<PAGE>
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
December 1, 1999
____________________
Date of Report (Date of earliest event reported)
SIEBEL SYSTEMS, INC.
____________________
(Exact name of registrant as specified in its charter)
Delaware 0-20725 94-3187233
----------------- ---------------- ------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation File Number) Identification No.)
1855 South Grant Street
San Mateo, CA 94402
____________________
(Address of principal executive offices)
(650) 295-5000
____________________
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Effective December 1, 1999, SE Acquisition Corp., a Delaware corporation
("Merger Sub") which was a wholly-owned subsidiary of Siebel Systems, Inc., a
Delaware corporation ("Siebel"), was merged (the "Merger") with and into
OnTarget, Inc., a Georgia corporation ("OnTarget"), pursuant to an Agreement and
Plan of Merger and Reorganization (the "Reorganization Agreement") dated
November 17, 1999 among Siebel, Merger Sub and OnTarget. The description
contained in this Item 2 of the transactions consummated pursuant to the terms
and conditions of the Reorganization Agreement is qualified in its entirety by
reference to the full text of the Reorganization Agreement, a copy of which is
attached to this Report as Exhibit 2.1.
In the Merger, each then-outstanding share of common stock ($.01 par value)
(including all shares of common stock of OnTarget issued upon conversion of all
convertible debt securities of OnTarget to purchase capital stock of OnTarget
immediately prior to the effective time of the Merger (the "Effective Time"))
were converted into the right to receive the "Applicable Fraction" of a share of
common stock of Siebel. The Applicable Fraction is the fraction having a
numerator equal to 4,000,000 and a denominator equal to the sum of (i) the
aggregate number of shares of common stock of OnTarget outstanding immediately
prior to the Effective Time (including any shares that are subject to a
repurchase option or risk of forfeiture under any restricted stock purchase or
other agreement), and (ii) the aggregate number of shares of common stock of
OnTarget purchasable under or otherwise subject to all options or convertible
securities to purchase shares of OnTarget common stock outstanding immediately
prior to the Effective Time (including all shares of OnTarget common stock that
may be ultimately purchased under options to purchase OnTarget common stock or
convertible securities to purchase shares of OnTarget common stock that are
unvested or are otherwise not then exercisable). Pursuant to the Reorganization
Agreement, Siebel assumed outstanding options to acquire common stock of
OnTarget in accordance with the terms of such option. At the Effective Time,
Merger Sub ceased to exist and OnTarget, as the surviving corporation in the
Merger, became a wholly-owned subsidiary of Siebel.
The Merger is intended to qualify as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and is expected to be accounted for
as a pooling-of-interests. A copy of the press release announcing the
consummation of the Merger is attached hereto as Exhibit 99.1.
OnTarget is a professional services firm that provides a complete
curriculum of sales training programs, consulting services and field application
tools to help companies achieve competitive advantage and strengthen
relationships with customers and partners.
Siebel is the world's leading supplier of Web-based front office software
systems. Siebel provides an integrated family of sales, marketing and customer
service application software for field sales, customer service, telesales,
telemarketing, field service, third-party resellers and Internet based
eCommerce.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
<PAGE>
(c) Exhibits
The following Exhibits are filed as part of this report:
2.1 Agreement and Plan of Merger and Reorganization, dated November
17, 1999, by and among Siebel, Merger Sub and OnTarget
99.1 Press Release of Siebel dated December 1, 1999
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Siebel Systems, Inc.
Date: December 14, 1999
By: /s/ Howard H. Graham
--------------------------------
Howard H. Graham
Senior Vice President,
Finance and Administration
and Chief Financial Officer
<PAGE>
================================================================================
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
Siebel Systems, Inc.,
a Delaware corporation;
SE Acquisition Corp.,
a Delaware corporation
and
OnTarget, Inc.,
a Georgia corporation
---------------------------
Dated as of November 17, 1999
---------------------------
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<PAGE>
Table Of Contents
<TABLE>
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<S> <C>
1. Description of Transaction............................................. 1
1.1 Merger of Merger Sub into the Company............................ 1
1.2 Effect of the Merger............................................. 1
1.3 Closing; Effective Time.......................................... 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.. 2
1.5 Conversion of Shares............................................. 2
1.6 Employee Stock Options........................................... 3
1.7 Closing of the Company's Transfer Books.......................... 4
1.8 Exchange of Certificates; Escrow Shares.......................... 4
1.9 Dissenting Shares................................................ 6
1.10 Tax Consequences................................................. 6
1.11 Accounting Treatment............................................. 6
1.12 Further Action................................................... 6
2. Representations and Warranties of the Company.......................... 6
2.1 Due Organization; Subsidiaries; Etc.............................. 6
2.2 Certificate of Incorporation and Bylaws; Records................. 7
2.3 Capitalization, Etc.............................................. 8
2.4 Financial Statements............................................. 9
2.5 Absence of Changes............................................... 10
2.6 Title to Assets.................................................. 12
2.7 Bank Accounts; Receivables....................................... 13
2.8 Equipment; Leasehold............................................. 13
2.9 Proprietary Assets............................................... 13
2.10 Contracts........................................................ 16
2.11 Liabilities...................................................... 19
2.12 Compliance with Legal Requirements............................... 19
2.13 Governmental Authorizations...................................... 19
2.14 Tax Matters...................................................... 19
2.15 Employee and Labor Matters; Benefit Plans........................ 21
</TABLE>
i.
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Table Of Contents
(continued)
<TABLE>
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<S> <C>
2.16 Environmental Matters............................................ 24
2.17 Insurance........................................................ 24
2.18 Related Party Transactions....................................... 25
2.19 Legal Proceedings; Orders........................................ 25
2.20 Authority; Binding Nature of Agreement........................... 26
2.21 Non-Contravention; Consents...................................... 26
2.22 Full Disclosure.................................................. 27
3. Certain Covenants of the Company....................................... 27
3.1 Access and Investigation.......................................... 27
3.2 Operation of the Company's Business............................... 27
3.3 Notification; Updates to Disclosure Schedule...................... 29
3.4 No Negotiation.................................................... 30
3.5 Conversion of Convertible Debt Securities......................... 30
3.6 Release of Security............................................... 31
3.7 Termination of 401(k) Plan........................................ 31
3.8 Art Jacobs Consulting Agreement................................... 31
4. Representations and Warranties of Parent and Merger Sub................ 31
4.1 SEC Filings; Financial Statements................................. 31
4.2 Due Organization.................................................. 32
4.3 Non-Contravention; Consents....................................... 32
4.4 Authority; Binding Nature of Agreement............................ 32
4.5 Valid Issuance.................................................... 33
4.6 Absence of Changes................................................ 33
4.7 Legal Proceedings; Orders......................................... 33
5. Certain Covenants of the Parties....................................... 33
5.1 Regulatory Approvals.............................................. 33
5.2 Stockholders' Consent............................................. 34
5.3 Public Announcements.............................................. 34
5.4 Best Efforts...................................................... 34
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
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Page
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5.5 Noncompetition Agreements........................................ 34
5.6 Employee Related Matters......................................... 35
5.7 FIRPTA Matters................................................... 35
5.8 Release.......................................................... 35
5.9 Stockholder Representation Letter................................ 35
5.10 Affiliate Agreements............................................. 35
5.11 Termination of Employee Plans.................................... 35
5.12 Pooling of Interests............................................. 35
5.13 Tax-Free Reorganization.......................................... 36
5.14 Tax Representation Letters....................................... 36
5.15 Indemnification of Officers and Directors........................ 36
5.16 Tax Matters...................................................... 36
5.17 Distribution of Company Earnings................................. 36
6. Conditions Precedent to Obligations of Parent and Merger Sub............ 37
6.1 Accuracy of Representations...................................... 37
6.2 Performance of Covenants......................................... 37
6.3 Stockholder Approval............................................. 37
6.4 Consents......................................................... 38
6.5 Tax Opinion...................................................... 38
6.6 Agreements and Documents......................................... 38
6.7 FIRPTA Compliance................................................ 39
6.8 HSR Act.......................................................... 39
6.9 No Restraints.................................................... 39
6.10 No Legal Proceedings............................................. 39
6.11 Termination of Employee Plans.................................... 39
6.12 Termination of Agreements........................................ 39
6.13 Due Diligence.................................................... 40
6.14 No Material Adverse Change....................................... 40
6.15 Stock Certificates............................................... 40
</TABLE>
iii.
<PAGE>
Table Of Contents
(CONTINUED)
<TABLE>
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<S> <C>
6.16 Evidence of Conversion of Convertible Debt Securities............ 40
6.17 Listing.......................................................... 40
6.18 Release of Company Common Stock from Escrow...................... 40
6.19 Release of Security.............................................. 41
7. Conditions Precedent to Obligations of the Company...................... 41
7.1 Accuracy of Representations...................................... 41
7.2 Performance of Covenants......................................... 41
7.3 Tax Opinion...................................................... 41
7.4 Documents........................................................ 42
7.5 No Restraints.................................................... 42
7.6 HSR Act.......................................................... 42
7.7 Listing.......................................................... 42
8. Termination............................................................. 42
8.1 Termination Events............................................... 42
8.2 Termination Procedures........................................... 43
8.3 Effect of Termination............................................ 43
9. Indemnification, Etc.................................................... 43
9.1 Survival of Representations, Etc................................. 43
9.2 Indemnification by Stockholders.................................. 44
9.3 No Contribution.................................................. 45
9.4 Interest......................................................... 45
9.5 Mitigation of Loss............................................... 46
9.6 Defense of Third Party Claims.................................... 46
9.7 Setoff........................................................... 47
9.8 Exclusive Remedy................................................. 47
9.9 Exercise of Remedies by Indemnitees Other Than Parent............ 47
10. Miscellaneous Provisions............................................... 47
10.1 Stockholders' Agent.............................................. 47
10.2 Further Assurances............................................... 47
</TABLE>
iv.
<PAGE>
Table Of Contents
(CONTINUED)
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10.3 Fees and Expenses................................................ 47
10.4 Attorneys' Fees.................................................. 48
10.5 Notices.......................................................... 48
10.6 Confidentiality.................................................. 49
10.7 Time of the Essence.............................................. 49
10.8 Headings......................................................... 49
10.9 Counterparts..................................................... 49
10.10 Governing Law.................................................... 49
10.11 Successors and Assigns........................................... 49
10.12 Remedies Cumulative; Specific Performance........................ 49
10.13 Waiver........................................................... 50
10.14 Waiver of Jury Trial............................................. 50
10.15 Amendments....................................................... 50
10.16 Severability..................................................... 50
10.17 Parties in Interest.............................................. 50
10.18 Entire Agreement................................................. 50
10.19 Construction..................................................... 51
</TABLE>
v.
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Certain Definitions
Exhibit B Form of Voting Agreement and Irrevocable Proxy
Exhibit C Directors and Officers of the Surviving Corporation
Exhibit D Individuals to Execute the Noncompetition Agreement
in the form attached as Exhibit F
Exhibit E Form of Noncompetition Agreement
Exhibit F Form of Release
Exhibit G Form of Stockholder Representation Letter
Exhibit H (a) Form of Affiliate Agreement
Exhibit H (b) Individuals to Execute the Affiliate Agreement in the form
attached as Exhibit H (a)
Exhibit I Form of Escrow Agreement
Exhibit J Form of Registration Rights Agreement
Exhibit K Form of Tax Representation Letter of Parent and Merger Sub
Exhibit L Form of Tax Representation Letter of the Company
Exhibit M Individuals included in definition of "knowledge"
</TABLE>
<PAGE>
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement And Plan Of Merger And Reorganization ("Agreement") is made
and entered into as of November 17, 1999, by and among: Siebel Systems, Inc., a
Delaware corporation ("Parent"); SE Acquisition Corp., a Delaware corporation
("Merger Sub"); and OnTarget, Inc., a Georgia corporation (the "Company").
Certain other capitalized terms used in this Agreement are defined in Exhibit A.
---------
Recitals
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement, the Georgia Business
Corporation Code and the Delaware General Corporation Law (the "Merger"). Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of directors
of Parent, Merger Sub and the Company.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
Key Stockholders (as defined in Exhibit A) shall enter into a Voting Agreement
---------
and Irrevocable Proxy substantially in the form attached hereto as Exhibit B.
---------
Agreement
The parties to this Agreement agree as follows:
1. Description of Transaction
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Georgia Business
Corporation Code (the "GBCC") and the Delaware General Corporation Law (the
"DGCL").
1.
<PAGE>
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square 3000 El Camino Real, Palo Alto,
California 94306 at 10:00 a.m. on November 30, 1999 or at such other time and
date as the parties may designate (the "Scheduled Closing Time"). (The date on
which the Closing actually takes place is referred to in this Agreement as the
"Closing Date.") Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL shall be filed with the Secretary of State of the State
of Delaware and a properly executed certificate of merger conforming to the
requirements of the GBCC shall be filed with the Secretary of State of the State
of Georgia. The Merger shall become effective at the latest to occur of the time
such certificate of merger is filed with and accepted by the Secretary of State
of the State of Delaware and such certificate of merger is filed with the
Secretary of State of the State of Georgia (the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the certificate of incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time in a form acceptable to
Parent;
(b) the bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
- ---------
1.5 Conversion of Shares.
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) each share of the common stock (par value $0.01 per share)
of the Company (the "Company Common Stock") outstanding immediately prior to the
Effective Time shall be converted into the right to receive the "Applicable
Fraction" (as defined in Section 1.5(b)) of a share of the common stock (par
value $.001 per share) of Parent ("Parent Common Stock");
(ii) each share of the common stock (with no par value) of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation; and
(iii) all calculations under this Section 1.5(a) shall be
rounded to the nearest one millionth (1/1,000,000th).
2.
<PAGE>
(b) For purposes of this Agreement, the "Applicable Fraction" shall
be the fraction: (A) having a numerator equal to 4,000,000 and (B) having a
denominator equal to the sum of (i) the aggregate number of shares of Company
Common Stock outstanding immediately prior to the Effective Time (including any
such shares that are subject to a repurchase option or risk of forfeiture under
any restricted stock purchase agreement or other agreement), plus (ii) the
aggregate number of shares of Company Common Stock purchasable under or
otherwise subject to all Company options or convertible debentures to purchase
Company Common Stock outstanding immediately prior to the Effective Time
(including all shares of Company Common Stock that may ultimately be purchased
under Company Options (as defined in Section 1.6 below) or convertible
debentures to purchase Company Common Stock that are unvested or are otherwise
not then exercisable). Subject only to Section 1.5(c), in no case shall the
number of shares of Parent Common Stock issued under this Section 1.5(a) to the
Merger Shareholders (as defined below), when added to the shares of Parent
Common Stock issuable to the holders of options and convertible debentures to
purchase Company Common Stock under 1.6, exceed 4,000,000 shares.
(c) In the event Parent at any time or from time to time between the
date of this Agreement and the Effective Time declares or pays any dividend on
Parent Common Stock payable in Parent Common Stock or in any right to acquire
Parent Common Stock, or effects a subdivision of the outstanding shares of
Parent Common Stock into a greater number of shares of Parent Common Stock (by
stock dividends, combinations, splits, recapitalizations and the like), or in
the event the outstanding shares of Parent Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Parent Common Stock, then the Applicable Fraction shall be appropriately
adjusted.
(d) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and/or subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends.
(e) A portion of the shares of Parent Common Stock issued in the
Merger shall be delivered into escrow and held as specified in Section 1.8
hereof.
1.6 Employee Stock Options. At the Effective Time, each stock option that
is then outstanding under the Company's 1999 Stock Option Plan, whether vested
or unvested (a "Company Option"), shall be assumed by Parent in accordance with
the terms (as in effect as of the date of this Agreement) of the Company's 1999
Stock Option Plan and the stock option agreement by which such Company Option is
evidenced. All rights with respect to Company Common Stock under outstanding
Company Options shall thereupon be converted into rights with respect to Parent
Common Stock. Accordingly, from and after the Effective Time, (a) each Company
Option assumed by Parent may be exercised solely for shares of Parent Common
Stock, (b) the number of shares of Parent Common Stock subject to each such
assumed
3.
<PAGE>
Company Option shall be equal to the number of shares of Company Common Stock
that were subject to such Company Option immediately prior to the Effective Time
multiplied by the Applicable Fraction, rounded down to the nearest whole number
of shares of Parent Common Stock, (c) the per share exercise price for the
Parent Common Stock issuable upon exercise of each such assumed Company Option
shall be determined by dividing the exercise price per share of Company Common
Stock subject to such Company Option, as in effect immediately prior to the
Effective Time, by the Applicable Fraction, and rounding the resulting exercise
price up to the nearest whole cent, and (d) each assumed Company Option
designated an "incentive stock option" as defined in Section 422 of the Code
("ISO") immediately prior to the Effective Time shall remain an ISO; and (e) all
restrictions on the exercise of each such assumed Company Option shall continue
in full force and effect (except that the conversion of each Company Option into
an option for Parent Common Stock in accordance herewith shall affect a
cancellation of any provision in such Company Option requiring the employee to
resell to the Company shares acquired by exercise of such Company Option if such
employee voluntarily ends his employment with the Company), and the term,
exercisability, vesting schedule and other provisions of such Company Option
shall otherwise remain unchanged; provided, however, that each such assumed
Company Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, reverse stock split, stock
dividend, recapitalization or other similar transaction effected by Parent after
the Effective Time. The Company and Parent shall take all action that may be
necessary (under the Company's 1999 Stock Option Plan and otherwise) to
effectuate the provisions of this Section 1.6. Following the Closing, Parent
will send to each holder of an assumed Company Option a written notice setting
forth (i) the number of shares of Parent Common Stock subject to such assumed
Company Option, and (ii) the exercise price per share of Parent Common Stock
issuable upon exercise of such assumed Company Option. After the Closing Date,
Parent shall file with the SEC, a registration statement on Form S-8 registering
the shares of Parent Common Stock issuable upon exercise of the Company Options
assumed by Parent pursuant to this Section 1.6.
1.7 Closing of the Company's Transfer Books. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 Exchange of Certificates; Escrow Shares.
(a) At the Closing, each Company shareholder that does not perfect
its dissenters' rights and is otherwise entitled to receive shares of Parent
Common Stock pursuant to Section 1.5 (a "Merger Shareholder") shall surrender to
Parent all certificates representing shares of Company Common Stock (properly
endorsed for transfer). As soon as practicable after the
4.
<PAGE>
Effective Time, Parent shall (i) deliver to each Shareholder a certificate
representing 90% of the number of whole shares of Parent Common Stock that such
Merger Shareholder has the right to receive pursuant to the provisions of
Section 1.5 and (ii) deliver to the escrow agent under the Escrow Agreement in
the form of Exhibit I hereto (the "Escrow Agreement"), on behalf and in the name
---------
of each Merger Shareholder, a certificate representing 10% of the number of
whole shares of Parent Common Stock that such Merger Shareholder has the right
to receive pursuant to the provisions of Section 1.5 (the "Escrow Shares"). If
any Company Stock Certificate shall have been lost, stolen or destroyed, Parent
may, in its discretion and as a condition precedent to the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional share shall be paid to any such holder, until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.8
(at which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
average of the closing sale prices of a share of Parent Common Stock as reported
on the Nasdaq National Market for each of the five consecutive trading days
ending on the trading day immediately preceding the Closing.
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
5.
<PAGE>
1.9 Dissenting Shares. Notwithstanding anything to the contrary contained
in this Agreement, shares ("Dissenting Shares") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by any
Person who is entitled to demand and properly demands payment of the fair value
of such Dissenting Shares pursuant to, and who complies in all respects with,
Article 13 of the GBCC ("Article 13") shall not be converted into or be
exchangeable for the right to receive Parent Common Stock in accordance with
Section 1.5 (or cash in lieu of fractional shares in accordance with Section
1.5), but rather the holders of Dissenting Shares shall be entitled to payment
of the fair value of such Dissenting Shares in accordance with Article 13;
provided, however, that if any such holder shall fail to perfect or otherwise
shall waive, withdraw or lose the right to receive payment of the fair value of
such holder's Dissenting Shares under Article 13, then the right of such holder
to be paid the fair value of such holder's Dissenting Shares shall cease and
such Dissenting Shares shall be deemed to have been converted as of the
Effective Time into, and to have become exchangeable solely for the right to
receive Parent Common Stock in accordance with Section 1.5 (or cash in lieu of
fractional shares in accordance with Section 1.5). The Company shall give prompt
notice to Parent and Merger Sub of any demands received by the Company for
payment of fair value of any shares of Company Common Stock (including a copy of
each demand), and Parent and Merger Sub shall have the right to participate in
and direct all negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, without the prior written consent
of Parent, make any payment with respect to, or settle or offer to settle, any
such demands or agree to do any of the foregoing.
1.10 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 Accounting Treatment. For accounting purposes, the Merger is intended
to be treated as a "pooling of interests."
1.12 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
2. Representations and Warranties of the Company
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 Due Organization; Subsidiaries; Etc.
(a) Each of the Acquired Corporations has been duly organized, and is
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has full
6.
<PAGE>
power (corporate and other) and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all material Contracts by which it is
bound.
(b) Except as set forth in Part 2.1(b) of the Disclosure Schedule,
each of the Acquired Corporations has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name.
(c) Each of the Acquired Corporations is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the property owned, leased or operated by it or the nature
of its business requires such qualification and where the failure to be so
qualified would have a Material Adverse Effect on such Acquired Corporation.
Each of the Acquired Corporations is in possession of and operating in
compliance with all Governmental Authorizations that are material to the conduct
of its business, all of which are valid and in full force and effect.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth (i)
the names of the members of the Company's board of directors, (ii) the names of
the members of each committee of the Company's board of directors, and (iii) the
names and titles of the Company's officers.
(e) The Company has no subsidiaries (defined below) other than
Trillium Research, Inc., a Georgia corporation, OnTarget (US) Inc., a Georgia
corporation, formerly known as Target Marketing Systems, Inc., Target Marketing
Systems Worldwide Ltd., a limited company organized in Ireland, The Sales
Consultancy, Inc., a Texas corporation, OnTarget, S.A, a Societe Anonyme
incorporated in Switzerland, formerly known as Target Marketing Systems, SA,
OnTarget (UK) Ltd., a limited company organized in the United Kingdom (the
"OnTarget Subsidiaries"), and Corporate Training Systems Limited, a limited
company organized in the United Kingdom ("Corporate Training Systems") (the
OnTarget Subsidiaries and Corporate Training Systems are hereinafter referred to
as the "Subsidiaries"). The Company directly owns 100 percent of the issued and
outstanding stock of each of the OnTarget Subsidiaries and indirectly owns 100
percent of the issued and outstanding stock of Corporate Training Systems. Other
than the Company's equity ownership in each of the Subsidiaries as set forth
above, none of the Acquired Corporations has any equity or other interest in any
Entity (defined below). As used in this Agreement, the word "subsidiary" means
any Entity of which the Company directly or indirectly owns 50 percent or more
of the equity or that the Company directly or indirectly controls. The Company
has not agreed and is not obligated to make any future investment in or capital
contribution to any Entity, including, without limitation, the Subsidiaries.
Except as set forth in Section 2.1(e) of the Disclosure Schedule, the Company
has not guaranteed and is not responsible or liable for any material obligation
of any of the Entities, including, without limitation, the Subsidiaries, in
which it owns or has owned any equity or other interest.
2.2 Certificate of Incorporation and Bylaws; Records. The Company has
delivered to Parent accurate and complete copies of: (1) each Acquired
Corporation's certificate
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of incorporation and bylaws or equivalent governing documents, including all
amendments thereto (the "Incorporation Documents"); (2) the stock records of the
Acquired Corporations; and (3) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders, the board of directors and all
committees of the board of directors of each of the Acquired Corporations. There
have been no formal meetings or other proceedings of the stockholders, board of
directors, or any committee of the board of directors of each of the Acquired
Corporations that are not fully reflected in such minutes or other records.
There has been no violation of any of the provisions of the Incorporation
Documents of each Acquired Corporation, and each Acquired Corporation has not
taken any action that is inconsistent in any material respect with any
resolution adopted by such Acquired Corporation's stockholders, board of
directors or any committee of such Acquired Corporation's board of directors,
except where such violation or action would not have a Material Adverse Effect
on such Acquired Corporation. The books of account, stock records, minute books
and other records of each Acquired Corporation are complete in all material
respects, and have been maintained in accordance with prudent business
practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock (par value $0.01), of which 9,888,625 shares
have been issued and are outstanding as of the date of this Agreement. All of
the outstanding shares of Company Common Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. As of the date of this
Agreement, the outstanding shares of Company Common Stock and all of the
outstanding shares of capital stock of each of the Subsidiaries are held by the
Persons, with the addresses of record and in the amounts set forth in Part
2.3(a) of the Disclosure Schedule. Part 2.3(a) of the Disclosure Schedule also
provides an accurate and complete description of the terms of each repurchase
option which is held by the Company and to which any of such shares is subject.
(b) Except as set forth in Part 2.3(b) of the Disclosure Schedule,
all of the stock of each of the Subsidiaries owned by the Company is owned by
the Company free and clear of any Encumbrance. All of the outstanding stock of
each of the Subsidiaries has been duly authorized and validly issued and is
fully paid and nonassessable, has been issued in compliance with all applicable
Legal Requirements, including securities laws, and was not issued in violation
of or subject to any preemptive rights or other rights to subscribe for or
purchase securities of such respective Subsidiary. There are no options,
warrants or other rights outstanding to subscribe for or purchase any shares of
the capital stock of the Subsidiaries and the Subsidiaries are not subject to
any obligation, commitment, plan, arrangement or court or administrative order
with respect to same. There are no preemptive rights applicable to any shares of
capital of any of the Subsidiaries. None of the Subsidiaries have the right to
vote on or approve the Merger or any of the other transactions contemplated
herein.
(c) The Company has reserved 3,000,000 shares of Company Common Stock
for issuance under its 1999 Stock Option Plan, of which options to purchase
1,012,500 shares are outstanding as of the date of this Agreement. Part 2.3(c)
of the Disclosure Schedule accurately
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sets forth, with respect to each Company Option that is outstanding as of the
date of this Agreement: (i) the name of the holder of such Company Option; (ii)
the total number of shares of Company Common Stock that are subject to such
Company Option and the number of shares of Company Common Stock with respect to
which such Company Option is immediately exercisable; (iii) the date on which
such Company Option was granted and the term of such Company Option; (iv) the
vesting schedule for such Company Option; (v) the exercise price per share of
Company Common Stock purchasable under such Company Option; and (vi) whether
such Company Option has been designated an "incentive stock option" as defined
in Section 422 of the Code.
(d) Part 2.3(d) of the Disclosure Schedule accurately sets forth,
with respect to each convertible debenture issued to any Person: (i) the name of
the holder of such convertible debenture; and (ii) the total number of shares of
Company Common Stock that are subject to such convertible debenture and the
number of shares of Company Common Stock with respect to which such convertible
debenture is immediately exercisable.
(e) Except as set forth in Parts 2.3(c) and 2.3(d) of the Disclosure
Schedule, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
best of the knowledge of the Company, condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of capital
stock or other securities of the Company.
(f) All outstanding shares of Company Common Stock and all
outstanding Company Options, have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all requirements set forth in applicable Contracts.
(g) Except as set forth in Part 2.3(g) of the Disclosure Schedule,
the Company has never repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities of the Company.
2.4 Financial Statements.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited combined balance sheet of Target Marketing
Systems, Inc. (now known as OnTarget (US), Inc.) and affiliates (which combines
the balance sheets of Target Marketing Systems, Inc., Target Marketing
International, Inc. (now known as OnTarget, Inc.) and Trillium Research, Inc.)
as of December 31, 1997, and the related audited combined statement of earnings
and retained earnings and combined statement of cash flows for the year
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then ended, together with the notes thereto and the unqualified report and
opinion of Metcalf Rice Fricke & Davis relating thereto;
(ii) the draft audited combined balance sheet of OnTarget, Inc.
and its affiliates (which combines the balance sheets of OnTarget, Inc., Target
Marketing Systems, Inc. (now known as OnTarget (US), Inc.) and Trillium
Research, Inc.) as of December 31, 1998, and the related draft audited combined
statement of income, combined statement of shareholders' equity and combined
statement of cash flows for the year then ended, together with the draft notes
thereto and the draft unqualified report and opinion of Arthur Andersen & Co.
relating thereto; and
(iii) the unaudited balance sheet of the Acquired Corporations,
as of October 31, 1999 (the "Unaudited Interim Balance Sheet"), and the related
unaudited income statement of the Acquired Corporations for the ten months then
ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and (in the case of
the financial statements referred to in Sections 2.4(a)(i) and 2.4(a)(ii)) cash
flows of the Company for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
that the financial statements referred to in Section 2.4(a)(iii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which are not reasonably expected to be, individually or in the aggregate,
material in magnitude).
(c) The books, records and accounts of the Acquired Corporations
accurately and fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Acquired Corporations.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since October 31, 1999:
(a) there has not been any material adverse change in any of the
Acquired Corporations' business, condition (financial or otherwise), assets,
liabilities, operations, financial performance or overall prospects, and, to the
best of the knowledge of the Company, no event has occurred that could
reasonably be expected to, have a Material Adverse Effect on any of the Acquired
Corporations;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Acquired Corporations'
material assets (whether or not covered by insurance);
(c) none of the Acquired Corporations has declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of their respective capital stock, and have not repurchased, redeemed or
otherwise reacquired any shares of their respective capital stock or other
securities;
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(d) the Acquired Corporations have not sold, issued or authorized the
issuance of (i) any capital stock or other security (except for, in the case of
the Company, Company Common Stock issued upon the exercise of outstanding
Company Options), (ii) any option or right to acquire any capital stock or any
other security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of its 1999 Stock
Option Plan, (ii) any provision of any agreement evidencing any outstanding
Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to any of the Acquired Corporations'
Incorporation Documents, and none of the Acquired Corporations have effected or
been a party to any Acquisition Transaction, recapitalization, reclassification
of shares, stock split, reverse stock split or similar transaction;
(g) none of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(h) none of the Acquired Corporations has made any capital
expenditure which, when added to all other capital expenditures made on behalf
of such respective Acquired Corporation since October 31, 1999, exceeds $50,000;
(i) none of the Acquired Corporations has (i) entered into or
permitted any of the assets owned or used by it to become bound by any Contract
that is or would constitute a Material Contract (as defined in Section 2.10(a)),
or (ii) amended or prematurely terminated, or waived any material right or
remedy under, any such Contract;
(j) none of the Acquired Corporations has (i) acquired, leased or
licensed any right or other asset from any other Person, (ii) sold or otherwise
disposed of, or leased or licensed, any right or other asset to any other
Person, or (iii) waived or relinquished any right, except for immaterial rights
or other immaterial assets acquired, leased, licensed or disposed of in the
ordinary course of business and consistent with each Acquired Corporation's past
practices;
(k) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness in excess of $10,000 with respect to a
single matter, or in excess of $50,000 in the aggregate;
(l) none of the Acquired Corporations has made any pledge of any of
its assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the ordinary course
of business and consistent with such Acquired Corporation's past practices;
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(m) none of the Acquired Corporations has (i) lent money to any
Person (other than pursuant to routine travel advances made to employees in the
ordinary course of business), or (ii) incurred or guaranteed any indebtedness
for borrowed money;
(n) none of the Acquired Corporations has (i) established or adopted
any Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees, or (iii) hired any new employee;
(o) none of the Acquired Corporations have changed any of their
respective methods of accounting or material accounting practices in any
respect;
(p) none of the Acquired Corporations has made any Tax election;
(q) none of the Acquired Corporations has commenced or settled any
Legal Proceeding;
(r) none of the Acquired Corporations has entered into any material
transaction or taken any other material action outside the ordinary course of
business or inconsistent with its past practices; and
(s) the Company has not agreed or legally committed to take any of
the actions referred to in clauses "(c)" through "(r)" above and the
Subsidiaries have not agreed or legally committed to take any of the actions
referred to in clauses "(c)" through "(r)", other than "(e)".
2.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all tangible assets
reflected on the Unaudited Interim Balance Sheet; (ii) all tangible assets
referred to in Parts 2.1, 2.7(b) and 2.9 of the Disclosure Schedule and all of
the Company's rights under the Contracts identified in Part 2.10 of the
Disclosure Schedule; and (iii) all other tangible assets reflected in the
Company's books and records as being owned by the Company. Except as set forth
in Part 2.6(a) of the Disclosure Schedule, all of said assets are owned by the
Company free and clear of any liens or other Encumbrances, except for (x) any
lien for current taxes not yet due and payable, and (y) liens that have arisen
in the ordinary course of business and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of the Company. Each of the Subsidiaries owns,
or has valid rights to use, all items of real and personal property that are
material to their respective businesses and, except as disclosed in Part 2.6(a),
such assets are owned or used by such Subsidiary free and clear of all
Encumbrances.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are material to the business of the Company and that are being leased or
licensed to the Company for which the annual rental payment for each such asset
exceeds $25,000.
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2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule describes each account
maintained by or for the benefit of the Company at any bank or other financial
institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of October 31, 1999. All existing accounts
receivable of the Company (including those accounts receivable reflected on the
Unaudited Interim Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since October 31, 1999 and have not yet
been collected) (i) represent valid obligations of customers of the Company
arising from bona fide transactions entered into in the ordinary course of
business, (ii) are current and will be collected in full when due, without any
counterclaim or set off (net of an allowance for doubtful accounts not to exceed
$100,000 in the aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to each of the Acquired Corporations are reasonably adequate for
the uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted).
(b) The Acquired Corporations do not own any real property or any
interest in real property, except for the leasehold created under the real
property leases identified in Part 2.10 of the Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Other than
unregistered trademarks, trade names and service marks (collectively, the
"Unregistered Trademarks"), Part 2.9(a)(ii) of the Disclosure Schedule
identifies and provides a brief description of all other Company Proprietary
Assets owned by the Acquired Corporations. Part 2.9(a)(ii) of the Disclosure
Schedule also discloses all Unregistered Trademarks that have been and are
currently being used by the Acquired Corporations in the ordinary course of
business. None of the Acquired Corporations have received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement or unlawful use of any Unregistered Trademark and to the
knowledge of the Company, the Acquired Corporations shall be entitled to use and
will continue to use such Unregistered Trademarks on and after the Closing. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to any of the Acquired
Corporations by any Person (except for any Proprietary Asset that is licensed to
such Acquired Corporation under any third party software license generally
available to the public at a cost of less than $5,000), and identifies the
license agreement under which such Proprietary Asset is being licensed to such
Acquired Corporation. Other than the Unregistered Trademarks identified in Part
2.9(a)(ii) of the
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Disclosure Schedule, each Acquired Corporation has good, valid and marketable
title to all of the Company Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Disclosure Schedule owned by it, free and clear of all liens
and other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Disclosure Schedule owned by it. Except as
set forth in Part 2.9(a)(iv), none of the Acquired Corporations are obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
Except as set forth in Part 2.9(a)(v) of the Disclosure Schedule, none of the
Acquired Corporations have developed jointly with any other Person any Company
Proprietary Asset with respect to which such other Person has any rights.
(b) Except as to the absence of registrations referenced in Part
2.9(a)(ii) of the Disclosure Schedule, each Acquired Corporation has taken all
measures and precautions reasonably necessary to protect and maintain the
confidentiality and secrecy of all Company Proprietary Assets (except Company
Proprietary Assets whose value would be unimpaired by public disclosure or
Company Proprietary Assets that are trade secrets) and otherwise to maintain and
protect the value of all Company Proprietary Assets. Each Acquired Corporation
has taken all measures and precautions necessary to protect and maintain the
confidentiality and secrecy of all Company Proprietary Assets that are trade
secrets (the "Trade Secrets") and otherwise to maintain and protect the value of
all Trade Secrets. Except as set forth in Part 2.9(b) of the Disclosure
Schedule, none of the Acquired Corporations have disclosed or delivered to any
Person, or permitted the disclosure or delivery to any Person of, (i) the source
code, or any portion or aspect of the source code, of any Company Proprietary
Asset, or (ii) the object code, or any portion or aspect of the object code, of
any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. Each Acquired
Corporation is not infringing, misappropriating or making any unlawful use of,
and each Acquired Corporation has not at any time infringed, misappropriated or
made any unlawful use of, or, except as set forth in Part 2.9(c) of the
Disclosure Schedule, received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by any
other Person. To the best knowledge of the Company, except as set forth in Part
2.9(c) of the Disclosure Schedule, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Company Proprietary
Asset.
(d) Each Company Proprietary Asset conforms in all material respects
with any enforceable specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of each Acquired Corporation; and there has not been any claim by any
customer or other Person alleging that any Company Proprietary Asset (including
each version thereof that has ever been licensed or otherwise made available by
the any of the Acquired Corporations to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of any of the
Acquired Corporations, and, to the best of the knowledge of the Company, there
is no basis for any such claim. Subject to Section 2.9(g) (as
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affected by Part 2.9(g) of the Disclosure Schedule), the Company has established
adequate reserves on the Unaudited Interim Balance Sheet to cover all costs
associated with any obligations that the Company may have with respect to the
correction or repair of programming errors or other defects in the Company
Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable each of the Acquired Corporations to conduct its
respective business in the manner in which such business has been and is being
conducted. Except as set forth in Part 2.9(e)(i) of the Disclosure Schedule,
none of the Acquired Corporations have licensed any of the Company Proprietary
Assets to any Person on an exclusive basis, and except as set forth in Part
2.9(e)(ii), none of the Acquired Corporations have entered into any covenant not
to compete or Contract limiting its ability to exploit fully any of its
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule,
all current and former employees of each of the Acquired Corporations have
executed and delivered to the respective Acquired Corporation an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially the same in all material respects as to the form of the
Employment Agreement previously delivered to Parent, and all current and former
consultants and independent contractors to each of the Acquired Corporations
have executed and delivered to such respective Acquired Corporation an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially the same in all material respects as to the form of the Company
Independent Consultant Agreement previously delivered to Parent.
(g) The Company's current version of its product known as "TAS
Navigator," when used in accordance with the product's specifications, will not
fail to operate in accordance with such specifications due to use of date data
falling on or before January 1, 2000 to and through December 31, 2029 (including
February 29, 2000); provided, however, that no representation or warranty is
made pursuant to this section with respect to any failure of the TAS Navigator
to perform in accordance with the foregoing arising out of any error, failure,
malfunction or incorrect result due to third party equipment, operating system
software, third party tools, application or database software, or other third
party products or materials (in each case, whether or not sold or licensed by
Company and including, without limitation, Microsoft operating system platforms,
the Microsoft Jet Database engine or Visual Basic). Part 2.9(g) of the
Disclosure Schedule describes the steps that the Company has taken, and plans to
take, in the review of its computer equipment and software applications used in
its internal business operations (but not the operations of any other Person),
with respect to the inability of its computerized systems to recognize and
properly perform date-sensitive functions (the "Year 2000 Problem"). The Company
has and is continuing to address the impact of the Year 2000 Problem on its TAS
Navigator software and its internal business computer systems and software
applications.
(h) Except with respect to demonstration or trial copies, no product,
system, program or software module designed, developed, sold, licensed or
otherwise made available by any of the Acquired Corporations to any Person
contains any "back door", "time bomb," "Trojan
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horse," "worm," "drop dead device," "virus" or other software routines or
hardware components designed to permit unauthorized access or to disable or
erase software, hardware or data without the consent of the user.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Acquired Corporation Contract relating to the
employment of, or the performance of services by, any employee, consultant or
independent contractor; any Acquired Corporation Contract pursuant to which any
of the Acquired Corporations is or may become obligated to make any severance,
termination or similar payment to any current or former employee or director;
and any Acquired Corporation Contract pursuant to which any of the Acquired
Corporations is or may become obligated to make any bonus or similar payment
(other than payment in respect of salary) in excess of $500 to any current or
former employee or director;
(ii) each Acquired Corporation Contract relating to the voting
and any other rights or obligations of a stockholder of any of the Acquired
Corporations, including, without limitation, the Shareholders Agreement dated
February 26, 1999 by and among the Company (formerly Target Marketing
International, Inc.), J. Alston Gardner, Nicholas J. Nascone, Fred R. Burton,
Bradford Milner, Jeffrey Muir, Philip Rawlins, Wendy Lea and Michael Waddell
(the "Shareholders' Agreement") and the Registration Rights Agreement dated
February 26, 1999 made by the Company (formerly Target Marketing International,
Inc.) in favour of Phil Rawlins, Wendy Lea and Michael Waddell (the
"Registration Rights Agreement");
(iii) each Acquired Corporation Contract relating to the merger,
consolidation, reorganization or any similar transaction with respect to any of
the Acquired Corporations;
(iv) each Acquired Corporation Contract relating to the
acquisition, transfer, use, development, sharing or license of any technology or
any material Proprietary Asset;
(v) each Acquired Corporation Contract creating or relating to
any partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(vi) each Acquired Corporation Contract relating to the license
of any patent, copyright, trade secret or other Proprietary Asset to or from any
of the Acquired Corporations;
(vii) each Acquired Corporation Contract imposing any restriction
on any of the Acquired Corporations (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, to
sell any product or other asset to
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or perform any services for any other Person or to transact business or deal in
any other manner with any other Person, or (C) develop or distribute any
technology;
(viii) each Acquired Corporation Contract creating or involving
any agency relationship, distribution arrangement or franchise relationship;
(ix) each Acquired Corporation Contract regarding the
acquisition, issuance or transfer of any securities and each Acquired
Corporation Contract affecting or dealing with any securities of any of the
Acquired Corporations including, without limitation, any restricted stock
agreements or escrow agreements;
(x) each Acquired Corporation Contract which provides for
indemnification of any officer, director, employee or agent;
(xi) each Acquired Corporation Contract relating to the
creation of any Encumbrance with respect to any material asset of any of the
Acquired Corporations;
(xii) each Acquired Corporation Contract involving or
incorporating any loan, guaranty, any pledge, any performance or completion
bond, any indemnity or any surety arrangement;
(xiii) each Acquired Corporation Contract related to or
regarding the performance of consulting, advisory or other services or work of
any type to any third party;
(xiv) each Acquired Corporation Contract relating to the
purchase or sale of any product or other asset by or to, or the performance of
any services by or for, any Related Party (as defined in Section 2.18);
(xv) each Acquired Corporation Contract constituting or
relating to a Government Contract or Government Bid;
(xvi) any other Acquired Corporation Contract that was entered
into outside the ordinary course of business or was inconsistent with any
Acquired Corporation's past practices;
(xvii) any other Acquired Corporation Contract that has a term
of more than 60 days and that may not be terminated by the respective Acquired
Corporation (without penalty) within 60 days after the delivery of a termination
notice by such Acquired Corporation; and
(xviii) any other Acquired Corporation Contract that contemplates
or involves (A) the payment or delivery of cash or other consideration in an
amount or having a value in excess of $50,000 in the aggregate, or (B) the
performance of services having a value in excess of $50,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiv)" above are referred to in this Agreement as "Material Contracts.")
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(b) The Company has delivered or made available to Parent accurate
and complete copies of all Material Contracts identified in Part 2.10 of the
Disclosure Schedule, including all amendments thereto. Part 2.10 of the
Disclosure Schedule provides an accurate description of the terms of each
Acquired Corporation Contract that is not in written form. Each Contract
identified in Part 2.10 of the Disclosure Schedule is valid and in full force
and effect, and, to the best of the knowledge of the Company, is enforceable by
the respective Acquired Corporation in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) none of the Acquired Corporations has violated or breached
in any material respect, or committed any material default under, any Acquired
Corporation Contract to which it is a party, which remains uncured, and, to the
best of the knowledge of the Company, no other Person has violated or breached,
or committed any default under, any Acquired Corporation Contract which remains
uncured;
(ii) to the best of the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A) result in a
violation or breach of any of the provisions of any Acquired Corporation
Contract, (B) give any Person the right to declare a default or exercise any
remedy under any Acquired Corporation Contract, (C) give any Person the right to
accelerate the maturity or performance of any Acquired Corporation Contract, or
(D) give any Person the right to cancel, terminate or modify any Acquired
Corporation Contract;
(iii) since January 1, 1997, the Company has not received any
notice or other communication regarding any actual or possible violation or
breach of, or default under, any Acquired Corporation Contract; and
(iv) to the knowledge of the Company, none of the Acquired
Corporations has waived any of its respective material rights under any Material
Contract.
(d) No Person is actively renegotiating, or has a contractual right
pursuant to the terms of any Acquired Corporation Contract to renegotiate, any
amount paid or payable in excess of $50,000, to the respective Acquired
Corporation under any Material Contract or any other material term or provision
of any Material Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable each of the
Acquired Corporations to conduct its business in the manner in which its
business is currently being conducted.
(f) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's written contractual obligations to
provide services or products under Acquired Corporation Contracts.
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2.11 Liabilities. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements in accordance
with generally accepted accounting principles, and whether due or to become
due), except for: (a) liabilities identified as such in the "liabilities" column
of the Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by each Acquired Corporation since October 31, 1999 in
the ordinary course of business and consistent with such Acquired Corporation's
past practices; (c) liabilities under the Acquired Corporation Contracts
identified in Part 2.10 of the Disclosure Schedule that are expressly set forth
and identifiable by reference to the text of such Acquired Corporation
Contracts; and (d) the liabilities identified in Part 2.11 of the Disclosure
Schedule.
2.12 Compliance with Legal Requirements. Each of the Acquired
Corporations is, and has at all times since January 1, 1997 been, in compliance
with all applicable Legal Requirements, except where the failure to comply with
such Legal Requirements has not had and could not reasonably be expected to have
a Material Adverse Effect on such Acquired Corporation. Since January 1, 1997,
none of the Acquired Corporations has received any written notice or written
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Acquired
Corporations, and the Company has delivered or made available to Parent accurate
and complete copies of all Governmental Authorizations identified in Part 2.13
of the Disclosure Schedule. The Governmental Authorizations identified in Part
2.13 of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
respective Acquired Corporation to conduct its business in the manner in which
its business is currently being conducted. Each Acquired Corporation is, and at
all times since December 31, 1995 has been, in substantial compliance with the
terms and requirements of the respective Governmental Authorizations identified
in Part 2.13 of the Disclosure Schedule. Since December 31, 1995, each Acquired
Corporation has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any Governmental Authorization, or (b)
any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization.
2.14 Tax Matters.
(a) Except as set forth in Part 2.14(a) of the Disclosure Schedule,
all Tax Returns required to be filed by or on behalf of the Acquired
Corporations with any Governmental Body with respect to any taxable period
ending on or before the Closing Date (the "Company Returns") (i) have been or
will be filed on or before the applicable due date (including any extensions of
such due date), and (ii) have been, or will be when filed, accurately and
completely prepared in compliance with all applicable Legal Requirements. All
amounts shown on the Company Returns to be due on or before the Closing Date
have been or will be paid on or before
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the Closing Date. The Company has delivered to Parent accurate and complete
copies of all Company Returns filed since December 31, 1995.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The Company
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
January 1, 1999 through the Closing Date, and the Company will disclose the
dollar amount of such reserves to Parent on or prior to the Closing Date. All
Taxes incurred since the date of the Unaudited Interim Balance Sheet have been
incurred in the ordinary course of business.
(c) Except as set forth in Part 2.14(c) of the Disclosure Schedule,
no Company Return relating to Taxes has ever been examined or audited by any
Governmental Body. There have been no examinations or audits of any Company
Return. No extension or waiver of the limitation period applicable to any of the
Company Returns has been granted (by any of the Acquired Corporation or any
other Person), and no such extension or waiver has been requested from any of
the Acquired Corporations.
(d) No claim or Proceeding is pending or to the best of the
knowledge of the Company, has been threatened against or with respect to any of
the Acquired Corporations in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by any of the Acquired Corporations with respect to
any Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
respective Acquired Corporations and with respect to which adequate reserves for
payment have been established). There are no liens for Taxes upon any of the
assets of each of the Acquired Corporations except liens for current Taxes not
yet due and payable. None of the Acquired Corporations have entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
Except as set forth in Part 2.14(d) of the Disclosure Schedule, none of the
Acquired Corporations have been, and none of the Acquired Corporations will be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. None of the Acquired Corporations is, or has been, a party to
or bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
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(f) The Acquired Corporations have no liability for any Tax pursuant
to Treasury Regulations Section 1.1502-6 or any analogous state, local or
foreign law or regulation or by reason of having been a member of any
consolidated, combined or unitary group on or before the Closing Date.
(g) At all times since the Company's inception through the Closing
Date, the Company has been an S corporation within the meaning of Section
1361(a)(1) of the Code and has used December 31 as its taxable year. Except in
connection with the transactions contemplated hereby, the Company and the
stockholders of the Company have not taken any action that has or will result in
the termination of the Company's status as an S corporation within the meaning
of Section 1361(a)(1) of the Code or imposition of a tax on the Company under
the provisions of Section 1374 of the Code. Except as set forth in Part 2.14(g)
of the Disclosure Schedule, the Company has not conducted any business in any
state or political subdivision in which the disposition of any of its assets
including goodwill in a transaction in which gain or income would be realized
would result in the imposition by that state or political subdivision of a
corporate level tax. The Company does not conduct any business which is a
historic business of, a continuation of, or successor to any business which was
previously conducted by another corporation or any other entity which was
subject to a United States corporate level tax on its gain or income including a
tax imposed by reason of the provisions of Section 1374 and 1375 of the Code, or
any predecessor provisions thereto. The Company has never acquired any asset,
including goodwill, the basis of which was determined in whole or in part by
reference to the basis of the asset in the hands of a C corporation within the
meaning of Section 1361(a)(2) of the Code or S corporation subject to the
provisions of Section 1374 of the Code or predecessor provisions thereto. The
Company has no accumulated "C" corporation earnings and profits. The Company's
status as an S corporation will continue to be in effect immediately prior to
the time of the consummation of the transactions contemplated hereby. The
representations and warranties set forth in this Section 2.14(g) shall also be
deemed to apply to any Acquired Corporation (and any predecessor entity of such
Acquired Corporation) for which S corporation status was elected or for which
Tax Returns were filed based on S corporation status.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by each Acquired
Corporation for the benefit of any employee of the respective Acquired
Corporation ("Employee"), except for Plans which would not require the
respective Acquired Corporation to make payments or provide benefits having a
value in excess of $50,000 in the aggregate.
(b) Except as set forth in Part 2.15(b) of the Disclosure Schedule,
each Acquired Corporation does not maintain, sponsor or contribute to, and, to
the best of the knowledge of the Company, has not at any time in the past
maintained, sponsored or contributed
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to, any employee pension benefit plan (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not excluded from coverage under specific Titles or Merger Subtitles of
ERISA) for the benefit of Employees or former Employees (a "Pension Plan").
(c) Each of the Acquired Corporations maintains, sponsors or
contributes only to those employee welfare benefit plans (as defined in Section
3(1) of ERISA, whether or not excluded from coverage under specific Titles or
Merger Subtitles of ERISA) for the benefit of Employees or former Employees
which are described in Part 2.15(c) of the Disclosure Schedule (the "Welfare
Plans"), none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered or made
available to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all material Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) Except as set forth in Part 2.15(e) of the Disclosure Schedule,
(i) none of the Acquired Corporations is required to be, and, to the best of the
knowledge of the Company, has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code, and (ii) none of the Acquired Corporations
has been a member of an "affiliated service group" within the meaning of Section
414(m) of the Code. To the best of the knowledge of the Company, none of the
Acquired Corporations has made a complete or partial withdrawal from a
multiemployer plan, as such term
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is defined in Section 3(37) of ERISA, resulting in "withdrawal liability," as
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(f) None of the Acquired Corporations has any plan or commitment to
create any additional Welfare Plan or any Pension Plan, or to modify or change
any existing Welfare Plan or Pension Plan (other than to comply with applicable
law or for administrative changes) in a manner that would materially affect any
Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure Schedule,
no Welfare Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and the Company is not aware of any reason why any such determination
letter should be revoked.
(k) Except as disclosed in Part 2.15(k) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former Employee or director of any of the
Acquired Corporations (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any acceleration of the time
of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
Except as set forth in Part 2.15(l) of the Disclosure Schedule, all of the
Company's employees are "at will" employees.
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(m) To the best of knowledge of the Company, Part 2.15(m) of the
Disclosure Schedule identifies each Employee who is not fully available to
perform work because of disability or other leave and sets forth the basis of
such leave and the anticipated date of return to full service.
(n) Each Acquired Corporation is in compliance in all material
respects with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters.
(o) Each of the Acquired Corporations has satisfactory labor
relations and to the knowledge of the Company: (i) the consummation of the
Merger or any of the other transactions contemplated by this Agreement will not
have a material adverse effect on the labor relations of any of the Acquired
Corporations, and (ii) none of the Company's employees intends to terminate his
or her employment with the Company within 60 days of the Closing.
2.16 Environmental Matters. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each respective Acquired Corporation
of all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. None
of the Acquired Corporations has received any written notice or written
communication, whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that such Acquired Corporation is not in compliance with
any Environmental Law, and, to the best of the knowledge of the Company, there
are no circumstances that could reasonably be expected to prevent or interfere
with such Acquired Corporation's compliance in all material respects with any
Environmental Law in the future. To the best of the knowledge of the Company, no
current or prior owner of any property leased or controlled by each of the
Acquired Corporations has received any written notice or written communication,
whether from a Government Body, citizens group, employee or otherwise, that
alleges that such current or prior owner or such Acquired Corporation is not in
compliance with any Environmental Law. All Governmental Authorizations currently
held by each of the Acquired Corporations pursuant to Environmental Laws are
identified in Part 2.16 of the Disclosure Schedule. (For purposes of this
Section 2.16: (i) "Environmental Law" means any federal, state, local or foreign
Legal Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.); and (ii) "Materials of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated by
any Environmental Law or that is otherwise a danger to health, reproduction or
the environment.)
2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of each
of the Acquired Corporations and
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identifies any material claims made thereunder, and the Company has delivered to
Parent accurate and complete copies of the insurance policies identified on Part
2.17 of the Disclosure Schedule. Each of the insurance policies identified in
Part 2.17 of the Disclosure Schedule is in full force and effect. Since December
31, 1995, none of the Acquired Corporations has received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy.
2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Disclosure Schedule, since January 1, 1997: (a) No Related Party has, and no
Related Party has had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of any of the Acquired
Corporations; (b) no Related Party is, or has been, indebted to any of the
Acquired Corporations; (c) no Related Party has entered into, or has had any
direct or indirect financial interest in, any material Contract, transaction or
business dealing or involving any of the Acquired Corporations; (d) no Related
Party is competing, or has at any time competed, directly or indirectly, with
any of the Acquired Corporations; and (e) no Related Party has any claim or
right against any of the Acquired Corporations (other than rights under company
Options and rights to receive compensation for services performed as an employee
of the respective Acquired Corporation). (For purposes of the Section 2.18 each
of the following shall be deemed to be a "Related Party": (i) each stockholder
of each of the Acquired Corporations; (ii) each individual who is, or who has at
any time since inception been, an officer of any of the Acquired Corporations;
(iii) each member of the immediate family of each of the individuals referred
to in clauses "(i)" and "(ii)" above; and (iv) any trust or other Entity (other
than the Company) in which any one of the individuals referred to in clauses
"(i)", "(ii)" and "(iii)" above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.19(a), there is no pending Legal
Proceeding, and (to the best of the knowledge of the Company) no Person has
threatened in writing to commence any Legal Proceeding: (i) that involves any
of the Acquired Corporations or any of the assets owned or used by any of the
Acquired Corporations or any Person whose liability any of the Acquired
Corporations has or may have retained or assumed, either contractually or by
operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the best of
the knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that could reasonably be expected to,
give rise to or serve as a basis for the commencement of any such Legal
Proceeding.
(b) Except as set forth in Part 2.19(b) of the Disclosure Schedule,
since January 1, 1997, no Legal Proceeding has been commenced by or has ever
been pending against any of the Acquired Corporations.
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(c) There is no order, writ, injunction, judgment or decree to which
any of the Acquired Corporations, or any of the assets owned or used by each
Acquired Corporation, is subject. To the best of the knowledge of the Company,
no officer or other employee of any of the Acquired Corporations is subject to
any order, writ, injunction, judgment or decree that prohibits such officer or
other employee from engaging in or continuing any conduct, activity or practice
relating to the respective Acquired Corporation's business.
2.20 Authority; Binding Nature of Agreement. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized by all necessary action
on the part of the Company and its board of directors. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of each Acquired Corporation's respective certificate of
incorporation or bylaws, or (ii) any resolution adopted by such Acquired
Corporation's stockholders, board of directors or any committee of such Acquired
Corporation's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which any of the Acquired Corporations, or any of the assets owned
or used by any of the Acquired Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any Acquired Corporation or that otherwise relates to such
Acquired Corporation's business or to any of the assets owned or used by such
Acquired Corporation;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation Contract
that is or would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Acquired Corporation
Contract, (ii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iii) cancel, terminate or modify any such Acquired
Corporation Contract; or
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(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by each Acquired
Corporation (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto or
materially impair the operations of any of the Acquired Corporations).
Except as may be required by the DGCL, the GBCC, or the HSR Act, the Company is
not and or will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Governmental Body or any industry regulatory
body in connection with (x) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, or (y)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement.
2.22 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, and the Company Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact or necessary in
order to make the representations, warranties and information contained and to
be contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
3. Certain Covenants of the Company
3.1 Access and Investigation. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to Section 8 or the Effective Time (the "Pre-Closing Period"), each of
the Acquired Corporations shall, and shall cause its Representatives to: (a)
provide Parent and Parent's Representatives with reasonable access to the
Acquired Corporations' Representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to the Acquired Corporations; and (b) provide Parent and Parent's
Representatives with copies of such existing books, records, Tax Returns, work
papers and other documents and information relating to each of the Acquired
Corporations, and with such additional financial, operating and other data and
information regarding each of the Acquired Corporations, as Parent may
reasonably request; provided, however, none of the Acquired Corporations shall
be required to furnish (i) any attorney-client privileged documents or
information or (ii) any work papers of its accountants unless, if requested by
such accountants, Parent enters into an indemnity agreement with such
accountants reasonably acceptable to such accountants. During the Pre-Closing
Period, Parent and its Representatives will hold any such information which is
confidential to any of the Acquired Corporations in accordance with the terms of
the Mutual Non-Disclosure Agreement, dated November 3, 1999, between the Company
and Parent.
3.2 Operation of the Company's Business. Unless the Company obtains the
prior written consent of Parent (which consent shall not be unreasonably
withheld), during the Pre-Closing Period:
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(a) each Acquired Corporation shall conduct its business and
operations in the ordinary course and in substantially the same manner as such
business and operations have been conducted prior to the date of this Agreement;
(b) each Acquired Corporation shall use reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and good will
with all suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with such Acquired Corporation;
(c) none of the Acquired Corporations shall cancel any of its
respective insurance policies identified in Part 2.17 of the Disclosure
Schedule;
(d) the Company shall cause its Chief Executive Officer to report
regularly (but in no event less frequently than weekly) to the President of
Parent concerning the status of the Company's business;
(e) except for the distributions set forth in Part 3.2(e) of the
Disclosure Schedule, none of the Acquired Corporations shall declare, accrue,
set aside or pay any dividend or make any other distribution in respect of any
shares of capital stock, nor repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities;
(f) none of the Acquired Corporations shall sell, issue or authorize
the issuance of (i) any capital stock or other security, (ii) any option or
right to acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security (except
that the Company shall be permitted to issue Company Common Stock to employees
upon the exercise of outstanding Company Options);
(g) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of its 1999 Stock
Option Plan, or (ii) any provision of any agreement evidencing any outstanding
Company Option;
(h) none of the Acquired Corporations shall amend or permit the
adoption of any amendment to such Acquired Corporation's certificate of
incorporation or bylaws, or effect or permit such Acquired Corporation to become
a party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(i) none of the Acquired Corporations shall form any subsidiary or
acquire any equity interest or other interest in any other Entity;
(j) none of the Acquired Corporations shall make any capital
expenditure, except for capital expenditures that, when added to all other
capital expenditures made on behalf of such Acquired Corporation during the Pre-
Closing Period, do not exceed $50,000 per month;
(k) none of the Acquired Corporations shall (i) enter into, or permit
any of the assets owned or used by it to become bound by, any Contract that is
or would constitute a
28.
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Material Contract, or (ii) amend or prematurely terminate, or waive any material
right or remedy under, any such Material Contract;
(l) other than within the ordinary course of business and consistent
with past practices, none of the Acquired Corporations shall (i) acquire, lease
or license any right or other asset from any other Person, (ii) sell or
otherwise dispose of, or lease or license, any right or other asset to any other
Person, or (iii) waive or relinquish any right, except for assets acquired,
leased, licensed or disposed of by such Acquired Corporation pursuant to
Contracts that are not Material Contracts;
(m) none of the Acquired Corporations shall (i) lend money to any
Person (except that each Acquired Corporation may make routine travel advances
to employees in the ordinary course of business), or (ii) incur or guarantee any
indebtedness for borrowed money;
(n) none of the Acquired Corporations shall (i) establish, adopt or
amend any Employee Benefit Plan (other than amendments adopted solely to comply
with applicable tax qualifications requirements under the Code and which do not
materially increase any of the Acquired Corporation's cost of maintaining such
plans), (ii) make any individual payment in excess of $500 in order to: (X) pay
any bonus or make any profit-sharing payment, cash incentive payment or similar
payment to, or (Y) increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hire any new employee whose aggregate annual
compensation is expected to exceed $100,000;
(o) none of the Acquired Corporations shall change any of its methods
of accounting or accounting practices in any material respect;
(p) none of the Acquired Corporations shall make any Tax election;
(q) none of the Acquired Corporations shall commence or settle any
material Legal Proceeding;
(r) none of the Acquired Corporation shall agree or commit to take
any of the actions described in clauses "(e)" through "(q)" above.
3.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by any of the Acquired Corporations of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by the Company in this Agreement;
29.
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(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of any of the
Acquired Corporations; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 3.3(a)requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. Except as set forth in Sections
9.2(a)(i) and (ii), no such update shall be deemed to supplement or amend the
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by the Company in this Agreement, or
(ii) determining whether any of the conditions set forth in Section 6 has been
satisfied.
3.4 No Negotiation. During the Pre-Closing Period, none of the Acquired
Corporations shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by any of the Acquired Corporations during the Pre-Closing Period.
3.5 Conversion of Convertible Debt Securities. At or prior to the Closing,
the Company shall cause each convertible debt security that is then outstanding
to be converted into Company Common Stock or terminated.
30.
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3.6 Release of Security. Prior to the Closing Date, the Company shall take
or shall cause to be taken all actions as shall be necessary or advisable in
order to ensure any Encumbrances held by Wachovia Bank, National Association
("Wachovia") (the "Release of Security") or any other Person with respect to any
capital stock or securities of any of the Acquired Corporations are fully
discharged. The parties agree that in order to effect the Release of Security,
the Wachovia loan commitment may be reduced from $10 million to $7 million if
requested by Wachovia. In the event such Encumbrances cannot be discharged
without repayment of any loan or advance made to an Acquired Corporation by
Wachovia, or any other Person, the Company shall pay or shall cause to be paid
in full: (i) any loans or other advances made by Wachovia in favor of any of the
Acquired Corporations pursuant to a loan and security agreement dated April 22,
1999 between the Company and Wachovia (the "Wachovia Loan Agreement") or
otherwise, and (ii) any other loans, advances or other amounts owing to any
other Person.
3.7 Termination of 401(k) Plan. To the extent requested by Parent, the
Company shall ensure that its Profit Sharing/401(k) Plan (the "Plan") shall be
terminated immediately prior to the Effective Time. The parties agree that a
determination letter shall be filed with the Internal Revenue Service with
respect to the termination of the Plan after the Closing Date.
3.8 Art Jacobs Consulting Agreement. The Company shall use best efforts to
either: (i) amend the consulting agreement dated July 26, 1995 by and among
Arthur Jacobs, Valkyrie Management Corporation, Target Marketing Systems Inc.
and Target Marketing International Inc. (the "Art Jacobs Agreement") to ensure
that any and all payment(s) that may be payable to Art Jacobs pursuant to the
Art Jacobs Agreement or otherwise are not accelerated as a result of the Merger
or any other transactions contemplated by this Agreement; or (ii) terminate the
Art Jacobs Agreement in its entirety without any acceleration of any payments
that may now or in the future be payable to Art Jacobs pursuant to the Art
Jacobs Agreement or otherwise.
4. Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Stockholder as follows:
4.1 SEC Filings; Financial Statements.
(a) Parent has made available to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by Parent with
the SEC between May 15, 1996 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments (which are not
reasonably expected to be, individually or in the aggregate, material in
amount); and (iii) fairly present the consolidated financial position of Parent
and its subsidiaries as of the respective dates thereof and the consolidated
results of operations of Parent and its subsidiaries for the periods covered
thereby.
4.2 Due Organization.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary power and authority to conduct its business in the manner
in which its business is currently being conducted and to own and use its assets
in the manner in which its assets are currently owned and used and to perform
its obligations under any contract filed as an exhibit to any Parent SEC
Documents.
(b) Parent is qualified to do business as a foreign corporation in
each jurisdiction in which the nature of its business and of its properties
makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on Parent's business, condition
(financial or otherwise), assets, liabilities or operations.
4.3 Non-Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time) contravene, conflict with or result in a
violation of (i) any of the provisions of the certificate of incorporation or
bylaws of Parent or Merger Sub, (ii) any resolution adopted by the stockholders,
the board of directors or any committee of the board of directors of Parent or
Merger Sub, or (iii) any provision of any contract filed as an exhibit to any of
the Parent SEC Documents. Neither Parent nor Merger Sub will be required to
make any filing with or give any notice to, or to obtain any Consent from, any
Person in connection with (x) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, or (y)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, except for (i) the filing of the certificate of merger with the
Secretary of State of the State of Delaware, (ii) the filing of one or more
registration statements on Form S-3 with the SEC and the declaration of
effectiveness of such registration statements by the SEC, and (iii) the filing
of a Notification of Listing of Additional Shares with the Nasdaq National
Market.
4.4 Authority; Binding Nature of Agreement. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this
32.
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Agreement; and the execution, delivery and performance by Parent and Merger Sub
of this Agreement (including the contemplated issuance of Parent Common Stock in
the Merger in accordance with this Agreement) have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
boards of directors. No vote of Parent's stockholders is needed to approve the
Merger. This Agreement constitutes the legal, valid and binding obligation of
Parent and Merger Sub, enforceable against them in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
4.5 Valid Issuance. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
4.6 Absence of Changes. From September 30, 1999 to the date of this
Agreement, there has not been any material adverse change in Parent's business,
condition (financial or otherwise), assets, liabilities or operations.
4.7 Legal Proceedings; Orders. There is no pending Legal Proceeding and to
the best knowledge of Parent and Merger Sub, no Person has threatened to
commence any Legal Proceeding: (i) against Parent that could reasonably be
expected to have a material adverse effect on Parent's business, condition
(financial or otherwise), assets, liabilities or operations (other that any
actual or threatened Legal Proceeding that has been previously disclosed in any
of the Parent SEC Documents); or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the Merger or any of the other transactions contemplated by this Agreement. To
the best of the knowledge of Parent and Merger Sub, no event has occurred, and
no claim, dispute or other condition or circumstance exists, that will, or that
could reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
5. Certain Covenants of the Parties
5.1 Regulatory Approvals. The Company and Parent shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (i) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement of any Legal Proceeding by or before any Governmental Body with
respect to the Merger or any of the other
33.
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transactions contemplated by this Agreement, (2) keep the other party informed
as to the status of any such Legal Proceeding, and (3) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other Governmental Body regarding the Merger. The
Company and Parent will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Legal Proceeding under or
relating to the HSR Act or any other federal or state antitrust or fair trade
law. In addition, except as may be prohibited by any Governmental Body or by any
Legal Requirement, in connection with any Legal Proceeding under or relating to
the HSR Act or any other federal or state antitrust or fair trade law or any
other similar Legal Proceeding, each of the Company and Parent agrees to permit
authorized Representatives of the other party to be present at each meeting or
conference relating to any such Legal Proceeding and to have access to and be
consulted in connection with any document, opinion or proposal made or submitted
to any Governmental Body in connection with any such Legal Proceeding.
5.2 Stockholders' Consent. The Company shall, in accordance with its
certificate of incorporation and bylaws and the applicable requirements of the
GBCC, solicit the consent, either in writing or by a special meeting, of the
stockholders of the Company as promptly as practicable for the purpose of
permitting them to consider and to vote upon and approve the Merger and this
Agreement. Without limiting the generality or the effect of anything contained
in the Voting Agreements and Irrevocable Proxies in the form of Exhibit B being
---------
executed and delivered by the Key Stockholders to Parent contemporaneously with
the execution and delivery of this Agreement, each Key Stockholder shall cause
all shares of the capital stock of the Company that are owned, beneficially or
of record, by such Key Stockholder on the record date for the solicitation of
the consent of the stockholders of the Company, either in writing or by special
meeting, to be voted in favor of the Merger and this Agreement. For greater
certainty, in lieu of calling and holding a special shareholders' meeting, the
Company may solicit the approval of the stockholders of the Company of the
Merger and the other transactions contemplated by this Agreement by written
consent.
5.3 Public Announcements. During the Pre-Closing Period, (a) each of the
Acquired Corporations shall not (and shall not permit any of their respective
Representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent, and (b) Parent will use reasonable efforts to consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger.
5.4 Best Efforts. Prior to Closing, (a) each of the Acquired Corporations
shall use its best efforts to cause the conditions set forth in Section 5 to be
satisfied on a timely basis, and (b) Parent and Merger Sub shall use their best
efforts to cause the conditions set forth in Section 6 to be satisfied on a
timely basis.
5.5 Noncompetition Agreements. At or prior to the Closing, each of the
individuals identified on Exhibit D shall execute and deliver a Noncompetition
---------
Agreement in the form of Exhibit E.
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34.
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5.6 Employee Related Matters. Parent shall offer to employees of the
Company as of the date of this Agreement who are also employees of the Company
immediately prior to the Effective Time employment by the Parent after the
Effective Time, and each such offer shall be in the form of an individual offer
letter prepared in accordance with Parent's customary form (such letter to
confirm such employee's initial position, compensation, location and reporting
relationship). Those employees of the Company that continue to be employees of
Parent or any of its affiliates, including the Company, following the Closing
shall, subject to any necessary transition period and the terms of such plans,
be immediately eligible to participate in Parent's health, vacation, employee
stock purchase, 401(k) and other plans, to the same extent as comparably
situated employees of Parent and shall receive credit under all Parent's benefit
plans for time served as an employee of the Company (it being agreed that such
credit shall not apply with respect to the vesting schedule of any stock options
granted by Parent to such employees).
5.7 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
5.8 Release. At the Closing, each Key Stockholder shall execute and
deliver to the Company and Parent a Release in the form of Exhibit F.
---------
5.9 Stockholder Representation Letter. At the Closing, each stockholder of
the Company shall execute and deliver to Parent a Stockholder Representation
Letter substantially in the form of Exhibit G.
---------
5.10 Affiliate Agreements. Each Person identified on Exhibit H (b) (and
-------------
any other Person that could reasonably be deemed to be an "affiliate" of any of
the Acquired Corporations for purposes of the Securities Act), to execute and
deliver to Parent, as promptly as practicable after the execution of this
Agreement, an Affiliate Agreement in the form of Exhibit H (a).
-------------
5.11 Termination of Employee Plans. At the Closing, the Company shall
terminate its 1999 Stock Option Plan, and shall ensure that no employee or
former employee of the Company has any rights under such Plan and that any
liabilities of the Company under such Plan (including any such liabilities
relating to services performed prior to the Closing) are fully extinguished at
no cost to the Company, except as otherwise provided in Section 1.6.
5.12 Pooling of Interests. Each of the Company and Parent agrees (and the
Company agrees to cause each of the Acquired Corporations) (a) not to take any
action during the Pre-Closing Period that would adversely affect the ability of
Parent to account for the Merger as a "pooling of interests," and (b) to use all
reasonable efforts to attempt to ensure that none of its "affiliates" (as that
term is used in Rule 145 under the Securities Act) takes any action that could
adversely affect the ability of Parent to account for the Merger as a "pooling
of interests."
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5.13 Tax-Free Reorganization. No party shall take any action either prior
to or after the Effective Time that could reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368 of the Code.
5.14 Tax Representation Letters. At or prior to the Closing, Parent, Merger
Sub and the Company shall each execute and deliver to Kilpatrick Stockton LLP
and Cooley Godward LLP tax representation letters in the form attached hereto as
Exhibit K and Exhibit L, respectively.
- --------- ---------
5.15 Indemnification of Officers and Directors. For six years from and
after the Closing Date, Parent agrees to indemnify and hold harmless all past
and present officers and directors of the Company to the same extent such
persons are indemnified as of the date of this Agreement by the Company pursuant
to the Company's Incorporation Documents for acts or omissions which occurred at
or prior to the Effective Time. This indemnification shall not apply to any
claim by an Indemnitee pursuant to the terms of this Agreement or any other
agreement contemplated by this Agreement.
5.16 Tax Matters.
(a) The Stockholders' Agent shall prepare or cause to be prepared in
good faith and in a manner consistent with the Financial Statements, and with
past practices of the Company and file or cause to be filed all Company Returns
relating to income Taxes for all periods ending on or prior to the Closing which
are filed after the Closing. The Company shall permit representatives of Parent
to review and comment on each such Tax Return described in the preceding
sentence prior to filing. Notwithstanding the foregoing, if the Stockholders'
Agent fails to prepare or cause to be prepared any Company Returns (in
accordance with this Section 5.16) on or before thirty (30) days prior to the
due date (without extension) of such Company Returns, then the parties agree
that Parent shall prepare or cause to be prepared, and file or cause to be
filed, such Company Returns.
(b) Parent shall cooperate fully, as and to the extent reasonably
requested by the Company, in connection with the filing of Company Returns
pursuant to Section 5.16(a) and any audit, litigation or other proceeding with
respect to income Taxes with respect to any period ending on or before the
Closing Date. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Parent agrees (i) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing until the expiration of the
statute of limitations of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the Stockholders' Agent reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the Company so
requests, to allow the Stockholders' Agent to take possession of such books and
records.
5.17 Distribution of Company Earnings. The parties agree that certain pre-
tax earnings of the Company for its three (3) fiscal quarters ended September
30, 1999 (the "Three
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Quarters Distribution") and its partial fiscal quarter ended on the Closing Date
(the "Partial Quarter Distribution") shall be distributed to the stockholders of
the Company. This distribution will be in an amount which is consistent with
prior years' distributions, as a percentage of taxable income. The distribution
will be made in the following manner:
(i) fifty percent (50%) of the Three Quarters Distribution will be
distributed on or before November 19, 1999 and the remaining fifty
percent (50%) of the Three Quarters Distribution will be distributed
on or before March 31, 2000; and
(ii) fifty percent (50%) of the Partial Quarter Distribution will be
distributed on or before February 15, 2000 and the remaining fifty
percent (50%) of the Partial Quarter Distribution will be distributed
on or before March 31, 2000.
The parties agree that the calculation of pre-tax earnings of the Company
during the relevant periods shall be made in accordance with generally accepted
accounting principles applied on a consistent basis throughout such periods.
6. Conditions Precedent to Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver by the Parent), at or prior to the Closing, of each of
the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement (except for such
representations and warranties that are qualified by their terms by a reference
to any "Material Adverse Effect" or other materiality qualifications, or any
similar qualifications, contained or incorporated directly or indirectly in such
representations and warranties, which representations and warranties as so
qualified shall be true and correct in all respects), and shall be accurate in
all material respects as of the Scheduled Closing Time as if made at the
Scheduled Closing Time (without giving effect to any update to the Disclosure
Schedule, and except for such representations and warranties which are qualified
by their terms by a reference to any "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties,
which representations and warranties as so qualified shall be true and correct
in all respects).
6.2 Performance of Covenants. All of the covenants and obligations that
the Acquired Corporations are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all respects.
6.3 Stockholder Approval. The Merger and this Agreement shall have been
duly approved by the affirmative vote of 95% of the shares of Company Common
Stock entitled to vote with respect thereto. The number of Dissenting Shares
shall be less than 5% of the Company Common Stock outstanding immediately prior
to the Scheduled Closing Time.
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6.4 Consents. All Consents (a) required to be obtained from any
Governmental Entity, and (b) otherwise required to be obtained, in each case, in
connection with the Merger and the other transactions contemplated by this
Agreement (including the consent of Wachovia and the Consents identified in Part
2.21 of the Disclosure Schedule) shall have been obtained and shall be in full
force and effect.
6.5 Tax Opinion. Parent shall have received a written opinion from Cooley
Godward LLP in form and substance reasonably satisfactory to it, to the effect
that the Merger will constitute a reorganization within the meaning of Section
368 of the Code and such opinion shall not have been withdrawn; provided,
however, that if Cooley Godward LLP does not render such opinion or withdraws or
modifies such opinion to Parent, this condition shall nonetheless be deemed to
be satisfied if counsel to the Company renders such opinion to Parent. In
rendering such tax opinion, counsel shall be entitled to rely on the tax
representation letters referred to in Section 5.14.
6.6 Agreements and Documents. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Noncompetition Agreements in the form of Exhibit E, executed by
---------
the Persons identified in Exhibit D;
---------
(b) a Release in the form of Exhibit F, executed by each of the
---------
stockholders of the Company;
(c) an Stockholder Representation Letter substantially in the form of
Exhibit G, executed by each stockholder of the Company;
- ---------
(d) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to Parent,
executed by Regent Tower Holdings, Inc.; Northpark Central VEFII, L.P.; Brolliet
S.A.; C. Center Corporation; Rumney-Manor Limited; Comptoir Genevois Immobilier;
Hausverwaltung Geldmacher - Schuler, Watermarke Companies, Inc., and Schweizer
Ruck-Versicherung;
(e) a legal opinion of Kilpatrick Stockton LLP as of the Closing
Date, in a form acceptable to Parent;
(f) a certificate executed by the Company and containing the
representation and warranty of the Company that each of the representations and
warranties set forth in Section 2 is accurate in all respects as of the Closing
Date as if made as of the Closing Date and that the conditions set forth in
Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied (the "Company Closing
Certificate");
(g) written resignations of all directors of the Company, effective
as of the Effective Time;
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(h) the Escrow Agreement in the form of Exhibit I, executed by the
---------
Stockholders' Agent and the other parties thereto, and the Escrow Shares shall
have been deposited thereunder;
(i) Affiliate Agreements in the form of Exhibit H (a), executed by
-------------
the Persons identified on Exhibit H (b) and by any other Person who could
-------------
reasonably be deemed to be an "affiliate" of the Acquired Corporations for
purposes of the Securities Act;
(j) a Registration Rights Agreement in the form of Exhibit J,
---------
executed by the Stockholders' Agent; and
(k) a letter from Arthur Andersen LLP, dated as of the Closing Date
and addressed to Parent and the Company, reasonably satisfactory in form and
substance to Parent and KPMG LLP, to the effect that, after reasonable
investigation, Arthur Andersen LLP, is not aware of any fact concerning any of
the Acquired Corporations or any of such Acquired Corporations' shareholders or
affiliates that could preclude Parent from accounting for the Merger as a
"pooling of interests" in accordance with GAAP, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC.
6.7 FIRPTA Compliance. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.8.
6.8 HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.9 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 No Legal Proceedings. No Governmental Body or Person shall have
commenced or threatened to commence any Legal Proceeding (a) challenging or
seeking the recovery of a material amount of damages in connection with the
Merger; (b) seeking to prohibit or limit the exercise by Parent of any material
right pertaining to its ownership of stock of Merger Sub or any of the Acquired
Corporations; or (c) claiming to own any capital stock of any of the Acquired
Corporations, or the option or other right to the capital stock of any of the
Acquired Corporations, or right to receive consideration as a result of the
Merger.
6.11 Termination of Employee Plans. The Company shall have provided Parent
with evidence, reasonably satisfactory to Parent, as to the termination of the
benefit plans referred to in Section 5.11.
6.12 Termination of Agreements. Prior to the Closing, the following
agreements and/or provisions of the following agreements shall be terminated and
shall no longer be in effect:
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(a) the Shareholders' Agreement (as defined in Section 2.10);
(b) the Registration Rights Agreement (as defined in Section 2.10);
(c) the registration rights agreement dated July 7, 1999 by and among
the Company, Alun Newby, Barbara Newby, David Roberts and William Hill;
(d) the escrow agreement dated February 26, 1999 by and among the
Company (formerly Target Marketing International, Inc.), Philip Rawlins, Wendy
Lea, Michael Waddell and Kilpatrick Stockton LLP, as escrow agent (the "February
1999 Escrow Agreement");
(e) the escrow agreement dated July 7, 1999 by and among the Company,
Alun Newby, Barbara Newby, Stephen William Hill, David Elwyn and Kilpatrick
Stockton LLP, as escrow agent (the "July 1999 Escrow Agreement"); and
(f) Section 6.9 of the agreement and plan of merger dated February
26, 1999 by and among Target Marketing International, Inc., TSC Merger
Subsidiary, Inc., The Sales Consultancy, Inc. and Philip Rawlins, Wendy Lea and
Michael Waddell.
6.13 Due Diligence. Parent shall have completed its investigation and
review of the Company's business, financial condition, legal status and other
matters in a manner satisfactory to Parent, as determined in it sole discretion.
6.14 No Material Adverse Change. There shall have been no material adverse
change or decline in value in the business, properties, condition (financial or
otherwise), results of operations, or prospects of the Company (or in any aspect
or portion thereof) since the date of this Agreement.
6.15 Stock Certificates. Parent shall have received certificates
representing all of the capital stock of each of the Acquired Corporations, less
any Dissenting Shares, duly endorsed in blank or accompanied by stock powers
duly endorsed in blank in proper form for transfer, with appropriate transfer
stamps, if any, affixed and, immediately following the Closing, Parent shall own
all of the outstanding capital stock and rights to acquire capital stock each of
the Acquired Corporations less any Dissenting Shares.
6.16 Evidence of Conversion of Convertible Debt Securities. The Company
shall have provided to Parent evidence satisfactory to Parent that all
convertible debt securities to purchase shares of the capital stock of each of
the Company have been converted to shares of Company Common Stock and that such
convertible debt securities are no longer in effect.
6.17 Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
Nasdaq National Market.
6.18 Release of Company Common Stock from Escrow. All of the shares of
Company Common Stock held in escrow pursuant to the February 1999 Escrow
Agreement and
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the July 1999 Escrow Agreement or any other escrow agreement or similar
agreement shall have been fully released from escrow and delivered to each of
the stockholders of the Company entitled to such shares.
6.19 Release of Security. Prior to the Closing Date, the Company shall
have provided to Parent evidence satisfactory to Parent that any and all
Encumbrances held by Wachovia or any other Person with respect to any capital
stock or securities of any of the Acquired Corporations have been fully
discharged and that all of the capital stock of each of the Acquired
Corporations is free and clear of all Encumbrances. The parties agree that in
order to effect the Release of Security (as defined in Section 3.6 above), the
Wachovia loan commitment may be reduced from $10 million to $7 million if
requested by Wachovia. In the event such Encumbrances cannot be discharged
without repayment of any loan or advance made to an Acquired Corporation by
Wachovia or any other Person, on or prior to the Closing Date, the Company shall
have provided to Parent evidence satisfactory to Parent that any and all loans
or other advances made by Wachovia or any other Person in favor of any of the
Acquired Corporations pursuant to the Wachovia Loan Agreement or otherwise, has
been paid in full and any Encumbrances held by Wachovia or any other Person with
respect to any assets of the Acquired Corporations has been fully discharged.
7. Conditions Precedent to Obligations of the Company
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver), at or prior to the Closing, of the following
conditions:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(without giving effect to any materiality or similar qualifications contained in
such representations and warranties).
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
7.3 Tax Opinion. The Company shall have received a written opinion from
Kilpatrick Stockton LLP in form and substance reasonably satisfactory to it, to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368 of the Code and such opinion shall not have been withdrawn;
provided, however, that if Kilpatrick Stockton LLP does not render such opinion
or withdraws or modifies such opinion to the Company, this condition shall
nonetheless be deemed to be satisfied if counsel to Parent renders such opinion
to the Company. In rendering such tax opinion, counsel shall be entitled to
rely on the management tax representation letters referred to in Section 5.14.
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7.4 Documents. The Company shall have received the following documents:
(a) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in a form acceptable to the Company;
(b) a Registration Rights Agreement in the form of Exhibit J,
---------
executed by Parent;
(c) a certificate executed by Parent and containing the
representation and warranty of Parent that each of the representations and
warranties set forth in Section 4 is accurate in all respects as of the Closing
Date as if made as of the Closing Date; and
(d) a letter from KPMG LLP, dated as of the Closing Date and
addressed to the Company, reasonably satisfactory in form and substance to the
Company, to the effect that, after reasonable investigation, KPMG LLP concurs
with the judgment of management of Parent that the Merger can be accounted for
using the "pooling of interests" method in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC.
7.5 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
7.7 Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
Nasdaq National Market.
8. Termination
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of any of the
Acquired Corporations or any of the stockholders of the Company to comply with
or perform any covenant or obligation set forth in this Agreement or in any
other agreement or instrument delivered to Parent);
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(c) by Parent if the Closing has not taken place on or before
December 31, 1999 (other than as a result of any failure on the part of Parent
to comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(d) by the Company if the Closing has not taken place on or before
December 31, 1999 (other than as a result of any failure on the part of one of
the Acquired Corporations to comply with or perform any covenant or obligation
of such Acquired Corporation as set forth in this Agreement); or
(e) by the mutual consent of Parent and the Company.
8.2 Termination Procedures. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c), or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(e), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither any of the Acquired Corporations
nor Parent shall be relieved of any obligation or liability arising from any
prior breach by such party of any provision of this Agreement; (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10; and (c) each of the Acquired Corporations
shall, in all events, remain bound by and continue to be subject to Section 5.3.
9. Indemnification, Etc.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company (including
the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Company Closing Certificate)
shall survive the Closing and shall expire on the first anniversary of the
Closing Date; provided, however, that if, at any time prior to the first
anniversary of the Closing Date, any Indemnitee (acting in good faith) delivers
to the Stockholders' Agent a written notice alleging the existence of an
inaccuracy in or a breach of any of the representations and warranties made by
the Company (and setting forth in reasonable detail the basis for such
Indemnitee's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the first anniversary of
the Closing until such time as such claim is fully and finally resolved. The
representations and warranties made by Parent and Merger Sub in Sections 4.4 and
4.5 shall survive the Closing and shall expire on the first anniversary of the
Closing Date. All other representations and warranties made by Parent and
Merger Sub in this Agreement shall terminate and expire as of the Effective
Time, and any
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liability of Parent or Merger Sub with respect to such representations and
warranties shall thereupon cease.
(b) The representations, warranties made by the Company, and the
covenants and obligations of each of the Acquired Corporations, and the rights
and remedies that may be exercised by the Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished to, or any
investigation made by or knowledge of, any of the Indemnitees or any of their
Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company in this Agreement.
9.2 Indemnification by Stockholders.
(a) From and after the Effective Time (but subject to Sections 9.1(a)
and 9.2(b)), the stockholders of the Company who shall have received, or shall
be entitled to receive, Parent Common Stock pursuant to Section 1.5 (the
"Indemnitors"), severally but not jointly, shall hold harmless and indemnify
each of the Indemnitees from and against, and shall compensate and reimburse
(through the Escrow Shares or otherwise) each of the Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim) and
which arise from or as a result of, or are directly or indirectly connected
with: (i) any inaccuracy in or breach of any representation or warranty set
forth in Section 2 made as of the date of this Agreement (without giving effect
to any "Material Adverse Effect" or other materiality qualification or any
similar qualification contained or incorporated directly or indirectly in such
representation or warranty, but with giving effect to any update to the
Disclosure Schedule delivered by the Company to Parent prior to the Closing,
except to the extent such update(s) disclose matters, either individually or in
the aggregate, which relate to the representations and warranties of the Company
set forth in Sections 2.3, 2.4, 2.14 or 2.19 and which impact the value of the
Acquired Corporations, taken as a whole, by an amount which equals or exceeds
$250,000); (ii) any inaccuracy in or breach of any representation or warranty
set forth in the Company Closing Certificate (without giving effect to any
"Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty, but with giving effect to any update to the
Disclosure Schedule delivered by the Company to Parent prior to the Closing);
(iii) any breach of any covenant or obligation of each of Acquired Corporations
(including the covenants set forth in Sections 3 and 5); or (iv) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)", "(ii)" or "(iii)" above (including any Legal Proceeding commenced
by any Indemnitee for the purpose of enforcing any of its rights under this
Section 9).
(b) For greater certainty and notwithstanding anything set forth in
Section 9.2(a)(i), the parties hereby agree that to the extent any update to the
Disclosure Schedule delivered by the Company to Parent prior to the Closing
discloses matters, either individually or
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in the aggregate, which relate to the representations and warranties of the
Company set forth in Sections 2.3, 2.4, 2.14 or 2.19 and which impact the value
of the Acquired Corporations, taken as a whole, by an amount which equals or
exceeds $250,000, such update(s) shall not be given effect in determining
whether any inaccuracy in or breach of any representation or warranty set forth
in Section 2 made as of the date of this Agreement has occurred and Parent shall
be entitled to full indemnification for Damages incurred in accordance with this
Section 9 on such basis.
(c) The Company acknowledges and agrees that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as an Indemnitee) Parent shall also be
deemed, by virtue of its ownership of the stock of the Surviving Corporation, to
have incurred Damages as a result of and in connection with such inaccuracy or
breach.
(d) Deductible. The Indemnitors shall not be required to make any
indemnification payment pursuant to Section 9.2(a) until such time as the total
amount of all Damages (including the Damages arising from any inaccuracies in or
breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees has or have otherwise become subject,
exceeds $350,000 in the aggregate. (If the total amount of such Damages exceeds
$350,000, then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed only for the portion of such Damages exceeding
$350,000.)
(e) Maximum Liability. The maximum liability of the Indemnitors to
the Indemnitees for Damages relating to any breach by an Indemnitor of any
representation or warranty, covenant or other provision contained in this
Agreement shall be limited to an amount equal to the product of (x) 1,000,000
and (y) the average of the closing sale prices of a share of Parent Common Stock
as reported on the Nasdaq National Market for each of the five consecutive
trading days ending on the trading day immediately preceding the Closing.
(f) Exclusions from Limitations. The limitations that are set forth
in Sections 9.2(d) and 9.2(e) shall not apply in the case of fraud or
intentional misrepresentation.
9.3 No Contribution. Each Indemnitor waives, and acknowledges and agrees
that he shall not have and shall not exercise or assert (or attempt to exercise
or assert), any right of contribution, right of indemnity or other right or
remedy against Merger Sub or any of the Acquired Corporations in connection with
any indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or the Company Closing
Certificate.
9.4 Interest. Any Indemnitor who is required to hold harmless, indemnify,
compensate or reimburse any Indemnitee pursuant to this Section 9 with respect
to any Damages shall also be liable to such Indemnitee for interest on the
amount of such Damages (for the period commencing as of the date on which such
Indemnitor first received notice of a claim for recovery by such Indemnitee and
ending on the date on which the liability of such Indemnitor to such Indemnitee
is fully satisfied by such Indemnitor) at a floating rate equal to the rate of
interest
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publicly announced by Bank of America, N.T. & S.A. from time to time as its
prime, base or reference rate.
9.5 Mitigation of Loss. Indemnitees shall use their reasonable efforts to
mitigate any Damages in connection with an indemnity claim made pursuant to
Section 9.2(a) with the scope to be as required by applicable law. If the
amount of Damages, at any time prior to or subsequent to the payment thereof by
an Indemnitor to an Indemnitee pursuant to this Section 9 is reduced pursuant to
any insurance coverage, the amount of such reduction (net of (i) any out-of-
pocket expenses, (ii) increases in premiums or (iii) any deductible incurred in
obtaining such reduction) shall promptly be repaid by the Indemnitee to the
Indemnitor. Notwithstanding any other provision in this Agreement including
this Section 9.5, there shall be no affirmative obligation or duty on the part
of either Parent or Merger Sub to obtain insurance with respect to any aspect of
their respective business, operations or assets.
9.6 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
Merger Sub or any of the Acquired Corporations, against Parent or against any
other Person) with respect to which any Indemnitor may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9, Parent shall have the right, at its election, to proceed with the
defense of such claim or Legal Proceeding on its own. If Parent so proceeds
with the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Indemnitors;
(b) each Indemnitor shall make available to Parent any documents and
materials in his possession or control that may be necessary to the defense of
such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Stockholders' Agent (as
defined in Section 10.1); provided, however, that such consent shall not be
unreasonably withheld.
Parent shall give the Stockholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent, Merger Sub or any of the Acquired
Corporations and shall keep the Stockholders' Agent informed at all stages
thereof; provided, however, that any failure on the part of Parent to so notify
or inform the Stockholders' Agent shall not limit any of the obligations of the
Indemnitors under this Section 9 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding). If Parent does not elect to
proceed with the defense of any such claim or Legal Proceeding, the
Stockholders' Agent may proceed with the defense of such claim or Legal
Proceeding with counsel reasonably satisfactory to Parent; provided, however,
that the Stockholders' Agent may not settle, adjust or compromise any such claim
or Legal Proceeding without the prior written consent of Parent (which consent
may not be unreasonably withheld).
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9.7 Setoff. In addition to any rights of setoff or other similar rights
that Parent or any of the other Indemnitees may have at common law or otherwise,
Parent shall have the right to withhold and deduct any sum that may be owed to
any Indemnitee under this Section 9 or pursuant to any other provision of this
Agreement from any amount otherwise payable by any Indemnitee to the
Shareholders' Agent or any stockholder of the Company.
9.8 Exclusive Remedy. Subject to the rights of the Indemnitees set forth
in Section 9.7, the Indemnitors shall not be liable or responsible in any manner
whatsoever to Indemnitees, whether for indemnification or otherwise, except for
indemnity as expressly provided in this Section 9 and this Section 9 provides
the exclusive remedy and cause of action of Indemnitees against any Indemnitor
with respect to any matter arising out of or in connection with this Agreement;
provided, however, no claim against an Indemnitor for fraud or intentional
misrepresentation by such Indemnitor shall be subject to the limitations of this
paragraph or this Section 9.
9.9 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
10. Miscellaneous Provisions
10.1 Stockholders' Agent. By virtue of their approval of the Merger,
stockholders of the Company hereby irrevocably appoint J. Alston Gardner as
their agent for purposes of Sections 6 and 9 (the "Stockholders' Agent"), and J.
Alston Gardner hereby accepts his appointment as the Stockholders' Agent.
Parent shall be entitled to deal exclusively with the Stockholders' Agent on all
matters relating to Sections 6 and 9, and shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document executed or
purported to be executed on behalf of any Stockholder by the Stockholders'
Agent, and on any other action taken or purported to be taken on behalf of any
Stockholder by the Stockholders' Agent, as fully binding upon such Stockholder.
10.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to any of the Acquired Corporation's business (and the furnishing of
information to Parent and its Representatives in connection with such
investigation and review), (b) the negotiation, preparation and review of this
Agreement (including the Disclosure Schedule) and all
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agreements, certificates, opinions and other instruments and documents delivered
or to be delivered in connection with the transactions contemplated by this
Agreement, (c) the preparation and submission of any filing or notice required
to be made or given in connection with any of the transactions contemplated by
this Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, (d) the consummation of the Merger;
provided, however, that, to the extent the total amount of all such fees, costs
and expenses incurred by or for the benefit of any of the Acquired Corporations
(including all such fees, costs and expenses incurred prior to the date of this
Agreement and including the amount of all special bonuses and other amounts that
may become payable to any officers of any of the Acquired Corporations or other
Persons in connection with the consummation of the transactions contemplated by
this Agreement) exceeds $400,000 in the aggregate, such fees, costs and expenses
shall be borne and paid by the stockholders of the Company and not by any of the
Acquired Corporations, and (e) the filing of the premerger notification and
report forms relating to the Merger under the HSR Act.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
If to Parent or Merger Sub:
Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Attention: Vice President, Legal Affairs
Facsimile: (650) 295-5116
If to the Company:
OnTarget, Inc.
3348 Peachtree Road NE, Suite 700
Atlanta, GA 30326
Attention: President
Facsimile: (404) 965-1711
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If to the Stockholders' Agent or any of the Indemnitors:
J. Alston Gardner
c/o OnTarget, Inc.
3348 Peachtree Road NE, Suite 700
Atlanta, GA 30326
Facsimile No.: (404) 965-1711
10.6 Confidentiality. Without limiting the generality of anything
contained in Section 5.3, on and at all times after the Closing Date, the
Company (and the Company shall cause each of the Subsidiaries) to keep
confidential, and not use or disclose to any other Person, any non-public
document or other non-public information in each Acquired Corporation's
possession that relates to the business of such Acquired Corporation or Parent.
10.7 Time of the Essence. For the purposes of this Agreement and the
transactions contemplated by this Agreement, time is of the essence.
10.8 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
10.10 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of Delaware
(without giving effect to principles of conflicts of laws).
10.11 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); Parent and its successors and
assigns (if any); and Merger Sub and its successors and assigns (if any). This
Agreement shall inure to the benefit of: the Company; the Company's stockholders
(to the extent set forth in Section 1.5); the holders of assumed Company Options
(to the extent set forth in Section 1.6); Parent; Merger Sub; the other
Indemnitees (subject to Section 9.9); and the respective successors and assigns
(if any) of the foregoing. After the Closing Date, Parent may freely assign any
or all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
10.12 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any reach or threatened breach by any
party to this Agreement of any covenant, obligation or other provision set forth
in this Agreement for the benefit of any other party to this Agreement, such
other party shall be entitled (in addition to any other remedy that may be
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available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.14 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any Legal Proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
10.15 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered: (a) prior to the Closing Date, on behalf of Parent, Merger Sub, the
Company and the Shareholders' Agent (acting exclusively for and on behalf of all
of the Merger Shareholders); and (b) after the Closing Date, on behalf of Parent
and the Shareholders' Agent (acting exclusively for and on behalf of all of the
Merger Shareholders).
10.16 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.17 Parties in Interest. Except for the provisions of Sections 1.5, 1.6
and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.18 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Mutual Non-Disclosure
Agreement executed on behalf of Parent on and the Company on November 3, 1999
50.
<PAGE>
shall not be superseded by this Agreement and shall remain in effect in
accordance with its terms until the earlier of (a) the Effective Time, or (b)
the date on which such Mutual Non-Disclosure Agreement is terminated in
accordance with its terms.
10.19 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections", "Schedules" and "Exhibits" are intended to refer to Sections of
this Agreement and Schedules and Exhibits to this Agreement.
51.
<PAGE>
The parties hereto have caused this Agreement to be executed and delivered
as of the date first written above.
Siebel Systems, Inc.,
a Delaware corporation
By: /s/ Howard H. Graham
---------------------------------------
Printed Name: Howard H. Graham
-----------------------------
Title: Senior Vice President Finance and
------------------------------------
Administration and Chief Financial Officer
------------------------------------------
SE Acquisition Corp.,
a Delaware corporation
By: /s/ Howard H. Graham
---------------------------------------
Printed Name: Howard H. Graham
-----------------------------
Title: President
------------------------------------
OnTarget, Inc.,
a Georgia corporation
By: /s/ Jeffrey S. Muir
---------------------------------------
Printed Name: Jeffrey S. Muir
-----------------------------
Title: Executive Vice President
------------------------------------
Signature Page
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
---------
Acquired Corporations. "Acquired Corporations" shall mean the Company and
all of the Subsidiaries.
Acquired Corporation Contract. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any of its assets is or may become
bound or under which any of the Acquired Corporations has, or may become subject
to, any obligation; or (c) under which any of the Acquired Corporations has or
may acquire any right or interest.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of any of the Acquired Corporations' business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of any of the Acquired Corporations (other than common
stock issued to employees of the Company, upon exercise of Company Options),
(ii) any option, call, warrant or right (whether or not immediately exercisable)
to acquire any capital stock or other equity security of any of the Acquired
Corporations (other than stock options granted to employees of the Company in
routine transactions in accordance with the Company's past practices), or (iii)
any security, instrument or obligation that is or may become convertible into or
exchangeable for any capital stock or other equity security of any of the
Acquired Corporations; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving any of the Acquired Corporations.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
---------
Schedule), as it may be amended from time to time.
Company Proprietary Asset. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to any of the Acquired Corporations or
otherwise used by any of the Acquired Corporations.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
A-1.
<PAGE>
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Government Bid. "Government Bid" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or higher-
tier subcontractor of any Governmental Body.
Government Contract. "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
A-2.
<PAGE>
HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including Merger Sub); (c) the
respective Representatives of the Persons referred to in clauses "(a)" and "(b)"
above; and (d) the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above; provided, however, that the Company's
stockholders shall not be deemed to be "Indemnitees."
Key Stockholders. "Key Stockholders" shall mean the following Persons:
Alston Gardner, Philip Rawlins, Wendy Lea, Nicholas Nascone, Bradford Milner,
Alun Newby, Barbara Newby and Jeffrey Muir.
Knowledge; Best of Knowledge. Information shall be deemed to be known to
the "best of knowledge" or to the "knowledge" of the Company if that information
is actually known or reasonably should have been known by any officer or
director of the Company, or any of the other persons listed on Exhibit M
---------
attached hereto, in each case after due inquiry by such persons.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Company Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) would have a material adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance or overall prospects.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product,
A-3.
<PAGE>
technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Subsidiaries. "Subsidiaries" shall have the meaning attributed to that
term in Section 2.1.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
A-4.
<PAGE>
Exhibit B
Form of Voting Agreement and Irrevocable Proxy
<PAGE>
VOTING AGREEMENT
This Voting Agreement is entered into as of November 17, 1999, by and
between Siebel Systems, Inc., a Delaware corporation ("Parent"), and __________
___________________ ("Stockholder").
Recitals
A. Parent, SE Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and OnTarget, Inc., a Georgia
corporation (the "Company"), are entering into an Agreement and Plan of Merger
and Reorganization of even date herewith (the "Reorganization Agreement") which
provides (subject to the conditions set forth therein) for the merger of the
Company with and into Merger Sub (the "Merger").
B. In order to induce Parent and Merger Sub to enter into the
Reorganization Agreement, Stockholder is entering into this Voting Agreement.
Agreement
The parties to this Voting Agreement, intending to be legally bound, agree
as follows:
1. Certain Definitions.
For purposes of this Voting Agreement:
(a) "Company Common Stock" shall mean the common stock, $0.01 par
value per share, of the Company.
(b) "Expiration Date" shall mean the earlier of (i) the date upon
which the Reorganization Agreement is validly terminated or (ii) the date upon
which the Merger becomes effective.
(c) Stockholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if Stockholder: (i) is the record owner of such
security or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(d) "Subject Securities" shall mean: (i) all securities of the Company
(including all shares of Company Common Stock and all options, warrants,
convertible debt securities and other rights to acquire shares of Company Common
Stock) Owned by Stockholder as of the date of this Agreement and (ii) all
additional securities of the Company (including all additional shares of Company
Common Stock and all additional options, warrants, convertible debt securities
and other rights to acquire shares of Company Common Stock) of which Stockholder
acquires Ownership during the period from the date of this Agreement through the
Expiration Date.
B-1.
<PAGE>
(e) A Person shall be deemed to have effected a "Transfer" of a
security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security or (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein.
(f) Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings given to them in the Reorganization Agreement.
2. Transfer Of Subject Securities
2.1 Transferee of Subject Securities to be Bound by this Agreement.
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not cause or permit any
Transfer of any of the Subject Securities to be effected unless each Person to
which any of such Subject Securities, or any interest in any of such Subject
Securities, is or may be transferred shall have: (a) executed a counterpart of
this Voting Agreement and a proxy in the form attached hereto as Exhibit A (with
such modifications as Parent may reasonably request) and (b) agreed to hold such
Subject Securities (or interest in such Subject Securities) subject to all of
the terms and provisions of this Voting Agreement.
2.2 Transfer of Voting Rights. Stockholder agrees that, during the
period from the date of this Voting Agreement through the Expiration Date,
Stockholder shall ensure that: (a) none of the Subject Securities is deposited
into a voting trust and (b) no proxy is granted, and no voting agreement or
similar agreement is entered into, with respect to any of the Subject
Securities.
3. Voting Of Shares
3.1 Voting Agreement. Stockholder agrees that, during the period
from the date of this Voting Agreement through the Expiration Date:
(a) at any meeting of Stockholders of the Company, however called,
Stockholder shall (unless otherwise directed in writing by Parent) cause all
outstanding shares of Company Common Stock that are Owned by Stockholder as of
the record date fixed for such meeting to be voted in favor of the approval and
adoption of the Reorganization Agreement and the approval of the Merger, and in
favor of each of the other actions contemplated by the Reorganization Agreement;
and
(b) in the event written consents are solicited or otherwise sought
from Stockholders of the Company with respect to the approval or adoption of the
Reorganization Agreement, with respect to the approval of the Merger or with
respect to any of the other actions contemplated by the Reorganization
Agreement, Stockholder shall (unless otherwise directed in writing by Parent)
cause to be executed, with respect to all shares of Company Common Stock that
are Owned by Stockholder as of the record date fixed for the consent to the
proposed action, a written consent or written consents to such proposed action.
B-2.
<PAGE>
3.2 Proxy; Further Assurances.
(a) Contemporaneously with the execution of this Voting Agreement:
(i) Stockholder shall deliver to Parent a proxy in the form attached to this
Voting Agreement as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "Proxy")
and (ii) Stockholder shall cause to be delivered to Parent an additional proxy
(in the form attached hereto as Exhibit A) executed on behalf of the record
owner of any outstanding shares of Company Common Stock that are owned
beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934), but not of record, by Stockholder.
(b) Stockholder shall, at his own expense, perform such further
acts and execute such further documents and instruments as may reasonably be
required to vest in Parent the power to carry out and give effect to the
provisions of this Voting Agreement.
4. Waiver Of Dissenters' Rights
Stockholder hereby irrevocably and unconditionally waives, and agrees
to cause to be waived and to prevent the exercise of, any rights of appraisal,
any dissenters' rights and any similar rights relating to the Merger or any
related transaction that Stockholder or any other Person may have by virtue of
the ownership of any outstanding shares of Company Common Stock Owned by
Stockholder.
5. No Solicitation
Stockholder agrees that, during the period from the date of this
Voting Agreement through the Expiration Date, Stockholder shall not, directly or
indirectly, and Stockholder shall ensure that his Representatives do not,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Transaction or take any action
that could reasonably be expected to lead to an Acquisition Transaction; (ii)
furnish any information regarding the Company or any direct or indirect
subsidiary of the Company to any Person in connection with or in response to an
Acquisition Transaction or potential Acquisition Transaction or (iii) engage in
discussions with any Person with respect to any Acquisition Transaction.
Stockholder shall immediately cease and discontinue, and Stockholder shall
ensure that his Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Transaction.
6. Representations And Warranties Of Stockholder
Stockholder hereby represents and warrants to Parent as follows:
6.1 Authorization, Etc. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Voting
Agreement and the Proxy and to perform his obligations hereunder and thereunder.
This Voting Agreement and the Proxy have been duly executed and delivered by
Stockholder and constitute legal, valid and binding obligations of Stockholder,
enforceable against Stockholder in accordance with their terms,
B-3.
<PAGE>
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
6.2 No Conflicts or Consents.
(a) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not: (i) conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to Stockholder or by which he
or any of his properties is or may be bound or affected; or (ii) result in or
constitute (with or without notice or lapse of time) any breach of or default
under, or give to any other Person (with or without notice or lapse of time) any
right of termination, amendment, acceleration or cancellation of, or result
(with or without notice or lapse of time) in the creation of any encumbrance or
restriction on any of the Subject Securities pursuant to, any contract to which
Stockholder is a party or by which Stockholder or any of his affiliates or
properties is or may be bound or affected.
(b) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not, require any consent or approval of any
Person.
6.3 Title to Securities. As of the date of this Voting Agreement:
(a) Stockholder holds of record (free and clear of any encumbrances or
restrictions) the number of outstanding shares of Company Common Stock set forth
under the heading "Shares Held of Record" on the signature page hereof; (b)
Stockholder holds (free and clear of any encumbrances or restrictions) the
options, warrants, convertible debt securities and other rights to acquire
shares of Company Common Stock set forth under the heading "Options and Other
Rights" on the signature page hereof; (c) Stockholder Owns the additional
securities of the Company set forth under the heading "Additional Securities
Beneficially Owned" on the signature page hereof and (d) Stockholder does not
directly or indirectly Own any shares of capital stock or other securities of
the Company, or any option, warrant, convertible debt security or other right to
acquire (by purchase, conversion or otherwise) any shares of capital stock or
other securities of the Company, other than the shares and options, warrants,
convertible debt securities and other rights set forth on the signature page
hereof.
6.4 Accuracy of Representations. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
7. Miscellaneous
7.1 Survival of Representations and Warranties. All representations
and warranties made by Stockholder in this Voting Agreement shall survive (i)
the consummation of the Merger, (ii) any termination of the Reorganization
Agreement and (iii) the Expiration Date.
B-4.
<PAGE>
7.2 Further Assurances. From time to time and without additional
consideration, Stockholder shall (at Stockholder's sole expense) execute and
deliver, or cause to be executed and delivered, such additional transfers,
assignments, endorsements, proxies, consents and other instruments, and shall
(at Stockholder's sole expense) take such further actions, as Parent may request
for the purpose of carrying out and furthering the intent of this Voting
Agreement.
7.3 Termination. This Agreement shall terminate and shall have no
further force or effect as of the Expiration Date.
7.4 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
7.5 Notices. Any notice or other communication required or permitted
to be delivered to either party under this Voting Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
party):
if to Stockholder:
at the address set forth below Stockholder's signature on
the signature page hereof
if to Parent:
Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Attn: Vice President, Legal Affairs
Fax: (650) 295-5116
7.6 Severability. If any provision of this Voting Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Voting Agreement.
Each provision of this Voting Agreement is separable from every other provision
of this Voting Agreement, and each part of each provision of this Voting
Agreement is separable from every other part of such provision.
B-5.
<PAGE>
7.7 Entire Agreement. This Voting Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision
of this Voting Agreement shall be binding upon either party unless made in
writing and signed by both parties.
7.8 Assignment; Binding Effect. Except as provided herein, neither
this Voting Agreement nor any of the interests or obligations hereunder may be
assigned or delegated by Stockholder and any attempted or purported assignment
or delegation of any of such interests or obligations shall be void. Subject to
the preceding sentence, this Voting Agreement shall be binding upon Stockholder
and his heirs, estate, executors, personal representatives, successors and
assigns, and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in Section 2 or
elsewhere in this Voting Agreement, this Voting Agreement shall be binding upon
any Person to whom any Subject Securities are transferred. Nothing in this
Voting Agreement is intended to confer on any Person (other than Parent and its
successors and assigns) any rights or remedies of any nature.
7.9 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Voting Agreement or
the Proxy was not performed in accordance with its specific terms or was
otherwise breached. Stockholder agrees that, in the event of any breach or
threatened breach by Stockholder of any covenant or obligation contained in this
Voting Agreement or in the Proxy, Parent shall be entitled (in addition to any
other remedy that may be available to it, including monetary damages) to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Stockholder further agrees that
neither Parent nor any other Person shall be required to obtain, furnish or post
any bond or similar instrument in connection with or as a condition to obtaining
any remedy referred to in this Section 7.9, and Stockholder irrevocably waives
any right he may have to require the obtaining, furnishing or posting of any
such bond or similar instrument.
7.10 Non-Exclusivity. The rights and remedies of Parent under this
Voting Agreement are not exclusive of or limited by any other rights or remedies
which it may have, whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of Parent under this Voting
Agreement, and the obligations and liabilities of Stockholder under this Voting
Agreement, are in addition to their respective rights, remedies, obligations and
liabilities under common law requirements and under all applicable statutes,
rules and regulations. Nothing in this Voting Agreement shall limit any of
Stockholder's obligations, or the rights or remedies of Parent, under any
Affiliate Agreement between Parent and Stockholder; and nothing in any such
Affiliate Agreement shall limit any of Stockholder's obligations, or any of the
rights or remedies of Parent, under this Voting Agreement.
B-6.
<PAGE>
7.11 Governing Law.
(a) This Voting Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
(b) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING AGREEMENT OR THE
PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS VOTING AGREEMENT OR THE PROXY.
7.12 Counterparts. This Voting Agreement may be executed by the
parties in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
7.13 Captions. The captions contained in this Voting Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Voting Agreement and shall not be referred to in connection with the
construction or interpretation of this Voting Agreement.
7.14 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Voting Agreement or the enforcement of any provision of this
Voting Agreement is brought against Stockholder, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
7.15 Waiver. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Voting Agreement, and no delay on the part
of Parent in exercising any power, right, privilege or remedy under this Voting
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Voting Agreement, or any power, right,
privilege or remedy of Parent under this Voting Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
7.16 Construction.
(a) For purposes of this Voting Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
B-7.
<PAGE>
(b) The parties agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Voting Agreement.
(c) As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
B-8.
<PAGE>
In Witness Whereof, Parent and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
Siebel Systems, Inc.
By:_______________________________________
Name:_____________________________________
Address:__________________________________
__________________________________________
Facsimile:________________________________
Additional Securities
Shares Held of Record Options and Other Rights Beneficialy Owned
- ------------------------ ---------------------------- ------------------------
B-9.
<PAGE>
Exhibit A
Form Of Irrevocable Proxy
The undersigned Stockholder of OnTarget, Inc., a Georgia corporation (the
"Company"), hereby irrevocably (to the fullest extent permitted by law) appoints
and constitutes Mark Hanson, Jeffrey Amann, and Siebel Systems, Inc., a Delaware
corporation ("Parent"), and each of them, the attorneys and proxies of the
undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to (i) the outstanding shares of
capital stock of the Company owned of record by the undersigned as of the date
of this proxy, which shares are specified on the final page of this proxy, and
(ii) any and all other shares of capital stock of the Company which the
undersigned may acquire on or after the date hereof. (The shares of the capital
stock of the Company referred to in clauses "(i)" and "(ii)" of the immediately
preceding sentence are collectively referred to as the "Shares.") Upon the
execution hereof, all prior proxies given by the undersigned with respect to any
of the Shares are hereby revoked, and the undersigned agrees that no subsequent
proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, SE Acquisition Corp.
and the Company (the "Reorganization Agreement").
The attorneys and proxies named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the earlier to occur of the valid
termination of the Reorganization Agreement or the effective time of the merger
contemplated thereby (the "Merger") at any meeting of the Stockholders of the
Company, however called, or in connection with any solicitation of written
consents from Stockholders of the Company in favor of the approval and adoption
of the Reorganization Agreement and the approval of the Merger, and in favor of
each of the other actions contemplated by the Reorganization Agreement.
The undersigned may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the undersigned (including any
transferee of any of the Shares).
If any provision of this proxy or any part of any such provision is held under
any circumstances to be invalid or unenforceable in any jurisdiction, then (a)
such provision or part thereof shall, with respect to such circumstances and in
such jurisdiction, be deemed amended to conform to applicable laws so as to be
valid and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder of
such provision or the validity or enforceability of any other provision of this
proxy. Each
B-10.
<PAGE>
provision of this proxy is separable from every other provision of this proxy,
and each part of each provision of this proxy is separable from every other part
of such provision.
This proxy shall terminate upon the earlier of the valid termination of the
Reorganization Agreement or the effective time of the Merger.
Dated: November __, 1999
_________________________________________
Name:
Number of shares of common stock of the
Company owned of record as of the date of
this proxy:
B-11.
<PAGE>
Exhibit C
Directors and Officers of Surviving Corporation
Director
Howard Graham
Officers
Howard Graham (President)
Jeffrey Amann (Secretary)
C-1.
<PAGE>
Exhibit D
Individuals to Execute the NonCompetition Agreement
J. Alston Gardner
Philip Rawlins
Wendy Lea
Nicholas Nascone
Fred Burton
Hugh Stevenson
D-1.
<PAGE>
Exhibit E
Form of NonCompetition Agreement
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "Agreement") is made and entered into
as of this ___ day of ___________, 1999 (the "Agreement Date"), by and between
Siebel Systems, Inc., a Delaware corporation ("Parent"), OnTarget, Inc., a
Georgia corporation (the "Company"), and ______________ ("Employee").
RECITALS
A. Employee is a key employee and stockholder and/or optionholder of the
Company. Parent and the Company have entered into an Agreement and Plan of
Merger and Reorganization (the "Reorganization Agreement") dated November 17,
1999, providing for the acquisition by Parent of the Company pursuant to a
merger of a wholly-owned subsidiary of Parent ("Merger Sub") with and into the
Company (the "Merger"). Immediately following the Merger, the business of the
Company will be conducted by Parent through the Company. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Reorganization Agreement. Employee (i) will receive substantial benefits as a
result of the Merger and (ii) has been offered employment with Parent following
the Effective Date (the "Employee's Employment") and, in connection therewith,
Employee has agreed not to compete in the manner and to the extent herein set
forth. Employee is entering into this Agreement as an inducement to Parent and
Merger Sub to consummate the Merger, with all of the attendant financial
benefits to Employee as an Employee of the Company.
B. Parent has requested, as a condition precedent to executing the
Reorganization Agreement and consummating the transactions contemplated by the
Reorganization Agreement, that Employee execute and deliver this Agreement, and
Employee desires to enter into this Agreement.
C. Parent, the Company and Parent's subsidiaries have conducted and are
conducting their respective businesses on a worldwide basis.
AGREEMENT
Now, Therefore, in consideration of the mutual covenants herein
contemplated and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Acknowledgements by Employee. Employee acknowledges that by virtue of
his position with the Company he has developed considerable expertise in the
business operations of the Company and has had extensive access to trade secrets
and other confidential information of the Company. Employee recognizes that
Parent would be irreparably damaged, and its substantial investment in the
Company materially impaired, if Employee were to enter into an activity
competing with the business of the Company (or any subsidiary, Affiliate (as
defined below) successor or acquiror of the Company) in violation of the terms
of this Agreement or if Employee were to disclose or make unauthorized use of
any confidential information concerning
E-1.
<PAGE>
the business of the Company (or any subsidiary, successor or acquiror of the
Company). Accordingly, Employee expressly acknowledges that he is voluntarily
entering into this Agreement and that the terms and conditions of this Agreement
are fair and reasonable to Employee in all respects.
2. Restricted Period. This Agreement shall expire on the third
anniversary of the effective date of the Merger (the "Termination Date"). The
period of time that elapses from the consummation of the Merger (the "Effective
Date") until the Termination Date shall be referred to herein as the "Restricted
Period."
3. Non-Competition. During the Restricted Period, Employee shall not,
directly or indirectly, without the prior written consent of Parent, own,
manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, or consultant of
any entity engaged in any activity that relates to the development, promotion,
marketing, licensing or distribution of products or services which then compete
with the products or services of the Company (or any subsidiary, successor,
Affiliate or acquiror of the Company) worldwide, that exist as of the date such
Employee leaves the Employee's Employment (the "Restricted Business").
Notwithstanding the above, Employee shall not be deemed to be in contravention
of the foregoing if Employee participates as a passive investor holding up to 1%
of the equity securities of an entity engaged in the Restricted Business, which
securities are publicly traded.
4. Non-Interference. Employee further agrees that during the Restricted
Period, he will not, without the prior written consent of Parent, (i) interfere
with the business of the Company or Parent, by soliciting, attempting to
solicit, induce or attempt to induce any employee or consultant of the Company
or Parent to terminate his employment as such in order to become an employee,
consultant or independent contractor to or for any competitor of the Company or
Parent or to or for any company with which Employee is associated in any way;
(provided that, in the absence of a violation of this Section 4(i), this
restriction shall not be construed as a prohibition against hiring); or (ii)
induce or attempt to induce any customers, suppliers, distributors, resellers,
or independent contractors of the Company or Parent to terminate their
relationships with, or to take any action that would be disadvantageous to the
business of, the Company or Parent.
5. Representations and Warranties. Employee represents and warrants, to
and for the benefit of the Indemnitees, that: (a) he has full power and capacity
to execute and deliver, and to perform all of Employee's obligations under, this
Agreement; and (b) neither the execution and delivery of this Agreement nor the
performance of this Agreement will result directly or indirectly in a violation
or breach of (i) any agreement or obligation by which he or any of his
Affiliates or subsidiaries is or may be bound, or (ii) any law, rule or
regulation. Employee's representations and warranties shall survive the
expiration of the Restricted Period for an unlimited period of time.
6. Independence of Obligations. The covenants of Employee set forth in
this Agreement shall be construed as independent of any other agreement or
arrangement between
E-2.
<PAGE>
Employee, on the one hand, and the Company or Parent or any of their Affiliates
or subsidiaries, on the other hand, and the existence of any claim or cause of
action by Employee against the Company or Parent or any of their Affiliates or
subsidiaries shall not constitute a defense to the enforcement of such covenants
against Employee.
7. Remedies. Employee expressly acknowledges that damages alone will not
be an adequate remedy for any breach by Employee of any of the covenants set
forth in this Agreement and that Parent and the Company, in addition to any
other remedies which they may have, shall be entitled, as a matter of right, to
injunctive relief, including, without limitation, specific performance, in any
court of competent jurisdiction with respect to any actual or threatened breach
by Employee of any of said covenants. The rights and remedies of Parent and the
other Indemnitees under this Agreement are not exclusive of or limited by any
other rights or remedies which they may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not alternative).
Without limiting the generality of the foregoing, the rights and remedies of
Parent and the other Indemnitees under this Agreement, and the obligations and
liabilities of Employee under this Agreement, are in addition to their
respective rights, remedies, obligations and liabilities under the law of unfair
competition, under laws relating to misappropriation of trade secrets, under
other laws and common law requirements and under all applicable rules and
regulations. Employee's obligations under this Agreement are absolute and
nothing in this Agreement shall limit any of Employee's obligations, or the
rights or remedies of Parent or any of the other Indemnitees, under the
Reorganization Agreement; and nothing in the Reorganization Agreement shall
limit any of Employee's obligations, or any of the rights or remedies of Parent
or any of the other Indemnitees, under this Agreement. No breach on the part of
Parent or any other party of any covenant or obligation contained in the
Reorganization Agreement or any other agreement or by virtue of any failure to
perform or other breach of any obligation of Parent, any other Indemnitee or any
other Person shall limit or otherwise affect any right or remedy of Parent or
any of the other Indeminitees under this Agreement.
8. Severability.
(a) If any provision of this Agreement shall be held by a court of
competent jurisdiction to be excessively broad as to duration, activity or
subject, it shall be deemed to extend only over the maximum duration, activity
and subject as to which such provision shall be valid and enforceable under
applicable law. In the event that any provision of this Agreement, or the
application of any such provision to any Person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
law.
(b) The parties intend that the covenant contained in Section 3 above
shall be construed as a series of separate covenants, one for each geographical
unit specified. Except for geographical coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 3 above.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this Agreement, then the unenforceable
E-3.
<PAGE>
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
9. Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address and facsimile telephone number set forth beneath the name of such party
below (or to such other address and facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
If to Parent: Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Attn: Vice President, Legal Affairs
Fax: (650) 295-5116
If to the Company: To the address of the Company set forth
in the Reorganization Agreement
If to Employee: the address set forth below Employee's
name on the signature page hereto
10. Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
11. Assignment. This Agreement shall be assignable by any or all of
Parent, Merger Sub or the Company to any of its or their assignees or successors
and each of such assignees or successors is hereby expressly authorized to
enforce this Agreement. This Agreement is not assignable or delegable by
Employee.
12. Amendment. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
E-4.
<PAGE>
13. Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Parent, Merger Sub and the Company and their respective assignees and
successors, and Employee and Employee's heirs and personal representatives.
15. Further Assurances. Employee shall (at Parent's sole expense) execute
and/or cause to be delivered to Parent (and each Indemnitee, if applicable) such
instruments and other documents, and shall (at Parent's sole expense) take such
other actions, as Parent and such Indemnitee may reasonably request at any time
(whether during or after the Restricted Period) for the purpose of carrying out
or evidencing any of the provisions of this Agreement.
16. Governing Law; Venue.
(a) This Agreement shall be construed in accordance, and governed in
all respects by, the internal laws of the State of California (without giving
effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
Santa Clara, California. Each party to this Agreement: (i) expressly and
irrevocably consents and submits to the jurisdiction of each state and federal
court located in the County of Santa Clara, California (and each appellate court
located in the State of California) in connection with any such legal
proceeding; (ii) agrees that service of any process, summons, notice or document
by U.S. mail addressed to him at the address set forth on the signature page of
this Agreement shall constitute effective service of such process, summons,
notice or document for purposes of any such legal proceeding; (iii) agrees that
each state and federal court located in the County of Santa Clara, California
shall be deemed to be a convenient forum; and (iv) agrees not to assert (by way
of motion, as a defense or otherwise), in any such legal proceeding commenced in
any state or federal court located in the County of Santa Clara, California, any
claim that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that this Agreement or the
subject matter of this Agreement may not be enforced in or by such court.
(c) EMPLOYEE IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE
ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT.
(d) Nothing in this Section 16 shall be deemed to limit or otherwise
affect the right of Parent or any other Indemnitee to commence any legal
proceeding against Employee in any forum or jurisdiction.
E-5.
<PAGE>
17. Signature. This Agreement will be deemed to have been executed for all
purposes when the Employee signs and dates the omnibus signature page.
18. Headings. The headings contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
19. Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
20. Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
E-6.
<PAGE>
In Witness Whereof, the undersigned have executed this Agreement as of the
date first above written.
Employee
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Address:______________________________________
______________________________________________
Facsimile:____________________________________
Siebel Systems, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
OnTarget, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
E-7.
<PAGE>
Exhibit F
Form of Release
<PAGE>
____________, 1999
Siebel Systems, Inc.
1855 S. Grant St.
San Mateo, CA 94402
Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Merger and
Reorganization dated as of November 17, 1999 (the "Reorganization Agreement"),
by and among Siebel Systems, Inc., a Delaware corporation ("Parent"), SE
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and OnTarget, Inc, a Georgia corporation (the "Company").
In order to induce Parent to consummate the transactions contemplated by
the Reorganization Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned,
intending to be legally bound, hereby covenants and agrees as follows:
1. Release. The undersigned (on behalf of himself and each person or
entity that the undersigned has the power to bind) hereby irrevocably,
unconditionally and completely releases, acquits and forever discharges each of
the Releasees (as defined below) from any Claim (as defined below), and hereby
irrevocably, unconditionally and completely waives and relinquishes each and
every Claim that the undersigned may have had in the past, may now have or may
have in the future against any of the Releasees, relating to any written or oral
agreements or arrangements entered into, and any events, matters, causes,
things, acts, omissions or conduct, occurring or existing, at any time up to and
including the date of this letter, including, without limitation, any Claim (a)
to the effect that the undersigned is or may be entitled to any compensation,
benefits or perquisites from the Company or any of its direct or indirect
subsidiaries or partnerships, or (b) otherwise arising (directly or indirectly)
out of or in any way connected with the undersigned's employment or other
relationship with the Company or any of its direct or indirect subsidiaries;
provided, however, that the undersigned is not releasing the undersigned's
rights, if any:
(i) under the Reorganization Agreement;
(ii) under the indemnification provisions contained in the
Company's Articles of Incorporation or Bylaws;
(iii) with respect to salaries, bonuses and expenses that
have accrued in the ordinary course of business consistent with past practices;
and
(iv) to accrued vacation and vested benefits under the
Company's employee benefit plans.
F-1.
<PAGE>
For purposes of this Agreement, (1) the term "Releasees" means: (v) Parent; (w)
the Company; (x) each of the direct and indirect subsidiaries of Parent and the
Company; (y) each other affiliate of Parent and the Company; and (z) the
successors and past, present and future assigns, directors, officers, agents,
attorneys and representatives of the respective entities identified or otherwise
referred to in clauses "(v)" through "(y)" of this clause "(1)," and (2) the
term "Claim" means all past, present and future disputes, claims, controversies,
demands, rights, obligations, liabilities, actions and causes of action of every
kind and nature, including (y) any unknown, unsuspected or undisclosed claim;
and (z) any claim or right that may be asserted or exercised by the undersigned
in the undersigned's capacity as a stockholder, director, officer or employee of
the Company or in any other capacity.
2. Miscellaneous. This letter shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws. If any
legal action or other legal proceeding relating to this letter or the
enforcement of any provision of this letter is brought against any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled). This letter and the agreements referred to herein set
forth the entire understanding of the parties relating to the subject matter
hereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof.
Very truly yours,
___________________________________________________
[Name]
Address:___________________________________________
___________________________________________________
___________________________________________________
F-2.
<PAGE>
Exhibit G
Form of Stockholder Representation Letter
<PAGE>
STOCKHOLDER REPRESENTATION LETTER
(For Accredited Investors)
This Stockholder Representation Letter ("Letter") is being executed and
delivered as of November ____, 1999, by the undersigned stockholder of OnTarget,
Inc., a Georgia corporation (the "Company"), to and in favor of, and for the
benefit of, Siebel Systems, Inc., a Delaware corporation ("Parent") and its
affiliates.
Recitals
A. The undersigned stockholder of the Company (the "Stockholder")
represents to Parent that he owns the number of shares of the common stock,
$0.01 par value per share, of the Company (the "Shares"); the number of options
to purchase shares of Company common stock; and/or the number of shares issuable
upon conversion of convertible debt securities as set forth below the
Stockholder's signature at the end of this Letter. Said securities are referred
to in this Letter as the "Securities."
B. Pursuant to an Agreement and Plan of Merger and Reorganization, dated
as of November 17, 1999 (the "Reorganization Agreement"), by and among Parent,
SE Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub") and the Company, it is contemplated that Merger Sub will
merge with and into the Company (the merger of Merger Sub into the Company being
referred to in this Letter as the "Merger") with the Company being the surviving
corporation. Upon the consummation of the Merger, (i) the Company's stockholders
are to receive shares of common stock of Parent ("Parent Common Stock") in
exchange for their shares of common stock of the Company, (ii) any outstanding
options to purchase shares of Company common stock are to be converted into
options to purchase Parent Common Stock, in accordance with the Reorganization
Agreement; and (iii) the Company is to become a wholly-owned subsidiary of
Parent. Accordingly, it is contemplated that the Stockholder will receive shares
of Parent Common Stock in connection with the Merger.
C. Capitalized terms used in this Letter have the meaning ascribed to
them in the Reorganization Agreement unless otherwise stated herein.
Certification
1. Representations And Warranties Of The Stockholder. The Stockholder
represents, warrants and certifies to Parent as follows:
(a) The Stockholder is the holder and beneficial owner of the
Securities and has good and valid title to the Securities free and clear of any
Encumbrances. The Securities are the only shares of the capital stock of the
Company or rights to acquire shares of the capital stock of the Company held by
the Stockholder. The Stockholder (or J. Alston Gardner, if applicable, pursuant
to a proxy that has been granted by Stockholder to J. Alston Gardner prior to
the date of this Letter) has the ability to vote all of the Shares at any
meeting of the Stockholders of the Company or by written consent in lieu of any
such meeting. Except as described in the
G-1.
<PAGE>
Disclosure Schedule to, or pursuant to the Reorganization Agreement, the
Stockholder has not appointed or granted any proxy or entered into any
agreement, contract, commitment or understanding with respect to any of the
Shares that is now in force.
(b) The Stockholder has the absolute and unrestricted right, power,
authority and capacity to enter into, execute, deliver and perform all of his
obligations under each other agreement, document or instrument referred to in or
contemplated by the Reorganization Agreement to which the Stockholder is or is
to become a party.
(c) Each agreement, document or instrument referred to in or
contemplated by the Reorganization Agreement to which the Stockholder is or is
to become a party (i) has been (or will when executed by the Stockholder be)
duly and validly executed by the Stockholder, and (ii) constitutes (or will when
executed by the Stockholder constitute) a valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors, and to rules of law governing specific performance,
injunctive relief and other equitable remedies.
(d) Neither the execution, delivery or performance of any agreement,
document or instrument referred to in or contemplated by the Reorganization
Agreement to which the Stockholder is or is to become a party, nor the
consummation of the Merger or any of the other transactions contemplated by the
Reorganization Agreement, will directly or indirectly: (i) result in any
violation or breach of any agreement or other instrument to which the
Stockholder is a party or by which the Stockholder is bound; or (ii) result in a
violation of any law, rule, regulation, order, judgment or decree to which the
Stockholder or any of the Securities is subject. No authorization, consent or
approval of, or notice to, any Person is required to be obtained or given by the
Stockholder in connection with the execution, delivery or performance of the
Reorganization Agreement or of any other agreement, document or instrument
referred to in or contemplated by the Reorganization Agreement to which the
Stockholder is or is to become a party.
(e) There is no Legal Proceeding by or before any Governmental Body
pending or, to the knowledge of the Stockholder, threatened against the
Stockholder that challenges or would challenge the execution and delivery of the
Reorganization Agreement or of any other agreement, document or instrument
referred to in or contemplated by the Reorganization Agreement to which the
Stockholder is or is to become a party or the taking of any of the actions
required to be taken by the Stockholder under the Reorganization Agreement or
under any other agreement, document or instrument referred to in or contemplated
by the Reorganization Agreement to which the Stockholder is or is to become a
party.
(f) The Stockholder is aware (i) that the Parent Common Stock to be
issued to the Stockholder in connection with the Merger will not be issued
pursuant to a registration statement under the Securities Act of 1933, as
amended (the "Act"), but will instead be issued in reliance on the exemption
from registration set forth in Section 4(2) of the Act and in Regulation
G-2.
<PAGE>
D under the Act, and (ii) that neither the Merger nor the issuance of such
Parent Common Stock has been approved or reviewed by the SEC or by any other
Governmental Body.
(g) The Stockholder is aware that the Parent Common Stock to be
issued in connection with the Merger cannot be resold unless such Parent Common
Stock is registered under the Act or unless an exemption from registration is
available. The Stockholder is also aware that: (i) except pursuant to the
Registration Rights Agreement and the Reorganization Agreement, Parent is under
no obligation to file a registration statement with respect to the Parent Common
Stock to be issued to the Stockholder in connection with the Merger; and (ii)
the provisions of Rule 144 under the Act will permit resale of the Parent Common
Stock to be issued to the Stockholder in connection with the Merger only under
limited circumstances, and such Parent Common Stock must be held by the
Stockholder for at least one year before it can be sold pursuant to Rule 144.
(h) The Parent Common Stock to be issued to the Stockholder in
connection with the Merger will be acquired by the Stockholder for investment
and for his own account, and not with a view to, or for resale in connection
with, any unregistered distribution thereof.
(i) The Stockholder has received and examined Parent's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999, Annual Report on Form
10-K for the year ended December 31, 1998 and Definitive Proxy Statements filed
with the SEC on April 5, 1999 and September 17, 1999, including the risk factors
described in the foregoing documents. Without limiting the generality of the
foregoing, the Stockholder specifically acknowledges that the stock price of
Parent Common Stock has been, and will likely continue to be, extremely
volatile, and the Stockholder unconditionally and forever waives and discharges
any rights he may have against Parent or any other Person relating solely to any
change in the price of Parent Common Stock between the date of the
Reorganization Agreement and the Closing Date.
(j) The Stockholder has been given the opportunity: (i) to ask
questions of, and to receive answers from, persons acting on behalf of the
Company and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in connection with the Merger, and
the business, properties, prospects and financial condition of the Company and
Parent; and (ii) to obtain any additional information (to the extent the Company
or Parent possesses such information or is able to acquire it without
unreasonable effort or expense and without breach of confidentiality
obligations) that is necessary to verify the accuracy of the information set
forth in the documents, provided or made available to the Stockholder.
(k) The Stockholder is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments in
securities presenting investment decisions like that involved in the
Stockholder's contemplated investment in the Parent Common Stock to be issued in
connection with the Merger.
(l) The Stockholder is an "accredited investor" (as such term is
defined in Rule 501 under the Act).
G-3.
<PAGE>
(m) The Stockholder understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Common Stock to
be issued to the Stockholder in connection with the Merger, and that there will
be placed on the certificate or certificates representing such Parent Common
Stock a legend identical or similar in effect to the following legend (together
with any other legend or legends required by applicable state securities laws or
otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED
UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT IS AVAILABLE."
2. Reliance. The Stockholder acknowledges that Parent will rely on his
representations, warranties and certifications set forth in Section 1 above for
purposes of determining his suitability as an investor in Parent Common Stock
and for purposes of confirming the availability of an exemption from the
registration requirements of the Act.
3. Prohibitions Against Transfer. The Stockholder shall not effect any
sale, transfer or other disposition of any of the Parent Common Stock that he is
to receive in connection with the Merger unless:
(a) such sale, transfer or other disposition has been registered
under the Act;
(b) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 144 under the Act, as evidenced by a broker's
letter and a representation letter executed by the Stockholder (satisfactory in
form and content to Parent) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Parent shall have advised
Parent in a written opinion letter (satisfactory in form and content to Parent),
upon which Parent may rely, that such sale, transfer or other disposition will
be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to the Stockholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall have
been delivered to Parent.
4. Construction.
(a) For purposes of this Letter, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
G-4.
<PAGE>
(b) The Stockholder hereto agrees that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Letter.
(c) As used in this Letter, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
The Stockholder has executed and delivered this Letter as of the date first
written above.
[NAME OF STOCKHOLDER]
___________________________________________
Number of shares:__________________________
State of Residence:________________________
G-5.
<PAGE>
STOCKHOLDER REPRESENTATION LETTER
(For Non-Accredited Investors)
This Stockholder Representation Letter ("Letter") is being executed and
delivered as of November ____, 1999, by the undersigned stockholder of OnTarget,
Inc., a Georgia corporation (the "Company"), to and in favor of, and for the
benefit of, Siebel Systems, Inc., a Delaware corporation ("Parent") and its
affiliates.
Recitals
A. The undersigned stockholder of the Company (the "Stockholder")
represents to Parent that he owns the number of shares of the common stock,
$0.01 par value per share, of the Company set forth below the Stockholder's
signature at the end of this Letter. Said shares are referred to in this Letter
as the "Shares."
B. Pursuant to an Agreement and Plan of Merger and Reorganization, dated
as of November 17, 1999 (the "Reorganization Agreement"), by and among Parent,
SE Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub") and the Company, it is contemplated that Merger Sub will
merge with and into the Company (the merger of Merger Sub into the Company being
referred to in this Letter as the "Merger") with the Company being the surviving
corporation. Upon the consummation of the Merger, (i) the Company's stockholders
are to receive shares of common stock of Parent ("Parent Common Stock") in
exchange for their shares of common stock of the Company, (ii) any outstanding
options to purchase shares of Company common stock are to be converted into
options to purchase Parent Common Stock, in accordance with the Reorganization
Agreement; and (iii) the Company is to become a wholly-owned subsidiary of
Parent. Accordingly, it is contemplated that the Stockholder will receive shares
of Parent Common Stock in connection with the Merger.
C. Capitalized terms used in this Letter have the meaning ascribed to
them in the Reorganization Agreement unless otherwise stated herein.
Certification
1. Representations And Warranties Of The Stockholder. The Stockholder
represents, warrants and certifies to Parent as follows:
(a) The Stockholder is the holder and beneficial owner of the Shares
and has good and valid title to the Shares free and clear of any Encumbrances.
The Shares are the only shares of the capital stock of the Company held by the
Stockholder. The Stockholder (or J. Alston Gardner, if applicable, pursuant to a
proxy that has been granted by Stockholder to J. Alston Gardner prior to the
date of this Letter) has the ability to vote all of the Shares at any meeting of
the Stockholders of the Company or by written consent in lieu of any such
meeting. Except as described in the Disclosure Schedule to, or pursuant to the
Reorganization Agreement, the Stockholder has not appointed or granted any proxy
or entered into any agreement, contract, commitment or understanding with
respect to any of the Shares that is now in force.
G-6.
<PAGE>
(b) The Stockholder has the absolute and unrestricted right, power,
authority and capacity to enter into, execute, deliver and perform all of his
obligations under each other agreement, document or instrument referred to in or
contemplated by the Reorganization Agreement to which the Stockholder is or is
to become a party.
(c) Each agreement, document or instrument referred to in or
contemplated by the Reorganization Agreement to which the Stockholder is or is
to become a party (i) has been (or will when executed by the Stockholder be)
duly and validly executed by the Stockholder, and (ii) constitutes (or will when
executed by the Stockholder constitute) a valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors, and to rules of law governing specific performance,
injunctive relief and other equitable remedies.
(d) Neither the execution, delivery or performance of any agreement,
document or instrument referred to in or contemplated by the Reorganization
Agreement to which the Stockholder is or is to become a party, nor the
consummation of the Merger or any of the other transactions contemplated by the
Reorganization Agreement, will directly or indirectly: (i) result in any
violation or breach of any agreement or other instrument to which the
Stockholder is a party or by which the Stockholder is bound; or (ii) result in a
violation of any law, rule, regulation, order, judgment or decree to which the
Stockholder or any of the Shares is subject. No authorization, consent or
approval of, or notice to, any Person is required to be obtained or given by the
Stockholder in connection with the execution, delivery or performance of the
Reorganization Agreement or of any other agreement, document or instrument
referred to in or contemplated by the Reorganization Agreement to which the
Stockholder is or is to become a party.
(e) There is no Legal Proceeding by or before any Governmental Body
pending or, to the knowledge of the Stockholder, threatened against the
Stockholder that challenges or would challenge the execution and delivery of the
Reorganization Agreement or of any other agreement, document or instrument
referred to in or contemplated by the Reorganization Agreement to which the
Stockholder is or is to become a party or the taking of any of the actions
required to be taken by the Stockholder under the Reorganization Agreement or
under any other agreement, document or instrument referred to in or contemplated
by the Reorganization Agreement to which the Stockholder is or is to become a
party.
(f) The Stockholder is aware (i) that the Parent Common Stock to be
issued to the Stockholder in connection with the Merger will not be issued
pursuant to a registration statement under the Securities Act of 1933, as
amended (the "Act"), but will instead be issued in reliance on the exemption
from registration set forth in Section 4(2) of the Act and in Regulation D under
the Act, and (ii) that neither the Merger nor the issuance of such Parent Common
Stock has been approved or reviewed by the SEC or by any other Governmental
Body.
(g) The Stockholder is aware that the Parent Common Stock to be
issued in connection with the Merger cannot be resold unless such Parent Common
Stock is registered
G-7.
<PAGE>
under the Act or unless an exemption from registration is available. The
Stockholder is also aware that: (i) except pursuant to the Registration Rights
Agreement and the Reorganization Agreement, Parent is under no obligation to
file a registration statement with respect to the Parent Common Stock to be
issued to the Stockholder in connection with the Merger; and (ii) the provisions
of Rule 144 under the Act will permit resale of the Parent Common Stock to be
issued to the Stockholder in connection with the Merger only under limited
circumstances, and such Parent Common Stock must be held by the Stockholder for
at least one year before it can be sold pursuant to Rule 144.
(h) The Parent Common Stock to be issued to the Stockholder in
connection with the Merger will be acquired by the Stockholder for investment
and for his own account, and not with a view to, or for resale in connection
with, any unregistered distribution thereof.
(i) The Stockholder has received and examined Parent's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999, Annual Report on Form
10-K for the year ended December 31, 1998 and Definitive Proxy Statements filed
with the SEC on April 5, 1999 and September 17, 1999, including the risk factors
described in the foregoing documents. Without limiting the generality of the
foregoing, the Stockholder specifically acknowledges that the stock price of
Parent Common Stock has been, and will likely continue to be, extremely
volatile, and the Stockholder unconditionally and forever waives and discharges
any rights he may have against Parent or any other Person relating solely to any
change in the price of Parent Common Stock between the date of the
Reorganization Agreement and the Closing Date.
(j) The Stockholder has been given the opportunity: (i) to ask
questions of, and to receive answers from, persons acting on behalf of the
Company and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in connection with the Merger, and
the business, properties, prospects and financial condition of the Company and
Parent; and (ii) to obtain any additional information (to the extent the Company
or Parent possesses such information or is able to acquire it without
unreasonable effort or expense and without breach of confidentiality
obligations) that is necessary to verify the accuracy of the information set
forth in the documents, provided or made available to the Stockholder.
(k) The Stockholder (either alone or together with its
representative) is knowledgeable, sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in securities
presenting investment decisions like that involved in the Stockholder's
contemplated investment in the Parent Common Stock to be issued in connection
with the Merger. The Stockholder acknowledges that he appointed J. Alston
Gardner (the "Purchaser Representative") to act as his purchaser representative
in connection with his evaluation of the merits and risks of the Merger and the
Stockholder's investment in Parent Common Stock, and has met with the Purchaser
Representative for the purpose of discussing the merits and risks of the Merger
and the Stockholder's investment in Parent Common Stock. The Stockholder is
aware that, contemporaneously with the consummation of the Merger, an employment
agreement between the Purchaser Representative and Parent will become effective
pursuant to which the Purchaser Representative will be entitled to certain
benefits, including options to purchase shares of Parent Common Stock, and that
the Purchaser Representative has
G-8.
<PAGE>
other interests in the Merger as described in the Information Statement provided
to and reviewed by the Stockholder in connection with the Merger.
(l) The Stockholder understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Common Stock to
be issued to the Stockholder in connection with the Merger, and that there will
be placed on the certificate or certificates representing such Parent Common
Stock a legend identical or similar in effect to the following legend (together
with any other legend or legends required by applicable state securities laws or
otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE."
2. Reliance. The Stockholder acknowledges that Parent will rely on his
representations, warranties and certifications set forth in Section 1 above for
purposes of determining his suitability as an investor in Parent Common Stock
and for purposes of confirming the availability of an exemption from the
registration requirements of the Act.
3. Prohibitions Against Transfer. The Stockholder shall not effect any
sale, transfer or other disposition of any of the Parent Common Stock that he is
to receive in connection with the Merger unless:
(a) such sale, transfer or other disposition has been registered
under the Act;
(b) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 144 under the Act, as evidenced by a broker's
letter and a representation letter executed by the Stockholder (satisfactory in
form and content to Parent) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Parent shall have advised
Parent in a written opinion letter (satisfactory in form and content to Parent),
upon which Parent may rely, that such sale, transfer or other disposition will
be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to the Stockholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall have
been delivered to Parent.
G-9.
<PAGE>
4. Construction.
(a) For purposes of this Letter, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The Stockholder hereto agrees that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Letter.
(c) As used in this Letter, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
The Stockholder has executed and delivered this Letter as of the date first
written above.
[NAME OF STOCKHOLDER]
________________________________________
Number of shares: ______________________
State of Residence: ____________________
ACKNOWLEDGED BY:
__________________________________
J. Alston Gardner
Purchaser Representative
G-10.
<PAGE>
Exhibit H (A)
Form of Affiliate Agreement
<PAGE>
AFFILIATE AGREEMENT
This Affiliate Agreement ("Affiliate Agreement") is being executed and
delivered as of November 17, 1999 by _________________ ("Affiliate") in favor of
and for the benefit of Siebel Systems, Inc., a Delaware corporation ("Parent").
RECITALS
A. Affiliate is a stockholder and/or an officer and/or director of,
OnTarget, Inc., a Georgia corporation (the "Company").
B. Parent, SE Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and the Company have entered into an
Agreement and Plan of Merger and Reorganization, dated as of November 17, 1999
(the "Reorganization Agreement"), providing for the merger of Merger Sub into
the Company (the "Merger"). The Reorganization Agreement contemplates that,
upon consummation of the Merger, (i) holders of shares of the common stock of
the Company will receive shares of common stock of Parent ("Parent Common
Stock") in exchange for their shares of common stock of the Company and (ii) the
Company will become a wholly owned subsidiary of Parent. It is accordingly
contemplated that the stockholders of the Company will receive shares of Parent
Common Stock in the Merger.
C. Affiliate understands that Affiliate may be deemed an "affiliate" of
Parent for purposes of determining Parent's eligibility to account for the
Merger as a "pooling of interests" under Accounting Series Releases 130 and 135,
as amended, of the Securities and Exchange Commission (the "SEC"), and under
other applicable "pooling of interests" accounting requirements.
AGREEMENT
Affiliate, intending to be legally bound, agrees as follows:
1. Representations and Warranties of Affiliate. Affiliate represents and
warrants to Parent as follows:
(a) Affiliate is the holder and beneficial owner of: (i) the number
of outstanding shares of common stock of the Company (the "Company Shares");
(ii) the number of shares issuable upon exercise of options to purchase shares
of Company common stock (the "Company Options"); and/or (iii) the number of
shares of Company common stock issuable upon conversion of convertible debt
securities as set forth beneath Affiliate's signature on the signature page
hereof (the "Company Debt Securities") (the Company Shares, the Company Options
and the Company Debt Securities are hereinafter referred to as the "Company
Securities"), and Affiliate has good and valid title to the Company Shares, free
and clear of any liens, pledges, security interests, adverse claims, equities,
options, proxies, charges, encumbrances or restrictions of any nature. Affiliate
has the sole right to vote and to dispose of the Company Shares.
H-1.
<PAGE>
(b) Affiliate does not own any options, warrants, convertible debt
securities or other rights to purchase shares of common stock of the Company or
any other securities of the Company, other than the Company Securities.
(c) Affiliate has carefully read this Affiliate Agreement and, to the
extent Affiliate felt necessary, has discussed with counsel the limitations
imposed on Affiliate's ability to hold, sell, transfer or otherwise dispose of
the Company Shares or the shares of Parent Common Stock that Affiliate is to
receive pursuant to the Reorganization Agreement, either directly, as a
stockholder of the Company, and any options to purchase shares of Parent Common
Stock that Affiliate is to receive in connection with the Merger. Affiliate
fully understands the limitations this Affiliate Agreement places upon
Affiliate's ability to hold, sell, transfer or otherwise dispose of securities
of the Company and securities of Parent.
(d) Affiliate understands that the representations, warranties and
covenants set forth in this Affiliate Agreement will be relied upon by Parent
and its counsel and accountants for purposes of determining Parent's eligibility
to account for the Merger as a "pooling of interests" and for purposes of
determining whether Parent should proceed with the Merger.
2. Prohibitions Against Transfer. Affiliate agrees that, during the
period from the date hereof through the date on which financial results covering
at least 30 days of post-Merger combined operations of Parent and the Company
have been published by Parent (within the meaning of the applicable "pooling of
interests" accounting requirements) (the "End Date"):
(a) Affiliate shall not sell, transfer or otherwise dispose of, or
reduce Affiliate's interest in or risk relating to, (A) any capital stock of the
Company (including, without limitation, the Company Shares and any additional
shares of capital stock of the Company acquired by Affiliate, whether upon
exercise of a stock option, conversion of debt securities or otherwise), except
pursuant to and upon consummation of the Merger, or (B) any option, convertible
debt securities or other right to purchase any shares of capital stock of the
Company, except pursuant to and upon consummation of the Merger; and
(b) Affiliate shall not sell, transfer or otherwise dispose of, or
permit to be sold, transferred or otherwise disposed of, or reduce Affiliate's
interest in or risk relating to, (A) any shares of capital stock of Parent
(including without limitation the Parent Shares and any additional shares of
capital stock of Parent acquired by Affiliate, whether upon exercise of a stock
option, conversion of debt securities or otherwise) (the "Affiliate's Parent
Common Stock"), or (B) any option, convertible debt securities or other right to
purchase any shares of capital stock of Parent.
3. Receipt of Certificates of Parent Common Stock. Notwithstanding any
provisions to the contrary in the Reorganization Agreement, Affiliate agrees
that, during the period from the date hereof through to and including the End
Date, Parent shall hold, on behalf of and for the benefit of Affiliate, any and
all share certificates representing shares of the Affiliate's Parent Common
Stock (the "Parent Stock Share Certificates") issued to such Affiliate pursuant
to the terms of the Reorganization Agreement (other than the Escrow Shares (as
that
H-2.
<PAGE>
term is defined in the Reorganization Agreement)); provided that such Parent
Stock Share Certificates shall be delivered to Affiliate by Parent immediately
after the End Date.
4. Independence of Obligations. The covenants and obligations of
Affiliate set forth in this Affiliate Agreement shall be construed as
independent of any other agreement or arrangement between Affiliate, on the one
hand, and the Company or Parent, on the other. The existence of any claim or
cause of action by Affiliate against the Company or Parent shall not constitute
a defense to the enforcement of any of such covenants or obligations against
Affiliate.
5. Specific Performance. Affiliate agrees that in the event of any
breach or threatened breach by Affiliate of any covenant, obligation or other
provision contained in this Affiliate Agreement, Parent shall be entitled (in
addition to any other remedy that may be available to Parent) to: (a) a decree
or order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision; and (b) an
injunction restraining such breach or threatened breach. Affiliate further
agrees that neither Parent nor any other person or entity shall be required to
obtain, furnish or post any bond or similar instrument in connection with or as
a condition to obtaining any remedy referred to in this Section 5, and Affiliate
irrevocably waives any right he may have to require the obtaining, furnishing or
posting of any such bond or similar instrument.
6. Other Agreements. Nothing in this Affiliate Agreement shall limit any
of the rights or remedies of Parent under the Reorganization Agreement, or any
of the rights or remedies of Parent or any of the obligations of Affiliate under
any agreement between Affiliate and Parent or any certificate or instrument
executed by Affiliate in favor of Parent; and nothing in the Reorganization
Agreement or in any other agreement, certificate or instrument shall limit any
of the rights or remedies of Parent or any of the obligations of Affiliate under
this Affiliate Agreement.
7. Notices. Any notice or other communication required or permitted to
be delivered to Affiliate or Parent under this Affiliate Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
party):
if to Parent:
Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Attn: Vice President, Legal Affairs
Fax: (650) 295-5116
H-3.
<PAGE>
if to Affiliate:
______________________________
______________________________
______________________________
Attn: _________________________
Fax: (___) _____ - _______
8. Severability. If any provision of this Affiliate Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Affiliate Agreement.
Each provision of this Affiliate Agreement is separable from every other
provision of this Affiliate Agreement, and each part of each provision of this
Affiliate Agreement is separable from every other part of such provision.
9. Applicable Law; Jurisdiction. THIS AFFILIATE AGREEMENT IS MADE UNDER,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF CALIFORNIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of
the parties, whether arising out of this Affiliate Agreement or otherwise, each
of the parties irrevocably waives the right to trial by jury.
10. Waiver; Termination. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Affiliate Agreement, and no delay
on the part of Parent in exercising any power, right, privilege or remedy under
this Affiliate Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. Parent shall not be deemed to have
waived any claim arising out of this Affiliate Agreement, or any power, right,
privilege or remedy under this Affiliate Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the specific instance in
which it is given. If the Exchange Agreement is terminated, this Affiliate
Agreement shall thereupon terminate.
11. Headings. The headings contained in this Affiliate Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Affiliate Agreement and shall not be referred to in connection with the
construction or interpretation of this Affiliate Agreement.
H-4.
<PAGE>
12. Further Assurances. Affiliate shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Affiliate Agreement.
13. Entire Agreement. This Affiliate Agreement and the Reorganization
Agreement collectively set forth the entire understanding of Parent and
Affiliate relating to the subject matter hereof and thereof and supersede all
other prior agreements and understandings between Parent and Affiliate relating
to the subject matter hereof and thereof.
14. Non-Exclusivity. The rights and remedies of Parent hereunder are not
exclusive of or limited by any other rights or remedies which Parent may have,
whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative).
15. Amendments. This Affiliate Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Affiliate.
16. Assignment. This Affiliate Agreement and all obligations of Affiliate
hereunder are personal to Affiliate and may not be transferred or delegated by
Affiliate at any time. Parent may freely assign any or all of its rights under
this Affiliate Agreement, in whole or in part, to any other person or entity
without obtaining the consent or approval of Affiliate.
17. Binding Nature. Subject to Section 16, this Affiliate Agreement will
inure to the benefit of Parent and its successors and assigns and will be
binding upon Affiliate and Affiliate's representatives, executors,
administrators, estate, heirs, successors and assigns.
18. Survival. Each of the representations, warranties, covenants and
obligations contained in this Affiliate Agreement shall survive the consummation
of the Merger.
Affiliate has executed this Affiliate Agreement as of the date first
written above.
____________________________________
Name:
Number Of Outstanding Shares Of
Common Stock Of The Company
Held By Affiliate:
_______________________________
H-5.
<PAGE>
Exhibit H (B)
Individuals to Execute Affiliate Agreement
Fred Burton
J. Alston Gardner
Wendy Lea
Jeffrey Muir
Nicholas Nascone
Philip Rawlins
Hugh Stevenson
Dennis Kubacak
H-6
<PAGE>
Exhibit I
Form of Escrow Agreement
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made and entered into as of November 30,
1999 by and among: Siebel Systems, Inc., a Delaware corporation ("Parent"), the
shareholders of OnTarget, Inc., a Georgia corporation (the "Company"),
identified on Exhibit A hereto (the "Stockholders"), J. Alston Gardner, as
Stockholders' Agent ("Stockholders' Agent"), and State Street Bank And Trust
Company Of California, N.A., a national banking association (the "Escrow
Agent").
RECITALS
A. Parent, SE Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and the Company have entered into an
Agreement and Plan of Merger and Reorganization dated as of November 17, 1999
(the "Reorganization Agreement"), pursuant to which Merger Sub will merge with
and into the Company and the Stockholders will have the right to receive shares
of common stock of Parent.
B. The Reorganization Agreement contemplates the establishment of an
escrow arrangement to secure the indemnification obligations of the Stockholders
under the Reorganization Agreement.
C. Pursuant to Section 10.1 of the Reorganization Agreement, the
Stockholders have irrevocably appointed J. Alston Gardner to serve as
Stockholders' Agent for, among other things, all matters set forth in Section 9
of the Reorganization Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given to them in the Reorganization
Agreement, a copy of which is attached hereto.
2. Escrow and Indemnification.
(a) Shares and Stock Powers Placed in Escrow. At the Effective Time,
which shall be set forth in a notice sent by Parent to the Escrow Agent: (i)
Parent shall issue certificates for 368,841 shares of Parent Common Stock
registered in the names of the Merger Stockholders as set forth on Exhibit B
hereto, evidencing the shares of Parent Common Stock to be held in escrow in
accordance with this Agreement and (ii) each of the Stockholders shall deliver
to Parent five original "assignments separate from certificate" ("Stock Powers")
endorsed by each such Stockholder in blank with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange. The shares
of Parent Common Stock being held in escrow pursuant to this Agreement (the
"Escrow Shares") shall constitute an escrow fund (the "Escrow Fund") with
respect to the indemnification obligations of the Stockholders under the
Reorganization Agreement. The Escrow Fund shall be held as a trust fund and it
is the intention
I-1.
<PAGE>
of Parent, the Company, the Stockholders and the Stockholders' Agent that the
Escrow Fund shall not be subject to any lien, attachment, trustee process or any
other judicial process of any creditor of any Stockholder or of any party
hereto. The Escrow Agent agrees to accept delivery of the Escrow Fund and to
hold the Escrow Fund in an escrow account (the "Escrow Account"), subject to the
terms and conditions of this Agreement.
(b) Voting of Escrow Shares. The record owner of the Escrow Shares
shall be entitled to exercise all voting rights with respect to such Escrow
Shares.
(c) Dividends, Etc. Parent and each of the Stockholders agree among
themselves, for the benefit of Parent and the Escrow Agent, that any cash,
securities or other property distributable (whether by way of dividend, stock
split or otherwise) in respect of or in exchange for any Escrow Shares shall not
be distributed to the record owners of such Escrow Shares, but rather shall be
distributed to and held by the Escrow Agent in the Escrow Account. Unless and
until the Escrow Agent shall actually receive such cash, securities or other
property, it may assume without inquiry that the Escrow Shares currently being
held by it in the Escrow Account are all that the Escrow Agent is required to
hold. At the time any Escrow Shares are required to be released from the Escrow
Account to any Person pursuant to this Escrow Agreement, any cash, securities or
other property previously received by the Escrow Agent in respect of or in
exchange for such Escrow Shares shall be released from the Escrow to such
Person.
(d) Transferability. The interests of the Stockholders in the Escrow
Account and in the Escrow Shares shall not be assignable or transferable, other
than by operation of law. No transfer of any of such interests by operation of
law shall be recognized or given effect until Parent and the Escrow Agent shall
have received written notice of such transfer.
(e) Fractional Shares. If the value to be distributed to any
Indemnitee (or to any Stockholder upon termination of the escrow) is not evenly
divisable by the Stipulated Value of the Parent Common Stock, the Escrow Agent
shall round down the number of shares to be distributed to the next highest
number of shares and shall cause the transfer agent of the Escrow Shares to
distribute that number. In lieu of the fractional interest not distributed,
Parent shall furnish to the Escrow Agent, and the Escrow Agent (or such stock
transfer agent) in turn will distribute to the Indemnitee (or such Stockholder)
cash equal to such fractional interest times the Stipulated Value. Parent shall
be deemed to have purchased such fractional interests with respect to which it
has furnished funds to the Escrow Agent. Accordingly, the Escrow Agent, upon
receipt of such funds, shall deliver the corresponding number of shares to
Parent. In all events, Parent shall acquire only a whole number of shares. Any
cash received from Parent and not so immediately distributed by the Escrow Agent
shall be retained by the Escrow Agent as part of the Escrow Fund, but need not
be invested.
3. Administration of Escrow Account. Except as otherwise provided herein,
the Escrow Agent shall administer the Escrow Account as follows:
(a) If any Indemnitee has or claims to have incurred or suffered
Damages for which it is or may be entitled to indemnification, compensation or
reimbursement under
I-2.
<PAGE>
Section 9.2 of the Reorganization Agreement, such Indemnitee may, on or prior to
the completion of the annual audit of Parent's consolidated financial statements
or the first anniversary of the Closing Date, whichever is earlier (the
"Termination Date"), deliver a claim notice (a "Claim Notice") to the
Stockholders' Agent and to the Escrow Agent in accordance with Section 11(b).
Each Claim Notice shall state that such Indemnitee believes in good faith and
after investigation that there is or has been a breach of a representation,
warranty or covenant contained in the Reorganization Agreement or that such
Indemnitee is entitled to indemnification, compensation or reimbursement under
the Reorganization Agreement and contain a brief description of the
circumstances supporting such Indemnitee's belief that there is or has been such
a breach or that such Indemnitee is so entitled to indemnification, compensation
or reimbursement and shall, to the extent possible, contain a non-binding,
preliminary estimate of the amount of Damages such Indemnitee claims to have so
incurred or suffered (the "Claimed Amount"). The Claim Notice shall set forth
the Termination Date and shall state that the annual audit of Parent's
consolidated statements has not been completed.
(b) Within 30 business days after receipt by the Stockholders' Agent
of a Claim Notice, the Stockholders' Agent may deliver to the Indemnitee who
delivered the Claim Notice and to the Escrow Agent a written response (the
"Response Notice") in which the Stockholders' Agent: (i) agrees that a whole
number of Escrow Shares having a "Stipulated Value" (as defined below) equal to
the full Claimed Amount may be released from the Escrow Account to the
Indemnitee; (ii) agrees that Escrow Shares having a Stipulated Value equal to
part, but not all, of the Claimed Amount (the "Agreed Amount") may be released
from the Escrow Account to the Indemnitee or (iii) indicates that no part of the
Claimed Amount may be released from the Escrow Account to the Indemnitee. Any
part of the Claimed Amount that is not to be released to the Indemnitee shall be
the "Contested Amount." If a Response Notice is not received by the Escrow Agent
within such 30 business-day period, then the Stockholders' Agent shall be deemed
to have agreed that Escrow Shares having a Stipulated Value equal to the full
Claimed Amount as set forth in the Claim Notice may be released to the
Indemnitee from the Escrow Account.
(c) If the Stockholders' Agent delivers a Response Notice agreeing
that Escrow Shares having a Stipulated Value equal to the full Claimed Amount as
set forth in the Claim Notice may be released from the Escrow Account to the
Indemnitee, or if the Stockholders' Agent does not deliver a Response Notice in
accordance with Section 3(b), the Escrow Agent shall promptly following the
receipt of the Response Notice (or, if the Stockholders' Agent has not delivered
a Response Notice, promptly following the expiration of the 30 business-day
period referred to in Section 3(b)), deliver or cause the transfer agent of the
Parent Common Stock to deliver to such Indemnitee such Escrow Shares.
(d) If the Stockholders' Agent delivers a Response Notice agreeing
that Escrow Shares having a Stipulated Value equal to part, but not all, of the
Claimed Amount may be released from the Escrow Account to the Indemnitee, the
Escrow Agent shall promptly following the receipt of the Response Notice deliver
to such Indemnitee Escrow Shares having a Stipulated Value equal to the Agreed
Amount.
I-3.
<PAGE>
(e) If the Stockholders' Agent delivers a Response Notice indicating
that there is a Contested Amount, the Stockholders' Agent and the Indemnitee
shall attempt in good faith to resolve the dispute related to the Contested
Amount. If the Indemnitee and the Stockholders' Agent shall resolve such
dispute, such resolution shall be binding on all of the Stockholders and a
settlement agreement containing the terms and conditions of such resolution
shall be signed by the Indemnitee and the Stockholders' Agent and sent to the
Escrow Agent, who shall, upon receipt thereof, release Escrow Shares from the
Escrow Account in accordance with such agreement.
(f) If the Stockholders' Agent and the Indemnitee are unable to
resolve the dispute relating to any Contested Amount within 30 business days
after the receipt of the Claim Notice, then the claim described in the Claim
Notice shall be settled by binding arbitration in the Wilmington, Delaware in
accordance with the Commercial Arbitration Rules then in effect of the American
Arbitration Association (the "AAA Rules"). Arbitration will be conducted by
three arbitrators; one selected by Parent, one selected by the Stockholders'
Agent and the third selected by the first two arbitrators. If either the
Stockholders' Agent or Parent fails to select an arbitrator prior to the
expiration of the 30-business day period commencing on the expiration of the 30-
business day period referred to in the first sentence of this Section 3(f), then
either the Stockholders' Agent or Parent, as the case may be, shall be entitled
to select the second arbitrator. The parties agree to use all reasonable efforts
to cause the arbitration hearing to be conducted within 60 calendar days after
the appointment of the last of the three arbitrators and to use all reasonable
efforts in the circumstances to cause the arbitrators' decision to be furnished
within 95 calendar days after the appointment of the last of the three
arbitrators. The parties further agree that, to the extent practicable,
discovery shall be completed at least 20 business days prior to the date of the
arbitration hearing and that Section 9.2 of the Reorganization Agreement can be
admitted as evidence. The arbitrators' decision shall relate solely to whether
the Indemnitee is entitled to recover the Contested Amount (or a portion
thereof), and the portion of such Contested Amount the Indemnitee is entitled to
recover. The final decision of the arbitrators shall be furnished to the
Stockholders' Agent, the Indemnitee and the Escrow Agent in writing and shall
constitute a conclusive determination of the issue in question, binding upon the
Stockholders, the Indemnitee and the Escrow Agent and shall not be contested by
any of them. The non-prevailing party in any arbitration shall pay the
reasonable expenses (including attorneys' fees) of the prevailing party, any
additional reasonable fees and expenses (including reasonable legal fees) of the
Escrow Agent, and the fees and expenses associated with the arbitration
(including the arbitrators' fees and expenses). For purposes of this Section
3(f), the non-prevailing party shall be deemed to be the Indemnitee if it is
entitled to recover less than 50% of the Contested Amount; otherwise it shall be
the Stockholders.
(g) The Escrow Agent shall release Escrow Shares from the Escrow
Account in connection with any Contested Amount within 5 business days after the
delivery to it of: (i) a copy of a settlement agreement executed by the
Indemnitee and the Stockholders' Agent setting forth instructions to the Escrow
Agent as to the number of Escrow Shares, if any, to be released from the Escrow
Account, with respect to such Contested Amount or (ii) a copy of the award of
the arbitrators referred to and as provided in Section 3(f) setting forth
instructions to the Escrow
I-4.
<PAGE>
Agent as to the number of Escrow Shares, if any, to be released from the Escrow
Account, with respect to such Contested Amount.
(h) Any Escrow Shares released from the Escrow Account to an
Indemnitee shall be deemed to reduce the Escrow Shares pro rata with respect to
each Stockholder in accordance with each Stockholder's percentage interest in
the Escrow Fund as set forth in Exhibit B.
4. Release of Escrow Shares. The Escrow Agent is not the stock transfer
agent for the Parent Common Stock. Accordingly, if a distribution of a number of
shares of Parent Common Stock less than all of the Escrow Shares is to be made,
the Escrow Agent must requisition the appropriate number of shares from such
stock transfer agent, delivering to it the appropriate stock certificates and
related Stock Powers. For the purposes of this Agreement, the Escrow Agent shall
be deemed to have delivered Parent Common Stock to the Person entitled to it
when the Escrow Agent has delivered such certificates and Stock Powers to such
stock transfer agent with instructions to deliver it to the appropriate Person.
Distributions of Parent Common Stock shall be made to Parent or the
Stockholders, as appropriate, at the addresses described in Section 10(b).
Whenever a distribution is to be made to the Stockholders, pro rata
distributions shall be made to each of them based on the Percentage Interests in
the Escrow Fund set forth in Exhibit B. Within five business days after the
Termination Date, the Escrow Agent shall distribute or cause the stock transfer
agent for the Parent Common Stock to distribute to each of the Stockholders such
Stockholder's pro-rata portion of the Escrow Shares then held in escrow based on
the percentage interests in the Escrow Fund set forth in Exhibit B; provided,
however, that notwithstanding the foregoing, if, prior to the Termination Date,
any Indemnitee has given a Claim Notice containing a claim which has not been
resolved prior to the Termination Date in accordance with Section 3, the Escrow
Agent shall retain in the Escrow Account after the Termination Date Escrow
Shares having a Stipulated Value equal to 100% of the Claimed Amount or
Contested Amount, as the case may be, with respect to all claims which have not
then been resolved. Unless and until the Escrow Agent shall receive a
certificate from Parent stating that the annual audit of Parent's consolidated
financial statements has been completed and setting forth the date of such
completion, the Escrow Agent may assume without inquiry that the Termination
Date expires on the first anniversary of the Closing Date as contemplated by
Section 3.1.
5. Valuation of Escrow Shares, Etc.
(a) Stipulated Value. For purposes of this Agreement, the "Stipulated
Value" of each Escrow Share shall be deemed to be equal to $70.47.
(b) Stock Splits. All numbers contained in, and all calculations
required to be made pursuant to, this Agreement shall be adjusted as appropriate
to reflect any stock split, reverse stock split, stock dividend or similar
transaction effected by Parent after the date hereof; provided, however, that
the Escrow Agent shall have received notice of such stock split or other action
and shall have received the appropriate number of additional shares of Parent
Common Stock or other property pursuant to Section 2(c) hereof.
I-5.
<PAGE>
6. Fees and Expenses. Upon the execution of this Agreement by all parties
hereto and the initial deposit of the Escrow Fund in the Escrow Account, fees
and expenses, in accordance with Exhibit C attached hereto, will be payable to
the Escrow Agent. This annual Escrow Agent fee will cover the first twelve
months of the escrow. In accordance with Exhibit C attached hereto, the Escrow
Agent will also be entitled to reimbursement for reasonable and documented out-
of-pocket expenses incurred by the Escrow Agent in the performance of its duties
hereunder. All such fees and expenses shall be paid by Parent.
7. Limitation of Escrow Agent's Liability.
(a) The Escrow Agent undertakes to perform such duties as are
specifically set forth in this Agreement only and shall have no duty under any
other agreement or document notwithstanding their being referred to herein or
attached hereto as an exhibit. The Escrow Agent shall not be liable except for
the performance of such duties as are specifically set forth in this Agreement,
and no implied covenants or obligations shall be read into this Agreement
against the Escrow Agent. The Escrow Agent shall incur no liability with respect
to any action taken by it or for any inaction on its part in reliance upon any
notice, direction, instruction, consent, statement or other document believed by
it to be genuine and duly authorized, nor for any other action or inaction
except for its own willful misconduct or negligence. The Escrow Agent may rely
on and use the Stock Powers and shall not be liable in connection therewith. In
all questions arising under this Agreement, the Escrow Agent may rely on the
advice of counsel, and for anything done, omitted or suffered in good faith by
the Escrow Agent based upon such advice the Escrow Agent shall not be liable to
anyone. The Escrow Agent shall not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided for
in a manner reasonably satisfactory to it. The Escrow Agent shall not be liable
for incidental, consequential or punitive damages.
(b) Parent hereby agrees to indemnify the Escrow Agent for, and hold
it harmless against, any loss, liability or expense incurred without negligence
or willful misconduct on the part of Escrow Agent, arising out of or in
connection with its carrying out of its duties hereunder. This right of
indemnification shall survive the termination of this Agreement, and the
resignation of the Escrow Agent. The costs and expenses of enforcing this right
of indemnification shall also be paid by Parent.
8. Termination. This Agreement shall terminate on the Termination Date
or, if earlier, upon the release by the Escrow Agent of the entire Escrow Fund
in accordance with this Agreement; provided, however, that if the Escrow Agent
has received from any Indemnitee a Claim Notice setting forth a claim that has
not been resolved by the Termination Date, then this Agreement shall continue in
full force and effect until the claim has been resolved and the Escrow Shares
released in accordance with this Agreement.
9. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue as escrow agent under this Agreement, the
Escrow Agent may resign and be discharged from its duties and obligations
hereunder by giving its written resignation to the parties to this Agreement.
Such resignation shall take effect not less than 30 calendar days after
I-6.
<PAGE>
it is given to all parties hereto. Parent may appoint a successor Escrow Agent
only with the consent of the Stockholders' Agent (which consent shall not be
unreasonably withheld or delayed). The Escrow Agent shall act in accordance with
written instructions from Parent as to the transfer of the Escrow Fund to a
successor escrow agent. If a successor Escrow Agent is not appointed, then the
Escrow Agent may apply to a court of competent jurisdiction to do so. In the
event of a merger, consolidation or sale of substantially all of the corporate
trust business of the Escrow Agent (including the administration of the Escrow
Fund), the successor organization, without further act, shall become the Escrow
Agent under this Agreement.
10. Stockholders' Agent.
(a) By virtue of their approval of the Merger and the Reorganization
Agreement and their execution of this Agreement, the Stockholders shall have
approved the indemnification and escrow terms set forth in the Reorganization
Agreement and this Agreement and shall have agreed to irrevocably appoint J.
Alston Gardner as their agent and attorney-in-fact, as Stockholders' Agent
coupled with an interest, to: (i) modify, amend or otherwise change this
Agreement or the Reorganization Agreement or any of the terms or provisions
included therein (including modifications, amendments or changes subsequent to
Closing); (ii) take all actions and to execute all documents under this
Agreement and the Reorganization Agreement (including all actions and documents
required under Sections 6, 9, 10.1 and 10.15 of the Reorganization Agreement)
necessary or desirable to consummate the Merger and the transactions
contemplated by the Reorganization Agreement, and to take all actions and to
execute all documents which may be necessary or desirable in connection
therewith; (iii) give and receive consents and all notices hereunder; (iv) to
authorize delivery to Parent of Parent Common Stock, cash or other property from
the Escrow Fund, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand dispute resolution pursuant to
Section 3 of this Agreement and Section 9 of the Reorganization Agreement 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
Stockholders' Agent for the accomplishment of the foregoing; and (v) deal with
Parent exclusively on all matters relating to Sections 6, 9, 10.1 and 10.15 of
the Reorganization Agreement or any other provision of the Reorganization
Agreement. Parent shall be entitled to deal exclusively with the Stockholders'
Agent on all matters set forth in this Section 10(a) and shall be entitled to
rely exclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Stockholder by
the Stockholders' Agent, and on any other action taken or purported to be taken
on behalf of any Stockholder by the Stockholders' Agent, as fully binding on
such Stockholder, without any obligation to notify or make inquiries with
respect to any Stockholder. THE STOCKHOLDERS AND EACH OF THEM INDIVIDIUALLY,
AGREE THAT SERVICE OF PROCESS UPON THE STOCKHOLDERS' AGENT IN ANY ACTION OR
PROCEEDINGS ARISING UNDER OR PERTAINING TO THIS AGREEMENT OR THE REORGANIZATION
AGREEMENT SHALL BE DEEMED TO BE VALID SERVICE OF PROCESS UPON EACH OF THE
STOCKHOLDERS AND ANY CLAIM BY PARENT AGAINST THE STOCKHOLDERS, OR ANY OF THEM ,
IN RESPECT OF THIS AGREEMENT OR THE REORGANIZATION AGREEMENT MAY BE ASSERTED
AGAINST AND SETTLED ON BEHALF OF ANY OF THEM BY, THE STOCKHOLDERS'
I-7.
<PAGE>
AGENT. The Stockholders' Agent shall be deemed to have accepted his appointment
herein upon his execution of this Agreement.
(b) Liability of Stockholders' Agent. Nothing contained herein shall
be deemed to make the Stockholders' Agent liable to the Stockholders because of
service in his capacity as Stockholders' Agent and attorney-in-fact. In
performing any of his duties hereunder, the Stockholders' Agent shall not incur
any liability to the Stockholders for losses, damages, liabilities or expenses,
except for fraud and his own willful misconduct, and shall not receive any
remuneration for acting in such capacity. The Stockholders shall jointly and
severally indemnify the Stockholders' Agent and hold the Stockholders' Agent
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Stockholders'
Agent and arising out of or in connection with the acceptance or administration
of the Stockholders' Agent's duties hereunder or pursuant to the Reorganization
Agreement, including the reasonable fees and expenses of any legal counsel or
other professional retained by the Stockholders' Agent. By virtue of their
approval of the Merger and this Agreement, the Stockholders hereby agree to pay
all costs and expenses, including those of any legal counsel or other
professional retained by the Stockholders' Agent, in connection with the
acceptance and administration of the Stockholders' Agent's duties hereunder.
(c) Succession of Stockholders' Agent. In the event of death,
disability, incompetency or resignation of the original Stockholders' Agent, the
successor agent shall be Nicholas Nascone (or his nominee). (the "Successor
Stockholders' Agent"). In the event of the death, disability, incompetency or
resignation of the Successor Stockholders' Agent, the remaining Stockholders
shall, within 30 days after notice from Parent, determine by simple majority
vote and designate another successor stockholders' agent or agents, as the case
may be, who shall have all of the rights, powers and authority conferred to the
Stockholders' Agent pursuant to this Agreement and the power of attorney set
forth hereunder. Notwithstanding the foregoing, if the Stockholders fail to
designate such successor stockholders' agent(s) within such 30 day period,
Parent shall be entitled to designate the successor stockholders' agent for and
on behalf of all of the Stockholders. Unless and until the Escrow Agent shall
receive written notice of the appointment of a successor Stockholders' Agent,
the Escrow Agent may assume without inquiry that the last Stockholders' Agent of
which it has notice remains in that capacity.
(d) Irrevocable; Binding on Successors, Etc. It is expressly
understood and agreed that the power of attorney set forth in this Agreement and
the agency created hereby is coupled with an interest of the respective parties
hereto and shall be binding and enforceable on and against the respective
successors, heirs, personal representatives, and assigns of the Stockholders and
this power of attorney shall not be revoked or terminated by death, disability,
incompetency or bankruptcy of any of the Stockholders, or any of them, but shall
continue to be binding and enforceable by the Stockholders' Agent, Parent and
their respective successors and assigns and on and against the heirs, personal
representatives, successors and assigns of the Stockholders in the manner
provided herein.
I-8.
<PAGE>
11. Miscellaneous.
(a) Attorneys' Fees. Except as provided for in Section 3(f) of this
Agreement, if any action or proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party
hereto (other than the Escrow Agent), the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
(b) Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
If to Escrow Agent: State Street Bank and Trust Company of California, N.A.
Library Tower
633 West 5th Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Administration
(Siebel Systems, Inc./OnTarget, Inc. 1999 escrow)
Telephone: (213) 362-7369
Facsimile: (213) 362-7357
If to Parent: Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Attn: Vice President, Legal Affairs
Telephone: (650) 295-5000
Fax: (650) 295-5116
If to Stockholders'
Agent: J. Alston Gardner
c/o OnTarget, Inc.
3348 Peachtree Road NE, Suite 700
Atlanta, GA 30326
Telephone: (404) 965-1611
Fax: (404) 965-1533
With a copy to (which copy shall not constitute notice):
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309
Attention: David A. Stockton, Esquire
Telephone: (404) 815-6444
Fax: (404) 815-6555
I-9.
<PAGE>
Notwithstanding the foregoing, any notice addressed to the Escrow Agent shall be
effective only upon receipt by an officer at the address set forth above. If any
Claim Notice, Response Notice or other document or notice of any kind is
required to be delivered to the Escrow Agent and any other person, the Escrow
Agent may assume without inquiry that such document has been delivered to such
other person if it has been delivered to the Escrow Agent.
(c) Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
(e) Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
(f) Successors and Assigns. This Agreement shall be binding upon each
of the parties hereto and each of their respective permitted successors and
assigns, if any. No Stockholder may assign such Stockholder's rights under this
Agreement without the express prior written consent of Parent, provided,
however, that (i) upon the death of a Stockholder, such Stockholder's rights
under this Agreement shall be transferred to the person(s) who receive such
Stockholder's Parent Common Stock under the laws of descent and distribution and
(ii) a Stockholder may assign such Stockholder's rights under this Agreement to
any organization qualified under Section 501(c)(3) of the Internal Revenue Code
to which the Stockholder transfers Registerable Shares. Nothing in this
Agreement is intended to confer, or shall be deemed to confer, any rights or
remedies upon any person or entity other than the parties hereto and their
permitted successors and assigns. This Agreement shall inure to the benefit of:
the Stockholders; Parent; Escrow Agent and the respective successors and
assigns, if any, of the foregoing.
(g) Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
I-10.
<PAGE>
(h) Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto; provided, however, that any
amendment duly executed and delivered by the Stockholders' Agent shall be deemed
to have been duly executed and delivered by all of the Stockholders.
(i) Severability. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
(j) Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns, if any.
(k) Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
(l) Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal Proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
(m) Tax Reporting Information and Certification of Tax Identification
Numbers.
(i) The parties hereto agree that, for tax reporting purposes,
all interest on or other income, if any, attributable to the Escrow Shares or
any other amount held in escrow by the Escrow Agent pursuant to this Agreement
shall be allocable to the Stockholders in accordance with their percentage
interests in the Escrow Fund set forth in Exhibit B.
(ii) Parent and each of the Stockholders agree to provide the
Escrow Agent with certified tax identification numbers for each of them by
furnishing appropriate forms W-9 (or Forms W-8, in the case of non-U.S. persons)
and other forms and documents that the Escrow Agent may reasonably request
(collectively, "Tax Reporting Documentation") to the Escrow Agent within 30 days
after the date hereof. The parties hereto understand that, if such Tax Reporting
Documentation is not so certified to the Escrow Agent, the Escrow Agent may be
required by the Internal Revenue Code, as it may be amended from time to time,
to withhold a portion of any interest or other income earned on the investment
of monies or other property held by the Escrow Agent pursuant to this Escrow
Agreement.
I-11.
<PAGE>
(n) Construction.
(i) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(ii) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(iii) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(o) Recalculation of Percentage Interests. If for any reason Exhibit
B should need to be recalculated, Parent and the Stockholders' Agent shall
jointly: (i) calculate revised percentage interests for the Stockholders and
(ii) submit such calculations in writing to the Escrow Agent.
I-12.
<PAGE>
In Witness Whereof, the parties have duly executed this Agreement as of the
day and year first above written.
Siebel Systems, Inc.
________________________________________
By:_____________________________________
Title:__________________________________
Stockholders' Agent:
________________________________________
By: J. Alston Gardner
Stockholder:
________________________________________
By:_____________________________________
Print Name:_____________________________
State Street Bank And Trust
Company Of California, N.A.
________________________________________
By:_____________________________________
Title:__________________________________
I-13.
<PAGE>
Exhibit A
Stockholders
J. Alston Gardner
The Gardner Family Grantor
Retained Annuity Trust
Jeffrey S. Muir, Trustee U/A
J. Alston Gardner dated
10/18/99, FBO Emma Gardner
and Decendents
Jeffrey S. Muir, Trustee U/A
J. Alston Gardner dated
10/18/99, FBO Anna Gardner
and Decendents
Philip N. Rawlins
Philip Norman Rawlins,
Trustee of the Philip N.
Rawlins 1999 Trust U/A
11/15/99
Wendy S. Lea
Nicholas J. Nascone
Jeffrey S. Muir, Trustee of
The Nascone Family Grantor
Retained Annuity Trust U/A
Nicholas J. Nascone 10/18/99
Fred R. Burton
Bradford Milner
Jeffrey S. Muir
I-14.
<PAGE>
Michael A. Waddell
Hugh Stevenson
Oberon Management, Ltd.
Fluvia Investments, Ltd.
Alun Newby
Barbara Kay Newby
Steve Hill
Dave Roberts
Stephen J. Bistritz
Deborah L. Gallagher
Mark B. Gardner
Donnie M. Hardison, Jr.
John W. Harris
Rod Jones
Robert J. Knight, III
Jeff Fiedler
I-15.
<PAGE>
Exhibit B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name, Address and Taxpayer Identification Number of Escrow Shares Pro Rata Share of Escrow
Number of Stockholder Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Alston Gardner 178,000 48.26%
3489 Riverly Road
Atlanta, GA 30327
TIN # 240929945
- -------------------------------------------------------------------------------------------------------------
The Gardner Family Grantor Retained Annuity Trust 30,775 8.34%
3489 Riverly Road
Atlanta, GA 30327
TIN # Applied For
- -------------------------------------------------------------------------------------------------------------
Jeffrey S. Muir, Trustee U/A J. Alston Gardner 4,616 1.25%
dated 10/18/99, FBO Emma Gardner and Decendents
3489 Riverly Road
Atlanta, GA 30327
TIN # Applied For
- -------------------------------------------------------------------------------------------------------------
Jeffrey S. Muir, Trustee U/A J. Alston Gardner 4,616 1.25%
dated 10/18/99, FBO Anna Gardner and Decendents
3489 Riverly Road
Atlanta, GA 30327
TIN # Applied For
- -------------------------------------------------------------------------------------------------------------
Philip N. Rawlins 23,186 6.29%
5910 Park Lane
Dallas, TX 75225
TIN # 645440179
- -------------------------------------------------------------------------------------------------------------
Philip Norman Rawlins, Trustee of the Philip N. 3,207 0.87%
Rawlins 1999 Trust U/A 11/15/99
5910 Park Lane
Dallas, TX 75225
TIN # Applied For
- -------------------------------------------------------------------------------------------------------------
Wendy S. Lea 26,393 7.16%
5910 Park Lane
Dallas, TX 75225
TIN # 587886100
- -------------------------------------------------------------------------------------------------------------
</TABLE>
I-16.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name, Address and Taxpayer Identification Number of Escrow Shares Pro Rata Share of Escrow
Number of Stockholder Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nicholas J. Nascone 13,695 3.71%
1728 Tamworth Court
Dunwoody, GA 30338
TIN # 292665766
- -------------------------------------------------------------------------------------------------------------
Jeffrey S. Muir, Trustee of The Nascone Family 2,462 0.67%
Grantor Retained Annuity Trust U/A Nicholas J.
Nascone 10/18/99
1728 Tamworth Court
Dunwoody, GA 30338
TIN # Applied For
- -------------------------------------------------------------------------------------------------------------
Fred R. Burton 8,079 2.19%
725 Orchard Point Drive
Dunwoody GA 30350
TIN # 265624476
- -------------------------------------------------------------------------------------------------------------
Bradford Milner 1,916 0.52%
900 Edgewater Drive
Atlanta, GA 30328
TIN # 257748440
- -------------------------------------------------------------------------------------------------------------
Jeffrey S. Muir 1,916 0.52%
4660 Brook Hollow Road, NW
Atlanta, GA 30327
TIN # 255760968
- -------------------------------------------------------------------------------------------------------------
Michael A. Waddell 2,770 0.75%
3748 Vancouver Drive
Dallas, TX 75229
TIN # 260746666
- -------------------------------------------------------------------------------------------------------------
Hugh Stevenson 0 0%
Tourniaux 14
1277 Borex
Switzerland
TIN # N/A
- -------------------------------------------------------------------------------------------------------------
Oberon Management, Ltd. 21,304 5.78%
PO Box 605
Le Marchant House
Le Marchant Street
St. Peter Port, Guernsey
GY1 4NP
British Virgin Islands
TIN # Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
</TABLE>
I-17.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name, Address and Taxpayer Identification Number of Escrow Shares Pro Rata Share of Escrow
Number of Stockholder Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fluvia Investments, Ltd. 21,304 5.78%
PO Box 202
Sommerville House
Phillips Street, St. Helier
Jersey, British Virgin Islands
TIN # Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
Alun Newby 10,546 2.86%
65 Botley Road
Chesham
Bucks
HP5 1XG
UK
TIN # Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
Barbara Kay Newby 4,520 1.23%
65 Botley Road
Chesham
Bucks
HP5 1XG
UK
TIN # Foreign Holder- W-8
- -------------------------------------------------------------------------------------------------------------
Steve Hill 3,228 0.88%
Firtress
78 Elvendon Road
Garing on Thames
RG80DR
UK
TIN # Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
Dave Roberts 3,228 0.88%
12 Wyndham Road
Woking
Surrey
GU21 3DS
UK
TIN # Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
Stephen J. Bistritz 385 0.1%
3752 Westbrooke Circle
Atlanta, GA 30319
TIN # 139340826
- -------------------------------------------------------------------------------------------------------------
</TABLE>
I-18.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name, Address and Taxpayer Identification Number of Escrow Shares Pro Rata Share of Escrow
Number of Stockholder Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deborah L. Gallagher 385 0.1%
2282 Brookelake Drive
Atlanta, GA 30338
TIN # 018465181
- -------------------------------------------------------------------------------------------------------------
Mark B. Gardner 385 0.1%
144 Panorama Place
Friday Harbor, WA 98250
TIN # 243866571
- -------------------------------------------------------------------------------------------------------------
Donnie M. Hardison, Jr. 385 0.1%
6 Greenbrier Circle
Newtown, PA 18940-2619
TIN # 239783834
- -------------------------------------------------------------------------------------------------------------
John W. Harris 385 0.1%
4420 Park Center Drive, SW
Atlanta, GA 30331-2065
TIN # 260701972
- -------------------------------------------------------------------------------------------------------------
Rod Jones 385 0.1%
Woodside House
23 Knottocks Drive
Beaconsfield
Bucks
HP92AH
UK
TIN # N/A- Foreign Holder - W-8
- -------------------------------------------------------------------------------------------------------------
Robert J. Knight, III 385 0.1%
205 Creffield Heights
Monte Sereno, CA 95030
TIN # 261888635
- -------------------------------------------------------------------------------------------------------------
Jeff Fiedler 385 0.1%
16711 Magneson Loop
Los Gatos, CA 95032
TIN # 570022853 (Living Abroad - has signed a W-8)
- -------------------------------------------------------------------------------------------------------------
Total 368,841 100%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
I-19.
<PAGE>
Exhibit C
Schedule of Fees for Escrow Services
Siebel Systems, Inc./OnTarget, Inc.
Acceptance Fee: $1,000.00
An acceptance fee will only be charged if we are
requested to review the documentation and close the
Escrow within two days.
Legal Counsel: at cost
State Street will engage the firm of Shipman & Goodwin,
Daniel P. Brown, Esq. to review and comment on the form
of agreement.
Annual Escrow Agent Fee: $3,500.00
Payable at funding and annually thereafter, if
applicable. Compensates State Street for administrative
services in accordance with the Escrow Agreement.
PRO-RATA CALCULATIONS: Should the Escrow Agreement
require pro-rata distribution of investment income to
the beneficiaries, the annual fee noted above includes
calculations and tax report for up to ten (10)
beneficiaries. State Street will assess an additional
$250 for each beneficiary pro-rata calculations beyond
the first ten.
Claims (if applicable):
Uncontested $250.00
Contested Billed at Cost
Preparation of 1099's (if applicable, each 1099): $ 15.00
International Wire Transfer Fee (if applicable): $ 25.00
This fee will be deducted from wire amount.
Investment Fee: $ 65.00
Per security purchased (i.e. Treasuries, Agencies, etc.)
Investment In State Street Investment Vehicles: 40 Basis Points (.0040)
(Calculated on the Average Daily Net Assets)
Investment Vehicles:
SSgA Prime Money Market Fund
SSgA US Treasury Money Market Fund
SSgA Tax Free Money Market Fund
State Street Insured Money Market (IMMA): No Transaction Fee
Out-of-pocket Expense: At Cost
I-20.
<PAGE>
Exhibit J
Form of Registration Rights Agreement
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered into
as of November 30, 1999, by and among: Siebel Systems, Inc., a Delaware
corporation ("Parent"); and the representative of the shareholders of OnTarget,
Inc., a Georgia corporation (the "Company"), identified on the signature page
hereto (the "Stockholders' Agent").
Recitals
A. Parent, SE Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and the Company have entered into an
Agreement and Plan of Merger and Reorganization dated as of November 17, 1999
(the "Reorganization Agreement"), pursuant to which Merger Sub will merge with
and into the Company and the shareholders of the company (the "Stockholders")
will have the right to receive shares of common stock of Parent. Capitalized
terms used in this Agreement and not otherwise defined shall have the meanings
given to them in the Reorganization Agreement.
B. Parent has agreed to provide the Stockholders with certain
registration rights as more fully described herein.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
SECTION 1: Registration
1.1 Registrable Shares. As used in this Agreement, "Registrable Shares"
means the shares of Parent Common Stock issued to the Stockholders pursuant to
Section 1.5 of the Reorganization Agreement and any shares of Parent Common
Stock issued in respect thereof as a result of any stock split, stock dividend,
share exchange, merger, consolidation or similar recapitalization; provided,
however, that Registrable Shares shall cease to be Registrable Shares when (i) a
registration statement covering such Registrable Shares shall have become
effective under the Securities Act of 1933, as amended (the "1933 Act"), and
such Registrable Shares shall have been disposed of in accordance with such
registration statement, or (ii) such Registrable Shares may be transferred
pursuant to Rule 144 under the 1933 Act, as such rule may be amended from time
to time, or any successor rule or regulation ("Rule 144"); and provided further,
that Registrable Shares shall not include any shares of Parent Common Stock held
in any "Escrow Account" pursuant to the Escrow Agreement dated of even date
herewith among the Stockholders, J. Alston Gardner, as Stockholders' Agent and
State Street Bank and Trust Company of California, N.A., as escrow agent. The
Stockholders desiring to sell shares of Parent Common Stock received pursuant to
Section 1.5 of the Reorganization Agreement, in accordance with Rule 144 shall
provide such Rule 144 representation letters in usual and customary form and
other usual customary documents as may reasonably be requested by Parent.
J-1.
<PAGE>
1.2 Registration.
(a) As soon as practicable after the Closing of the Merger and in any
event, within 30 days after the Closing Date, Parent shall prepare and file with
the Securities and Exchange Commission ("SEC") a registration statement on Form
S-3 (the "Registration Statement") covering the resale of the Registrable
Shares. Parent shall use its best efforts to cause such Registration Statement
to be declared effective as soon as practicable after the filing.
(b) The Stockholders shall furnish such information as Parent may
reasonably request in connection with the preparation of the Registration
Statement. Upon the effectiveness of the Registration Statement with the SEC,
pursuant to the terms of this Agreement, the Registrable Shares may be sold in
accordance with the Registration Statement under the 1933 Act. Subject to the
terms of this Agreement, including, without limitation, Sections 2.4, 3.2 and
4.1, Parent shall use reasonable efforts to cause the Registration Statement to
remain effective until the earliest of (i) the date on which all Registrable
Shares covered by the Registration Statement have been sold to the public
pursuant to the Registration Statement; and (ii) one year after the Closing
Date.
1.3 Other Shares. Parent may include in the Registration Statement any
other shares of Parent Common Stock (including issued and outstanding shares of
Parent Common Stock as to which the holders thereof have contracted with Parent
for "piggyback" registration rights).
SECTION 2: Parent's Obligations
In connection with the Registration Statement referred to in Section 1.2,
Parent shall:
2.1 Registration Statement. Prepare and file with the SEC the
Registration Statement with respect to the Registrable Shares and thereafter use
its reasonable efforts to cause the Registration Statement to become and remain
effective for the period as set forth in Section 1.2.
2.2 Amendments and Supplements. Prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective for the period set forth in Section 1.2 and to comply with the
provisions of the 1933 Act with respect to the sale or other disposition of the
shares of Parent Common Stock covered by the Registration Statement.
2.3 Copies of Offering Documents. Furnish to the Stockholders such
numbers of copies of the Registration Statement, prospectus, and any amendments
and supplements thereto, in conformity with the requirements of the 1933 Act,
such documents incorporated by reference in the Registration Statement and such
other documents as the Stockholders reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares.
2.4 Misleading Prospectus. Promptly notify each Stockholder, at any time
when a prospectus relating thereto covered by the Registration Statement is
required to be delivered
J-2.
<PAGE>
under the 1933 Act, upon Parent becoming aware that the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and immediately thereafter, use reasonable efforts
to prepare and file with the SEC as soon as possible and furnish to each
Stockholder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not include an
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 not misleading in
the light of the circumstances under which they are made.
2.5 Rule 144. Use its reasonable efforts to file in a timely manner any
reports required to be filed by it under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and take such further action
as the Stockholders may reasonably request, all from time to time to enable each
Stockholder to sell the Registrable Shares owned by it without registration
under the 1933 Act pursuant to the exemption provided by Rule 144.
2.6 Blue Sky Filings. Use its reasonable efforts to register and qualify
the securities covered by the Registration Statement under the Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Stockholders,
provided that Parent shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
SECTION 3: The Stockholders' Obligations
In connection with the Registration Statement referred to in Section 1.2,
the Stockholders shall each:
3.1 Other Documents and Information. Complete, execute, acknowledge
and/or deliver such questionnaires, indemnification agreements, custody
agreements, underwriting agreements (if the registration is underwritten) and
other documents, certificates and instruments as are reasonably required by
Parent or any underwriter(s) or are otherwise necessary in connection with the
registration and offering. Each Stockholder shall promptly provide to Parent
such information concerning such Stockholder, their ownership of Parent's
securities, the intended method of distribution and such other information as
may be required by applicable law or regulation or as may be reasonably
requested by Parent.
3.2 Cessation of Offering. Upon receipt of any notice from Parent of the
happening of any event of the kind described in Section 2.4, immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such shares until the Stockholders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2.4, and, if so
directed by Parent, deliver to Parent all copies of the prospectus covering such
Registrable Shares in such Stockholder's possession at the time of receipt of
such notice.
J-3
<PAGE>
3.3 No Preliminary Prospectus. No Stockholder and no person or entity
acting on any Stockholder's behalf (other than an underwriter selected by Parent
or approved by Parent) shall offer any Registrable Shares by means of any
preliminary prospectus.
SECTION 4: Limitations
4.1 Other Transactions. Parent shall not be obligated to effect a
registration pursuant to Section 1, or to file any amendment or supplement
thereto, and may suspend the Stockholders' rights to make sales pursuant to an
effective registration pursuant to Section 1, at any time when Parent, in the
good faith judgment of its Board of Directors, reasonably believes that the
filing thereof at the time requested, or the offering of securities pursuant
thereto, would (i) materially and adversely affect a pending or proposed
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction, or negotiations, discussions or pending proposals related thereto
or (ii) be seriously detrimental to Parent and its stockholders, in which event
(under clause (i) or (ii) above) Parent's sole relief from its registration
obligations is the right to defer filing of a registration statement (or to
suspend the Stockholders' rights to make sales pursuant to an effective
registration pursuant to Section 1) for a period of not more than 60 days;
provided, however, that Parent shall not utilize the right described in this
Section 4.1 more than twice in any 12-month period.
SECTION 5: Expenses and Indemnification
5.1 Certain Fees and Commissions. Parent shall pay its own legal and
accounting fees and all printing fees in connection with the Registration
Statement. Parent shall reimburse the Stockholders up to a total of $5,000 for
reasonable legal fees and costs incurred by the Stockholders in connection with
the initial preparation and filing of the Registration Statement. The
Stockholders shall pay any additional fees and costs of their own counsel and
all underwriting discounts, commissions and expenses of underwriters or brokers
incurred in connection with the offering and sale of the Registrable Shares.
5.2 Other Expenses. Parent shall pay all registration and filing fees
attributable to the Registrable Shares and the listing fee payable to the Nasdaq
National Market.
5.3 Indemnification. In the event any Registrable Shares are included in
a registration statement under Section 1:
(a) Indemnification by Parent. To the extent permitted by law, Parent
will indemnify and hold harmless each Stockholder, such Stockholder's heirs,
successors and assigns, any underwriter (as defined in the 1933 Act) for such
Stockholder (if selected by Parent or approved by Parent), and each person, if
any, who controls such Stockholder or underwriter within the meaning of the 1933
Act or the 1934 Act, against any losses, claims, damages, liabilities or actions
to which they may become subject under the 1933 Act, the 1934 Act or other
federal or state law, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus (not prohibited by Section 3.3)
or final prospectus contained therein or any amendments or supplements thereto,
or arising out of or based upon the omission or alleged omission to state
J-4.
<PAGE>
therein a material fact required to be stated therein or necessary to make the
statements therein, in the context in which made, not misleading; and Parent
will reimburse each such Stockholder, such Stockholder's heirs, successors and
assigns, underwriter (if selected by Parent or approved by Parent) or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnification and other
rights provided for in this Section 5.3(a) shall not apply (i) to any such loss,
claim, damage, liability, or action insofar as it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, preliminary prospectus or final prospectus
or any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any Stockholder or (ii) if the person asserting any such loss,
claim, damage, liability or action who purchased the Registrable Shares which
are the subject thereof did not receive a copy of an amended preliminary
prospectus or the final prospectus (or the final prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of such
Registrable Shares to such person because of the failure of such Stockholder or
underwriter to so provide such amended preliminary or final prospectus and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact made in such preliminary prospectus was corrected in the amended
preliminary pro spectus or the final prospectus (or the final prospectus as
amended and supplemented). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Stockholder,
underwriter or controlling person and shall survive the transfer of the
Registrable Shares by such Stockholder.
(b) Indemnification by Stockholders. To the extent permitted by law,
each Stockholder will severally (but not jointly and pro rata with the other
Stockholders) indemnify and hold harmless Parent, its successors and assigns,
its officers and directors, any underwriter (as defined in the 1933 Act) with
respect to the Registrable Shares, and each person, if any, who controls Parent
or any such underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, liabilities or actions (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act or other
federal or state law, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arising out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the context
in which made, not misleading; provided that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished by such Stockholder expressly
for use in such registration by such Stockholder, or (ii) the failure of such
Stockholder or any underwriter with respect to the Registrable Shares held by
such Stockholder at or prior to the written confirmation of the sale of the
Registrable Shares held by such Stockholder to send or arrange delivery of a
copy of an amended preliminary prospectus
J-5.
<PAGE>
or the final prospectus (or the final prospectus as amended or supplemented) to
the person asserting any such loss, claim, damage, liability or action who
purchased the Registrable Shares which is the subject thereof and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact made in such preliminary prospectus was corrected in the amended
preliminary prospectus or the final prospectus (or the final prospectus as
amended and supplemented). Each Stockholder will reimburse Parent and each such
officer or director or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
Parent or any such officer, director, underwriter or controlling person and
shall survive the transfer of the Registrable Shares by such Stockholder.
(c) Indemnification Procedures. Promptly after receipt by a person
who may be entitled to indemnification under this Section 5.3 (an "indemnified
party") of notice of the commencement of any action (including any governmental
action) for which indemnification may be available under this Section 5.3, such
indemnified party will, if a claim in respect thereof is to be made against any
person who must provide indemnification under this Section 5.3 (an "indemnifying
party"), deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel (and the
reasonable fees of such counsel shall be paid by the indemnifying party) and
assume its own defense if (i) the retention of such counsel has been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party has failed to promptly assume the defense and employ
experienced counsel reasonably acceptable to the indemnified party after the
indemnifying party has received the notice of the indemnification matter from
the indemnified party, or (iii) the named parties to any such action include
both the indemnified party and the indemnifying party, and the representation of
both parties by the same counsel would be inappropriate due to a conflict of
interest between them. It is understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
indemnified parties unless the indemnified parties in good faith conclude and
are advised by their counsel that there is an actual or potential conflict of
interest among the indemnified parties. No indemnification provided for in
Section 5.3(a) or Section 5.3(b) shall be available to any party who shall fail
to give notice as provided in this Section 5.3(c) to the extent that the party
to whom notice was not given was unaware of the proceeding to which such notice
would have related and was materially prejudiced by the failure to give such
notice.
SECTION 6: Other Provisions
6.1 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered in the manner and
to the address or facsimile telephone number set forth in Section 10.5 of the
Reorganization Agreement (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto).
J-6.
<PAGE>
6.2 Headings. The bold-faced headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
6.3 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
6.4 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
6.5 Successors and Assigns. This Agreement shall be binding upon each of
the parties hereto and each of their respective permitted successors and
assigns, if any. No Stockholder may assign such Stockholder's rights under this
Agreement without the express prior written consent of Parent, provided,
however, that (i) upon the death of a Stockholder, such Stockholder's rights
under this Agreement shall be transferred to the person(s) who receive such
Stockholder's Parent Common Stock under the laws of descent and distribution,
and (ii) a Stockholder may assign such Stockholder's rights under this Agreement
to any organization qualified under Section 501(c)(3) of the Internal Revenue
Code to which the Stockholder transfers Registrable Shares. Nothing in this
Agreement is intended to confer, or shall be deemed to confer, any rights or
remedies upon any person or entity other than the parties hereto and their
permitted successors and assigns. This Agreement shall inure to the benefit of:
the Stockholders' Agent; the Stockholders; Parent; and the respective successors
and assigns, if any, of the foregoing.
6.6 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
6.7 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and the Stockholders' Agent (acting on behalf of
and for all of the Stockholders).
6.8 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is
J-7.
<PAGE>
determined to be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
6.9 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
6.10 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any Legal Proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
6.11 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
J-8.
<PAGE>
The parties hereto have caused this Agreement to be executed and delivered
as of the date first written above.
Siebel Systems, Inc.
__________________________________
By:_______________________________
Title:____________________________
Stockholders' Agent
By:_______________________________
Name: J. Alston Gardner
J-9.
<PAGE>
Exhibit K
Form of Tax Representation Letter of Parent and Merger Sub
<PAGE>
FORM OF
TAX REPRESENTATION LETTER
TO BE EXECUTED BY PARENT AND MERGER SUB
_______________, 1999
Kilpatrick Stockton LLP Cooley Godward LLP
3500 One First Union Center Five Palo Alto Square
301 South College Street 3000 El Camino Real
Charlotte, NC 28202-6001 Palo Alto, CA 94306
The undersigned are officers of Siebel Systems, Inc., a Delaware
corporation ("Parent") and Se Acquisition Corp., a Delaware corporation that is
a wholly-owned subsidiary of Parent ("Merger Sub"). This certificate is provided
in connection with the proposed merger of Merger Sub with and into OnTarget,
Inc., a Georgia corporation (the "Company"), with the Company surviving the
merger (the "Merger"), all pursuant to that certain Agreement and Plan of Merger
and Reorganization by and among Parent, Merger Sub and the Company, dated as of
November 17, 1999, and exhibits thereto (collectively, the "Agreement"). Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Agreement.
On behalf of Parent and Merger Sub, respectively, after consulting with
legal counsel and financial auditors regarding the meaning of and the factual
support for the following representations, the undersigned hereby certify and
represent that the following facts are now true, and will continue to be true as
of the Closing Date and Effective Time for the Merger, and thereafter as
relevant.
1. Merger Sub is a newly-formed corporation that was created for the sole
purpose of facilitating Parent's acquisition of the Company. Merger Sub has not
conducted and is not conducting any business activities and has no significant
assets.
2. Following the Merger, the Company will continue to hold at least 90
percent of the fair market value of its net assets determined immediately prior
to the Merger and at least 70 percent of the fair market value of its gross
assets determined immediately prior to the Merger. Following the Merger, the
Company will hold at least 90 percent of the fair market value of Merger Sub's
net assets determined immediately prior to the Merger and at least 70 percent of
the fair market value of Merger Sub's gross assets determined immediately prior
to the Merger. For purposes of this representation, (i) amounts paid by the
Company or Merger Sub to dissenters, (ii) amounts paid by the Company or Merger
Sub to stockholders who receive cash or other property, including cash paid to
Company stockholders in lieu of fractional shares of Parent stock, (iii) amounts
used by the Company or Merger Sub to pay expenses or liabilities incurred in
connection with the Merger, (iv) amounts used for any redemption or distribution
(except for regular, normal dividends) made by the Company or Merger Sub prior
to or subsequent to the
K-1.
<PAGE>
Merger and in contemplation thereof or related thereto, and (v) any asset
disposed of by the Company or Merger Sub, other than in the ordinary course of
business, during the period ending
3. On the Effective Time and beginning with the commencement of
negotiations (whether formal or informal) between the Company and Parent
regarding the Merger (the "Pre-Merger Period")), will be included as assets of
the Company or Merger Sub, respectively, immediately prior to the Merger but not
subsequent to the Merger.
4. Prior to the Merger, Parent will be in Control of Merger Sub. As used
herein, "Control" shall mean direct ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of shares
of each other class of stock of the corporation. For purposes of determining
Control, a person shall not be considered to own shares of voting stock if
rights to vote such shares (or to restrict or otherwise control the voting of
such shares) are held by a third party (including a voting trust) other than an
agent of such person.
5. Parent will acquire Control of the Company in the Merger solely in
exchange for Parent voting common stock. For purposes of this paragraph, shares
of stock of the Company exchanged in the Merger for cash and other property
(including, without limitation, cash paid to stockholders of the Company
perfecting dissenters' rights, if any, or in lieu of fractional shares of Parent
stock) will be treated as shares of stock of the Company outstanding on the date
of the Merger but not exchanged for shares of Parent stock.
6. Parent has no plan or intention to cause the Company to issue, after
the Merger, additional shares of stock (or rights to acquire shares of Company
stock) or to take any other action that would result in Parent losing Control of
the Company.
7. Parent has no plan or intention to reacquire, directly or indirectly
(through one or more related parties as defined in Treas. Reg. Section 1.368-
1(e)(3)), any of its stock issued in the Merger. For purposes of this
representation, it should be noted that Parent may from time to time repurchase
some of its issued and outstanding common stock in open market repurchase
transactions unrelated to the Merger. Prior to the Effective Time, neither
Parent nor any person related to Parent (within the meaning of Treas. Reg.
Section 1.368-1(e)(3)) will acquire any Company stock except pursuant to the
Agreement.
8. Except for transfers described in Section 368(a)(2)(C) of the Code or
Treas. Reg. Section 1.368-2(k)(2), Parent has no plan or intention to: (i)
cause the Company to sell, transfer or otherwise dispose of any of its assets or
of any of the assets acquired from Merger Sub except for dispositions made in
the ordinary course of business or for the payment of expenses incurred by the
Company in the Merger; (ii) liquidate the Company; (iii) merge the Company with
or into another corporation including Parent or its affiliates; (iv) sell,
distribute or otherwise dispose of the stock of the Company; or (v) to cause the
Company to sell, distribute, or otherwise dispose of the stock of the Company.
9. In the Merger, Merger Sub will have no liabilities assumed by the
Company and will not transfer to the Company any assets subject to liabilities
except to the extent incurred in
K-2.
<PAGE>
connection with the transactions contemplated in the Agreement. At the Effective
Time, Merger Sub's liabilities will not exceed the tax basis of its assets.
10. Parent intends that, following the Merger, the Company will continue
its historic business or Parent will use a significant portion of the Company's
historic business assets in a business. For this purpose, Parent shall be
treated as continuing the business and holding the assets of related entities,
as described in Treas. Reg. Section 1.368-1(d)(4).
11. Neither Parent nor any Parent subsidiary owns, or has owned during the
past five (5) years, directly or indirectly, any shares of Company stock, or the
right to acquire or vote any such stock. To Parent's knowledge, no person
related to Parent within the meaning of Treas. Reg. Section 1.368-1(e)(3) owns,
or has owned during the past five (5) years, any shares of Company stock, or the
right to acquire or vote any such stock.
12. With respect to each instance, if any, in which shares of stock of the
Company have been purchased by a stockholder of Parent (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase"): (i) the Stock Purchase was not made
by such Stockholder as a representative of Parent; (ii) the purchase price paid
by such Stockholder pursuant to the Stock Purchase was not advanced, and will
not be reimbursed, either directly or indirectly, by Parent; (iii) at no time
was such Stockholder or any other party required or obligated to surrender to
Parent the Company stock acquired in the Stock Purchase, and neither such
Stockholder nor any other party will be required to surrender to Parent the
Parent stock for which such shares of stock of the Company will be exchanged in
the Merger; and (iv) the Stock Purchase was not a formal or informal condition
to consummation of the Merger.
13. The transfer of cash to Company stockholders in lieu of fractional
Parent voting common stock shares, if any, is solely for the purpose of avoiding
the expense and inconvenience to Parent of accounting for fractional shares and
does not represent separately bargained-for consideration. The fractional share
interests of each Company stockholder will be aggregated, and no Company
stockholder will receive cash in an amount equal to or greater than the value of
one full share of Parent stock.
14. Except with respect to payments of cash in lieu of fractional shares
of Parent voting common stock and cash paid for Company dissenting shares, if
any, one hundred percent (100%) of the Company stock outstanding immediately
prior to the Merger will be exchanged solely for Parent voting common stock.
Thus, except as set forth in the preceding sentence, Merger Sub and Parent
intend that no consideration other than Parent voting common stock be paid or
received (directly or indirectly, actually or constructively) for Company stock.
15. The total fair market value of all consideration other than Parent
voting common stock received by Company stockholders in exchange for their
Company stock in the Merger (including, without limitation, cash paid to Company
stockholders exercising dissenters' rights and cash paid to Company stockholders
in lieu of fractional shares of Parent voting common stock) will be no greater
than five percent (5%) of the aggregate fair market value of Company stock
outstanding immediately prior to the Merger.
K-3.
<PAGE>
16. No shares of Merger Sub have been or will be used as consideration or
issued to stockholders of the Company in the Merger.
17. Parent and Merger Sub will each pay its own expenses in connection with
the Merger as contemplated by the Agreement, except as otherwise provided in the
Agreement; provided, however, that to the extent any expenses relating to the
Merger (or the "plan of reorganization" within the meaning of Treas. Reg.
Section 1.368-1(c) with respect to the Merger) are funded directly or
indirectly by a party other than the incurring party, such expenses will be
within the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
18. There is no inter-corporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired, or
will be settled at a discount as a result of the Merger, and Parent will assume
no liabilities of the Company or any Company stockholder in connection with the
Merger.
19. None of the payments to be received by any stockholder-employee of the
Company which are designated as compensation are actually separate consideration
for, or allocable to, any of their shares of Company stock; none of the shares
of Parent stock received by Company stockholders in the Merger will be separate
consideration for, or allocable to, any employment agreement, any covenant not
to compete, or similar agreement; and the compensation to be paid to any
stockholder-employee of the Company will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
20. Neither Parent nor Merger Sub is an investment company as defined in
Section 368(a)(2)(F) of the Code.
21. Parent's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes.
22. The terms of the Agreement and the agreements related thereto are the
product of arm's length negotiations.
23. The fair market value of the Parent stock received by each Company
stockholder will be approximately equal to the fair market value of the Company
stock surrendered in exchange therefor, and the aggregate consideration received
by the Company stockholders in exchange for their Company stock will be
approximately equal to the fair market value of all of the outstanding shares of
Company stock immediately prior to the Merger.
24. There are no other agreements, arrangements or understandings among
any of Parent, Merger Sub, the Company and/or any of their subsidiaries,
affiliates or stockholders bearing on the terms of the Merger other than those
described or referenced in the Agreement.
25. Parent and Merger Sub are authorized to make all of the
representations set forth herein, and the undersigned are authorized to execute
this certificate on behalf of Parent and Merger Sub.
K-4.
<PAGE>
The undersigned recognize that (i) counsel to and auditors for the Company
and counsel to and auditors for Parent and Merger Sub will rely upon the
foregoing representations in evaluating the qualification of the Merger as a
reorganization under US federal income tax laws and (ii) the opinions will be
subject to certain limitations and qualifications (including that they may not
be relied upon if any such representations are not accurate in all material
respects). If, prior to the Effective Time, any of the representations set forth
herein cease to be accurate in any material respect, the undersigned agrees to
deliver immediately a written notice to that effect.
The undersigned recognizes that the opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Siebel Systems, Inc., a Delaware
corporation:
By:____________________________
Date:__________________________
SE Acquisition Corp., a Delaware
corporation:
By:____________________________
Date:__________________________
K-5.
<PAGE>
Exhibit L
Form of Tax Representation Letter of the Company
<PAGE>
FORM OF
TAX REPRESENTATION LETTER
TO BE EXECUTED BY THE COMPANY
_______________, 1999
Kilpatrick Stockton LLP Cooley Godward LLP
3500 One First Union Center Five Palo Alto Square
301 South College Street 3000 El Camino Real
Charlotte, NC 28202-6001 Palo Alto, CA 94306
The undersigned is an officer of OnTarget, Inc., a Georgia corporation (the
"Company"). This certificate is provided in connection with the proposed merger
of SE Acquisition Corp., a Delaware corporation ("Merger Sub") and a wholly-
owned subsidiary of Siebel Systems, Inc., a Delaware corporation ("Parent"),
with and into the Company, with the Company surviving the merger (the "Merger"),
all pursuant to that certain Agreement and Plan of Merger and Reorganization by
and among Parent, Merger Sub and the Company, dated as of November 17, 1999, and
exhibits thereto (collectively, the "Agreement"). Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth in the
Agreement.
On behalf of the Company, after consulting with legal counsel and financial
auditors regarding the meaning of and the factual support for the following
representations, the undersigned hereby certifies and represents that the
following facts are now true, and will continue to be true as of the Closing
Date and Effective Time for the Merger, and thereafter as relevant:
1. Following the Merger, the Company will continue to hold at least 90
percent of the fair market value of its net assets determined immediately prior
to the Merger and at least 70 percent of the fair market value of its gross
assets determined immediately prior to the Merger. Following the Merger, the
Company will hold at least 90 percent of the fair market value of Merger Sub's
net assets determined immediately prior to the Merger and at least 70 percent of
the fair market value of Merger Sub's gross assets determined immediately prior
to the Merger. For purposes of this representation, (i) amounts paid by the
Company or Merger Sub to dissenters, (ii) amounts paid by the Company or Merger
Sub to stockholders who receive cash or other property, including cash paid to
Company stockholders in lieu of fractional shares of Parent stock, (iii) amounts
used by the Company or Merger Sub to pay expenses or liabilities incurred in
connection with the Merger, (iv) amounts used for any redemption or distribution
(except for regular, normal dividends) made by the Company or Merger Sub prior
to the Merger and in contemplation thereof or related thereto, and (v) any asset
disposed of by the Company or Merger Sub, other than in the ordinary course of
business, during the period ending on the Effective Time and beginning with the
commencement of negotiations (whether formal or informal) between the Company
and Parent regarding the Merger (the "Pre-Merger Period")), will be included as
assets of the Company or Merger Sub, respectively, immediately prior to the
L-1.
<PAGE>
Merger but not subsequent to the Merger. The Company is under no obligation to
dispose of any assets of the Company or Merger Sub at any time subsequent to the
Merger.
2. The Company has made no transfer of any of its assets (including any
distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the Pre-Merger Period other than (i) in
the ordinary course of business, and (ii) payments for expenses incurred in
connection with the Merger.
3. In the Merger, shares of Company stock representing Control of the
Company will be exchanged solely for voting common stock of Parent; at the time
of the Merger, there will exist no rights of any kind (including without
limitation warrants, options, convertible securities, contingent rights,
informal or unwritten rights) to acquire Company stock or to vote (or restrict
or otherwise control the vote of) Company stock which, if exercised, could
affect Parent's acquisition and retention of Control of the Company . For
purposes of this representation, shares of Company stock exchanged in the Merger
for cash and other property (including, without limitation, cash paid to
stockholders of the Company perfecting dissenters' rights, if any, or in lieu of
fractional shares of Parent stock) will be treated as Company stock outstanding
on the date of the Merger but not exchanged for voting common stock of Parent.
As used herein, the term "Control" shall mean direct ownership of stock
possessing at least eighty percent (80%) of the total combined voting power of
all classes of stock entitled to vote and at least eighty percent (80%) of the
total number of shares of each other class of stock of the corporation. For
purposes of determining Control, a person shall not be considered to own shares
of voting stock if rights to vote such shares (or to restrict or otherwise
control the voting of such shares) are held by a third party (including a voting
trust) other than an agent of such person.
4. At the Effective Time of the Merger, there will be no declared but
unpaid dividends on shares of Company stock.
5. At the Effective Time of the Merger, the fair market value of the
Company's assets will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
6. The Company has no obligation, understanding, agreement, plan or
intention to issue additional shares of stock after the Merger that would result
in Parent losing Control of the Company.
7. Other than shares of Company stock or options to acquire Company stock
issued as compensation to present or former service providers (including,
without limitation, employees or directors) of the Company in the ordinary
course of business, if any, no issuances of Company stock or rights to acquire
the Company have occurred or will occur during the pre-Merger Period other than
pursuant to options, warrants, or agreements outstanding prior to the Pre-Merger
Period.
8. The Company has no plan or intention, and is under no obligation, to
discontinue its business, to sell or otherwise dispose of any of its assets or
of any of the assets acquired from Merger Sub in the Merger except for
dispositions made in the ordinary course of business, the
L-2.
<PAGE>
payment of expenses incurred by the Company pursuant to the Merger, or transfers
of assets to a corporation controlled by the Company, as described in
Section 368(a)(2)(c) of the Code or Treas. Reg. Section 1.368-2(k).
9. The total fair market value of all consideration other than Parent
common stock received by Company stockholders for Company common stock in the
Merger (including, without limitation, cash paid to Company stockholders
perfecting dissenters' rights and cash paid to Company stockholders in lieu of
fractional shares of Parent voting common stock), will be less than five percent
(5%) of both (1) the total fair market value of all the consideration
transferred to Company stockholders in the Merger, and (2) total fair market
value of all the Company's common stock outstanding at the Effective Time of the
Merger. In addition, at the Effective Time of the Merger, the fair market value
of the Parent common stock received by each Company stockholder will be
approximately equal to the fair market value of the shares of Company stock
surrendered in exchange therefor, and the aggregate consideration received by
Company stockholders in exchange for their Company shares will be approximately
equal to the aggregate fair market value of all of the outstanding shares of
Company stock immediately prior to the Merger.
10. The Company, and persons related to the Company (as defined in Treas.
Reg. Section 1.368-1(e)(3), determined without regard to (e)(3)(i)(A)), prior to
the Effective Date of the Merger will not have redeemed, purchased or otherwise
acquired Company stock except as set forth in the Agreement or the Disclosure
Schedule thereto, and the Company has not made any extraordinary distributions
(as described in Treas. Reg. Section 1.368-1T(e)) with respect to its stock,
prior to and in connection with the Merger. For purposes of this representation,
extraordinary distributions will not include periodic dividends that are
consistent with the Company's historic dividend practices.
11. The Company has no knowledge of any plan or intention of Parent to
reacquire any of its stock issued pursuant to the Merger.
12. The transfer of cash to Company stockholders in lieu of fractional
shares of Parent voting common stock, if any, is solely for the purpose of
avoiding the expense and inconvenience to Parent of accounting for fractional
shares and does not represent separately bargained-for consideration. The
fractional share interests of each Company stockholder will be aggregated, and
no Company stockholder will receive cash in an amount equal to or greater than
the value of one full share of Parent stock.
13. Except with respect to payments of cash to Company stockholders in
lieu of fractional shares of Parent voting common stock and cash paid for
Company stockholders perfecting dissenters' rights, if any, or as otherwise
provided in the Agreement, one hundred percent (100%) of the Company stock
outstanding immediately prior to the Merger will be exchanged solely for Parent
voting common stock. Thus, except as set forth in the preceding sentence, the
Company intends that no consideration other than Parent voting common stock be
paid or received (directly or indirectly, actually or constructively) for
Company stock.
L-3.
<PAGE>
14. The Company and the stockholders of the Company will each pay
separately its or their own expenses in connection with the Merger as
contemplated by the Agreement, except as otherwise provided in the Agreement;
provided, however, that to the extent any expenses relating to the Merger (or
the "plan of reorganization" within the meaning of Treas. Reg. Section 1.368-
1(c) with respect to the Merger) are funded directly or indirectly by a party
other than the incurring party, such expenses will be within the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187.
15. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired, or
will be settled at a discount as a result of the Merger, and to the best
knowledge of the management of the Company, Parent will assume no liabilities of
the Company or any Company stockholder in connection with the Merger.
16. None of the payments received by any stockholder-employee of the
Company which have been designated as compensation are actually separate
consideration for, or allocable to, any of their shares of Company stock; none
of the shares of Parent stock received by Company stockholders in the Merger
will be separate consideration for, or allocable to, any employment agreement,
any covenant not to compete, or similar agreement; and the compensation to be
paid to any stockholder of the Company will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
17. The Company is not an investment company as defined in Section
368(a)(2)(F) of the Code, and is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
18. There are no other agreements, arrangements or understandings among
any of Parent, Merger Sub, the Company and/or any of their subsidiaries,
affiliates or stockholders other than those described or referenced in the
Agreement.
19. The Company's principal reasons for participating in the Merger are
bona fide business purposes not related to taxes.
20. The terms of the Agreement and the agreements related thereto are the
product of arm's length negotiations.
21. The liabilities of the Company have been incurred by the Company in
the ordinary course of business.
22. With respect to each instance, if any, in which shares of stock of the
Company have been purchased by a stockholder of Parent (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase") to the best knowledge of the Company:
(i) the Stock Purchase was made by such Stockholder on its own behalf, rather
than as a representative, or for the benefit, of Parent; and (ii) the Stock
Purchase was not a formal or informal condition to consummation of the Merger.
L-4.
<PAGE>
23. The Company is authorized to make all of the representations set forth
herein, and the undersigned is authorized to execute this certificate on behalf
of the Company.
The undersigned recognizes that (i) counsel to and auditors for the Company
and counsel to and auditors for Parent and Merger Sub will rely upon the
foregoing representations in evaluating the qualification of the Merger as a
reorganization under US federal income tax laws and (ii) the opinions will be
subject to certain limitations and qualifications (including that they may not
be relied upon if any such representations are not accurate in all material
respects). If, prior to the Effective Time, any of the representations set forth
herein cease to be accurate in any material respect, the undersigned agrees to
deliver immediately a written notice to that effect.
The undersigned recognizes that the opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
OnTarget, Inc., a Georgia corporation:
By:____________________________________
Name:__________________________________
Title:_________________________________
Date:__________________________________
L-5.
<PAGE>
Exhibit M
Individuals included in the definition of "knowledge"
Fred Burton
J. Alston Gardner
Wendy Lea
Jeffrey Muir
Nicholas Nascone
Philip Rawlins
Hugh Stevenson
Dennis Kubacak
L-6.
<PAGE>
Exhibit 99.1
NEWS RELEASE
Siebel Systems Completes Acquisition of OnTarget, Inc.
Siebel Systems to Offer Customers a Seamlessly
Integrated Front Office Solution, Including Strategy, Methodology and Software
San Mateo, CA - December 1, 1999 - Siebel Systems, Inc. (Nasdaq: SEBL) today
announced that it has closed its acquisition of OnTarget, Inc., a leading
provider of consulting services and training programs for sales and marketing
organizations, pursuant to the terms of a definitive acquisition agreement
executed on November 17, 1999.
Under the terms of the agreement, each outstanding share of OnTarget common
stock was exchanged, at a fixed exchange ratio of approximately 0.3078, for
newly issued shares of common stock of Siebel Systems. This resulted in the
issuance of approximately 3.7 million additional Siebel Systems' shares, valued
at approximately $250 million, based upon Siebel Systems' closing price as of
December 1, 1999. In addition, all outstanding employee stock options of
OnTarget were converted into approximately 0.3 million Siebel Systems options at
the same exchange ratio.
About Siebel Systems
Siebel Systems, Inc. (Nasdaq: SEBL) is the world's leading supplier of Web-based
front office software systems. Siebel Systems provides an integrated family of
sales, marketing and customer service application software for field sales,
customer service, telesales, telemarketing, field service, third-party resellers
and Internet based eCommerce. Siebel Systems' products are designed to meet the
needs of small, medium and large businesses. Siebel Systems' sales and service
facilities are deployed locally in more than 20 countries and can be reached
through the World Wide Web at www.siebel.com.
--------------
About OnTarget
OnTarget, Inc. is a professional services firm that provides a complete
curriculum of sales training programs, consulting services and field application
tools to help companies achieve competitive advantage and strengthen
relationships with customers and partners. The company has proven solutions for
winning major sales opportunities, penetrating and growing
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<PAGE>
Siebel Systems Completes Acquisition on OnTarget, Inc.
- --------------------------------------------------------------------------------
and healthcare. OnTarget delivers its offerings to more than 450 companies
worldwide, including AT&T, BellSouth, Cisco Systems, Compaq, CSC, Dell, Deloitte
& Touche, Hewlett-Packard, IBM, KPMG, Lucent Technologies, Microsoft, Oracle,
Pfizer, SAP, Siemens and SmithKline Beecham.
OnTarget had revenues of approximately $18 million in 1998 and $30 million for
the nine-month period ended September 30, 1999. OnTarget employs more than 90
professional sales consultants and 175 employees worldwide. The company
maintains offices in Atlanta, Dallas and San Jose. European headquarters are
located in Geneva, Switzerland, with additional offices in Dusseldorf and
London. Asia Pacific headquarters are located in Hong Kong with representatives
or agents in Australia, New Zealand and Japan. For more information, please
visit http://www.ontarget.com.
-----------------------
###
Media Contact:
Tamara Ireland Stone
Siebel Systems, Inc.
650-295-5455
[email protected]
Except for the historical information contained herein, this press release
contains forward-looking statements that involve risk or uncertainties. The
success of the acquisition and future operating results of Siebel Systems may
differ from the results discussed or forecasted in the forward-looking
statements due to factors that include, but are not limited to, risks associated
with acquisition, such as the potential difficulties in the assimilation of
operations, strategies, technologies, methodologies and products of the acquired
company, the risk of loss of key personnel of the acquired company, diversion of
management attention from other business concerns, business risks including the
risk of variations in quarterly operating results, significant current and
expected additional competition and the need to continue to expand product
distribution and services offerings. Further information on potential factors
that could affect the financial results of Siebel Systems are included in Siebel
Systems' Report on Form 10-K for the year ended December 31, 1998 and its other
filings with the Securities and Exchange Commission.
Siebel is a trademark of Siebel Systems, Inc. and may be registered in certain
jurisdictions. All other product and company names mentioned are the property of
their respective owners and are mentioned for identification purposes only.
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