Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG VIVID HOLDINGS, INC.,
VIVID PUBLISHING, INC.,
THE STOCKHOLDERS OF VIVID HOLDINGS, INC.,
MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇, INC.
AND
MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇ MERGER CORP.
Dated as of December 17, 1999
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Other Defined Terms...........................................8
SECTION 1.03. Accounting Terms..............................................9
SECTION 1.04. Singular and Plural Forms.....................................9
SECTION 1.05. Gender Forms..................................................9
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger....................................................9
SECTION 2.02. Closing......................................................10
SECTION 2.03. Effective Time of the Merger.................................10
SECTION 2.04. Certificate of Incorporation.................................10
SECTION 2.05. By-laws......................................................10
SECTION 2.06. Directors....................................................10
SECTION 2.07. Officers.....................................................10
ARTICLE 3
CONVERSION OF SHARES
SECTION 3.01. Effect on Capital Stock......................................11
SECTION 3.02. Surrender of Certificates Representing Shares................12
SECTION 3.03. Dividends; Transfer Taxes....................................13
SECTION 3.04. No Fractional Shares.........................................13
SECTION 3.05. Closing of Company Transfer Books............................14
SECTION 3.06. Stock Options................................................14
SECTION 3.07. Exchange of Certain Indebtedness.............................14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, OPERATING SUB AND THE
STOCKHOLDERS
SECTION 4.01. Organization and Good Standing...............................15
SECTION 4.02. Corporate Records............................................15
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SECTION 4.03. Corporate Power and Authority................................16
SECTION 4.04. Governmental Authorization...................................16
SECTION 4.05. Capitalization...............................................16
SECTION 4.06. Subsidiaries.................................................17
SECTION 4.07. No Violation.................................................17
SECTION 4.08. Approvals....................................................18
SECTION 4.09. Financial Statements; No Undisclosed Liabilities.............18
SECTION 4.10. Absence of Certain Changes...................................19
SECTION 4.11. Leases of Personal Property; Material Contracts; No
Default......................................................21
SECTION 4.12. Intellectual Property Matters................................23
SECTION 4.13. Year 2000 Compliance Matters.................................26
SECTION 4.14. Litigation...................................................26
SECTION 4.15. Compliance with Laws.........................................27
SECTION 4.16. Taxes........................................................27
SECTION 4.17. Insurance....................................................31
SECTION 4.18. Employee Benefit Plans.......................................31
SECTION 4.19. Environmental Matters........................................33
SECTION 4.20. Labor Matters................................................33
SECTION 4.21. Title to Property............................................34
SECTION 4.22. Personal Property............................................34
SECTION 4.23. Real Property................................................34
SECTION 4.24. Sales Representatives and Customers..........................35
SECTION 4.25. Accounts Receivable..........................................35
SECTION 4.26. Inventory....................................................36
SECTION 4.27. Safe Deposit Boxes and Bank Accounts.........................36
SECTION 4.28. Finders' or Advisors' Fees...................................36
SECTION 4.29. Ownership of Operating Sub...................................36
SECTION 4.30. Related-party Transactions...................................36
SECTION 4.31. Disclosure...................................................37
ARTICLE 5
SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
SECTION 5.01. Validity, Power and Authority................................37
SECTION 5.02. Absence of Conflicts.........................................38
SECTION 5.03. Valid Title..................................................38
SECTION 5.04. Investment Representations...................................38
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION SUB
SECTION 6.01. Organization and Good Standing...............................39
SECTION 6.02. Corporate Records............................................39
SECTION 6.03. Corporate Power and Authority................................39
SECTION 6.04. SEC Documents; Undisclosed Liabilities.......................40
SECTION 6.05. Finders' or Advisors' Fees...................................40
SECTION 6.06. Interim Operations of Acquisition Sub........................40
SECTION 6.07. Valid Issuance of Shares.....................................41
ARTICLE 7
COVENANTS OF THE COMPANY, OPERATING SUB AND THE STOCKHOLDERS
SECTION 7.01. Conduct of the Company.......................................41
SECTION 7.02. Consents and Approvals.......................................43
SECTION 7.03. Stockholder Approval.........................................43
SECTION 7.04. No Solicitation of Transaction...............................43
SECTION 7.05. Audited Financials...........................................44
SECTION 7.06. Parachute Payments...........................................44
ARTICLE 8
COVENANTS OF THE STOCKHOLDERS
SECTION 8.01. Compliance with Laws.........................................45
SECTION 8.02. Conduct of the Company.......................................45
SECTION 8.03. Stockholder Approval.........................................45
SECTION 8.04. Spousal Consents.............................................45
ARTICLE 9
COVENANTS OF THE PURCHASER AND ACQUISITION SUB PENDING THE CLOSING
SECTION 9.01. Consents and Approvals.......................................45
SECTION 9.02. Form S-8.....................................................45
SECTION 9.03. Interim Funding..............................................46
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER AND
ACQUISITION SUB
SECTION 10.01. Representations and Warranties True.........................46
SECTION 10.02. Performance of Covenants....................................46
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SECTION 10.03. No Governmental Proceeding..................................46
SECTION 10.04. Approval of Stockholders....................................46
SECTION 10.05. Certificates................................................47
SECTION 10.06. Consents....................................................47
SECTION 10.07. Payment of Company Indebtedness.............................47
SECTION 10.08. No Material Adverse Effect..................................47
SECTION 10.09. Delivery of Good Standing Certificates and Corporate
Resolutions.................................................47
SECTION 10.10. Notes Receivable............................................47
SECTION 10.11. Spousal Consents............................................47
SECTION 10.12. Escrow Agreement............................................48
SECTION 10.13. Audited Financial Statements................................48
SECTION 10.14. Purchase of the Residual Shares.............................48
SECTION 10.15. Warrant Exercise............................................48
SECTION 10.16. Noncompetition Agreements...................................48
SECTION 10.17. FIRPTA Certificate..........................................48
ARTICLE 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY, OPERATING SUB
AND THE STOCKHOLDERS
SECTION 11.01. Representations and Warranties True.........................49
SECTION 11.02. Performance of Covenants....................................49
SECTION 11.03. No Governmental Proceeding..................................49
SECTION 11.04. Certificates................................................49
SECTION 11.05. Delivery of Good Standing Certificates and Corporate
Resolutions........................................................49
SECTION 11.06. Escrow Agreement............................................50
SECTION 11.07. Payment of Company Indebtedness.............................50
SECTION 11.08. Purchase of the Residual Shares.............................50
ARTICLE 12
INDEMNITY
SECTION 12.01. Indemnification.............................................50
SECTION 12.02. Notice of Claims............................................51
SECTION 12.03. Matters Involving Third Parties.............................52
SECTION 12.04. Release.....................................................52
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ARTICLE 13
TERMINATION, AMENDMENT AND WAIVER
SECTION 13.01. Termination.................................................53
SECTION 13.02. Effect of Termination.......................................53
SECTION 13.03. Amendment...................................................54
SECTION 13.04. Extension, Waiver...........................................54
ARTICLE 14
OTHER AGREEMENTS
SECTION 14.01. Best Efforts................................................54
SECTION 14.02. Access to Information.......................................55
SECTION 14.03. Public Announcements........................................55
SECTION 14.04. Notices of Certain Events...................................55
SECTION 14.05. Expenses....................................................56
SECTION 14.06. Specific Performance; Injunctive Relief.....................56
SECTION 14.07. Issuance of New Share Options...............................56
ARTICLE 15
MISCELLANEOUS
SECTION 15.01. Entire Agreement............................................57
SECTION 15.02. Assignment..................................................57
SECTION 15.03. Governing Law and Venue.....................................57
SECTION 15.04. Waiver of Jury Trial........................................57
SECTION 15.05. Headings and Exhibits.......................................57
SECTION 15.06. Survival of Representations, Warranties and
Covenants...................................................58
SECTION 15.07. Notices.....................................................58
SECTION 15.08. Counterparts................................................59
SECTION 15.09. Severability................................................59
EXHIBITS
Exhibit A Form of Warrant Exercise Agreement
Exhibit B Form of Consent of Spouse
Exhibit C Form of Note Exchange Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 17, 1999, is made
and entered into among MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇, INC., a Delaware corporation
(the "Purchaser"), MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇ MERGER CORP., a Delaware corporation
("Acquisition Sub"), VIVID HOLDINGS, INC., a Delaware corporation (the
"Company"), VIVID PUBLISHING, INC. (d/b/a Vivid Studios), a California
corporation ("Operating Sub"), and the STOCKHOLDERS of the Company (as defined
herein) as to certain provisions as provided herein.
WHEREAS, the parties desire to enter into this Agreement with each other
under the terms of which Acquisition Sub will merge with and into the Company,
with the Company surviving and becoming a wholly-owned subsidiary of the
Purchaser; and
WHEREAS, Computer Associates (as defined herein) has entered into an
agreement with the Purchaser and the Company to sell to the Purchaser all of
the shares of capital stock it owns of Operating Sub; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will be a reorganization described in Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, and intending to be legally bound, the parties to this
Agreement hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, shall have
the following meanings:
(a) "Action" shall mean any action, claim, dispute, proceeding, suit or
investigation (whether civil, criminal, administrative or investigative), or
any appeal therefrom.
(b) "Acquisition Sub Common Stock" shall mean the common stock of the
Acquisition Sub, par value $1.00 per share.
(c) "Affiliate" shall mean any Person, a spouse of such Person, any
relative (by blood, adoption or marriage) of such Person within the second
degree, any director, officer or employee of such Person, any other Person of
which such Person is a member, director, officer or employee, and any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person.
(d) "Agreement" shall mean this Agreement and Plan of Merger and shall
include all of the Schedules and Exhibits, if any, attached hereto.
(e) "Approval" shall mean any approval, authorization, consent, license,
franchise, order, registration, permit or other confirmation of or by, or
filing with, a Person.
(f) "Audited Financial Statements" shall mean the audited balance sheet,
income and cash flow statements of the Operating Sub at and for the year ended
December 31, 1998 (and December 31, 1997 if Purchaser reasonably believes such
additional statements are likely to be required by the SEC in connection with
any SEC filing that the Purchaser reasonably expects to make in the next 12
months) and of the Company on a pro forma consolidated basis at and for the
nine months ended September 30, 1999 which (i) meet the requirements of
Regulation S-X promulgated by the Securities and Exchange Commission assuming
that such financial statements were being prepared for inclusion in a
registration statement on Form S-1 and (ii) are accompanied an opinion of
independent public accountants to the Company and the Operating Sub on such
financial statements which is unqualified (except with respect to going
concern). The audited pro forma consolidated income statement of the Company
for the nine months ended September 30, 1999 shall contain a compensation
charge reasonably satisfactory to Purchaser and its independent public
accountants.
(g) "Balance Sheet Date" shall mean December 31, 1998.
(h) "Business Day" shall mean any day other than a Saturday, a Sunday, a
legal holiday in the State of New York or a day on which commercial banks in
the State of New York are permitted or authorized to close.
(i) "CA Agreement" shall mean the Stock Purchase Agreement dated as of the
date hereof by and among Computer Associates, the Purchaser and the Company.
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(j) "CA Note" shall mean the promissory note with a face amount of
$8,300,000, dated as of June 30, 1999, issued by the Company, as maker, to
Computer Associates.
(k) "Closing Stock Price" shall mean the average of the closing sales
prices per share of Purchaser Common Stock on the National Market System of
NASDAQ for the ten consecutive trading days ending on the third Business Day
immediately prior to Closing.
(l) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
(m) "Company Common Stock" shall mean the common stock of the Company, par
value $0.001 per share.
(n) "Company Indebtedness" shall mean the $200,000 "Asset/Release Payment"
to be paid by Purchaser pursuant to the Computer Associates Agreement and all
amounts owed by the Company pursuant to the CA Note and the Promissory Notes,
plus any accrued but unpaid interest on such indebtedness through January 15,
2000, plus any early payment fees or "make whole" premiums paid by the Company
in connection with the Closing and any related fees or expenses incurred or
charged in connection therewith, including but not limited to, attorneys fees
and charges for the release of Liens with respect to such indebtedness.
(o) "Computer Associates" shall mean Computer Associates International,
Inc., a Delaware corporation.
(p) "Condition" shall mean, with respect to a Person, the business,
liabilities, properties, prospects, assets, operations, results of operations
and/or condition (financial or otherwise) of such Person.
(q) "Damages" shall mean any claim, loss, deficiency (financial or
otherwise), Liability, cost or expense (including, without limitation,
reasonable attorneys' fees, costs and expenses) or damage of any kind or nature
whatsoever.
(r) "DGCL" shall mean the General Corporation Law of the State of
Delaware.
(s) "Environmental Laws" shall mean all currently existing foreign,
federal, state and local laws, regulations, rules and ordinances relating to
pollution or protection of the environment or human health and safety,
including, without limitation, laws relating to releases or threatened releases
of Hazardous Materials
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into the indoor or outdoor environment (including, without limitation, ambient
air, surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, release, transport or handling of Hazardous Materials and
all laws and regulations with regard to record keeping, notification,
disclosure and reporting requirements respecting Hazardous Materials, and all
laws relating to endangered or threatened species of fish, wildlife and plants
and the management or use of natural resources.
(t) "Fully Diluted Company Shares" means the number of outstanding shares
of Company Common Stock assuming the exercise in full of all outstanding
options, warrants or other rights to acquire Company Common Stock (whether or
not vested).
(u) "GAAP" shall mean United States generally accepted accounting
principles.
(v) "Governmental Authority" shall mean any United States federal, state,
local, foreign or other governmental, administrative or regulatory authority,
body, agency, court, tribunal or similar entity.
(w) "Hazardous Materials" shall mean any substance: (i) the presence of
which requires or may require investigation or remediation of any kind under
any Environmental Laws; (ii) which is defined as "hazardous waste," "hazardous
material," "residual waste," "hazardous substance," "pollutant" or
"contaminant" under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, CERCLA and/or
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) or
(iii) which is otherwise regulated pursuant to any applicable Environmental
Law.
(x) "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereto.
(y) "Indemnified Party" shall mean any party entitled to indemnification
pursuant to Section 12.01 hereof.
(z) "Indemnifying Party" shall mean any party required to indemnify an
Indemnified Party pursuant to Section 12.01 hereof.
(aa) "Intellectual Property" means trademarks, service marks, trade names,
Internet domain names, designs, logos, slogans, and general intangibles of like
nature, together with all goodwill, registrations and applications related to
the foregoing (collectively, "Trademarks"); patents and industrial designs
(including
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any continuations, divisionals, continuations-in-part, renewals, reissues, and
applications for any of the foregoing); copyrights (including any registrations
and applications for any of the foregoing); computer programs, databases and
compilations and documentation relating to the foregoing; "mask works" (as
defined under 17 USC ss. 901) and any registrations and applications for "mask
works"; technology, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and methodologies; rights
of publicity and privacy relating to the use of the names, likenesses, voices,
signatures and biographical information of real persons.
(bb) "Interim Financial Statements" shall mean the unaudited balance sheet
of the Company as of September 30, 1999 and the unaudited pro forma profit and
loss statement of Operating Sub for the nine months ended September 30, 1999,
each as previously delivered to the Purchaser.
(cc) "Law" shall mean any federal, state, local or foreign law, statute,
rule, regulation, ordinance, standard, requirement, administrative ruling,
order or process (including, without limitation, any zoning or land use law or
ordinance, building code, Environmental Law, securities, blue sky, civil rights
or occupational health and safety law or regulation) or administrative
interpretation thereof, and any court, or arbitrator's order or process.
(dd) "Liability" shall mean any debt, liability, commitment or obligation
of any kind, character or nature whatsoever, whether known or unknown, secured
or unsecured, accrued, fixed, absolute, contingent or otherwise, and whether
due or to become due.
(ee) "Lien" shall mean any lien, statutory lien, pledge, mortgage,
security interest, charge, encumbrance, easement, right of way, covenant,
claim, restriction, right, option, conditional sale or other title retention
agreement, warrant or equity of any kind or nature.
(ff) "Material Adverse Effect" shall mean, with respect to a Person, any
change or effect that is or is likely to be, individually or in the aggregate
with all other changes or effects, materially adverse to the Condition of such
Person.
(gg) "Person" shall mean any individual, partnership, corporation, limited
liability company, association, business trust, joint venture, governmental
entity, business entity or other entity of any kind or nature, including any
business unit of such Person.
(hh) "Post-Closing Tax Period" shall mean any Tax period beginning after
the Closing Date; and, with respect to a Tax period that begins on or before
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the Closing Date and ends thereafter, the portion of such Tax period beginning
after the Closing Date.
(ii) "Pre-Closing Tax Period" shall mean any Tax period ending on or
before the Closing Date; and, with respect to a Tax period that begins on or
before the Closing Date and ends thereafter, the portion of such Tax period
ending on the Closing Date.
(jj) "Promissory Notes" shall mean all outstanding promissory notes issued
by the Company, as maker, to the Stockholders and third parties (other than the
CA Note) as described in Schedule 1.01(jj) hereto.
(kk) "Purchaser Common Stock" shall mean the Class A common stock of the
Purchaser, par value $.001 per share.
(ll) "Representatives" shall mean with respect to any Person, its
shareholders, employees, officers, directors, investment bankers, attorneys,
agents, representatives or Affiliates.
(mm) "Residual Shares" shall mean all issued and outstanding shares of
Operating Sub other than those directly owned by the Company, all of which are
owned by Computer Associates.
(nn) "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereto.
(oo) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations thereto.
(pp) "Software" means any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies, whether in
source code or object code form, (b) databases and compilations, including any
and all data and collections of data, and (c) all documentation, including user
manuals and training materials, relating to any of the foregoing, in each case
used in or necessary for the conduct of the Company's or its Subsidiaries'
business as currently conducted or contemplated to be conducted.
(qq) "Stock Option" shall mean an option granted to a Company employee
pursuant to the Company's 1999 Stock Incentive Plan and set forth on Schedule
3.06.
(rr) "Stockholders" shall mean any and all of the following individuals:
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
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(ss) "Subsidiary" when used with respect to any Person means any other
Person, whether incorporated or unincorporated, of which (i) more than fifty
percent of the securities or other ownership interests or (ii) securities or
other interests having by their terms ordinary voting power to elect more than
fifty percent of the board of directors or others performing similar functions
with respect to such corporation or other organization, is directly owned or
controlled by such Person or by any one or more of its Subsidiaries.
(tt) "Tax" shall mean any United States federal, state or local or foreign
income, gross receipts, license, severance, occupation, premium, environmental
(including taxes under Code Section 59A), customs, duties, profits, disability,
registration, alternative or add-on minimum, estimated, withholding (including
withholding or amounts paid to or by any Person), payroll, employment,
unemployment insurance, social security (or similar), excise, sales, use,
value-added, occupancy, franchise, real property, personal property, business
and occupation, windfall profits, capital stock, stamp, transfer, workmen's
compensation or other tax, fee or imposition of any kind whatsoever, including
any interest, penalties, additions, additional amounts or assessments with
respect thereto, whether disputed or not, (ii) in the case of the Company or
Operating Sub, liability for the payment of any amount of the type described in
clause (i) as a result of being or having been before the Closing Date a member
of an affiliated, consolidated, combined or unitary group, or a party to any
agreement or arrangement, as a result of which liability of the Company or
Operating Sub to a Governmental Authority is determined or taken into account
with reference to the activities of any other Person, and (iii) liability of
the Company or Operating Sub for the payment of any amount described in (i) or
(ii) as a result of any existing express or implied Tax Indemnification
Agreement.
(uu) "Tax Law" shall mean the Law (including any applicable legislative
history, existing and proposed regulations, published rulings and court
decisions or any administrative pronouncement) of any Governmental Authority
relating to any Tax.
(vv) "Tax Period" shall mean with respect to any Tax, the period for which
the Tax is reported as provided under the applicable Tax Law.
(ww) "Tax Return" shall mean any federal, state, local or foreign return,
declaration, report, claim for refund, amended return, declaration of estimated
Tax or information return or statement relating to Taxes, and any schedule,
exhibit, attachment or other materials submitted with any of the foregoing, and
any amendment thereto.
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(xx) "Trade Secrets" means any and all technology, trade secrets and other
confidential information, know-how, proprietary processes, formulae,
algorithms, models, and methodologies used in or necessary for the conduct of
the Company's or its Subsidiaries' business as currently conducted or
contemplated to be conducted.
(yy) "Warrant" shall mean a warrant to purchase shares of the Company's
Common Stock pursuant to a written warrant agreement and set forth on Schedule
3.06.
SECTION 1.02. Other Defined Terms. The following terms shall have the
meanings given such terms in the Sections set forth below:
Term Section
Alternative Transaction 7.04
Assumed Options 3.06
Assumed Warrants 3.07
Audits 4.16(e)
Buyer Party 12.01(a)
Buyer Parties 12.01(a)
CA Allocation 3.01(a)(ii)
CA Purchase Price 1.01(l)
Certificate of Merger 2.03
Closing 2.02
Closing Date 2.02
Company Employee Plans 4.18(a)
Computer Associates Agreement 4.14(b)
Constituent Corporations 2.01
Contracts 4.11(b)
Date Data 4.13
Date-Sensitive System 4.13
Domain Names 4.12(h)
Effective Time 2.03
ERISA 4.18(a)
Escrow Agent 3.02(b)
Escrow Agreement 3.02(b)
Financial Statements 4.09(a)
Indemnification Escrow Fund 3.02(b)
Indemnity Basket 12.01(d)
Interim Indebtedness 9.03
Leased Real Property 4.23(b)
Merger 2.01
Non-Disclosure Agreement 14.02
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Term Section
NSI 4.12(h)
Operating Sub Common Stock 4.05(b)
Option Shares 4.05(a)
Outstanding Shares 4.05(a)
Per Share Merger Consideration 3.01(a)
Personal Property Leases 4.11(a)
Real Property Leases 4.23(b)
SEC Reports 6.04
Seller Party 12.01(b)
Seller Parties 12.01(b)
Stock Exchange Ratio 3.01(b)
Stock Value 3.01(a)
Surviving Corporation 2.01
Tax Indemnification Agreements 4.16(n)
Third Party Claim 12.03(a)
Warrant Shares 4.05(a)
Year 2000 Compliant 4.13
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP
consistently applied.
SECTION 1.04. Singular and Plural Forms. The use herein of the singular
form also denotes the plural form, and the use of the plural form herein also
denotes the singular form, as in each case the context may require.
SECTION 1.05. Gender Forms. The use herein of any gender word (such as
"he" or "his") includes both the male and female genders.
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. Subject to the terms and conditions set forth in
this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 2.03), Acquisition Sub shall be merged with and into the
Company (together with Acquisition Sub, the "Constituent Corporations") in
accordance with this Agreement and the separate existence of Acquisition Sub
shall cease (the "Merger"). The Company shall survive the Merger and the
Company shall become a wholly-owned subsidiary of Purchaser and shall continue
to be governed by the laws of the State of Delaware (as such, the
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"Surviving Corporation"). The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 2.02. Closing. The closing of the Merger (the "Closing") shall
take place at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ (i) on January 15, 2000, (ii) if the conditions set forth in
Articles 10 and 11 (other than those conditions that by their nature are to be
fulfilled at the Closing, but subject to the fulfillment or waiver of such
conditions) have not been fulfilled or waived in accordance with this Agreement
prior to such date, within three Business Days after the day on which the last
to be fulfilled or waived of such conditions shall be so fulfilled or waived or
(iii) at such other place and time or on such other date as the parties may
agree in writing (the "Closing Date").
SECTION 2.03. Effective Time of the Merger. The Merger shall become
effective on the date and at the time at which a properly executed certificate
of merger (the "Certificate of Merger") is duly filed with the Secretary of
State of the State of Delaware, or at such later date and time as may be
specified therein. The Certificate of Merger filing shall be made as soon as
practicable on or after the Closing Date. When used in this Agreement, the term
"Effective Time" shall mean the date and time on which such Certificate of
Merger is so filed or at such later time as the parties shall designate
therein.
SECTION 2.04. Certificate of Incorporation. The Certificate of
Incorporation of Acquisition Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation unless and until amended as provided by Law and the Certificate of
Incorporation, except that Article One thereof shall provide that the name of
the Surviving Corporation shall be: "Vivid Holdings, Inc.".
SECTION 2.05. By-laws. The By-Laws of Acquisition Sub as in effect
immediately prior to the Effective Time shall be the By-Laws of the Surviving
Corporation unless and until amended in accordance with their terms and the
Certificate of Incorporation of the Surviving Corporation.
SECTION 2.06. Directors. The directors of Acquisition Sub at the Effective
Time shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and by-laws of the Surviving Corporation or as otherwise provided
by Law.
SECTION 2.07. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
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office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and by-laws of the Surviving Corporation, or as otherwise
provided by Law.
ARTICLE 3
CONVERSION OF SHARES
SECTION 3.01. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of either of
the Constituent Corporations:
(a) Conversion of Company Common Stock. (i) Each stockholder of the
Company shall have his or her shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Company Common
Stock to be cancelled in accordance with Section 3.01(b) hereof) converted into
the right to receive such number of fully paid and nonassessable shares of
Purchaser Common Stock as equals the product of the number of shares of Company
Common Stock held by such stockholder at the Effective Time times the ratio
(the "Stock Exchange Ratio"), calculated in accordance with Section 3.01(a)(ii)
hereof (the "Per Share Merger Consideration"); provided, however, no fractional
shares of Purchaser Common Stock shall be issued. Each of the shares of Company
Common Stock converted in accordance with this paragraph shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Per Share Merger Consideration, upon the surrender of such
certificate in accordance with Section 3.02 hereof.
(ii) The Stock Exchange Ratio shall equal the quotient obtained by
dividing the Per Share Value (x) by $64.42 or (y) if the Closing Stock
Price shall be less than $42.50, by the price which would produce a Stock
Exchange Ratio causing the number of shares of Purchaser Common Stock
issued in connection with the Merger (including shares of Purchaser Common
Stock exchanged for Promissory Notes pursuant to Section 3.07 and such
shares issuable pursuant to the Assumed Options (assuming full vesting
thereof)) to increase by 12% over the number of shares which would have
been so issued if the Stock Value were $64.42 ((x) or (y), as applicable,
the "Stock Value"). The "Per Share Value" shall equal the quotient
obtained by dividing (i) $64,000,000 less the amount of the Company
Indebtedness less the amount of the Interim Indebtedness by (ii) the sum
of (A) the number of Fully Diluted Company Shares outstanding
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immediately prior to the Effective Time and (B) that number (the "CA
Allocation") which is 10% of the sum of the Fully Diluted Company Shares
plus the CA Allocation. As of the date hereof, the Fully Diluted Company
Shares is 10,875,610 and the CA Allocation is 1,208,401. Schedule 3.01(a)
sets forth a computation schedule used by the parties to illustrate the
number of shares of Purchaser Common Stock which would be issued in
connection with the Merger based on the capitalization of the Company as
of the date hereof.
(iii) If between the date of this Agreement and the Effective Time
the Purchaser Common Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination,
exchange of shares or the like, the Stock Exchange Ratio shall be
correspondingly adjusted.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
held in the treasury of the Company, if any, immediately prior to the Effective
Time shall be cancelled and retired and cease to exist.
(c) Conversion of Acquisition Sub Common Stock. Each share of Acquisition
Sub Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable share of
common stock, par value $.001 per share, of the Surviving Corporation with the
same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
SECTION 3.02. Surrender of Certificates Representing Shares. (a) At the
Effective Time, each Stockholder, upon surrender to the Purchaser of one or
more certificates in valid form representing the shares of Company Common
Stock, duly endorsed in blank or accompanied by duly executed stock powers,
with all required stock transfer tax stamps affixed, and accompanied by a
spousal consent where applicable, shall be entitled to receive the Per Share
Merger Consideration in respect of the shares of common stock represented by
such certificates, subject to the escrow arrangements described in Section
3.02(b) and in the Escrow Agreement. Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes only
the right to receive such Per Share Merger Consideration.
(b) Notwithstanding the foregoing paragraph (a), all of the shares of
Purchaser Common Stock issued pursuant to Section 3.01 with an aggregate Stock
Value equal to $4.5 million assumed pursuant to Section 3.07 hereof held by the
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Stockholders (the "Indemnification Escrow Fund") shall be delivered to a
mutually agreeable escrow agent (the "Escrow Agent") on the Closing Date,
together with executed but undated stock powers, to be held in accordance with
the terms of the escrow agreement (the "Escrow Agreement") with the terms to be
mutually agreed by the parties. The Indemnification Escrow Fund shall be
maintained as security for the Indemnification obligations of the Stockholders
pursuant to Article 12 hereof.
SECTION 3.03. Dividends; Transfer Taxes. No dividends that are declared on
Purchaser Common Stock will be paid to Persons entitled to receive certificates
representing shares of Purchaser Common Stock until such Persons surrender
their certificates representing shares of Company Common Stock. Upon such
surrender, there shall be paid to the Person in whose name the certificates
representing such shares of Purchaser Common Stock shall be issued, any
dividends which shall have become payable with respect to such shares of
Purchaser Common Stock between the Effective Time and the time of such
surrender. In no event shall the Person entitled to receive such dividends be
entitled to receive interest on such dividends. If any certificates for any
shares of Purchaser Common Stock are to be issued in a name other than that in
which the certificate representing shares of Company Common Stock surrendered
in exchange therefor is registered, it shall be a condition to such exchange
that the Person requesting such exchange shall pay to the Purchaser any
transfer or other Taxes required by reason of the issuance of certificates for
such shares of Purchaser Common Stock in a name other than that of the
registered holder of the certificate surrendered or shall establish to the
satisfaction of the Purchaser that such Tax has been paid or is not applicable.
Notwithstanding the foregoing, (i) neither the Purchaser nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any shares of
Purchaser Common Stock or dividends thereon, in each case, delivered to a
public official pursuant to applicable escheat Laws, and (ii) any shares of
Purchaser Common Stock held by the Purchaser prior to surrender of certificates
representing shares of Company Common Stock shall not be deemed issued.
SECTION 3.04. No Fractional Shares. No certificates or scrip representing
fractional shares of Purchaser Common Stock shall be issued upon the surrender
for exchange of certificates representing shares of Company Common Stock
pursuant to this Article 3 and no dividend, stock split or other change in the
capital structure of Purchaser shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional shares of Purchaser
Common Stock, each holder of shares of Company Common Stock who would otherwise
have been entitled to a fraction of a share of Purchaser Common Stock upon
surrender of stock certificates for exchange pursuant to this Article 3 will be
paid cash upon
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such surrender in an amount equal to the product of such fraction multiplied by
the Closing Stock Price. For purposes of this Section 3.04, shares of Company
Common Stock of any holder represented by two or more certificates may be
aggregated, and in no event shall any holder be paid an amount of cash in
respect of more than one share of Purchaser Common Stock.
SECTION 3.05. Closing of Company Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made. If, after the
Effective Time, certificates representing shares of Company Common Stock are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for certificates representing shares of Purchaser Common Stock.
SECTION 3.06. Stock Options. At the Effective Time, each Stock Option
which is outstanding and unexercised at the Effective Time, whether vested or
unvested, shall by virtue of this Agreement and without any further action of
the Company, the Purchaser or the holder of such option be assumed by the
Purchaser and converted into an option (the "Assumed Options") to purchase that
number of shares of Purchaser Common Stock equal to the product of the number
of shares of Company Common Stock that were purchasable under such Stock Option
immediately prior to the Effective Time multiplied by the Stock Exchange Ratio,
rounded to the nearest whole number of shares of Purchaser Common Stock, and
the per share exercise price for the shares of Purchaser Common Stock will be
equal to the quotient determined by dividing the exercise price per share at
which such Stock Option was exercisable immediately prior to the Effective Time
by the Stock Exchange Ratio, and rounding the resulting exercise price to the
nearest whole cent. Each of the Assumed Options will be subject to the same
terms as governed the applicable Stock Options prior to their conversion. As a
condition to the conversion of the Assumed Options, each holder of an Assumed
Option will execute and sign an assumption agreement acknowledging, among other
things, that the Purchaser cannot represent or guarantee that the Assumed
Options will be "incentive stock options" as this term is defined in Section
422(b) of the Code. The holders and numbers of stock Options are set forth on
Schedule 3.06.
SECTION 3.07. Exchange of Certain Indebtedness. The Promissory Notes
described in Schedule 3.07 shall be exchanged into that number of shares of
Purchaser Common Stock equal to the quotient of: (a) the aggregate principal
amount of such Promissory Notes, plus any accrued interest, divided by (b) the
Stock Value.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, OPERATING SUB AND THE
STOCKHOLDERS
The Company, Operating Sub and the Stockholders, jointly and severally,
hereby represent and warrant to the Purchaser and Acquisition Sub, as of the
date hereof and as of the Closing Date, as follows; provided, however, that the
representations and warranties of Operating Sub are not to be deemed
representations and warranties of its 10% shareholder, Computer Associates:
SECTION 4.01. Organization and Good Standing. (a) The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority and all
governmental licenses, authorizations, consents and approvals required to own,
operate and lease its properties and assets and to conduct its business as it
is now being owned, operated, leased and conducted. The Company is duly
qualified or licensed to do business as a foreign corporation, and is in good
standing as a foreign corporation, in every jurisdiction in which the failure
to be so qualified or licensed or in good standing would have a Material
Adverse Effect on the Company's business or operations or the Company's ability
to consummate the transactions provided for or contemplated by this Agreement.
Schedule 4.01(a) hereto sets forth a true and complete list of all foreign
jurisdictions in which the Company is so qualified or licensed and in good
standing.
(b) The Operating Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of California and has the
requisite power and authority and all governmental licenses, authorizations,
consents and approvals required to own, operate and lease its properties and
assets and to conduct its business as it is now being owned, operated, leased
and conducted. The Operating Sub is duly qualified or licensed to do business
as a foreign corporation, and is in good standing as a foreign corporation, in
every jurisdiction in which the failure to be so qualified or licensed or in
good standing would have a Material Adverse Effect on the Operating Sub's
business or operations or the Operating Sub's ability to consummate the
transactions provided for or contemplated by this Agreement. Schedule 4.01(b)
hereto sets forth a true and complete list of all foreign jurisdictions in
which the Operating Sub is so qualified or licensed and in good standing.
SECTION 4.02. Corporate Records. Copies of the certificate of
incorporation of the Company and Operating Sub, certified by the Secretary of
State of the State of incorporation of each such corporation, and of the
by-laws of the Company and Operating Sub, certified by the Secretary of each
such corporation, heretofore delivered to the Purchaser are true and complete
copies of
15
such instrument as amended to the date of this Agreement. Such certificates of
incorporation and by-laws of the Company and Operating Sub are in full force
and effect. Neither the Company nor Operating Sub is in violation of any
provision of its certificate of incorporation or by-laws.
SECTION 4.03. Corporate Power and Authority. The Company and Operating Sub
have the requisite corporate power and authority to execute and deliver this
Agreement, perform their obligations hereunder and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and Operating Sub, the performance by them of their obligations
hereunder and the consummation by them of the transactions contemplated hereby
have been duly authorized by all necessary corporate actions on the part of the
Company and Operating Sub except for the required approval of the Company's
stockholders in connection with the Merger. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. This Agreement constitutes the
legal, valid and binding obligation of each of the Company and Operating Sub,
enforceable against each in accordance with its terms.
SECTION 4.04. Governmental Authorization. The execution, delivery and
performance by the Company and Operating Sub of this Agreement and the
consummation by the Company and Operating Sub of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Authority.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists solely of 30,000,000 shares of Company Common Stock. As of the
date hereof and as of the Closing, there are (i) 1,400 shares of Company Common
Stock issued and outstanding (the "Outstanding Shares"); (ii) 9,529,210 shares
of Company Common Stock are issuable upon exercise of Stock Options (the
"Option Shares"); and (iii) 1,345,000 shares of Company Common Stock are
issuable upon exercise of the Warrants (the "Warrant Shares"). As of the date
hereof, no shares of Company Common Stock were held as treasury shares.
(b) The authorized capital stock of Operating Sub consists solely of
100,000 shares of common stock, no par value ("Operating Sub Common Stock").
There are 1,000 shares of Operating Sub Common Stock issued and outstanding,
900 of which are held by the Company and 100 of which are held by Computer
Associates. There are no shares of Operating Sub Common Stock held as treasury
shares.
16
(c) All of the issued and outstanding shares of Company Common Stock and
Operating Sub Common Stock are validly issued, fully paid and nonassessable and
free of preemptive rights and were issued in compliance with all applicable
Laws concerning the issuance of securities. Except as set forth above, there
are not any shares of capital stock or voting securities of the Company or
Operating Sub issued or outstanding or any options, warrants, subscriptions,
calls, rights, convertible or exchangeable securities or other agreements or
commitments obligating the Company or Operating Sub to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock or
securities. There are not any notes, bonds, debentures or other indebtedness of
the Company or Operating Sub having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any matters upon which
stockholders of the Company or Operating Sub may vote. Except as set forth in
Schedule 4.05(c), there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company or Operating Sub to
repurchase, redeem or otherwise acquire or make any payment in respect of or
measured or determined based on the value or market price of any shares of
capital stock of the Company or Operating Sub, and there are no irrevocable
proxies with respect to shares of capital stock of the Company or Operating
Sub. Except as set forth on Schedule 4.05(c), there are no agreements or
arrangements pursuant to which the Company or Operating Sub is or could be
required to register shares of Company Common Stock or Operating Sub Common
Stock or other securities under the Securities Act.
SECTION 4.06. Subsidiaries. Except as set forth on Schedule 4.06 and for
the shares of Operating Sub Capital Stock held by the Company, neither the
Company nor Operating Sub owns, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, limited liability
company, joint venture or other business association or entity. All shares of
capital stock of, or other ownership interests in, Operating Sub, directly or
indirectly, owned by the Company are owned free and clear of any Lien and free
of any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests).
SECTION 4.07. No Violation. Neither the execution and delivery of this
Agreement by the Company or Operating Sub, the performance by them of their
respective obligations hereunder, nor the consummation by it of the
transactions contemplated hereby, will (a) contravene any provision of the
certificate of incorporation or bylaws of the Company or Operating Sub; (b)
contravene, conflict with or result in a violation or breach of any provision
of any applicable Law; or (c) violate, be in conflict with, constitute a
default under, permit the termination of, cause the acceleration (whether after
the giving of notice or the lapse of time or both) of the maturity of, any debt
or obligation of the Company
17
or Operating Sub or binding on the Surviving Corporation after the Closing,
require the consent of any other party to, constitute a breach of, create a
loss of a benefit under, or result in the creation or imposition of any Lien
upon any of the properties or assets of the Company or Operating Sub under, any
note, bond, license, franchise permit, approval, mortgage, indenture, lease,
contract, agreement, instrument or commitment relating to the Company or
Operating Sub to which it is a party or by which it or any of its assets or
properties constituting part of the business of the Company and Operating Sub
are bound.
SECTION 4.08. Approvals. (a) No declaration, filing or registration with,
notice to, nor Approval of, any Governmental Authority is required to be made,
obtained or given by or with respect to the Company or Operating Sub in
connection with the execution, delivery or performance by the Company of this
Agreement, the performance by it of its obligations hereunder or the
consummation by it of the transactions contemplated hereby.
(b) The Company and Operating Sub have all material Approvals required for
their operation and the use and ownership or leasing of their properties and
assets that constitute part of the business, as currently operated, used, owned
or leased. All of such Approvals are valid, in full force and effect and in
good standing, except where the failure to be so would not, individually or in
the aggregate, have a Material Adverse Effect on the Condition of the Company
or Operating Sub. There is no proceeding pending or, to the knowledge of the
Company, Operating Sub or any Stockholder, threatened, that disputes the
validity of any such Approval or that is likely to result in the revocation,
cancellation or suspension, or any adverse modification of any such Approval.
SECTION 4.09. Financial Statements; No Undisclosed Liabilities. (a)
Schedule 4.09(a) includes true, correct and complete copies of: (1) Operating
Sub's unaudited, pro forma profit and loss statements for the years ended
December 31, 1997 and 1998, and (2) the unaudited, pro forma consolidated
balance sheet of the Company at December 31, 1997 and 1998, and (3) the Interim
Financial Statements (collectively, the "Financial Statements"). Except as may
otherwise be indicated therein, the Financial Statements (i) were compiled from
the books and records of the Company regularly maintained by management, and
(ii) present fairly the pro forma results of operations of the Operating Sub
for the periods indicated therein and the pro forma consolidated financial
position of the Company as of the respective dates thereof (subject to normal
year-end adjustments in the case of the Interim Financial Statements). As of
the Closing, the Audited Financial Statements (including any related notes and
schedules) (i) will be prepared in conformity with GAAP applied on a consistent
basis, and (ii) will present fairly the consolidated financial position of the
Company as of the
18
respective dates thereof and the results of operations and cash flows of the
Company for the periods indicated therein.
(b) The Company Indebtedness is the only indebtedness for borrowed money
of the Company or the Operating Sub. Except for the Company Indebtedness or as
reflected in the Interim Balance Sheet, the Company and Operating Sub do not
have, and as a result of the transactions contemplated by this Agreement, will
not have, any Liabilities (whether absolute, accrued, contingent or otherwise,
and whether due or to become due) and there is no existing condition, situation
or set of circumstances that could reasonably be expected to result in such a
Liability, except for Liabilities (i) incurred in the ordinary course of
business consistent with past practice since the date of the Interim Balance
Sheet, or (ii) which, individually or in the aggregate, will not have a
Material Adverse Effect on the Condition of the Company and Operating Sub.
(c) The books and records, minute books, stock record books, and other
records of the Company and Operating Sub, all of which have been made available
by the Company and Operating Sub, are complete and correct and have been
maintained in accordance with sound business practices. The minute books of the
Company and Operating Sub contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders, the Board of
Directors, and committees of the Board of Directors of each of the Company and
Operating Sub, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared as of the date
hereof and are not contained in such minute book.
(d) The computer and other office equipment listed on the balance sheet
included in the Interim Financial Statements is owned by Operating Sub free and
clear of all Liens, if any, except Liens relating to the Special Assets (as
defined in the CA Agreement).
SECTION 4.10. Absence of Certain Changes. Except as set forth on Schedule
4.10 or in the Interim Balance Sheet, since December 31, 1998, the Company and
Operating Sub have conducted their respective businesses in the ordinary
course, consistent with past practice, and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or Operating Sub of
19
any outstanding shares of their capital stock or any options, warrants,
subscriptions, calls, rights, convertible securities or other securities,
agreements or commitments which obligate the Company or Operating Sub to issue,
transfer, sell, redeem, repurchase or otherwise acquire any shares of its
capital stock or securities;
(c) any amendment of any term of any outstanding security of the Company
or Operating Sub;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the
Company or Operating Sub relating to its assets or business (including the
acquisition or disposition of any material amount of assets) or any
relinquishment by the Company or Operating Sub of any contract or other right,
other than transactions, commitments, contracts, agreements, settlements or
relinquishments in the ordinary course of business consistent with past
practice and those contemplated by this Agreement;
(e) any change in any method of accounting or accounting practice by the
Company or Operating Sub, except for any such change which is not material or
which is required by reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment to
any such existing arrangement with) any director, officer or employee of the
Company or Operating Sub, (ii) entering into of any employment, deferred
compensation, supplemental retirement or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or Operating Sub, (iii) increase in, or accelerated
vesting and/or payment of, benefits under any existing severance or termination
pay policies or employment agreements or (iv) increase in or enhancement of any
rights or features related to compensation, bonus or other benefits payable to
directors, officers or senior employees of the Company or Operating Sub, in
each case, other than in the ordinary course of business consistent with past
practice; or
(g) any material Tax election made or changed, any annual tax accounting
period changed, any method of tax accounting adopted or changed, any material
amended Tax Returns filed, any material closing agreement entered into, any
material Tax claim, audit or assessment settled or any right to claim a
material Tax refund, offset or other reduction in Tax liability surrendered;
(h) any making of any material loan, advance or capital contributions to
or investment in any entity;
20
(i) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or the Operating
Sub that has had or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company; or
(j) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company or the Operating Sub, except
for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the Securities Exchange Act of 1934.
SECTION 4.11. Leases of Personal Property; Material Contracts; No Default.
(a) Schedule 4.11(a) hereto sets forth a true and complete list of each lease
of personal property to which the Company or Operating Sub is a party or by
which it or its properties or assets are bound which provides for payments in
excess of $10,000 per annum and which has a remaining term in excess of one
year (collectively, the "Personal Property Leases"). The Company has delivered
or made available to the Purchaser a true and complete copy of each of the
Personal Property Leases.
(b) Schedule 4.11(b) hereto sets forth a true and complete list of all
agreements to which the Company or Operating Sub is a party or by which it or
any of its properties or assets are bound (collectively, the "Contracts"), of
the following types: (i) employment agreements providing for annual
compensation in excess of $50,000 with respect to any employee; (ii) agreements
which limit or restrict the Company, Operating Sub or any Affiliate (including,
after the Closing, the Purchaser, the Surviving Corporation and any Affiliate)
from competing in any line of business included in the business of the Company
and Operating Sub or otherwise in any other business, or from carrying on or
expanding the nature or geographical scope of the business of the Company and
Operating Sub anywhere in the world, or agreements which restrict the products,
product lines or distribution channels in which the Company, Operating Sub or
any Affiliate (including, after the Closing, the Purchaser, the Surviving
Corporation or any Affiliate) can compete, other than limitations and
restrictions relating to the use of patents, trademarks, trade names and
copyrights and intellectual property licenses currently used by the Company or
Operating Sub; (iii) agreements which limit or restrict the Company, Operating
Sub and any Affiliate (including, after the Closing, the Purchaser, the
Surviving Corporation and any Affiliate) from purchasing any raw materials,
goods, supplies, services or products from any Person, including its
subsidiaries and Affiliates, (iv) sales agency, distribution or manufacturers
representatives' agreements which provide for compensation on a commission
basis which compensation is expected to exceed $50,000 in the twelve month
period ended September 30, 1999; (v) any agreement providing for the sale by
the Company of the Operating Sub of materials, supplies, goods,
21
services, equipment or other assets that provides for (A) annual payments to
the Company and the Operating Sub of $100,000 or more or (B) aggregate payments
to the Company and the Operating Sub of $100,000 or more; (vi) any agreement
relating to the acquisition or disposition of any business (whether by merger,
sale of stock, sale of assets or otherwise); (vii) collective bargaining
agreements or other Contracts with any labor union or other labor organization
relating to wages, hours and other conditions of employment in effect as of the
date hereof; (viii) loan agreements, notes, mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing of
money, in each case pursuant to which the outstanding indebtedness is in excess
of $50,000; (ix) material franchise and broker agreements between the Company
or Operating Sub and any other Person; (x) license agreements in which the
Company or the Operating Sub is licensor or licensee and under which the
licensee thereunder has a payment obligation of more than $50,000 in the
aggregate of guaranteed royalties during the respective remaining terms of such
license agreements; (xi) powers of attorney (other than agency agreements and
powers of attorney entered into in the ordinary course of business); (xii)
partnership or joint venture agreements; (xiii) agreements with any Affiliate;
and (xiv) any other agreement (other than purchase orders, agreements with
third party service providers, "off-the-shelf" software licenses or
arrangements and agreements with vendors and customers entered into on an
arms-length basis in the ordinary course of business) requiring payments in
excess of $100,000 during the remainder of its term. The Company has delivered
or made available to the Purchaser a true and complete copy of each of the
Contracts or other agreements listed on Schedule 4.11(b) hereto.
(c) Except as set forth on Schedule 4.11(c) hereto, the Company and
Operating Sub have performed in all material respects, or are now performing in
all material respects, their obligations under, and are not in default (and
would not by the lapse of time or the giving of notice or both be in default)
under, or in breach or violation of, nor have they received notice of any
asserted claim of a material default by the Company or Operating Sub under, or
a material breach or violation by the Company or Operating Sub of, any of the
Personal Property Leases or Contracts and, to the knowledge of the Company,
Operating Sub or any Stockholder, the other party or parties thereto are
performing in all material respects and are not in violation thereunder. Each
Contract and Personal Property Lease is in full force and effect in all
material respects and is a valid and binding agreement of the Company or the
Operating Sub in all material respects and, to the knowledge of the Company,
Operating Sub or any Stockholder, the other parties thereto.
(d) Neither the Company or Operating Sub is, or has ever been, a party to
any contract with a Governmental Authority.
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SECTION 4.12. Intellectual Property Matters. (a) Except as set forth on
Schedule 4.12(a):
(i) the Company has good and marketable title to all copyrights in
and to the Software owned by the Company or Operating Sub, free and clear
of any Lien, and to the knowledge of the Company and the Shareholders,
such copyrights are not being challenged in any way;
(ii) neither the Company nor Operating Sub has obtained any copyright
registrations and has made no application for such registrations;
(iii) no person or entity has any rights of renewal, reversion, or
termination with respect to any copyrights owned by the Company or
Operating Sub or any rights under such copyrights; and
(iv) neither the Company nor Operating Sub has any registered or
unregistered trademarks, trade names, service marks or pending
applications to register trademarks, trade names, or service marks,
related to the Software or any other products or services sold or licensed
by it or which it otherwise uses in the conduct of its business.
(b) Except as set forth on Schedule 4.12(b):
(i) neither the Company nor Operating Sub owns or uses any patents or
applications for patents; and
(ii) none of the Intellectual Property owned by the Company or
Operating Sub and sold or licensed by the Company or Operating Sub or
other assets owned by the Company or Operating Sub or used in the conduct
of its business comes within the scope of any claims included in any
patent.
(c) Except as set forth in Schedule 4.12(c), the Company and Operating Sub
have taken all reasonable security measures to protect the secrecy,
confidentiality, and value of the Trade Secrets owned by the Company or
Operating Sub, and any third parties who have knowledge of or access to
information relating to such Trade Secrets have been put on notice and have
entered into agreements that such Trade Secrets are proprietary to the Company
and are not to be divulged or misused. All of the material Trade Secrets owned
by the Company or Operating Sub are presently valid and protectable, are not
part of the public domain (except insofar as they are part of the Form
Agreements with the Company's or Operating Sub' customers), and, to the
knowledge of the
23
Company and the Shareholders, have not been used, divulged, or appropriated for
the benefit of any third parties or to the detriment of the Company or
Operating Sub.
(d) Neither the Company nor Operating Sub has infringed or
misappropriated, or is infringing or misappropriating, on any Intellectual
Property right of another Person and there is no claim pending or threatened in
writing against the Company or Operating Sub with respect to any alleged
infringement, misappropriation or dilution of any Intellectual Property right
of another Person nor does the operation of the business of the Company or
Operating Sub in the manner in which it has heretofore been operated or in
which it is contemplated to be operated (including the sale or licensing of the
Software) give rise to any such infringement, misappropriation or dilution.
Neither the Company nor the Shareholders have any knowledge that any Person is
infringing, misappropriating or diluting any Intellectual Property owned by the
Company or Operating Sub.
(e) Schedule 4.12(e) contains a complete and accurate list of all material
Intellectual Property owned or used by the Company. The Company or Operating
Sub has good and marketable right, title, and interest in and to the
Intellectual Property listed on Schedule 4.12(e) (including the exclusive right
to make, copy, sell, exploit, and provide to others the use of the Software and
all derivative works thereof) free and clear of any Liens and adverse rights of
every kind, nature, and description. To the knowledge of the Company and the
Shareholders, neither the Company nor Operating Sub have, by any of its acts or
omissions, or by acts or omissions of its affiliates, directors, officers,
employees, agents, or Representatives caused any of its proprietary rights in
the Intellectual Property owned by the Company or Operating Sub to be
transferred, diminished, or adversely affected to any material extent.
(f) Except as set forth in Schedule 4.12(f), all copies of the Software
contain appropriate copyright legends; neither the Company nor the Shareholders
have any knowledge that any third party is violating or has violated any of the
Company's or Operating Sub's proprietary rights in any Intellectual Property;
no third party has any interest in, or right to compensation from the Company
or Operating Sub by reason of, the use, exploitation, or sale of any
Intellectual Property (other than as set forth in the Form Agreements with the
Company's or Operating Sub's customers); there are no restrictions on the
ability of the Company (or any successor or assignee of the Company) or
Operating Sub to use or otherwise exploit any Intellectual Property owned or
used by the Company or Operating Sub, and such use or exploitation does not and
will not obligate the Company (or any successor or assign of the Company,
including Buyer) or Operating Sub to pay any royalty, fee, or other
compensation to any person or entity; and neither the Company nor Operating Sub
have received any notice in
24
writing and do not have any knowledge of any complaint, assertion, threat, or
allegation inconsistent with the preceding statements in this paragraph.
(g) Schedule 4.12(g) contains: (i) a list of all material agreements (A)
granting or obtaining any right to use or practice any rights in any
Intellectual Property, (B) restricting the Company's or Operating Sub's rights
to use any Intellectual Property, including license agreements, development
agreements, distribution agreements, settlement agreements, consent to use
agreements, and covenants not to ▇▇▇ (collectively, the "License Agreements").
Neither the Company nor Operating Sub is in violation of any of the License
Agreements. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated hereby, will not limit in any way the
Company's or Operating Sub's ability to use or provide the use of any
Intellectual Property owned or used by the Company or Operating Sub.
(h) All domain names listed on Schedule 4.12(h) (the "Domain Names") have
been duly registered with Network Solutions, Inc. "NSI") through NSI's
registration procedures, and are operating, accessible domain names. Neither
the Company nor Operating Sub has waived, and each prior owner of such Domain
Names has not waived with respect to any third parties, any rights in or to the
Domain Names. Further, neither the Company nor Operating Sub has forfeited, and
each prior owner of such Domain Names has not forfeited with respect to third
parties, any benefits, entitlements or rights of renewal with respect to the
Domain Names. The Company, Operating Sub and each prior owner of the Domain
Names shall have taken all necessary steps to maintain in force each such
Domain Name. At the expiration of the current registration period, the Company
or Operating Sub shall have the unfettered right to renew in its name the
registration of each of the Domain Names.
(i) The Company or Operating Sub owns all equitable and legal title
to the Domain Names.
(ii) There are no Liens on any of the Domain Names.
(iii) Neither NSI nor any third party has advised the Company or
Operating Sub that any of the Domain Names infringe, dilute or interfere
with the rights of any other party, or may infringe, dilute or interfere
with the rights of any other party.
(iv) NSI has not notified the Company or Operating Sub that any of
the Domain Names have been placed on "hold" or are otherwise subject to a
dispute or potential dispute pursuant to NSI's dispute resolution policy.
25
(v) There are no claims pending or which may be validly brought
against the continued use, or attempted or continued registration in the
United States or throughout the world of any of the Domain Names. None of
the Company, Operating Sub or any Stockholder is aware of any facts which
would support any such claims, actual or potential.
SECTION 4.13. Year 2000 Compliance Matters. As of the Closing Date, all
material Date Data and Date-Sensitive Systems used by the Company in connection
with its business as currently conducted , or in development or on order, are
Year 2000 Compliant, or are reasonably expected to be Year 2000 Compliant in a
timely manner. "Date Data" means any data of any type that includes date
information or which is otherwise derived from, dependent on or related to date
information. "Date-Sensitive System" means any Software, microcode or hardware
system or component, including any electronic or electronically controlled
system or component, that processes any Date Data. "Year 2000 Compliant" means
(i) with respect to Date Data, that such data is in proper format and accurate
for all dates in, or spanning, the twentieth and twenty-first centuries, and
(ii) with respect to Date-Sensitive Systems, that each such system accurately
processes all Date Data, including for the twentieth and twenty-first
centuries, without loss of any functionality, interoperability or performance,
including but not limited to calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap year considerations), when used
as a stand-alone system, or in combination with other Software, hardware, or
Content that is Year 2000 Compliant and properly interfaces with that
Date-Sensitive System.
SECTION 4.14. Litigation. (a) Except as set forth in Schedule 4.14, (i)
there is no, and since January 1, 1998 there has not been any, Action pending
against or affecting or, to the knowledge of the Company, Operating Sub or any
Stockholder, threatened against or affecting, the Company or Operating Sub or
any of their respective assets, properties or rights, or any of their
respective officers or directors before any court or arbitrator or any other
Governmental Authority and (ii) since January 1, 1998, there has been no
material Action or dispute with any customer of the Company or Operating Sub.
To the knowledge of the Company, Operating Sub or any Stockholder, there are no
facts that would likely result in any such Action.
(b) Neither the Company nor Operating Sub has any potential Action arising
under that certain Stock Purchase Agreement dated as of June 30, 1999 by and
among the Company, Operating Sub, Computer Associates, Platinum Technology
International, Inc., a Delaware corporation, and Platinum Technology IP, Inc.,
a Delaware corporation (the "Computer Associates Agreement") against
26
any of the Sellers (as such term is defined in the Computer Associates
Agreement). The Sellers delivered to Operating Sub all of the Assets (as such
term is defined in the Computer Associates Agreement) as provided by Section
5.1 of the Computer Associates Agreement, and did not fail to obtain any
assignment, sublease or similar arrangement necessary to allow Operating Sub to
continue to use such Assets. To the knowledge of the Company, Operating Sub or
any Stockholder, none of the Sellers have any potential Action arising out of
the Computer Associates Agreement.
SECTION 4.15. Compliance with Laws. The Company and Operating Sub are, and
since January 1, 1998 have been, in compliance in all material respects with
all Laws applicable thereto, neither the Company nor Operating Sub is at
present charged with or, to the knowledge of the Company, Operating Sub or any
Stockholder, threatened with any charge concerning or under any investigation
with respect to, any violation, in any material respect, of any provision of
any Law, and neither the Company nor Operating Sub is in violation of or in
default under, and to the knowledge of the Company, Operating Sub or any
Stockholder, no event has occurred which, with the lapse of time or the giving
of notice or both, would result in the violation of or default under, the terms
of any judgment, decree, order, injunction or writ of any court or other
Governmental Authority.
SECTION 4.16. Taxes. Except as set forth on Schedule 4.16:
(a) Each of the Company and Operating Sub has (x) duly and timely filed
(or there has been filed on its behalf) with the appropriate Governmental
Authorities all Tax Returns required to be filed by it, and all such Tax
Returns are true, correct and complete and (y) timely paid all Taxes shown as
due and payable on such Tax Returns);
(b) The Company and Operating Sub have complied in all material respects
with all applicable Tax Laws relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Code and employment withholding Taxes) and have, within the
time and manner prescribed by law, withheld and paid over to the proper
Governmental Authority all amounts required to be withheld and paid over under
all applicable Tax Laws;
(c) There are no Liens for Taxes upon the assets or properties of the
Company or Operating Sub except for statutory Liens for current Taxes not yet
due;
(d) Neither the Company nor Operating Sub has requested any extension of
time within which to file any Tax Return in respect of any taxable year which
27
has not since been filed, and no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns has been given by or on behalf of the Company or Operating
Sub;
(e) No federal, state, local or foreign audits, review, or other Actions
("Audits") exist or have been initiated or threatened in writing with regard to
any Taxes or Tax Returns of the Company or Operating Sub, and neither the
Company nor Operating Sub has received any notice of such an Audit;
(f) All Tax deficiencies which have been claimed, proposed or asserted
against the Company or Operating Sub by any taxing authority have been fully
paid or settled (and the amount of such settlement has been fully paid). No
issue has been raised by any taxing authority in any current or prior
examination which, by application of the same principles, would reasonably be
expected to result in a proposed deficiency for any subsequent Tax Period.
Neither the Company nor Operating Sub is subject to any private letter ruling
of the Internal Revenue Service or any comparable ruling of any other taxing
authority;
(g) Neither the Company nor Operating Sub is required to include in income
for any Post-Closing Tax Period any adjustment pursuant to Section 481(c) of
the Code, by reason of any voluntary or involuntary change in accounting method
for a Pre-Closing Tax Period (nor has any Governmental Authority proposed any
such adjustment or change of accounting method);
(h) Neither the Company nor Operating Sub will be required to include for
a Post-Closing Tax Period taxable income attributable to income economically
realized in a Pre-Closing Tax Period, including any distributions in a
Pre-Closing Tax Period from a fiscally transparent entity and any income that
would be includible in a Post-Closing Tax Period as a result of the installment
method or the look-back method (as defined in Section 460(b) of the Code);
(i) No power of attorney has been granted by or with respect to the
Company or Operating Sub with respect to any matter relating to Taxes;
(j) Neither the Company nor Operating Sub has filed a consent pursuant to
Section 341(f) of the Code (or any predecessor provision) or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code);
(k) The reserves for Taxes (determined in accordance with GAAP
consistently applied) for any Pre-closing Tax Period reflected in the Company's
books and records (excluding any provision for deferred income taxes reflecting
either differences between the treatment of items for accounting and income tax
28
purposes or carryforwards) are adequate for the payment of all Taxes accruing
through the date hereof. Since the date of the Interim Balance Sheet, neither
the Company nor Operating Sub has incurred any liability for Taxes other than
in the ordinary course of business;
(l) Neither the Company nor Operating Sub is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code, or in payments that will not be deductible by operation of
Section 162(m) of the Code;
(m) Neither the Company nor Operating Sub has requested or received a
ruling or determination from any Governmental Authority or signed a closing or
other agreement with any Governmental Authority with regard to the Company or
Operating Sub affecting any Tax Period for which the applicable statute of
limitations, after giving effect to extensions or waivers, has not expired;
(n) Neither the Company nor Operating Sub (i) has received a tax opinion
with respect to any transaction relating to the Company or Operating Sub other
than a transaction in the ordinary course of business (ii) is a direct or
indirect beneficiary of a guarantee of tax benefits or any other arrangement
that has the same economic effect (including an indemnity from a seller or
lessee of property, or other insurance) with respect to any transaction or tax
opinion relating to the Company or Operating Sub or (iii) is a party to any
understanding or arrangement described in Section 6111(d) or Section
6662(d)(2)(C)(iii) of the Code;
(o) During the five-year period ending on the date hereof, neither the
Company nor Operating Sub was a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the
Code;
(p) The Federal income Tax Returns of the Company and Operating Sub for
the Tax Periods ending before January 1, 1996 have been examined and closed by
the appropriate Governmental Authority (or the applicable statue of limitations
for the assessment of such taxes has expired);
(q) Except for agreements deemed to arise by operation of law under
Section 1.1502-6 of the Treasury regulations promulgated under the Code (or any
similar provision under state, local or foreign law) between the Company and
Operating Sub, neither the Company nor Operating Sub is a party to, is bound
by, or has any obligation under, any Tax sharing agreement that provides for
the allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts, or gains
for the purpose of determining any person's Tax liability, Tax indemnification
agreement or
29
similar contract, provision or arrangement (collectively, "Tax Indemnification
Agreements"). As of the date of this Agreement, neither the Company nor
Operating Sub is aware of any potential Liability to any Person (other than the
Company and Operating Sub) as a result of, or pursuant to, any such Tax
Indemnification Agreement;
(r) The Company and Operating Sub have previously delivered or made
available to the Purchaser complete and accurate copies of each of (a) all
audit reports, letter rulings, technical advice memoranda and similar documents
issued by a Governmental Authority relating to the United States federal,
state, local or foreign Taxes due from or with respect to the Company and
Operating Sub and (b) the United States federal income Tax Returns, and those
state, local and foreign income Tax Returns filed by the Company and Operating
Sub (or on their behalf). The Company will deliver to the Purchaser all
materials with respect to the foregoing for all matters arising after the date
hereof;
(s) Neither the Company nor Operating Sub has any or could have any
Liability for Taxes of another Person (excluding the Company and Operating Sub)
under Section 1.1502-6 of the treasury regulations promulgated under the Code
(or any similar provision under state, local or foreign law), by contract or
otherwise;
(t) Neither the Company nor Operating Sub has any deferred intercompany
gain or loss arising as a result of a deferred intercompany transaction within
the meaning of Section 1.1502-13 of the Treasury Regulations (or similar
provision under state, local or foreign law);
(u) Neither the Company nor Operating Sub has taken any position on any
Tax Return that could give rise to an understatement of United States federal
income Tax liability within the meaning of Section 6662(d) of the Code;
(v) No claim in writing has been made by a taxing authority in a
jurisdiction where either the Company or Operating Sub does not file Tax
Returns to the effect that the Company or Operating Sub is or may be subject to
taxation by that jurisdiction;
(w) Neither the Company nor Operating Sub owns an interest in real
property in any jurisdiction in which a Tax is imposed, or the value of the
interest is reassessed, on the transfer of an interest in real property and
which treats the transfer of an interest in an entity that owns an interest in
real property as a transfer of the interest in real property;
30
(x) Each person granted a Stock Option by the Company is an employee of
the Company for Federal income tax purposes.
SECTION 4.17. Insurance. Schedule 4.17 hereto sets forth a true and
complete list of all insurance policies or binders maintained by or for the
benefit of the Company and Operating Sub and their respective directors,
officers, employees or agents. The Company has delivered or made available to
the Purchaser true and complete copies of such policies and binders. Except as
set forth on Schedule 4.17 hereto, (a) all such policies or binders are in full
force and effect and no premiums due and payable thereon are delinquent, (b)
there are no pending material claims against such insurance policies or binders
by the Company or Operating Sub as to which the insurers have denied liability,
(c) the Company and Operating Sub have complied in all material respects with
the provisions of such policies and (d) there exist no material claims under
such insurance policies or binders that have not been properly and timely
submitted by the Company or Operating Sub to their insurers.
SECTION 4.18. Employee Benefit Plans. (a) For purposes of this Agreement,
the term "Company Employee Plans" shall mean and include: each management,
consulting, non-compete, employment, severance or similar contract, plan, or
arrangement, including, without limitation, all Company Stock Plans,
arrangements or policies applicable to any director, former director, employee
or former employee of the Company and each plan, program, policy, agreement or
arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded, which is maintained,
administered or contributed to by the Company or any Subsidiary and covers any
employee or director or former employee or director of the Company or any
Subsidiary, or under which the Company has any Liability contingent or
otherwise (including but not limited to each material "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), but excluding any such plan that is a
"multiemployer plan," as defined in Section 3(37) of ERISA). Neither the
Company nor any of its Affiliates contributes to, or is required to contribute
to, any "multiemployer plan" as defined in Section 3(37) of ERISA. Schedule
4.18 sets forth a true, accurate and complete list of all Company Employee
Plans. The Company has provided or made available to the Purchaser a complete
and accurate copy of each Company Employee Plan, together with the most recent
Form 5500 (if any) filed in connection therewith.
31
(b) Each Company Employee Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (including but not limited to ERISA and
the Code) which are applicable to such Plan, except where failure to so comply
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(c) Neither the Company nor any Affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any Affiliate
of the Company of incurring any such liability. All contributions required to
be made under the terms of any Company Employee Plan have been made, and, where
applicable to a Company Employee Plan, the Company and its Affiliates have
complied with the minimum funding requirements under Section 412 of the Code
and Section 302 of ERISA with respect to each such Company Employee Plan.
(d) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code and, to
the knowledge of the Company, Operating Sub or any Stockholder, no
circumstances exist which will adversely affect such qualification or
exemption.
(e) No director or officer or other employee of the Company or Operating
Sub will become entitled to any retirement, severance or similar benefit or
enhanced or accelerated benefit (including any acceleration of vesting or lapse
of repurchase rights or obligations with respect to any Stock Options or other
benefit under any compensation plan or arrangement of the Company) solely as a
result of the transactions contemplated hereby; and (ii) no payment made or to
be made to any current or former employee or director of the Company or any of
its Affiliates by reason of the transactions contemplated hereby (whether alone
or in connection with any other event, including, but not limited to, a
termination of employment) will constitute an "excess parachute payment" within
the meaning of Section 280G of the Code.
(f) No Company Employee Plan provides material post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or Operating Sub nor has the Company or Operating Sub represented or promised
to provide such benefits.
(g) There has been no amendment to, or change in employee participation or
coverage under, any Company Employee Plan which would
32
increase materially the expense of maintaining such Company Employee Plan above
the level of the expense incurred in respect thereof for the 12 months ended on
the Balance Sheet Date.
(h) The Company and Operating Sub are in compliance with all applicable
federal, state, local and foreign statutes, laws (including, without
limitation, common law), judicial decisions, regulations, ordinances, rules,
judgments, orders and codes respecting employment, employment practices, labor,
terms and conditions of employment and wages and hours, and no work stoppage or
labor strike against the Company and Operating Sub are pending or threatened,
nor are the Company and Operating Sub involved in or threatened with any labor
dispute, grievance, or litigation relating to labor matters involving any
employees, in each case except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. There are no suits, Actions,
disputes, claims (other than routine claims for benefits), investigations or
audits pending or, to the knowledge of the Company, Operating Sub or any
Stockholder, threatened in connection with any Company Employee Plan, but
excluding any of the foregoing which would not have a Material Adverse Effect
on the Company.
SECTION 4.19. Environmental Matters. No written notice, notification,
demand, request for information, citation, summons, complaint or order has been
received by, and no investigation, Action, claim, suit, proceeding or review is
pending or, to the knowledge of the Company, Operating Sub or any Stockholder,
threatened by any Person against, the Company or Operating Sub, and no penalty
has been assessed against the Company or Operating Sub, in each case, with
respect to any matters relating to or arising out of any Environmental Law; the
Company and Operating Sub are in compliance with all Environmental Laws; and
there are no Liabilities of or relating to the Company or Operating Sub
relating to or arising out of any Environmental Law and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a Liability.
SECTION 4.20. Labor Matters. There is no unfair labor practice charge or
complaint against the Company or Operating Sub pending before the National
Labor Relations Board, any state labor relations board or any court or tribunal
and, to the knowledge of the Company, Operating Sub or any Stockholder, none is
or has been threatened; there is no labor strike, dispute, request for
representation, organizing activity, slowdown or stoppage actually pending
against or affecting the Company or Operating Sub and, to the knowledge of the
Company, Operating Sub or any Stockholder, none is or has been threatened.
Neither the Company nor Operating Sub has engaged any individual as an
independent contractor or made payments for services to be performed by any
individual as an independent
33
contractor who should be considered, under applicable Law, an employee of
(rather than an independent contractor to) the Company or Operating Sub.
SECTION 4.21. Title to Property. The Company and Operating Sub have good
title to or a valid leasehold interest in or license to use all of their
material properties and assets (real, personal, mixed, tangible and intangible)
used by the Company or Operating Sub, free and clear of all Liens.
SECTION 4.22. Personal Property. Schedule 4.22 hereto sets forth a true
and complete list of all equipment and fixtures having an acquisition cost of
$10,000 or more owned by the Company or Operating Sub. Except as set forth on
Schedule 4.22 hereto, all such assets are in substantially good condition and
repair, normal wear and tear excepted, and are adequate for the uses to which
they are being put in the ordinary course of the business. All of the assets
listed on Schedule 4.22 hereto, together with all other personal property owned
by the Company and Operating Sub constitute, in the reasonable business
judgment of the Company, all of the tangible personal property necessary for
the operation of the business as it is currently operated (other than such
personal property as may be leased or licensed by the Company and Operating Sub
and other than those items, if any, the failure of which to own or lease would
not, individually or in the aggregate, have a Material Adverse Effect on the
Condition of the Company or Operating Sub).
SECTION 4.23. Real Property. (a) Neither the Company nor Operating Sub has
ever owned any real property.
(b) Set forth on Schedule 4.23(b) hereto is a list of all leases,
subleases, licenses and other agreements (collectively, the "Real Property
Leases") under which the Company or Operating Sub uses or occupies or has the
right to use or occupy, now or in the future, any real property used by the
Company and Operating Sub (the land, buildings and other improvements covered
by the Real Property Leases being herein called the "Leased Real Property").
(c) The Company and Operating Sub have performed in all material respects,
or are now performing in all material respects, their obligations under, and
are not in default (and would not by the lapse of time or the giving of notice
or both be in default) under, or in breach or violation of, nor have they
received notice of any asserted claim of a material default by the Company or
Operating Sub under, or a material breach or violation by the Company or
Operating Sub of, any of the Real Property Leases and, to the knowledge of the
Company, Operating Sub or any Stockholder, the other party or parties thereto
are performing in all material respects and are not in violation thereunder.
34
(d) Neither the Company nor Operating Sub owns or holds, or is obligated
under or a party to, any option, right of first refusal or other contractual
right to purchase any Leased Real Property or any portion thereof or interest
therein.
SECTION 4.24. Sales Representatives and Customers. Schedule 4.24 hereto
sets forth a list of the top ten customers based on net sales of the Company
and Operating Sub for the 12 months ended September 30, 1999. Except as set
forth on Schedule 4.24 hereto, to the knowledge of the Company, Operating Sub
or any Stockholder, the Company and Operating Sub enjoy good working
relationships with their customers and under all of their respective sales
representative and similar agreements necessary to the normal operation of
their respective businesses. American Century Services Corporation has not
indicated to the Company or the Operating Sub that it will stop, or decrease
the rate of, buying products or services from the Company or the Operating Sub.
SECTION 4.25. Accounts Receivable. The accounts receivable of the Company
and Operating Sub (i) arose from bona fide sales transactions in the ordinary
course of business, are payable on ordinary trade terms and are, to the
knowledge of the Company, Operating Sub or any Stockholder, not subject to
setoff, counterclaims or defense, (ii) are legal, valid and binding obligations
of the respective debtors enforceable in accordance with their terms subject to
bankruptcy, insolvency, fraudulent conveyance, moratorium or other similar laws
affecting creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity), (iii) do not represent obligations for goods sold on consignment or
approval; (iv) do not represent obligations for goods sold on a sale-or-return
basis for which no reserve has been recorded in the ordinary course in
accordance with GAAP and the Company, Operating Sub and the Stockholders have
no knowledge of any facts that would cause it to believe that the amount of
such reserve is inappropriate, and (v) are fully collectible in the aggregate
amount thereof, subject to reserves established on the Interim Balance Sheet
or, with respect to accounts receivable arising subsequent to the date thereof,
to reserves established in the ordinary course consistent with past practice
and in accordance with GAAP. Schedule 4.25 hereto sets forth a description of
any security arrangements and collateral (other than guarantees and letters of
credit taken in the ordinary course of business and purchase money security
interests) securing the repayment or other satisfaction of receivables of the
Company and Operating Sub.
SECTION 4.26. Inventory. Neither the Company nor Operating Sub maintains
any inventory.
35
SECTION 4.27. Safe Deposit Boxes and Bank Accounts. Schedule 4.27 sets
forth a list of the names and locations of all banks, trust companies, savings
and loan associations and other financial institutions at which the Company or
Operating Sub maintains safe deposit boxes or lock boxes or bank accounts and
the names of all persons authorized to have access to such boxes and accounts.
SECTION 4.28. Finders' or Advisors' Fees. (a) There is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company or Operating Sub or the Stockholders
who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
(b) Schedule 4.28(b) sets forth a complete and accurate list of the
unbilled or unpaid fees and expenses incurred through November 30, 1999 and
expected to be incurred through January 1, 2000 by the Company and the
Operating Sub in connection with this Agreement and the transactions
contemplated by this Agreement and not accrued on the Operating Sub's pro forma
profit and loss statement for the nine-months ended September 30, 1999
(including the fees and expenses of the Company's legal counsel and
accountants).
SECTION 4.29. Ownership of Operating Sub. As of the date hereof, to the
knowledge of the Company, Operating Sub or any Stockholder, Computer Associates
has good and valid title to the Residual Shares, free and clear of all Liens.
SECTION 4.30. Related-party Transactions. Except as set forth on Schedule
4.30, no employee, officer, or director of the Company or Operating Sub or
member of his or her immediate family is currently indebted to the Company or
Operating Sub, nor is the Company or Operating Sub indebted (or committed to
make loans or extend or guarantee credit) to any of such individuals. Except as
set forth on Schedule 4.30, to the knowledge of the Company, Operating Sub or
any Stockholder, as of the date hereof none of such persons has any direct or
indirect ownership interest in any firm or corporation with which the Company
or Operating Sub is affiliated or with which the Company or Operating Sub has a
business relationship, or any firm or corporation that competes with the
Company or Operating Sub, except that employees, officers, or directors of the
Company or Operating Sub and members of their immediate families may own stock
in an amount not to exceed 1% of the outstanding capital stock of publicly
traded companies that may compete with the Company or Operating Sub or the
Purchaser. As of the date hereof, except as set forth on Schedule 4.30, no
employee, director, or officer of the Company or Operating Sub and no member of
the immediate family of any employee, officer, or director of the Company or
36
Operating Sub is directly or indirectly interested in any material contract
with the Company or Operating Sub.
SECTION 4.31. Disclosure. No representation or warranty by the Company,
Operating Sub or the Stockholders contained in this Agreement, and no
representation, warranty or statement by the Company, Operating Sub or the
Stockholders contained in any list, certificate, schedule or other instrument,
document, agreement or writing furnished or to be furnished to, or made with,
Purchaser or Acquisition Sub pursuant hereto or in connection with the
negotiation, execution or performance hereof, contains any untrue statement by
the Company, Operating Sub or the Stockholders of a material fact or omits to
state any material fact necessary to make any statement herein or therein not
misleading. The financial projections relating to the Company and the Operating
Sub delivered to Purchaser are made in good faith and are based on reasonable
assumptions.
ARTICLE 5
SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders, severally as to such Stockholder himself and not
jointly, represents and warrants to, and agrees with, as of the date hereof and
as of the Closing Date, the Purchaser that:
SECTION 5.01. Validity, Power and Authority. All consents, approvals,
authorizations and orders necessary for the execution and delivery by such
Stockholder of this Agreement and for the Merger hereunder, have been obtained;
and such Stockholder has full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the shares to be converted
hereunder. Each of the Stockholders has the legal capacity to enter into this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of the Stockholders and
this Agreement constitutes a valid and binding agreement of such Stockholder
enforceable against such Stockholder in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar Laws now or hereafter in effect relating to creditors' rights
generally and subject to general principles of equity. The execution, delivery
and performance by such Stockholder of this Agreement and the consummation by
such Stockholder of the transactions contemplated hereby require no action by
or in respect of, or filing with, any Governmental Authority.
37
SECTION 5.02. Absence of Conflicts. The sale of the shares to be sold by
such Stockholder hereunder and the compliance by such Stockholder with all of
the provisions of this Agreement and the consummation by such Stockholder of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such Stockholder is a
party or by which such Stockholder is bound or to which any of the property or
assets of such Stockholder is subject, nor will such action result in any
violation of the provisions of or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over such
Stockholder or the property of such Stockholder.
SECTION 5.03. Valid Title. Such Stockholder has good and marketable title
to the Company Common Stock to be converted pursuant to the Merger, free and
clear of all Liens.
SECTION 5.04. Investment Representations. Such Stockholder acknowledges
and agrees with the Purchaser that the consideration to be received in the form
of Purchaser Common Stock will not be registered under the Securities Act and
may not be offered or sold except pursuant to registration or an exemption from
the registration requirements of the Securities Act. Such Stockholder further
agrees that he has not entered and will not enter into any transaction or
arrangement with respect to the sale, transfer or delivery of the Purchaser
Common Stock, other than pursuant to any transaction that does not require
registration under the Securities Act. Such Stockholder is acquiring the
Purchaser Common Stock for his own account for investment and not with a view
toward distribution in a manner which would violate the Securities Act. Such
Stockholder represents that by reason of his business and financial experience
he has the capacity to protect his own interests in connection with the
transactions contemplated by this Agreement. Such Stockholder further
represents that he is able to bear the economic risk of an investment in the
Purchaser Common Stock and has an adequate income independent of any income
produced from an investment in the Purchaser Common Stock, sufficient net worth
to sustain a loss of all of his investment in the Purchaser Common Stock
without economic hardship if such a loss should occur. Such Stockholder
represents that he is an "accredited investor" as that term is defined in
Regulation D promulgated under the Securities Act. Such Stockholder represents
that he is a resident of the State of California and has no present intention
of becoming a resident of any other state or jurisdiction. Such Stockholder has
been given access to all Purchaser documents, records, and other information of
the Purchaser, has received physical delivery of all such documents, records
and information which such Stockholder has requested, and has had adequate
opportunity to ask questions of, and receive
38
answers from, the Purchaser as well as the Purchaser's officers, employees,
agents, accountants, and representatives concerning the Purchaser's business,
operations, financial condition, assets, Liabilities, and all other matters
relevant to his investment in the Purchaser Common Stock.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION SUB
The Purchaser and Acquisition Sub hereby represent and warrant to the
Company, Operating Sub and the Stockholders as follows:
SECTION 6.01. Organization and Good Standing. The Purchaser and
Acquisition Sub are corporations duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and each has the
requisite power and authority and all governmental licenses, authorizations,
consents and approvals required to own, operate and lease its properties and
assets and to conduct its business as they are now being owned, operated,
leased and conducted. Each of the Purchaser and Acquisition Sub is duly
qualified or licensed to do business as a foreign corporation, and is in good
standing as a foreign corporation, in every jurisdiction in which the failure
to be so qualified or licensed or in good standing would have a Material
Adverse Effect on the Purchaser's or Acquisition Sub's respective businesses or
operations or their ability to consummate the transactions provided for or
contemplated by this Agreement.
SECTION 6.02. Corporate Records. Copies of the certificate of
incorporation of the Company and Acquisition Sub, certified by the Secretary of
State of the State of Delaware, and of the by-laws of the Purchaser and
Acquisition Sub, certified by the Secretary of each such corporation,
heretofore delivered to the Company are true and complete copies of such
instrument as amended to the date of this Agreement. Such certificate of
incorporation and by-laws of the Purchaser and Acquisition Sub are in full
force and effect. Neither the Purchaser nor Acquisition Sub is in violation of
any provision of its certificate of incorporation or by-laws.
SECTION 6.03. Corporate Power and Authority. The Purchaser and Acquisition
Sub have the requisite corporate power and authority to execute and deliver
this Agreement, perform their obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Purchaser and Acquisition Sub, the performance by them of their
obligations hereunder and the consummation by them of the transactions
39
contemplated hereby have been duly authorized by all necessary corporate
actions on the part of the Purchaser and Acquisition Sub. This Agreement
constitutes the legal, valid and binding obligation of each of the Purchaser
and Acquisition Sub, enforceable against them in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar Laws now or hereafter in effect relating to creditors'
rights generally and subject to general principles of equity.
SECTION 6.04. SEC Documents; Undisclosed Liabilities. The Purchaser has
filed all required registration statements, prospectuses, reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) with the Securities and Exchange Commission
(the "SEC") since December 31, 1998 (the "SEC Reports"). As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act or the Securities Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Reports, and none of the SEC Reports when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Purchaser included in the SEC Reports comply as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Purchaser and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
SECTION 6.05. Finders' or Advisors' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Purchaser or Acquisition Sub who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 6.06. Interim Operations of Acquisition Sub. Acquisition Sub was
incorporated on December 9, 1999 solely for the purposes of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
40
SECTION 6.07. Valid Issuance of Shares. The Purchaser Common Stock to be
issued by Purchaser pursuant to this Agreement and the transactions
contemplated hereby will, upon issuance, be duly authorized, validly issued,
fully paid and nonassessable and issued in compliance with all applicable state
and federal securities law.
ARTICLE 7
COVENANTS OF THE COMPANY, OPERATING SUB AND THE STOCKHOLDERS
The Company, Operating Sub and the Stockholders covenant and agree that
from the date of this Agreement until the Closing Date, except as otherwise
consented to by the Purchaser or Acquisition Sub in writing:
SECTION 7.01. Conduct of the Company. From the date of this Agreement
until the Closing, the Company and Operating Sub shall conduct their respective
businesses in the ordinary course consistent with past practice and shall use
their commercially reasonable best efforts to preserve intact their business
organizations and relationships with third parties. Without limiting the
generality of the foregoing and, without the prior written consent of the
Purchaser, from the date of this Agreement until the Closing:
(a) Neither the Company nor Operating Sub will adopt or propose any change
in its certificate of incorporation or by-laws;
(b) Neither the Company nor Operating Sub will adopt a plan or agreement
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
Operating Sub;
(c) Neither the Company nor Operating Sub will issue, sell, transfer,
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class or series of the
Company or Operating Sub;
(d) Neither the Company nor Operating Sub will (i) split, combine,
subdivide or reclassify its outstanding shares of capital stock, or (ii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock;
41
(e) Neither the Company nor Operating Sub will redeem, purchase or
otherwise acquire directly or indirectly any shares of capital stock of the
Company or Operating Sub;
(f) Neither the Company nor Operating Sub will amend the terms (including
the terms relating to accelerating the vesting or lapse of repurchase rights or
obligations) of any employee or director stock options or other stock based
awards;
(g) Neither the Company nor Operating Sub will (i) grant any severance or
termination pay to (or amend any such existing arrangement with) any director,
officer or employee of the Company or Operating Sub, (ii) enter into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company or Operating Sub, (iii) increase any benefits payable under any
existing severance or termination pay policies or employment agreements, (iv)
increase (or amend the terms of) any compensation, bonus or other benefits
payable to directors, officers or employees of the Company or Operating Sub or
(v) permit any director, officer or employee who is not already a party to an
agreement or a participant in a plan providing benefits upon or following a
"change in control" to become a party to any such agreement or a participant in
any such plan;
(h) Neither the Company nor Operating Sub will acquire any assets or
property of any other Person except in the ordinary course of business
consistent with past practice;
(i) Neither the Company nor Operating Sub will sell, lease, license or
otherwise dispose of any assets or property except pursuant to existing
contracts or commitments and except in the ordinary course of business
consistent with past practice;
(j) Except for any such change which is required by reason of a concurrent
change in GAAP, neither the Company nor Operating Sub will change any method of
accounting or accounting practice used by it;
(k) Neither the Company nor Operating Sub will enter into any joint
venture, partnership or other similar arrangement;
(l) Neither the Company nor Operating Sub will take any action that would
make any representation or warranty of the Company or Operating Sub hereunder
inaccurate in any material respect at, or as of any time prior to, the Closing
Date;
42
(m) Neither the Company nor Operating Sub shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting, file any amended Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
offset or other reduction in Tax liability, consent to any extension or waiver
of the limitations period applicable to any Tax claim or assessment or make any
discretionary decision which materially affects the computation of the Tax
liability of the Company, if such action or decision would have the effect of
increasing the Tax liability or reducing any Tax Asset of the Purchaser, the
Company or any Subsidiary;
(n) Neither the Company nor Operating Sub will enter into, amend or waive
any provisions of any standstill agreement; and
(o) Neither the Company nor Operating Sub will agree or commit to do any
of the foregoing.
SECTION 7.02. Consents and Approvals. The Company and Operating Sub shall
use their best efforts to obtain at the earliest practicable date, and in any
event prior to Closing, all Approvals from Government Authorities and, to the
extent that the rights of the Company or Operating Sub under any material
Contract would be impaired upon consummation of the Merger, all Approvals
reasonably requested by the Purchaser or Acquisition Sub with respect to such
Contracts or to obtain fulfillment of the conditions set forth in Article Ten
hereof.
SECTION 7.03. Stockholder Approval. The Company shall cause a special
meeting of its stockholders to be duly called and held as soon as practicable
after the date hereof, or take action by written consent for the purpose of
approving the Merger, this Agreement and the transactions contemplated hereby
which require approval of the stockholders of the Company as provided for in
the DGCL. The Company will, through its Board of Directors, recommend to its
stockholders approval of the transactions contemplated by this Agreement and
will not rescind such recommendation.
SECTION 7.04. No Solicitation of Transaction. The Company, Operating Sub
and the Stockholders, shall not, and shall use their best efforts to cause
their Representatives not to, directly or indirectly, take any of the following
actions with any Person other than the Purchaser without the prior written
consent of the Purchaser: (A) solicit, initiate, facilitate or encourage, or
furnish information with respect to either Company or Operating Sub, in
connection with, any inquiry, proposal or offer with respect to any merger,
consolidation or other business combination involving either Company, Operating
Sub or the acquisition of all or
43
a substantial portion of the assets of, or any securities of, either Company
(an "Alternative Transaction") (other than the information which either Company
provides to other persons in the ordinary course of its business consistent
with past custom and practice, so long as such Company and its shareholders
have no reason to believe that the information may be utilized to evaluate an
Alternative Transaction); (B) negotiate, discuss, explore or otherwise
communicate or cooperate in any way with any third party with respect to any
Alternative Transaction; or (C) enter into any agreement, arrangement or
understanding with respect to an Alternative Transaction or requiring either
Company to abandon, terminate or refrain from consummating a transaction with
the Purchaser. Each of the Company and Operating Sub shall, and shall use its
best efforts to cause its Representatives to, notify the Purchaser orally and
in writing promptly upon receipt of any inquiry, offer or proposal with respect
to an Alternative Transaction, including the identity of the party making such
inquiry, offer or proposal and stating the terms thereof. Each of the Company
and Operating Sub shall immediately cease any existing discussions or
negotiations with any third party relating to any proposed Alternative
Transaction.
SECTION 7.05. Audited Financials. The Company and Operating Sub shall use
their best efforts to conduct at their own expense an audit under GAAP,
consistently applied, to produce Audited Financial Statements, to the extent
that such financial statements are required for purposes of compliance with
Securities and Exchange Commission rules applicable to the Purchaser.
SECTION 7.06. Parachute Payments. Prior to the Closing, the Company shall
take all actions necessary under Section 280G(b)(5) of the Code such that (i)
the acceleration of vesting of any Stock Options occurring in connection with
the Merger or any event associated with the Merger (such as the elapse of time
or a termination of employment or constructive termination of employment
following the Merger and (ii) any grant of Stock Options subsequent to
September 1, 1999 shall not be considered an "excess parachute payment" as
defined in Section 280G(b)(1) of the Code.
ARTICLE 8
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders severally as to such Stockholder, and not
jointly, covenants that:
SECTION 8.01. Compliance with Laws. Such Stockholder and his or her
transferees shall comply with all filing and other reporting obligations under
all
44
laws, rules and regulations which may be applicable to such Stockholder with
respect to the transactions contemplated hereby.
SECTION 8.02. Conduct of the Company. Such Stockholder will use its best
efforts to prevent the Company from breaching any of its obligations set forth
in Section 7.01 hereof.
SECTION 8.03. Stockholder Approval. Such Stockholder agrees to execute a
written consent, or otherwise vote in favor of, approving this Agreement and
transactions contemplated hereby at the request of the Company.
SECTION 8.04. Spousal Consents. If applicable, such Stockholder shall
obtain a spousal consent substantially in the form of Exhibit B.
ARTICLE 9
COVENANTS OF THE PURCHASER AND ACQUISITION SUB PENDING THE CLOSING
The Purchaser and Acquisition Sub covenant and agree that, except as
otherwise consented to by the Company, at or prior to the Closing:
SECTION 9.01. Consents and Approvals. The Purchaser and Acquisition Sub
shall use their best efforts to obtain at the earliest practicable date, and in
any event prior to Closing, all Approvals from Government Authorities and, to
the extent that the rights of the Purchaser and Acquisition Sub under any
material contract would be impaired upon consummation of the Merger, all
Approvals reasonably requested by the Company or Operating Sub with respect to
such contracts or to obtain fulfillment of the conditions set forth in Article
Nine hereof.
SECTION 9.02. Form S-8. The Purchaser shall file as soon as reasonably
practicable after the Closing Date with the SEC a registration statement on
Form S-8 (or other appropriate form) for the purpose of registering all of the
shares of Purchaser Common Stock issuable upon exercise of the Assumed Options.
SECTION 9.03. Interim Funding. Promptly upon the request of the Company
after the date hereof, Purchaser shall lend Operating Sub up to $500,000 (the
"Interim Indebtedness"). The Interim Indebtedness shall be secured by a Lien on
the personal property and equipment of Operating Sub. The Company and Operating
Sub agree to execute such documents and instruments as may be reasonably
requested by Purchaser to evidence the Interim Indebtedness and the Lien
securing the Interim Indebtedness.
45
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER AND
ACQUISITION SUB
The obligations of the Purchaser and Acquisition Sub to effect the Closing
hereunder are subject to the satisfaction, at or prior to the Closing, of all
of the following conditions:
SECTION 10.01. Representations and Warranties True. The representations
and warranties contained in Articles Four and Five hereof, in the Schedules to
this Agreement, and in all certificates delivered by the Company or the
Stockholders to the Purchaser and Acquisition Sub pursuant hereto or in
connection with the transactions contemplated hereby shall be true and accurate
as of the date when made and shall be deemed to be made again at and as of the
Closing Date and shall then be true and accurate (except for changes
contemplated by this Agreement and except for representations and warranties
that by their terms speak as of the date of this Agreement or some other date
which shall be true and correct only as of such date).
SECTION 10.02. Performance of Covenants. The Company and the Stockholders
shall have performed and complied with each and every covenant, agreement and
condition required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
SECTION 10.03. No Governmental Proceeding. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
prohibits the consummation of the transactions contemplated by this Agreement.
SECTION 10.04. Approval of Stockholders. This Agreement and the Merger
shall have been approved by the requisite vote or action of the Company's
stockholders under its Certificate of Incorporation, By-Laws and the DGCL.
SECTION 10.05. Certificates. The Company, Operating Sub and the
Stockholders shall have furnished the Purchaser and Acquisition Sub with such
certificates to evidence compliance with the conditions set forth in this
Article Ten as may be reasonably requested by Purchaser.
SECTION 10.06. Consents. The Company and Operating Sub shall have obtained
all consents under the Contracts, License Agreements and the Real Property
Leases listed on Schedule 4.23(b) hereto and all other consents required in
connection with the consummation of the transactions contemplated by this
46
Agreement shall have been obtained the failure of which to obtain would have a
Material Adverse Effect on the Condition of the Company or Operating Sub.
SECTION 10.07. Payment of Company Indebtedness. The Purchaser shall
arrange for the repayment in full upon Closing of all amounts due under the CA
Note in cash, and the holders of Promissory Notes listed in Schedule 3.07 shall
have received Purchaser Common Stock from the Purchaser in accordance with
Section 3.07. Each of the Security Agreement between the Company and Computer
Associates International dated as of June 30, 1999 and the Security Agreement
between the Company and/or Operating Sub and a lender codenamed XYZ Corp. shall
have been terminated.
SECTION 10.08. No Material Adverse Effect. There shall have been, between
the Balance Sheet Date and the Closing Date, no Material Adverse Effect on the
Company or Operating Sub.
SECTION 10.09. Delivery of Good Standing Certificates and Corporate
Resolutions. The Purchaser shall have received certificates of good standing
with respect to each of the Company and the Operating Sub issued by the
jurisdiction of its incorporation and the jurisdictions listed on Schedules
4.01(a) and 4.01(b). The Purchaser shall have received copies of the
resolutions of the Company, Operating Sub and their stockholders approving this
Agreement, the Merger and the transactions contemplated herein, certified by an
appropriate officer.
SECTION 10.10. Notes Receivable. All notes receivable from the
Stockholders or the employees of either the Company or Operating Sub shall have
been repaid in full in accordance with their terms.
SECTION 10.11. Spousal Consents. The Purchaser shall have received a
spousal consent from each Stockholder and holder of a Stock Option, Promissory
Note or Warrant where applicable.
SECTION 10.12. Escrow Agreement. The Stockholders shall have delivered to
the Purchaser an executed Escrow Agreement in a form reasonably satisfactory to
the Purchaser, the Stockholder and the Company.
SECTION 10.13. Audited Financial Statements. The Company shall have
provided to the Purchaser the Audited Financial Statements. With respect to any
date or any period covered by both the Financial Statements and the Audited
Financial Statements, the Audited Financial Statements shall have shown no
material change in the overall consolidated financial position or results of
operations of the Company (except with respect to the financial indebtedness of
the Company) as compared with the Financial Statements for such date or period.
47
SECTION 10.14. Purchase of the Residual Shares. The Residual Shares shall
have been delivered to the Purchaser by Computer Associates in accordance with
the CA Agreement.
SECTION 10.15. Warrant Exercise. Each outstanding and unexercised Warrant
shall have been exercised in full, and the holder thereof shall have purchased
shares of Company Common Stock from the Company pursuant to the terms of such
Warrant and the Warrant Exercise Agreement between such holder, Purchaser and
the Company.
SECTION 10.16. Noncompetition Agreements. Proprietary Information,
Confidentiality, and Noncompetition Agreements between each Stockholder and the
Purchaser dated the date hereof shall be in full force and effect.
SECTION 10.17. FIRPTA Certificate. The Company and the Operating Sub shall
each have delivered a certification dated not more than 30 days prior to the
Closing Date, signed by the Company and the Operating Sub respectively, to the
effect that the Company or the Operating Sub, as the case may be, is not, nor
has been within 5 years of the date of the certification, a "United States real
property holding corporation" as defined in Section 897 of the Code.
ARTICLE 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY, OPERATING SUB
AND THE STOCKHOLDERS
The obligations of the Company, Operating Sub and the Stockholders to
effect the Closing hereunder are subject to the satisfaction, at or prior to
the Closing, of all of the following conditions:
SECTION 11.01. Representations and Warranties True. The representations
and warranties contained in Article Five hereof and in all certificates
delivered by the Purchaser or Acquisition Sub to the Company pursuant hereto or
in connection with the transactions contemplated hereby shall be true and
accurate as of the date when made and shall be deemed to be made again at and
as of the Closing Date and shall then be true and accurate (except for changes
contemplated by this Agreement and except for representations and warranties
that by their terms speak as of the date of this Agreement or such other date
which shall be true and accurate only as of such date).
SECTION 11.02. Performance of Covenants. The Purchaser and Acquisition Sub
shall have performed and complied with each and every
48
covenant, agreement and condition required by this Agreement to be performed or
complied with by them prior to or on the Closing Date.
SECTION 11.03. No Governmental Proceeding. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered into any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
prohibits the consummation of the transactions contemplated by this Agreement.
SECTION 11.04. Certificates. The Purchaser and Acquisition Sub shall have
furnished the Company, Operating Sub and the Stockholders with such
certificates to evidence compliance with the conditions set forth in this
Article Eleven as may be reasonably requested by Purchaser.
SECTION 11.05. Delivery of Good Standing Certificates and Corporate
Resolutions. The Company shall have received certificates of good standing with
respect to each of the Purchaser and Acquisition Sub issued by the jurisdiction
of its incorporation and the jurisdictions listed on Schedule 6.01. The Company
shall have received copies of the resolutions of the Purchaser and the
Acquisition Sub approving this Agreement, the Merger and the transactions
contemplated herein, certified by an appropriate officer.
SECTION 11.06. Escrow Agreement. The Purchaser shall have delivered to the
Stockholders an executed Escrow Agreement.
SECTION 11.07. Payment of Company Indebtedness. The Purchaser shall have
arranged for the repayment in full upon Closing of all amounts due under the CA
Note in cash, and the holders of Promissory Notes listed in Schedule 3.07 shall
have received Purchaser Common Stock from the Purchaser in accordance with
Section 3.07.
SECTION 11.08. Purchase of the Residual Shares. The Residual Shares shall
have been delivered to the Purchaser by Computer Associates in accordance with
the CA Agreement.
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ARTICLE 12
INDEMNITY
SECTION 12.01. Indemnification. (a) Each of the Company, the Operating Sub
and the Stockholders, jointly and severally, covenants and agrees to indemnify,
defend, protect and hold harmless the Purchaser, Acquisition Sub and their
officers, directors, members, managers, employees, stockholders, assigns,
successors and Affiliates (individually, a "Buyer Party" and collectively
"Buyer Parties") from, against and in respect of all Damages, Actions, and
interest (including interest from the date of such Damages) suffered,
sustained, incurred or paid by the Purchaser, in any Action (x) between a Buyer
Party and the Company, Operating Sub or any Stockholder or (y) between a Buyer
Party and a third party, in connection with, resulting from or arising out of,
directly or indirectly: (i) the inaccuracy of any representation or the breach
of any warranty set forth in this Agreement or certificates delivered on the
part of the Company, Operating Sub, or any Stockholder in connection with the
Closing; and (ii) the nonfulfillment of any covenant or agreement on the part
of the Company, Operating Sub, or any Stockholder set forth in this Agreement
or in any agreement or certificate executed and delivered by the Company,
Operating Sub, or any Stockholder pursuant to this Agreement or in the
transaction contemplated hereby. Nothing in this Agreement shall be interpreted
to impose an obligation on Computer Associates to indemnify any Buyer Party.
(b) Each of the Purchaser and Acquisition Sub, jointly and severally,
covenant and agree to indemnify, defend, protect and hold harmless (i) each
Stockholder and his successors and assigns and (ii) the Company and Operating
Sub and their respective officers, directors, members, managers, employees,
stockholders, assigns, successors and Affiliates (individually, a "Seller
Party" and collectively "Seller Parties") from, against and in respect of all
Damages, Actions, and interest (including interest from the date of such
Damages) suffered, sustained, incurred or paid by the Company, Operating Sub or
the Stockholders, in any Action (x) between the Purchaser or Acquisition Sub
and a Seller Party or (y) between a Seller Party and a third party, in
connection with, resulting from or arising out of, directly or indirectly: (i)
the inaccuracy of any representation or the breach of any warranty set forth in
this Agreement or certificates delivered on the part of the Purchaser or
Acquisition Sub in connection with the Closing; and (ii) the nonfulfillment of
any covenant or agreement on the part of the Purchaser or Acquisition Sub set
forth in this Agreement or in any agreement or certificate executed and
delivered by the Purchaser or Acquisition Sub pursuant to this Agreement or in
the transaction contemplated hereby.
(c) Notwithstanding the foregoing provisions of this Section 12.01(a) and
(b), if the Closing occurs, (i) each Stockholder hereby waives any right of
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contribution, reimbursement or other rights of recovery that they might
otherwise have against the Company or Operating Sub in connection with any such
indemnification or other obligations, (ii) the Company and Operating Sub shall
each be deemed to be a Buyer Party, and (iii) the representations and
warranties made by the Company and Operating Sub shall terminate (it being
understood that the representations and warranties made by the Stockholders in
Articles 4 and 5 will continue to survive).
(d) Notwithstanding anything contained in Article Twelve to the contrary,
there shall be no liability for indemnification under this Section 12.01 (i)
unless the aggregate amount of Damages exceeds $100,000 (the "Indemnity
Basket") or (ii) to the extent that an Indemnified Party has suffered,
incurred, sustained or become subject to, Damages by reason of all such claims
in excess of the Indemnification Escrow Fund, and no Indemnifying Party shall
be obligated to pay more than the Indemnification Escrow Fund under Article
Twelve; provided, however, that the Indemnity Basket shall not apply in the
event that liability arises out of or in connection with a breach of the
representations or warranties in any of Section 4.01, 4.02, 4.03, 4.05, 4.16 or
Article 5, or for a breach of the covenants contained in Article 14.
SECTION 12.02. Notice of Claims. An Indemnified Party shall notify the
Indemnifying Party within a reasonable period of time after becoming aware of,
and shall provide to the Indemnifying Party as soon as practicable thereafter,
all information and documentation necessary to support and verify any Damages
which the Indemnified Party shall have determined has given or could give rise
to a claim for indemnification under Section 12.01 hereof, and the Indemnifying
Party and its agents shall be given access to all books and records in the
possession or control of the Indemnified Party which the Indemnifying Party
reasonably determines to be related to such claim.
SECTION 12.03. Matters Involving Third Parties. (a) If any third party
shall commence an Action against any Indemnified Party with respect to any
matter (a "Third Party Claim") which may give rise to a claim for
indemnification under Section 12.01, the Indemnified Party shall notify the
Indemnifying Party in writing as soon as practicable.
(b) The Indemnifying Party shall have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice and reasonably
acceptable to the Indemnified Party so long as (i) the Indemnifying Party shall
notify the Indemnified Party in writing (within ten days after its receipt of
notice of the Third Party Claim) that the Indemnified Party will be entitled to
indemnification under Section 12.01 hereof from and against any Damages the
Indemnified Party may suffer arising out of the Third Party Claim and (ii) the
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Indemnifying Party diligently conducts the defense of the Third Party Claim. It
is agreed that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party of a claim (including any Third Party Claim) will relieve
the Indemnifying Party thereby unless said Indemnifying Party is prejudiced by
such failure to give notice.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 12.03(b) above, (i) the
Indemnified Party may retain separate co-counsel, at its sole cost and expense,
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed, (iii) the Indemnified Party shall cooperate within reason
with the Indemnifying Party's defense of such Third Party Claim and (iv) the
Indemnifying Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding any other provision of this Section 12.03,
if an Indemnified Party withholds its consent to a settlement or elects to
defend any claim, where but for such action the Indemnifying Party could have
settled such claim, the Indemnifying Party shall be required to indemnify the
Indemnified Party only up to a maximum of the bona fide settlement offer for
which the Indemnifying Party could have settled such claim.
SECTION 12.04. Release. Effective as of the Closing, each of the
Stockholders hereby irrevocably waives and releases the Company and Operating
Sub of, from and against any and all claims or causes of actions for Damages
that he has, may have, or has had at any time on or before the Closing.
ARTICLE 13
TERMINATION, AMENDMENT AND WAIVER
SECTION 13.01. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of the Purchaser and the Company;
(b) by either the Purchaser or the Company if the Closing has not occurred
prior to February 15, 2000, provided that the right to terminate this Agreement
under this Section 13.01(b) shall not be available to either party whose
material misrepresentations, breach of warranty or failure to fulfill any
obligation
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under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date;
(c) by either the Purchaser or the Company if there has been a material
misrepresentation or material breach on the part of the other party in the
representations, warranties or covenants set forth in this Agreement which is
not cured within ten Business Days after such other party has been notified in
writing of the intent to terminate this Agreement pursuant to this clause
(iii); or
(d) by either the Purchaser or the Company, if any permanent injunction or
action by any court or other Governmental Authority of competent jurisdiction
enjoining, denying Approval of or otherwise prohibiting consummation of any of
the transactions contemplated by this Agreement shall become final and
nonappealable.
SECTION 13.02. Effect of Termination. In the event of termination of this
Agreement as expressly permitted under Section 13.01 hereof, this Agreement
shall forthwith become void (except for Sections 14.02, 14.03 and 14.05 and
this Section 13.02) and there shall be no Action on the part of the Company,
Acquisition Sub, the Stockholders, the Purchaser or Operating Sub or their
respective officers, directors or affiliates; provided, that, if such
termination shall result from the willful breach by a party of the covenants of
such party contained in this Agreement, such party shall be fully liable for
any and all Damages sustained or incurred as a result of such breach. In the
event of termination hereunder prior to the Closing, the Purchaser and
Acquisition Sub shall return promptly to the Company all documents, work papers
and other material of the Company and Operating Sub furnished or made available
to the Purchaser and Acquisition Sub or their representatives or agents and all
copies thereof, and no information received by the Purchaser or Acquisition Sub
shall be revealed to any third party nor used for the advantage of the
Purchaser or Acquisition Sub or any other party.
SECTION 13.03. Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties hereto. The
Company, the Purchaser and Acquisition Sub may amend this Agreement at any time
prior to the filing of the Certificate of Merger with the Department of State
of the State of Delaware; provided that an amendment made subsequent to the
adoption of this Agreement by the stockholders of any Constituent Corporation
shall not (i) alter or change the amount or class of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all
or any of the shares of any class or series thereof of such Constituent
Corporation, (ii) alter or change any term of the Certificate of Incorporation
of the Surviving Corporation to be effected by the Merger, or (iii) alter or
change any of the terms
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and conditions of this Agreement if such alteration or change would adversely
affect the holders of any class of shares or series thereof of such Constituent
Corporation.
SECTION 13.04. Extension, Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in writing
in an instrument signed by or on behalf of such party. The waiver by any party
hereto of a breach of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
ARTICLE 14
OTHER AGREEMENTS
The parties hereto agree that:
SECTION 14.01. Best Efforts. The Company, the Stockholders and the
Purchaser shall each cooperate with the others and use (and shall cause their
respective Subsidiaries to use) their respective commercially reasonable best
efforts to promptly (i) take or cause to be taken all necessary actions, and do
or cause to be done all things, necessary, proper or advisable under this
Agreement and applicable laws to consummate and make effective the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including, without limitation, preparing and filing promptly and fully all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtain all Approvals required to be obtained from any third party
necessary, proper or advisable to consummate the Merger and other transactions
contemplated by this Agreement.
SECTION 14.02. Access to Information. Subject to the terms set forth in
that certain Non-Disclosure Agreement among the Company and the Purchaser (the
"Non-Disclosure Agreement"), which is incorporated by reference herein,
respecting due diligence investigation and certain other matters, each of the
parties hereto shall afford each other's employees, auditors, legal counsel and
other authorized representatives, all reasonable opportunity and access during
normal business hours to inspect, investigate, audit and interview the
respective
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assets, liabilities, contracts, each of the other's operations, business,
employees and officers before the Closing. These activities shall be conducted
in a reasonable manner during regular business hours using reasonable efforts
to minimize interference with each party's respective business operations. Each
of the parties hereto shall promptly and completely provide all disclosures
requested by the other parties or their agents.
SECTION 14.03. Public Announcements. At the proper time, as determined by
the parties hereto in good faith consultation with each other, the parties
hereto shall issue a press release or make a public statement concerning this
Agreement and the related transactions containing disclosure which is mutually
agreeable to the parties; provided, that prior to the issuance of a press
release, none of the parties hereto shall make any announcement of such
transaction or disclose the existence of and/or particulars of any negotiations
related thereto, including, but not limited to, the terms, conditions,
consideration to be paid or other facts related to this Agreement and the
related transactions, except to the extent permitted by the Non-Disclosure
Agreement. Notwithstanding the foregoing, the Purchaser may make such
disclosures as may be required (based on the advice of counsel) due to its
status as a public company, after good faith consultation with the other
parties hereto.
SECTION 14.04. Notices of Certain Events. (a) Each of the parties hereto
shall promptly notify the other party of: (i) any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement if the
failure of any of the parties hereto, as the case may be, to obtain such
consent would result in a Material Adverse Effect on any of the parties hereto,
as applicable; and (ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The parties hereto shall promptly notify the other party of any
Actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 14.05. Expenses. The Purchaser, Acquisition Sub, the Company and
Operating Sub shall each bear their own expenses (including those of counsel
and accountants) incurred by any of them in connection with this Agreement and
the transactions contemplated herein.
SECTION 14.06. Specific Performance; Injunctive Relief. Each of the
parties hereto acknowledges, understands and agrees that any breach or
threatened
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breach by such party or such party's Affiliates of Sections 14.02 or 14.03 will
cause irreparable injury to the other party and that money damages will not
provide an adequate remedy therefor. Accordingly, in the event of any such
breach or threatened breach, the non-breaching party shall have the right and
remedy (in addition to any other rights or remedies available at law or in
equity, including, money damages) to have the provisions of such Sections 14.02
or 14.03 specifically enforced by, and to seek injunctive relief and other
equitable remedies in, any court having competent jurisdiction.
SECTION 14.07. Issuance of New Share Options. When the Purchaser grants
options to its employee base after the Closing, Purchaser shall grant to the
employees of Operating Sub options to acquire Purchaser Common Stock in amounts
and terms generally commensurate with share options granted by Purchaser
generally to employees of similar rank and experience, using similar criteria
for such grants as used in granting options to Purchaser's employees.
Notwithstanding the preceding sentence, the Company acknowledges that the
Purchaser intends to grant options to a certain group of its existing employees
and that the employees of the Company and Operating Sub shall not participate
in such non-broad based grants and that such non-broad based grants shall not
be considered precedent for the grants to be made to employees of the Company
and Operating Sub following the Closing.
ARTICLE 15
MISCELLANEOUS
SECTION 15.01. Entire Agreement. This Agreement (including the documents
and instruments referred to herein) and the Non-Disclosure Agreement embody the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersedes all other prior commitments,
arrangements or understandings, both oral and written, between the parties with
respect thereto. There are no agreements, covenants, representations or
warranties with respect to the transactions contemplated hereby other than
those expressly set forth herein.
SECTION 15.02. Assignment. Except as set forth in this Section 16.02, this
Agreement may not be assigned (whether by operation of law or otherwise) by any
party without the prior written consent of the other parties hereto. The
Purchaser and the Acquisition Sub may assign this Agreement to any of their
wholly-owned subsidiaries without the prior written consent of the Company;
provided, that such assignment shall not release the Purchaser or Acquisition
Sub from their respective obligations under this Agreement . Subject to the
foregoing, this
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Agreement shall be binding upon, and shall inure to the benefits of, the
parties hereto and their respective heirs, personal representatives successors
and assigns, and shall not confer any third party beneficiary rights upon any
person who is not a party hereto.
SECTION 15.03. Governing Law and Venue. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of New
York. The parties agree that all Actions or proceedings arising in connection
with this Agreement shall be tried and litigated only in the federal or state
courts located in the County of New York, State of New York. The Purchaser,
Acquisition Sub and the Company and the Stockholders hereby irrevocably submit
to the exclusive jurisdiction of the federal and state courts located in the
County of New York, State of New York for the purpose of any such Action or
proceeding.
SECTION 15.04. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 15.05. Headings and Exhibits. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. Schedules and documents
referred to in this Agreement are an integral part of this Agreement.
SECTION 15.06. Survival of Representations, Warranties and Covenants. All
representations and warranties made by any party in or pursuant to this
Agreement or in any document delivered pursuant hereto shall survive for one
year after the Closing; provided, however, that (i) in the event of fraud by
any party, the representations and warranties of the party shall survive the
Closing for an indefinite period of time, and (ii) the representations and
warranties in Sections 4.01, 4.02, 4.03, 4.05, and 4.16 and Article 5, shall
survive until the expiration of the applicable statute of limitations, or if
there is no applicable statute of limitations, such representations and
warranties shall survive indefinitely. Notwithstanding the foregoing, if a
claim notice is sent pursuant to Section 12.02, the representation or warranty
with respect to which such claim notice is sent, and the related
indemnification obligations set forth in Article Twelve with respect to the
claim notice, shall survive until the resolution of the claim for Damages to
which such claim notice relates, or such longer period as provided in
subsections (i) and (ii) hereof. All covenants made by any party pursuant to
this Agreement shall survive the Closing pursuant to their terms.
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SECTION 15.07. Notices. Any notices or other communications required or
permitted hereunder shall be in writing and personally delivered at the
addresses designated below, by facsimile transmission to the respective
facsimile numbers designated below, or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or to such
other address or addresses as may hereafter be furnished by one party to the
other party in compliance with the terms hereof:
If to the Purchaser, Acquisition Sub, the Surviving Corporation or
Operating Sub (post-Closing):
Modem Media.▇▇▇▇▇ ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: 203/299-7060
With a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, Operating Sub (pre-Closing) or the Stockholders:
Vivid Holdings, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Pillsbury Madison & Sutro LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the Person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
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request, claim, demand, waiver, consent, approval, or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
SECTION 15.08. Counterparts. This Agreement may be executed in any number
of counterparts (which may be by facsimile) each of which, when executed, shall
be deemed to be an original and all of which together shall be deemed to be one
and the same instrument.
SECTION 15.09. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
[Execution Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
Chief Executive Officer
MODEM MEDIA.▇▇▇▇▇ ▇▇▇▇▇
MERGER CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
Chief Executive Officer
VIVID HOLDINGS, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
VIVID PUBLISHING, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
STOCKHOLDERS
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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