EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
PALM, INC.
AND
EXTENDED SYSTEMS INCORPORATED
Dated as of March 6, 2001
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER............................................. 2
1.1 The Merger............................................ 2
1.2 Effective Time; Closing............................... 2
1.3 Effect of the Merger.................................. 2
1.4 Certificate of Incorporation; Bylaws.................. 2
1.5 Directors and Officers................................ 2
1.6 Effect on Capital Stock............................... 3
1.7 Surrender of Certificates............................. 4
1.8 No Further Ownership Rights in Company Common Stock... 6
1.9 Lost, Stolen or Destroyed Certificates................ 6
1.10 Tax Consequences...................................... 6
1.11 Taking of Necessary Action; Further Action............ 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 7
2.1 Organization of the Company........................... 7
2.2 Company Capital Structure............................. 8
2.3 Obligations With Respect to Capital Stock............. 9
2.4 Authority; Non-Contravention.......................... 10
2.5 SEC Filings; Company Financial Statements............. 11
2.6 Absence of Certain Changes or Events.................. 12
2.7 Taxes................................................. 12
2.8 Title to Properties; Absence of Liens and
Encumbrances......................................... 15
2.9 Intellectual Property................................. 15
2.10 Compliance; Permits; Restrictions..................... 18
2.11 Litigation............................................ 18
2.12 Brokers' and Finders' Fees............................ 19
2.13 Transactions with Affiliates.......................... 19
2.14 Employee Benefit Plans................................ 19
2.15 Environmental Matters................................. 23
2.16 Year 2000 Compliance.................................. 24
2.17 Agreements, Contracts and Commitments................. 24
2.18 Change of Control Payments............................ 25
2.19 Disclosure............................................ 25
2.20 Board Approval........................................ 26
2.21 Fairness Opinion...................................... 26
2.22 Section 203 of the Delaware General Corporation Law
Not Applicable....................................... 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT............. 26
3.1 Organization, Standing and Power...................... 27
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TABLE OF CONTENTS
(continued)
Page
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3.2 Capital Structure..................................... 27
3.3 Authority; Non-Contravention.......................... 28
3.4 SEC Filings; Parent Financial Statements.............. 29
3.5 No Material Adverse Effect............................ 30
3.6 Disclosure............................................ 30
3.7 Litigation............................................ 30
3.8 Board Approval........................................ 30
3.9 Taxes................................................. 30
3.10 Brokers' and Finders' Fees............................ 31
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................... 31
4.1 Conduct of Business by the Company.................... 31
ARTICLE V ADDITIONAL AGREEMENTS.................................. 33
5.1 Prospectus/Proxy Statement; Registration Statement;
Other Filings; Board Recommendations................. 33
5.2 Meeting of Company Stockholders....................... 34
5.3 Confidentiality; Access to Information................ 36
5.4 No Solicitation....................................... 36
5.5 Public Disclosure..................................... 38
5.6 Reasonable Efforts; Notification...................... 38
5.7 Third Party Consents.................................. 39
5.8 Stock Options and Employee Benefits................... 40
5.9 Form S-8.............................................. 41
5.10 Indemnification....................................... 41
5.11 Nasdaq Listing........................................ 41
5.12 Company Affiliate Agreement........................... 42
5.13 Employment of Key Employees........................... 42
5.14 Treatment as Reorganization........................... 42
ARTICLE VI CLOSING CONDITIONS.................................... 43
6.1 Conditions to Obligations of Each Party to Effect the
Merger............................................... 43
6.2 Additional Conditions to Obligations of the Company... 43
6.3 Additional Conditions to the Obligations of Parent.... 44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................... 45
7.1 Termination........................................... 45
7.2 Notice of Termination; Effect of Termination.......... 47
7.3 Fees and Expenses..................................... 47
7.4 Amendment............................................. 48
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TABLE OF CONTENTS
(continued)
Page
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7.5 Extension; Waiver..................................... 48
ARTICLE VIII GENERAL PROVISIONS.................................. 48
8.1 Non-Survival of Representations and Warranties........ 48
8.2 Notices............................................... 48
8.3 Interpretation; Knowledge............................. 50
8.4 Counterparts.......................................... 50
8.5 Entire Agreement; Third Party Beneficiaries........... 51
8.6 Severability.......................................... 51
8.7 Other Remedies; Specific Performance.................. 51
8.8 Governing Law......................................... 51
8.9 Rules of Construction................................. 51
8.10 Assignment............................................ 51
8.11 WAIVER OF JURY TRIAL.................................. 52
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INDEX OF EXHIBITS
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Exhibit A Company Voting Agreement
Exhibit B Stock Option Agreement
Exhibit C List of Company Affiliates
Exhibit D Company Affiliates Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
March 6, 2001, (this "Agreement"), between Palm, Inc., a Delaware corporation
("Parent") and Extended Systems Incorporated, a Delaware corporation (the
"Company").
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("Delaware Law"), Parent
and the Company intend to enter into a business combination transaction.
B. The Board of Directors of the Company (i) has determined that the
Merger (as defined in Section 1.1) is fair to, and in the best interests of, the
Company and its stockholders, (ii) has approved this Agreement, the Merger and
the other transactions contemplated by this Agreement and (iii) subject to the
terms and conditions of this Agreement, has determined to recommend that the
stockholders of the Company adopt and approve this Agreement and approve the
Merger.
C. The Board of Directors of Parent (i) has determined that the Merger (as
defined in Section 1.1) is fair to, and in the best interests of, Parent and its
stockholders and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's and Company's respective willingness to enter into
this Agreement, certain stockholders of Company are entering into Voting
Agreements in substantially the form attached hereto as Exhibit A (the "Company
---------
Voting Agreements").
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, the Company
is executing and delivering a Stock Option Agreement in favor of Parent in
substantially the form attached hereto as Exhibit B (the "Stock Option
---------
Agreement"). The Board of Directors of the Company has approved the Stock
Option Agreement.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, the Company shall be merged with and into
Parent (the "Merger"), the separate corporate existence of the Company shall
cease and Parent shall continue as the surviving corporation. Parent as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation".
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
-----------------------
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "Effective Time")
as soon as practicable on or after the Closing Date (as herein defined). Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and Plan of Reorganization and the Certificate of
Merger. The closing of the Merger (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of
Parent, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation.
(b) The Bylaws of Parent, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The directors of the Surviving Corporation
----------------------
shall be the directors of Parent immediately prior to the Effective Time. The
officers of the Surviving Corporation shall be the officers of Parent
immediately prior to the Effective Time.
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1.6 Effect on Capital Stock. Subject to the terms and conditions of this
-----------------------
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of the Company or the holders of any of the following securities,
the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock
----------------------------------
of the Company ("Company Common Stock") issued and outstanding immediately prior
to the Effective Time, other than any shares of the Company Common Stock to be
canceled pursuant to Section 1.6(b), will be automatically converted (subject to
Section 1.6(d)) into the right to receive the Exchange Ratio (as defined below)
upon surrender of the Certificate (as defined in Section 1.7(c)) representing
such share of the Company Common Stock in the manner provided in Section 1.7 (or
in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9). For
purposes of this Agreement, the "Exchange Ratio" is a number of shares of Common
Stock, par value of $0.001 per share of Parent ("Parent Common Stock") equal to
$22 divided by the Average Parent Common Stock Price; provided, however, that if
such quotient is greater than 1.325, the Exchange Ratio will equal 1.325, and if
such quotient is less than 1.0, the Exchange Ratio will equal 1.0. The "Average
Parent Common Stock Price" is the simple average of the closing stock price of
the Parent Common Stock as reported by the Nasdaq National Market System
("Nasdaq") for the ten trading days ending two business days prior to (but not
including) the date of the Company Stockholders' Meeting (as defined in Section
5.2). If any shares of Company Common Stock outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company, then (except as otherwise
provided in such restricted stock purchase agreement or other agreement) the
shares of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends. The parties shall take all action that may be reasonably necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
----------------------------------
Stock held by the Company or owned by Parent or any direct or indirect wholly-
owned subsidiary of the Company or of Parent immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective
--------------------------------------------
Time, all options to purchase Company Common Stock then outstanding under
Company's 1984 Incentive Stock Option ("ISO") Plan, as amended (the "1984
Plan"), Company's 1987 Restricted Stock Purchase Plan, as amended (the "1987
Plan"), Company's 1994 ISO Plan (the "1994 Plan"), Company's 1998 Stock Plan
(the "1998 Plan"), Company's Approved Share Option Scheme ("UK Plan") and
Company's 1998 Directors Option Plan (the "Director Plan" and, together with the
1984 Plan, 1987 Plan, 1994 Plan, 1998 Plan and UK Plan, the "Company Stock
Option Plans") shall be assumed by Parent in accordance with Section 5.8 hereof.
At the Effective Time, rights
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outstanding under the Company's 1998 Employee Stock Purchase Plan (the "Company
Purchase Plan") shall be treated as set forth in Section 5.8 hereof.
(d) Fractional Shares. No fraction of a share of Parent Common Stock
-----------------
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock immediately prior to the Effective Time who would
otherwise be entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock that otherwise would be
received by such holder) shall, upon surrender of such holder's Certificate(s)
(as defined in Section 1.7(c)), receive from Parent an amount of cash (rounded
to the nearest whole cent), without interest, equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of one share of Parent
Common Stock for the ten (10) most recent days that Parent Common Stock has
traded, ending on the last trading day prior to the Closing Date, as reported on
the Nasdaq.
(e) No Effect on Parent Stock. Each share of Parent Common Stock and
-------------------------
any other shares of Parent capital stock or securities convertible into Parent
capital stock issued and outstanding immediately prior the Effective Time, will
remain issued and outstanding without change.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
1.7 Surrender of Certificates.
-------------------------
(a) Exchange Agent. Parent shall select an institution reasonably
--------------
satisfactory to the Company to act as the exchange agent (the "Exchange Agent")
in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
------------------------------
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for the shares of Company Common Stock that
were outstanding immediately prior to the Effective Time and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(d)
and for payment of any dividends or distributions to which holders of shares of
Company Common Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent
-------------------
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of Company Common Stock whose shares were converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.6, cash in
lieu of any fractional shares pursuant to Section 1.6(d) and any dividends or
other distributions pursuant to Section 1.7(d), (i) a letter of transmittal for
their certificate or certificates (the "Certificates") which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(which shall specify that delivery shall
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be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other customary provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock, cash in
lieu of any fractional shares pursuant to Section 1.6(d) and any dividends or
other distributions pursuant to Section 1.7(d). Upon surrender of Certificates
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock, payment in lieu
of fractional shares which such holders have the right to receive pursuant to
Section 1.6(d) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Common Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(d) and any
dividends or distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(d) hereof and the amount of
any such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent
----------------------
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
--------------------
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal
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Requirement (as defined in Section 2.2(c)). To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would otherwise
have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.6(d) and 1.7(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any Certificates
--------------------------------------
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(d) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Company or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title to and possession of all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the Company
will take all such lawful and necessary action, so long as such action is
consistent with this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company represents
and warrants to Parent, subject to the exceptions specifically disclosed in
writing in the disclosure letter and referencing a specific representation
supplied by the Company to Parent dated as of the date hereof and certified by a
duly authorized officer of the Company (the "Company Disclosure Schedule"), as
follows:
2.1 Organization of the Company.
---------------------------
(a) The Company has no subsidiaries, except for the corporations
identified in Part 2.1(a)(i) of the Company Disclosure Schedule; and neither the
Company nor any of the other corporations identified in Part 2.1(a)(i) of the
Company Disclosure Schedule owns any capital stock of, or any equity interest of
any nature in, any other entity, other than the entities identified in Part
2.1(a)(ii) of the Company Disclosure Schedule, except for passive investments in
equity interests of public companies as part of the cash management program of
the Company. Neither the Company nor any subsidiary thereof has agreed or is
obligated to make, or is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereinafter be in effect ("Contract") under which Contract
it may become obligated to make, any future investment in or capital
contribution to any other entity. Neither the Company, nor any subsidiary
thereof, has, at any time, been a general partner of any general partnership,
limited partnership or other entity.
(b) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary corporate power and
authority: (i) to conduct its business in the manner in which its business is
currently being conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used; and (iii) to perform its obligations
under all Contracts by which it is bound.
(c) The Company and each of its subsidiaries is qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to so qualify would have a Material Adverse Effect (as
defined in Section 8.3) on the Company.
(d) The Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation (including any Certificate of
Designations) and Bylaws of the Company and similar governing instruments of
each of its subsidiaries, each as amended to date (collectively, the "Company
Charter Documents"), and each such instrument is in full force and effect. The
Company is not in violation of any of the provisions of the Company Charter
Documents. None of the Company's subsidiaries is in violation of any provision
of its Articles or Certificate of Incorporation or Bylaws or other similar
governing instruments.
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2.2 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of: (i)
75,000,000 shares of Company Common Stock, par value $0.001 per share, of which
10,759,249 shares have been issued and are outstanding as of the date of this
Agreement; and (ii) 5,000,000 shares of Preferred Stock ("Company Preferred
Stock"), par value $0.001 per share, of which no shares are outstanding as of
the date of this Agreement. The Company has no convertible promissory notes
outstanding. All of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, and are fully paid and nonassessable.
As of the date of this Agreement, there are no shares of Company Common Stock
held in treasury by the Company. Upon consummation of the Merger, (A) the shares
of Parent Common Stock issued in exchange for any shares of Company Common Stock
that are subject to a Contract pursuant to which the Company has the right to
repurchase, redeem or otherwise reacquire any shares of Company Common Stock
will, without any further act of Parent, the Company or any other person, become
subject to the restrictions, conditions and other provisions contained in such
Contract, and (B) Parent will automatically succeed to and become entitled to
exercise the Company's rights and remedies under any such Contract.
(b) As of the date of this Agreement: (i) 2,591,519 shares of Company
Common Stock are subject to issuance pursuant to outstanding options to purchase
Company Common Stock under the Company Stock Option Plans; and (ii) 700,000
shares of Company Common Stock are reserved for future issuance under the
Company Purchase Plan. (Stock options granted by the Company pursuant to the
Company Stock Option Plans are referred to in this Agreement as "Company
Options"). Part 2.2(b) of the Company Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding as of the
date of this Agreement: (i) the name and address of the optionee; (ii) the
particular plan pursuant to which such Company Option was granted; (iii) the
number of shares of Company Common Stock subject to such Company Option; (iv)
the exercise price of such Company Option; (v) the date on which such Company
Option was granted; (vi) the applicable vesting schedule; (vii) the date on
which such Company Option expires and (viii) whether the exercisability of such
option will be accelerated in any way by the transactions contemplated by this
Agreement, and the extent of any such acceleration. The Company has made
available to Parent accurate and complete copies of all stock option plans
pursuant to which the Company has granted stock options that are currently
outstanding and the form of all stock option agreements evidencing such options.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. There are no commitments or agreements of any character to
which the Company is bound, obligating the Company to accelerate the vesting of
any Company Option as a result of the Merger, other than Company Options issued
to directors pursuant to the Director Plan which provides that the options
granted under such plan shall become fully exercisable if, following a merger,
the optionee's status as a director of the Company or of the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the optionee.
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(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, and all outstanding shares of capital stock of each subsidiary
of the Company have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements (as defined
below) and (ii) all requirements set forth in applicable Contracts. For the
purposes of this Agreement, "Legal Requirements" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity (as defined
below).
2.3 Obligations With Respect to Capital Stock. Except as set forth in
-----------------------------------------
Part 2.3 of the Company Disclosure Schedule, there are no equity securities,
partnership interests or similar ownership interests of any class of any Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities the Company owns free and clear of all claims and Encumbrances,
directly or indirectly through one or more subsidiaries, and except for shares
of capital stock or other similar ownership interests of certain subsidiaries of
the Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries (which
shares or other interests do not materially affect the Company's control of such
subsidiaries), as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any subsidiary of the Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. For the purposes of this Agreement "Encumbrances" means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset). Except as set forth in Part 2.3 of the Company
Disclosure Schedule or as set forth in Section 2.2 hereof and except for the
Stock Option Agreement, as of the date of this Agreement, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement, there are no registration
rights and there is, except for the Company Voting Agreement, no voting trust,
proxy, rights plan, antitakeover plan or other agreement or understanding to
which the Company is a party or by which it is bound with respect to any equity
security of any class of the Company or with respect to any equity security,
-9-
partnership interest or similar ownership interest of any class of any of its
subsidiaries. Stockholders of the Company will not be entitled to dissenters' or
appraisal rights under applicable state law in connection with the Merger.
2.4 Authority; Non-Contravention.
----------------------------
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the
approval and adoption of this Agreement and the approval of the Merger by the
Company's stockholders and the filing of the Certificate of Merger pursuant to
Delaware Law. A vote of the holders of a majority of the outstanding shares of
the Company Common Stock is sufficient for the Company's stockholders to approve
and adopt this Agreement and approve the Merger. This Agreement and the Stock
Option Agreement have each been duly executed and delivered by the Company and,
assuming due execution and delivery by Parent, constitute(s) valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other similar laws and general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law). The execution and delivery of this Agreement and the Stock
Option Agreement by the Company do not, and the performance of this Agreement
and the Stock Option Agreement by the Company will not, (i) conflict with or
violate the Company Charter Documents, (ii) subject to obtaining the approval
and adoption of this Agreement and the approval of the Merger by the Company's
stockholders as contemplated in Section 5.2 and compliance with the requirements
set forth in Section 2.4(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries or any of their
respective material properties is bound or affected, or (iii) result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair the Company's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material lien or
Encumbrance on any of the material properties or assets of the Company or any of
its subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective assets are bound or affected. Part 2.4(a) of the Company Disclosure
Schedule lists all consents, waivers and approvals under any of the Company's or
any of its subsidiaries' agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate not obtained, would result in
a material loss of benefits to the Company, Parent or the Surviving Corporation
as a result of the Merger.
-10-
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by the Company in
connection with the execution and delivery of this Agreement and the Stock
Option Agreement or the consummation of the Merger, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (ii) the filing of the Prospectus/Proxy
Statement (as defined in Section 2.19) with the Securities and Exchange
Commission ("SEC") in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and
the securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to the Company or Parent or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
2.5 SEC Filings; Company Financial Statements.
-----------------------------------------
(a) The Company has filed all forms, reports and documents required
to be filed by the Company with the SEC since March 2, 1998 and has made
available to Parent such forms, reports and documents in the form filed with the
SEC. All such required forms, reports and documents (including those that the
Company may file subsequent to the date hereof), as amended, are referred to
herein as the "Company SEC Reports." As of their respective dates, the Company
SEC Reports (i) were prepared in accordance and complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of the Company's operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal
-11-
and recurring year-end adjustments. The balance sheet of the Company contained
in the Company SEC Reports as of December 31, 2000 is hereinafter referred to as
the "Company Balance Sheet."
(c) Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet neither the Company nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a consolidated balance sheet
(absolute, accrued, contingent or otherwise) which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except for
liabilities incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practices and liabilities incurred
pursuant to this Agreement.
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
------------------------------------
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
of the Company's capital stock or any other securities of the Company or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees or independent
contractors following their termination pursuant to the terms of their pre-
existing stock option or purchase agreements, (iii) any split, combination or
reclassification of any of the Company's or any of its subsidiaries' capital
stock, (iv) any granting by the Company or any of its subsidiaries of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its subsidiaries of any bonus, except
for bonuses made in the ordinary course of business consistent with past
practice, or any granting by the Company or any of its subsidiaries of any
increase in severance or termination pay or any entry by the Company or any of
its subsidiaries into any currently effective employment, severance, termination
or indemnification agreement or any agreement the benefits of which are
contingent or the terms of which are materially altered upon the occurrence of a
transaction involving the Company of the nature contemplated hereby, (v) entry
by the Company or any of its subsidiaries into any licensing or other agreement
with regard to the acquisition or disposition of any material Intellectual
Property (as defined in Section 2.9) other than licenses in the ordinary course
of business consistent with past practice, (vi) any amendment or consent with
respect to any licensing agreement filed or required to be filed by the Company
with the SEC, (vii) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (viii) any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
-----
-12-
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
-------------------
or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, 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 or transferor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company and each of its subsidiaries have timely filed
all federal, state, local and foreign returns, estimates, information statements
and reports ("Returns") relating to Taxes required to be filed by the Company
and each of its subsidiaries with any Tax authority, except such Returns which
are not material to the Company. The Company and each of its subsidiaries have
paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and other
Taxes (including foreign Taxes) required to be withheld.
(iii) Neither the Company nor any of its subsidiaries is
currently delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extended the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company
or any of its subsidiaries by any Tax authority is presently in progress, nor
has the Company or any of its subsidiaries been notified of any request for such
an audit or other examination.
(v) No adjustment relating to any Returns filed by the Company
or any of its subsidiaries has been proposed in writing formally or informally
by any Tax authority to the Company or any of its subsidiaries or any
representative thereof which has not yet been finally resolved.
(vi) Neither the Company nor any of its subsidiaries has any
liability for unpaid Taxes which has not been accrued for or reserved on the
Company Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, other than any liability for unpaid Taxes that
may have accrued since the date of the Company Balance Sheet in connection with
the operation of the business of the Company and its subsidiaries in the
ordinary course.
-13-
(vii) There is no contract, agreement, plan or arrangement to
which the Company or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Code. There is no contract, agreement, plan or arrangement to
which the Company is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the Code.
(viii) Neither the Company nor any of its subsidiaries has 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 or any of its
subsidiaries.
(ix) Neither the Company nor any of its subsidiaries is party
to or has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement. Neither the Company nor any of its subsidiaries has
ever been a member of a group filing a consolidated, unitary, combined or
similar Return (other than Returns which include only the Company and any of its
subsidiaries) under any federal, state, local or foreign law. Neither the
Company nor any of its subsidiaries is party to any joint venture, partnership
or other arrangement that could be treated as a partnership for Tax purposes.
(x) Except as may be required as a result of the Merger, the
Company and its subsidiaries have not been and will not be required to include
any adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Closing.
(xi) None of the Company's or its subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
(xii) Part 2.7 of the Company Disclosure Schedule lists (A) any
foreign Tax holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by the Company or any of its
subsidiaries with any Tax authority and (C) any expatriate programs or policies
affecting the Company or any of its subsidiaries. The Company and each of its
subsidiaries are in full compliance with each such holiday, agreement,
arrangement, program or policy. The consummation of the Merger will not have any
adverse effect on the continued validity and effectiveness of any such holiday,
agreement, arrangement, program or policy relative to any government authority.
(xiii) Neither the Company nor any subsidiary of the Company has
participated as either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code.
(xiv) To the knowledge of the Company, neither the Company nor
any of its affiliates has taken or agreed to take any action that would prevent
the Merger from qualifying as a
-14-
reorganization within the meaning of Section 368(a) of the Code. The Company is
not aware of any agreement, plan or other circumstances that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
2.8 Title to Properties; Absence of Liens and Encumbrances
------------------------------------------------------
(a) Part 2.8(a) of the Company Disclosure Schedule lists the real
property interests owned by the Company and its subsidiaries as of the date of
this Agreement. Part 2.8(a)(i) of the Company Disclosure Schedule lists all real
property leases to which the Company or any of its subsidiaries is a party as of
the date of this Agreement and each amendment thereto that is in effect as of
the date of this Agreement. Except as disclosed on Schedule 2.8(a)(i), 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) that would give rise to a
material claim. Other than the ownership interests disclosed in Schedule 2.8(a)
and the leaseholds created under the real property leases identified in Part
2.8(a)(i) of the Company Disclosure Schedule, the Company and its subsidiaries
do not own or lease any other interest in real property.
(b) The Company and each of its subsidiaries 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, pledges, charges,
claims, security interests or other customary encumbrances of any sort
("Liens"), except as reflected in the Company Financials and except for liens
for taxes not yet due and payable and such Liens or other 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.
2.9 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United
States, international and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) all inventions
(whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto
throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all
trade names, logos, URLs, common law trademarks and service marks,
trademark and service ▇▇▇▇ registrations and applications therefor
throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; (vii) all moral and economic
rights of authors and inventors, however denominated, throughout the
world, and (viii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
-15-
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, the Company or any of
its subsidiaries.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks and
service marks, applications to register trademarks and service marks,
intent-to-use applications, or other registrations or applications
related to trademarks and service marks; (iii) registered copyrights
and applications for copyright registration; and (iv) any other
Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal
authority.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company
or any of its subsidiaries.
(a) No material Company Intellectual Property or product or service
of the Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by the Company, or which could reasonably be anticipated to
affect the validity, use or enforceability of such Company Intellectual
Property.
(b) Part 2.9(b) of the Company Disclosure Schedule is a complete and
accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property 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. Each material item of Company
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
Company Registered Intellectual Property have been made and all necessary
documents, recordations and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Company
Registered Intellectual Property.
(c) The Company or one of its subsidiaries owns and has good and
exclusive title to, or has joint ownership or license (sufficient for the
conduct of its business as currently conducted) to, each material item of
Company Intellectual Property or other Intellectual Property used by the Company
free and clear of any lien or encumbrance (excluding licenses and related
restrictions); and the Company is the exclusive owner of all trademarks, trade
names and service marks used in connection with the operation or conduct of the
business of the Company, including the sale of any products or the provision of
any services by the Company.
(d) The Company or one of its subsidiaries owns exclusively, and has
good title to, all copyrighted works that are Company products or which the
Company or any of its subsidiaries otherwise expressly purports to own.
-16-
(e) To the extent that any Intellectual Property has been developed
or created for the Company or any of its subsidiaries by a third party for the
Company or any of its subsidiaries, the Company or one of its subsidiaries has a
written agreement with such third party with respect thereto and the Company or
such subsidiary thereby either (i) has obtained ownership of, and is the
exclusive owner of, or (ii) has obtained a license (sufficient for the conduct
of its business as currently conducted) to all such third party's Intellectual
Property in such work, material or invention by operation of law or by valid
assignment or license, to the fullest extent it is legally possible to do so.
(f) Neither the Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material to the Company Intellectual Property, to any
third party.
(g) Part 2.9(g) of the Company Disclosure Schedule lists all material
contracts, licenses and agreements to which the Company or any of its
subsidiaries is a party (i) with respect to Company Intellectual Property
licensed or transferred to any third party (other than end-user licenses in the
ordinary course); or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to the Company or any of its
subsidiaries.
(h) All material contracts, licenses and agreements listed in Part
2.9(g) of the Company Disclosure Schedule are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements. The Company and each of
its subsidiaries is in material compliance with, and has not materially breached
any term any of such contracts, licenses and agreements and, to the knowledge of
the Company, all other parties to such contracts, licenses and agreements are in
compliance with, and have not materially breached any term of any such
contracts, licenses and agreements. Following the Closing Date, the Surviving
Corporation will be permitted to exercise all of the Company's rights under such
contracts, licenses and agreements to the same extent the Company would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay.
(i) The operation of the business of the Company as such business
currently is conducted, including the Company's design, development,
manufacture, marketing and sale of the products or services of the Company
(including with respect to products currently under development) has not and
does not infringe or misappropriate the Intellectual Property of any third party
or constitute unfair competition or trade practices under the laws of any
jurisdiction.
(j) The Company has not received written notice, or to the Company's
knowledge, oral notice from any third party that the operation of the business
of the Company or any act, product or service of the Company, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
-17-
(k) To the knowledge of the Company, no person has or is infringing
or misappropriating any Company Intellectual Property.
(l) The Company has taken commercially reasonable steps to protect
the Company's rights in the Company's confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to counsel to Parent and all current and former employees and
contractors of the Company and its subsidiaries have executed such an agreement,
except where the failure to do so is not reasonably expected to be material to
the Company.
2.10 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or in violation of (i) any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective properties is bound or affected, or (ii) any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective businesses or properties is, or the Company
believes is reasonably likely to be, bound or affected, except for conflicts,
violations and defaults that (individually or in the aggregate) would not cause
the Company to lose any material benefit or incur any material liability. No
investigation or review by any Governmental Entity is pending or, to the
Company's knowledge, has been threatened in a writing delivered to the Company,
against the Company or any of its subsidiaries, nor, to the Company's knowledge,
has any Governmental Entity indicated an intention to conduct an investigation
of the Company or any of its subsidiaries. There is no material agreement,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of the Company or any
of its subsidiaries, any acquisition of material property by the Company or any
of its subsidiaries or the conduct of business by the Company as currently
conducted.
(b) The Company and its subsidiaries hold, to the extent legally
required, all permits, licenses, variances, exemptions, orders and approvals
from Governmental Entities that are material to and required for the operation
of the business of the Company as currently conducted (collectively, the
"Company Permits"). The Company and its subsidiaries are in compliance in all
material respects with the terms of the Company Permits, except where the
failure to be in compliance with the terms of the Company Permits would not be
material to the Company.
2.11 Litigation. Except as disclosed in Part 2.11 of the Company
----------
Disclosure Schedule, there are no claims, suits, actions or proceedings pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could
-18-
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to be material to the Company. No Governmental
Entity has at any time challenged or questioned in a writing delivered to the
Company the legal right of the Company to design, manufacture, offer or sell any
of its products or services in the present manner or style thereof. As of the
date hereof, to the knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, cause or provide a bona fide basis for a
director or executive officer of the Company to seek indemnification from the
Company.
The Company has never been subject to an audit, compliance review,
investigation or like contract review by the GSA office of the Inspector General
or other Governmental Entity or agent thereof in connection with any government
contract (a "Government Audit"), to the Company's knowledge no Government Audit
is threatened or reasonably anticipated, and in the event of such Government
Audit, to the knowledge of the Company no basis exists for a finding of
noncompliance with any material provision of any government contract or a refund
of any amounts paid or owed by any Governmental Entity pursuant to such
government contract. For each item disclosed in the Company Schedule pursuant
to this Section 2.11, a true and complete copy of all correspondence and
documentation with respect thereto has been provided to Parent.
2.12 Brokers' and Finders' Fees. The Company has not incurred, nor will
--------------------------
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.13 Transactions with Affiliates. Except as set forth in the Company SEC
----------------------------
Reports, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred as of the date of this Agreement that would be
required to be reported by the Company pursuant to Item 404 of Regulation S-K
promulgated by the SEC. Part 2.13 of the Company Disclosure Schedule identifies
each person who is an "affiliate" (as that term is used in Rule 145 promulgated
under the Securities Act) of the Company as of the date of this Agreement.
2.14 Employee Benefit Plans.
----------------------
(a) Definitions. With the exception of the definition of
-----------
"Affiliate" set forth in Section 2.14(a)(i) below (which definition shall apply
only to this Section 2.14), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean 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 written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of
-19-
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;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean 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;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company, whether
informally or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Part 2.14(b) of the Company Disclosure Schedule
--------
contain an accurate and complete list of each Company Employee Plan and each
material Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, 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, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
material Employee Agreement, nor does it have any intention or commitment to do
any of the foregoing.
(c) Documents. The Company has provided to Parent: (i) correct and
---------
complete copies of all documents embodying to each Company Employee Plan and
each Employee
-20-
Agreement including all amendments thereto and written interpretations thereof;
(ii) the most recent annual actuarial valuations, if any, prepared for each
Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached 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 summary of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (vi) all IRS determination, opinion, notification and advisory
letters, and rulings relating to Company Employee Plans and copies of all
applications and correspondence to or from the IRS or the DOL with respect to
any Company Employee Plan; (vii) all material written agreements and contracts
relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) 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, any of which would result in any material liability
to the Company; (ix) all COBRA forms and related notices; and (x) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in all
------------------------
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no knowledge of any default or violation by
any other party to 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) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination letter from the IRS with respect to each such
Plan as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent,
the Company or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) there are no audits,
inquiries or proceedings pending or, to the knowledge of the Company or any
Affiliates, threatened by the IRS or DOL with respect to any Company Employee
Plan; and (vii) neither the Company nor any Affiliate is subject to any penalty
or tax with respect to any Company Employee Plan under Section 402(i) of ERISA
or Sections 4975 through 4980 of the Code.
-21-
(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 Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to
-------------------
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
------------------------------
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, 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) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) No Violations. Neither the Company nor any Affiliate has, prior
-------------
to the Effective Time, in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA, the requirements
of the Health Insurance Portability and Accountability Act of 1996, the
requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction. (i) The execution of this Agreement and
---------------------
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee; and (ii)
no payment or benefit which will or may be made by the Company or its Affiliates
with respect to any Employee will be characterized as a "parachute payment,"
within the meaning of Section 280G(B)(2) of the Code.
(j) Employment Matters. The Company and each of its subsidiaries:
------------------
(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) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any material 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). There are no pending, threatened or reasonably anticipated
claims or actions against the Company or any of its subsidiaries under any
worker's compensation policy or long-term disability policy. To the Company's
knowledge, no employee of the Company has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee
-22-
being employed by the Company and disclosing to the Company or using trade
secrets or proprietary information of any other person or entity.
(k) Labor. No general work stoppage or labor strike against the
-----
Company is pending, threatened or reasonably anticipated. The Company does not
know of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the knowledge of the Company, threatened or reasonably
anticipated relating to any 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 any 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.
The Company and its subsidiaries are not presently, nor has any of them 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 or any of its subsidiaries.
(l) International Employee Plan. Each International Employee Plan
---------------------------
has been established, maintained and administered in material compliance with
its terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. Furthermore, no International Employee Plan has unfunded liabilities, that
as of the Effective Time, will not be offset by insurance or fully accrued.
Except as required by law, no condition exists that would prevent the Company or
Parent from terminating or amending any International Employee Plan at any time
for any reason.
2.15 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not result in material
------------------
liability to the Company, no underground storage tanks and no 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, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "Hazardous Material") are present, as a result of the
actions of the Company or any of its subsidiaries or any affiliate 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 or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
------------------------------
material liability to the Company (in any individual case or in the aggregate)
(i) neither the Company nor any of its subsidiaries has 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
Date, and (ii) neither the Company nor any of its subsidiaries has disposed of,
transported, sold,
-23-
used, released, exposed its employees or others to or manufactured any product
containing a Hazardous Material (collectively "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 and its subsidiaries currently hold all
-------
environmental approvals, permits, licenses, clearances and consents (the
"Company Environmental Permits") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ or injunction is pending, and to the
Company's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against the Company or any of its subsidiaries in a writing delivered to the
Company concerning any Company Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of the Company or any of its subsidiaries. The
Company is not aware of any fact or circumstance which could involve the Company
or any of its subsidiaries in any environmental litigation or impose upon the
Company any material environmental liability.
2.16 Year 2000 Compliance. Neither the Company nor any of its
--------------------
subsidiaries has given any warranties or indemnities that remain outstanding and
that pertain to products or technology sold by the Company or any subsidiary
under which claims have been made that such products or technology fail to
correctly handle date and time entry recognition, calculations that accommodate
same century and multi-century formulas and date values, leap year recognition
and calculations, or date data interface values that reflect the century.
Additionally, neither the Company nor any of its subsidiaries have any
outstanding warranty or indemnification obligation under which claims have been
made that the Company's products and technology fail to correctly manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, or that they cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates.
2.17 Agreements, Contracts and Commitments. Except as otherwise set forth
-------------------------------------
in Part 2.17 of the Company Disclosure Schedule, as of the date hereof neither
the Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of the Company's
Board of Directors, other than those that are terminable by the Company or any
of its subsidiaries on no more than thirty days notice without liability or
financial obligation, except to the extent general principles of wrongful
termination law may limit the Company's or any of its subsidiaries' ability to
terminate employees at will;
-24-
(b) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software or hardware products in the ordinary course of business;
(c) any agreement, contract or commitment containing any covenant
limiting in any respect the right of the Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(d) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company or any of
its subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than the Company's
subsidiaries;
(e) any joint marketing or development agreement currently in force
under which the Company or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of 90 days or less, or any material
agreement pursuant to which the Company or any of its subsidiaries have
continuing material obligations to jointly develop any intellectual property
that will not be owned, in whole or in part, by the Company or any of its
subsidiaries and which may not be canceled without penalty upon notice of 90
days or less; or
(f) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to the Company and its subsidiaries taken as a whole.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound that are required to be
disclosed in the Company Disclosure Schedule pursuant to clauses (a) through (f)
above or pursuant to Section 2.9 hereof or are required to be filed with any
Company SEC Report (any such agreement, contract or commitment, a "Company
Contract") in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
2.18 Change of Control Payments. Part 2.18 of the Company Disclosure
--------------------------
Schedule sets forth each plan or agreement pursuant to which any amounts may
become payable (whether currently or in the future) to current or former
employees and directors of the Company or any of its subsidiaries as a result of
or in connection with the Merger.
2.19 Disclosure. None of the information supplied by or on behalf of the
----------
Company for inclusion or incorporation by reference in the registration
statement on Form S-4 (or similar
-25-
successor form) to be filed with the SEC by Parent in connection with the
issuance of Parent Common Stock in the Merger (including amendments or
supplements thereto) (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Prospectus/Proxy Statement to be filed with the SEC as part of
the Registration Statement (the "Prospectus/Proxy Statement"), will, at the time
the Prospectus/Proxy Statement is mailed to the stockholders of the Company, at
the time of the Company Stockholders' Meeting or as of the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, except that no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein based on information supplied by Parent for inclusion or
incorporation by reference in the Prospectus/Proxy Statement.
2.20 Board Approval. The Board of Directors of the Company has, as of the
--------------
date of this Agreement, unanimously (i) approved this Agreement and the
transactions contemplated hereby, subject to stockholder approval, (ii) approved
the Stock Option Agreement and the transactions contemplated thereby, (iii)
determined that the Merger is in the best interests of the stockholders of the
Company and is on terms that are fair to such stockholders, and (iv) recommended
that the stockholders of the Company approve and adopt this Agreement and
approve the Merger.
2.21 Fairness Opinion. The Company's Board of Directors has received a
----------------
written opinion from ▇.▇. ▇▇▇▇▇▇ H & Q, dated as of the date hereof, to the
effect that as of the date hereof, the Exchange Ratio is fair to the Company's
stockholders from a financial point of view and has delivered to Parent a copy
of such opinion.
2.22 Section 203 of the Delaware General Corporation Law Not Applicable.
------------------------------------------------------------------
The Board of Directors of Company has taken all actions so that the restrictions
contained in Section 203 of the Delaware General Corporation Law applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or the Stock Option
Agreement or to the consummation of the Merger or the other transactions
contemplated by this Agreement and the Stock Option Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
As of the date hereof and as of the Closing Date, Parent represents and
warrants to the Company, subject to the exceptions specifically disclosed in
writing in the disclosure letter and referencing a specific representation
supplied by Parent to the Company dated as of the date hereof and certified by a
duly authorized officer of Parent (the "Parent Disclosure Schedule"), as
follows:
-26-
3.1 Organization, Standing and Power.
--------------------------------
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(b) Parent is qualified to do business as a foreign corporation, and
is in good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification and where the failure to be so qualified
(either individually or collectively) would have a Material Adverse Effect on
Parent.
(c) Parent has delivered or made available to the Company a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent, each as
amended to date (collectively, the "Parent Charter Documents"), and each such
instrument is in full force and effect. Parent is not in violation of any of the
provisions of the Parent Charter Documents.
3.2 Capital Structure.
-----------------
(a) The authorized capital stock of Parent consists of: (i)
2,000,000,000 shares of Common Stock, $0.001 par value, of which 566,512,760
shares have been issued and are outstanding as of March 2, 2001; and (ii)
125,000,000 shares of Preferred Stock, $0.001 par value per share, of which no
shares have been issued or are outstanding as of the date of this Agreement. All
of the outstanding shares of Parent's Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable.
(b) As of the date of this Agreement: (i) 18,987,717 shares of Parent
Common Stock are subject to issuance pursuant to outstanding options to purchase
Common Stock under Parent's 1999 Stock Plan and Amended and Restated 1999
Director Option Plan; and (ii) 14,863,914 shares of Common Stock are reserved
for future issuance under Parent's 1999 Employee Stock Purchase Plan (the
"Parent Purchase Plan"). (Stock options granted by Parent pursuant to Parent's
stock option plans and stock options assumed by Parent pursuant to various
corporate transactions collectively are referred to in this Agreement as "Parent
Options"). Parent has made available to the Company accurate and complete copies
of all stock option plans pursuant to which Parent has granted stock options
that are currently outstanding and the form of all stock option agreements
evidencing such options. All shares of Parent Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable.
(c) All outstanding shares of Parent Common Stock, and all
outstanding Parent Options, have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements and (ii)
all requirements set forth in applicable Contracts.
-27-
(d) Except for Parent Options, warrants disclosed in Parent SEC
Reports that have not been subsequently cancelled and shares of Parent Common
Stock reserved for issuance under Parent's 1999 Stock Plan, Amended and Restated
1999 Director Option Plan and Parent Purchase Plan, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Parent or
conditionally or absolutely obligating Parent to issue or sell any shares of
capital stock of, or other equity interests in, Parent or its subsidiaries.
There are no outstanding obligations of Parent to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock.
3.3 Authority; Non-Contravention.
----------------------------
(a) Parent has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent, subject only to the filing of the
Certificate of Merger pursuant to Delaware Law. The Board of Directors of Parent
has approved the Merger and this Agreement. This Agreement and the Stock Option
Agreement have each been duly executed and delivered by Parent and, assuming the
due execution and delivery by the Company, constitute valid and binding
obligations of Parent, enforceable against Parent in accordance with their
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement and the Stock Option Agreement by Parent do not, and as of the
Effective Time, the performance of this Agreement and the Stock Option Agreement
by Parent will not, (i) conflict with or violate the Parent Charter Documents,
(ii) subject to compliance with the requirements set forth in Section 3.3(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or by which Parent or any of its properties are
bound or affected except where such conflict or violation would not have a
material adverse effect on Parent, or (iii) except as would not have a material
adverse effect on Parent, result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair Parent's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or Encumbrance on any of the material properties or
assets of Parent pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which Parent is a party or by which Parent or its
assets are bound or affected.
(b) No consent, waiver approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity, is required to
be obtained or made by Parent in connection with the execution and delivery of
this Agreement and the Stock Option Agreement or the consummation of the Merger,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the HSR
Act, and the securities or antitrust laws of any foreign country, (iii) filing
of the Registration Statement and the Prospectus/Proxy Statement and a Schedule
-28-
13D with regard to the Company Voting Agreement and the Stock Option Agreement
in accordance with the Securities Act and the Exchange Act, as the case may be,
and the effectiveness of the Registration Statement and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent or have a Material Adverse
Effect (as defined in Section 8.3(c)) on the ability of the parties hereto to
consummate the Merger.
3.4 SEC Filings; Parent Financial Statements.
----------------------------------------
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since March 2, 2000 and has made available to the
Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "Parent SEC
Reports". As of their respective dates, Parent SEC Reports (i) were prepared in
accordance and complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports and (ii)
did not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of Parent's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials"), including each Parent SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Parent and its subsidiaries as at the respective dates
thereof and the consolidated results of Parent's operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring year-
end adjustments. The balance sheet of Parent contained in Parent SEC Report as
of December 1, 2000 is hereinafter referred to as the "Parent Balance Sheet".
Except as disclosed in the Parent Financials, since the date of the Parent
Balance Sheet neither Parent nor any of its subsidiaries has any liabilities
required under GAAP to be set forth on a consolidated balance sheet (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of Parent
and its subsidiaries taken as a whole, except for liabilities incurred since the
date of the Parent Balance Sheet in the ordinary course of business consistent
with past practices and liabilities incurred pursuant to this Agreement.
(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications which have not yet been filed
with the SEC but which are
-29-
required to be filed, to agreements, documents or other instruments which
previously had been filed by Parent with the SEC pursuant to the Securities Act
or the Exchange Act.
3.5 No Material Adverse Effect. Since the date of the Parent Balance
--------------------------
Sheet and through the date hereof, there has not been any Material Adverse
Effect on Parent.
3.6 Disclosure. None of the information supplied by or on behalf of
----------
Parent for inclusion in the Registration Statement will, at the time the
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of Parent for inclusion or incorporation by reference
in the Prospectus/Proxy Statement will, at the time the Prospectus/Proxy
Statement is mailed to the stockholders of the Company, at the time of the
Company Stockholders' Meeting or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated by
the SEC thereunder, except that no representation or warranty is made by Parent
with respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
in the Prospectus/Proxy Statement.
3.7 Litigation. Except as disclosed in Part 3.7 of the Parent Disclosure
----------
Schedule or as contained in the Parent SEC Reports, there are no claims, suits,
actions or proceedings pending or, to the knowledge of Parent, threatened
against Parent before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonably be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to have a material adverse effect on
Parent. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Parent the legal right of Parent to design, manufacture,
offer or sell any of its products or services in the present manner or style
thereof. As of the date hereof, to the knowledge of Parent, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Parent to seek indemnification from
Parent.
3.8 Board Approval. The Board of Directors of Parent has, as of the date
--------------
of this Agreement, approved this Agreement and the Stock Option Agreement and
the transactions contemplated hereby and thereby.
3.9 Taxes. To the knowledge of Parent, neither Parent nor any of its
-----
affiliates has taken or agreed to take any action that would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code. Parent is not aware of any agreement, plan or other circumstances that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
-30-
3.10 Brokers' and Finders' Fees. Parent has not incurred, nor will it
--------------------------
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company. Except as specifically provided
----------------------------------
by this Agreement (including without limitation the actions contemplated by
Schedule 4.1(i) hereto), during the period from the date of this Agreement and
---------------
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company and each of its subsidiaries shall,
except to the extent that Parent shall otherwise consent in writing, carry on
its business, in all material respects, in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due subject to good faith disputes over such
obligations, and use its commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business organization,
(ii) keep available the services of its present officers and employees and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has business dealings.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Part 4 of the Company Disclosure Schedule, without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay (whether in cash, equity-
based or otherwise) to any officer or employee except pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing or made available to Parent, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company Intellectual
Property, or enter into grants to future patent rights, other than non-exclusive
licenses in the ordinary course of business and consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine
-31-
or reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber,
any shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than (i) issuance of
shares of the Company Common Stock pursuant to the exercise of stock options
therefor outstanding as of the date of this Agreement and (ii) issuance of
shares of the Company Common Stock to participants in the Company Purchase Plan
pursuant to the terms thereof;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of the Company or enter into any material joint
ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company, except (i) sales of inventory and used equipment in
the ordinary course of business consistent with past practice, (ii) disposition
of assets and other actions as set forth on Schedule 4.1(i) hereto in the manner
---------------
set forth therein, and (iii) the granting of non-exclusive licenses in the
ordinary course of business and consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in connection with the financing of ordinary
course trade payables consistent with past practice or (ii) pursuant to existing
credit facilities or equipment leasing arrangements in the ordinary course of
business;
(k) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of
-32-
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business, consistent with past
practice, or change in any material respect any management policies or
procedures;
(l) Make or change any Tax election, settle or compromise any
material Tax liability, or consent to any extension or waiver of any limitations
period with respect to Taxes.
(m) Modify, amend or terminate any Company Contract or other material
contract or agreement to which the Company or any subsidiary thereof is a party
or waive, release or assign any material rights or claims thereunder;
(n) Enter into any contracts, agreements, or obligations relating to
the distribution, sale, license or marketing by third parties of the Company's
products or products licensed by the Company other than in the ordinary course
of business consistent with past practice;
(o) Enter into any licensing, distribution, sponsorship, advertising,
merchant program or similar contracts, agreements, or obligations other than in
the ordinary course of business consistent with past practice;
(p) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(q) Take any action (including any action by its Board of Directors)
to cause the Company's representation set forth in Section 2.22 hereof to be
untrue in any respect; or
(r) Agree in writing or otherwise to take any of the actions
described in (a) through (q) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement; Other Filings;
------------------------------------------------------------------
Board Recommendations. As promptly as practicable after the execution of this
---------------------
Agreement, the Company and Parent will prepare and file the Prospectus/Proxy
Statement with the SEC and Parent will prepare and file with the SEC the
Registration Statement in which the Prospectus/Proxy Statement will be included
as a prospectus. Each of the Company and Parent will respond to any comments of
the SEC, will use its respective commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and the Company will cause the Prospectus/Proxy
Statement to be mailed to its stockholders at the earliest practicable time
after the Registration Statement is declared effective by the SEC. As promptly
as practicable after the date of this Agreement, each of the Company and Parent
will prepare and file (i) with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
("DOJ") Notification and Report Forms relating to the
-33-
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the "Antitrust Filings") and (ii) any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other Federal,
state or foreign laws relating to the Merger and the transactions contemplated
by this Agreement (the "Other Filings"). The Company and Parent each shall
promptly supply the other with any information which may be required in order to
effectuate any filings pursuant to this Section 5.1. Each of the Company and
Parent will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials in connection with any filing
made pursuant hereto and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Prospectus/Proxy Statement or any Antitrust Filings or Other
Filing or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Prospectus/Proxy
Statement, the Merger or any Antitrust Filing or Other Filing. Each of the
Company and Parent will cause all documents that it is responsible for filing
with the SEC or other regulatory authorities under this Section 5.1 to comply in
all material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Prospectus/Proxy Statement,
the Registration Statement or any Antitrust Filing or Other Filing, the Company
or Parent, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of the Company, such amendment or
supplement.
5.2 Meeting of Company Stockholders.
-------------------------------
(a) Promptly after the date hereof, the Company will take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene a meeting of the Company's stockholders to consider
adoption and approval of this Agreement and approval of the Merger (the "Company
Stockholders' Meeting") to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.2(c) hereof, the Company will use its commercially reasonable efforts to
solicit from its stockholders proxies in favor of the adoption and approval of
this Agreement and the approval of the Merger and will take all other action
necessary or advisable to secure the vote or consent of its stockholders
required by the rules of Nasdaq and to secure the vote or consent of its
stockholders required by Delaware Law to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to the Company's stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time at which the Company Stockholders' Meeting
is originally scheduled (as set forth in the Prospectus/Proxy Statement) there
are insufficient shares of Company Common Stock represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business of the
Company's Stockholders' Meeting. The Company shall ensure that the Company
Stockholders'
-34-
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by the Company in connection with the Company Stockholders' Meeting
are solicited, in compliance with the Delaware Law, the Company's Certificate of
Incorporation and Bylaws, the rules of Nasdaq and all other applicable legal
requirements. The Company's obligation to call, give notice of, convene and hold
the Company Stockholders' Meeting in accordance with this Section 5.2(a) shall
not be limited to or otherwise affected by the commencement, disclosure,
announcement or submission to the Company of any Acquisition Proposal (as
defined in Section 5.4(a)), or by any withdrawal, amendment or modification of
the recommendation of the Board of Directors of the Company with respect to the
Merger and/or this Agreement.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall unanimously recommend that the Company's stockholders vote in
favor of and adopt and approve this Agreement and approve the Merger at the
Company Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include
a statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or publicly propose or
resolve to withdraw, amend or modify in a manner adverse to Parent, the
unanimous recommendation of the Board of Directors of the Company that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from recommending a Superior Offer (as defined below) or
withholding, withdrawing, amending or modifying its unanimous recommendation in
favor of the Merger if at any time prior to the Effective Time (i) a Superior
Offer is made to the Company or its stockholders and is not withdrawn, (ii) the
Company shall have provided written notice to Parent (a "Notice of Superior
Offer") advising Parent that the Company has received a Superior Offer,
specifying the material terms and conditions of such Superior Offer and
identifying the person or entity making such Superior Offer, (iii) Parent shall
not have, within three (3) (which shall include at least two (2) business days)
days of Parent's receipt of the Notice of Superior Offer, made an offer that the
Board of Directors of the Company by a majority vote determines in its good
faith judgment (based on, among other things, the advice of a financial adviser
of nationally recognized reputation) to be at least as favorable to the
Company's stockholders as such Superior Offer (it being agreed that the Board of
Directors of the Company shall convene a meeting to consider any such offer by
Parent promptly following the receipt thereof), (iv) the Board of Directors of
the Company concludes in good faith, after consultation with its outside
counsel, that, in light of such Superior Offer, the withholding, withdrawal,
amendment or modification of such recommendation is required in order for the
Board of Directors of the Company to comply with its fiduciary obligations to
the Company's stockholders under applicable law and (v) neither the Company nor
any of its representatives shall have violated any of the restrictions set forth
in Section 5.4 or this Section 5.2. The Company shall provide Parent with such
prior notice (both in time and form) as is provided to the members of
-35-
the Company's Board of Directors of any meeting of the Company's Board of
Directors at which the Company's Board of Directors is reasonably expected to
consider any Acquisition Transaction (as defined below). Nothing contained in
this Section 5.2(c) shall limit the Company's obligation to hold and convene the
Company Stockholders' Meeting (regardless of whether the unanimous
recommendation of the Board of Directors of the Company shall have been
withdrawn, amended or modified). For purposes of this Agreement "Superior Offer"
shall mean an unsolicited, bona fide written offer made by a reputable and
responsible third party to acquire, directly or indirectly, including pursuant
to a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 80% of the total
outstanding voting securities of the Company or all or substantially all the
assets of the Company on terms that the Board of Directors of the Company
determines, in its reasonable judgment (based on, among other things, the advice
of a financial adviser of nationally recognized reputation) to be more favorable
to the Company stockholders than the terms of the Merger; provided, however,
that any such offer shall not be deemed to be a "Superior Offer" unless any
financing required to consummate the transaction contemplated by such offer is
either committed or in the good faith judgment of the Board of Directors of the
Company, capable of and reasonably likely to be obtained.
(d) Nothing contained in this Agreement shall prohibit the Company or
its Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
as otherwise required by applicable law.
5.3 Confidentiality; Access to Information.
--------------------------------------
(a) The parties acknowledge that the Company and Parent have
previously executed a Confidentiality Agreement, dated as of October 15, 2000
(the "Confidentiality Agreement"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
(b) Access to Information. The Company will afford Parent and its
---------------------
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of the Company
during the period prior to the Effective Time to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of the Company, as Parent may
reasonably request. No information or knowledge obtained by Parent in any
investigation pursuant to this Section 5.3 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 No Solicitation.
---------------
(a) Subject to the provisions of Section 5.2(c), from and after the
date of this Agreement until the Effective Time or termination of this Agreement
pursuant to Article VII, the Company and its subsidiaries will not, nor will
they authorize or permit any of their respective officers, directors, affiliates
or employees or any investment banker, attorney or other advisor or
representative retained by any of them to, directly or indirectly, (i) solicit,
initiate, encourage or
-36-
induce the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Transaction;
provided, however, that nothing contained in this Section 5.4 shall prohibit the
-----------------
Board of Directors of the Company from (i) in response to an unsolicited, bona
fide written Acquisition Proposal from a reputable and responsible third party
for a Company Acquisition that the Board of Directors of the Company has
reasonably concluded (based on, among other things, the advice of a financial
advisor of nationally recognized reputation), is reasonably expected to lead to
a Superior Offer, furnishing nonpublic information to the party making such
Acquisition Proposal, and submitting to the party making such Acquisition
Proposal written questions, the sole purpose of which is to elicit
clarifications as to the material terms of such Acquisition Proposal so as to
enable the Board of Directors of the Company to make a determination whether to
construe such Acquisition Proposal as a Superior Offer, to the extent that (A)
the Board of Directors of the Company concludes in good faith, after
consultation with its outside counsel, that its fiduciary obligations under
applicable law require it to do so, (B) (x) concurrently with furnishing any
such nonpublic information to, or written questions to such party, the Company
gives Parent written notice of the Company's intention to furnish nonpublic
information, or written questions to such party and (y) the Company receives
from such party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such party on behalf of the Company, the terms of which
are at least as restrictive as the terms contained in the Confidentiality
Agreement, and (C) contemporaneously with furnishing any such nonpublic
information to such party, the Company furnishes such nonpublic information to
Parent (to the extent such nonpublic information has not been previously
furnished by the Company to Parent) and (ii) in response to an unsolicited, bona
fide written Acquisition Proposal that constitutes a Superior Offer, engaging in
negotiations with the party making such Acquisition Proposal to the extent that
(A) the Board of Directors of the Company concludes in good faith, after
consultation with its outside counsel, that its fiduciary obligations under
applicable law require it to do so, (B) (x) concurrently with entering into
negotiations with such party, the Company gives Parent written notice of the
Company's intention to enter into negotiations with such party and (y) the
Company receives from such party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such party on behalf of the Company,
the terms of which are at least as restrictive as the terms contained in the
Confidentiality Agreement. The Company and its subsidiaries will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding two sentences by any officer, director or employee of
the Company or any of its subsidiaries or any investment banker, attorney or
other advisor or representative of the Company or any of its subsidiaries shall
be deemed to be a breach of this Section 5.4 by the Company.
-37-
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean any transaction or series of related transactions
involving: (i) any purchase from the Company or acquisition by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 10% interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 10% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the
Company; (ii) any sale, lease (other than in the ordinary course of business or
as contemplated by Schedule 4.1(i)), exchange, transfer, license (other than in
the ordinary course of business or as contemplated by Schedule 4.1(i)),
acquisition or disposition of more than 10% of the assets of the Company; or
(iii) any liquidation or dissolution of the Company.
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 5.4, the Company as promptly as practicable (but
in any event within twenty-four (24) hours) shall advise Parent orally and in
writing of any Acquisition Proposal or any request for non-public information or
inquiry which the Company reasonably believes would lead to an Acquisition
Proposal or to any Acquisition Transaction, or any inquiry with respect to or
which the Company reasonably should believe would lead to any Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal, or
request or inquiry, and the identity of the person or group making any such
request, Acquisition Proposal or inquiry. Additionally, as promptly as practical
(but in any event within twenty-four (24) hours) the Company shall provide to
Parent all written materials received from or sent to any person or entity
making an Acquisition Proposal and written summaries of any oral modifications
to such written materials. The Company will keep Parent informed as promptly as
practicable in all material respects of the status and details (including
material amendments or proposed material amendments) of any such request,
Acquisition Proposal or inquiry.
5.5 Public Disclosure. Parent and the Company will attempt to consult
-----------------
with each other, and to the extent practicable, agree, before issuing any press
release or otherwise making any public statement with respect to the Merger,
this Agreement or any Acquisition Proposal and will not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.6 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable
-38-
efforts to accomplish the following: (i) the taking of all reasonable acts
necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iv) the defending of any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, the Company and its Board of Directors shall, if
any state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement or any of the transactions contemplated
by this Agreement, use all reasonable efforts to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall be deemed to require Parent or the
Company or any subsidiary or affiliate thereof to agree to any divestiture by
itself or any of its affiliates of shares of capital stock or of any business,
assets or property, 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.
(b) The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of the Company to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or 6.3(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Parent to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Parent and the Company will each use its commercially reasonable efforts
to obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases
-39-
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
5.8 Stock Options and Employee Benefits.
-----------------------------------
(a) At the Effective Time, each outstanding Company Option, whether
or not exercisable and regardless of the respective exercise prices thereof,
will be assumed by Parent. Each Company Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Company Option and Company Stock Option
Plan immediately prior to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions), except that (i) each Company Option
will be exercisable (or will become exercisable in accordance with its terms)
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Option will be equal
to the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that Company Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Company Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.8 shall be applied consistent with such intent.
(c) Outstanding rights to purchase shares of Company Common Stock
shall be exercised in accordance with the Company Purchase Plan, and each share
of Company Common Stock purchased or to be purchased pursuant to such exercise
shall by virtue of the Merger, and without any action on the part of the holder
thereof, be converted into the right to receive a number of shares of Parent
Common Stock equal to the Exchange Ratio, without issuance of certificates
representing issued and outstanding shares of Company Common Stock to
participants under the Company Purchase Plan. The rights of participants in the
Company Purchase Plan with respect to any offering then underway under the
Company Purchase Plan shall be determined by treating the last business day
prior to the Effective Time as the last day of such offering and by making such
other pro rata adjustments as may be necessary to reflect the shortened offering
but otherwise treating such shortened offering as a fully effective and
completed offering for all purposes under the Company Purchase Plan. As of the
Effective Time, the Company Purchase Plan shall be terminated. Employees of the
Company who become employees of Parent shall be eligible to participate in the
employee stock purchase plan of Parent (the "Parent ESPP") (subject to such
plan's terms and conditions) at the next regularly scheduled offering period
under the Parent ESPP.
(d) Effective as of the day immediately preceding the Closing Date,
the Company and its Affiliates, as applicable, shall each terminate any and all
plans intended to include a Code Section 401(k) arrangement (unless Parent
provides written notice to the Company that such 401(k)
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plan(s) shall not be terminated). Unless Parent provides such written
notice to the Company, no later than five (5) business days prior to the Closing
Date, the Company shall provide Parent with evidence that such 401(k) plan(s)
have been terminated (effective as of the day immediately preceding the Closing
Date) pursuant to resolutions of the Board of Directors of the Company. The form
and substance of such resolutions shall be subject to review and approval of
Parent. The Company also shall take such other actions in furtherance of
terminating such 401(k) plan(s) as Parent may reasonably request.
5.9 Form S-8. Parent agrees to file a registration statement on Form S-8
--------
for the shares of Parent Common Stock issuable with respect to assumed Company
Options as soon as is reasonably practicable after the Effective Time, and in
any event not more than thirty (30) business days thereafter, and intends to
maintain the effectiveness of such registration statement thereafter for so long
as any of such options or other rights remain outstanding.
5.10 Indemnification.
---------------
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the existing
obligations of the Company pursuant to any indemnification agreements and
obligations (including obligations arising under the Company's Certificate of
Incorporation or Bylaws) between the Company and its current and former
directors and officers as of the Effective Time (the "Indemnified Parties").
(b) For a period of six years after the Effective Time, Parent will
use its commercially reasonable efforts to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms comparable to those applicable to the current directors and
officers of the Company; provided, however, that in no event will Parent or the
Surviving Corporation be required to expend in excess of 150% of the annual
premium currently paid by the Company for such coverage (or such coverage as is
available for such 150% of such annual premium).
(c) This Section 5.10 is intended to be for the benefit of, and shall
be enforceable by the Indemnified Parties and their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
successors and assigns. In the event the Surviving Corporation or its successor
or assign (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each case, proper provision shall be made so that
the successor and assign of the Surviving Corporation honor the indemnification
obligations set forth in this Section 5.10.
5.11 Nasdaq Listing. Parent agrees to take all commercially reasonable
--------------
efforts and to submit all appropriate filings and applications to cause the
shares of Parent Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, to be approved for listing on Nasdaq
upon official notice of issuance.
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5.12 Company Affiliate Agreement. Set forth on Exhibit C is a list of
--------------------------- ---------
those persons who may be, in the Company's reasonable judgment, affiliates of
the Company within the meaning of Rule 145 promulgated under the Securities Act
(each a "Company Affiliate"). The Company will provide Parent with such
information and documents as Parent reasonably requests for purposes of
reviewing such list. The Company will use its commercially reasonable efforts to
deliver or cause to be delivered to Parent, as promptly as practicable on or
following the date hereof, from each Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit D (the "Company
---------
Affiliate Agreement"), each of which will be in full force and effect as of the
Effective Time. Parent will be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Agreement.
5.13 Employment of Key Employees. Promptly following the date hereof,
---------------------------
Parent shall endeavor to negotiate in good faith with each of the employees of
the Company set forth on Schedule 5.13 hereof (the "Key Employees") regarding
-------------
the terms of employment with Parent of the Key Employees following the Effective
Time. Parent shall consult with the Chief Executive Officer of the Company
regarding appropriate terms of such employment. The terms offered by Parent
shall provide for "at-will employment", be market competitive (taking into
account the skill set of the Key Employee and the market for these skills in the
geographic location such Key Employee is employed) and shall include title, base
salary (which shall not be less than the base salary in effect for such Key
Employee at the Company as of the date hereof) and benefits (including stock
options, if appropriate) that are commensurate with such Key Employee's
employment history with the Company and that take into account the acquisition
of the Company by Parent and the integration of the Company's operations into
Parent's business organization. The terms of offers of employment shall also
include noncompetition and nonsolicitation provisions to be binding on the Key
Employees which provisions shall be customary for transactions similar to the
Merger. Without limiting the foregoing, in particular, the noncompetition and
nonsolicitation provisions may last for the longer of (i) a two-year period
following the Effective Time and (ii) a one year period following termination of
the Key Employee's service with Parent. In the event of the Key Employee's
termination of employment by Parent without cause (as opposed to voluntary
termination or termination with cause), Parent shall have the unilateral right
to terminate the noncompetition provisions (with no payment obligations to the
Key Employee) or to continue the noncompetition provisions provided that the Key
Employee is paid an amount equal to the Key Employee's periodic base salary (as
in effect immediately prior to termination of employment without cause) during
all or part of the duration of the noncompetition provisions, in which case such
provisions shall continue in effect during the duration of such payments.
5.14 Treatment as Reorganization. Neither Parent or the Company, nor any
---------------------------
of their respective affiliates, will take any action prior to or following the
Closing that would reasonably be expected to jeopardize the status of the Merger
as a reorganization with the meaning of Section 368(a) of the Code.
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5.15 Asset Dispositions. As soon as reasonably practicable after the date
------------------
hereof, the Company shall commence and complete those actions as are set forth
in Schedule 4.1(i) to this Agreement.
---------------
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
----------------------------
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of the Company.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
-------------------------------------------------
have declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose, and no similar proceeding in respect
of the Prospectus/Proxy Statement, shall have been initiated or threatened in
writing by the SEC.
(c) No Prohibition; HSR Act. No Governmental Entity shall have
-----------------------
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Parent and the Company shall each have received
------------
written opinions from their respective tax counsel (▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation, and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and such opinions shall not have been withdrawn. The
parties to this Agreement agree to make such customary representations as
requested by such counsel for the purpose of rendering such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock to be issued
--------------
in the Merger shall have been authorized for listing on Nasdaq, subject to
notice of issuance.
6.2 Additional Conditions to Obligations of the Company. The obligation
---------------------------------------------------
of the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
-43-
(a) Representations and Warranties. Except for those representations
------------------------------
and warranties which address matters only as of a particular date (which shall
be true and correct in all material respects as of such date), each
representation and warranty of Parent contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct as of the Closing Date with the same force and effect as if made on
the Closing Date, except with respect to clauses (i) and (ii) above where the
failure to be true and correct does not constitute a Material Adverse Effect on
Parent (disregarding for purposes of evaluating whether this condition is
satisfied, any "Material Adverse Effect" or other materiality qualifications
contained in the representations and warranties), provided, however, such
-----------------
Material Adverse Effect qualification shall be inapplicable to the
representations and warranties contained in Sections 3.3 and 3.8. The Company
shall have received a certificate with respect to the foregoing signed on behalf
of Parent by an authorized officer of Parent.
(b) Agreements and Covenants. Parent shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and the Company shall have received a certificate to such effect signed on
behalf of Parent by an authorized officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Parent shall have occurred since the date of this Agreement.
6.3 Additional Conditions to the Obligations of Parent. The obligations
---------------------------------------------------
of Parent to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. Except for those representations
------------------------------
and warranties which address matters only as of a particular date (which shall
be true and correct in all material respects as of such date), each
representation and warranty of the Company contained in this Agreement (i) shall
have been true and correct as of the date of this Agreement and (ii) shall be
true and correct as of the Closing Date with the same force and effect as if
made on the Closing Date, except with respect to clauses (i) and (ii) above
where the failure to be true and correct does not constitute a Material Adverse
Effect on the Company (disregarding for purposes of evaluating whether this
condition is satisfied, any "Material Adverse Effect" or other materiality
qualifications contained in the representations and warranties), provided,
--------
however, such Material Adverse Effect qualification shall be inapplicable to the
-------
representations and warranties contained in Sections 2.20, 2.21 and 2.22 and the
first four sentences of Section 2.4. Parent shall have received a certificate
with respect to the foregoing signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company.
-44-
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to the Company and its subsidiaries shall have occurred since the date of this
Agreement and be continuing.
(d) Employment Matters. At least 75% of the Key Employees shall have
------------------
accepted an offer of employment with Parent to be effective at the Effective
Time and shall have executed and delivered employment, noncompetition and
nonsolicitation agreements with Parent in form and substance reasonably
acceptable to Parent consistent with the terms described in Section 5.13. In the
event Parent breaches its obligations under Section 5.13 in any material respect
the condition set forth in this Section 6.3(d) shall be deemed satisfied.
(e) Third Party Consents. Parent shall have received all consents,
--------------------
waivers, approvals and assignments listed on Schedule 6.3(e) to this Agreement.
---------------
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after the requisite approval of the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by August 31, 2001 (the "End Date") for any reason; provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a material breach
of this Agreement;
(c) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by either the Company or Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
the Company stockholders duly convened therefor or at any adjournment thereof;
provided, however, that the right to terminate this Agreement under this Section
7.1(d) shall not be available to the Company where the failure to obtain the
Company stockholder approval shall have been primarily caused by (i) the action
or failure to act of the Company and such action or failure to act constitutes a
material breach by the Company of this Agreement or (ii) a breach of any Company
Voting Agreement by any party thereto other than Parent;
-45-
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of the
Company) (i) if a Company Triggering Event (as defined below) shall have
occurred or (ii) the Company shall have entered into negotiations with respect
to an Acquisition Proposal pursuant to Section 5.4(a) hereof and such
negotiations shall not have been terminated prior to the eighth (8th) business
day following commencement of such negotiations or the Company shall have
otherwise engaged in negotiations with respect to any Acquisition Proposal for
an aggregate of more than seven (7) business days ;
(f) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided, that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company through the exercise of its commercially
reasonable efforts, then Parent may not terminate this Agreement under this
Section 7.1(f) prior to the End Date, provided the Company continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
Parent may not terminate this Agreement pursuant to this paragraph (f) if Parent
shall have materially breached this Agreement or if such breach by the Company
is cured prior to the End Date).
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then the Company may not terminate this Agreement under this Section 7.1(g)
prior to the End Date, provided Parent continues to exercise commercially
reasonable efforts to cure such breach (it being understood that the Company may
not terminate this Agreement pursuant to this paragraph (g) if Company shall
have materially breached this Agreement or if such breach by Parent is cured
prior to the End Date).
For the purposes of this Agreement, a "Company Triggering Event" shall be
deemed to have occurred if: (i) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its unanimous recommendation in favor of,
the adoption and approval of the Agreement or the approval of the Merger; (ii)
the Company shall have failed to include in the Prospectus/Proxy Statement the
unanimous recommendation of the Board of Directors of the Company in favor of
the adoption and approval of the Agreement and the approval of the Merger; (iii)
the Board of Directors of the Company fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within ten (10) business days after Parent requests in
writing that such recommendation be reaffirmed; (iv) the Board of Directors of
the Company or any committee thereof shall have approved or recommended any
Acquisition Proposal; or (v) a tender or exchange offer relating to securities
of the Company shall have been commenced by a Person
-46-
unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act,
within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that the Company recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
--------------------------------------------
Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice from the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses
-----------------
(a) General. Except as set forth in this Section 7.3, all fees and
-------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and the Company
-----------------
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Prospectus/Proxy Statement (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated
----------------
by Parent or the Company, as applicable, pursuant to Sections 7.1(b), (d) or
(e), the Company shall promptly, but in no event later than two days after the
date of such termination, pay Parent a fee equal to eleven million U.S. Dollars
($11,000,000) in immediately available funds (the "Termination Fee"); provided,
--------
however, that in the case of termination under Section 7.1(b) or 7.1(d), such
-------
payment shall be made only if following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced an
Acquisition Proposal and within 12 months following the termination of this
Agreement a Company Acquisition (as defined below) is consummated, and provided,
--------
further that in the case of termination under Section 7.1(e), such payment shall
-------
be made only if within nine (9) months following termination of this Agreement,
a Company Acquisition is consummated or the Company enters into an agreement
providing for a Company Acquisition. The Company acknowledges that the
agreements contained in this Section 7.3(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company fails to
pay in a timely manner the amounts due pursuant to this Section 7.3(b), and, in
order to obtain such payment, Parent makes a claim that results in a judgment
against the Company for the amounts set forth in this Section 7.3(b), the
Company shall pay to Parent its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(b) at the prime rate of
Bank of America in effect on the date such payment was required to be made.
Payment of the fees described in this
-47-
Section 7.3(b) shall not be in lieu of damages incurred in the event of breach
of this Agreement. For the purposes of this Agreement "Company Acquisition"
shall mean any of the following transactions (other than the transactions
contemplated by this Agreement); (i) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 60% of the aggregate
equity interests in the surviving or resulting entity of such transaction, (ii)
a sale or other disposition by the Company of assets representing in excess of
40% of the aggregate fair market value of the Company's business immediately
prior to such sale or (iii) the acquisition by any person or group (including by
way of a tender offer or an exchange offer or issuance by the Company), directly
or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 40% of the voting power of the
then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, 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 Parent and the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
-----------------
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
----------------------------------------------
and warranties of the Company and Parent contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via facsimile (receipt confirmed) to the parties at
the following addresses or facsimile numbers (or at such other address or
facsimile numbers for a party as shall be specified by like notice):
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(a) if to Parent, to:
Palm, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Palm, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Extended Systems Incorporated
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel.: (208) 322-7575 ext. 6056
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Rock
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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8.3 Interpretation; Knowledge.
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(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement the term "knowledge" means with
respect to Parent, with respect to any matter in question, that any of the Chief
Executive Officer, Chief Financial Officer, General Counsel or Controller of
Parent, has actual knowledge of such matter, and with respect to the Company,
with respect to any matter in question that any of the Chief Executive Officer,
Chief Financial Officer, Chief Technical Officer, General Counsel, Controller or
any Vice President of the Company has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect that is or is reasonably likely to
be materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
taken as a whole with its subsidiaries except to the extent that any such
change, event, violation, inaccuracy, circumstance or effect directly and
primarily results from (i) changes in general economic conditions or changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity in a disproportionate manner), (ii)
changes in trading prices for such entity's capital stock or failure to meet
analysts' expectations in and of itself, (iii) a shortfall in revenue caused by
the delay or deferral of customer orders or the failure to sign new customers,
in any event, caused by the announcement or pendency of the Merger, (iv) the
disposition or the public announcement of the disposition of Company assets as
contemplated by Section 4.1(i) of this Agreement, or (v) shareholder class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 Counterparts. This Agreement may be executed in one or more
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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.
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8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
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documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Schedule
and the Parent Disclosure Schedule (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, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.10.
8.6 Severability. In the event that any provision of this Agreement or
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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.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
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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. 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 seek 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.
8.8 Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
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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.
8.10 Assignment. No party may assign either this Agreement or any of its
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rights, interests, or obligations hereunder without the prior written approval
of the other parties. Any purported assignment in violation of this Section 8.10
shall be void. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
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8.11 WAIVER OF JURY TRIAL. EACH OF PARENT AND THE COMPANY HEREBY
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IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT OR THE COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
PALM, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: Chief Executive Officer
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EXTENDED SYSTEMS INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: President and Chief Executive Officer
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**** AGREEMENT AND PLAN OF REORGANIZATION ****
