be limited by
liquidation, conservatorship, bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally from time to time in effect and except that equitable remedies are
subject to judicial discretion.
4.3 EFFECT OF AGREEMENT ON THE SHAREHOLDERS. Neither the execution and
delivery of this Agreement nor the Transaction Documents to which such
Shareholder is a party nor the consummation of the transactions contemplated
hereby or thereby will (i) result in the acceleration, breach or termination
of, or the creation in any party of the right to accelerate, terminate, modify,
cancel or require any notice under, any contract, lease, license, instrument or
other arrangement, or other obligation or liability to which such Shareholder
is a party or is bound or to which such Shareholder's assets are subject, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction or decree applicable to such Shareholder by which any of his or her
respective properties or assets is bound or affected, (iv) or result in the
creation of any Lien upon the Company Stock or any assets, tangible or
intangible, of such Shareholder.
4.4 LITIGATION. There are no claims, actions, suits, arbitrations,
grievances, proceedings or investigations pending or, to the knowledge of such
Shareholder, threatened against such Shareholder, at law, in equity or before
any federal, state, municipal or other governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, involving the transactions contemplated hereby.
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4.5 SHAREHOLDER AGREEMENTS. Except as set forth on Schedule 4.5, there are
no agreements, written or oral, between the Company and such Shareholder or
between such Shareholder and other Shareholders, relating to the acquisition
(including without limitation rights of first refusal or pre-emptive rights),
disposition, registration under the Securities Act, as amended, or voting of the
capital stock of the Company.
4.6 INVESTMENT REPRESENTATIONS.
4.6.1 Such Shareholder understands and acknowledges that the shares
of WebGain's Common Stock to be issued to such Shareholder are being issued in
reliance upon the exemption for the registration requirements of the Securities
Act afforded by Section 4(2) and/or Regulation D, and that such shares will not
be registered under the Securities Act or any state securities or "blue sky"
law.
4.6.2 Except to the extent otherwise provided for in connection with,
or otherwise not applicable in light of, the express provisions of any of the
Transaction Documents, the shares of WebGain's Common Stock to be issued as
consideration pursuant hereto are being acquired by such Shareholder pursuant
to the terms and subject to the conditions of this Agreement for such
Shareholder's own account and for investment purposes only, and not with a view
to any public resale, public distribution or other public offering thereof, in
each case within the meaning of the Securities Act or any state securities or
"blue sky" law.
4.6.3 Such Shareholder understands and acknowledges that the shares
of WebGain's Common Stock to be issued as consideration pursuant hereto may not
be sold or otherwise disposed of, except pursuant to registration under the
Securities Act or pursuant to an exemption from the registration requirements
of the Securities Act.
4.6.4 Such Shareholder has such knowledge and experience in financial
and business matters that such Shareholder is capable of evaluating the merits
and risks of the prospective investment in WebGain's Common Stock, and such
Shareholder is able to bear the economic consequences thereof.
4.6.5 In making the decision to invest in WebGain's Common Stock,
such Shareholder has relied upon independent investigations made by such
Shareholder and, to the extent believed by such Shareholder to be appropriate,
such Shareholder's representative, including such Shareholder's own
professional, tax and other advisors, and has not relied upon any
representation or warranty from the WebGain or any of its directors, officers,
employees, agents, affiliates or representatives with respect to the value of
WebGain's Common Stock or the tax consequences of the transactions contemplated
by this Agreement or any of the Transaction Documents.
4.6.6 Such Shareholder and such Shareholder's representative, if any,
has been given a full opportunity to examine all documents relating to the
transactions contemplated by this Agreement and the Transaction Documents, and
to ask questions of, and to receive answers from WebGain and its
representatives concerning the terms of the transactions contemplated by this
Agreement and each of the Transaction Documents and such other information as
such
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Shareholder desires in order to evaluate an investment in WebGain's Common
Stock and all such questions have been answered to the full satisfaction of
such Shareholder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF WEBGAIN
WebGain hereby represents and warrants to the Company and the
Shareholders as follows:
5.1 CORPORATE EXISTENCE AND POWER. WebGain is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted and as contemplated to be conducted by WebGain.
WebGain is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualify, individually or
in the aggregate, would not have a Material Adverse Effect. WebGain has
heretofore delivered to the Company true and complete copies of the Certificate
of Incorporation and Bylaws of WebGain as currently in effect.
5.2 CORPORATE AUTHORIZATION AND AUTHORITY. WebGain has the corporate
power and authority to execute, deliver and perform this Agreement and the
other Transaction Documents to which it is a party. This Agreement, and the
other Transaction Documents to which it is a party, have been duly authorized
and approved by all necessary corporate action on the part of WebGain. This
Agreement has been duly executed and delivered by WebGain (assuming that it has
been duly executed and delivered by the Company and the Shareholders),
constitutes a legal, valid and binding obligation of WebGain, enforceable
against WebGain in accordance with its terms, except as enforcement thereof may
be limited by liquidation, conservatorship, bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally from time to time in effect and except that
equitable remedies are subject to judicial discretion. Each of the Transaction
Documents to which WebGain is a party, when executed and delivered in
accordance with the terms hereof (and assuming that each such Transaction
Document has been duly executed and delivered by the other parties thereto),
will constitute the legal, valid and binding obligation of WebGain, enforceable
against WebGain in accordance with its terms, except as enforcement thereof may
be limited by liquidation, conservatorship, bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally from time to time in effect and except that
equitable remedies are subject to judicial discretion.
5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by WebGain of this Agreement requires no action by or in respect of, or filing
with, any Taxing Authority, agency, or official, except for federal or state
securities laws.
5.4 EFFECT OF AGREEMENT ON WEBGAIN. Neither the execution and delivery of
this Agreement nor the Transaction Documents to which it is a party nor the
consummation of the transactions contemplated hereby or thereby will (i) result
in the acceleration, breach or
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termination of, or the creation in any party of the right to accelerate,
terminate, modify, cancel or require any notice under, any contract, lease,
license, instrument or other arrangement, or other obligation or liability to
which WebGain is a party or is bound or to which WebGain's assets are subject,
(ii) conflict with, violate or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of WebGain, or (iii) conflict with or
violate any law, rule, regulation, ordinance, order, writ, injunction or decree
applicable to WebGain or by which any of their respective properties or assets
is bound or affected.
5.5 CAPITALIZATION.
5.5.1 The authorized capital stock of the Company consists of (i)
two hundred sixty two million four hundred forty three thousand seven hundred
(262,443,700) shares of Common Stock, $0.001 par value per share, of which two
hundred sixteen million (216,000,000) shares are designated Class A Common
Stock and forty six million four hundred forty three thousand seven hundred
(46,443,700) shares are designated Class B Common Stock, and (ii) twenty
million (20,000,000) shares of Preferred Stock, $0.001 par value per share, all
of which are designated Series A Preferred Stock. As of the date of this
Agreement, the outstanding capital of the Company consists of (i) thirteen
million two hundred nine thousand eight hundred forty eight (13,209,848)
shares of Class A Common Stock, (ii) thirty two million eight hundred seventy
two thousand (32,872,000) shares of Class B Common Stock, and (iii) eight
million four hundred thousand (8,400,000) shares of Series A Preferred Stock.
The outstanding shares of Class A Common Stock, Class B Common Stock and Series
A Preferred Stock are duly and validly authorized and issued, fully paid and
nonassessable. Except for (A) the conversion privileges of the Series A
Preferred Stock and Class B Common Stock, (B) the rights provided in the
Registration Rights Agreement (as defined herein) and the Stockholders
Agreement (as defined herein), (C) a promissory note convertible into 5,428,300
shares of Class A Common Stock, (D) a promissory note convertible into
13,571,700 shares of Class B Common Stock, (E) a promissory note convertible
into 3,600,000 shares of Series A Preferred Stock, (F) currently outstanding
options to purchase 5,388,013 shares of Class A Common Stock granted pursuant
to WebGain's 2000 Nonqualified Stock Option Plan, (G) currently outstanding
options to purchase 14,652,750 shares of Class A Common Stock granted pursuant
to WebGain's 2000 Stock Incentive Plan, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights) or written
agreements for the purchase or acquisition from WebGain of any shares of its
capital stock.
5.5.2 The outstanding shares of Class A Common Stock, Class B
Common Stock and Series A Preferred Stock were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Act"), and any relevant state securities laws or pursuant to
valid exemptions therefrom.
5.6 FINDERS' FEES. Except as previously disclosed by WebGain to the
Company, no investment banker, broker, finder or other intermediary is entitled
to any fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by WebGain.
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5.7 ISSUANCE OF COMMON STOCK. The shares of WebGain's Common Stock, when
issued, sold, and delivered in accordance with the terms of this Agreement for
the consideration set forth herein, will be duly authorized and validly issued,
fully paid and nonassessable.
5.8 FULL DISCLOSURE. To the knowledge of WebGain, no representation or
warranty of WebGain made in this Agreement, nor any written statement furnished
to the Principal Shareholders pursuant hereto, or in connection with the
transactions contemplated hereby, heretofore furnished to the Principal
Shareholders by WebGain, contains or will contain any statement which
constitutes an untrue statement of a material fact or fails or will fail to
state a material fact which was necessary to make the statements or facts
contained herein or therein in the light of the circumstances in which they
were made not misleading.
ARTICLE 6
TAX REPRESENTATIONS
The Company and the Principal Shareholders jointly and severally
represent and warrant to WebGain as of the date hereof and as of the Closing
Date as follows:
6.1 TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
6.1.1 TAX. "Tax" shall mean any tax (including any income tax,
franchise tax, capital gains tax, estimated tax, gross receipts tax, value
added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales
tax, use tax, property tax, business tax, occupation tax, inventory tax,
occupancy tax, withholding tax or payroll tax), levy, assessment, tariff,
impost, imposition, toll, duty (including any customs duty), deficiency or fee,
and any related charge or amount (including any addition to tax, fine, penalty
or interest), (a) imposed, assessed or collected by or for a Taxing Authority,
or (b) payable pursuant to any tax sharing agreement or similar contract.
6.1.2 TAXING AUTHORITY. "Taxing Authority" shall mean any
governmental authority (domestic or foreign) responsible for the imposition of
any Tax.
6.1.3 TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information that is, has been or may in the future be filed with or submitted
to, or required to be filed with or submitted to, any Taxing Authority in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Tax.
6.2 TAX REPRESENTATIONS AND COVENANTS.
6.2.1 Except as set forth on Schedule 6.2.1, each Tax required to
have been paid, or claimed by any Taxing Authority to be payable, by the
Company (whether pursuant to any Tax Return or otherwise) has been duly paid in
full on a timely basis. Except as set forth on
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Schedule 6.2.1, any Tax required to have been withheld or collected by the
Company has been duly withheld and collected, and (to the extent required) each
such Tax has been paid to the appropriate Taxing Authority.
6.2.2 Schedule 6.2.2 accurately identifies all Tax Returns required
to be filed by or on behalf of the Company with any Taxing Authority with
respect to any taxable period ending on or before the date hereof ("Company
Returns"). All Company Returns (i) have been or will be filed when due, and
(ii) have been, or will be when filed, accurately and completely prepared in
material compliance with all applicable legal requirements. All amounts shown
on the Company Returns to be due on or before the date hereof, and all amounts
otherwise payable in connection with the Company Returns on or before the date
hereof, have been paid. The Company has delivered to WebGain accurate and
complete copies of Company Returns filed by the Company.
6.2.3 The Company's liability for unpaid Taxes for all periods
ending on or before the date of the Financial Statements does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred taxes) reported in the Financial Statements.
The Company has established in the ordinary course of business reserves for the
payment of all Taxes for the period from the date of the Financial Statements
through the date hereof and has disclosed the dollar amount of such reserves to
WebGain.
6.2.4 Schedule 6.2 accurately identifies each examination or audit
of any Company Return that has been conducted by any Taxing Authority. The
Company has delivered to WebGain accurate and complete copies of all audit
reports and similar documents relating to Company Returns. Except as set
forth on Schedule 6.2.4, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted, and no such
extension or waiver has been requested from the Company.
6.2.5 Except as set forth on Schedule 6.2.5, no claim, audit,
examination or other proceeding is pending or to the Company's knowledge has
been threatened against or with respect to Company in respect of any Tax. There
are no unsatisfied liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by the Company.
6.2.6 Except as set forth in Schedule 6.2, the Company is not, and
has never been, an "S corporation" within the meaning of Section 1361 of the
Code. The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. The Company has not been, and
will not be, required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing. The Company is in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any Taxing Authority
to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse affect on such
compliance. The Company is not a party to a safe harbor lease within the
meaning of Section
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168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and
Fiscal Responsibility Act of 1982. The Company has not been the "distributing
corporation" (within the meaning of Section 355(c)(2) of the Code) with respect
to a transaction described in Section 355 of the Code within the three-year
period ending as of the date of this Agreement.
6.2.7 There is no agreement, plan, arrangement or other contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, individually or collectively, could
give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G of the Code.
6.2.8 All stock options that the Company has treated as incentive stock
options under Section 421 of the Code meet the requirements of Section 422 of
the Code.
6.2.9 The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
6.2.10 Except as set forth on Schedule 6.2.10, the Company has no net
operating losses or other tax attributes presently subject to limitation under
Code Sections 382, 383, or 384.
6.2.11 Except as set forth on Schedule 6.2.11, the Company is not liable
for Taxes incurred by any individual, trust, corporation, partnership or other
entity other than Company, either as a transferee or pursuant to Treasury
Regulations Section 1.1502-6, or pursuant to any other provision of federal,
state or local law or regulation. Except as set forth on Schedule 6.2.11, the
Company is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
6.2.12 Except as set forth on Schedule 6.2.12, the Company is not a
party to any joint venture, partnership or other arrangement or contract which
could be treated as a partnership for United States federal income tax purposes.
6.2.13 In the Merger, Acquisition Subsidiary will acquire at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by
Company immediately prior to the Merger. For purposes of this representation,
amounts paid by Company to dissenters, amounts paid by Company to shareholders
who receive cash or other property, Company assets used to pay its
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Company immediately preceding the Merger will
be included as assets of Company held immediately prior to the Merger.
6.2.14 Company has not sold, transferred or otherwise disposed of assets
that would prevent Acquisition Subsidiary from either continuing the historic
business of Company or using a significant portion of Company's historic assets
in a business following the Merger, both within the meaning of Treasury
Regulation Section 1.368-1(d).
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6.2.15 Nothing contained in this Section 6.2 (other than Sections
6.2.13 and 6.2.14) shall be construed as a representation by the Shareholders
with respect to the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
ARTICLE 7
EMPLOYEE BENEFITS
The Company and the Principal Shareholders jointly and severally
represent, warrant and covenant to WebGain as of the date hereof and as of the
Closing Date as follows.
7.1 EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used herein,
shall have the following meanings:
7.1.1 "Defined Benefit Plan" shall mean either a plan described in
Section 3(35) of ERISA or a plan subject to the minimum funding standards set
forth in Section 302 of ERISA and Section 412 of the Code.
7.1.2 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
7.1.3 "Member of the Controlled Group" shall mean each trade or
business, whether or not incorporated, which would be treated as a single
employer with the Company under Section 4001 of ERISA or Section 414(b), (c),
(m) or (o) of the Code.
7.1.4 "Multiemployer Plan" shall mean a plan described in Section
3(37) of ERISA.
7.2 REPRESENTATIONS AND WARRANTIES REGARDING THE PLANS.
7.2.1 Schedule 7.2.1 lists (i) all "employee benefit plans" within
the meaning of Section 3(3) of ERISA, (ii) all employment agreements,
including, but not limited to, any individual benefit arrangement, policy or
practice with respect to any current or former employee or director of the
Company or Member of the Controlled Group, and (iii) all other employee
benefit, bonus or other incentive compensation, stock option, stock purchase,
stock appreciation, severance pay, lay-off or reduction in force, change in
control, sick pay, vacation pay, salary continuation, retainer, leave of
absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, which the Company or any Member of the Controlled Group maintains, to
which any of them contributes, or for which any of them has any obligation or
liability (collectively, the "Plans").
7.2.2 None of the Plans is a Defined Benefit Plan, and neither the
Company nor any Member of the Controlled Group has ever sponsored, maintained
or contributed to, or ever been obligated to contribute to, a Defined Benefit
Plan.
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7.2.3 None of the Plans is a Multiemployer Plan, and neither the
Company nor any Member of the Controlled Group has ever contributed to, or ever
been obligated to contribute to, a Multiemployer Plan.
7.2.4 The Company does not maintain or contribute to any plan that
provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Section 601 through 608 of ERISA.
7.2.5 Each Plan which is an "employee benefit plan," as defined in
Section 3(3) of ERISA, complies by its terms and in operation with the
requirements provided by any and all statutes, orders or governmental rules and
regulations currently in effect and applicable to the Plan, including but not
limited to ERISA and the Code.
7.2.6 All reports, forms and other documents required to be filed
with any government entity or furnished to employees, former employees or
beneficiaries with respect to any Plan (including without limitation, summary
plan descriptions, Forms 5500 and summary annual reports) have been timely
filed and furnished and are accurate.
7.2.7 Each of the Plans that is intended to qualify under Section
401(a) of the Code has been determined by the Internal Revenue Service so to
qualify after January 1, 1989, and each trust maintained pursuant thereto has
been determined by the Internal Revenue Service to be exempt from taxation
under Section 501 of the Code. Nothing has occurred since the date of the
Internal Revenue Service's favorable determination letter that could adversely
affect the qualification of the Plan and its related trust. The Company and
each Member of the Controlled Group have timely amended and operated each of
the Plans to comply with the Small Business and Job Protection Act of 1996 and
subsequent legislation enacted through the date hereof, and Section 501 of the
Code.
7.2.8 All contributions for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) have been made prior to the Closing Date by the Company.
7.2.9 All insurance premiums have been paid in full, subject only
to normal retrospective adjustments in the ordinary course, with regard to the
Plan for plan years ending on or before the Closing Date.
7.2.10 With respect to each Plan.
(a) no prohibited transactions (as defined in Section 406 or 407
of ERISA or Section 4975 of the Code) have occurred for which a statutory
exemption is not available;
(b) no action or claims (other than routine claims for benefits
made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending, to the
knowledge of the Principal Shareholders, threatened or imminent against or with
respect to the Plan, any employer who is participating (or who has
participated) in any Plan or any fiduciary (as defined in Section 3(21) of
ERISA), of the Plan;
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(c) neither the Company, nor any fiduciary has any knowledge of any
fact that could give rise to any such action or claim; and
(d) it provides that it may be amended or terminated at any time
and, except for benefits protected under Section 411(d) of the Code, all
benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by the Company at any time without liability.
7.2.11 Neither the Company nor any Member of the Controlled Group
has any liability or, to the knowledge of the Principal Shareholders, is
threatened with any liability (whether joint or several) (i) for any excise tax
imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) to a
fine under Section 502 of ERISA.
7.2.12 All of the Plans, to the extent applicable, are in
compliance with the continuation of group health coverage provisions contained
in Section 4980B of the Code and Sections 601 through 608 of ERISA.
7.2.13 True, correct and complete copies of all documents creating
or evidencing any Plan have been delivered to WebGain, and true, correct and
complete copies of all reports, forms and other documents required to be filed
with any governmental entity or furnished to employees, former employees or
beneficiaries (including, without limitation, summary plan descriptions, Forms
5500 and summary annual reports for all plans subject to ERISA, but excluding
individual account statements and tax forms) have been delivered to WebGain.
There are no negotiations, demands or proposals which are pending or have been
made which concern matters now covered, or that would be covered, by the type
of agreements required to be listed in Schedule 7.12.13.
7.2.14 All expenses and liabilities relating to all of the Plans
have been, and will on the Closing Date be fully and properly accrued on the
Company's books and records and disclosed in accordance with generally accepted
accounting principles and in Plan financial statements.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement, the subject matter or terms hereof or any
confidential information or other proprietary knowledge concerning the business
or affairs of any other party which it may have acquired from such party in the
course of pursuing the transactions contemplated by this Agreement without the
prior consent of the other parties hereto.
8.2 EMPLOYMENT AGREEMENTS. On or prior to the Closing, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Key Employees") shall have
accepted employment
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with WebGain in accordance with the terms of offer letters previously delivered
by WebGain to such Key Employees and, at the Closing, WebGain shall enter into
an employment agreements in the form attached hereto as Exhibit D with such Key
Employees (the "Employment Agreement").
8.3 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT. At the Closing,
WebGain, the Shareholders, BEA, WPV, WPEP shall have entered into the Amended
and Restated Registration Rights Agreement in the form attached hereto as
Exhibit E (the "Registration Rights Agreement").
8.4 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT. At the Closing, WebGain,
the Shareholders, BEA Systems, Inc., Warburg Pincus Ventures, L.P., and Warburg
Pincus Equity Partners, L.P. shall have entered into the Amended and Restated
Stockholders Agreement in the form attached hereto as Exhibit F (the
"Stockholders Agreement").
8.5 CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK. On or prior to
the Closing, all holders of Series A Convertible Preferred Stock shall have
converted their Series A Convertible Preferred Stock into the Company's Common
Stock as provided in Section 4.9.5(a)(i) of the Company's Articles of
Incorporation.
8.6 POST CLOSING TAX COVENANTS.
8.6.1 WebGain will not cause Acquisition Subsidiary to issue any
additional shares of stock following the Merger which would result in WebGain
losing control of Acquisition Subsidiary within the meaning of Section 368(c)
of the Code, if such action would cause the Merger not to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
8.6.2 WebGain will not: (a) liquidate Acquisition Subsidiary; (b)
merge Acquisition Subsidiary with or into another corporation: (c) sell,
exchange, transfer or otherwise dispose of any stock of Acquisition Subsidiary
except for transfers described in Section 368(a)(2)(C) of the Code or Treasury
Regulation Section 1.368-2(k)(2), or (d) cause Acquisition Subsidiary to sell,
exchange, transfer or otherwise dispose of any of its assets or of any assets
acquired from Company in the Merger, except for dispositions made in the
ordinary course of business or transfers described in Section 368(a)(2)(C) of
the Code or Treasury Regulation Section 1.368-2(k)(2), if such action would
cause the Merger not to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code.
8.6.3 Following the Merger, WebGain will cause Acquisition Subsidiary
to either continue the historic business of Company or use a significant
portion of Company's historic business assets in a business, both within the
meaning of Treasury Regulation Section 1.368-1(d), unless the failure to
continue such historic business or use such historic assets in a business would
not adversely affect the status of the Merger as a "reorganization" within the
meaning of Section 368(a) of the Code.
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ARTICLE 9
CLOSING DELIVERIES
9.1 COMPANY AND SHAREHOLDER DELIVERIES AT CLOSING. At the Closing, the
Company and Shareholders shall deliver or cause to be delivered to WebGain:
9.1.1 Stock certificates (with stock powers executed in blank)
representing all of the issued and outstanding capital stock of the Company
accompanied by a properly completed Letter of Transmittal;
9.1.2 Certified resolutions of the Company Board of Directors and
the holders of 100% of the Company's voting securities authorizing consummation
of the transactions contemplated by this Agreement (the "Secretary's
Certificate");
9.1.3 Tax and Secretary of State good standing certificates from the
State of Oregon for the Company as of a date not earlier than three (3)
business days before the Closing;
9.1.4 All third-party consents necessary for consummation of the
transactions contemplated hereby;
9.1.5 The Escrow Agreement, executed by the Representative;
9.1.6 An opinion of its counsel in form and content reasonably
acceptable to WebGain and its counsel and containing customary exclusions,
exceptions and qualifications;
9.1.7 The Employment Agreements, executed by all Key Employees;
9.1.8 The Registration Rights Agreement, executed by the
Shareholders;
9.1.9 The Stockholders Agreement, executed by the Shareholders;
9.1.10 Evidence, in form and substance reasonably satisfactory to
WebGain and its legal counsel, that all (i) outstanding options and other
rights to purchase shares of the Company's capital stock have been (A)
cancelled by the Company and the rights thereunder waived by the holders
thereof, or (B) exercised by the holders thereof; (ii) all issued and
outstanding preferred stock of the Company has been converted to shares of the
Company Stock;
9.1.11 A Certificate, in form and substance reasonably satisfactory
to WebGain, evidencing that WebGain is not required to withhold under Section
1445 of the Code with respect to the Merger (the "FIRPTA Certificate");
9.1.12 Such other documents and instruments as shall be reasonably
requested by WebGain to effect the transactions contemplated hereby (such other
documents and instruments, together with all documents, certificates and
instruments described in Sections 9.1.1-9.1.11 above, collectively, the
"Shareholder Closing Deliveries").
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9.2 WEBGAIN DELIVERIES AT CLOSING. At the Closing, WebGain and
Acquisition Subsidiary shall deliver or cause to be delivered to the
Shareholders:
9.2.1 The Stock Consideration minus the Escrow Stock;
9.2.2 The Cash Consideration minus the Escrow Stock;
9.2.3 Certified resolutions of the Board of Directors and
stockholders of WebGain and the Surviving Corporation authorizing consummation
of the transactions contemplated by this Agreement;
9.2.4 The Escrow Agreement, executed by WebGain;
9.2.5 The Employment Agreements, executed by WebGain;
9.2.6 The Registration Rights Agreement, executed by WebGain;
9.2.7 The Stockholders Agreement, executed by WebGain;
9.2.8 An opinion of its counsel in form and content reasonably
acceptable to the Company and its counsel and containing customary exclusions,
exceptions and qualifications;
9.2.9 Such other documents and instruments as shall be reasonably
requested by the Company and the Shareholders to effect the transactions
contemplated hereby (such other documents and instruments, together with all
documents, certificates and instruments described in Sections 9.2.1-9.2.8
above, collectively, the "WebGain Closing Deliveries").
9.3 THIRD PARTY DELIVERIES.
9.3.1 TAX OPINION. The Company shall have received the written
opinion of PricewaterhouseCoopers LLP, in form and substance reasonably
satisfactory to it, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinion shall not have been withdrawn.
9.3.2 TAX OPINION. WebGain shall have received the written opinion
of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, in form and substance reasonably satisfactory to
it, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinion shall not have been
withdrawn.
9.3.3 BEA, WPV and WPEP shall have executed the Registration Rights
Agreement; and
9.3.4 BEA, WPV and WPEP shall have executed the Stockholders
Agreement.
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ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 SURVIVAL.
(i) The covenants, agreements, representations and warranties
of the parties hereto contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall survive
until the one year anniversary of the Closing:
(ii) notwithstanding Section 10.1(i) above, the covenants,
agreements, representations and warranties contained in Articles 6 and 7 shall
survive until expiration of the statute of limitations applicable to the
matters covered thereby (giving effect to any waiver, mitigation or extension
thereof); and
(iii) notwithstanding Section 10.1(i) above, the covenant
agreements, representations and warranties contained in Sections 3.1, 3.2, 3.5,
4.1, 4.2, 5.1, 5.2 and 5.5.1 shall survive indefinitely. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. Such notice shall be given in reasonable detail by
the party(ies) seeking indemnity and shall be given promptly after such
party(ies) become aware of its/their indemnity right; provided, however, the
rights of the party(ies) to be indemnified shall not be adversely affected by
its/their failure to give notice promptly unless the party(ies) obligated to
provide indemnification hereunder is/are prejudiced thereby.
10.2 INDEMNIFICATION OBLIGATIONS.
10.2.1 INDEMNIFICATION BY THE SHAREHOLDERS AND THE PRINCIPAL
SHAREHOLDERS.
(a) The Shareholders jointly and severally shall indemnify, defend
and hold harmless WebGain and its Affiliates from, against and in respect of
any and all claims, damages, losses, deficiencies, liabilities, assessments,
judgments, costs, fees and expenses (including reasonable attorneys fees and
reasonable expenses) (collectively, "Damages") resulting from, relating to or
arising out of (A) any misrepresentation, inaccuracy in or breach of
representations or warranties (including any misrepresentation, inaccuracy in
or breach of the representations and warranties made under Article 6 hereof,
the "Article 6 Indemnification Obligation") of the Company or the Shareholders
except for those representations or warranties set forth in Sections 3.1, 3.2,
3.5, 4.1, and 4.2 hereof, (B) any failure to perform, satisfy, or observe or
the non-fulfillment of any agreement or covenant on the part of the Company
(which failure occurred prior to the Effective Date) or the Shareholders, (C)
any Taxes for periods ending on or before the Closing Date (excluding any Taxes
resulting from the failure of the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code), and (D) any and all actions,
suits, proceedings, demands, assessments, judgments, costs (including reasonable
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attorneys' fees) and reasonable legal and other reasonable expenses relating to
any of the foregoing or to the enforcement of this Section 10.2.1(a) (the
"First Indemnification Obligations"); provided, however, that the share and
cash payable to satisfy the First Indemnification Obligations shall be limited
to the Escrow Shares and Escrow Cash (as defined in the Escrow Agreement) held
by the Escrow Agent pursuant to the Escrow Agreement and valued as set forth in
the Escrow Agreement. Notwithstanding the foregoing, the Article 6
Indemnification Obligation shall survive until the expiration of the applicable
statute of limitations and shall remain payable by the Shareholders until such
date, provided, however, that such Article 6 Indemnification Obligation and the
First Indemnification Obligations in the aggregate shall not exceed the Value
of the Escrow Fund. The "Value of the Escrow Fund" is equal to the sum of
Escrow Cash and the Escrow Share Value (as defined in the Escrow Agreement).
Each Shareholder shall only be liable for the portion of the Article 6
Indemnification Obligation not otherwise paid to WebGain pursuant to the Escrow
Agreement (if any) as is equal to his respective ownership percentage of the
Company as of the Closing as set forth on Schedule 2.1.
(b) In addition to the First Indemnification Obligations, the
Shareholders severally shall indemnify, defend and hold harmless WebGain and
its Affiliates from, against and in respect of any Damages resulting from,
relating to or arising out of (A) any misrepresentation, inaccuracy in or
breach of representations or warranties set forth in Sections 3.1, 3.2, 3.5,
4.1, and 4.2 hereof, (B) any and all actions, suits, proceedings, demands,
assessments, judgments, costs (including reasonable attorneys' fees) and
reasonable legal and other reasonable expenses relating to any of the foregoing
or to the enforcement of this Section 10.2.1(b) (the "Second Indemnification
Obligations," together with the First Indemnification Obligations, including
the Article 6 Indemnification Obligation, the "Shareholder Indemnification
Obligations"); provided, however, (i) with respect to Second Indemnification
Obligations relating to Sections 3.1, 3.2 and 3.5, each Shareholder shall only
be liable for a portion of such Second Indemnification Obligation equal to his
respective ownership percentage of the Company as of the Closing as set forth
in Schedule 2.1, and (ii) each Shareholder's aggregate indemnification under
the First Indemnification Obligation and the Second Indemnification Obligation
shall not exceed the aggregate Consideration received by such Shareholder.
(c) In addition to the Shareholder Indemnification Obligations, the
Principal Shareholders severally shall indemnify, defend and hold harmless
WebGain and its Affiliates from, against and in respect of any and all Damages
resulting from, relating to or arising out of (A) any misrepresentation,
inaccuracy in or breach of representations or warranties made in Section 3.16
hereof; and (B) any and all actions, suits, proceedings, demands, assessments,
judgments, costs (including reasonable attorneys' fees) and reasonable legal
and other reasonable expenses relating to such misrepresentation, inaccuracy or
breach or to the enforcement of this Section 10.2.1(c) (the "Principal
Shareholder Indemnification Obligations," together with the Shareholder
Indemnification Obligations, the "Indemnification Obligations"); provided,
however, (i) with respect to the Principal Shareholder Indemnification
Obligations, each Principal Shareholder shall only be liable for a portion of
such Principal Shareholder Indemnification Obligation equal to the quotient
resulting from dividing (x) the number of shares
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of Company Stock held by such Principal Shareholder as of the Closing as set
forth in Schedule 2.1 by (y) the total number of shares of Company Stock held
by the Principal Shareholders as of the Closing as set forth in Schedule 2.1,
and (ii) each Principal Shareholder's aggregate indemnification obligation
under the First Indemnification Obligations, the Second Indemnification
Obligations and the Principal Shareholder Indemnification Obligations shall not
exceed the aggregate Consideration received by such Principal Shareholder.
(d) Subject to Section 10.2.2, the Shareholders, including the Principal
Shareholders, may, at their election, pay any Article 6 Indemnification
Obligation, Second Indemnification Obligations and/or Principal Shareholder
Indemnification Obligations in cash or WebGain Common Stock valued as set forth
in the Escrow Agreement.
(e) Nothing contained in this Section 10.2.1 shall be deemed to limit or
restrict in any manner (whether by time, amount, procedure or otherwise) any
remedy at law or in equity to which WebGain and its Affiliates may be entitled
as a result of actual fraud by the Shareholders or the Company.
(f) The Indemnification Obligations shall survive the Closing for the
period of time as set forth in Section 10.1.
(g) Any shares of WebGain Common Stock returned in connection with these
indemnities shall be valued at the Escrow Share Value as set forth in the
Escrow Agreement.
10.2.2 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing, the
right to indemnification under this Article 10 shall be subject to the
following terms:
(a) No Indemnification Obligation shall be payable until the amount of
all such Indemnification Obligations exceeds $100,000 in the aggregate,
whereupon the Indemnification Obligations shall be payable for all Damages, in
excess of the first $100,000, in accordance with the terms hereof.
(b) Claims made against the Escrow Fund shall be applied to satisfy
Indemnification Obligations in the following order:
(i) First Indemnification Obligations, including the Article 6
Indemnification Obligation;
(ii) Second Indemnification Obligations and then
(iii) Principal Shareholder Indemnification Obligations.
(c) Following any application of the Escrow Funds to satisfy the Second
Indemnification Obligations and the Principal Shareholder Indemnification
Obligations (the "Consideration Indemnification Obligations") as set forth in
subsection (b) above, if any Article 6 Indemnification Obligation or
Consideration Indemnification Obligations remain unsatisfied, the Shareholders
(including the Principal Shareholders) may, at their election, satisfy the
Article
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6 Indemnification Obligation and the Consideration Indemnification Obligations
through (i) the payment of cash or, alternatively, (ii) the return of shares of
WebGain Common Stock, provided that the number of shares of WebGain Common
Stock being returned when added to all other shares of WebGain Common Stock
previously returned in connection with indemnification claims does not exceed
an aggregate of 1,500,000 shares of WebGain Common Stock ( this includes,
without limitation, any Escrow Shares returned to WebGain pursuant to the
Escrow Agreement or thereafter pursuant to an Article 6 Indemnification
Obligation).
(d) Following the return of an aggregate of 1,500,000 shares of
WebGain Common Stock (including any Escrow Shares returned to WebGain pursuant
to the Escrow Agreement or thereafter pursuant to an Article 6 Indemnification
Obligation) to satisfy the Consideration Indemnification Obligations as set
forth in subsection (c) above, if any Consideration Indemnification Obligations
remain unsatisfied, the Shareholders (including the Principal Shareholders) may
satisfy any remaining Consideration Indemnification Obligations through (i) the
payment of cash or, alternatively (ii) a return of shares of WebGain Common
Stock and cash in a ratio of one dollar of cash per one share of WebGain Common
Stock returned or in any other manner subject to obtaining an opinion from
WebGain's counsel reasonably acceptable to WebGain that the transaction
contemplated by this Agreement will remain a reorganization with the meaning of
Section 368(a) of the Code notwithstanding such payment.
(e) The parties hereto acknowledge the First Indemnification
Obligations, the Article 6 Indemnification Obligation, the Second
Indemnification Obligations and the Principal Shareholder Indemnification
Obligations are limited as set forth in Sections 10.2.1(a), 10.2.1(b) and
10.2.1(c) above. In the event a Shareholder (including any Principal
Shareholder) is unable to remit shares of WebGain Common Stock to satisfy the
Article 6 Indemnification Obligation or the Consideration Indemnification
Obligations as set forth in subsections (a), (b), (c) or (d) above (e.g.
because such Shareholder has previously sold, transferred, pledged or otherwise
disposed of or encumbered such shares), WebGain shall have the right to pursue
other assets of such Shareholder for satisfaction of the Consideration
Indemnification Obligations; provided, however, that, (i) in no event shall the
preceding create liability of any Shareholder (including any Principal
Shareholder) to WebGain in excess of the appropriate limitations set forth in
Sections 10.2.1(a), 10.2.1(b) and 10.2.1(c); and (ii) WebGain has not taken any
direct action intended to preclude (which a reasonable person would conclude
was intended to preclude) any Shareholder from remitting his WebGain Common
Stock in connection with an Indemnification Obligation hereunder.
10.2.3 The Shareholders acknowledge that their Indemnification
Obligations hereunder relate solely to their capacity as former Shareholders of
the Company, and accordingly, such Indemnification Obligations set forth in
this Article 10 shall not entitle the Shareholders, or any current or former
officer, director or employee of the Company, to any indemnification from the
Company under the Company's Articles of Incorporation and Bylaws, this
Agreement or any of the Transaction Documents.
10.2.4 INDEMNIFICATION BY WEBGAIN.
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(a) WebGain shall indemnify, defend and hold harmless the
Shareholders from, against and in respect of any and all Damages resulting
from, relating to or arising out of any (i) misrepresentation, inaccuracy in or
breach of representations or warranties of WebGain except for those
representations or warranties set forth in Sections 5.1, 5.2 and 5.5.1; (ii)
any failure to perform, satisfy, or observe or the non-fulfillment of any
agreement or covenant on the part of WebGain or the Company for any such
failure occurring after the Effective Date, or (iii) any and all actions,
suits, proceedings, demands, assessments, judgements, costs (including
reasonable attorneys' fees) and reasonable legal and other reasonable expenses
related to any of the foregoing or to the enforcement of this Section
10.2.4(a); provided that WebGain's indemnification obligation shall not exceed
the Value of the Escrow Fund.
(b) WebGain shall indemnify, defend and hold harmless the
Shareholders from, against and in respect of any and all Damages resulting
from, relating to or arising out of any (i) misrepresentation, inaccuracy in or
breach of representations or warranties set forth in Section 5.1, 5.2 and
5.5.1, or (ii) any and all actions, suits, proceedings, demands, assessments,
judgments, costs (including attorneys' fees) and legal and other expenses
related to any of the foregoing or to the enforcement of this Section
10.2.4(b); provided that WebGain's indemnification obligation shall not exceed
the value of the aggregate Stock Consideration received by all Shareholders
(with the Stock Consideration valued as set forth in the Escrow Agreement).
(c) Nothing contained in this Section 10.2.4 shall be deemed to
limit or restrict in any manner (whether by time, amount, procedure or
otherwise) any remedy at law or in equity to which the Shareholders may be
entitled as a result of actual fraud by WebGain.
(d) WebGain's indemnification obligations shall survive the
Closing for the period of time as set forth in Section 10.1.
(e) Notwithstanding the foregoing, WebGain's indemnification
obligation pursuant to this Section 10.2.4 shall not be payable until the
amount of all such indemnification obligations exceeds $100,000 in the
aggregate, whereupon such indemnification obligations shall be payable for all
Damages, in excess of the first $100,000, in accordance with the terms hereof.
10.2.5 For purposes of this Article X, all Damages shall be computed
net of any tax benefit which reduces the Damages that would otherwise be
sustained. All payments of Damages by the Shareholders hereunder shall be
treated as a reduction of the value of the Consideration received in connection
with the Merger.
10.3 PROCEDURE FOR INDEMNIFICATION.
10.3.1 For purposes of this Agreement, (i) the term "Indemnifying
Party" shall mean the Shareholders if WebGain is seeking indemnification
hereunder and shall mean WebGain if the Shareholders are seeking
indemnification hereunder and (ii) the term "Indemnified Party" shall mean
WebGain if WebGain is seeking indemnification hereunder and shall mean the
Shareholders if the Shareholders are seeking indemnification hereunder.
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10.3.2 If the Indemnified Party determines to seek indemnification
under this Article X with respect to an Indemnification Obligation resulting
from the assertion of liability by a third party, it or he shall give notice to
the Indemnifying Party promptly after the Indemnified Party's becoming aware of
any such Indemnification Obligation which notice shall set forth such material
information with respect to such Indemnification Obligation as is then
reasonably available to the Indemnified Party, including the amount of the
alleged Damages. If any such liability is asserted against the Indemnified Party
and the Indemnified Party notifies the Indemnifying Party of such liability in
the manner set forth in this Section 10.3.2, the Indemnifying Party shall be
entitled, if it so elects by written notice delivered to the Indemnified Party
(to WebGain if WebGain is the Indemnified Party and to the Shareholders if they
are the Indemnified Party) within thirty (30) calendar days after receiving the
Indemnified Party's notice, to assume the defense of such asserted liability
with counsel reasonably satisfactory to the Indemnified Party. Notwithstanding
the foregoing, the Indemnified Party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be
payable by the Indemnified Party. With respect to any assertion of liability by
a third party that results in an Indemnification Obligation, the Indemnified
Party and the Indemnifying Party shall make available to each other all relevant
information in their possession which is material to any such assertion.
10.3.3 In the event that the Indemnifying Party fails to assume the
defense of the Indemnified Party against any such Indemnification Obligation
within thirty (30) days after receipt of the Indemnified Party's notice of such
Indemnification Obligation the Indemnified Party shall have the right to assume
the defense of such asserted liability with counsel reasonably satisfactory to
the Indemnifying Party. In no event shall the Indemnified Party or the
Indemnifying Party settle any third party claim which is the subject of a
proper written claim for indemnification hereunder without the written consent
of the other, which consent shall not be unreasonably withheld or delayed.
ARTICLE 11
MISCELLANEOUS
11.1 ANNOUNCEMENTS. The Company and WebGain agree that neither shall make
any press releases or other public announcements regarding this Agreement
without each other's prior written consent, which consent shall not be
unreasonably withheld.
11.2 AMENDMENT. Subject to applicable law, this Agreement may only be
amended or supplemented by written agreement of the WebGain and the holders of
greater than 50% of WebGain Common Stock issued pursuant to this Agreement.
11.3 WAIVER OF COMPLIANCE. Any failure of the Company, on the one hand, or
WebGain, on the other, to comply with any provision of this Agreement may be
expressly waived in writing by WebGain or the Company, respectively, but such
waiver or failure to insist upon strict compliance with such provision shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial
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exercise of any right, remedy, or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
11.4 EXPENSES. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, brokers, finders,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of each party contained herein shall not be
deemed waived or otherwise affected by any investigation made by or on behalf
of the other party and such representations and warranties shall survive the
Closing and the consummation of the Merger contemplated hereby as provided in
Article 10. All statements contained in this Agreement, the Company Disclosure
Schedule, the Secretary's Certificate, or the FIRPTA Certificate or documents
required to be delivered pursuant to the representations and warranties shall
be deemed representations or warranties, as the case may be (as such terms are
used in this Agreement), of the party making such statements.
11.6 NOTICES. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed as
follows:
To Company at:
ZAT, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
41
With a copy to:
Venture Counsel, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
To Shareholders at:
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇
To WebGain at:
WebGain, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Notice of change of address shall be effective only when done in
accordance with this Section. All notices complying with this Section shall be
deemed to have been received on the date of delivery or on the third business
day after mailing.
11.7 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, each party agrees that it will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any right or obligation under this Agreement. Any purported assignment,
transfer, or delegation in violation of this Section shall be null and void.
Subject to the foregoing limits on assignment and delegation, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Except for those enumerated above, this
Agreement does not create, and shall not be construed as creating, any rights
or claims enforceable by any person or entity not a party to this Agreement.
11.8 GOVERNING LAW. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the internal law of the State of California.
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11.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.10 HEADINGS. The headings of the Sections and Articles of this
Agreement and Table of Contents are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement.
11.11 ENTIRE AGREEMENT. The parties intend that the terms of this
Agreement, including the Company Disclosure Schedule and other documents
referred to herein, shall be the final expression of their agreement with
respect to the subject matter hereof and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11.12 PERFORMANCE BY WEBGAIN. WebGain shall cause Acquisition Subsidiary
to perform all of its covenants and obligations hereunder.
11.13 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any Person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable, or void, the remainder of
this Agreement and such provisions as applied to other Persons, places, and
circumstances shall remain in full force and effect.
11.14 RULES OF CONSTRUCTION. The parties acknowledge that each party has
read and negotiated the language used in this Agreement. The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.
11.15 ADDITIONAL DOCUMENTS. Each of the parties agree, without further
consideration, to execute and deliver such other and take such further
action as may be reasonably required to effectuate the provisions of this
Agreement.
11.16 DISPUTE RESOLUTION. Any dispute, controversy or claim between the
parties relating to, or arising out of or in connection with, this Agreement (or
any subsequent agreements or amendments thereto), including as to its existence,
enforceability, validity, interpretation, performance, breach or damages,
including claims in tort, whether arising before or after the termination of
this Agreement, shall be settled only by binding arbitration pursuant to the
Commercial Arbitration Rules, as then amended and in effect, of the American
Arbitration Association (the "Rules"), subject to the following:
11.16.1 The arbitration shall take place in Santa ▇▇▇▇▇ County,
California.
11.16.2 There shall be one arbitrator, who shall be selected under
the normal procedures prescribed in the Rules.
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11.16.3 Subject to legal privileges, each party shall be entitled
to discovery in accordance with the Federal Rules of Civil Procedure.
11.16.4 At the arbitration hearing, each party may make written and
oral presentations to the arbitrator, present testimony and written evidence
and examine witnesses.
11.16.5 The arbitrators' decision shall be writing, shall be
binding and final and may be entered and enforced in any court of competent
jurisdiction.
11.16.6 No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, exemplary or punitive damages.
11.16.7 Each party to the arbitration shall pay one-half of the
fees and expenses of the arbitrators and the American Arbitration Association.
11.16.8 The arbitrators shall not have the power to amend this
Agreement.
11.17 EXHIBITS. All Exhibits attached hereto shall be deemed to be a part
of this Agreement and are fully incorporated in this Agreement by this
reference.
11.18 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
capitalized terms shall have the respective meanings ascribed to such terms in
this Section:
(a) "Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; provided that no party to this Agreement shall be
deemed to be an Affiliate of any other party to this Agreement (including,
without limitation, the Company) solely by reason of its ownership of Company
Stock.
(b) "Balance Sheet" means the balance sheet of the Company as of
March 31, 2000.
(c) "Balance Sheet Date" means March 31, 2000.
(d) "Closing Date" means the date of Closing.
(e) "Company Intellectual Property Assets" shall mean (i) all
Schedule 3.16.1 Rights; and (ii) any other Intellectual Property Rights and
Technology that are used, (or proposed to be used) in the business of the
Company or necessary to conduct the business to the same extent and in
substantially the same manner as presently conducted and as presently proposed
by the Company to be conducted.
(f) "Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, now in
effect, relating to human health, the environment or to emissions, discharges
or releases of pollutants, contaminants, Hazardous Substances or wastes
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into the environment, including without limitation ambient air, surface water,
ground water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
(g) "Environmental Liabilities" means any and all liabilities of or
relating to the Company (including any entity which is, in whole or in part, a
predecessor of the Company), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, which (a) arise under or relate to
matters covered by Environmental Laws and (b) relate to actions occurring or
conditions existing on or prior to the Closing Date.
(g) "Environmental Permits" means all permits, licenses,
authorizations, certificates and approvals of governmental authorities relating
to or required by Environmental Laws and necessary or proper for the business
of the Company as currently conducted.
(i) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulation promulgated thereunder.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(k) "GAAP" means generally accepted accounting principles,
consistently applied.
(l) "Hazardous Substances" means any toxic, radioactive, corrosive
or otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, including, without
limitation, any substance regulated under Environmental Laws.
(m) "Immediate Family Member" means, with respect to any Person,
such Person's spouse, parents, children and siblings.
(n) "Independent Investors" shall mean any Person other than BEA,
WPV or WPEP.
(o) "Intellectual Property Right" means any intellectual property
rights, including, without limitation, patent applications, copyrights,
copyright registrations, applications for copyright registrations, mask works,
mask work registrations, applications for mask work registrations, trade
secrets, trademarks, service marks, collective marks, certification marks,
registrations therefor and applications for registrations therefor, trade
names, and trade dress.
(p) "Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of
this Agreement, a Person shall be deemed to own
43
45
subject to a Lien any property or asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such property or
asset.
(q) "Material Adverse Effect" means any material adverse change in, or
material adverse effect on, the business, assets, prospects, results of
operations, value or financial or other condition of the Company, or any event
or circumstance that would likely prevent, hinder or materially delay the
consummation of any of the transactions contemplated by this Agreement and the
Transaction Documents.
(r) "Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
(s) "Principal Shareholders" means individually and jointly ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
(t) "Schedule 3.16.1 Rights" shall mean all patents, patent applications,
registered and unregistered trademarks, service marks, collective marks, and
certification marks, and applications for registration therefor, copyright
registrations, applications for copyright registrations, mask work
registrations, and applications for mask work registrations that are owned by
the Company.
(u) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(v) "Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
(w) "Technology" shall mean any algorithms, confidential or proprietary
information or data, designs, discoveries, domain names, formulae, ideas,
inventions, know-how, logos, methods, models, names, processes, research,
software, techniques, technology, works of authorship, and general intangibles
of like nature, whether patentable or unpatentable and whether or not reduced
to practice.
(x) "Transaction Documents" means this Agreement, the Stockholders
Agreement, the Registration Rights Agreement, and the Escrow Agreement.
44
46
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: /s/ ▇▇ ▇▇▇▇▇ By:
-------------------------- -------------------------------
Name: ▇▇ ▇▇▇▇▇ Name:
Title: President Title:
WEBGAIN, INC. SHAREHOLDERS
By:
-------------------------- -------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS -------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
-------------------------------
____________________, Trustee
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
47
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- -----------------------------------
Name: Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Title: President
WEBGAIN, INC. SHAREHOLDERS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- --------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO, President
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
----------------------------------- --------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
-------------------, Trustee
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
45
48
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
49
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
50
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
AGREEMENT AND PLAN OF MERGER
Signature Page
51
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
52
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
53
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
54
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
--------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
55
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
56
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
AGREEMENT AND PLAN OF MERGER
Signature Page
57
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
58
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
ZAT, INC. ZAT ACQUISITION CORPORATION
By: By:
------------------------------------- --------------------------------
Name: Name:
Title: Title:
WEBGAIN, INC. SHAREHOLDERS
By:
------------------------------------- --------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
PRINCIPAL SHAREHOLDERS --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1996 Revocable
Trust Dtd. 11/19/96
--------------------------------------
, Trustee
-----------------------------
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Signature Page
59
LIST OF SCHEDULES AND EXHIBITS*
SCHEDULE NAME
-------- ----
Schedule 2.1 Consideration to Shareholders of the Company
Schedule 3.3 Governmental Authorization
Schedule 3.4 Effect of Agreement on the Company
Schedule 3.5.1 List of Shareholders
Schedule 3.5.2 Outstanding Warrants and Options
Schedule 3.6 Subsidiaries
Schedule 3.7 Financial Statements
Schedule 3.8 Absence of Certain Changes
Schedule 3.9 No Undisclosed Liabilities
Schedule 3.10 Related Party Transactions
Schedule 3.11.1 Material Agreements
Schedule 3.12.2 Litigation
Schedule 3.14.1 Properties
Schedule 3.14.3 Plant and Equipment
Schedule 3.14.4 Property and Assets
Schedule 3.15.1 Proprietary Software
Schedule 3.15.2 Software Errors
Schedule 3.16.1 Schedule 3.16.1 Rights
Schedule 3.16.2 Breaches of Default; Royalties
Schedule 3.16.4 Confidentiality and Inventions
Assignment Agreements
Schedule 3.16.5 Source Code
Schedule 3.17 Insurance
Schedule 3.18.1 Licenses and Permits
Schedule 3.20 Loans, Notes, Accounts Receivable and
Accounts Payable
Schedule 3.22 Employees
Schedule 4.5 Shareholder Agreements
Schedule 5.3 Government Authorization
Schedule 5.4 Effect of Agreement on WebGain
Schedule 6.2.1 Taxes
Schedule 6.2.2 Tax Returns
Schedule 6.2.4 Completed Audits
Schedule 6.2.5 Pending Audits
Schedule 6.2.10 Net Operating Losses
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Schedule 6.2.11 Other Taxes
Schedule 6.2.12 Partnership Taxes
Schedule 7.2.1 Plans
EXHIBIT NAME
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Exhibit A-1 Certificate of Merger
Exhibit A-2 Agreement of Merger
Exhibit B Letter of Transmittal
Exhibit C Form of Escrow Agreement
Exhibit D Form of Employment Agreement
Exhibit E Form of Amended and Restated Registration
Rights Agreement
Exhibit F Form of Amended and Restated
Stockholders Agreement
*Omitted Schedules and Exhibits will be furnished supplementally to the
Commission upon request.
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