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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 8, 1999
VISUAL NETWORKS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 000-23699 52-1837515
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
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2092 Gaither Road
Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
301-296-2300
(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets.
On September 15, 1999, Visual Networks, Inc. ("Visual") announced the
merger (the "Merger") of Visual Acquisitions Two, Inc. ("Acquisitions"), a
wholly-owned subsidiary of Visual, with and into Inverse Network Technology
("Inverse") pursuant to an Agreement and Plan of Merger dated as of September
15, 1999 ("Merger Agreement"). On September 30, 1999, the Merger was consummated
and Acquisitions was merged with and into Inverse.
Under the terms of the Merger Agreement, all outstanding shares of Inverse
capital stock and all shares of Inverse common stock reserved for issuance upon
the exercise of all outstanding Inverse warrants were exchanged for an
aggregate of 4,110,944 shares of Visual common stock and the outstanding
options to purchase Inverse common stock as of September 30, 1999 were
converted into options to purchase 410,620 shares of Visual common stock.
Visual issued a press release announcing the completion of the Merger on
October 1, 1999, which is filed herewith as Exhibit 99.1 and is incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) The financial statements of Inverse will be filed by amendment not
later than 60 days from September 30, 1999.
(b) The pro forma financial information of the combined company will be
filed by amendment not later than 60 days from September 30, 1999.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated September 15, 1999 by and
among Visual Networks, Inc., Visual Acquisitions Two, Inc. and
Inverse Network Technology.
99.1 Press release of Visual Networks, Inc. dated October 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 8, 1999 Visual Networks, Inc.
/s/ Peter J. Minihane
By: Peter J. Minihane
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated September 15, 1999 by and
among Visual Networks, Inc., Visual Acquisitions Two, Inc. and
Inverse Network Technology.
99.1 Press release of Visual Networks, Inc. dated October 1, 1999.
4
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VISUAL NETWORKS, INC.,
VISUAL ACQUISITIONS TWO, INC.
AND
INVERSE NETWORK TECHNOLOGY
SEPTEMBER 15, 1999
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TABLE OF CONTENTS
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ARTICLE I........................................................................1
THE MERGER.......................................................................1
1.1 The Merger........................................................1
1.2 The Closing.......................................................1
1.3 Actions at the Closing............................................2
1.4 Additional Action.................................................2
1.5 Effect on Capital Stock...........................................2
1.6 Dissenting Shares.................................................4
1.7 Exchange of Shares................................................5
1.8 Dividends.........................................................6
1.9 Fractional Shares.................................................6
1.10 Options; Warrants and Restricted Stock............................6
1.11 Certificate Legends...............................................8
1.12 Articles of Incorporation.........................................9
1.13 By-laws...........................................................9
1.14 Directors and Officers............................................9
1.15 No Further Rights.................................................9
1.16 Closing of Transfer Books.........................................9
1.17 Tax and Accounting Consequences...................................9
1.18 Taking of Necessary Action; Further Action.......................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................10
2.1 Organization, Qualification and Corporate Power..................10
2.2 Capitalization...................................................10
2.3 Authorization of Transaction.....................................11
2.4 Noncontravention.................................................12
2.5 Subsidiaries.....................................................13
2.6 Financial Statements.............................................13
2.7 Absence of Certain Changes.......................................13
2.8 Undisclosed Liabilities..........................................13
2.9 Tax Matters......................................................14
2.10 Assets...........................................................15
2.11 Owned Real Property..............................................15
2.12 Intellectual Property............................................16
2.13 Real Property Leases.............................................19
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2.14 Contracts........................................................19
2.15 Powers of Attorney...............................................21
2.16 Insurance........................................................21
2.17 Litigation.......................................................21
2.18 Employees........................................................22
2.19 Employee Benefits................................................23
2.20 Environmental Matters............................................25
2.21 Legal Compliance; Restrictions on Business Activities............26
2.22 Permits..........................................................26
2.23 Certain Business Relationships With Affiliates...................26
2.24 Fees.............................................................26
2.25 Books and Records................................................26
2.26 Company Action...................................................27
2.27 Customers and Suppliers..........................................27
2.28 Pooling of Interests.............................................27
2.29 Restrictions on Business Activities..............................27
2.30 Certain Payments.................................................27
2.31 State "Anti-Takeover" Statutes...................................28
2.32 Information Supplied by the Company..............................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE MERGER SUB......28
3.1 Organization.....................................................29
3.2 Capitalization...................................................29
3.3 Authorization of Transaction.....................................29
3.4 Noncontravention.................................................30
3.5 Reports and Financial Statements.................................30
3.6 Tax Matters......................................................31
3.7 Absence of Material Adverse Changes..............................32
3.8 Litigation.......................................................32
3.9 Legal Compliance; Restrictions on Business Activities............32
3.10 Company Action...................................................32
3.11 Pooling of Interests.............................................33
3.12 Intentionally Omitted............................................33
3.13 Information Supplied by the Buyer................................33
3.14 Brokers' Fees....................................................33
ARTICLE IV COVENANTS............................................................33
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4.1 Best Efforts.....................................................33
4.2 Notices and Consents.............................................34
4.3 Special Meeting..................................................34
4.4 Securities Laws..................................................34
4.5 Operation of Business............................................35
4.6 Full Access; Confidentiality.....................................37
4.7 Notice of Breaches...............................................37
4.8 Exclusivity......................................................38
4.9 Employee Agreements..............................................38
4.10 Employee Matters.................................................38
4.11 Agreements From Certain Affiliates of the Company................38
4.12 Shareholder Agreements...........................................39
4.13 Registration Rights..............................................39
4.14 Buyer Common Stock...............................................39
4.15 Pooling Accounting...............................................39
4.16 Escrow Agreement.................................................39
4.17 Form S-8.........................................................40
4.18 Reorganization...................................................40
4.19 Interim Financial Statements; Special Earnings Release...........40
4.20 Indemnification of Officers and Directors........................40
4.21 Reasonable Commercial Efforts and Further Assurances.............41
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER..................................41
5.1 Conditions to Each Party's Obligations...........................41
5.2 Conditions to Obligations of the Buyer and the Merger Sub........42
5.3 Conditions to Obligations of the Company.........................44
ARTICLE VI TERMINATION..........................................................45
6.1 Termination of Agreement.........................................45
6.2 Amendment........................................................46
6.3 Extension; Waiver................................................46
ARTICLE VII ESCROW AND INDEMNIFICATION..........................................47
7.1 Indemnification..................................................47
7.2 Escrow Fund......................................................48
7.3 Damage Threshold.................................................48
7.4 Escrow Period....................................................48
7.5 Claims Upon Escrow Fund..........................................49
7.6 Objections to Claims.............................................49
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7.7 Resolution of Conflicts and Arbitration..........................50
7.8 Shareholders' Agent..............................................51
7.9 Actions of the Shareholders' Agent...............................52
7.10 Third-Party Claims...............................................52
ARTICLE VIII DEFINITIONS........................................................52
ARTICLE IX MISCELLANEOUS........................................................55
9.1 Press Releases and Announcements.................................55
9.2 No Third Party Beneficiaries.....................................55
9.3 Entire Agreement.................................................55
9.4 Succession and Assignment........................................56
9.5 Counterparts.....................................................56
9.6 Headings.........................................................56
9.7 Notices..........................................................56
9.8 Governing Law....................................................58
9.9 Waivers..........................................................58
9.10 Severability.....................................................58
9.11 Expenses.........................................................59
9.12 Other Remedies...................................................59
9.13 Specific Performance.............................................59
9.14 Construction.....................................................59
9.15 Incorporation of Exhibits and Schedules..........................59
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EXHIBITS
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Exhibit A Form of Confidentiality/Assignment of Inventions Agreement
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Exhibit B Form of Employment Agreement
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Exhibit C Form of Affiliate Agreement
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Exhibit D Form of Shareholder Agreement
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Exhibit E Form of Registration Rights Agreement
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Exhibit F Form of Escrow Agreement
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Exhibit G Form of Opinion of Counsel to the Company
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Exhibit H Form of Tax Opinion of Counsel to the Buyer and the Merger Sub
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Exhibit I Form of Company Tax Certificate
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Exhibit J Form of Opinion of Counsel to the Buyer and the Merger Sub
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Exhibit K Form of Tax Opinion of Counsel to the Company
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Exhibit L Form of Buyer Tax Certificate
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") entered into as of
September 15, 1999 by and among VISUAL NETWORKS, INC., a Delaware corporation
(the "Buyer"), VISUAL ACQUISITIONS TWO, INC., a California corporation and a
wholly-owned subsidiary of the Buyer (the "Merger Sub"), and INVERSE NETWORK
TECHNOLOGY, a California corporation (the "Company"). The Buyer, the Merger Sub
and the Company are referred to herein individually as a "Party" and
collectively as the "Parties."
This Agreement contemplates a merger of the Merger Sub into the Company
in a transaction that will qualify, for federal income tax purposes, as a
reorganization under Section 368(a) of the Internal Revenue Code of 1986 (as
amended, the "Code"). In such merger, the shareholders of the Company will
receive capital stock of the Buyer in exchange for their capital stock of the
Company.
NOW, THEREFORE, in consideration of the representations, warranties,
agreements and covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER.
Upon and subject to the terms and conditions of this Agreement, the
Merger Sub shall merge with and into the Company (with such merger referred to
herein as the "Merger") at the Effective Time. From and after the Effective
Time, the separate corporate existence of the Merger Sub shall cease and the
Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time at which the
Surviving Corporation files an agreement of merger with the requisite officers'
certificates prepared and executed in accordance with the relevant provisions of
the California General Corporation Law ("CGCL") (collectively, the "Certificate
of Merger") with the Secretary of State of the State California. The Merger
shall have the effects specified in this Agreement, the Certificate of Merger
and the applicable provisions of the CGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.2 THE CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Piper & Marbury L.L.P., 1200
Nineteenth Street, N.W., Washington, D.C., commencing at 1:00 p.m. local time on
September 30, 1999, or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby have not been
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satisfied or waived by such date, on such mutually agreed upon later date as
soon as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Closing Date"). If the Closing is consummated, Buyer and Merger Sub will
be deemed to have waived any of the conditions set forth in Article V to the
extent not satisfied at or prior to the Closing.
1.3 ACTIONS AT THE CLOSING.
At the Closing: (a) the Company shall deliver to the Buyer and the
Merger Sub the various certificates, instruments and documents referred to in
Section 5.2; (b) the Buyer and the Merger Sub shall deliver to the Company the
various certificates, instruments and documents referred to in Section 5.3; (c)
the Company and the Merger Sub shall file with the Secretary of State of the
State of California the Certificate of Merger; and (d) the Buyer shall deliver
certificates for the Merger Shares to Boston EquiServ LP as exchange agent (the
"Exchange Agent") in accordance with Section 1.7.
1.4 ADDITIONAL ACTION.
The Surviving Corporation may, at any time after the Effective Time,
take any action, including executing and delivering any document, in the name
and on behalf of either the Company or the Merger Sub, necessary to consummate
the transactions contemplated by this Agreement.
1.5 EFFECT ON CAPITAL STOCK.
(a) Definitions.
"Buyer Common Stock" shall mean the common stock, par value
$0.01 per share, of Visual Networks, Inc.
"Buyer Share Market Value" shall mean the average trading
price on the Nasdaq National Market System for shares of Buyer Common Stock for
the three (3) trading days ending one (1) day immediately prior to the Closing
Date.
"Common Stock Conversion Ratio" shall mean a fraction, the
numerator of which shall be the number of Merger Shares and the denominator of
which shall be the number of Common Stock Equivalents plus the number of Counted
Assumed Warrant Shares.
"Common Stock Equivalents" shall mean the total number of
shares of Company Common Stock outstanding plus the total number of shares to
which holders of outstanding shares of the Company's Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock would be entitled upon
conversion.
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"Company Common Stock" shall mean the common stock, no par
value per share, of Inverse Network Technology, a California corporation.
"Company Preferred Stock" shall mean shares of the Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock.
"Company Shares" shall mean shares of the Company's equity
securities including Company Common Stock, Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock, on an as-converted basis, actually
held by each Company Shareholder.
"Company Shareholder" shall mean the holders of the Company's
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock,
and Company Common Stock.
"Counted Assumed Warrant Shares" shall mean the shares of
Company Common Stock and Company Preferred Stock, on an as-converted basis,
issuable upon exercise of any Warrants.
"Escrow Share Market Value" shall mean the average trading
price on the Nasdaq National Market System for shares of Buyer Common Stock for
the three (3) trading days ending one (1) day immediately prior to the Closing
Date.
"Merger Shares" shall mean the number of shares equal to
19.99% of the outstanding shares of Buyer Commons Stock determined as of the
Closing Date.
"Merger Sub Common Stock" shall mean the common stock, par
value $0.01 per share, of the Merger Sub.
"Series A Conversion Ratio" shall mean the product of (a) 1.5
multiplied by (b) the Common Stock Conversion Ratio.
"Series A Warrant" shall mean the warrant dated January 3,
1997 issued to Venture Lending & Leasing, Inc. by the Company.
(b) At the Effective Time, each share of the Company's
capital stock shall, by virtue of the Merger and without any action on the part
of any Party or the holder of any of the Company's capital stock, automatically
be canceled and extinguished and converted into the right to receive the
following:
(i) each share of the Company Common Stock and
Series B Convertible Preferred Stock shall be converted into a right to receive
a fraction of a share of Buyer Common Stock equal to the Common Stock Conversion
Ratio; and
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(ii) each share of the Company's Series A
Convertible Preferred Stock shall be converted into a right to receive a
fraction of a share of the Buyer Common Stock equal to the Series A
Conversion Ratio.
(c) At the Effective Time, each share of Merger Sub
Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) Notwithstanding the foregoing, no fractional shares
of Buyer Common Stock shall be issued. Such fractional shares shall be converted
into cash as provided in Section 1.9.
(e) Notwithstanding the foregoing, as soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Article VII hereof, the Buyer shall cause to be distributed to the Escrow
Agent a certificate or certificates representing seven and one half percent
(7.5%) of the aggregate number of Merger Shares which shall be registered in the
name of the Escrow Agent as nominees for the holder of Certificates pursuant to
Section 1.7 (the "Escrow Shares"). Such shares shall be beneficially owned by
such holders and shall be held in escrow and shall be available to compensate
the Buyer for certain damages as provided in Article VII. To the extent not used
for such purposes, such shares shall be released, all as provided in Article
VII.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares"
means Company Shares held as of the Effective Time by a Company Shareholder who
has not voted such Company Shares in favor of the adoption of this Agreement and
the Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Chapter 13 of the CGCL and not effectively
withdrawn or forfeited prior to the Effective Time. Notwithstanding anything to
the contrary contained in Section 1.5 above, Dissenting Shares shall not be
converted into or represent the right to receive Merger Shares, unless such
Company Shareholder shall have forfeited his right to appraisal under the CGCL
or withdrawn, with the consent of the Company, his demand for appraisal. If such
Company Shareholder has so forfeited or withdrawn his right to appraisal of
Dissenting Shares, then as of the occurrence of such event, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Shares issuable in respect of
such Company Shares pursuant to Section 1.5.
(b) The Company shall give the Buyer and the
Shareholders' Agent (i) prompt notice of any written demands for appraisal of
any Company Shares, withdrawals of such demands, and any other instruments that
relate to such demands received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for
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appraisal under the CGCL. The Company shall not, except with the prior written
consent of the Buyer, which consent shall not be unreasonably withheld, make
any payment with respect to any demands for appraisal of Company Shares or
offer to settle or settle any such demands.
1.7 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Buyer shall appoint
the Exchange Agent to effect the exchange for the Merger Shares of certificates
that, immediately prior to the Effective Time, represented Company Shares
converted into Merger Shares pursuant to Section 1.5 ("Certificates"). On the
Closing Date, the Buyer shall deliver to the Exchange Agent, in trust for the
benefit of holders of Certificates, a stock certificate (issued in the name of
the Exchange Agent or its nominee) representing the Merger Shares, as described
in Section 1.5. No later than ten (10) business days following the Effective
Time, the Buyer shall cause the Exchange Agent to send a notice and a
transmittal form to each holder of a Certificate advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent such Certificate in exchange for the Merger Shares issuable pursuant to
Section 1.5. Each holder of a Certificate, upon proper surrender thereof to the
Exchange Agent in accordance with the instructions in such notice, shall be
entitled to receive in exchange therefor (subject to any taxes required to be
withheld) the Merger Shares issuable pursuant to Section 1.5 (other than the
Escrow Shares). Until properly surrendered, each such Certificate shall be
deemed for all purposes to evidence only the right to receive the Merger Shares
issuable pursuant to Section 1.5. Holders of Certificates shall not be entitled
to receive certificates for the Merger Shares to which they would otherwise be
entitled until such Certificates are properly surrendered.
(b) If any Merger Shares are to be issued in the name of
a person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance of such
Merger Shares that: (i) the Certificate so surrendered shall be properly
assigned, endorsed or accompanied by appropriate stock powers; (ii) such
transfer shall otherwise be proper; and (iii) the person requesting such
transfer shall pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid. Notwithstanding
the foregoing, neither the Exchange Agent nor any Party shall be liable to a
holder of Company Shares for any Merger Shares issuable to such holder pursuant
to Section 1.5 that are delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, only upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed, shall the
Buyer issue in exchange for such lost, stolen or destroyed Certificate the
Merger Shares issuable in exchange therefor pursuant to Section 1.5. The Board
of Directors of the Buyer may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to submit to the Buyer an affidavit and to give to the Buyer an
indemnity against any claim that may be made against the Buyer with respect to
the Certificate alleged to have been lost, stolen or destroyed. In addition, a
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holder of such lost, stolen or destroyed Certificate may be required by the
Exchange Agent to post a bond in connection therewith.
(d) Promptly following the date that is one year from the
Closing Date, the Exchange Agent shall return to the Buyer all Merger Shares in
its possession, and the Exchange Agent's duties shall terminate. Thereafter,
each holder of a Certificate may surrender such Certificate to the Buyer and,
subject to applicable abandoned property, escheat and similar laws, receive in
exchange therefor the Merger Shares issuable with respect thereto pursuant to
Section 1.5.
1.8 DIVIDENDS.
No dividends or other distributions that are payable to the holders of
record of Buyer Common Stock as of a date on or after the Closing Date shall be
paid to former Company Shareholders entitled by reason of the Merger to receive
Merger Shares until such holders surrender their Certificates in accordance with
Section 1.7. Upon such surrender, the Buyer shall pay or deliver to the persons
in whose name the certificates representing such Merger Shares are issued any
dividends or other distributions that are payable to the holders of record of
Buyer Common Stock as of a date on or after the Closing Date and that were paid
or delivered between the Effective Time and the time of such surrender;
provided, however, that no such person shall be entitled to receive any interest
on such dividends or other distributions.
1.9 FRACTIONAL SHARES.
No certificates or scrip representing fractional Merger Shares shall be
issued to former Company Shareholders upon the surrender for exchange of
Certificates, and such former Company Shareholders shall not be entitled to any
voting rights, rights to receive any dividends or distributions or other rights
as a stockholder of the Buyer with respect to any fractional Merger Shares that
would otherwise be issued to such former Company Shareholders. In lieu of any
fractional Merger Shares that would otherwise be issued, each former Company
Shareholder that would have been entitled to receive a fractional Merger Share
shall, upon proper surrender of such person's Certificates, receive a cash
payment equal to the Buyer Share Market Value, multiplied by the fraction of a
share that such Company Shareholder would otherwise be entitled to receive.
1.10 OPTIONS; WARRANTS AND RESTRICTED STOCK.
(a) As of the Effective Time, all options to purchase
Company Shares issued by the Company pursuant to the Inverse Network Technology
1996 Stock Option Plan (the "Company Stock Option Plan") or pursuant to a
resolution of the Company's Board of Directors or the Compensation Committee
thereof ("Options"), whether vested, unvested or subject to repurchase by the
Company following such exercise, which are outstanding and not exercised
immediately prior to the Effective Time shall become and represent an option to
acquire, on the same terms and conditions as were applicable under such Option
immediately prior to the
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Effective Time, such number of shares of Buyer Common Stock as is equal to the
number of shares of Company Common Stock subject to the unexercised portion of
such Option multiplied by the Common Stock Conversion Ratio (with any fraction
resulting from such multiplication to be rounded down to the next lower whole
number). The exercise price per share of each such assumed Option shall be equal
to the exercise price of such Option immediately prior to the Effective Time,
divided by the Common Stock Conversion Ratio (with any fraction of a cent
resulting from such division to be rounded up to the next higher whole cent).
The term, exercisability (including any acceleration of exercisability as a
result of this transaction), vesting schedule, repurchase provisions, status as
an "incentive stock option" under Section 422 of the Code, if applicable, and
all of the other terms of the Options in effect immediately prior to the
Effective Time and after giving effect to any acceleration of vesting for such
Options as a result of this transaction shall otherwise remain unchanged.
(b) As of the Effective Time, each warrant to purchase
Company Common Stock issued by the Company, other than the Series A Warrant
(each, a "Common Warrant" and collectively with the Series A Warrant, the
"Warrants"), to the extent outstanding and not exercised immediately prior to
the Effective Time, shall become and represent a warrant to acquire, on the same
terms and conditions as were applicable under such Common Warrant immediately
prior to the Effective Time, such number of shares of Buyer Common Stock as is
equal to the number of shares of Company Common Stock subject to the unexercised
portion of such Common Warrant immediately prior to the Effective Time
multiplied by the Common Stock Conversion Ratio (with any fraction resulting
from such multiplication to be rounded down to the next lower whole number). The
exercise price per share of each such assumed Common Warrant shall be equal to
the exercise price of such Common Warrant immediately prior to the Effective
Time, divided by the Common Stock Conversion Ratio (with any fraction of a cent
resulting from such division to be rounded up to the next higher whole cent).
The term and all of the other provisions of each Common Warrant in effect
immediately prior to the Effective Time shall otherwise remain unchanged.
(c) As of the Effective Time, the Series A Warrant, to
the extent outstanding and not exercised immediately prior to the Effective
Time, shall become and represent a warrant to acquire, on the same terms and
conditions as were applicable under such Series A Warrant immediately prior to
the Effective Time, such number of shares of Buyer Common Stock as is equal to
the number of shares of Series A Convertible Preferred Stock subject to the
unexercised portion of such Series A Warrant immediately prior to the Effective
Time multiplied by the Series A Conversion Ratio (with any fraction resulting
from such multiplication to be rounded down to the next lower whole number). The
exercise price per share of each such assumed Series A Warrant shall be equal to
the exercise price of such Series A Warrant immediately prior to the Effective
Time, divided by the Series A Conversion Ratio (with any fraction of a cent
resulting from such division to be rounded up to the next higher whole cent).
The term and all of the other provisions of the Series A Warrant in effect
immediately prior to the Effective Time shall otherwise remain unchanged.
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(d) As soon as practicable after the Effective Time, the
Buyer or the Surviving Corporation shall deliver to the holders of Options and
Warrants appropriate notices setting forth such holders' rights pursuant to such
Options and Warrants, as amended by this Section 1.10, and the agreements
evidencing such Options and Warrants shall continue in effect on the same terms
and conditions (subject to the amendments provided for in this Section 1.10 and
such notice).
(e) The Buyer shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options and Warrants exchanged in accordance with
this Section 1.10. Promptly after the Closing Date, the Buyer shall file a
Registration Statement on Form S-8 (or any successor form) under the Securities
Act of 1933 (as amended, the "Securities Act") with respect to all shares of
Buyer Common Stock subject to such Options, and shall use its best efforts to
maintain the effectiveness of such Registration Statement for so long as such
Options remain outstanding.
(f) The Company shall use commercially reasonable efforts
to obtain, prior to the Closing, the consent from each holder of an Option or
Warrant to the assumption of such Option or Warrant pursuant to this Section
1.10.
(g) All Company Shares which are subject to restrictions
(the "Company Restricted Stock") shall be converted into shares of the Buyer
Common Stock pursuant to the terms of Section 1.5 hereof, and on and after the
Effective Date such Buyer Common Stock shall continue to be subject to all
terms, conditions and restrictions applicable to the Company Restricted Stock
prior to the Effective Date.
1.11 CERTIFICATE LEGENDS.
The shares of Buyer Common Stock to be issued pursuant to this Article
I shall not have been registered and shall be characterized as "restricted
securities" under the federal securities laws, and under such laws such shares
may be resold without registration under the Securities Act, only in certain
limited circumstances. Each certificate evidencing shares of Buyer Common Stock
to be issued pursuant to this Article I shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN
OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Upon delivery to the Buyer of a legal opinion by counsel to the holder of such
certificate, reasonably satisfactory in form and substance to the Buyer, stating
that the shares of
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Buyer Common Stock represented by such certificate may be offered, sold and
delivered in the United States without restrictions under the United States
securities laws, such certificate shall be reissued without the foregoing
legend.
1.12 ARTICLES OF INCORPORATION.
At the Effective Time, the Articles of Incorporation of Merger Sub, as
in effect immediately prior the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by CGCL; provided, however, that Section 1 of the Articles of Incorporation of
the Surviving Corporation shall be amended to read as follows: "The name of the
Corporation is Inverse Network Technology."
1.13 BY-LAWS.
The By-laws of the Surviving Corporation shall be the same as the
By-laws of the Merger Sub immediately prior to the Effective Time.
1.14 DIRECTORS AND OFFICERS.
The directors of the Merger Sub shall become the directors of the
Surviving Corporation after the Effective Time. The officers of the Merger Sub
shall become the officers of the Surviving Corporation after the Effective Time,
retaining their respective positions.
1.15 NO FURTHER RIGHTS.
All shares of Buyer Common Stock issued upon the surrender for exchange
of shares of Company Shares in accordance with the terms hereof (including any
cash paid in lieu of fractional shares) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Company Shares.
1.16 CLOSING OF TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of Company Shares shall thereafter be made. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent, they shall be canceled and exchanged for Merger Shares in
accordance with Section 1.5, subject to applicable law in the case of Dissenting
Shares.
1.17 TAX AND ACCOUNTING CONSEQUENCES.
It is intended by the parties hereto that the Merger shall (a)
constitute a reorganization within the meaning of Section 368 of the Code and
(b) qualify for accounting treatment as a pooling of interests, and that this
Agreement constitutes a plan of reorganization within the meaning of the Code.
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<PAGE> 16
1.18 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Buyer and Merger Sub,
the officers and directors of the Company and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Merger Sub
that, as of the date hereof, the statements contained in this Article II are
true and correct, except as set forth in the letter provided by the Company to
the Buyer and the Merger Sub (the "Disclosure Letter").
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of California. The Company
is duly qualified to conduct business and is in corporate good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect on the Company. The Company has the corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company has furnished to the Buyer true and
complete copies of its Articles of Incorporation and By-laws, each as amended
and as in effect on the date hereof (hereinafter "Charter" and "By-laws,"
respectively). The Company is not in default under or in violation of any
provision of its Charter or By-laws, each as amended to date.
2.2 CAPITALIZATION.
The authorized capital stock of the Company consists of (a) Twenty
Million (20,000,000) shares of Company Common Stock, of which Seven Million, Six
Hundred Sixty-Two Thousand, Seven Hundred Seventy-Nine (7,662,779) shares are
issued and outstanding; (b) Two Million, Five Hundred Fifteen Thousand, Seven
Hundred Eighty-Nine (2,515,789) shares of Series A Convertible Preferred Stock,
of which Two Million, Five Hundred Thousand (2,500,000) shares are issued and
outstanding; and (c) Five Million, Three Hundred Twelve Thousand, Ninety-Two
(5,312,092) shares of Series B Convertible Preferred Stock, all of which are
issued and outstanding. No shares of the capital stock of the Company are held
in the treasury of the Company. Section 2.2 of the Disclosure Letter sets forth
a complete and accurate list of (a) all shareholders of the Company, indicating
the type and number of Company Shares held by each
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shareholder and (b) all holders of Options and Warrants, indicating the type
and number of Company Shares subject to each Option and Warrant and the
exercise price thereof. All of the Options and Warrants have been granted
pursuant to a form of agreement or other instrument previously provided to the
Buyer. All of the issued and outstanding Company Shares are, and all Company
Shares that may be issued upon exercise of Options and Warrants will be, duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. There are no declared or accrued but unpaid dividends with
regard to any issued and outstanding Company Shares. Holders of issued and
outstanding Company Shares have no basis for asserting rights to rescind the
purchase of any such Company Shares. Other than the Options and Warrants, there
are no outstanding or authorized options, warrants, rights, calls, convertible
instruments, agreements or commitments to which the Company is a party or which
are binding upon the Company providing for the issuance, disposition or
acquisition of any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to the
Company. Except for the Shareholder Agreements, the Affiliate Agreements and as
set forth on Section 2.2 of the Disclosure Letter, there are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares (a) between or
among the Company and any of its shareholders and (b) to the Company's
knowledge, between or among any of the Company's shareholders. All of the
issued and outstanding Company Shares were issued in compliance with applicable
federal and state securities laws.
2.3 AUTHORIZATION OF TRANSACTION.
Subject to the Requisite Shareholder Approval of the Merger and this
Agreement, the Company has the corporate power and authority to execute and
deliver this Agreement, the Escrow Agreement, the Registration Rights Agreement,
the Employment Agreements and the other documents, agreements, certificates and
other instruments to be executed, delivered and performed in connection with the
transactions contemplated by this Agreement (collectively the "Transaction
Agreements") to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Agreements to
which the Company is a party (the "Company Transaction Agreements") and, subject
to the adoption of this Agreement and the approval of the Merger by: (a) holders
of not less than two-thirds of the outstanding shares of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock, voting
together as a single class, and (b) a majority of the votes represented by the
outstanding Company Common Stock, in each case, entitled to vote on this
Agreement and the Merger, voting in accordance with the CGCL and the Charter of
the Company (the "Requisite Shareholder Approval"), the performance by the
Company of this Agreement and the other Company Transaction Agreements, and the
consummation by the Company of the transactions contemplated and hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company. This Agreement and the other Company Transaction Agreements have
been duly and validly executed and delivered by the Company (or, in the case of
Company Transaction Agreements to be executed and delivered at Closing, when
executed and delivered will be duly and validly executed and delivered) and,
assuming the due authorization, execution and delivery by the Buyer and the
Merger Sub, constitute (or, in the case of Transaction
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<PAGE> 18
Agreements to be executed and delivered at Closing, when executed and delivered
will constitute) a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court
before which any proceeding therefor may be brought.
2.4 NONCONTRAVENTION.
Subject to: (a) receipt of the Requisite Shareholder Approval; (b)
compliance with the applicable requirements of the Securities Act and any
applicable state securities laws; and (c) the filing of the Certificate of
Merger as required by the CGCL, neither the execution and delivery of this
Agreement and the other Company Transaction Agreements by the Company, nor the
consummation by the Company of the transactions contemplated hereby or thereby,
will: (i) conflict with or violate any provision of the Charter or By-laws of
the Company; (ii) require on the part of the Company any filing with, or any
permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"); (iii) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Company is a
party or by which the Company is bound or to which any of its assets is subject;
(iv) result in the imposition of any Security Interest upon any assets of the
Company; or (v) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of its properties or assets other than
such conflicts, violations, defaults, cancellations or accelerations referred to
in clauses (i) through (v) hereof which would not have a Material Adverse Effect
on the Company. For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge, or other lien (whether
arising by contract or by operation of law), other than: (a) mechanic's,
materialmen's, and similar liens; (b) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar legislation;
and (c) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the ordinary course of business consistent with
past custom and practice (including with respect to frequency and amount)
("Ordinary Course of Business") of the Company and not material to the Company.
2.5 SUBSIDIARIES.
The Company does not have any direct or indirect subsidiaries or any
other equity interest in any other firm, corporation, partnership, joint
venture, association or other business organization.
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2.6 FINANCIAL STATEMENTS.
The Company has provided to the Buyer (i) the audited balance sheets
and statements of operations, changes in shareholders' equity and cash flows for
the years ended December 31, 1996, December 31, 1997 and December 31, 1998, and
(ii) the unaudited balance sheet, statement of operations and statement of cash
flows as of and for the eight months ended August 31, 1999 (the "Most Recent
Period"). Such financial statements (collectively, the "Financial Statements")
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods covered thereby, fairly present the financial condition, results of
operations and cash flows of the Company as of the respective dates thereof and
for the periods referred to therein and are consistent with the books and
records of the Company, provided, however, that the Financial Statements
referred to in clause (ii) above are subject to normal recurring year-end
adjustments (which will not in the aggregate be material) and do not include
footnotes.
2.7 ABSENCE OF CERTAIN CHANGES.
Since August 31, 1999, the Company has conducted its business in the
ordinary course consistent with past practice and there has not occurred any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in any Material Adverse
Effect (as defined) on the Company.
2.8 UNDISCLOSED LIABILITIES.
The Company has no liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due or to
become due), except for; (a) liabilities accrued or reserved against on the
August 31, 1999, unaudited consolidated balance sheet of the Company ("Most
Recent Balance Sheet"); (b) liabilities which have arisen since August 31, 1999,
in the Ordinary Course of Business and which are similar in nature and amount to
the liabilities which arose during the comparable period of time in the
immediately preceding fiscal period; (c) liabilities incurred in the Ordinary
Course of Business which are consistent with past practice and are not required
by GAAP to be reflected on a balance sheet; (d) up to an aggregate of $600,000
incurred in connection with the preparation and execution of the Agreement and
the Transaction Agreements and in anticipation of the Merger and the
transactions contemplated hereby for reasonable legal, accounting and
transaction costs, plus the fees and expenses of the Company's investment
banker, Sequoia Partners, Inc., pursuant to the engagement letter that has been
delivered to the Buyer prior to the date hereof (collectively, "Transaction
Costs"); (e) liabilities which individually or in the aggregate would not result
in a Material Adverse Effect on the Company; and (f) liabilities set forth on
Section 2.8 of the Disclosure Letter.
2.9 TAX MATTERS.
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<PAGE> 20
(a) The Company has filed all Tax Returns that it was
required to file and all such Tax Returns were correct and complete in all
material respects. The Company has paid or will pay all Taxes due on or before
the Closing Date, regardless of whether shown on any such Tax Returns, except
such as are being contested in good faith by appropriate proceedings (to the
extent any such proceedings are required) and with respect to which the Company
is maintaining reserves adequate for their payment. The accrued but unpaid
Taxes of the Company for tax periods through the date of the Most Recent
Balance Sheet do not exceed the accruals and reserves for Taxes (other than
deferred Taxes) set forth on the Most Recent Balance Sheet. All Taxes
attributable to the period January 1, 1999 through the Closing Date are
attributable to the conduct by the Company of its operations in the Ordinary
Course of Business. The Company has no actual or potential liability for any
Tax obligation of any taxpayer (including without limitation any affiliated
group of corporations or other entities that included the Company during a
prior period) other than the Company. All Taxes that the Company is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity,
except such as are being contested in good faith by appropriate proceedings (to
the extent any such proceedings are required) and with respect to which the
Company is maintaining reserves adequate for their payment.
(i) For purposes of this Agreement, "Taxes"
means all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll and franchise taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof.
(ii) For purposes of this Agreement, "Tax
Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company since
December 31, 1996. No examination or audit of any Tax Returns of the Company by
any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. The Company has not waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to a tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within
the meaning of Section 341(f) of the Code and none of the assets of the Company
are subject to an election under Section 341(f) of the Code. The Company has
not been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable
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<PAGE> 21
period specified in Section 897(c)(l)(A)(ii) of the Code. The Company is not a
party to any Tax allocation or sharing agreements.
(d) The Company is not and has never been a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code).
2.10 ASSETS.
(a) Except for assets subject to leases or contracts
referred to in Section 2.13 or Section 2.14, the Company has good and valid
title to all tangible assets necessary for the conduct of its businesses as
presently conducted and as presently proposed to be conducted. Each such
tangible assets is suitable for the purposes for which it presently is used. No
asset of the Company (tangible or intangible) is subject to any Security
Interest.
(b) The inventories (net of any reserves) shown on the
Financial Statements or thereafter acquired by the Company, consisted of items
of a quantity and quality usable or salable in the Ordinary Course of Business.
Since August 31, 1999, the Company has continued to replenish inventories in a
normal and customary manner consistent with past practices. The Company has not
received notice that it will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality and at a
reasonable price and upon reasonable terms and conditions, the supplies or
component products required for the manufacture, assembly or production of its
products. The value at which inventories are carried reflect the inventory
valuation policy of the Company, which is consistent with its past practice and
in accordance with GAAP applied on a consistent basis.
(c) Subject to any reserves set forth in the Financial
Statements, the accounts receivable shown on the Financial Statements represent
and will represent bona fide claims against debtors for sales and other charges,
and are not subject to discount except for normal cash and immaterial trade
discounts. No reserves for doubtful accounts and allowances were necessary for
the periods presented by the Financial Statements.
2.11 OWNED REAL PROPERTY.
The Company does not own any real property.
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<PAGE> 22
2.12 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed under the issued
United States patents, patent applications, trademarks (registered or
unregistered), trade names, service marks (registered or unregistered), and
copyrights (registered or unregistered) that are listed below, and owns, or has
a license thereto from the owner to use, the trade secrets, schematics,
technology, know-how, computer software programs or applications and tangible
or intangible proprietary information or material (excluding packaged
commercially available licensed software programs sold to the public)
(collectively, "Intellectual Property") that are needed, to the Company's
knowledge, to conduct its business as currently conducted or planned to be
conducted.
(i) Section 2.12(a)(i) of the Disclosure Letter
lists all patents, patent applications, trademarks, copyrights, trade names and
service marks owned by the Company and all trademarks, trade names and service
marks used in the business of the Company, and that section lists the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any such application for such issuance or registration
has been filed.
(ii) Section 2.12(a)(ii) of the Disclosure
Letter lists all written licenses, sublicenses and other agreements to which
the Company is a party and pursuant to which any person is licensed under any
Intellectual Property rights of the Company, except such licenses, sublicenses
or other agreements with end-users that grant non-exclusive rights to use a
Company product in accordance with the Company's standard form of end-user
license agreement.
(iii) Section 2.12(a)(iii) of the Disclosure
Letter lists all written licenses, sublicenses and other agreements as to which
the Company is a party and pursuant to which the Company is licensed under any
third party patents, trademarks, service marks, trade secrets or copyrights,
including software ("Third Party Intellectual Property Rights") which are
needed in the business of the Company or which are needed to allow the Company
to sell any existing product or provide any existing service of the Company,
excluding packaged commercially available licensed software programs sold to
the public.
(iv) Section 2.12(a)(iv) of the Disclosure
Letter lists all material written agreements or other arrangements under which
the Company has provided or agreed to provide source code of any Company
product to any third party, except for software development kits provided to
agent integration providers.
The Company has made available to the Buyer correct and complete copies
of all such patents, registrations, applications, licenses, sublicenses and
agreements as amended to date. The Company is not a party to any oral license,
sublicense or agreement which, if reduced to written form, would be required to
be listed in Section 2.12 of the Disclosure Letter under the terms of this
Section 2.12(a).
(b) With respect to each item of Intellectual Property that
the Company owns (i) subject to such rights as have been granted by the Company
under license agreements entered
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into by the Company (copies of which previously have been delivered to the
Buyer), the Company possesses all right, title and interest in and to such item
(free and clear of any liens or encumbrances) and has sole and exclusive rights
(and is not contractually obligated to pay any compensation to any third party
in respect thereof) and (ii) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction. With respect to each item
of Third Party Intellectual Property Rights: (i) the license, sublicense or
other agreement covering such item is legal, valid, binding, enforceable and in
full force and effect with respect to the Company party thereto, and to the
Company's knowledge is legal, valid, binding, enforceable and in full force and
effect with respect to each other party thereto, except as enforcement may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court
before which any proceeding therefor may be brought; (ii) the Company is not in
material breach or default under, and to the Company's knowledge, no other
party is in material breach or default under, any such license or other
agreement and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification or
acceleration thereunder; (iii) the underlying item of Third Party Intellectual
Property is not subject to any outstanding judgment, order, decree, stipulation
or injunction to which the Company is a party or has been specifically named,
nor to the Company's knowledge subject to any other outstanding judgment,
order, decree, stipulation, or injunction; and (iv) no license or other fee is
payable upon any transfer or assignment of such license, sublicense or other
agreement.
(c) The Company (i) has not been served in any suit,
action or proceeding which involves a claim of infringement or misappropriation
of any Intellectual Property right of any third party and (ii) has not received
any written notice alleging any such claim of infringement or misappropriation.
The Company has previously delivered to the Buyer correct and complete copies
of all such suits, actions or proceedings or written notices to the extent the
Company is not prohibited from disclosing the same under applicable court
orders. The manufacturing, marketing, licensing or sale of the products or
service offerings of the Company do not currently infringe, and have not within
the past five years infringed, any Intellectual Property right of any third
party; and to the Company's knowledge, the Intellectual Property rights of the
Company are not being infringed by activities, products or services of any
third party.
(d) The execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will
neither cause the Company to be in violation or default under any license,
sublicense or agreement, nor terminate nor modify nor entitle any other party
to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement, nor limit in any way the Company's ability to
conduct its business or use or provide the use of the Intellectual Property or
Third Party Intellectual Property Rights, except to the extent any such
violation or default or other action would not result in a Material Adverse
Effect on the Company.
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<PAGE> 24
(e) The Company has taken reasonable security measures
to safeguard and maintain the secrecy, confidentiality and value of, and its
property rights in, all Intellectual Property. All officers, employees and
consultants of the Company or any of its subsidiaries who have access to
proprietary information or Intellectual Property have executed and delivered to
the Company or any of its subsidiaries an agreement regarding the protection of
proprietary information and the assignment to the Company or any of its
subsidiaries of all Intellectual Property arising from the services performed
for the Company or any of its subsidiaries by such persons. No current or prior
officers, employees or consultants of the Company or any of its subsidiaries
have made any written claim to any ownership interest in any material
Intellectual Property as a result of having been involved in the development of
such property while employed by or consulting to the Company or any of its
subsidiaries, or otherwise. Except as set forth in Section 2.12 of the
Disclosure Letter, all of the Intellectual Property has been developed by
employees of the Company or any of its subsidiaries, within the scope of their
employment.
(f) The Company has the right, title and interest in and
to all material software development tools, not entirely developed internally,
used by the Company in the development of any of the computer software included
in the Intellectual Property, excluding packaged commercially available
licensed software programs, operating systems and development tools sold or
made available to the public.
(g) As of the date hereof and to the Company's
knowledge, there are no defects in the Company's commercially available
software products, and there are no errors in any documentation,
specifications, manuals, user guides, promotional material, technical
documentation, drawings, flow charts, diagrams, source language statements, and
demo disks related to, associated with or used or produced in the development
of the Company's commercially available software products, which defects or
errors would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. The Company's commercially available
products operate as represented in the specifications, manuals, user guides,
promotional materials and demo disks for such products, except where the
failure to so operate would not have a Material Adverse Effect on the Company.
For all products sold by the Company since its inception, the occurrence in or
use by the commercially available products of dates on or after January 1, 2000
(the "Millennial Dates") will not adversely affect the performance of the
software with respect to date dependent data, computations, output or other
functions (including without limitation, calculating, computing and sequencing)
and the software will create, sort and generate output data related to or
including Millennial Dates without errors or omissions, provided, however, in
each case, each software or hardware product used in conjunction with the
computer software products are also able to create, generate, sort, output and
otherwise process Millennial Dates.
(h) No government funding or university or college
facilities were used in the development of the Company's commercially available
products and the software was not developed pursuant to any contract or other
agreement with any person or entity.
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2.13 REAL PROPERTY LEASES.
Section 2.13 of the Disclosure Letter lists all real property leased or
subleased to the Company. The Company has delivered to the Buyer correct and
complete copies of the leases and subleases (as amended to date) listed in
Section 2.13 of the Disclosure Letter. With respect to each lease and sublease
listed in Section 2.13 of the Disclosure Letter:
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect with respect to the Company, to the
Company's knowledge is legal, valid, binding, enforceable and in full force and
effect with respect to each other party thereto, and will continue to be so
following the Closing in accordance with the terms thereof as in effect prior
to the Closing, in each case except as enforcement may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought;
(b) the Company is not in breach or default under any
such lease or sublease, to the Company's knowledge no other party to the lease
or sublease is in breach or default, and, to the Company's knowledge, no event
has occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(c) there are no disputes, oral agreements or
forbearance programs in effect as to the lease or sublease; and
(d) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold.
2.14 CONTRACTS.
Section 2.14 of the Disclosure Letter lists the following written
arrangements (including without limitation written agreements) to which the
Company is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $25,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the licensing or distribution of software, products or other
personal property or for the furnishing or receipt of services: (i) which calls
for performance over a period of more than one year; (ii) which involves more
than the sum of $25,000; or (iii) in which the Company has granted rights to
license, sublicense or copy, "most favored nation" pricing provisions or
exclusive marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum
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quantity of goods or services or has agreed to purchase goods or services
exclusively from a certain party;
(c) any written arrangement establishing a partnership
or joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $25,000 or under which it has imposed
(or may impose) a Security Interest on any of its assets, tangible or
intangible;
(e) the form of any written arrangement concerning
confidentiality or noncompetition, including a list of all parties to such
agreements;
(f) any written arrangement involving any of the Company
Shareholders or their affiliates, as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") ("Affiliates");
(g) any written arrangement under which the consequences
of a default or termination could have a Material Adverse Effect on the
Company;
(h) any other written arrangement (or group of related
written arrangements) either involving more than $50,000 or not entered into in
the Ordinary Course of Business;
(i) any written arrangement under which the Company
provides maintenance or support services to any third party with regard to the
Company's products and any written arrangement containing a commitment by the
Company to provide support for any such products for more than one year from
the date of this Agreement;
(j) any written arrangement by which the Company agrees
to make available any product; and
(k) any other material contract or agreement, as such
terms are defined in Regulation S-K promulgated under the Securities Act to
which the Company is a party.
The Company has delivered to the Buyer a correct and complete copy of
each written arrangement (or, in the case of confidentiality and/or
noncompetition arrangements, the forms of such agreement(s)) (as amended to
date) listed in Section 2.14 of the Disclosure Letter. With respect to each
written arrangement so listed: (i) the written arrangement is legal, valid,
binding and enforceable and in full force and effect with respect to the Company
and, to the Company's knowledge the written arrangement is legal, valid, binding
and is enforceable and in full force and effect with respect to each other party
thereto, in each case except as enforcement may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally, and except that
the
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availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought; (ii) the written arrangement will continue to be legal, valid, binding
and enforceable and in full force and effect immediately following the Closing
in accordance with the terms thereof as in effect prior to the Closing and does
not require the consent of any party to the transactions contemplated hereby;
and (iii) the Company is not in breach or default, to the Company's knowledge,
no other party thereto is in breach or default, and, to the Company's
knowledge, no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement. The Company is not a party to any
oral contract, agreement or other arrangement which, if reduced to written
form, would be required to be listed in Section 2.14 of the Disclosure Letter
under the terms of this Section 2.14.
2.15 POWERS OF ATTORNEY.
There are no outstanding powers of attorney executed on behalf of the
Company.
2.16 INSURANCE.
Section 2.16 of the Disclosure Letter lists each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company is a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past year. Section 2.16 of the Disclosure Letter lists each person or entity
required to be listed as an additional insured under each such policy. Each such
policy is in full force and effect and by its terms and with the payment of the
requisite premiums thereon will continue to be in full force and effect
following the Closing.
The Company is not in breach or default (including with respect to the
payment of premiums or the giving of notices) under such policy, and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration, under
such policy; and the Company has not received any notice from the insurer
disclaiming coverage or reserving rights with respect to a particular claim or
such policy in general. The Company has not incurred any material loss, damage,
expense or liability covered by any such insurance policy for which it has not
properly asserted a claim under such policy. The Company is covered by insurance
in scope and amount customary and reasonable for the businesses in which it is
engaged.
2.17 LITIGATION.
(a) Section 2.17(a) of the Disclosure Letter identifies, and
contains a description of (i) any unsatisfied judgment, order, decree,
stipulation or injunction and (ii) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Company, any officer, director, employee or agent of
the Company (in such person's capacity as an officer, director, employee or
agent of the
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<PAGE> 28
Company, and not personally) is or was (from the Company's incorporation to and
including the date hereof) a party or, to the knowledge of the Company, is
threatened to be made a party. Other than as set forth in Section 2.17(a) of
the Disclosure Letter, none of the complaints, actions, suits, proceedings,
hearings, and investigations set forth in Section 2.17(a) of the Disclosure
Letter, if determined adversely to the Company, would reasonably be expected to
have a Material Adverse Effect on the Company.
(b) Section 2.17(b) of the Disclosure Letter identifies any
agreement or other document or instrument settling any claim, complaint, action,
suit or other proceeding, or a threat of any such claim, complaint, action, suit
or other proceeding, against the Company.
2.18 EMPLOYEES.
The Company has provided to the Buyer a written list of all full-time
employees (each, an "employee") of the Company, along with the position and the
current rate of compensation of each such person on an annual basis. Each such
employee has entered into a confidentiality/assignment of inventions agreement
with the Company in substantially the form attached hereto as Exhibit A, which
has previously been delivered (with copies thereof having been made available)
to the Buyer. No key employee or group of employees has informed the Company of
any plans to terminate employment with the Company within the next six months.
The Company is not a party to or bound by any collective bargaining agreement,
nor has it experienced any material strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has no knowledge
of any organizational effort made or threatened, either currently or within the
past two years, by or on behalf of any labor union with respect to employees of
the Company. The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting wages, hours, occupational
safety, health and employment practices, and discrimination in employment terms
and conditions, and is not engaged in any unfair labor practice. There are no
pending claims against the Company under any workers compensation plan or policy
or for long term disability. The Company has no material obligations under COBRA
with respect to any former employees or beneficiaries thereunder. There are no
proceedings pending or, to the knowledge of the Company, threatened, between the
Company and its employees, which proceedings have or would reasonably be
expected to have a Material Adverse Effect on the Company. In addition, the
Company has provided all employees, with all relocation benefits, stock options,
bonuses and incentives, and all other compensation that such employee has earned
up through the date of this Agreement or that such employee was otherwise
promised in his or her employment agreements with the Company.
2.19 EMPLOYEE BENEFITS.
(a) Section 2.19(a) of the Disclosure Letter contains a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, or any ERISA Affiliate. For purposes of this
Agreement, "Employee Benefit Plan" means any "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security
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Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any
entity which is a member of: (i) a controlled group of corporations (as defined
in Section 414(b) of the Code); (ii) a group of trades or businesses under
common control (as defined in Section 414(c) of the Code); or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes the
Company. Complete and accurate copies of: (i) all Employee Benefit Plans which
have been reduced to writing; (ii) written summaries of all unwritten Employee
Benefit Plans; (iii) all related trust agreements, insurance contracts and
summary plan descriptions; and (iv) all annual reports filed on IRS Form 5500,
5500C or 5500R for the plan years since the Company's inception for each
Employee Benefit Plan which is a pension plan (as defined in Section 3(2) of
ERISA), have been made available to the Buyer. To the Company's knowledge, each
Employee Benefit Plan has been administered in accordance with its terms and
each of the Company, and the ERISA Affiliates has met its obligations with
respect to such Employee Benefit Plan and has made all required contributions
thereto within the timeframes required by applicable law and the terms of such
Employee Benefit Plans. The Company and all Employee Benefit Plans are in
compliance with the currently applicable provisions of ERISA, the Code and the
regulations thereunder.
(b) There are no investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or
claims to benefits under any Employee Benefit Plan that could give rise to any
material liability.
(c) All the Employee Benefit Plans that are intended to
be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified as of the date hereof and the plans and the trusts
related thereto are exempt from federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, or the remedial amendment period for such
plan has not expired, no such determination letter has been revoked and
revocation has not been threatened, and no fact exists which could adversely
affect the qualified status of any such plan, except to the extent that the
failure to be so qualified can be corrected under Revenue Procedures 98-22 and
any successor thereto without material liability to the Company.
(d) Neither the Company nor any ERISA Affiliate has ever
maintained an Employee Benefit Plan subject to Section 412 of the Code or Title
IV of ERISA.
(e) At no time has the Company or any ERISA Affiliate
been obligated to contribute to any "multi-employer plan" (as defined in
Section 4001(a)(3) of ERISA).
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<PAGE> 30
(f) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any employee
of the Company (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code and insurance conversion privileges under federal or state law.
(g) To the Company's knowledge, no act or omission has
occurred and no condition exists with respect to any Employee Benefit Plan
maintained by the Company or any ERISA Affiliate that would subject the Company
or any ERISA Affiliate to any material fine, penalty, tax or liability of any
kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated
with, or related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) To the Company's knowledge, no Employee Benefit
Plan, summary plan description or other written communication distributed to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan at any time, without the consent of any person, and
without incurring any material liability to the Company.
(j) Section 2.19(j) of the Disclosure Letter discloses
each: (i) agreement with any director, executive officer or other key employee
of the Company: (A) the benefits of which are contingent, or the terms of which
are altered, upon the occurrence of a transaction involving the Company of the
nature of any of the transactions contemplated by this Agreement; (B) providing
any term of employment or compensation guarantee; or (C) providing severance
benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan or
arrangement under which any person may receive payments from the Company that
may be subject to the tax imposed by Section 4999 of the Code or included in
the determination of such person's "parachute payment" under Section 280G of
the Code; and (iii) agreement or plan binding the Company, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan, or any Employee
Benefit Plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
2.20 ENVIRONMENTAL MATTERS.
(a) The Company has complied with all applicable
Environmental Laws. There is no pending or threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or,
to the knowledge of the Company, any investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Company. For purposes of this Agreement, "Environmental Law" means any
federal, state or local law, statute, rule or regulation relating to the
environment or occupational health and safety,
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including without limitation any statute, regulation or order pertaining to:
(i) treatment, storage, disposal, generation and transportation of industrial,
toxic or hazardous substances or toxic or hazardous waste; (ii) air, water and
noise pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants or
contaminants; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi)
storage tanks, vessels and containers; (vii) underground and other storage
tanks or vessels, abandoned, disposed or discarded barrels, containers and
other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
toxic or hazardous substances or oil or petroleum products or toxic or
hazardous waste. As used above, the terms "release" and "environment" shall
have the meaning set forth in the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA").
(b) The Company has not released any Materials of
Environmental Concern into the environment at any parcel of real property or
any facility during the time when such real property or facility was leased,
operated or controlled by the Company. The Company is not aware of any other
releases of Materials of Environmental Concern that could reasonably be
expected to have an impact on the real property or facilities owned, leased,
operated or controlled by the Company. For purposes of this Agreement,
"Materials of Environmental Concern" means any pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), hazardous wastes
(as such terms are defined under the federal Resources Conservation and
Recovery Act), toxic materials, oil or petroleum and petroleum products, or any
other material subject to regulation under any Environmental Law.
(c) The Company is not aware of any environmental
reports, investigations and audits relating to premises currently or previously
leased or operated by the Company (whether conducted by or on behalf of the
Company or a third party, and whether done at the initiative of the Company or
directed by a Governmental Entity or other third party) being issued or
conducted during the past five years.
2.21 LEGAL COMPLIANCE; RESTRICTIONS ON BUSINESS ACTIVITIES.
The Company and the conduct and operations of its business are in
compliance with each law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity, which
(a) affects or relates to this Agreement or the transactions contemplated hereby
or (b) is applicable to the Company or its business, except for any violation of
or default which would not reasonably be expected to have a Material Adverse
Effect on the Company. There is no agreement, judgment, injunction, order or
decree binding upon the Company which has or would reasonably be expected to
have the effect of prohibiting or materially impairing any current or future
business practice of the Company as currently contemplated by the Company, any
acquisition of property of the Company or the conduct of
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<PAGE> 32
business by the Company as currently conducted or as proposed to be conducted
by the Company.
2.22 PERMITS.
Section 2.22 of the Disclosure Letter sets forth a list of all permits,
licenses, registrations, certificates, orders or approvals from any Governmental
Entity (including without limitation those issued or required under applicable
export laws or regulations) ("Permits") issued to or held by the Company. Such
listed Permits are the only Permits that are required for the Company to conduct
its business as presently conducted, except for those the absence of which would
not have a Material Adverse Effect on the Company. Each such Permit is in full
force and effect and, to the knowledge of the Company, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect following the Closing.
2.23 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES.
No Affiliate of the Company: (a) owns any property or right, tangible
or intangible, which is used in the business of the Company; (b) has any claim
or cause of action against the Company; or (c) owes any money to the Company.
Section 2.23 of the Disclosure Letter describes any transactions or
relationships between the Company and any Affiliate thereof which are reflected
in the Financial Statements.
2.24 FEES.
Except as disclosed in Section 2.24 of the Disclosure Letter, the
Company has no liability or obligation to pay any fees or commissions to any
broker, investment banking firm, finder or agent with respect to the
transactions contemplated by this Agreement.
2.25 BOOKS AND RECORDS.
The minute books and other similar records of the Company contain true
and complete records of all material actions taken at any meetings of the
Company's shareholders, Board of Directors or any committee thereof and of all
written consents executed in lieu of the holding of any such meeting through
September 1, 1999. The Company has not taken any action during the period
beginning on September 1, 1999 through the date hereof, the result of which
would be likely to have a Material Adverse Effect on the Company. The books and
records of the Company accurately reflect in all material respects the assets,
liabilities, business, financial condition and results of operations of the
Company and have been maintained in accordance with good business and
bookkeeping practices.
2.26 COMPANY ACTION.
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The Board of Directors of the Company, at a meeting duly called and
held, has by the unanimous vote of all directors: (a) determined that the Merger
is fair and in the best interests of the Company and its shareholders; (b)
adopted this Agreement in accordance with the provisions of the CGCL; and (c)
directed that this Agreement and the Merger be submitted to the Company
Shareholders for their adoption and approval and resolved to recommend that
Company Shareholders vote in favor of the adoption of this Agreement and the
approval of the Merger.
2.27 CUSTOMERS AND SUPPLIERS.
As of the date hereof, no customer which individually accounted for
more than 5% of the Company's gross revenues during the 12 month period
preceding the date hereof and no supplier of the Company has canceled or
otherwise terminated, or made any written threat to the Company to cancel or
otherwise terminate its relationship with the Company or has at any time on or
after December 31, 1998, decreased materially its services or supplies to the
Company in the case of any such supplier, or its usage of these services or
products of the Company in the case of such customer, and to the Company's
knowledge, no supplier or customer has indicated either orally or in writing
that it will cancel or otherwise terminate its relationship with the Company or
decrease materially its services or supplies to the Company or its usage of the
services or products of the Company, as the case may be. The Company has not
engaged in any fraudulent conduct with respect to any customer or supplier of
the Company.
2.28 POOLING OF INTERESTS.
To the Company's knowledge, neither the Company nor any of its
Affiliates has taken or agreed to take any action that could prevent Buyer from
accounting for the business combination to be effected by the Merger as a
"pooling of interests" in accordance with GAAP. The Company has made no
acquisitions.
2.29 RESTRICTIONS ON BUSINESS ACTIVITIES.
Except as disclosed in Section 2.29 of the Disclosure Letter, there is
no agreement, judgment, injunction, order or decree binding upon the Company or
its properties (including, without limitation, their intellectual properties)
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any acquisition of property by the Company or the conduct
of any business by the Company, including any exclusive distribution or
licensing agreements.
2.30 CERTAIN PAYMENTS.
To the Company's knowledge, neither the Company nor any director,
officer, agent, or employee of the Company or any other person or entity
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person or entity, private or public,
regardless of form, whether in money, property, or services: (1) to obtain
favorable treatment in
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<PAGE> 34
securing business; (2) to pay for favorable treatment for business secured; (3)
to obtain special concessions or for special concessions already obtained, for
or in respect of the Company or any Affiliate of the Company; or (4) in
violation of any federal, state, local, municipal, foreign or other
constitution, ordinance, regulation, statute, treaty, or other law, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
2.31 STATE "ANTI-TAKEOVER" STATUTES.
No "fair price" or "control share acquisition" statute or other similar
statute or regulation is applicable to the Merger, this Agreement or the
Shareholder Agreements or the transactions contemplated hereby or thereby.
2.32 INFORMATION SUPPLIED BY THE COMPANY.
None of the information supplied or to be supplied by the Company for
inclusion in the proxy statement to be delivered to its shareholders in
connection with any written consent by or meeting of such shareholders
(collectively, "Shareholder Materials"), at the date on which such information
was supplied prior to the time the Company's shareholders were requested to
approve the Merger, contained or will contain any untrue statement of a material
fact or omitted or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representations or warranties regarding information
furnished by or related to the Buyer or the Merger Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE MERGER SUB
Each of the Buyer and the Merger Sub represents and warrants to the
Company as follows:
3.1 ORGANIZATION.
Each of the Buyer and the Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation. Each of the Buyer and Merger Sub is duly qualified to conduct
business and is in corporate good standing under the laws of each jurisdiction
in which the nature of its businesses or the ownership or leasing of its
properties requires such qualification. Each of the Buyer and the Merger Sub has
the corporate power and authority to carry on the business in which it is
engaged and to own and use the
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properties owned and used by it. Nether the Buyer nor the Merger Sub is in
default under or in violation of any provisions of its Charter or By-laws, each
as amended to date.
3.2 CAPITALIZATION.
The authorized capital stock of the Buyer consists of Five Million
(5,000,000) shares of undesignated preferred stock, of which no shares were
issued and outstanding as of the date hereof, and Fifty Million (50,000,000)
shares of Buyer Common Stock, of which Twenty Million, Five Hundred Sixty Two
Thousand, Six Hundred Two (20,562,602) shares were issued and outstanding and no
shares were held in the treasury of the Buyer as of September 14, 1999. All of
the issued and outstanding shares of Buyer Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights. All
of the Merger Shares will be, when issued in accordance with this Agreement,
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. As of September 14, 1999, there were Two Million, Five
Hundred Eighteen Thousand, Two Hundred Seventy-Five (2,518,275) shares reserved
for issuance under the Buyer's 1994 Stock Option Plan, 1997 Omnibus Stock Plan,
1997 Directors' Stock Option Plan, and the Net2Net Stock Option Plan (the "Buyer
Option Plans"), under which options to purchase One Million, Nine Hundred Eighty
Five Thousand, One Hundred Seventy-Seven (1,985,177) shares of Buyer Common
Stock are outstanding. Other than shares reserved for issuance under the Buyer
Option Plans, there are no outstanding or authorized options, warrants, rights,
calls, convertible instruments, agreements or commitments to which the Buyer is
a party or which are binding upon the Buyer providing for the issuance,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Buyer. All of the issued and outstanding shares of Buyer Common Stock
were issued in compliance with applicable federal and state securities laws.
3.3 AUTHORIZATION OF TRANSACTION.
Each of the Buyer and the Merger Sub has all requisite corporate power
and authority to execute and deliver this Agreement and the other Transaction
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Agreements,
the performance of each of the Transaction Agreements, in each case, to which
the Buyer or the Meyer Sub is a party, and the consummation of the transactions
contemplated hereby and thereby by the Buyer and the Merger Sub have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Merger Sub. This Agreement and the other Transaction Agreements to
which the Buyer or the Merger Sub is a party have been duly and validly executed
and delivered by the Buyer and the Merger Sub, as the case may be (or in the
case of Transaction Agreements to be executed and delivered at Closing, when
executed and delivered will be duly and validly executed and delivered) and,
assuming the due authorization, execution and delivery by the Company,
constitute (or in the case of Transaction Agreements to be executed and
delivered at Closing, when executed and delivered will constitute) a valid and
binding obligation of the Buyer and the Merger Sub, as the case may be,
enforceable against them in accordance with their terms, except as enforcement
may be
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<PAGE> 36
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally, and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
3.4 NONCONTRAVENTION.
Subject to (a) compliance with the applicable requirements of the
Securities Act, any applicable state securities laws, and the Exchange Act and
(b) the filing of the Certificate of Merger as required by the CGCL; neither the
execution and delivery of this Agreement, nor the consummation by the Buyer or
the Merger Sub of the transactions contemplated hereby or thereby, will: (1)
conflict with or violate any provision of the Charter or By-laws of the Buyer or
the Merger Sub; (2) require on the part of the Buyer or the Merger Sub any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity; (3) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Buyer or Merger Sub is a party or by which either is
bound or to which any of their assets are subject; or (4) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Buyer or
the Merger Sub or any of their properties or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS.
The Buyer has previously furnished or made available to the Company
complete and accurate copies, as amended or supplemented, of all reports filed
by the Buyer under Section 13 of the Exchange Act with the SEC since the Buyer's
initial public offering on February 6, 1998 (such reports are collectively
referred to herein as the "Buyer Reports"). The Buyer Reports constitute all of
the documents required to be filed by the Buyer under Section 13 of the Exchange
Act with the SEC since such date and complied at the time of filing in all
material respects with the applicable requirements of the Exchange Act. As of
their respective dates, the Buyer Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports: (a) comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto; (b) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby (except as
may be indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act); (c)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein; and (d) are consistent with the books and records of the
Buyer.
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3.6 TAX MATTERS.
(a) Each of the Buyer and the Merger Sub has filed all
Tax Returns that it was required to file and all such Tax Returns were correct
and complete in all material respects. Each of the Buyer and the Merger Sub has
paid or will pay all Taxes due on or before the Closing Date, regardless of
whether shown on any such Tax Returns, except such as are being contested in
good faith by appropriate proceedings (to the extent any such proceedings are
required) and with respect to which each of the Buyer and the Merger Sub is
maintaining reserves adequate for their payment. The accrued but unpaid Taxes
of the Buyer and the Merger Sub for tax periods through June 30, 1999 do not
exceed the accruals and reserves for Taxes (other than deferred Taxes) set
forth on the Buyer's most recent balance sheet. All Taxes attributable to the
period January 1, 1999 through the Closing Date are attributable to the conduct
by the Buyer and the Merger Sub of their respective operations in the Ordinary
Course of Business. The Buyer and the Merger Sub have no actual or potential
liability for any Tax obligation of any taxpayer (including without limitation
any affiliated group of corporations or other entities that included the Buyer
and the Merger Sub during a prior period) other than the Buyer and the Merger
Sub. All Taxes that each of the Buyer and the Merger Sub is or was required by
law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity, except such
as are being contested in good faith by appropriate proceedings (to the extent
any such proceedings are required) and with respect to which the Buyer and the
Merger Sub are maintaining reserves adequate for their payment.
(b) No examination or audit of any Tax Returns of the
Buyer and the Merger Sub by any Governmental Entity is currently in progress
or, to the knowledge of the Buyer and the Merger Sub, threatened or
contemplated, except with respect to which, if determined adversely to the
Buyer or the Merger Sub would not reasonably be expected to result in a
Material Adverse Effect on the Buyer and the Merger Sub. Neither the Buyer nor
the Merger Sub has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a tax assessment or deficiency.
(c) Neither the Buyer nor the Merger Sub is a
"consenting corporation" within the meaning of Section 341(f) of the Code and
none of the assets of the Buyer or the Merger Sub is subject to an election
under Section 341(f) of the Code. Neither the Buyer nor the Merger Sub has been
a United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(I)(A)(ii) of the Code. Neither the Buyer nor the Merger Sub is a party
to any Tax allocation or sharing agreements.
(d) The Buyer and Merger Sub are not and have never been
members of an "affiliated group" of corporations (within the meaning of Section
1504 of the Code).
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3.7 ABSENCE OF MATERIAL ADVERSE CHANGES.
Since June 30, 1999, there has not been any material adverse change in
the assets, business, financial condition or results of operations of the Buyer,
nor has there occurred any event or development that could reasonably be
foreseen to result in such a material adverse change in the future.
3.8 LITIGATION.
Neither the Buyer nor the Merger Sub is a party to, nor are its assets
or properties subject to (i) any unsatisfied judgment, order, decree,
stipulation or injunction or (ii) any claim, complaint, action, suit,
proceeding, hearing or, to the Buyer's knowledge, investigation of or in any
Governmental Entity, other than judgments, orders, decrees, stipulations,
injunctions, claims, complaints, actions, suits, proceedings, hearings or, to
the Buyer's knowledge, investigations that, if determined adversely to the Buyer
or the Merger Sub would not reasonably be expected to have a Material Adverse
Effect on the Buyer.
3.9 LEGAL COMPLIANCE; RESTRICTIONS ON BUSINESS ACTIVITIES
The Buyer and the Merger Sub and the conduct and operations of their
respective businesses are in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Buyer and the
Merger Sub or their respective businesses, except for any violation of or
default which would not reasonably be expected to have a Material Adverse Effect
on the Buyer and the Merger Sub. There is no agreement, judgment, injunction,
order or decree binding upon the Buyer or the Merger Sub which has or would
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of the Buyer and the Merger Sub as
currently contemplated by the Buyer and the Merger Sub, any acquisition of
property of the Buyer and the Merger Sub or the conduct of business of the Buyer
and the Merger Sub as currently conducted or as proposed to be conducted by the
Buyer and the Merger Sub.
3.10 COMPANY ACTION.
The Board of Directors of the Buyer and the Merger Sub, at meetings
duly called and held, have by the unanimous vote of all directors (a) determined
that the Merger is fair and in the best interests of the Buyer and Merger Sub,
and each of its shareholders and (b) adopted this Agreement in accordance with
the provisions of the CGCL. The sole shareholder of the Merger Sub by written
consent has adopted and approved this Agreement in accordance with the
provisions of the CGCL.
3.11 POOLING OF INTERESTS.
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To the Buyer's knowledge, neither the Buyer nor the Merger Sub, nor any
of their respective Affiliates, has taken or agreed to take any action that
could prevent Buyer from accounting for the business combination to be effected
by the Merger as a "pooling of interests" in accordance with GAAP.
3.12 INTENTIONALLY OMITTED.
3.13 INFORMATION SUPPLIED BY THE BUYER.
None of the information supplied or to be supplied by the Buyer or the
Merger Sub for inclusion in the Shareholders Materials, including the Buyer
Reports, at the date such information was supplied prior to the time the
Company's shareholders were requested to approve the Merger, contained or will
contain any unture statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that the Buyer and the Merger Sub make no
representations or warranties regarding information furnished by or related to
the Company.
3.14 BROKERS' FEES.
Neither the Buyer nor the Merger Sub has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement except to Goldman, Sachs & Co.
ARTICLE IV
COVENANTS
4.1 BEST EFFORTS.
Each of the Parties shall use its best efforts, to the extent
commercially reasonable, to take all actions and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement.
4.2 NOTICES AND CONSENTS.
Each of the Buyer, the Merger Sub and the Company shall use its
respective best efforts to obtain, at its expense, all such waivers, permits,
consents, approvals or other authorizations from third parties and Governmental
Entities, and to effect all such registrations, filings and notices with or to
third parties and Governmental Entities, as may be required by or with respect
to the Buyer, the Merger Sub or the Company, respectively, in connection with
the transactions contemplated by this Agreement (including without limitation,
with respect to the Company, those listed in Section 2.4 or Section 2.22 of the
Disclosure Letter).
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4.3 SPECIAL MEETING.
(a) No later than September 30, 1999, the Company shall
hold a special meeting of Company Shareholders to be held to vote in favor of
the adoption of this Agreement and the approval of the Merger ("the Company
Special Meeting") in accordance with the CGCL and shall solicit proxies from
its shareholders to vote in favor of the adoption of this Agreement and the
approval of the Merger at the Company Special Meeting. In lieu of the Company
calling a Special Meeting of the Company Shareholders, the Company may
circulate for execution a written consent of shareholders in lieu of special
meeting.
(b) The Company will send the Shareholder Materials to
the shareholders of the Company, in a timely manner, for the purposes of
considering approval of the Merger, either at the Company Special Meeting or by
their execution of a written consent. The Company and the Buyer each will
promptly provide all information relating to its respective business or
operations necessary for inclusion in the Shareholder Materials to satisfy all
requirements of applicable state and federal securities laws. The Company and
the Buyer will not provide or publish to the Company Shareholders any material
concerning them or their Affiliates that violates the Securities Act or the
Exchange Act with respect to the transactions contemplated hereby. The Company
shall comply with all applicable provisions of the CGCL in the preparation,
filing and distribution of any shareholder materials, the solicitation of
proxies thereunder, and the calling and holding of the Company Special Meeting.
(c) The Company, acting through its Board of Directors,
shall include in any Shareholder Materials the recommendation of its Board of
Directors that the Company Shareholders vote in favor of the adoption of this
Agreement and the approval of the Merger, and shall otherwise use its best
efforts to obtain the Requisite Shareholder Approval.
(d) The Buyer shall vote the proxies solicited at the
Company Special Meeting from the Company Shareholders in favor of the adoption
of this Agreement and the approval of the Merger.
4.4 SECURITIES LAWS.
(a) Prior to the Closing, the Company shall not take any
action, including the granting of employee stock options, that would cause the
number of Company Shareholders who are not "accredited investors" pursuant to
Regulation D promulgated under the Securities Act to increase to more than 35
during the term of this Agreement or that would cause any person who does not
meet the standards of Regulation D required for "purchasers" under Regulation D
to become a shareholder, provided, however, the Company will not be precluded
from issuing Company Shares upon the exercise of Options or Warrants.
(b) The Buyer shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Buyer Common Stock in connection with the
Merger. The Company shall use its best efforts, to the
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extent commercially reasonable, to assist the Buyer as may be necessary to
comply with such securities and blue sky laws.
4.5 OPERATION OF BUSINESS.
Except as contemplated by this Agreement, during the period
from the date of this Agreement to the Effective Time, the Company shall conduct
its operations in the Ordinary Course of Business and in compliance with all
applicable laws and regulations and, to the extent consistent therewith, use all
reasonable efforts to preserve intact its current business organization, keep
its physical assets in good working condition, keep available the services of
its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, prior to the Effective Time,
the Company shall not, without the written consent of the Buyer:
(i) issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any stock
of any class or any other securities or any rights, warrants or options to
acquire any such stock or other securities (except pursuant to the conversion
or exercise of convertible securities, Options or Warrants outstanding on the
date hereof), or amend any of the terms of any such convertible securities,
Options or Warrants;
(ii) split, combine or reclassify any shares of
its capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(iii) create, incur or assume any debt not
currently outstanding (including obligations in respect of capital leases);
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person or
entity; or make any loans, advances or capital contributions to, or investments
in, any other person or entity, in each case, except in the Ordinary Course of
Business;
(iv) enter into, adopt or amend any Employee
Benefit Plan or any employment or severance agreement or arrangement of the
type described in Section 2.19(j) or increase in any manner the compensation or
fringe benefits of, or modify the employment terms of, its directors, officers
or employees, generally or individually, or pay any benefit not required by the
terms in effect on the date hereof of any existing Employee Benefit Plan;
(v) acquire, sell, lease, encumber or dispose
of any assets or property (including without limitation any shares or other
equity interests in or securities of any Subsidiary or any corporation,
partnership, association or other business organization or division thereof),
other than purchases and sales of assets in the Ordinary Course of Business;
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(vi) amend its Charter or By-laws;
(vii) change in any material respect its
accounting methods, principles or practices, except insofar as may be required
by a generally applicable change in GAAP or as required by Buyer;
(viii) discharge or satisfy any Security
Interest or pay any obligation or liability other than in the Ordinary Course
of Business;
(ix) mortgage or pledge any of its property or
assets or subject any such assets to any Security Interest;
(x) sell, assign, transfer or license any
Intellectual Property, other than in the Ordinary Course of Business;
(xi) make or commit to make any capital
expenditure in excess of $50,000 per item;
(xii) take any action or fail to take any
action permitted by this Agreement with the knowledge that such action or
failure to take action would result in (i) any of the representations and
warranties of the Company set forth in this Agreement becoming untrue or (ii)
any of the conditions to the Merger set forth in Article V not being satisfied;
(xiii) hire, terminate or discharge any employee or
engage or terminate any consultant, except for the hiring of persons for whom
offers of employment are outstanding on the date hereof as set forth on Section
4.5 of the Disclosure Letter or in the Ordinary Course of Business;
(xiv) enter into any material contract, other
than in the Ordinary Course of Business and as provided to the Buyer, or any
material amendment or termination of, or take any action that would constitute
a default under, or waive, release or assign any rights under, any material
contract to which the Company is a party or by which it is bound;
(xv) take any action, which would interfere with
the Buyer's ability to account for the Merger as a "pooling of interests";
(xvi) commence any litigation other than (i) for
the routine collection of bills, (ii) for software piracy, or (iii) in such
cases where the Company in good faith determines that failure to commence suit
would result in the material impairment of a valuable aspect of the Company's
business, provided that Company consults with the Buyer prior to the filing of
such a suit;
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(xvii) make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of Taxes,
file any material Return or any amendment to a material Return (in which case,
the written consent of the Buyer shall not be unreasonably withheld), enter
into any closing agreement, settle any claim or assessment in respect of Taxes
(except settlements effected solely through payment of immaterial sums of
money), or consent to any extension or waiver of the limitation period
applicable to any material claim or assessment in respect of Taxes;
(xviii) incur Transaction Costs in excess of the
aggregate of the amount provided in Section 2.8; or
(xix) agree in writing or otherwise to take any of
the foregoing actions.
4.6 FULL ACCESS; CONFIDENTIALITY.
The Company shall permit representatives of the Buyer to have full
access (upon reasonable notice and at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the Company) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company, subject to
compliance with applicable confidentiality obligations of the Company.
4.7 NOTICE OF BREACHES.
The Company shall promptly deliver to the Buyer written notice of any
event or development that would (a) render any statement, representation or
warranty of the Company in this Agreement (including the Disclosure Letter)
inaccurate or incomplete in any material respect or (b) constitute or result in
a breach by the Company or any of its Affiliates of, or a failure by the Company
or any of its Affiliates to comply with, any agreement or covenant in this
Agreement applicable to such party. The Buyer or the Merger Sub shall promptly
deliver to the Company written notice of any event or development that would (a)
render any statement, representation or warranty of the Buyer or the Merger Sub
in this Agreement inaccurate or incomplete in any material respect or (b)
constitute or result in a breach by the Buyer or the Merger Sub of, or a failure
by the Buyer or the Merger Sub to comply with, any agreement or covenant in this
Agreement applicable to such party. No such disclosure shall be deemed to avoid
or cure any such misrepresentation or breach.
4.8 EXCLUSIVITY.
The Company shall not, and the Company shall use its best efforts to
cause its Affiliates and each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (a) solicit,
initiate, engage or participate in or knowingly encourage discussions or
negotiations with any person or entity (other than the Buyer) concerning any
merger, consolidation, sale of material assets, tender offer, recapitalization,
accumulation of Company Shares, proxy solicitation or other business combination
involving the Company or any division
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of the Company or (b) provide any non-public information concerning the
business, properties or assets of the Company to any person or entity (other
than the Buyer). The Company shall immediately notify the Buyer of, and shall
disclose to the Buyer all details of, any inquiries, discussions or
negotiations of the nature described in the first sentence of this Section 4.8.
4.9 EMPLOYEE AGREEMENTS.
After the execution of this Agreement, the Company shall
require all employees of the Company hired after the date hereof (in accordance
with this Agreement) to execute a confidentiality/assignment of inventions
agreement with the Company in substantially the form attached hereto as Exhibit
A.
4.10 EMPLOYEE MATTERS.
The Buyer shall use commercially reasonable efforts to make available
to the employees of the Surviving Corporation all employee benefits then offered
to employees of the Buyer of similar positions and responsibilities. For all
purposes (other than accrual of benefits under any retirement plan), the
Surviving Corporation and each of its Affiliates shall treat each employee's
entire period of employment with the Company as if it had been employment with
the Buyer, the Surviving Corporation and their Affiliates, even though the
employees were not actually employed by the Buyer or any of its Affiliates prior
to Closing.
4.11 AGREEMENTS FROM CERTAIN AFFILIATES OF THE COMPANY.
Section 4.11 of the Disclosure Letter sets forth a list of all persons
or entities who are Affiliates of the Company (the "Company Affiliates") as of
the date hereof. The Company shall provide the Buyer such information and
documents as the Buyer shall reasonably request for purposes of reviewing such
list. The Company shall use its best efforts or cause to be delivered to the
Buyer, concurrently with the execution of this Agreement (and in each case prior
to the Effective Time), from each of the Company Affiliates an executed
Affiliate Agreement in the form attached hereto as Exhibit C (the "Affiliate
Agreements"). The Buyer and Merger Sub shall be entitled to place appropriate
legends on the certificates evidencing any Buyer Common Stock to be received by
the Company Affiliates pursuant to the terms of this Agreement and to issue
appropriate stock transfer instructions to the transfer agent for Buyer Common
Stock, consistent with the terms of such Affiliate Agreement.
4.12 SHAREHOLDER AGREEMENTS.
Prior to the execution hereof, the holders of capital stock of the
Company set forth on Section 4.12 of the Disclosure Letter have executed and
delivered to the Buyer voting agreements substantially in the form of Exhibit D
hereto (the "Shareholder Agreements").
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4.13 REGISTRATION RIGHTS.
Prior to or simultaneously with the Effective Time, the Buyer
shall execute and deliver a registration rights agreement, substantially in the
form of Exhibit E hereto (the "Registration Rights Agreement"), pursuant to
which the Buyer will grant each Company Shareholder that is a party thereto,
certain rights with respect to the sale of the Merger Shares as provided
therein.
4.14 BUYER COMMON STOCK.
The Buyer agrees to authorize for listing on the NASDAQ
National Market the shares of the Buyer Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger by filing
with the NASDAQ National Market a Notification of Listing of Additional Shares
(or such other form as may be required by the NASDAQ National Market) in a
timely manner prior to the Effective Time or otherwise in accordance with the
rules and regulations of the NASDAQ National Market.
4.15 POOLING ACCOUNTING.
The Buyer, Merger Sub and the Company shall use their best efforts, to
the extent commercially reasonable, to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests. Each of
the Company, Merger Sub and the Buyer shall use its best efforts to cause its
Affiliates not to take any action that would adversely affect the ability of the
Buyer to account of the business combination to be effected by the Merger as a
pooling of interests.
4.16 ESCROW AGREEMENT.
On or before the Effective Time, the Escrow Agent and the Shareholders'
Agent will execute the Escrow Agreement contemplated by Article VII in the form
attached hereto as Exhibit F (the "Escrow Agreement").
4.17 FORM S-8.
The Buyer agrees to file, promptly after the Closing Date, a
registration statement on Form S-8 covering the shares of Buyer Common Stock
issuable pursuant to the Options assumed by the Buyer. The Company shall
cooperate with and assist the Buyer in the preparation of such registration
statement.
4.18 REORGANIZATION.
The Buyer and the Company shall each use its best efforts to cause the
business combination to be effected by the Merger to be qualified as a
"reorganization" described in Section 368(a) of the Code.
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4.19 INTERIM FINANCIAL STATEMENTS; SPECIAL EARNINGS RELEASE.
As soon as practicable after thirty (30) days after the Closing Date,
but in no event later than forty-five (45) days after the Closing Date, the
Buyer shall use its best efforts to publicly disclose the Buyer's unaudited
consolidated results of operations as of such 30th day and for the thirty (30)
day period then ended. Concurrently with such disclosure, the Buyer shall
publicly disclose an earnings report or press release or other authorized public
disclosure by the Buyer that includes the consolidated results of operations of
the Buyer and the Surviving Corporation (the "Special Earnings Release").
4.20 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
From the Effective Time through the date that is six years after the
Effective Time, the Buyer agrees that it will, and will cause the Surviving
Corporation to, indemnify and hold harmless each present and former director and
officer (the "Indemnified Officers"), against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under California law and its Articles of Incorporation or By-laws in
effect on the date hereof to indemnify such Indemnified Officer (and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided the Indemnified Officer to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Indemnified Officer is not entitled to
indemnification). The provisions of this Section 4.20 are intended to be in
addition to the rights otherwise available to the current officers and directors
of the Company by law, charter, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Officers, their
heirs and their representatives.
4.21 REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES.
Each of the Parties shall use reasonable commercial efforts to
effectuate the transactions contemplated hereby and to fill and cause to be
fulfilled the conditions to Closing under this Agreement. Each Party, at the
reasonable request of another Party, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
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ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each Party to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received
the Requisite Shareholder Approval by the Company Shareholders;
(b) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of the Merger or limiting or restricting the Buyer's conduct
or operation of the business of the Buyer or the Surviving Corporation after
the Merger shall have been issued, nor shall any proceeding brought by any
Governmental Entity, seeking any of the foregoing be pending; nor shall there
be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(c) the Buyer shall have received all permits and other
authorizations required under applicable state securities laws for the issuance
of the Merger Shares; and
(d) the Company, the Buyer, the Escrow Agent and the
Shareholders' Agent (as defined in Article VII hereto) shall have entered into
the Escrow Agreement.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE MERGER SUB.
The obligation of each of the Buyer and the Merger Sub to
consummate the Merger is subject to the satisfaction of the following additional
conditions:
(a) the Agreement and the Merger shall have been
approved and adopted with the Requisite Shareholder Approval and the number of
Dissenting Shares shall not exceed 10% of the number of outstanding Company
Shares as of the Effective Time;
(b) the Company shall have obtained all of the waivers,
permits, consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2, except for any
which if not obtained or effected would not have a Material Adverse Effect on
the Company or on the ability of the Parties to consummate the transactions
contemplated by this Agreement;
(c) the representations and warranties of the Company
set forth in Article II that are qualified by materiality shall be true and
correct when made on the date hereof and shall be true and correct in all
respects as of the Effective Time as if made as of the Effective Time,
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except for (i) representations and warranties made as of a specific date, which
shall be true and correct as of such date and (ii) changes contemplated by this
Agreement, and the representations and warranties of the Company set forth in
Article II that are not qualified by materiality shall be true and correct when
made on the date hereof in all material respects and shall be true and correct
in all material respects as of the Effective Time as if made as of the
Effective Time, except for (i) representations and warranties made as of a
specific date, which shall be true and correct as of such date and (ii) changes
contemplated by this Agreement;
(d) the Company shall have performed or complied with in
all material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(e) the Company shall have delivered to the Buyer and
the Merger Sub a certificate (without qualification as to knowledge or
materiality or otherwise) to the effect that each of the conditions specified
in clauses (a) and (b) (to the extent the Company is a party or is named
therein) of Section 5.1 and clauses (a) through (d) of this Section 5.2 is
satisfied in all respects;
(f) the Buyer and the Merger Sub shall have received
from Latham & Watkins, counsel to the Company, an opinion substantially in the
form attached hereto as Exhibit G, addressed to the Buyer and the Merger Sub
and dated as of the Closing Date;
(g) the Buyer and the Merger Sub shall have received the
resignations, effective as of the Effective Time, of each director of the
Company;
(h) each of Michael Watters and Sud Verma shall have
executed an employment agreement substantially in the form attached hereto as
Exhibit B or other forms reasonably acceptable to the Buyer and such agreement
shall be in full force and effect;
(i) the Company Affiliates shall have executed and
delivered the Affiliate Agreements;
(j) the Company Shareholders set forth on Section 2.2 of
the Disclosure Letter shall have executed and delivered the Shareholder
Agreements;
(k) the Buyer shall have received a written opinion from
Arthur Andersen LLP, dated as of the Closing Date, stating that the Merger will
qualify as a "pooling of interests" transaction under Accounting Principles
Board Opinion No. 16 and applicable SEC regulations, if the Merger is
consummated in accordance with this Agreement;
(l) all actions to be taken by the Company in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer and the Merger Sub;
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(m) there shall not have occurred any material adverse
change in the official condition, properties, assets (including intangible
assets), liabilities, business, operations or results of operations of the
Company since the date of this Agreement, the Company's Transaction Costs shall
not have exceeded the amount set forth in Section 2.8;
(n) the Major Holders (as defined in the Registration
Rights Agreement) shall have entered into and delivered the Registration Rights
Agreement; and
(o) the Buyer and the Merger Sub shall have received an
opinion of Piper & Marbury L.L.P., counsel to the Buyer and the Merger Sub,
substantially in the form attached hereto as Exhibit H, on the basis of certain
facts, representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code and that each of the Buyer and the Company will be a
party to the reorganization within the meaning of Section 368(b) of the Code,
and counsel to the Buyer and the Merger Sub shall have received from the
Company certificates substantially in the forms attached hereto as Exhibit I
(collectively, the "Company Tax Certificate"). In rendering such opinion, such
counsel shall be entitled to rely upon the representations contained in the
Company Tax Certificate (as defined) and a certificate delivered by the Buyer
to counsel to the Buyer and the Merger Sub.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the Merger is subject to
the satisfaction of the following additional conditions:
(a) the representations and warranties of the Buyer and
the Merger Sub set forth in Article III that are qualified by materiality shall
be true and correct when made on the date hereof and shall be true and correct
in all respects as of the Effective Time as if made as of the Effective Time,
except for (i) representations and warranties made as of a specific date, which
shall be true and correct as of such date and (ii) changes contemplated by this
Agreement, and the representations and warranties of the Buyer and the Merger
Sub set forth in Article III that are not qualified by materiality shall be
true and correct when made on the date hereof in all material respects and
shall be true and correct in all material respects as of the Effective Time as
if made as of the Effective Time, except for (i) representations and warranties
made as of a specific date, which shall be true and correct as of such date and
(ii) changes contemplated by this Agreement;
(b) the Buyer and the Merger Sub shall have obtained all
of the waivers, permits, consents, approvals or other authorizations, and
effected all of the registrations, filings and notices, referred to in Section
4.2, except for any which if not obtained or effected would not have a Material
Adverse Effect on the Buyer and the Merger Sub or on the ability of the Parties
to consummate the transactions contemplated by this Agreement;
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<PAGE> 50
(c) each of the Buyer and the Merger Sub shall have
performed or complied with in all material respects its agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Effective Time;
(d) each of the Buyer and the Merger Sub shall have
delivered to the Company a certificate (without qualification as to knowledge
or materiality or otherwise) to the effect that each of the conditions
specified in clauses (a), (b), (c), (d) (to the extent the Buyer or Merger Sub
is a party or is named therein) of Section 5.1 and clauses (a), (b) and (c) of
this Section 5.3 is satisfied in all respects;
(e) the Company Shareholders shall have received from
Piper & Marbury L.L.P., counsel to the Buyer and the Merger Sub, an opinion
substantially in the form attached hereto as Exhibit J, addressed to the
Company and dated as of the Closing Date;
(f) the Company shall have received a written opinion
from Ernst & Young LLP, dated as of the Closing Date, stating that the Merger
will qualify as a "pooling of interests" transaction under Accounting
Principles Board Opinion No. 16 and applicable SEC regulations, if the Merger
is consummated in accordance with this Agreement;
(g) all actions to be taken by the Buyer and the Merger
Sub in connection with the consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby shall be reasonably satisfactory in
form and substance to the Company;
(h) there shall not have occurred any material adverse
change in the official condition, properties, assets (including intangible
assets), liabilities, business, operations or results of operations of the
Buyer since the date of this Agreement;
(i) the Buyer shall have entered into and delivered the
Registration Rights Agreement; and
(j) the Company shall have received an opinion of Latham
& Watkins, counsel to the Company, substantially in form attached hereto as
Exhibit K, on the basis of certain facts, representations and assumptions set
forth in such opinion, dated the Effective Time, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization qualifying
under the provisions of Section 368(a) of the Code and that each of the Buyer
and the Company will be a party to the reorganization within the meaning of
Section 368(b)of the Code and counsel to the Company shall have received from
the Buyer a certificate substantially in the form attached hereto as Exhibit L
(the "Buyer Tax Certificate"). In rendering such opinion, such counsel shall be
entitled to rely upon the representations contained in the Buyer Tax
Certificate and a certificate delivered by the Company to counsel to the
Company.
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<PAGE> 51
ARTICLE VI
TERMINATION
6.1 TERMINATION OF AGREEMENT.
The Parties may terminate this Agreement prior to the Effective Time
(whether before or after Requisite Shareholder Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) Buyer may terminate this Agreement by giving written
notice to the Company in the event that the Company is in breach, and the
Company may terminate this Agreement by giving written notice to Buyer and the
Merger Subsidiary in the event that Buyer or the Merger Subsidiary is in
breach, of any material representation, warranty, or covenant contained in this
Agreement, and such breach is not remedied within 10 days of delivery of
written notice thereof;
(c) any Party may terminate this Agreement by giving
written notice to the other Parties at any time after the Company Shareholders
have voted on whether to approve this Agreement and the Merger in the event
this Agreement and the Merger failed to receive the Requisite Company
Shareholder Approval;
(d) any Party may terminate this Agreement by giving
written notice to the other Party if the Closing shall not have occurred on or
before September 30, 1999 (provided, however, that the right to terminate this
Agreement under this Section 6.1(d) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(e) by either Buyer or the Company if a court of
competent jurisdiction or other Governmental Entity shall have issued a final
order, decree or ruling, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, and all
appeals with respect to such order, decree, ruling or action have been
exhausted or the time for appeal of such order, decree, ruling or action shall
have expired.
This Agreement shall automatically terminate if the Closing has not
occurred on or prior to November 15, 1999.
6.2 AMENDMENT.
The board of directors of the Parties may cause this Agreement to be
amended at any time by execution of an instrument in writing signed on behalf of
each of the Parties; provided that an
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<PAGE> 52
amendment made subsequent to the adoption of the Agreement by Company
Shareholders shall not: (a) alter or change the amount or kind of consideration
to be received on conversion of the Company Shares; (b) alter or change any
term of the Charter or By-laws of the Surviving Corporation to be effected by
the Merger; or (c) alter or change any of the terms and conditions of the
Agreement if such alteration or change would adversely affect the holders of
Company Shares.
6.3 EXTENSION; WAIVER.
At any time prior the Effective Time, any Party may, to the extent
legally allowed: (a) extend the time for the performance of any of the
obligations or other acts of the other Parties; (b) waive any inaccuracies in
the representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto; and (c) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party.
ARTICLE VII
ESCROW AND INDEMNIFICATION
7.1 INDEMNIFICATION.
(a) Subject to the terms of the Affiliate Agreements,
the Shareholder Agreements and this Article VII, the Company Shareholders will
indemnify and hold harmless the Buyer and the Surviving Corporation and its
respective officers, directors, agents and employees, and each person, if any,
who controls or may control the Buyer or the Surviving Corporation within the
meaning of the Securities Act (hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and
against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation
reasonable legal fees, net of any recoveries under existing insurance policies,
tax benefits received by the Buyer or its Affiliates as a result of such
damages, indemnities from third parties or in the case of third party claims,
by any amount actually recovered by the Buyer or its Affiliates pursuant to
counterclaims made by any of them directly relating to the facts giving rise to
such third party claims (collectively, "Damages") arising out of any
misrepresentation or breach in connection with any of the representations and
warranties given or made by the Company in this Agreement, the Disclosure
Letter or any Exhibit to this Agreement. The Buyer and its Affiliates shall act
in good faith and in a commercially reasonable manner to mitigate any Damages
they may suffer.
(b) The Buyer will indemnify and hold harmless the
Company and its respective officers, directors, agents and employees, and each
person, if any, who controls or may control the Company within the meaning of
the Securities Act (hereinafter referred to individually as an "Company
Indemnified Person" and collectively as "Company Indemnified
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<PAGE> 53
Persons") from and against any and all losses, costs, damages, liabilities and
expenses arising from claims, demands, actions, causes of action, including,
without limitation reasonable legal fees, net of any recoveries under existing
insurance policies, tax benefits received by the Company or its Affiliates as a
result of such damages, indemnities from third parties or in the case of third
party claims, by any amount actually recovered by the Company or its Affiliates
pursuant to counterclaims made by any of them directly relating to the facts
giving rise to such third party claims (collectively, "Company Damages")
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by the Buyer or the Merger Sub in this Agreement or any Exhibit to this
Agreement. The Company and its Affiliates shall act in good faith and in a
commercially reasonable manner to mitigate any Company Damages they may suffer.
(c) Nothing in this Agreement shall limit the liability
(i) of the Company, the Buyer or the Merger Sub for any breach of any
representation, warranty or covenant if the Merger does not close or (ii) of
any Company Shareholder in connection with any breach by such shareholder of
the Affiliate Agreements or the Shareholder Agreements delivered hereunder.
7.2 ESCROW FUND.
Notwithstanding the provisions of Article I, upon the Closing of the
Merger, the Buyer shall issue to each Company Shareholder 92.5% of the Buyer
Common Stock otherwise issuable to such shareholder pursuant to Article I
(rounded upward to the nearest whole share). The remaining 7.5% of the Buyer
Common Stock issuable to a Company Shareholder in connection with the Merger
shall be referred to as "Escrow Shares," collectively, the Escrow Shares shall
be referred to as the "Escrow Fund." Damages that (a) are accepted as valid by
the Shareholders' Agents or (b) are determined to be valid by arbitration as
described in this Article VII, shall reduce the number of Escrow Shares issuable
to the Company Shareholders by the number of Escrow Shares (rounded to the
closest whole number) equal to such Damages divided by the Escrow Share Market
Value. As soon as practicable after the Effective Date, the Escrow Shares shall
be registered in the name of, and be deposited with, State Street Bank and Trust
(or other institution selected by the Buyer with the reasonable consent of the
Company) as escrow agent (the "Escrow Agent"), such deposit to constitute the
Escrow Fund and to be governed by the terms set forth herein and in the Escrow
Agreement attached hereto as Exhibit F. The Escrow Shares shall be beneficially
owned by the Company Shareholders and the Escrow Fund shall be the sole and
exclusive remedy to compensate the Buyer pursuant to the indemnification
obligations of the Company Shareholders set forth in Section 7.1(a).
7.3 DAMAGE THRESHOLD.
Notwithstanding Section 7.1, the Buyer may not receive any
shares from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 7.5 below) and identifying the requirements
of Section 7.5(a)(ii) and identifying Damages has been delivered to the Escrow
Agent as provided in Section 7.5 below and such amount is determined
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<PAGE> 54
pursuant to this Article VII to be payable, in which case the Buyer shall
receive shares equal in value to the full amount of Damages.
7.4 ESCROW PERIOD.
The "Escrow Period" shall terminate upon the earlier of: (i) three (3)
business days after the delivery of the Buyer's independent certified public
accountants of its reports for the fiscal year ending on December 31, 1999 and
(ii) the close of business on March 31, 2000; provided, however, that a portion
of the Escrow Shares, which, in the reasonable judgment of the Buyer, subject to
the objection of the Shareholders' Agent and the subsequent arbitration of the
matter in the manner provided in Section 7.7 hereof are necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate theretofore delivered
to the Escrow Agent prior to termination of the Escrow Period with respect to
claims made by the Buyer prior to expiration of the Escrow Period shall remain
in the Escrow Fund until such claims have been resolved. Such retained portion
of the Escrow Fund shall be retained only until the claim for indemnification
pursuant to which such portion is being retained is settled or finally
determined between Buyer and the Shareholders' Agent in accordance with Section
7.7 below and upon resolution shall be promptly released pursuant to the Escrow
Agreement. On the date which is five (5) years after the Closing Date, any
shares remaining in the Escrow Fund shall be released therefrom and paid to the
Company Shareholders; provided, however, that if any claim with respect to the
Escrow Fund remain unresolved as of such date, the Company Shareholders shall
continue to be liable with respect thereto to the full extent of their
respective interests in such released Escrow Fund.
7.5 CLAIMS UPON ESCROW FUND.
Subject to the provisions set forth in Section 7.6:
(a) Upon receipt by the Escrow Agent on or before the
last day of the Escrow Period of a certificate signed by any officer of the
Buyer (an "Officer's Certificate"):
(i) stating that with respect to the
indemnification obligations of Company Shareholders, Damages exist in an
aggregate amount equal to or greater than $1,000,000 (which aggregate amount
cannot include any individual Damage items of $25,000 or less); and
(ii) specifying in reasonable detail the
individual items of such Damages included in the amount so stated, the date
each such item was paid, or properly accrued or arose, the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of this Article VII, deliver
to the Buyer out of the Escrow Fund, as promptly as practicable, Buyer Common
Stock or other assets held in the Escrow Fund having a value determined in
accordance with Section 7.5(b) of this Agreement equal to such Damages with
respect to the indemnification obligations of Company Shareholders set forth in
Section 7.1. The Escrow Agent will not release any portion of the Escrow Fund
to
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<PAGE> 55
Buyer pursuant to an Officer's Certificate until such claim has been resolved
or is uncontested in accordance with Section 7.6 below.
(b) For the purpose of compensating the Buyer for its
Damages pursuant to this Agreement, Buyer Common Stock in the Escrow Fund shall
be valued at the Escrow Share Market Value.
7.6 OBJECTIONS TO CLAIMS.
At the time of delivery of any Officer's Certificate to the Escrow
Agent, a duplicate copy of such Officer's Certificate shall be delivered to the
Shareholders' Agent and for a period of forty-five (45) days after such
delivery, the Escrow Agent shall make no delivery of Buyer Common Stock or other
property pursuant to Section 7.5 hereof unless the Escrow Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such forty-five (45) days period, the Escrow
Agent shall make delivery of Buyer Common Stock or other property in the Escrow
Fund in accordance with Section 7.5 hereof, provided that no such payment or
delivery may be made if the Shareholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent and to the Buyer prior to the
expiration of such forty-five (45) day period.
7.7 RESOLUTION OF CONFLICTS AND ARBITRATION.
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by the Buyer made in any Officer's Certificate,
the Buyer shall have fifteen (15) days from receipt of a Shareholders' Agent's
objections under Section 7.6 to respond in a written statement to the objection
of the Shareholders' Agent. If after such fifteen (15) day period there remains
a dispute as to any claims, the Shareholders' Agent and the Buyer shall attempt
in good faith for thirty (30) days to agree upon the rights of the respective
parties with respect to each of such claims. If the Shareholders' Agent and the
Buyer should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute Buyer Common Stock or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either the Buyer or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15) days
after such written notice is sent, the Buyer and the Shareholders' Agent shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrators as to the validity and amount
of any claim in such Officer's Certificate shall be binding and conclusive upon
the
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<PAGE> 56
parties to this Agreement, and notwithstanding anything in Section 7.6 hereof,
the Escrow Agent shall be entitled to act in accordance with such decision and
make or withhold payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Montgomery County, Maryland under the commercial rules then in effect
of the American Arbitration Association. For purposes of this Section 7.7(c),
in any arbitration hereunder in which any claim or the amount thereof stated in
the Officer's Certificate is at issue, the Buyer shall be deemed to be the
Non-Prevailing Party unless the arbitrators award the Buyer more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
Company Shareholders for whom shares of Buyer Common Stock otherwise issuable
to them have been deposited in the Escrow Fund shall be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation attorneys' fees and costs, reasonably incurred by the other party to
the arbitration. Notwithstanding anything contained herein to the contrary
except for the provisions of Section 7.8(c) hereof, the fees and expenses to be
paid pursuant to the preceding sentence shall not be paid out of the Escrow
Fund.
7.8 SHAREHOLDERS' AGENT.
(a) Greg Ennis shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of Company Shareholders to act
on their behalf under the Escrow Agreement, to give and receive notices and
communications, to authorize delivery to the Buyer of Buyer Common Stock or
other property from the Escrow Fund in satisfaction of claims by the Buyer, to
object to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of the Shareholders' Agent for the
accomplishment of the foregoing. Such agency may be changed by the holders of a
majority in interest of the Escrow Fund from time to time upon not less than
ten (10) days' prior written notice to the Buyer, Shareholders' Agent and the
Escrow Agent. No bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall receive no compensation for his services. Notices or
communications to or from the Shareholders' Agent shall constitute notice to or
from each Company Shareholder.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith. The
Company Shareholders shall severally indemnify the Shareholders' Agent and hold
him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
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<PAGE> 57
(c) The Shareholders' Agent shall have reasonable access
to information about the Surviving Corporation and the reasonable assistance of
the Surviving Corporation's officers and employees for purposes of performing
his duties and exercising his rights hereunder, provided that the Shareholders'
Agent shall treat confidentially and not disclose any nonpublic information
from or about the Surviving Corporation to anyone (except on a need to know
basis to individuals who agree to treat such information confidentially). The
Shareholders' Agent will not be entitled to receive any compensation from Buyer
or the Company Shareholders in connection with this Agreement. Any fees and
expenses incurred by Shareholders' Agent in connection with actions taken
pursuant to the terms of the Escrow Agreement will be paid by the Company
Shareholders to the Shareholders' Agent, provided, however, that the
Shareholders' Agent shall be entitled to submit a claim for reimbursement of
actual reasonable expenses incurred or paid to counsel or other third parties
in investigating, negotiating, arbitrating or settling any claim hereunder in
an amount not to exceed $50,000, and Escrow Shares in such amount shall be paid
by the Escrow Agent within 45 days of receipt, and provided, further, to the
extent any Escrow Shares remain available for distribution on the final release
date, such fees and expenses shall be paid out from such Escrow Fund prior to
the distribution to the Company Shareholders, but only upon the written
direction of Buyer and the Shareholders' Agent to be given to the Escrow Agent
at least three (3) business days prior to the final release date.
(d) The Buyer acknowledges that Greg Ennis may have a
conflict of interest with respect to his duties as Shareholders' Agent, and in
such regard will act in the best interests of the Company Shareholders.
7.9 ACTIONS OF THE SHAREHOLDERS' AGENT.
A decision, act, consent or instruction of the Shareholders' Agent
shall constitute a decision of all Company Shareholders for whom shares of Buyer
Common Stock otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each such Company Shareholder, and
the Escrow Agent and the Buyer may rely upon any decision, act, consent or
instruction of the Shareholders' Agent as being the decision, act, consent or
instruction of each and every such Company Shareholder. The Escrow Agent and the
Buyer are hereby relieved from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the
Shareholders' Agent.
7.10 THIRD-PARTY CLAIMS.
In the event the Buyer becomes aware of a third-party claim which the
Buyer believes may result in a demand against the Escrow Fund, the Buyer shall
promptly notify the Shareholders' Agent of such claim, and the Shareholders'
Agent and the Company Shareholders for whom shares of Buyer Common Stock
otherwise issuable to them are deposited in the Escrow Fund shall be entitled,
at their expense, to participate in any defense of such claim. The Buyer shall
have the right to settle any such claim; provided, however, that the Buyer may
not effect the settlement of any such claim without the prior written consent of
the Shareholders' Agent, which consent shall not be unreasonably withheld.
Following notice of any claim, the
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<PAGE> 58
Buyer shall notify the Shareholders' Agent of any discussions, negotiations or
other material developments affecting such claim and, to the extent
commercially reasonable, permit the Shareholders' Agents to participate in any
such discussions or negotiations.
ARTICLE VIII
DEFINITIONS
(a) In this Agreement, any reference to any event, change,
condition or effect being "material" with respect to any entity or group of
entities means any material event, change, condition or effect related to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations or results of operations of such
entity; provided, however, that any adverse effect that primarily results from
the execution and delivery of this Agreement will not be considered a Material
Adverse Effect. In this Agreement, any reference to a Party's knowledge means
such Party's actual knowledge after reasonable inquiry of officers, directors
and other employees of such Party reasonably believed to have knowledge of such
matters.
(b) For purposes of this Agreement, each of the following defined
terms is defined in the Section of this Agreement indicated below:
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
Affiliates.......................................................................................2.14
Affiliate Agreements.............................................................................4.11
Agreement....................................................................................Preamble
Budget............................................................................................2.6
Buyer .......................................................................................Preamble
Buyer Common Stock................................................................................1.5
Buyer Option Plans................................................................................3.2
Buyer Reports.....................................................................................3.5
Buyer Share Market Value..........................................................................1.5
Buyer Tax Certificate.............................................................................5.3
By-Laws...........................................................................................2.1
CERCLA...........................................................................................2.20
Certificate of Merger.............................................................................1.1
Certificates......................................................................................1.7
CGCL..............................................................................................1.1
Charter...........................................................................................2.1
Closing...........................................................................................1.2
Closing Date......................................................................................1.2
Code.............................................................................................1.10
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C>
Common Stock Conversion Ratio.....................................................................1.5
Common Stock Equivalents..........................................................................1.5
Common Stock Warrant.............................................................................1.10
Company......................................................................................Preamble
Company Affiliates...............................................................................4.11
Company Common Stock..............................................................................1.5
Company Damages...................................................................................7.1
Company Indemnified Person........................................................................7.1
Company Indemnified Persons.......................................................................7.1
Company Preferred Stock...........................................................................1.5
Company Restricted Stock.........................................................................1.10
Company Shares....................................................................................1.5
Company Special Meeting...........................................................................4.3
Company Shareholder...............................................................................1.5
Company Stock Option Plan........................................................................1.10
Company Tax Certificate...........................................................................5.2
Company Transaction Agreements....................................................................2.3
Counted Assumed Warrant Shares....................................................................1.5
Disclosure Letter..........................................................................Article II
Dissenting Shares.................................................................................1.6
Effective Time....................................................................................1.1
Employee Benefit Plan............................................................................2.19
Environmental Law................................................................................2.20
ERISA............................................................................................2.19
ERISA Affiliate..................................................................................2.19
Escrow Agent......................................................................................7.2
Escrow Agreement.................................................................................4.16
Escrow Fund.......................................................................................7.2
Escrow Period.....................................................................................7.4
Escrow Share Market Value.........................................................................1.5
Escrow Shares.....................................................................................1.5
Exchange Act.....................................................................................2.14
Exchange Agent....................................................................................1.3
Financial Statements..............................................................................2.6
GAAP..............................................................................................2.6
Governmental Entity...............................................................................2.4
Indemnified Person................................................................................7.1
Indemnified Persons...............................................................................7.1
Indemnified Officers.............................................................................4.20
Intellectual Property............................................................................2.12
Material Adverse Effect..................................................................Article VIII
Materials of Environmental Concern...............................................................2.20
Merger............................................................................................1.1
Merger Shares.....................................................................................1.5
</TABLE>
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<PAGE> 60
<TABLE>
<S> <C>
Merger Sub...................................................................................Preamble
Merger Sub Common Stock...........................................................................1.5
Millennial Dates.................................................................................2.12
Most Recent Balance Sheet.........................................................................2.8
Most Recent Period................................................................................2.6
Officer's Certificate.............................................................................7.5
Options..........................................................................................1.10
Ordinary Course of Business.......................................................................2.4
Party........................................................................................Preamble
Permits..........................................................................................2.22
Registration Rights Agreement....................................................................4.13
Requisite Shareholder Approval....................................................................2.3
Securities Act...................................................................................1.10
Security Interest.................................................................................2.4
Series A Conversion Ratio.........................................................................1.5
Series A Warrant..................................................................................1.5
Special Earnings Release.........................................................................4.18
Shareholder Agreements...........................................................................4.12
Shareholder Consent...............................................................................4.3
Shareholder Materials............................................................................2.32
Shareholders' Agent...............................................................................7.8
Surviving Corporation.............................................................................1.1
Taxes.............................................................................................2.9
Tax Returns.......................................................................................2.9
Third Party Intellectual Property Rights.........................................................2.12
Transaction Agreements............................................................................2.3
Transaction Costs.................................................................................2.8
Warrants.........................................................................................1.10
</TABLE>
ARTICLE IX
MISCELLANEOUS
9.1 PRESS RELEASES AND ANNOUNCEMENTS.
No Party shall issue any press release or make any public disclosure
relating to the subject matter of this Agreement without the prior written
approval of the other Parties; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or regulation (in
which case the disclosing Party shall advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).
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9.2 NO THIRD PARTY BENEFICIARIES.
This Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns;
provided, however, that the provisions in Article I concerning issuance of the
Merger Shares is intended for the benefit of the Company Shareholders and the
provisions of this Agreement with respect to indemnification are intended for
the benefit of the Persons indemnifying or to be indemnified as contemplated
therein.
9.3 ENTIRE AGREEMENT.
This Agreement, the Disclosure Letter, Exhibits, the documents and
instruments and other agreements among the parties referred to herein and the
nondisclosure agreements signed by each of the Parties prior to the date hereof
constitute the entire agreement among the Parties and supersede any prior
understandings, agreements or representations by or among the Parties, written
or oral, with respect to the subject matter hereof.
9.4 SUCCESSION AND ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Parties;
provided that the Merger Sub may assign its rights, interests and obligations
hereunder to an Affiliate of the Buyer.
9.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
9.6 HEADINGS.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.7 NOTICES.
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered two business days after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service or sent via facsimile (with acknowledgment of complete
transmission) with a confirmation copy by registered or certified mail, in each
case to the intended recipient as set forth below:
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If to the Company:
Inverse Network Technology
1215 Apollo Way
Sunnyvale, CA 94086
Attn: Its President
Copy to (which shall not constitute notice):
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attn: Michael W. Hall, Esq.
If to the Buyer:
Visual Networks, Inc.
2092 Gaither Road
Rockville, MD 20850
Attn: Its President
Copy to (which shall not constitute notice):
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036
Attn: Nancy A. Spangler, Esq.
If to the Merger Sub:
Visual Acquisitions Two, Inc.
2092 Gaither Road
Rockville, MD 20850
Attn: Its President
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Copy to (which shall not constitute notice):
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036
Attn: Nancy A. Spangler, Esq.
If to the Shareholders' Agent:
Greg Ennis
3000 Sand Hill Road
Building 1, Suite 185
Menlo Park, CA 94025
Copy to (which shall not constitute notice):
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attn: Michael W. Hall, Esq.
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the internal laws (and not the law of conflicts) of the State of California.
9.9 WAIVERS.
No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent default, misrepresentation, breach of such warranty
or covenant.
9.10 SEVERABILITY.
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Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction; provided, that, this Agreement shall not then
substantially deprive any Party of the bargained-for performance of any other
Party. If the final judgment of a court of competent jurisdiction declares that
any term or provision hereof is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
9.11 EXPENSES.
All fees and expenses (including all accounting, legal and investment
banking fees and expenses and all other expenses) incurred by the Buyer and
Merger Sub in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Buyer and Merger Sub, as the case may be, whether or
not the Merger is consummated. All Transaction Costs incurred by the Company
shall be paid by the Company; provided, that, the total of such Transaction
Costs incurred by the Company shall not exceed the amount set forth in Section
2.8. In the event that the Company's available cash is insufficient to pay the
Company's Transaction Costs, the Surviving Corporation shall pay such
Transaction Costs in the event that the Closing occurs.
9.12 OTHER REMEDIES.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with, and not
exclusive of, any other remedy conferred hereby or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.13 SPECIFIC PERFORMANCE.
The Parties acknowledge and agree that damages would be an inadequate
remedy for any breach of the provisions of this Agreement and agree that the
obligations of the Parties hereunder shall be specifically enforced in
accordance with the terms of this Agreement. The prevailing party in any such
action shall be entitled to recover from the other party its attorneys' fees,
costs and expenses incurred in connection with regard to such action.
9.14 CONSTRUCTION.
The Parties agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement and, therefore, waive
the application of any law,
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regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
9.15 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Disclosure Letter identified in this Agreement are
incorporated herein by reference and made a part hereof.
[Signatures begin on following page]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
VISUAL NETWORKS, INC.
By: /s/ SCOTT E. STOUFFER
----------------------------------
Name: Scott E. Stouffer
--------------------------------
Title: President / CEO
-------------------------------
VISUAL ACQUISITIONS TWO, INC.
By: /s/ SCOTT E. STOUFFER
----------------------------------
Name: Scott E. Stouffer
--------------------------------
Title: President
-------------------------------
INVERSE NETWORK TECHNOLOGY
By: /s/ MICHAEL WATTERS
----------------------------------
Name: Michael Watters
--------------------------------
Title: Chief Executive Officer
-------------------------------
<PAGE> 1
FOR IMMEDIATE RELEASE
INVESTOR CONTACT: PRESS CONTACT:
Angela Tandy Chris Roeckl
Manager, Investor Relations Director of Marketing
Visual Networks, Inc. Visual Networks, Inc.
301-296-2394 408-616-6284
[email protected] [email protected]
VISUAL NETWORKS COMPLETES MERGER WITH
INVERSE NETWORK TECHNOLOGY
ROCKVILLE, MD - OCTOBER 1, 1999 - Visual Networks(R), Inc. (NASDAQ: VNWK), the
leading provider of reliability solutions for the Internet and corporate IP
Networks, today announced that it has completed its merger with privately-held
Inverse Network Technology.
Under terms of the transaction announced on September 15, 1999, Visual Networks
completed its merger with Inverse Network Technology for 4.1 million shares of
Visual Networks' common stock. Based on the September 30, 1999 closing price of
Visual Networks' common stock, the transaction is valued at approximately $192
million. The transaction is being accounted for as a pooling of interests and is
structured as a tax-free reorganization. As a result of the merger, Visual
Networks will recognize a one-time charge of approximately $10 million for the
quarter ended September 1999.
Based in Sunnyvale, California, Inverse Network Technology is the leading
provider of software solutions and measurement services that allow service
providers and their business customers to manage service quality for IP/Internet
services such as remote access outsourcing, virtual private networks (VPNs) and
electronic commerce.
ABOUT VISUAL NETWORKS
Visual Networks, Inc. (NASDAQ: VNWK) is the clear market leader in providing WAN
service management solutions for new world networks. The company provides
reliable network infrastructure for the Internet and IP corporate networks
whether they are running on frame relay, ATM, IP VPN, or any other transport
technologies. Utilizing Visual Networks systems such as Visual UpTime(R) and IP
InSight(TM), service providers and their subscribers can increase network
reliability, dramatically reduce operational expenses, and lower their customers
total cost of ownership. Visual Networks is headquartered in Rockville,
Maryland, with sales offices nationwide.
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VISUAL NETWORKS COMPLETES INVERSE NETWORK TECHNOLOGY MERGER
PAGE 2
For more information about Visual Networks, contact Visual Networks, Inc., 2092
Gaither Road, Rockville, Maryland 20850, at (800) 240-4010, or via the World
Wide Web at http://www.visualnetworks.com
This press release may contain forward-looking information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and is subject to the safe harbor created by those
sections. Visual Networks assumes no obligations to update the information
contained in this press release. Visual Networks' future results may be impacted
by its ability to implement its provider deployment model, its lengthy sales
cycle, dependence on its major customers, risks associated with rapid
technological change and the emerging services market, potential fluctuations in
its quarterly operating results, its dependence on sole and limited source
suppliers and fluctuations in component pricing and its dependence on key
employees. Visual Networks' future results may be impacted by other risk factors
listed from time to time in its SEC reports, including, but not limited to, the
Company's Registration Statement on Form S-3 dated March 2, 1999, its Annual
Report on Form 10K and its Quarterly Report on Form 10-Q.
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