EXHIBIT 2.2
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STOCK PURCHASE AGREEMENT
BY AND AMONG
METATOOLS, INC.
AND
CERTAIN STOCKHOLDERS AND OPTION HOLDERS OF
REAL TIME GEOMETRY CORP.
DATED AS OF DECEMBER 23, 1996
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF STOCK........................................................................................ 2
1.1 Sale of Stock................................................................................................... 2
1.2 Exchange of Options............................................................................................. 2
1.3 Closing......................................................................................................... 2
1.4 Consideration and Payment...................................................................................... 2
1.5 Surrender of Certificates...................................................................................... 3
1.6 Tax Consequences............................................................................................... 3
1.7 Taking of Necessary Action; Further Action..................................................................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS................................................................... 4
2.1 Organization of the Company..................................................................................... 4
2.2 Company Capital Structure....................................................................................... 4
2.3 Subsidiaries.................................................................................................... 5
2.4 No Conflicts and Consents....................................................................................... 5
2.5 Company Financial Statements.................................................................................... 5
2.6 No Undisclosed Liabilities...................................................................................... 5
2.7 No Changes...................................................................................................... 6
2.8 Tax and Other Returns and Reports............................................................................... 7
2.9 Restrictions on Business Activities............................................................................. 9
2.10 Title to Properties; Absence of Liens and Encumbrances.......................................................... 9
2.11 Intellectual Property........................................................................................... 10
2.12 Agreements, Contracts and Commitments........................................................................... 11
2.13 Interested Party Transactions................................................................................... 12
2.14 Compliance with Laws............................................................................................ 13
2.15 Litigation...................................................................................................... 13
2.16 Insurance....................................................................................................... 13
2.17 Minute Books.................................................................................................... 13
2.18 Environmental Matters........................................................................................... 13
2.19 Brokers' and Finders' Fees; Third Party Expenses................................................................ 14
2.20 Employee Matters and Benefit Plans.............................................................................. 14
2.21 Section 280(g).................................................................................................. 17
2.22 Representations Complete........................................................................................ 17
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH SELLER........................................................ 17
3.1 Authority....................................................................................................... 18
3.2 Good and Marketable Title....................................................................................... 18
3.3 Investment Representations...................................................................................... 18
3.4 Standstill and Restrictions on Transfer......................................................................... 19
3.5 Maximum Net Worth............................................................................................... 19
3.6 Tax Matters..................................................................................................... 19
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TABLE OF CONTENTS
(continued)
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................................... 20
4.1 Organization, Standing and Power................................................................................ 20
4.2 Authority....................................................................................................... 21
4.3 Capital Structure............................................................................................... 21
4.4 SEC Documents; Buyer Financial Statements....................................................................... 21
4.5 No Material Adverse Change...................................................................................... 22
4.6 Litigation...................................................................................................... 22
4.7 Brokers' and Finders' Fees...................................................................................... 22
4.8 Continuity of Business Enterprise; Section 368 Reorganization................................................... 22
4.9 Employee Benefit Plans; ERISA................................................................................... 22
ARTICLE V CONDUCT PRIOR TO THE CLOSING...................................................................................... 23
5.1 Conduct of Business of the Company.............................................................................. 23
5.2 No Solicitation................................................................................................. 25
5.3 No Encumbrance.................................................................................................. 26
ARTICLE VI ADDITIONAL AGREEMENTS............................................................................................ 26
6.1 Access to Information........................................................................................... 26
6.2 Confidentiality................................................................................................. 27
6.3 Expenses........................................................................................................ 27
6.4 Public Disclosure............................................................................................... 27
6.5 Consents........................................................................................................ 27
6.6 FIRPTA Compliance............................................................................................... 28
6.7 Legal Requirements.............................................................................................. 28
6.8 Notification of Certain Matters................................................................................. 28
6.9 Certain Benefit Plans........................................................................................... 28
6.10 Buyer Stock Options............................................................................................. 29
6.11 Additional Documents and Further Assurances..................................................................... 29
6.12 Form S-8........................................................................................................ 29
6.13 Company's Auditors.............................................................................................. 29
6.14 Arrangements with Wexford....................................................................................... 29
6.15 Company Agreements.............................................................................................. 30
ARTICLE VII CONDITIONS TO THE PURCHASE...................................................................................... 30
7.1 Conditions to Obligations of Each Party to Effect the Purchase.................................................. 30
7.2 Additional Conditions to Obligations of the Sellers............................................................. 30
7.3 Additional Conditions to the Obligations of Buyer............................................................... 31
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TABLE OF CONTENTS
(continued)
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ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.................................................... 33
8.1 Survival of Representations and Warranties...................................................................... 33
8.2 Indemnity for Representations of Founders....................................................................... 33
8.3 Indemnity for Representations of Each Seller.................................................................... 33
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................................................................ 34
9.1 Termination..................................................................................................... 34
9.2 Effect of Termination........................................................................................... 34
9.3 Amendment....................................................................................................... 35
9.4 Extension; Waiver............................................................................................... 35
ARTICLE X GENERAL PROVISIONS................................................................................................ 35
10.1 Notices......................................................................................................... 35
10.2 Interpretation.................................................................................................. 36
10.3 Counterparts.................................................................................................... 37
10.4 Entire Agreement; Assignment.................................................................................... 37
10.5 Severability.................................................................................................... 37
10.6 Other Remedies.................................................................................................. 37
10.7 Governing Law................................................................................................... 37
10.8 Rules of Construction........................................................................................... 37
10.9 Specific Performance............................................................................................ 37
10.10 Unified Disclosure Schedules.................................................................................... 38
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A-1 Form of ▇▇▇▇▇▇ Employment Agreement
Exhibit A-2 Form of Rice Employment Agreement
Exhibit B Form of ▇▇▇▇▇▇ Noncompete
Exhibit C Form of Amended and Restated Investors' Rights Agreement
Schedule I Allocation of Buyer Common Stock and Buyer Options
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of December 23, 1996 among MetaTools, Inc., a Delaware corporation ("Buyer"),
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇", and collectively with ▇▇▇▇▇▇,
the "Founders"), Wexford Capital Partners II, LP ("Wexford Capital") and Wexford
Overseas Partners I, LP ("Wexford Overseas", and collectively with ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, "▇▇▇▇▇▇▇") and certain other stockholders of (the "Other Stockholders,"
and collectively with ▇▇▇▇▇▇ and Wexford, the "Stockholders"), and certain
holders of options, warrants or other rights to acquire capital stock of (the
"Option Holders," and collectively with the Stockholders, the "Sellers") of Real
Time Geometry Corp., a Delaware corporation (the "Company").
RECITALS
A. The parties believe it is in their respective best interests that Buyer
acquire the Company through the purchase (the "Purchase") by Buyer from the
Sellers of all capital stock of the Company ("Company Capital Stock") held by
them, together with all (subject to certain exceptions) outstanding options,
warrants or other rights to acquire or receive shares of Company Capital Stock
from the Company or from ▇▇▇▇▇▇ ("Company Options"), in exchange for shares of
voting Common Stock of Buyer ("Buyer Common Stock"), or options, warrants or
other rights to acquire or receive Buyer Common Stock, as applicable.
B. The Stockholders are collectively the owners of and have good and valid
title to approximately 97% of the Company Capital Stock, free and clear of any
legal or equitable encumbrances. The Option Holders and Wexford are collectively
the owners of and have good and valid title to all Company Options, free and
clear of any legal or equitable encumbrances.
C. Buyer and the Sellers desire to make certain representations and
warranties and other agreements in connection with the Purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
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ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Sale of Stock. At the Closing (as defined in Section 1.3 hereof) and
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subject to and upon the terms and conditions of this Agreement, each Stockholder
will sell, transfer, convey, assign and deliver to Buyer, and Buyer will
purchase and acquire from each Stockholder, good and valid title to all shares
of Company Capital Stock held by such Stockholder (collectively, the "Purchased
Shares"), free and clear of any liens, claims, charges, restrictions, pledges,
security interests, options, rights of any nature or other legal or equitable
encumbrances. At the Closing, each Stockholder will deliver to Buyer duly
executed instruments of transfer and assignment of the Purchased Shares
sufficient to vest in Buyer all right, title and interest in the Purchased
Shares in accordance with the terms of this Agreement. Except as set forth in
Section 1.5(c), Buyer will bear the cost of any documentary, stamp, sales,
excise, transfer or other taxes payable in respect of the sale of the Purchased
Shares. Each Stockholder's obligation to sell such Stockholder's Purchased
Shares to Buyer is a separate obligation.
1.2 Exchange of Options. At the Closing and subject to and upon the terms and
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conditions of this Agreement, the Option Holders will agree to cancel their
entire outstanding and unexercised Company Options, whether vested, unvested,
exercisable or unexercisable, in exchange for the grant by Buyer of new, fully
vested and immediately exercisable options, under the Buyer's 1996 Nonstatutory
Stock Option Plan, to acquire a number of shares of Buyer Common Stock as set
forth on Schedule I hereto. Such new options shall have a per share option
exercise price equal to the per share exercise price as set forth on Schedule I
hereto.
1.3 Closing. Unless this Agreement is earlier terminated pursuant to Article
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IX hereof, the closing of the purchase and sale of the Purchased Shares (the
"Closing") will take place as promptly as practicable, but no later than five
(5) business days, following satisfaction or waiver of the conditions set forth
in Article VII hereof, at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to
by Buyer and the Founders. The date upon which the Closing actually occurs is
herein referred to as the "Closing Date"). Subsequent to the Closing, the
Company is sometimes referred to herein as the "Surviving Corporation").
1.4 Consideration and Payment.
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(a) Common Stock Purchase Price. The consideration to be paid by Buyer
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to each Stockholder selling Common Stock of the Company ("Company Common
Stock"), with respect to such Common Stock, shall be as set forth on Schedule I
hereto.
(b) Preferred Stock Purchase Price. The consideration to be paid by
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Buyer to each Stockholder selling Preferred Stock of the Company ("Company
Preferred Stock"), with respect to such Preferred Stock, shall be as set forth
on Schedule I hereto.
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(c) No Adjustment for Subsequent Issuances. No adjustment shall be made
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in the number of shares of Buyer Common Stock issued as a result of any cash
proceeds received by the Company from the date hereof to the Closing pursuant to
the exercise of any Company Options.
(d) Fractional Shares. No fraction of a share of Buyer Common Stock will
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be issued, but, in lieu thereof, each Stockholder who would otherwise be
entitled to a fraction of a share of Buyer Common Stock (after aggregating all
fractional shares of Buyer Common Stock to be received by such stockholder)
shall be entitled to receive from Buyer an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average closing price of a share of Buyer Common Stock for the five (5)
consecutive trading days ending on the trading day immediately prior to the
Closing Date, as reported on the Nasdaq National Market (the "Closing Fair
Market Value").
1.5 Surrender of Certificates.
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(a) Surrender of Certificates. Each Stockholder shall deliver to Buyer
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at the Closing all certificates, duly endorsed for transfer, representing all
shares of Company Capital Stock held by such Stockholder (the "Certificates").
(b) Lost, Stolen or Destroyed Certificates. In the event any
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Certificates evidencing Purchased Shares shall have been lost, stolen or
destroyed, the Stockholder shall deliver to the Buyer an affidavit of that fact
and a bond in such sum as Buyer may reasonably request as indemnity against any
claim that may be made against Buyer with respect to the Certificates alleged to
have been lost, stolen or destroyed.
(c) Transfers of Ownership. If any certificate for shares of Buyer
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Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Buyer or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Buyer Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Buyer or any
agent designated by it that such tax has been paid or is not payable.
1.6 Tax Consequences. It is intended by the parties hereto that the Purchase
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shall constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
1.7 Taking of Necessary Action; Further Action. If, at any time after the
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Closing, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Buyer with full right, title and
possession to all Purchased Shares, each Stockholder agrees to promptly, at its
own expense, take all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS
The Founders hereby represent and warrant to Buyer subject to such exceptions
as are specifically disclosed in the schedules (referencing the appropriate
section number) supplied by the Founders to Buyer (the "Company Schedules") and
dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted by the Company.
The Company is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect (as defined below). (As used in this Agreement,
the term "Material Adverse Effect" means a material adverse effect on the
business, assets (including intangible assets), financial condition or results
of operations of the Company or the Buyer, as applicable). The Company has
delivered a true and correct copy of its Certificate of Incorporation and
Bylaws, each as amended to date, to Buyer.
2.2 Company Capital Structure.
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(a) The authorized capital stock of the Company consists of 1,500 shares
of authorized Common Stock, of which 825 shares are issued and outstanding, and
200 shares of authorized Series A Preferred Stock, of which 200 shares are
issued and outstanding. The Company Capital Stock is held of record by the
persons, with the addresses of record and in the amounts set forth on Schedule
2.2(a). All outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of the
Company or any agreement to which the Company is a party or by which it is
bound.
(b) The Company has reserved 250 shares of Common Stock for issuance
upon exercise of the Company Options. Schedule 2.2(b) sets forth for each
outstanding Company Option, the name of the holder of such Company Option, the
domicile address of such holder, the number of shares of Common Stock subject to
such Company Option, the exercise price of such Company Option and the vesting
schedule for such Company Option, including the extent vested to date and
whether the exercisability of such Company Option will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement. Except
for the Company Options described in Schedule 2.2(b), there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company or any stockholder of the Company is a party or by
which the Company is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. The holders of Company Options have been or will be given, or
shall have properly waived, any required notice prior to the Purchase.
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(c) As a result of the Purchase, Buyer will be the record and sole
beneficial owner of at least 97% of the Company Capital Stock and all rights to
acquire or receive Company Capital Stock.
2.3 Subsidiaries. The Company does not have and has never had any subsidiaries
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or affiliated companies and does not otherwise own and has never otherwise owned
any shares of capital stock or any interest in, and does not control, directly
or indirectly, any other corporation, partnership, association, joint venture or
other business entity.
2.4 No Conflicts and Consents. Except as set forth on Schedule 2.4, the
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execution and delivery of this Agreement by the Sellers does not, and, as of the
Closing, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the
Certificate of Incorporation or Bylaws of the Company or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality, agency
or commission ("Governmental Entity") or any third party, including a party to
any agreement with the Company (so as not to trigger any Conflict) is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and (ii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5(a) sets forth the Company's
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unaudited balance sheet as of November 30, 1996 (the "Balance Sheet") and the
related unaudited statements of operations and cash flows for the eleven-month
period then ended (collectively, the "Company Financials"). The Company
Financials are complete and correct in all material respects and have been
prepared on a modified accrual basis which is consistent with financial
statements prepared under generally accepted accounting principles ("GAAP"),
except as disclosed in footnote 2 of the company Financials in accordance with
GAAP, applied on a basis consistent throughout the periods indicated and
consistent with each other. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject, to normal year-end adjustments, which
adjustments will not be material in amount or significance.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6, the
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Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
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principles), which individually or in the aggregate, (i) has not been reflected
in the Balance Sheet, or (ii) has not arisen in the ordinary course of the
Company's business since the date of the Balance Sheet, consistent with past
practices.
2.7 No Changes. Except as set forth in Schedule 2.6 or Schedule 2.7, since
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the date of the Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of business
as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Certificate of Incorporation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company, either individually
in excess of $5,000 or in the aggregate exceeding $50,000;
(d) destruction of, damage to or loss of any assets (including intangible
assets), business or customer of the Company (whether or not covered by
insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside, or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(i) increase in the salary or other compensation payable or to become
payable to any of its officers, directors, employees, consultants or advisors,
or the declaration, payment or commitment or obligation of any kind for the
payment of a bonus or other additional salary or compensation to any such
person;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
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(l) loan by the Company to any person or entity, incurring by the Company
of any indebtedness, guaranteeing by the Company of any indebtedness, issuance
or sale of any debt securities of the Company or guaranteeing of any debt
securities of others, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practices;
(m) waiver or release of any right or claim of the Company, including any
write-off or other compromise of any account receivable of the Company;
(n) commencement or notice or threat of commencement of any lawsuit or
proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of any Company
Intellectual Property Rights (as defined in Section 2.11 below) or of
infringement by the Company of any third party's intellectual property rights;
(p) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities (except as contemplated by this Agreement);
(q) change in pricing or royalties set or charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(r) event or condition of any character that has or could be reasonably
expected to have a Material Adverse Effect on the Company; or
(s) negotiation or agreement by the Company or any officer, employee or
agent thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Buyer and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
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(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
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collectively, "Taxes", means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
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(b) Tax Returns and Audits.
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(i) The Company as of the Closing will have prepared and filed all
required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns, if any, are true
and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Closing: (A) will have paid or accrued
all Taxes it is required to pay or accrue and (B) will have withheld with
respect to its employees all federal and state income taxes, The Federal
Insurance Contribution Act ("FICA"), the Federal Unemployment Tax Act ("FUTA")
and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any Tax
nor is there any Tax deficiency outstanding, proposed or assessed against the
Company, nor has the Company executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company is
currently in progress, nor has the Company been notified of any request for such
an audit or other examination.
(v) The Company does not have any liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved against
in accordance with GAAP on the Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has no knowledge of any basis for the
assertion of any such liability attributable to the Company, its assets or
operations.
(vi) The Company has provided to Buyer copies of all federal and
state income and all state sales and use Tax Returns for all periods since the
date of Company's incorporation.
(vii) There are (and as of immediately following the Closing there
will be) no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("Liens") on the assets of the Company relating to or
attributable to Taxes, except for Liens for taxes not yet due and payable.
(viii) The Company has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
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(x) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
(xi) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xii) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business. There is no agreement (noncompete or
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otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
could be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
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(a) The Company owns no real property, nor has it ever owned any real
property. Schedule 2.10(a) sets forth a list of all real property currently, or
at any time in the past, leased by the Company, the name of the lessor, the date
of the lease and each amendment thereto and, with respect to any current lease,
the aggregate annual rental and/or other fees payable under any such lease. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Company
Financials or in Schedule 2.10(b) and except for liens for taxes not yet due and
payable and such imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
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2.11 Intellectual Property.
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(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, net lists, schematics, technology,
know-how, computer software programs or applications (in both source code and
object code form as to software programs and applications owned by the Company
and in object code form as to software programs and applications licensed by the
Company), and tangible or intangible proprietary information or material that
are used in the business of the Company (the "Company Intellectual Property
Rights").
(b) Schedule 2.11(a) sets forth a complete list of all patents,
registered and material unregistered trademarks, registered copyrights, trade
names and service marks, and any applications therefor, included in the Company
Intellectual Property Rights, and specifies, where applicable, the jurisdictions
in which each such Company Intellectual Property Right has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners. Schedule 2.11(b) sets forth a complete list of
all licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company or any other person is authorized to use
any Company Intellectual Property Right or trade secret of the Company, and
includes the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty or other fees and the term
thereof. The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company to be in violation or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement. Except
as set forth in Schedules 2.11(a) or 2.11(b), the Company is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), the Company Intellectual Property
Rights, and has sole and exclusive rights (and is not contractually obligated to
pay any compensation to any third party in respect thereof) to the use thereof
or the material covered thereby in connection with the services or products in
respect of which the Company Intellectual Property Rights are being used.
(c) No claims with respect to the Company Intellectual Property Rights
have been asserted or are threatened by any person, nor is the Company aware of
any valid grounds for any bona fide claims, (i) to the effect that the
manufacture, sale, licensing or use of any of the products of the Company
infringes on any copyright, patent, trade ▇▇▇▇, service ▇▇▇▇, trade secret or
other proprietary right of others, (ii) against the use by the Company of any
trademarks, service marks, trade names, trade secrets, copyrights, maskworks,
patents, technology, know-how or computer software programs and applications
used in the Company's business as currently conducted or as proposed to be
conducted by the Company, or (iii) challenging the ownership by the Company or
the validity or effectiveness of any of the Company Intellectual Property
Rights. All registered trademarks, service marks and copyrights held by the
Company are valid and subsisting. To the best of the Company's knowledge, the
Company has not infringed, and the business of the Company as currently
conducted or as proposed to be conducted does not infringe, any copyright,
patent, trademark, service ▇▇▇▇, trade secret or other proprietary right of any
third party. The Company is not aware of any material unauthorized use,
infringement or misappropriation of any of the Company
-10-
Intellectual Property Rights by any third party, including any employee or
former employee of the Company. No Company Intellectual Property Right or
product of the Company is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company. Each
employee, consultant or contractor of the Company has executed a proprietary
information and confidentiality agreement substantially in the Company's
standard forms. All software included in the Company Intellectual Property
Rights is original with the Company and has been either created by employees of
the Company on a work-for-hire basis or by consultants or contractors who have
created such software themselves and have assigned all rights they may have had
in such software to the Company.
2.12 Agreements, Contracts and Commitments. Except as set forth on Schedule
-------------------------------------
2.12(a), the Company does not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or any consulting or
sales agreement, contract or commitment under which any firm or other
organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually in
excess of $10,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any person,
-11-
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000,
(xi) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (viii)
hereof,
(xiii) any purchase order or contract for the purchase of raw materials
involving $10,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
(xvi) any agreement pursuant to which the Company has granted or may
grant in the future, to any party, a source-code license or option or other
right to use or acquire, contingent or otherwise, source-code, or
(xvii) any other agreement, contract or commitment that involves $10,000
or more or is not cancelable without penalty within thirty (30) days.
The Company has not breached, violated or defaulted under, or received notice
that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment to which it is bound
(including those set forth in any of the Company Schedules) (any such agreement,
contract or commitment, a "Contract") in any manner which could reasonably be
expected to have a Material Adverse Effect. Each Contract is in full force and
effect and is not subject to any default thereunder of which the Company has
knowledge by any party obligated to the Company pursuant thereto.
2.13 Interested Party Transactions. Except as set forth in Schedule 2.13, no
-----------------------------
officer, director or stockholder of the Company (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in
any entity that purchases from or sells or furnishes to the Company any goods or
services or (iii) a beneficial interest in any Contract; provided, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly-traded corporation shall not be deemed an "economic interest in any
entity" for purposes of this Section 2.13.
-12-
2.14 Compliance with Laws. The Company has complied in all respects with, is
--------------------
not in violation of, and has not received any notices of violation with respect
to, any foreign, federal, state or local statute, law or regulation, the
violation of which could reasonably be expected to have a Material Adverse
Effect.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no action,
----------
suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, there is no investigation pending or threatened against the
Company, its properties or any of its officers or directors by or before any
governmental entity. Schedule 2.15 sets forth, with respect to any pending or
threatened action, suit, proceeding or investigation, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. No governmental entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof. Schedule 2.15 also lists
all suits and legal actions initiated by the Company.
2.16 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid, and the
Company is otherwise in material compliance with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies. Such policies
of insurance and bonds are the type and in the amounts customarily carried by
persons conducting businesses similar to those of the Company.
2.17 Minute Books. The minute books of the Company made available to counsel
------------
for Buyer are the only minute books of the Company and contain an accurate
summary of all meetings of directors (or committees thereof) and stockholders or
actions by written consent since the time of incorporation of the Company.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not operated any underground
------------------
storage tanks, and has no knowledge of the existence, at any time, of any
underground storage tank (or related piping or pumps), at any property that the
Company has at any time owned, operated, occupied or leased. The Company has not
released any amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean
-13-
Air Act, as amended, and the regulations promulgated pursuant to such laws, (a
"Hazardous Material"). No Hazardous Materials are present as a result of the
actions or omissions of the Company, or, to the Company's knowledge, as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing, nor has the Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "Hazardous Materials Activities") in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending or
threatened concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of the Company. The Company is not aware of any
fact or circumstance which could involve the Company in any environmental
litigation or impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Other than pursuant
------------------------------------------------
to a Letter Agreement dated November 1, 1996 (executed by the Company on
November 7, 1996) between the Company and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, the Company has not
incurred, nor will incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby. Schedule 2.19 sets forth
the Founders' current reasonable estimate of all Third Party Expenses (as
defined in Section 5.4) expected to be incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate" set
-----------
forth in Section 2.20(a)(i) below (which definition shall apply only to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
---------
control with the Company within the meaning of Section 414(b) or (c) of the Code
and the regulations thereunder;
-14-
(ii) "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
---------------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability;
(iv) "Employee" shall mean any current, former, or retired employee,
--------
officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management, employment,
------------------
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between the Company or any Affiliate and
any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
------------------
below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA;
and
(viii) "Pension Plan" shall refer to each Company Employee Plan
------------
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.20(b) contains a complete list of each Company
--------
Employee Plan and each Employee Agreement. The Company does not have any legally
binding plan or commitment to establish any new Company Employee Plan or
Employee Agreement, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any present intention to do any of the
foregoing.
(c) Documents. The Company has provided to Buyer (i) correct and
---------
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement including all amendments thereto; (ii) the most recent annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
most recent annual report (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan
or related trust; (iv) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination letters and rulings relating
to
-15-
Company Employee Plans; and (vii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company.
(d) Employee Plan Compliance. Except as set forth on Schedule 2.20(d),
------------------------
(i) the Company has performed in all material respects all obligations required
to be performed by it under each Company Employee Plan, and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) no non-exempt "prohibited transaction", within the meaning of Section 4975
of the Code or Section 406 of ERISA, has occurred with respect to any Company
Employee Plan which would have a Material Adverse Effect; (iii) there are no
actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; (iv)
there are no inquiries or proceedings pending or, to the knowledge of the
Company threatened by the IRS or the Department of Labor with respect to any
Company Employee Plan; and (v) the Company is not subject to any material
penalty or tax with respect to any Company Employee Plan under Section 502(i) of
ERISA or Section 4976 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to any
-------------------
Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.20(g), no Company Employee Plan provides, or has any obligation to provide,
life insurance, medical or other employee benefits to any Employee upon his or
her retirement or termination of employment for any reason, except as may be
required by applicable law, rule or regulation, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute.
(h) Effect of Transaction.
----------------------
(i) Except as set forth on Schedule 2.20(h), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether
-16-
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(ii) Except as set forth on Schedule 2.20(h), no payment or benefit
which will or may be made by the Company or Buyer or any of their respective
affiliates with respect to any Employee will be characterized as an "excess
parachute payment", within the meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all material
------------------
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii) is
not liable for material amounts in respect of any arrears of wages or any
material penalty for failure to comply with any of the foregoing; and (iii) is
not liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice).
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the best knowledge of the Company, threatened. The Company is not
involved in or, to the best knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in material liability to the
Company. Neither the Company nor any of its subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act
which would, individually or in the aggregate, directly or indirectly result in
a material liability to the Company. The Company is not presently, nor has it
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no collective bargaining
agreement is being negotiated by the Company.
2.21 Section 280(g). The Company has obtained all stockholder consents
--------------
necessary to exempt any payments contemplated pursuant to this Agreement from
Section 280(g) of the Code.
2.22 Representations Complete. None of the representations or warranties made
------------------------
by the Founders (as modified by the Company Schedules), nor any statement made
in any schedule or certificate furnished by the Founders pursuant to this
Agreement contains or will contain at the Closing, any untrue statement of a
material fact, or omits or will omit at the Closing to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH SELLER
-17-
Each Seller severally and not jointly hereby represents, warrants and
covenants to Buyer as follows:
3.1 Authority. Such Seller has all requisite power and authority to enter into
---------
this Agreement and to consummate the transactions contemplated hereby. If such
Seller is not an individual, the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate or partnership action on the part of the
Seller. If applicable, the Board of Directors (or comparable managing body) of
Seller has unanimously approved this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Seller and
constitutes the valid and binding obligation of the Seller, enforceable in
accordance with its terms except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The execution and delivery of this Agreement by the Seller does not, and as of
the Closing Date the consummation of the transactions contemplated hereby will
not, result in any Conflict with (i) any provision of the Certificate of
Incorporation, Articles of Organization or Bylaws (or comparable organizational
document) of the Seller, if applicable, or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Seller. No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Conflict), is required by or with respect
to the Seller in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
3.2 Good and Marketable Title.
-------------------------
(a) Company Capital Stock. In the case of a Stockholder, Seller is the
---------------------
sole owner, beneficially and of record, of all Purchased Shares to be sold by
Seller hereunder and has not granted any other person any interest therein.
Seller has good and marketable title to all Purchased Shares, free and clear of
any and all liens, encumbrances, equities, security interests, and claims
whatsoever, with full right and authority to deliver the same hereunder, and
upon delivery of such Purchased Shares and payment of the consideration therefor
as contemplated hereby, will convey to Buyer good and marketable title to the
Purchased Shares free and clear of all liens, claims, encumbrances, equities,
security interests, preemptive rights, rights of first refusal, and any other
claim of any third party;
(b) Company Options. In the case of the Option Holders and Wexford,
---------------
Seller is the sole owner, beneficially and of record, of all Company Options to
be canceled by such person pursuant hereto and has not granted any other person
any interest therein. Seller has good and marketable title to all such Company
Options, free and clear of any and all liens, encumbrances, equities, security
interests, and claims whatsoever, with full right and authority to cancel the
same hereunder, and upon such cancellation and payment of the consideration
therefor as contemplated hereby, such Company Options will be extinguished and
of no further force or effect.
3.3 Investment Representations.
--------------------------
-18-
(a) Investment Intent. The Seller is acquiring the Buyer Common Stock or
-----------------
in the case of the Option Holders options therefor (collectively, the
"Securities") for the Seller's own account for investment purposes only and not
with a view to, or for resale in connection with any "distribution" thereof in
violation of the Securities Act of 1933, as amended (the "Securities Act").
(b) Information About Buyer. The Seller is aware of Buyer's business
-----------------------
affairs and financial condition and has acquired sufficient information about
Buyer to reach an informed and knowledgeable decision to acquire the Securities
(based in part on the representations and warranties of Buyer contained in
Article IV).
(c) High Risk. The Seller realizes that investment in the Securities
---------
involves a high degree of risk. The Seller is able to bear the risk of the
investment, to hold the Securities for an indefinite period of time and to
suffer a complete loss of the investment.
(d) Securities Not Registered. The Seller understands that the
-------------------------
Securities have not been registered under the Securities Act in reliance upon a
specific exemption therefrom.
(e) Held Indefinitely. The Seller further understands that the
-----------------
Securities may be disposed of only if subsequently registered under the
Securities Act or unless an exemption from registration is otherwise available.
In addition, the Seller understands that the certificate(s) evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to Buyer.
(f) Rule 144. The Seller is familiar with the provisions of Rule 144
--------
promulgated under the Securities Act.
(g) No Public Market. The Seller further understands that at the time
----------------
the Seller wishes to sell the Securities there may be no public market upon
which to make such a sale, and that, even if such a public market then exists,
Buyer may not be satisfying the current public information requirements of Rule
144, and that, in such event, the Seller would be precluded from selling the
Securities under Rule 144 even if the two-year minimum holding period had been
satisfied.
3.4 Standstill and Restrictions on Transfer. Seller agrees to abide by the
---------------------------------------
provisions of Sections 2.15 and 2.16 of the Rights Agreement (as defined herein)
with regard to any transfers of Buyer Common Stock, or other securities of
Buyer, by Seller.
3.5 Maximum Net Worth. In the case of any Seller who will acquire voting
-----------------
securities of Buyer having a Closing Fair Market Value of at least $15 million,
Seller (and any "ultimate parent entity" of Seller, as such term is defined in
the regulations to the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976) has
a net worth less than $100 million.
3.6 Tax Matters.
-----------
-19-
(a) Seller is the beneficial owner of all Company Capital Stock held by
such persons (including Company Capital Stock issuable upon exercise of Company
Options) and did not acquire any of the Company Capital Stock in contemplation
of the Purchase.
(b) Seller has not engaged in a Sale (as defined below) of any shares of
Company Capital Stock in contemplation of the Purchase.
(c) Seller has no current plan or intention (a "Plan") to engage in a
sale, exchange, transfer, redemption or reduction in any way of Seller's risk of
ownership by short sale or otherwise, or other disposition, directly or
indirectly (such actions being collectively referred to herein as a "Sale") of
any of Buyer Common Stock (on a fully diluted basis, giving effect to all
options) to be received by Seller hereunder.
(d) If Seller is a partnership, then the term "Sale" as used in
paragraph (c) above shall not be deemed to include any distribution to Seller's
partners, provided that if any recipient of any such distribution will receive
shares of Buyer Common Stock having a fair market value of 1% or more of the
fair market value of all the shares of Company Capital Stock presently
outstanding, Seller is not aware of any Plan on the part of such recipient to
engage in a Sale of any of the shares of Buyer Common Stock (on a fully diluted
basis, giving effect to all options) to be received by such recipient in such
distribution.
(e) Seller is not aware of, or participating in, any Plan on the part of
the stockholders of the Company to engage in a Sale or Sales of the Buyer Common
Stock to be received hereunder such that the aggregate fair market value, as of
the Closing of the shares subject to such Sales would exceed 50% of the
aggregate fair market value of all shares of outstanding Company Capital Stock
immediately prior to such Closing.
(f) Seller understands that Buyer and its affiliates, as well as legal
counsel to Company and Buyer (in connection with rendering their opinions that
the Purchase will be a "reorganization" within the meaning of Section 368 of the
Code) will be relying on (a) the truth and accuracy of the representations
contained herein and (b) Seller's performance of the obligations set forth
herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
4.1 Organization, Standing and Power. Buyer is a corporation duly organized,
--------------------------------
validly existing and in good standing under the laws of the State of Delaware.
Buyer has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on Buyer and its subsidiaries, taken as a whole.
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4.2 Authority. Buyer has all requisite corporate power and authority to
---------
enter into this Agreement and the Rights Agreement (as defined below) and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Rights Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement and the Rights Agreement have been duly
executed and delivered by Buyer and constitute the valid and binding obligations
of Buyer, enforceable in accordance with its terms.
4.3 Capital Structure.
-----------------
(a) The authorized stock of Buyer consists of 30,000,000 shares of
Common Stock, of which approximately 11,895,614 shares were issued and
outstanding as of November 8, 1996, and 5,000,000 shares of Preferred Stock,
none of which is issued or outstanding. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issued,
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Buyer Common Stock to be issued hereunder when issued,
will be duly authorized, validly issued, fully paid, non-assessable and, subject
to the accuracy of the representations of the Sellers as set forth in Article
III hereof, issued in compliance with applicable federal and state securities
laws.
4.4 SEC Documents; Buyer Financial Statements. Buyer has furnished or made
-----------------------------------------
available to the Founders or legal counsel to the Company true and complete
copies of all reports or registration statements filed by it with the SEC since
December 12, 1995, all in the form so filed (all of the foregoing being
collectively referred to as the "SEC Documents"). As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a document subsequently filed with the SEC. The financial
statements of Buyer, including the notes thereto, included in the SEC Documents
(the "Buyer Financial Statements") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and present fairly the consolidated financial position of Buyer at the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
audit adjustments). There has been no change in Buyer accounting policies
except as described in the notes to Buyer Financial Statements; provided,
however, Buyer may have restated or may restate one or more of Buyer Financial
Statements to reflect acquisitions entered into subsequent to the respective
dates thereof.
-21-
4.5 No Material Adverse Change. Since the date of the balance sheet included
--------------------------
in Buyer's most recently filed report on Form 10-Q, Buyer has conducted its
business in the ordinary course and there has not occurred: (a) any material
adverse change in the financial condition, liabilities, assets or business of
Buyer; (b) any amendment or change in the Certificate of Incorporation or Bylaws
of Buyer (other than restatements of the Certificate or Incorporation which did
not require stockholders' approval); or (c) any damage to, destruction or loss
of any assets of Buyer, (whether or not covered by insurance) that materially
and adversely affects the financial condition or business of Buyer.
4.6 Litigation. There is no action, suit, proceeding, claim, arbitration or
----------
investigation pending, or as to which Buyer has received any notice of assertion
against Buyer, which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay any of the transactions contemplated by this Agreement or,
if adversely determined, is reasonably likely to have a material adverse effect
on the financial condition or business of Buyer as a whole.
4.7 Brokers' and Finders' Fees. Other than pursuant to a Letter Agreement
--------------------------
dated December [__], 1996 between the Buyer and ▇▇▇▇▇ & Co., Buyer has not
incurred, now will incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
4.8 Continuity of Business Enterprise; Section 368 Reorganization. It is
-------------------------------------------------------------
the present intention of Buyer to cause the Surviving Corporation to continue at
least one significant historic business line of the Company, or to use at least
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Treasury Regulation Section 1.368-1(d). Buyer
will use all reasonable efforts, and will cause the Surviving Corporation to use
all reasonable efforts, to take no action that would cause the Purchase not to
constitute a reorganization within the meaning of Section 368 of the Code.
4.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) Except as described in the Buyer's SEC Documents filed prior to the
date of this Agreement or as would not have a material adverse effect on Buyer
and its subsidiaries taken as a whole, all Buyer Employee Benefit Plans (as
defined below) are in compliance with all applicable requirements of law,
including (without limitation) ERISA and the Code.
(b) As used herein:
(i) "Buyer Employee Benefit Plan" means any Plan (as defined below)
---------------------------
entered into, established, maintained, sponsored, contributed to or required to
be contributed to by Buyer or any of its subsidiaries for the benefit of the
current or former employees or directors of Buyer or any of its subsidiaries and
existing on the date of this Agreement or at any time subsequent thereto and on
or prior to the Closing and, in the case of a Plan which is subject to Part 3 of
Title I of ERISA, Section 412 of the Code or Title IV of ERISA, at any time
during the five-year period preceding the date of this Agreement; and
-22-
(ii) "Plan" means any employment, bonus, incentive compensation,
----
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, medical, accident, disability, workmen's compensation or other
insurance, severance, separation, termination, change of control or other
benefit plan, agreement, practice, policy, program or arrangement of any kind,
whether written or oral, including, but not limited to any "employee benefit
plan" within the meaning of Section 3(3) of ERISA.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING
5.1 Conduct of Business of the Company.
----------------------------------
(a) Company Conduct. During the period from the date of this Agreement
---------------
and continuing until the earlier of the termination of this Agreement and the
Closing, the Founders agree to cause the Company (except to the extent that
Buyer shall otherwise consent in writing) to carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, to pay its debts and Taxes when due, to pay or perform other
obligations when due, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Closing. The Founders shall promptly
notify Buyer of any event or occurrence or emergency not in the ordinary course
of its business, and any material event involving or adversely affecting the
Company or its business. Except as expressly contemplated by this Agreement, the
Founders shall not permit the Company, without the prior written consent of
Buyer:
(i) Enter into any commitment, activity or transaction not in the
ordinary course of business;
(ii) Transfer to any person or entity any rights to any Company
Intellectual Property Rights;
(iii) Enter into or amend any agreements pursuant to which any other
party is granted manufacturing, marketing, distribution or similar rights of any
type or scope with respect to any products of the Company;
(iv) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
-23-
(v) Commence any litigation;
(vi) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor);
(vii) Except for the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Options or Preferred Stock,
issue, grant, deliver or sell or authorize or propose the issuance, grant,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;
(viii) Cause or permit to be made any amendments to its Certificate
of Incorporation or Bylaws;
(ix) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(x) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practice;
(xi) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others, including, without limitation, pursuant to that
certain Revolving Credit and Security Agreement described in Section 5.17
hereof;
(xii) Grant any severance or termination pay to any director,
officer employee or consultant;
(xiii) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment offer,
pay or agree to pay any special bonus or special remuneration to any director,
employee or consultant, or increase the salaries or wage rates of its employees;
(xiv) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past practice;
-24-
(xv) Take any action, including the acceleration of vesting of any
options, warrants, restricted stock or other rights to acquire shares of the
capital stock of the Company, that could jeopardize the tax-free reorganization
hereunder;
(xvi) Pay, discharge or satisfy, in an amount in excess of $5,000,
in any one case, or $10,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financial
Statements or incurred in the ordinary course of business since November 30,
1996;
(xvii) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xviii) Enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(xix) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(xx) Waive or commit to waive any rights with a value in excess of
$5,000, in any one case, or $10,000, in the aggregate;
(xxi) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(xxii) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date hereof;
or
(xxiii) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(i) through (xxii) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
(b) Buyer Conduct. Buyer shall promptly notify the Company of any event
-------------
or occurrence which is not in the ordinary course of business of Buyer and which
is material and adverse to the business of Buyer.
5.2 No Solicitation. Until the earlier of the Closing and the date of
---------------
termination of this Agreement pursuant to the provisions of Section 9.1 hereof,
each of the Sellers will not (nor will the Founders permit the Company or any of
the Company's officers, directors, stockholders, agents, representatives or
affiliates to) directly or indirectly, take any of the following actions with
any party other than Buyer and its designees: (a) solicit, initiate, entertain,
or encourage any proposals or offers from, or conduct discussions with or engage
in negotiations with, any person relating to any
-25-
possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company, (b) provide
information with respect to it to any person, other than Buyer, relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by any
such person with regard to, any possible acquisition of the Company (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity interest
in the Company, (c) enter into an agreement with any person, other than Buyer,
providing for the acquisition of the Company (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise), any material portion of its
or their capital stock or assets or any equity interest in the Company, or (d)
make or authorize any statement, recommendation or solicitation in support of
any possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company by any
person, other than by Buyer. To the extent within such Seller's power, each
Seller shall immediately cease and cause to be terminated any such contacts or
negotiations made by or entered into by the Company or such Seller with third
parties relating to any such transaction or proposed transaction. In addition to
the foregoing, if the Company or any Seller receives prior to the Closing or the
termination of this Agreement any offer or proposal relating to any of the
above, to the extent within such Seller's knowledge, such Seller shall
immediately notify Buyer thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Buyer may reasonably request. Except as contemplated by this
Agreement, disclosure by the Company or any Seller of the terms of this
Agreement (other than the prohibition of this section) shall be deemed to be a
violation of this Section 5.2. Nothing contained in this Section 5.2 shall
prohibit or restrict any of the Company's directors and officers from fulfilling
his or her fiduciary obligations in such capacity.
5.3 No Encumbrance. Until the earlier of the Closing Date or the date of
--------------
termination of this Agreement, each Seller will not (and such Seller will not
permit any of its officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any action which could in any way and at any time
impair such Seller's good and valid title to all shares of Company Capital Stock
or Company Options or could cause or lead to the creation of any lien, claim,
charge, restriction, pledge, security interest, option, right of any nature or
other legal or equitable encumbrance with regard to any share or shares of
Company Capital Stock or Company Options.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. Each party shall afford the others and its
---------------------
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Closing to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request, subject, in the case of Buyer, to reasonable limits on access to its
technical and other nonpublic information. No information or knowledge obtained
in any investigation pursuant to this Section 6.1 shall affect or be deemed to
modify any
-26-
representation or warranty contained herein or, except as provided by Section
7.3(h), the conditions to the obligations of the parties to consummate the
Purchase.
6.2 Confidentiality. Each of the parties hereto hereby agrees to keep such
---------------
information or knowledge obtained in any investigation pursuant to Section 6.1,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) becomes known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed by order of court or
government agency with subpoena powers or (f) which is disclosed in the course
of any litigation between any of the parties hereto.
6.3 Expenses.
--------
(a) If the Purchase is not consummated, all fees and expenses incurred
in connection with the Purchase, including without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by Buyer, on the one hand, or by
the Company or the Sellers, on the other hand, in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses.
(b) If the Purchase is consummated, all Third Party Expenses incurred by
Buyer or the Company (but not the Sellers individually and apart from the
Company) shall be the obligation of Buyer; provided, however, that Buyer shall
not be responsible for Third Party Expenses of the Company exceeding $175,000,
in addition to the $400,000 payable to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ pursuant to the
agreement referred to in Section 2.19 hereof, which shall be paid as provided in
Section 7.2(f).
6.4 Public Disclosure. Unless otherwise required by law (including, without
-----------------
limitation, federal and state securities laws) or, as to Buyer, by the rules and
regulations of the National Association of Securities Dealers, Inc., prior to
the Closing, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Buyer and the Founders and Wexford prior to release, provided that
such approval shall not be unreasonably withheld.
6.5 Consents. The Sellers shall use their best efforts to obtain the
--------
consents, waivers and approvals under any of the Contracts or as may be required
in connection with the Purchase (all of which consents, waivers and approvals
are set forth in Schedule 7.3(c)) so as to preserve all rights of and benefits
to the Company under such contracts or to consummate the transactions
contemplated hereby.
-27-
6.6 FIRPTA Compliance. On or prior to the Closing Date, the Sellers shall
-----------------
cause the Company to deliver to Buyer a properly executed statement in a form
reasonably acceptable to Buyer for purposes of satisfying Buyer's obligations
under Treasury Regulation Section 1.1445-2(c)(3).
6.7 Legal Requirements. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all reasonable best actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Buyer shall not be required to agree to any
divestiture by Buyer or the Company or any of Buyer's subsidiaries or affiliates
of shares of capital stock or of any business, assets or property of Buyer or
its subsidiaries or affiliates or the Company or its affiliates, or the
imposition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock.
6.8 Notification of Certain Matters. Each Seller shall give prompt notice
-------------------------------
to Buyer, and Buyer shall give prompt notice to the Sellers, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of such Seller or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing and (ii) any failure of such Seller or Buyer, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.8 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
6.9 Certain Benefit Plans. Following the Closing, Buyer shall take such
---------------------
reasonable actions as are necessary to allow eligible employees of the Company
to participate in the benefit programs of Buyer, or alternative benefits
programs substantially comparable to those applicable to employees of Buyer on
similar terms, as soon as practicable after the Closing. Without limiting the
generality of the above, Buyer shall, with respect to all employees of the
Company who become employees of Buyer or Surviving Corporation, or who are
employees of the Company, in each case, on or after the Closing (the
"Employees"), provide coverage under welfare benefit plans, programs and
arrangements (the "Welfare Plans") providing benefits not substantially less
favorable in the aggregate to the Employees than the Welfare Plans covering the
other similarly situated employees of Buyer as in effect immediately prior to
the Closing, including (without limitation) group health plans which do not
exclude or limit the coverage of the Employees on account of waiting periods or
preexisting conditions, and which have in all material respects identical or
superior coverage in terms of employee participation. The Employees shall be
subject to the other personnel and compensation policies and practices of the
Buyer in the same manner as Buyer's similarly situated employees. For purposes
of any length of service requirements, waiting periods, vesting periods or
differential benefits based on length of service under any Welfare Plans or
other plans for which an
-28-
Employee may be eligible after the Closing, Buyer shall ensure that service by
such Employee with the Company shall be treated in the same manner as service
with the Buyer.
6.10 Buyer Stock Options.
-------------------
(a) After the date hereof, but prior to the Closing Date, Buyer and
Company shall agree upon the allocation to certain directors, officers and other
employees of the Company of options to purchase an aggregate of 500,000 shares
of Buyer Common Stock (the "Employee Options").
(b) At the Closing, Buyer shall grant the Employee Options in accordance
with such previously agreed upon allocation under Buyer's 1996 Nonstatutory
Stock Option Plan. Each such option granted to any of the Sellers shall vest and
become exercisable at a rate of 1/3rd of the shares subject thereto on each of
the first, second and third anniversaries of the date of grant. Each such option
granted to any other person shall vest in accordance with Buyer's standard
vesting schedule of 25% of such options vesting upon the one-year anniversary of
the date of grant and 1/48th vesting monthly thereafter, except for each such
option granted to any of the Sellers, which shall vest and become exercisable as
to one-third of such options upon each of the first three anniversaries of this
Agreement. The exercise price of each such option shall be equal to the closing
sale price of Buyer's Common Stock, as traded on the Nasdaq National Market and
reported by the Wall Street Journal, on the last business day immediately
preceding the Closing Date.
6.11 Additional Documents and Further Assurances. Each party hereto, at the
-------------------------------------------
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
6.12 Form S-8. Promptly after the Closing, Buyer shall file a registration
--------
statement on Form S-8 covering, and any necessary application to qualify for
trading on the principal market for the Buyer Common Stock, the shares of Buyer
Common Stock issuable with respect to the Employee Options and the options
issuable to the Option Holders pursuant to Section 1.2.
6.13 Company's Auditors. The Company will use its best efforts to cause its
------------------
management and its independent auditors to facilitate on a timely basis (i) the
preparation of financial statements (including pro forma financial statements if
required) as required by Buyer to comply with applicable SEC regulations and
(ii) the review of the Company's audit work papers for up to the past three
years, including the examination of selected interim financial statements and
data.
6.14 Arrangements with Wexford. At the Closing, Buyer shall pay all
-------------------------
outstanding principal amounts, together with all accrued and unpaid interest
thereon, due under the Revolving Credit and Security Agreement, dated August 6,
1996, among the Company, as borrower, Wexford Capital and Wexford Overseas, as
lenders, and Wexford Management LLC, as Agent. The aggregate amount outstanding
thereunder as of December 16, 1996 was $1,200,000 plus accrued interest of
$21,944.44. At the Closing, Buyer (or the Surviving Corporation) shall execute
and deliver an Instrument of Assignment and Assumption with respect to certain
office premises in ▇▇▇▇▇ ▇▇▇▇▇,
-▇▇-
▇▇▇ ▇▇▇▇▇▇ satisfactory to Wexford. At the closing, Buyer or the Surviving
Corporation shall pay to Wexford $45,000 in reimbursement of internal and
external counsel fees and $25,000 in payment for accounting and Schedules
preparation services in respect of this Agreement and the transactions
contemplated hereby; provided, however, that such aggregate amounts of $70,000
shall be deemed to be Third Party Expenses for the purposes of Section 6.3
(notwithstanding anything to the contrary contained in Section 6.3).
Simultaneously, Wexford shall deliver all necessary documents requested by Buyer
to terminate all security interests, reconvey all pledged or assigned assets and
release all collateral pledged in connection with the foregoing agreement.
6.15 Company Agreements. The Sellers hereby waive all rights they may have
------------------
under that certain Stockholders Agreement, dated as of August 6, 1996, among any
or all of them or between or among any or all of them and the Company, and any
other rights they may have under any other agreements, that are inconsistent
with their rights and obligations under the Agreement and hereby agree that all
such agreements shall terminate without further action on the part of the
Sellers upon the Closing.
ARTICLE VII
CONDITIONS TO THE PURCHASE
7.1 Conditions to Obligations of Each Party to Effect the Purchase. The
--------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Purchase
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Purchase shall be in effect.
(b) Allocation of Buyer Options. The Company and Buyer shall have agreed
---------------------------
upon the allocation of the Buyer Options.
(c) Employment Agreements. Buyer shall have entered into (i) employment
---------------------
agreements substantially in the form attached hereto as Exhibits A-1 and A-2
(the "Employment Agreements") with ▇▇▇▇▇▇ and ▇▇▇▇, respectively, and (ii) the
Noncompete Agreement substantially in the form attached hereto as Exhibit B with
▇▇▇▇▇▇.
7.2 Additional Conditions to Obligations of the Sellers. The obligations of
---------------------------------------------------
each Seller to consummate the Purchase and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Founders and Wexford:
-30-
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date, except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), with the same force and effect as if made on and as of the Closing
Date; and the Sellers shall have received a certificate to such effect signed on
behalf of Buyer by a duly authorized officer of Buyer.
(b) Agreements and Covenants. Buyer shall have performed or complied in
------------------------
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing;
and the Sellers shall have received a certificate to such effect signed on
behalf of Buyer by a duly authorized officer of Buyer.
(c) Third Party Consents. The Company shall have been furnished with
--------------------
evidence satisfactory to it that Buyer has obtained the consents, approvals and
waivers set forth in Schedule 7.2(c).
(d) Amended and Restated Investors' Rights Agreement. Buyer, each Seller
------------------------------------------------
and the other parties to that certain Investors' Rights Agreement, dated January
24, 1994, as amended on September 30, 1994 and on October 25, 1995, shall have
entered into an Amended and Restated Investors' Rights Agreement in the form
attached hereto as Exhibit D (the "Rights Agreement").
(e) Legal Opinion. The Sellers shall have received a legal opinion from
-------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Buyer, in
form and substance satisfactory to the Founders.
(f) H&Q Fees and Expenses. Buyer shall pay to H&Q the amount of
---------------------
$400,000.00 owing to H&Q by the Company under the agreement referred to in
Section 2.19 for investment banking services rendered to the Company.
7.3 Additional Conditions to the Obligations of Buyer. The obligations of
-------------------------------------------------
Buyer to consummate the Purchase and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Buyer:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Founders and the Sellers contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date; and Buyer shall have received a certificate
to such effect signed by each Founder and each Seller.
-31-
(b) Agreements and Covenants. The Founders and the Sellers shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing; and Buyer shall have received a certificate to such effect
signed by each Founder and each Seller.
(c) Third Party Consents. Buyer shall have been furnished with evidence
--------------------
satisfactory to it that the consents, approvals and waivers set forth in
Schedule 7.3(c) have been obtained.
(d) Legal Opinion. Buyer shall have received a legal opinion from
-------------
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, legal counsel to the Company and the Sellers,
in form and substance satisfactory to Buyer.
(e) Resignation of Directors. All directors of the Company shall have
------------------------
tendered their resignations effective as of the Closing.
(f) Material Adverse Effect. Since the date of the Balance Sheet, no
-----------------------
event or condition of any character shall have occurred that has or could be
reasonably expected to have a Material Adverse Effect on the Company.
(g) Minimum Participation. Stockholders holding at least 97% of the
---------------------
outstanding shares of Company Capital Stock shall have executed this Agreement
and be prepared to tender all of their shares of Company Capital Stock at the
Closing.
(h) Due Diligence Investigation. Buyer shall have completed its due
---------------------------
diligence investigation of the Company to Buyer's satisfaction, provided that no
information or knowledge obtained in such investigation shall affect or be
deemed to modify any representation or warranty of the Founders or the Sellers
contained herein.
(i) Cancellation of Wexford Options. Immediately prior to the Closing,
-------------------------------
that certain Stock Purchase Option, dated April 4, 1996, to purchase up to 162
shares of the Company's Common Stock held by Wexford Capital and that certain
Stock Purchase Option, dated April 4, 1996, to purchase up to 38 shares of the
Company's Common Stock held by Wexford Overseas (collectively, the "Wexford
Options") shall be canceled and shall be of no further force or effect.
(j) Fairness Opinion. Buyer shall have received a fairness opinion from
----------------
▇▇▇▇▇ & Co. stating that the consideration to be issued to the Sellers hereunder
is fair to Buyer and its stockholders from a financial point of view.
(k) Termination of Wexford Management Agreement. The Company shall
-------------------------------------------
deliver to Buyer evidence of the termination of any existing management
agreement or relationship, or evidence of the absence of any such agreement or
relationship, in such form as is reasonably satisfactory to Buyer.
-32-
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
8.1 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties of the Founders and the Sellers (other than the representations of
the Sellers in Sections 3.1 and 3.2) in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Purchase and continue
until 5:00 p.m., California time, on the date which is one year following the
Closing Date (the "Expiration Date"). The representations of the Sellers
contained in Sections 3.1 and 3.2 shall survive the Closing indefinitely.
8.2 Indemnity for Representations of Founders. Each of the Founders
-----------------------------------------
agrees to indemnify and hold harmless each of Buyer and its affiliates for any
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of investigation
and defense (hereinafter individually a "Loss" and collectively "Losses")
----
incurred by Buyer, its officers, directors, or affiliates (including the
Surviving Corporation) directly or indirectly as a result of any inaccuracy or
breach of a representation or warranty of the Founders contained herein or any
failure by the Founders to perform or comply with any covenant contained herein;
provided, however that the indemnification obligation of each Founder under this
Section 8.2 shall be limited to the Closing Fair Market Value of the total
consideration received by each pursuant to Article I of this Agreement (which
value in the case of Rice shall be calculated based upon the difference between
the exercise price per share of the option granted to Rice pursuant to Section
1.2 and the Closing Fair Market Value); provided that each Founder shall be
obligated for that portion of a Loss that is commensurate with the portion
received by such Founder of the aggregate Closing Fair Market Value of the
consideration received by both Founders pursuant to Section 1.2 (calculated as
aforesaid in the case of Rice), that such obligation may be satisfied by the
transfer to Buyer of shares of Buyer Common Stock delivered to ▇▇▇▇▇▇ in
accordance with Section 1.4(a), in the case of ▇▇▇▇▇▇, or a portion or all of
the option granted pursuant to Section 1.2, in the case of Rice, having an
aggregate Closing Fair Market Value (calculated as aforesaid in the case of
Rice), equal to such obligation, and that the Founders shall have customary
rights to participate in (at their own expense) but not to control the defense
against, or any settlement of, any third party claim that could result in a
Loss, which control shall be exercised by Buyer or the Surviving Corporation
reasonably and in good faith in view of the indemnification obligation of each
Founder under this Section 8.2.
8.3 Indemnity for Representations of Each. Each Seller, severally and not
-------------------------------------
jointly, agrees to indemnify and hold harmless each of Buyer and its affiliates
for any incurred by Buyer, its officers, directors or affiliates (including the
Surviving Corporation) directly or indirectly as a result of any inaccuracy or
breach of a representation or warranty of such Seller contained in Section 3 or
any failure of such Seller to perform or comply with any covenant contained
herein; provided, however, that the indemnification obligation of each Seller
under this Section 8.3 shall be limited to the Closing Fair Market Value of the
total consideration received by such Seller pursuant to Article I of this
Agreement (and may be satisfied as provided in Section 8.2 with respect to
indemnification obligations of the Founders).
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Purchase abandoned at any time prior to the Closing:
(a) by mutual consent of Buyer and a majority in interest of the
Sellers;
(b) by Buyer or a majority in interest of the Sellers if: (i) the
Closing has not occurred before 5:00 p.m. (Pacific time) on December 31, 1996
(provided that the right to terminate this Agreement under this clause 9.1(b)(i)
shall not be available to any party whose willful failure to fulfill any
obligation hereunder has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Purchase; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Purchase by any governmental entity that would make consummation of the Purchase
illegal;
(c) by Buyer if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Purchase, by any Governmental Entity, which would: (i) prohibit Buyer's or the
Company's ownership or operation of all or any portion of the business of the
Company or (ii) compel Buyer or the Company to dispose of or hold separate all
or a portion of the business or assets of the Company or Buyer as a result of
the Purchase;
(d) by Buyer if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of a Founder or a
Seller and (i) such breach has not been cured within five (5) business days
after written notice to the Sellers (provided that no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a result
of such breach the conditions set forth in Section 7.3(a) or 7.3(b), as the case
may be, would not then be satisfied;
(e) by a majority in interest of the Sellers if the Founders and the
Sellers are not in material breach of their respective obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Buyer and (i) such
breach has not been cured within five (5) business days after written notice to
Buyer (provided that no cure period shall be required for a breach which by its
nature cannot be cured), and (ii) as a result of such breach the conditions set
forth in Section 7.2(a) or 7.2(b), as the case may be, would not then be
satisfied.
9.2 Effect of Termination. In the event of termination of this Agreement as
---------------------
provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Buyer, the Founders or any
Seller, or their respective officers, directors or stockholders, provided that
each party shall remain liable for any breaches of this Agreement prior to
-34-
its termination; and provided further that, the provisions of Sections 6.2 and
6.3 and Article IX of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
9.3 Amendment. This Agreement, this Agreement may be amended by the parties
---------
hereto at any time by execution of an instrument in writing signed on behalf of
each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Closing, Buyer on the one
-----------------
hand, and the Sellers, on the other, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one business day
after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed:
-35-
(a) if to Buyer to:
MetaTools, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Founders or the Sellers, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇
Real Time Geometry Corp.
▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
10.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to the knowledge or awareness of
the Company used herein shall be deemed to include the knowledge and awareness
of the Founders and any other officers of the Company.
-36-
10.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the Schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Buyer may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
10.5 Severability. In the event that any provision of this Agreement or the
------------
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect, and the application of such provision to
other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 Specific Performance. The parties hereto agree that irreparable damage
--------------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
-37-
10.10 Unified Disclosure Schedules. The disclosure made in any Schedule to
----------------------------
this Agreement shall be deemed to be made in each other Schedule to this
Agreement.
-38-
IN WITNESS WHEREOF, Buyer, the Company and the Sellers have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
METATOOLS, INC.:
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman and CEO
SELLERS:
FOUNDERS: WEXFORD CAPITAL PARTNERS II, LP:
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Sr. Vice President
/s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇ WEXFORD OVERSEAS PARTNERS I, LP:
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
OTHER STOCKHOLDERS: Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Sr. Vice President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
OPTION HOLDER:
/s/ DMIRY PAPERNEY
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
***STOCK PURCHASE AGREEMENT***
-39-
SCHEDULE I
----------
Allocation of Buyer Common Stock and Buyer Options
--------------------------------------------------
-------------------------------------------------------------------------------
SHARE AND OPTION EXCHANGE IN ACQUISITION
-------------------------------------------------------------------------------
NUMBER OF
NUMBER OF SHARES OF
RTG SHARES CLASS METATOOLS
CURRENTLY OF COMMON STOCK
STOCKHOLDERS HELD STOCK TO BE ISSUED
-------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 700 Common 815,469
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 75 Common 91,283
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 25 Common 30,427
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25 Common 30,427
Wexford Overseas 38 Preferred 69,207
Partners I, L.P.
Wexford Capital 162 Preferred 295,043
Partners II, L.P.
NUMBER OF
OPTIONS TO
PURCHASE NUMBER OF EXERCISE
RTG RTG SHARES METATOOLS PRICE
OPTION CURRENTLY OPTIONS TO PER
HOLDERS HELD BE ISSUED SHARE
-------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ 75 90,165 $5.03
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 5 6,011 $0.08
-40-