<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 20, 1999
MESSAGEMEDIA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-21751 33-0612860
(Commission File No.) (IRS Employer Identification No.)
6060 SPINE ROAD
BOULDER, COLORADO 80301
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (303) 440-7550
<PAGE> 2
ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS.
(a) ACQUISITION OF REVNET SYSTEMS, INC.
Terms of the Revnet Merger. On August 9, 1999, MessageMedia, Inc.
("MessageMedia") acquired Revnet Systems, Inc., an Alabama corporation
("Revnet"). Revnet was acquired pursuant to an Agreement and Plan of Merger and
Reorganization, dated as of July 22, 1999 (the "Revnet Merger Agreement"), among
MessageMedia, Revnet, a merger subsidiary wholly owned by MessageMedia, and the
Securityholders' Agent for the securityholders of Revnet. Pursuant to the Revnet
Merger Agreement, Revnet was merged with a wholly owned subsidiary of
MessageMedia, with Revnet as the surviving corporation (the "Revnet Merger"). As
a result of the Revnet Merger, Revnet became a wholly owned subsidiary of
MessageMedia.
Stock Ownership Following the Revnet Merger. In accordance with the
Revnet Merger, an aggregate of 3,262,120 shares of MessageMedia Common Stock are
to be issued to Revnet securityholders, and MessageMedia assumed options
exercisable for an additional 681,675 shares of MessageMedia Common Stock.
Conversion of Revnet Capital Stock. Each share of Revnet Common Stock
and each share of Revnet Non-voting Common Stock issued and outstanding
immediately prior to the effective time of the Revnet Merger was canceled and
extinguished and converted automatically into the right to receive 0.4300086 of
a share of MessageMedia Common Stock upon surrender of the certificate
representing such share of Revnet capital stock in the manner provided in a
letter of transmittal sent to each record holder of Revnet capital stock
following the effective time, subject to the escrow provisions of the Revnet
Merger Agreement described below.
Revnet Stock Options. At the Effective Time, each unexpired and
unexercised option to purchase shares of Revnet Common Stock (each an "Revnet
Option") was, in connection with the Revnet Merger, assumed by MessageMedia
(each, an "Assumed Revnet Option"). Each Revnet Option so assumed by
MessageMedia will continue to have, and be subject to, substantially the same
terms and conditions set forth in the documents governing such Revnet Option
immediately prior to the effective time, except that (i) such Assumed Revnet
Option will be exercisable for that number of whole shares of MessageMedia
Common Stock equal to the product of the number of shares of Revnet capital
stock (on an as-converted to Common Stock basis) that were purchasable under
such Assumed Revnet Option immediately prior to the effective time multiplied by
0.4300086, rounded down to the nearest whole number of shares of MessageMedia
Common Stock and (ii) the per share exercise price for the shares of
MessageMedia Common Stock issuable upon exercise of such Assumed Revnet Option
will be equal to the quotient obtained by dividing the exercise price per share
of Revnet Capital Stock (on an as-converted to Common Stock basis) at which such
Revnet Option was exercisable immediately prior to the effective time by
0.4300086, rounded up to the nearest whole cent.
The Revnet Escrow Fund. An aggregate of 793,811 of such shares were
deposited in escrow, such deposit constituting the escrow fund (the "Revnet
Escrow Fund"), with Chase Manhattan Bank and Trust Company, N.A. (the "Escrow
Agent") to secure certain indemnity
<PAGE> 3
obligations of the former Revnet shareholders pursuant to the Revnet Merger
Agreement. The Revnet Escrow Fund is available to compensate MessageMedia for
any losses incurred by MessageMedia directly or indirectly as a result of any
inaccuracy or breach of a representation or warranty of Revnet contained in the
Revnet Merger Agreement or any failure by Revnet to perform or comply with any
covenant contained therein. Revnet shareholders will have voting rights with
respect to the escrowed shares while in escrow. Subject to resolution of
unsatisfied claims of MessageMedia, the Revnet Escrow Fund will terminate upon
twelve months following the closing date of the Merger.
Securities Act Registration. Pursuant to the Revnet Merger Agreement,
MessageMedia will file a Registration Statement on Form S-3 with the Securities
and Exchange Commission for the purpose of registering the shares of Common
Stock issued to the former Revnet securityholders pursuant to the Revnet Merger
Agreement under the Securities Act of 1933 within thirty days of the closing of
the Revnet Merger for resale by the former securityholders of Revnet and will
file a Registration Statement on Form S-8 with the Securities and Exchange
Commission for the purpose of registering the shares of Common Stock issuable
upon exercise of the Assumed Revnet Options under the Securities Act of 1933
within thirty days of the closing of the Revnet Merger.
Accounting Treatment. The Revnet Merger is intended to qualify as a
tax-free reorganization and to be accounted for as a purchase for financial
accounting purposes.
(b) ACQUISITION OF DECISIVE TECHNOLOGY CORPORATION
Terms of the Decisive Merger. On August 16, 1999, MessageMedia, Inc.
("MessageMedia") acquired Decisive Technology Corporation, a Delaware
corporation ("Decisive"). Decisive was acquired pursuant to an Agreement and
Plan of Merger and Reorganization, dated as of July 27, 1999 (the "Decisive
Merger Agreement"), among MessageMedia, Decisive, a merger subsidiary wholly
owned by MessageMedia, and the Securityholders' Agent for the shareholders of
Decisive. Pursuant to the Decisive Merger Agreement, Decisive was merged with a
wholly owned subsidiary of MessageMedia, with Decisive as the surviving
corporation (the "Decisive Merger"). As a result of the Decisive Merger,
Decisive became a wholly owed subsidiary of MessageMedia.
Stock Ownership Following the Decisive Merger. In accordance with the
Decisive Merger, an aggregate of 2,006,310 shares of MessageMedia Common Stock
are to be issued to Decisive securityholders, and MessageMedia assumed options
exercisable for an additional 466,800 shares of MessageMedia Common Stock.
Conversion of Decisive Capital Stock. Each share of Decisive Common
Stock issued and outstanding immediately prior to the effective time of the
Decisive Merger was canceled and extinguished and converted automatically into
the right to receive 0.07777 of a share of MessageMedia Common Stock upon
surrender of the certificate representing such share of Decisive capital stock
in the manner provided in a letter of transmittal sent to each record holder of
Decisive capital stock following the effective time, subject to the escrow
provisions of the Decisive Merger Agreement described below.
<PAGE> 4
Decisive Stock Options. At the Effective Time, each unexpired and
unexercised option to purchase shares of Decisive Common Stock (each an
"Decisive Option") was, in connection with the Decisive Merger, assumed by
MessageMedia (each, an "Assumed Decisive Option"). Each Decisive Option so
assumed by MessageMedia will continue to have, and be subject to, substantially
the same terms and conditions set forth in the documents governing such Decisive
Option immediately prior to the effective time, except that (i) such Assumed
Decisive Option will be exercisable for that number of whole shares of
MessageMedia Common Stock equal to the product of the number of shares of
Decisive capital stock (on an as-converted to Common Stock basis) that were
purchasable under such Assumed Decisive Option immediately prior to the
effective time multiplied by 0.07777, rounded down to the nearest whole number
of shares of MessageMedia Common Stock and (ii) the per share exercise price for
the shares of MessageMedia Common Stock issuable upon exercise of such Assumed
Decisive Option will be equal to the quotient obtained by dividing the exercise
price per share of Decisive Capital Stock (on an as-converted to Common Stock
basis) at which such Decisive Option was exercisable immediately prior to the
effective time by 0.07777, rounded up to the nearest whole cent.
The Decisive Escrow Fund. An aggregate of 473,418 of such shares will
be deposited in escrow, such deposit constituting the escrow fund (the "Decisive
Escrow Fund"), with Chase Manhattan Bank and Trust Company, N.A. (the "Escrow
Agent") to secure certain indemnity obligations of the former Decisive
shareholders pursuant to the Decisive Merger Agreement. The Decisive Escrow Fund
is available to compensate MessageMedia for any losses incurred by MessageMedia
directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty of Decisive contained in the Decisive Merger
Agreement or any failure by Decisive to perform or comply with any covenant
contained therein. Decisive shareholders will have voting rights with respect to
the escrowed shares while in escrow. Subject to resolution of unsatisfied claims
of MessageMedia, the Decisive Escrow Fund will terminate upon fifteen months
following the closing date of the Merger.
Securities Act Registration. Pursuant to the Decisive Merger Agreement,
MessageMedia will file a Registration Statement on Form S-3 with the Securities
and Exchange Commission for the purpose of registering the shares of Common
Stock issued to the former Decisive securityholders pursuant to the Decisive
Merger Agreement under the Securities Act of 1933 with in thirty days of the
closing of the Decisive Merger for resale by the former securityholders of
Decisive and will file a Registration Statement on Form S-8 with the Securities
and Exchange Commission for the purpose of registering the shares of Common
Stock issuable upon exercise of the Assumed Decisive Options under the
Securities Act of 1933 within thirty days of the closing of the Decisive Merger.
Accounting Treatment. The Decisive Merger is intended to qualify as a
tax-free reorganization and to be accounted for as a purchase for financial
accounting purposes.
Material Relationship. Softbank Ventures, Inc., an affiliate of
SOFTBANK Holdings Inc. and SOFTBANK Technology Ventures IV, L.P. which together
beneficially owned approximately 46% of MessageMedia Common Stock prior to the
Decisive Merger, will receive 254,028 shares of MessageMedia Common Stock in
connection with the Decisive Merger as consideration for the shares of Decisive
capital stock held by Softbank Ventures, Inc.
<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Revnet Systems, Inc. Financial Statements
The required financial statements will be filed by amendment
as soon as practicable.
2. Decisive Technology Corporation Financial Statements
The required financial statements will be filed by amendment
as soon as practicable.
(b) PRO FORMA FINANCIAL INFORMATION.
1. Revnet Systems, Inc. Pro Forma Financial Information
The required pro forma financial information will be filed by
amendment as soon as practicable.
2. Decisive Technology Corporation Pro Forma Financial Information
The required pro forma financial information will be filed by
amendment as soon as practicable.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger and Reorganization dated July 22,
1999 among the Registrant, Revnet Systems, Inc. and MM1 Acquisition
Corporation
2.2 Agreement and Plan of Merger and Reorganization dated July 27,
1999 among the Registrant, Decisive Technology Corporation, and MM2
Acquisition Corporation
4.1 Registration Rights Agreement among the Registrant, the
Securityholders' Agent and James Clayton
4.2 Registration Rights Agreement among the Registrant, the
Securityholders' Agent and William Blair & Company, LLC
<PAGE> 6
99.1 Press Release dated August 10, 1999.
99.2 Press Release dated August 17, 1999.
<PAGE> 7
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.
MESSAGEMEDIA , INC.
Dated: August 23, 1999 By: /s/ Larry Jones
---------------------------
Larry Jones
Chief Executive Officer
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization dated July 22, 1999
among the Registrant, Revnet Systems, Inc. and MM1 Acquisition
Corporation.
2.2 Agreement and Plan of Merger and Reorganization dated July 27, 1999
among the Registrant, Decisive Technology Corporation. and MM2
Acquisition Corporation.
4.1 Registration Rights Agreement among the Registrant, the
Securityholders' Agent and James Clayton
4.2 Registration Rights Agreement among the Registrant, the
Securityholders' Agent and William Blair & Company, LLC
99.1 Press Release dated August 10, 1999.
99.2 Press Release dated August 17, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
MESSAGEMEDIA, INC.,
a Delaware corporation;
MM1 ACQUISITION CORP.,
an Alabama corporation;
and
REVNET SYSTEMS, INC.,
an Alabama corporation;
---------------------------
Dated as of July 22, 1999
---------------------------
================================================================================
<PAGE> 2
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
Exhibit A - Certain definitions
Exhibit B1 - Form of Voting Agreement
Exhibit B2 - Persons to execute Voting Agreements
Exhibit C - Assumed Company Options
Exhibit D - Intrinsic Value Company Options
Exhibit E - Non-Compensatory Company Options
Exhibit F - Persons to sign Employment and Noncompetition Agreements
Exhibit G - Form of Employment Agreement
Exhibit H - Form of Noncompetition Agreement
Exhibit I - Form of Securityholder Representation Statement
Exhibit J - Certain employees
Exhibit K - Form of Registration Rights Agreement
Exhibit L - Form of Escrow Agreement
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <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.............................................1
1.4 Articles of Incorporation and Bylaws; Directors and Officers........2
1.5 Conversion of Shares................................................2
1.6 Stock Options.......................................................3
1.7 Closing of the Company's Transfer Books.............................4
1.8 Escrow..............................................................5
1.9 Exchange of Certificates............................................5
1.10 Dissenting Shares...................................................7
1.11 Tax Consequences....................................................7
1.12 Accounting Treatment................................................7
1.13 Further Action......................................................7
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................8
2.1 Due Organization; No Subsidiaries; Etc..............................8
2.2 Articles of Incorporation and Bylaws; Records.......................9
2.3 Capitalization, Etc.................................................9
2.4 Financial Statements...............................................10
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........................................................18
2.12 Compliance with Legal Requirements.................................18
2.13 Governmental Authorizations........................................18
2.14 Tax Matters........................................................19
2.15 Employee and Labor Matters; Benefit Plans..........................20
</TABLE>
i
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.16 Environmental Matters...........................................22
2.17 Insurance.......................................................23
2.18 Related Party Transactions......................................23
2.19 Legal Proceedings; Orders.......................................24
2.20 Authority; Binding Nature of Agreement..........................24
2.21 Non-Contravention; Consents.....................................25
2.22 Full Disclosure.................................................26
2.23 Vote Required...................................................26
2.24 Financial Advisor...............................................26
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................27
3.1 Organization, Standing and Power................................27
3.2 SEC Filings; Financial Statements...............................27
3.3 Authority; Binding Nature of Agreement..........................27
3.4 Valid Issuance..................................................28
3.5 Absence of Changes..............................................28
4. CERTAIN COVENANTS OF THE COMPANY.........................................28
4.1 Access and Investigation........................................28
4.2 Operation of the Company's Business.............................29
4.3 Notification; Updates to Disclosure Schedule....................31
4.4 No Negotiation..................................................31
5. ADDITIONAL COVENANTS OF THE PARTIES......................................32
5.1 Filings and Consents............................................32
5.2 Company Shareholders' Meeting...................................32
5.3 Stock Options...................................................32
5.4 Public Announcements............................................33
5.5 Best Efforts....................................................33
5.6 Employment and Noncompetition Agreements........................33
5.7 FIRPTA Matters..................................................33
5.8 Listing.........................................................33
5.9 Resignation of Officers and Directors...........................33
</TABLE>
ii
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.10 Certain Stock Option Matters......................................34
5.11 Securityholder Representation Statements; Appointment
of Purchaser Representative.......................................34
5.12 Securities Act Exemption..........................................34
5.13 Stock Restrictions................................................35
5.14 Registration on Form S-3..........................................35
5.15 Clayton Post Closing Stock Issuance...............................35
5.16 Blue Sky Laws.....................................................36
5.17 Retention Options.................................................36
5.18 Personal Guarantees...............................................36
5.19 Use of Warrant Proceeds...........................................36
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB...............36
6.1 Accuracy of Representations.......................................36
6.2 Performance of Covenants..........................................36
6.3 Shareholder Approval..............................................36
6.4 Consents..........................................................37
6.5 Agreements and Documents..........................................37
6.6 FIRPTA Compliance.................................................38
6.7 Listing...........................................................38
6.8 No Restraints.....................................................38
6.9 No Legal Proceedings..............................................38
6.10 Employees.........................................................38
6.11 Securities Exemption..............................................38
6.12 Director and Officer Insurance....................................38
6.13 Dissenters' Rights................................................38
6.14 Debt Payoff.......................................................39
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.........................39
7.1 Accuracy of Representations.......................................39
7.2 Performance of Covenants..........................................39
7.3 Documents.........................................................39
</TABLE>
iii
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
7.4 Listing......................................................39
7.5 No Restraints................................................39
8. TERMINATION...........................................................39
8.1 Termination Events...........................................39
8.2 Termination Procedures.......................................40
8.3 Effect of Termination........................................40
9. INDEMNIFICATION, ETC..................................................41
9.1 Survival of Representations, Etc.............................41
9.2 Indemnification by Company Shareholders......................41
9.3 Threshold; Ceiling...........................................42
(b) 42
9.4 Exclusive Remedy.............................................42
9.5 No Contribution..............................................42
9.6 Defense of Third Party Claims................................42
9.7 Exercise of Remedies by Indemnitees Other Than Parent........43
10. MISCELLANEOUS PROVISIONS..............................................43
10.1 Securityholders' Agent.......................................43
10.2 Further Assurances...........................................44
10.3 Fees and Expenses............................................44
10.4 Attorneys' Fees..............................................44
10.5 Legacy Capital Fees..........................................45
10.6 Notices......................................................45
10.7 Confidentiality..............................................46
10.8 Time of the Essence..........................................46
10.9 Headings.....................................................46
10.10 Counterparts.................................................46
10.11 Governing Law................................................46
10.12 Successors and Assigns.......................................47
10.13 Remedies Cumulative; Specific Performance....................47
10.14 Waiver.......................................................47
</TABLE>
iv
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
10.15 Amendments...................................................47
10.16 Severability.................................................47
10.17 Parties in Interest..........................................48
10.18 Entire Agreement.............................................48
10.19 Construction.................................................48
</TABLE>
v
<PAGE> 8
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of July 22, 1999, by and among: MESSAGEMEDIA, INC., a
Delaware corporation ("Parent"); MM1 ACQUISITION CORP., an Alabama corporation
and a wholly owned subsidiary of Parent ("Merger Sub"); and REVNET SYSTEMS,
INC., an Alabama 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 and the Alabama
Business Corporation Act (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 "purchase."
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. In order to induce Parent to enter into this Agreement and to
consummate the Merger, certain shareholders of the Company listed on Exhibit B-2
of the Company are entering into Voting Agreements, a form of which is attached
hereto as Exhibit B-1, pursuant to which they are agreeing to vote in favor of
the adoption and approval of this Agreement and the approval of the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, 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 Alabama Business
Corporation Act.
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,
1
<PAGE> 9
2595 Canyon Boulevard, Suite 250, Boulder, Colorado 80302, at 10:00 a.m. on
August 5, 1999, or as soon as practicable after such time as the parties agree,
but not later than two (2) business days following satisfaction or waiver of
each of the conditions set forth in Section 6 and Section 7 below (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, properly executed articles of
merger conforming to the requirements of the Alabama Business Corporation Act
shall be filed with the Secretary of State of the State of Alabama. The Merger
shall become effective at the time such articles of merger are filed with the
Secretary of State of the State of Alabama or at such later time as may be
specified in such articles of merger (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Articles of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Articles of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time;
(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 Merger Sub immediately prior to
the Effective Time shall continue as the directors and officers of the Surviving
Corporation immediately after the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(b), 1.5(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 shareholder of the Company ("Company
Shareholder"):
(i) any shares of Company Common Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall be
canceled and retired and shall cease to exist at the Effective Time, and no
consideration shall be delivered in exchange therefor;
(ii) any shares of Company Common Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled and retired and
shall cease to exist at the Effective Time, and no consideration shall be
delivered in exchange therefor;
(iii) each share of the common stock, $0.01 par value per
share, of Merger Sub then outstanding shall be converted into one share of
common stock of the Surviving Corporation; and
(iv) except as provided in clauses "(i)" and "(ii)" of this
sentence, each share of Company Common Stock and Company Non-Voting Common Stock
outstanding
2
<PAGE> 10
immediately prior to the Effective Time shall be converted into the right to
receive a fraction of a share(s) of the common stock (par value $0.001 per
share) of Parent ("Parent Common Stock") equal to a fraction (the "Exchange
Ratio"):
(1) if the Parent Average Stock price is $12.00 or more,
(x) the numerator of which is 4,000,000 minus the Excluded Expenses (expressed
on an as converted to Parent Common Stock basis using the Parent Average Stock
Price as the measure for the per-share value of the Parent Common Stock) and (y)
the denominator of which is the Fully Diluted Number of Company Shares;
(2) if the Parent Average Stock price is less than $12.00
and greater than or equal to $10.67, (x) the numerator of which is (i)
$48,000,000 minus the dollar amount of the Excluded Expenses divided by (ii) the
Parent Average Stock Price and (y) the denominator of which is the Fully Diluted
Number of Company Shares; or
(3) if the Parent Average Stock price is less than $10.67,
(x) the numerator of which is 4,500,000 minus the Excluded Expenses (on an as
converted to Parent Common Stock basis using the Parent Average Stock Price as
the measure for the per-share value of the Parent Common Stock) and (y) the
denominator of which is the Fully Diluted Number of Company Shares.
(b) The numerator of the fraction used to calculate the Exchange
Ratio, in accordance with this Agreement but prior to the deduction of any
Excluded Expenses, is hereinafter referred to as the "Aggregate Parent Share
Number."
(c) If, between the date of this Agreement and the Effective Time,
the outstanding shares of Company Common Stock or Parent Common Stock are
changed into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction, then the Exchange Ratio 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 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.
1.6 STOCK OPTIONS.
(a) At the Effective Time, each stock option listed on Exhibit C
hereto that is then outstanding, whether vested or unvested (an "Assumed Company
Option"), shall be assumed by Parent in accordance with the terms (as in effect
as of the Effective Time) of the stock option agreement by which such Company
Option is evidenced. All rights with respect to Company Common Stock under
outstanding Assumed Company Options shall thereupon be converted into rights
with respect to Parent Common Stock. Accordingly, from and after the
3
<PAGE> 11
Effective Time, (a) each Assumed 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 Company Option shall be equal
to the number of shares of Company Common Stock that were subject to such
Assumed Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock, (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
Assumed Company Option, as in effect immediately prior to the Effective Time, by
the Exchange Ratio, and rounding the resulting exercise price up to the nearest
whole cent, and (d) all restrictions on the exercise of each such Assumed
Company Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such Assumed 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 1994 Incentive 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. Parent shall
file with the SEC, within thirty (30) days after the Closing Date, a
registration statement on Form S-8 registering the exercise of the Company
Options assumed by Parent pursuant to this Section 1.6(a), provided such Company
Options are registrable on Form S-8.
(b) Prior to the Effective Time, each stock option listed on
Exhibit D hereto that is then outstanding (an "Intrinsic Value Company Option"),
shall be settled by the issuance by Company of additional shares of Company
Non-Voting Common Stock to the option holders in accordance with the terms of
the Company's amended 1994 Incentive Stock Option Plan. All such shares of
Company Non-Voting Common Stock shall thereafter be converted in the Merger into
the right to receive shares of Parent Common Stock pursuant to Section 1.5
above. All shares of Parent Common Stock issuable with respect to Intrinsic
Value Company Options shall be Restricted Resale Stock.
(c) Prior to the Effective Time, each stock option listed on
Exhibit E hereto that is then outstanding (a "Non-Compensatory Company Option"),
shall be fully exercised in cash for additional shares of Company Common Stock.
All such shares of Company Common Stock shall thereafter be converted in the
Merger into the right to receive shares of Parent Common Stock pursuant to
Section 1.5 above. All shares of Parent Common Stock issuable with respect to
Non-Compensatory Company Options shall be Restricted Resale Stock.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all 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 shareholders of the Company, and (b) the
4
<PAGE> 12
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
Exchange Agent (as defined in Section 1.9) or to the Surviving Corporation or
Parent, such Company Stock Certificate shall be canceled and shall be exchanged
as provided in Section 1.9.
1.8 ESCROW.
(a) The aggregate number of shares to be placed in escrow (the
"Escrow Shares") as collateral for the indemnification obligations of the
Company pursuant to Section 9 of this Agreement shall be equal to the product of
(x) .20 and (y) the Aggregate Parent Share Number less an amount (expressed on
an as converted to Parent Common Stock basis using the Parent Average Stock
Price) equal to the aggregate exercise price of the Intrinsic Value Company
Options. The Escrow Shares shall be withheld from the number of whole shares of
Parent Common Stock that each Company Shareholder has the right to receive
pursuant to the provisions of Section 1.5. At Closing, the Company shall deliver
to Parent a Schedule 1.8 indicating the number of Escrow Shares to be withheld
from each Company Shareholder.
(b) The number of Escrow Shares to be withheld from each Company
Shareholder shall be set forth on a Schedule 1.8 to be delivered by the
Securityholders' Agent prior to Closing, and shall equal the aggregate number of
shares determined in accordance with Section 1.8(a) above.
1.9 EXCHANGE OF CERTIFICATES.
(a) American Stock Transfer & Trust or such other reputable bank or
trust company selected by Parent prior to the Closing Date shall act as exchange
agent in the Merger (the "Exchange Agent"). Promptly after the Effective Time,
Parent shall deposit with the Exchange Agent certificates representing the
shares of Parent Common Stock issuable pursuant to this Section 1. The shares of
Parent Common Stock so deposited with the Exchange Agent, together with any
dividends or distributions received by the Exchange Agent with respect to such
shares, are referred to collectively as the "Exchange Fund."
(b) At or as soon as practicable after the Effective Time, the
Exchange Agent will send to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, the holder of such Company Stock Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of
5
<PAGE> 13
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of this Section 1, and the Company Stock Certificate so surrendered
shall be canceled. As soon as practicable after receipt by the Exchange Agent of
the Company Stock Certificates, the duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange Agent or Parent,
the Exchange Agent shall deliver to each former Company Shareholder a
certificate representing the number of whole shares of Parent Common Stock that
such shareholder has the right to receive pursuant to the provisions of Section
1.5 less the number of shares to be delivered to the escrow agent (determined in
accordance with Section 1.8(b) above) and (ii) deliver to the escrow agent
pursuant to the Escrow Agreement (as defined below), on behalf and in the name
of each shareholder, a certificate representing such shareholder's proportionate
share of the Escrow Shares. Until surrendered as contemplated by this Section
1.9(b), each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive upon such surrender a
certificate representing shares of Parent Common Stock as contemplated by this
Section 1 and as adjusted to reflect any claims made against 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 the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate.
(c) 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 until such
holder surrenders such Company Stock Certificate in accordance with this Section
1.9 (at which time such holder shall be entitled to receive all such dividends
and distributions).
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no cash, certificates or scrip for any such
fractional shares shall be issued. In lieu thereof, the number of shares
otherwise issued or issuable to any holder of capital stock of the Company
(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
rounded to the nearest whole share of Parent Common Stock, with one-half share
or more being rounded up.
(e) 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 the Exchange Agent, 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.
6
<PAGE> 14
(f) 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.
1.10 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shareholder of the Company that, as of the Effective Time, is or
may become a "Dissenter" within the meaning of Section 10-2B-13.01(3) of the
Alabama Business Corporation Act ("Dissenting Shareholder") shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5, and each Dissenting Shareholder shall be entitled
only to such rights as may be granted to such Dissenter in Article 13 of the
Alabama Business Corporation Act; provided, however, that if the status of a
Dissenting Shareholder as a Dissenter shall not be perfected in accordance with
Article 13 of the Alabama Business Corporation Act, then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, the shares of capital stock of the Company held by the Dissenting
Shareholder shall automatically be converted into and shall represent only the
right to receive (upon the surrender of the certificate or certificates
representing such shares) Parent Common Stock in accordance with Section 1.5.
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to
10-2B-13.21 of the Alabama Business Corporation Act and of any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the Alabama Business Corporation Act, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such demand,
notice or instrument. The Company shall not make any payment or settlement offer
prior to the Effective Time with respect to any such demand unless Parent shall
have consented in writing to such payment or settlement offer.
1.11 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. Parent and the Company shall each use its
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code. From and after
the Effective Time, neither Parent, Merger Sub nor the Company shall take any
action that could reasonably be expected to cause the Merger not to be treated
as a reorganization within the meaning of Section 368(a) of the Code.
1.12 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "purchase."
1.13 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
7
<PAGE> 15
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
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Company to Parent prior to the execution and delivery
of this Agreement and referring to the representations and warranties in this
Agreement (including, but not limited to the schedules specifically referenced
in this Article 2, the "Disclosure Schedule"), the Company represents and
warrants, to and for the benefit of the Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Alabama and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company 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, other than the name "Revnet Systems, Inc."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company. The Company is in good standing as a foreign corporation in each
of the jurisdictions identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 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 does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1 of the Disclosure
Schedule, the Company has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any Entity.
The Company has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it owns
or has owned any equity interest.
8
<PAGE> 16
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's Articles
of Incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, 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 shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not fully reflected in such minutes or other records.
There has not been any violation of any of the provisions of the Company's
Articles of Incorporation or bylaws, and the Company has not taken any action
that is inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The stock and stock option records, minute books
and other records of the Company are accurate, up-to-date and 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: (i)
9,000,000 shares of Common Stock ($0.001 par value), of which 5,430,125 shares
have been issued and are outstanding as of July 20, 1999; and (ii) 1,000,000
shares of Non-Voting Common Stock ($0.001 par value), of which 227,000 shares
have been issued and are outstanding as of July 20, 1999. All of the outstanding
shares of Company Common Stock and Non-Voting Common Stock have been duly
authorized and validly issued, and are fully paid and non-assessable. Part 2.3
of the Disclosure Schedule provides an accurate and complete description of the
terms of each repurchase option that is held by the Company and to which any of
such shares is subject.
(b) The Company has reserved 700,000 shares of Company Non-Voting
Common Stock for issuance under its 1994 Incentive Stock Option Plan, of which
options to purchase 470,333 shares are outstanding as of the date of this
Agreement. Part 2.3 of the Disclosure Schedule accurately sets forth, with
respect to each Company Option (whether granted under the 1994 Incentive Stock
Option Plan or otherwise) 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 that are subject to such Company Option and the number of shares 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 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. Except as set forth in Part 2.3 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
9
<PAGE> 17
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.
(c) All outstanding shares of Company Common Stock and Non-Voting
Common Stock, all outstanding Company Options and all other outstanding
securities of the Company 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.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company. All securities so reacquired
by the Company were reacquired in compliance with (i) the applicable provisions
of the Alabama Business Corporation Act and all other applicable Legal
Requirements, and (ii) all requirements set forth in applicable restricted stock
purchase agreements and other applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The balance sheets of the Company as of December 31, 1998,
1997 and 1996, and the income statements, statements of shareholders' equity and
statements of cash flows of the Company for the years then ended, together with
the notes thereto; and
(ii) the unaudited balance sheet of the Company as of March 31,
1999 (the "Unaudited Interim Balance Sheet"), and the related unaudited income
statement of the Company for the three (3) months then ended.
(b) The Company Financial Statements present fairly, in all
material respects, 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 Section 2.4(a)(i)) 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)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude). The Company Financial Statements
referred to in Section 2.4(a)(i) shall be identical to those statements on which
PricewaterhouseCoopers LLP will issue an unqualified report and opinion after
the date hereof.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since March 31, 1999:
(a) there has not been any material adverse change in the Company's
business, condition, capitalization, assets, liabilities, operations, financial
performance or
10
<PAGE> 18
prospects, and no event has occurred that will, or could reasonably be expected
to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets (whether
or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued, granted or authorized the
issuance of (i) any capital stock or other security (except for Company Common
Stock issued upon the valid exercise of outstanding Company Options in
accordance with the terms of the option agreement pursuant to which such Company
Options are outstanding), (ii) any option or right to acquire any capital stock
or any other security (except for Company Options described in Part 2.3 of the
Disclosure Schedule), or (iii) any instrument convertible into or exchangeable
for any capital stock or other security;
(e) other than those amendments that are specifically contemplated
by Section 5.10 of this Agreement, the Company has not amended or waived any of
its rights under, or permitted the acceleration of vesting under, (i) any
provision of its 1994 Incentive 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 the Company's Articles of
Incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, division or subdivision of shares, reverse stock split, consolidation of
shares or similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure that, when
added to all other capital expenditures made on behalf of the Company since
March 31, 1999, exceeds $125,000;
(i) the Company has not (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) the Company has not (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 the Company's past practices;
11
<PAGE> 19
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(l) the Company has not 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 the Company's past practices;
(m) the Company has not (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (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) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not 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 committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
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 assets reflected on
the Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7 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 assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 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) minor 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.
(b) Part 2.6 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.
12
<PAGE> 20
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information, including bank name, bank contact information, account number,
authorized signatories and most recent available balance, with respect to 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 March 31, 1999. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, 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 March 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 of $74,000 and of an allowance for the
sales returns of $50,000).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
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. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part 2.9(a)(iv)
of the Disclosure Schedule, the Company 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, 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. Except as set forth in Part
2.9(a)(v) of the Disclosure Schedule, the Company is not obligated to make any
payment to any Person for the use of any Company
13
<PAGE> 21
Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the Disclosure
Schedule, the Company has not developed jointly with any other Person any
Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken all measures and precautions 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) and otherwise to maintain and protect the value of all
Company Proprietary Assets. Except as set forth in Part 2.9(b) of the Disclosure
Schedule, the Company has not (other than pursuant to license agreements
identified in Part 2.10 of the Disclosure Schedule) 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. The Company is not
infringing, misappropriating or making any unlawful use of, and the Company has
not at any time infringed, misappropriated or made any unlawful use of, or
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 of the knowledge of the Company, 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) Except as set forth in Part 2.9(d) of the Disclosure Schedule:
(i) each Company Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided with respect thereto by or on behalf of the Company; and (ii)
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 Company 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 the Company, and, to the best of the knowledge of the Company, there
is no basis for any such claim.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in Part
2.9(e) of the Disclosure Schedule, (i) the Company has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii) the
Company has not 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,
(i) all current and former employees of the Company have executed and delivered
to the Company an agreement (containing no exceptions to or exclusions from the
scope of its coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement previously delivered
to Parent, and (ii) all current and former consultants and
14
<PAGE> 22
independent contractors to the Company have executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered to Parent.
No person not subject to any such agreement has made any material contribution
to the Company Proprietary Assets.
(g) Except as set forth in Part 2.9(g)(i) of the Disclosure
Schedule, each computer, item of computer related hardware, computer program and
other item of software (whether installed on a computer or on any other piece of
equipment, including firmware) that is owned, licensed or used by the Company
for its internal business operations is Year 2000 Compliant. Except as set forth
in Part 2.9(g)(ii) of the Disclosure Schedule, each computer program and other
item of software that has been designed, developed, sold, licensed or otherwise
made available to any Person by the Company is Year 2000 Compliant. Except as
set forth in Part 2.9(g)(iii) of the Disclosure Schedule, the Company has
conducted sufficient Year 2000 compliance testing for each computer, item of
computer related hardware, computer program and item of software referred to in
the preceding two sentences to be able to determine whether such computer, item
of computer related hardware, computer program and item of software is Year 2000
Compliant, and has obtained warranties or other written assurances from each of
its suppliers to the effect that the products and services provided by such
suppliers to the Company is Year 2000 Compliant. As used in this Section 2.9,
"Year 2000 Compliant" means, with respect to a computer, item of computer
related hardware, computer program or other item of software (i) the functions,
calculations, and other computing processes of the computer, program or software
(collectively, "Processes") perform in a consistent and correct manner without
interruption regardless of the date on which the Processes are actually
performed and regardless of the date input to the applicable computer system,
whether before, on, or after January 1, 2000; (ii) the computer, program or
software accepts, calculates, compares, sorts, extracts, sequences, and
otherwise processes date inputs and date values, and returns and displays date
values, in a consistent and correct manner regardless of the dates used whether
before, on, or after January 1, 2000; (iii) the computer, program or software
accepts and responds to year input, if any, in a manner that resolves any
ambiguities as to century in a defined, predetermined, and appropriate manner;
(iv) the computer, program or software stores and displays date information in
ways that are unambiguous as to the determination of the century; and (v) leap
years will be determined by the following standard (A) if dividing the year by 4
yields an integer, it is a leap year, except for years ending in 00, but (B) a
year ending in 00 is a leap year if dividing it by 400 yields an integer.
Notwithstanding the foregoing, the Company's computers, items of computer
related hardware, computer programs and other items of software shall not be
considered to be non-Year 2000 Compliant to the extent that any adverse effects
are directly attributable to date data that is input or transmitted that is
incorrect, ambiguous or does not specify a century.
(h) Except with respect to evaluation or trial copies, no product,
system, program or software module designed, developed, sold, licensed or
otherwise made available by the Company to any Person contains any "back door,"
"time bomb," "Trojan 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.
15
<PAGE> 23
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor; any Contract pursuant to which the Company is or may become
obligated to make any severance, termination or similar payment to any current
or former employee or director; and any Contract pursuant to which the Company
is or may become obligated to make any bonus or similar payment (other than
payments in respect of salary) to any current or former employee or director;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset (other than for purchase orders and Express Hosting Agreements
entered into in the ordinary course of business consistent with past practice);
(iii) each Company Contract imposing any restriction on the
Company's right or ability (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 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;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company 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);
(x) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices;
(xi) any other Company Contract that has a term of more than
60 days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company;
16
<PAGE> 24
(xii) any Contract which provides for indemnification of any
officer, director, employee or agent;
(xiii) any other Company 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 $10,000 in the aggregate, or (B) the performance
of services having a value in excess of $10,000 in the aggregate.
(xiv) any Contract imposing any confidentiality obligation on
the Company;
(xv) any Contract (not otherwise identified in clauses "(i)"
through "(xiv)" of this sentence) that could reasonably be expected to have a
material effect on the business, condition, capitalization, assets, liabilities,
operations, financial performance or prospects of the Company or to any of the
transactions contemplated by this Agreement; and
(xvi) any other Contract, if a breach of such Contract could
reasonably be expected to have a Material Adverse Effect on the Company.)
(Contracts in the respective categories described in clauses "(i)" through
"(xvi)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written 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 Company 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 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.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the knowledge of the
Company, no other Person has violated or breached, or committed any default
under, any Company Contract;
(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 Company Contract, (B) give
any Person the right to declare a default or exercise any remedy under any
Company Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Contract, or (D) give any Person the right to cancel,
terminate or modify any Company Contract;
(iii) since December 31, 1997, the Company has not received
any notice or other communication regarding any actual or possible violation or
breach of, or default
17
<PAGE> 25
under, any Company Contract that has had, or is reasonably likely to have, a
Material Adverse Effect on the Company; and
(iv) the Company has not waived any of its material rights
under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or payable to the
Company 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 the
Company to conduct its business in the manner in which its business is currently
being conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by the Company since January 1, 1999.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
(h) The Company has entered into no Government Contracts.
2.11 LIABILITIES. The Company has no 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, accrued salaries or other
immaterial liabilities that have been incurred by the Company since March 31,
1999 in the ordinary course of business and consistent with the Company's past
practices; (c) liabilities under the Company Contracts identified in Part 2.10
of the Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since the Company's inception been, in compliance with all applicable
Legal Requirements, except where the failure to comply with such Legal
Requirements has not had and will not have a Material Adverse Effect on the
Company. Except as set forth in Part 2.12 of the Disclosure Schedule, since the
Company's inception, the Company has not received any notice or other
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 Company, and the
Company has delivered 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
18
<PAGE> 26
2.13 of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted. The Company is, and at all times since the Company's inception
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 the Company's inception, the Company 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) All Tax Returns required to be filed by or on behalf of the
Company 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 all material respects 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 the Closing Date. The
Company has delivered to Parent accurate and complete copies of all Company
Returns filed since 1994.
(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
March 31, 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.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part 2.14
of the Disclosure Schedule, there have been no examinations or audits of any
Company Return. The Company has delivered to Parent accurate and complete copies
of all audit reports and similar documents (to which the Company has access)
relating to the Company Returns. Except as set forth in Part 2.14 of the
Disclosure Schedule, no extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule,
no claim or Proceeding is pending or has been threatened against or with respect
to the Company 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 the Company 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 Company and with respect
to which adequate reserves for payment have been established). There are no
liens for Taxes upon any of the assets of the Company except liens for current
Taxes not yet due and payable. The Company has not entered
19
<PAGE> 27
into or become bound by any agreement or consent pursuant to Section 341(f) of
the Code or any comparable provisional state or foreign Tax laws. The Company
has not been, and the Company will not 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 the Company 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
or any comparable provisional state or foreign Tax laws, other than payments for
which shareholder approval meeting the requirements of Section 280G(b)(5) of the
Code are obtained prior to the Closing Date. The Company is not, and has never
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
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 the Company for
the benefit of any current or former employee of the Company ("Employee"),
except for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, the Company 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 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) The Company 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 to
Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
20
<PAGE> 28
(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 of
the most recent financial statements thereof;
(v) accurate and complete copies of all 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) The Company is not 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. The Company has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code. The
Company has never made a complete or partial withdrawal from a multiemployer
plan, as such term 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) The Company does not have 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) in a
manner that would 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.
21
<PAGE> 29
(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 could be revoked.
(k) Except as set forth 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
the Company (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.
All of the Company's employees are "at will" employees.
(m) 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) The Company 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) Except as set forth in Part 2.15(o) of the Disclosure
Schedule, the Company has good labor relations, and has no knowledge of any
facts indicating that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse effect
on the Company's labor relations, or (ii) any of the Company's employees intends
to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by the Company of all permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. The Company has not received any notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the best of the knowledge of the
Company, there are no circumstances that may prevent or interfere with the
Company's compliance with any Environmental Law in the future. To the best of
the knowledge of the Company (a) all
22
<PAGE> 30
property that is leased to, controlled by or used by the Company, and all
surface water, groundwater and soil associated with or adjacent to such property
is free of any material environmental contamination of any nature, (b) none of
the property leased to, controlled by or used by the Company contains any
underground storage tanks, asbestos, equipment using PCBs, underground injection
wells, and (c) none of the property leased to, controlled by or used by the
Company contains any septic tanks in which process wastewater or any Materials
of Environmental Concern have been disposed. The Company has never sent or
transported, or arranged to send or transport, any Materials of Environmental
Concern to a site that, pursuant to any applicable Environmental Law, (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a Legal Requirement to take "removal" or "remedial"
action as detailed in any applicable Environmental Law or to make payment for
the cost of cleaning up the site. No current or prior owner of any property
leased or controlled by the Company has received any notice or other
communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company 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" include 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 the
Company and 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 the Company's inception, the Company has not 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: (a) no Related Party has, and no Related Party has at
any time since the Company's inception had, any direct or indirect interest in
any material asset used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has at any time since the Company's inception been,
indebted to the Company; (c) since the Company's inception, no Related Party has
entered into, or has had any direct or indirect financial interest in, any
material Contract, transaction or business dealing involving the Company; (d) no
Related Party is competing, or has
23
<PAGE> 31
at any time since the Company's inception competed, directly or indirectly, with
the Company; and (e) no Related Party has any claim or right against the Company
(other than rights under Company Options and rights to receive compensation for
services performed as an employee of the Company). (For purposes of the Section
2.18 each of the following shall be deemed to be a "Related Party": (i) each
individual who is, or who has at any time since the Company's inception been, an
officer or director of the Company; (ii) each member of the immediate family of
each of the individuals referred to in clause "(i)" above; and (iii) any trust
or other Entity (other than the Company) in which any one of the individuals
referred to in clauses "(i)" and "(ii)" 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 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of the
Company no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company or any
Person whose liability the Company 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, except as set forth in
Part 2.19 of the Disclosure Schedule, 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.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule,
no Legal Proceeding has ever been commenced by or has ever been pending against
the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the best of the knowledge of the Company, no officer or other
employee of the Company 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 Company'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, subject
only to approval of the Merger by the shareholders of the Company. The board of
directors of the Company (at a meeting duly called and held) has (a) determined
(pursuant to a unanimous vote of all members of the board of directors of the
Company) that the Merger is advisable and fair and in the best interests of the
Company and its shareholders, (b) authorized and approved (pursuant to a
unanimous vote of all members of the board of directors of the Company) the
execution, delivery and performance of this Agreement by the Company and
approved (pursuant to a unanimous vote of all members of the board of directors
of the Company) the Merger, (c) recommended (pursuant to a unanimous vote of all
members of the board of directors of the Company) the approval of this Agreement
and the Merger by the
24
<PAGE> 32
holders of Company's capital stock and directed that this Agreement and the
Merger be submitted for consideration by the Company's shareholders at the
Company Shareholders' Meeting (as defined in Section 5.2), and (d) adopted
(pursuant to a unanimous vote of all members of the board of directors of the
Company) a resolution having the effect of causing the Company not to be subject
to any state takeover law or similar Legal Requirement that might otherwise
apply to the Merger or any of the other transactions contemplated by this
Agreement. 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 the Company's Articles of Incorporation or bylaws, or (ii)
any resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company'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 the Company, or any of the assets owned or used by the
Company, 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 the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Company 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 Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(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 the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person
25
<PAGE> 33
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.
(a) This Agreement (including the Disclosure Schedule) does not,
and the certificate referred to in Section 6.5(o) 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 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.
(b) The information supplied by the Company for inclusion in the
information statement to be delivered to the Company's shareholders at the
Company Shareholders' Meeting will not, as of the date of the Information
Statement or as of the date of the Company Shareholders' Meeting (as defined in
Section 5.2), (i) contain any statement that is inaccurate or misleading with
respect to any material fact, or (ii) omit to state any material fact necessary
in order to make such information (in the light of the circumstances under which
it is provided) not false or misleading.
2.23 VOTE REQUIRED. The affirmative vote of the holders of (i) 66 2/3ds
of the shares of Company Common Stock outstanding on the record date for the
Company Shareholders' Meeting and (ii) 66 2/3ds of the shares of Company
Non-Voting Common Stock outstanding on the record date for the Company
Shareholders' Meeting (collectively, the "Required Company Shareholder Vote") is
the only vote of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement.
2.24 FINANCIAL ADVISOR. Except for Legacy Capital, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
any of the Acquired Corporations. The total of all fees, commissions and other
amounts that have been paid by the Company to Legacy Capital and all fees,
commissions and other amounts, whether paid in cash or equity, that may become
payable to Legacy Capital by the Company if the Merger is consummated will not
exceed 2% of the product of the Aggregate Parent Share Number multiplied by the
Parent Average Stock Price, plus all out-of-pocket expenses. The Company has
furnished to Parent accurate and complete copies of all agreements under which
any such fees, commissions or other amounts have been paid or may become payable
and all indemnification and other agreements related to the engagement of Legacy
Capital.
26
<PAGE> 34
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant
to the Company as follows:
3.1 ORGANIZATION, STANDING AND POWER. 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 the State of Alabama, respectively, and has
all necessary power and authority: (a) to conduct its business in the manner in
which its business is currently being conducted; (b) to own and use its assets
in the manner in which its assets are currently owned and used; and (c) to
perform its obligations under all Contracts by which it is bound. Each of Parent
and Merger Sub is duly qualified to do business as a foreign corporation, and is
in good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification and where the failure to be so qualified
would have a Material Adverse Effect on Parent.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company,
including through the SEC EDGAR system, 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
January 1, 1999 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.
(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; 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.
3.3 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this 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
27
<PAGE> 35
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.
3.4 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.
3.5 ABSENCE OF CHANGES. Except as set forth in the SEC Documents, since
March 31, 1999 there has not been any material adverse change in Parent's
business, condition, capitalization, assets, liabilities, operations, financial
performance or prospects, and no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on Parent.
4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; 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 the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request. Without
limiting the generality of the foregoing, during the Pre-Closing Period, the
Company shall promptly provide Parent with copies of:
(a) all material operating and financial reports prepared by the
Company and its Subsidiaries for the Company's senior management, including (A)
copies of the unaudited monthly consolidated balance sheets of the Company and
the related unaudited monthly consolidated statements of operations, statements
of shareholders' equity and statements of cash flows and (B) copies of any sales
forecasts, marketing plans, development plans, discount reports, write-off
reports, hiring reports and capital expenditure reports prepared for the
Company's senior management;
(b) any written materials or communications sent by or on behalf
of the Company to its shareholders;
(c) any material notice, document or other communication sent by
or on behalf of the Company to any party to any Company Contract or sent to the
Company by any party to any Company Contract (other than any communication that
relates solely to routine commercial transactions between the Company and the
other party to any such Company Contract and that is of the type sent in the
ordinary course of business and consistent with past practices);
28
<PAGE> 36
(d) any notice, report or other document filed with or sent to any
Governmental Body in connection with the Merger or any of the other transactions
contemplated by this Agreement; and
(e) any material notice, report or other document received by the
Company from any Governmental Body.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company 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) the Company shall use all reasonable efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but
in no event less frequently than weekly) to Parent concerning the status of the
Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company may repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(f) the Company shall not 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 (x) to grant stock options to employees in accordance with
its past practices and as contemplated by this agreement, and (y) to issue
Company Common Stock to employees upon the exercise of outstanding Company
Options);
(g) except as expressly provided in this Agreement, the Company
shall not amend or waive any of its rights under, or permit the acceleration of
vesting under, (i) any provision of its 1994 Incentive Stock Option Plan, (ii)
any provision of any agreement evidencing any outstanding Company Option, or
(iii) any provision of any restricted stock purchase agreement;
(h) The Company shall not amend or permit the adoption of any
amendment to the Company's Articles of Incorporation or bylaws, or effect or
permit the Company to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock
29
<PAGE> 37
split, division or subdivision of shares, reverse stock split, consolidation of
shares or similar transaction;
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $10,000 in
the aggregate;
(k) the Company shall not (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 Material Contract, or (ii) amend or prematurely terminate, or waive
or exercise any material right or remedy under, any such Contract;
(l) the Company shall not (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 the Company pursuant to Contracts that are not Material
Contracts;
(m) the Company shall not (i) lend money to any Person (except
that the Company may make routine travel advances to employees in the ordinary
course of business) or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-sharing payment,
cash incentive payment or similar payment to, or 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;
(o) the Company shall not change any of its methods of accounting
or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any Legal Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company.
30
<PAGE> 38
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company 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;
(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 the Company;
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 4.3(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. 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.
4.4 NO NEGOTIATION. During the Pre-Closing Period, none of the Company,
any of its Representatives or any of its shareholders 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.
31
<PAGE> 39
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 the Company during the Pre-Closing Period.
5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other transactions contemplated
by this Agreement, and (b) shall use all commercially reasonable efforts to
obtain all Consents (if any) required to be obtained (pursuant to any applicable
Legal Requirement or Contract, or otherwise) by such party in connection with
the Merger and the other transactions contemplated by this Agreement. The
Company shall (upon request) promptly deliver to Parent a copy of each such
filing made, each such notice given and each such Consent obtained by the
Company during the Pre-Closing Period.
5.2 COMPANY SHAREHOLDERS' MEETING. The Company shall, in accordance
with its Articles of Incorporation and bylaws and the applicable requirements of
the Alabama Business Corporation Act, call and hold a special meeting of its
shareholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger and this Agreement (the
"Company Shareholders' Meeting"). The Company Shareholders' Meeting will be held
as promptly as practicable and in any event within 10 business days after
execution of this agreement. The Company shall ensure that the Company
Shareholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited in connection with the Company Shareholders' Meeting are
solicited, in compliance with all applicable Legal Requirements. The Company's
obligation to call, give notice of, convene and hold the Company Shareholders'
Meeting in accordance with this Section 5.2 shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission of any
Superior Offer or other Acquisition Proposal, or by any withdrawal, amendment or
modification of the recommendation of the board of directors of the Company with
respect to the Merger.
5.3 STOCK OPTIONS.
(a) Subject to Section 5.3(b), at the Effective Time, all rights
with respect to Company Common Stock or Non-Voting Common Stock under each
Assumed Company Option then outstanding shall be converted into and become
rights with respect to Parent Common Stock, and Parent shall assume each such
Company Option in accordance with the terms (as in effect as of the closing
date) of the stock option plan under which it was issued and the stock option
agreement by which it is evidenced. From and after the Effective Time, (i) each
Assumed Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (ii) the number of shares of Parent Common Stock subject to
each such Assumed Company Option shall be equal to the number of shares of
Company Common Stock subject to such Assumed Company Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounding down to the
nearest whole share, (iii) the per share exercise price under each such Assumed
Company Option shall be adjusted by dividing the per share exercise price under
such Company Option by the Exchange Ratio and rounding up to the nearest cent
32
<PAGE> 40
and (iv) any restriction on the exercise of any such Assumed Company Option
shall continue in full force and effect and the term, exercisability, vesting
schedule and other provisions of such Company Option shall otherwise remain
unchanged; provided, however, that each Assumed Company Option assumed by Parent
in accordance with this Section 5.3(a) shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction subsequent to the Effective Time. Parent shall file with the SEC,
within 30 days after the date on which the Merger becomes effective, a
registration statement on Form S-8 relating to the shares of Parent Common Stock
issuable with respect to the Assumed Company Options, which may be legally
registered on a Form S-8.
(b) The Company shall take all action that may be necessary to
effectuate the provisions of this Section 5.3 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.3.
5.4 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) the
Company shall not (and the Company shall not permit any of its 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.
5.5 BEST EFFORTS. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 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 7 to be satisfied on a
timely basis.
5.6 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At or prior to the
Closing, the Company shall use all commercially reasonable efforts to cause each
of the persons identified on Exhibit F to execute and deliver to the Company and
Parent, at the Closing, an Employment Agreement and a Noncompetition Agreement
in a form acceptable to Parent.
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 Treasure 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 LISTING. Parent shall use reasonable efforts to cause the shares of
Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
5.9 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent on or prior to the Closing
the resignation of each officer and director of the Company.
33
<PAGE> 41
5.10 CERTAIN STOCK OPTION MATTERS. At the Closing, the Company shall
show evidence of the completion of the following actions:
(a) ASSUMED COMPANY OPTIONS WITH PERFORMANCE VESTING. Each of the
Assumed Company Options with performance vesting shall continue to vest in
accordance with the original terms of the respective option agreements and the
portions of such options that are already vested as of the Closing Date shall
remain vested; provided, however, that the unvested portion of Mr. Obermann's
option will remain unvested for a period of one year from the Closing Date
whereupon such option shall become fully vested; and provided further, that the
unvested portion of the options granted to Messrs. Bachmeyer and Clark shall
accelerate such that their respective options become fully vested prior to the
Closing. Any shares of Parent Common Stock issued upon the exercise of such
Assumed Company Options shall be Restricted Resale Stock.
(b) NEW ASSUMED COMPANY OPTIONS. The option grants issued as of
February 1, 1999 to certain of the Company's key employees for an aggregate of
1,185,000 shares of Company Common Stock shall have a vesting schedule
reasonably acceptable to Parent. Such options shall have an exercise price of at
least $0.40 per share of Company Common Stock.
(c) INTRINSIC VALUE COMPANY OPTIONS. Prior to the Effective Time,
each Intrinsic Value Company Option shall have been (i) validly amended to
permit such options to be settled by the issuance by Company of additional
shares of Company Non-Voting Common Stock to the option holders, and (ii)
settled in such manner in accordance with the terms of such amended options and
the Company's amended 1994 Incentive Stock Option Plan.
(d) NON-COMPENSATORY COMPANY OPTIONS. Every Non-Compensatory
Option shall have been exercised in full or lapsed prior to the Effective Time;
no such options or warrants shall be outstanding as of the Effective Time. Any
shares of Parent Common Stock issued or issuable upon exercise of such Company
Options shall be Restricted Resale Stock.
5.11 SECURITYHOLDER REPRESENTATION STATEMENTS; APPOINTMENT OF PURCHASER
REPRESENTATIVE. Each securityholder of the Company who is to receive Parent
Common Stock in connection with this Agreement shall complete and execute a
securityholder representation statement, which shall, among other things,
provide certain representations and warranties to Parent, and appoint Sidney R.
White to serve as such securityholder's purchaser representative in the event
that such securityholder is not an "accredited investor." A form of such
securityholder representation statement is attached as Exhibit G to this
Agreement.
5.12 SECURITIES ACT EXEMPTION. The Parent Common Stock to be issued
pursuant to this Agreement initially will not be registered under the Securities
Act in reliance on the exemption set forth in Section 4(2) and Rule 506 of
Regulation D thereunder. In connection with the acquisition of Parent Common
Stock, each securityholder of the Company who is to receive Parent Common Stock
in connection with this Agreement shall represent to the Company, among other
things, that (i) such Company Shareholder is acquiring the Parent Common Stock
for investment purposes only and not with a view to, or for resale in connection
with, any "distribution" thereof as that term is used for purposes of the
Securities Act; (ii) such
34
<PAGE> 42
Company Shareholder is aware of Parent's business affairs and financial
condition and has sufficient information about Parent (together with such
securityholder's purchaser representative if applicable) to reach an informed
and knowledgeable decision to acquire Parent Common Stock; and (iii) the Company
Shareholder understands that the Parent Common Stock has not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein.
5.13 STOCK RESTRICTIONS. In addition to any legend imposed by
applicable state securities laws or by any contract that continues in effect
after the Effective Time, the certificates representing shares of Parent Common
Stock issued pursuant to this Agreement shall bear a restrictive legend (and
stop orders shall be placed against the transfer thereof with the Parent's
Transfer Agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
The certificates representing shares of Parent Common Stock issued pursuant to
this Agreement that are Restricted Resale Stock shall bear a restrictive legend
(and stop orders shall be placed against the transfer thereof with the Parent's
Transfer Agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH CERTAIN VOLUME
LIMITATIONS PURSUANT TO THE TERMS OF A CERTAIN AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION DATED JULY 22, 1999, A
COPY OF WHICH WILL BE PROVIDED TO THE HOLDER OF THIS
CERTIFICATE UPON REQUEST.
5.14 REGISTRATION ON FORM S-3. Parent shall use its commercially
reasonable efforts to file, within 30 days of the Closing Date, a registration
statement on Form S-3 with the Securities and Exchange Commission covering the
resale of shares of Parent Common Stock issued to Company Shareholders in
connection with the Merger. Any such registration shall be subject to the terms
and conditions set forth in Registration Rights Agreement attached hereto as
Exhibit I. All shares eligible for registration on the above-mentioned
registration statement shall be deemed Restricted Resale Stock.
5.15 CLAYTON POST CLOSING STOCK ISSUANCE. After the Closing, Parent
shall issue to James Clayton $146,104 (net of applicable withholding) of Parent
Common Stock, valued at the closing market price of Parent Common Stock on the
Nasdaq National Market on the date of the issuance, in consideration for the
cancellation of $146,104 of deferred salary owed by the
35
<PAGE> 43
Company to James Clayton. Such shares shall be deemed Restricted Resale Stock
but shall not be subject to the lock-up agreement executed by James Clayton in
connection with this Agreement.
5.16 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities blue sky laws of all jurisdictions that are
applicable to the issuance of the Parent Common Stock pursuant to hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities blue sky laws of all jurisdictions that are
applicable in connection with the issuance of the Parent Common Stock pursuant
to hereto.
5.17 RETENTION OPTIONS. Parent agrees to grant to former employees of
the Company who are then current employees of Parent within 90 days of the
Closing Date non-qualified options to purchase an aggregate of 900,000 shares of
Parent Common Stock with a per share exercise price equal to Parent's closing
stock price as reported on The Nasdaq National Market on the date of grant and
with terms substantially equivalent to options granted pursuant to Parent's
current option plan. The distribution of the options shall be to mutually agreed
upon by Parent and Stuart Obermann.
5.18 PERSONAL GUARANTEES. Parent and the Company will cooperate to
remove any Company stockholders as guarantors on the Company's existing bank
lines of credit. Parent will indemnify any such guarantors against any related
liabilities or obligations until such releases are obtained.
5.19 USE OF WARRANT PROCEEDS. Parent agrees to apply the proceeds from
the exercise of the Non-Compensatory Company Options in the following manner:
(i) retire all outstanding debt for money borrowed prior to the Closing, (ii)
payment of the $300,000 cash portion of the Legacy Capital fee, and (iii)
payment of other transaction expenses.
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, at or prior to the Closing, of each of the
following conditions:
6.1 ACCURACY OF REPRESENTATIONS. 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, and shall be accurate in all material respects as of the
Scheduled Closing Time as if made at the Scheduled Closing Time.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company is 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 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the Required Company Shareholder Vote.
36
<PAGE> 44
6.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
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 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) Voting Agreements in the form of Exhibit B-1, executed by the
Persons identified on Exhibit B-2;
(b) Employment Agreements in a form acceptable to Parent executed
by the individuals identified on Exhibit F;
(c) Noncompetition Agreements in a form acceptable to Parent
executed by the individuals identified on Exhibit F;
(d) Securityholder Representation Statements in the form of Exhibit
G, executed by each of the Company's securityholders;
(e) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees of the
Company and by all consultants and independent contractors to the Company who
have not already signed such agreements;
(f) the statement referred to in Section 5.7, executed by the
Company;
(g) the Escrow Agreement in the form of Exhibit J, executed by the
Securityholder Agent on behalf of each of the Company Shareholders, and also
executed by the escrow agent (the "Escrow Agreement:);
(h) 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 REFCO, LLC;
(i) a legal opinion of Sirotte & Permutt, dated as of the Closing
Date, in a form reasonably acceptable to Parent and its counsel;
(j) the Registration Rights Agreement in the form of Exhibit I,
executed by the Securityholder Agent on behalf of each of the Company
Shareholders (the "Registration Rights Agreement");
(k) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming 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
on the Closing Date and that the conditions set forth in Sections 6.1, 6.2, 6.3,
6.4, 6.8, and 6.9 have been duly satisfied;
(l) written resignations of all officers and directors of the
Company, effective as of the Effective Time;
37
<PAGE> 45
(m) evidence acceptable to Parent that certain amounts owing to
James Clayton have been forgiven or retired and that Mr. Clayton has exercised
certain options to purchase shares of Non-Voting Common Stock;
(n) a market stand-off agreement executed by James Clayton agreeing
to not to sell or dispose of his shares of Parent Company Common Stock, other
than those shares issuable pursuant to Section 5.15, during the period
commencing with the filing by Parent of a registration statement for an
underwritten public offering and ending on such date as may be specified by the
managing underwriter of such offering, provided that such period shall not
exceed the period agreed to by Parent's directors and officers with respect to
shares owned by them in connection with such offering; and
(o) articles of merger executed by the Company and Merger Sub to
filed with the Secretary of State of the State of Alabama in accordance with
Section 1.3.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.7(b).
6.7 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.
6.8 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.
6.9 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.10 EMPLOYEES. None of the individuals identified on Exhibit H shall
have ceased to be employed by, or expressed an intention to terminate their
employment with, the Company.
6.11 SECURITIES EXEMPTION. The issuance of Parent Common Stock in
accordance with this Agreement shall be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Rule 506 of Regulation D.
6.12 DIRECTOR AND OFFICER INSURANCE. The Company shall have obtained
and show evidence of a tail insurance policy that is reasonably acceptable to
Parent covering the Company's directors and officers for acts and omissions of
such directors and officers that occurred prior to the Closing.
6.13 DISSENTERS' RIGHTS. Holders of not more than 5% of the outstanding
shares of the Company's capital stock shall not have exercised, nor shall they
have any continued right to
38
<PAGE> 46
exercise, appraisal, dissenters' or similar rights under applicable law with
respect to their shares by virtue of the Merger.
6.14 DEBT PAYOFF. The Company shall have paid off all outstanding debt
for money borrowed.
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, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. 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, and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time.
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 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in form reasonably acceptable to Company and its counsel.
7.4 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.
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.
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
39
<PAGE> 47
of any failure on the part 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);
(c) by Parent at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(e) by Parent if the Closing has not taken place on or before
August 15, 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);
(f) by the Company if the Closing has not taken place on or before
August 15, 1999 (other than as a result of the failure on the part 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); or
(g) by the mutual consent of Parent and the Company.
(h) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(i) by the Company if the Parent Average Stock Price as of the
Scheduled Closing Time is less than $7.00.
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(f), 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 and 8.2, all further obligations of the parties under this Agreement
shall terminate; provided, however, that: (a) neither the Company 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) the Company shall, in all events, remain bound by and
continue to be subject to Section 5.4.
40
<PAGE> 48
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) 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
Securityholders' 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 in accordance with the Escrow Agreement 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. All representations and warranties made by Parent and Merger
Sub shall survive the Closing and shall expire nine (9) months following the
Closing Date, and any liability of Parent or Merger Sub with respect to such
representations and warranties shall thereafter cease.
(b) The representations, warranties, covenants and obligations of
the Company, 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 COMPANY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the Company Shareholders, jointly and severally, shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate and
reimburse 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 or in the officers'
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
giving effect to any update to the Disclosure Schedule delivered by the Company
to Parent prior to the Closing); (ii) any breach of any covenant or obligation
of the Company (including the covenants set forth in Sections 4 and 5); (iii)
any Excluded Expenses to the extent not offset as of the Closing against the
Aggregate Parent Share Number pursuant to Section 1.5 above; (iv) those matters
set forth in the supplemental letter dated as of the date hereof between Parent
and Company, (v) those matters referred to in Section 2.9(a)(iv), 2.12, 2.14 and
2.15(h) of the Disclosure Scehdule or (vi) any Legal Proceeding relating to any
inaccuracy or breach or expense of the type referred
41
<PAGE> 49
to in clause (i), (ii), (iii), (iv) or (v) above (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Section 9).
(b) The Company Shareholders acknowledge and agree 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.
9.3 THRESHOLD; CEILING.
(a) The Company Shareholders shall not be required to make any
indemnification payment pursuant to Section 9.2(a) for any inaccuracy in or
breach of any of the representations and warranties set forth in Section 2 until
such time as the total amount of all Damages (including the Damages arising from
such inaccuracy or breach and all other Damages arising from any other
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 $800,000 in the aggregate. If the total amount
of such Damages exceeds $800,000, then the Indemnitees shall be entitled to be
indemnified against and compensated and reimbursed for all of such Damages. The
provisions of this Section 9.3(a) shall not apply to any claims made by any
Indemnitee regarding reimbursement of costs incurred in connection with Excluded
Expenses.
(b) With the exception of claims based upon fraud, the maximum
liability of each Company Shareholder under Section 9.2(a) for breaches of the
representations and warranties set forth in Section 2 shall be equal to the
value of the shares of Parent Common Stock placed in escrow by such Company
Shareholders pursuant to Section 1.8 of this Agreement determined in accordance
with the terms of the Escrow Agreement.
9.4 EXCLUSIVE REMEDY. With the exception of claims based upon fraud,
from and after the Closing, recourse of Parent to the shares of Parent Common
Stock held in escrow pursuant to the Escrow Agreement shall be the sole and
exclusive remedy of Parent and the other Indemnitees for Damages for any matters
covered by this Article 9.
9.5 NO CONTRIBUTION. Each Company Shareholder 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 the Surviving Corporation 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 Officers' Closing Certificate.
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 the
Surviving Corporation, against Parent or against any other Person) with respect
to which any of the Company
42
<PAGE> 50
Shareholders 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 with counsel reasonably acceptable to the Securityholders'
Agent (whose consent to such counsel shall not be unreasonably withheld). The
Company Shareholders, by and through the Securityholders' Agent, may
participate, through counsel chosen by Securityholders' Agent and at the expense
of the Company Shareholders, in (but not control) the defense of any such Legal
Proceeding. 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 Company
Shareholders;
(b) each Company Shareholder 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 Securityholders' Agent
(as defined in Section 10.1); provided, however, that such consent shall not be
unreasonably withheld.
Parent shall give the Securityholders' Agent prompt notice of the commencement
of any such Legal Proceeding against Parent or the Surviving Corporation;
provided, however, that any failure on the part of Parent to so notify the
Securityholders' Agent shall not limit any of the obligations of the Company
Shareholders under this Section 9 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding).
9.7 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 SECURITYHOLDERS' AGENT. In the event that the Merger is approved,
effective upon such vote and without any further act of any shareholder, the
Company Shareholders shall be deemed to have approved, among other matters, the
indemnification and escrow terms set forth in Section 9, the terms of the Escrow
Agreement and the terms of the Registration Rights Agreement, and shall
irrevocably appoint James Clayton as their agent for all purposes in connection
therewith (the "Securityholders' Agent"), including to give and receive notices
and communications, 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 the Escrow Agreement and comply with orders of courts and
awards of arbitrators with respect to indemnification claims, and to take all
actions necessary or appropriate in the judgment of the Securityholders' Agent
for the accomplishment of the foregoing. James Clayton hereby accepts his
appointment as the
43
<PAGE> 51
Securityholders' Agent. Parent shall be entitled to deal exclusively with the
Securityholders' Agent on all matters relating to Section 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 Company
Shareholder by the Securityholders' Agent (including, without limitation, the
execution of the Escrow Agreement and the Registration Rights Agreement on
behalf of the Company Shareholders) and on any other action taken or purported
to be taken on behalf of any Company Shareholder by the Securityholders' Agent,
as fully binding upon such Company Shareholder. If the Securityholders' Agent
shall die, become disabled or otherwise be unable to fulfill his
responsibilities as agent of the Company Shareholders, then the Company
Shareholders shall, in accordance with the Escrow Agreement, appoint a successor
agent and, promptly thereafter, shall notify Parent of the identity of such
successor. Any such successor shall become the "Securityholders' Agent" for
purposes of Section 9 and this Section 10.1. If for any reason there is no
Securityholders' Agent at any time, all references herein to the
Securityholders' Agent shall be deemed to refer to the Company Shareholders.
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 the Company'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 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, and
(d) the consummation of the Merger; provided, however, that upon the successful
Closing of the transactions contemplated by this Agreement, Parent agrees to pay
transaction expenses of Company Shareholders (without any adjustment to the
purchase price) in an amount equal to the lesser of (i) fifty percent (50%) of
the transaction expenses incurred by the Company (exclusive of any fees and
expenses paid to Legacy Capital) or (ii) $100,000. Transaction expenses not paid
by Parent shall be "Excluded Expenses." If Excluded Expenses are not paid in
cash by the Company Shareholders, the amount of such fees (i) shall reduce the
Aggregate Parent Share Number in accordance with Section 1.5 hereof or (ii)
shall be paid out of the Escrow Fund.
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).
44
<PAGE> 52
10.5 LEGACY CAPITAL FEES. Upon the Closing, Legacy Capital shall be
entitled to receive a fee and expense reimbursements in the amount referred to
in Section 2.24 hereof. The Company shall pay Legacy Capital a $300,000 portion
of such fee (less the amount of any previous expense reimbursements) in cash.
The balance of such fee shall be paid in the form of that number of shares of
Parent Common Stock equal to the remaining fee divided by the Parent Average
Stock Price. Such shares shall be included in the S-3 registration statement
referred to in the Registration Rights Agreement attached hereto as Exhibit I.
Such shares shall be considered Restricted Resale Stock.
10.6 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:
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
(303) 440-0303 (fax)
Attention: Chief Executive Officer
WITH A COPY TO:
Cooley Godward LLP
2595 Canyon Boulevard
Suite 250
Boulder, Colorado 80302
(303) 546-4099 (fax)
Attention: James H. Carroll, Esq.
IF TO THE COMPANY:
Revnet Systems, Inc.
3304 Westmill Drive
Huntsville, Alabama 35805
(256) 519-9973 (fax)
Attention: President
45
<PAGE> 53
WITH A COPY TO:
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, Alabama 35205
(205) 930-5301 (fax)
Attention: John H. Cooper, Esq.
IF TO THE SECURITYHOLDERS' AGENT:
James Clayton
738 Bluewood Drive
Huntsville, Alabama 35802
P.O. Box 12605
Huntsville, Alabama 35815
(256) 922-0938 (fax)
WITH A COPY TO:
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, Alabama 35205
(205) 930-5301 (fax)
Attention: John H. Cooper, Esq.
10.7 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, the
Company shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in the Company's
possession that relates to the business of the Company or Parent.
10.8 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.9 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.
10.10 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.
10.11 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
Colorado (without giving effect to principles of conflicts of laws), except that
the Merger and matters of corporate governance shall be governed by the laws of
Alabama.
46
<PAGE> 54
10.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Company Shareholders and
their respective personal representatives, executors, administrators, estates,
heirs, 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 Shareholders (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; and
the respective successors and assigns (if any) of the foregoing. Parent may
freely assign any or all of its rights under this Agreement (including its
indemnification rights under Section 9 and the Escrow Agreement), 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.
10.13 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 breach 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 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.
10.14 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.
10.15 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.
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.
47
<PAGE> 55
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
non-disclosure agreements dated February 25, 1999 and March 30, 1999 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 non-disclosure agreements are terminated in accordance with their 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" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
48
<PAGE> 56
The parties hereto have caused this Agreement to be executed and delivered as of
July 22, 1999.
MESSAGEMEDIA, INC.,
a Delaware corporation
By: /s/Larry Jones
-------------------------------------
Print name: Larry Jones
Title: President
MM1 ACQUISITION CORP.,
an Alabama corporation
By: /s/Larry Jones
-------------------------------------
Print name: Larry Jones
Title: President
REVNET SYSTEMS, INC.
an Alabama corporation
By: /s/James Clayton
-------------------------------------
Print name: James Clayton
Title: Chairman
SECURITYHOLDERS' AGENT
By: /s/James Clayton
-------------------------------------
James Clayton
49
<PAGE> 57
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock
issued to employees of the Company, upon exercise of Company Options or
otherwise, in routine transactions in accordance with the Company's
past practices), (ii) any option, call, warrant or right (whether or
not immediately exercisable) to acquire any capital stock or other
equity security of the Company (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 the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer,
proposal or inquiry (other than an offer or proposal by Parent) contemplating or
otherwise relating to any Acquisition Transaction.
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 CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY OPTION. "Company Option" shall mean, collectively, the Assumed
Company Options, the Intrinsic Value Company Options and the Non-Compensatory
Company Options.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
A-1
<PAGE> 58
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.
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.
EXCLUDED EXPENSES. "Excluded Expenses" shall mean (i) any fees and
expenses payable to Legacy Capital, (ii) any fees and expenses payable to any
other any other financial advisor, investment banker, broker or finder, (iii)
any other transaction fees and expenses of the Company and the Company
Shareholders (other than the amounts agreed to be paid by Parent, not to exceed
$100,000 pursuant to Section 10.3 hereof), and (iv) an amount equal to the
aggregate exercise price of the Intrinsic Value Company Options.
FULLY DILUTED NUMBER OF COMPANY SHARES. "Fully Diluted Number of
Company Shares" means the sum of (i) the aggregate number of shares of capital
stock of the Company outstanding immediately prior to the Effective Time, plus
(ii) the aggregate number of shares of capital stock of the Company (if any)
issuable upon the exercise of any option or other right to acquire capital stock
of the Company, or the conversion of any convertible securities, outstanding
immediately prior to the Effective Time.
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.
A-2
<PAGE> 59
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).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Parent; (b) Parent's current and future affiliates (including the Surviving
Corporation); (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.
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 officers 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 prospects.
PARENT AVERAGE STOCK PRICE. "Parent Average Stock Price" shall mean the
average of the closing sales price of a share of Parent Common Stock as reported
on the Nasdaq National Market for each of the twenty consecutive trading days
ending on and including the trading day immediately preceding the Scheduled
Closing Time.
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
A-3
<PAGE> 60
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, 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.
RESTRICTED RESALE STOCK. "Restricted Resale Stock" shall mean shares of
Parent Common Stock issued as consideration for the Merger that are subject to
restrictions on resale in accordance with the following volume limitations: (i)
upon the effectiveness of a registration statement registering such shares of
Parent Common Stock, any Person holding Restricted Resale Stock may sell up to
15% of their total equity position in Parent as measured on the Closing Date;
(ii) during period between three months and six months following the Closing
Date any Person holding Restricted Resale Stock may sell up to an additional 20%
(aggregating 35%) of their total equity position in Parent as measured on the
Closing Date (iii) during period between six months and nine months following
the Closing date, any Person holding Restricted Resale Stock may sell up to an
additional 20% (aggregating 55%) of their total equity position in Parent as
measured on the Closing Date (iv) during period between nine months and twelve
months following the Closing date, any Person holding Restricted Resale Stock
may sell up to an additional 20% (aggregating 75%) of their total equity
position in Parent as measured on the Closing Date; and (v) during period
following the first anniversary of the Closing date, any Person holding
Restricted Resale Stock may sell up to an additional 25% (aggregating 100%) of
their total equity position in Parent as measured on the Closing Date; provided,
however, in no event may any Person sell more than the total number of shares
that they hold that are vested at the time of such sale; provided, further, no
Person may sell any shares that are otherwise subject to other resale
restrictions where such sale would be in violation of such other resale
restrictions.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SUPERIOR OFFER. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the outstanding
shares of Company Common Stock on terms that the board of directors of the
Company determines, in its reasonable judgment, based upon the written advice of
its financial advisor, to be more favorable to the Company's shareholders than
the terms of the Merger; provided, however, that any such offer shall not be
deemed to be a "Superior Offer" if any financing required to consummate the
transaction contemplated by such offer is not committed and is not likely to be
obtained by such third party on a timely basis.
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
A-4
<PAGE> 61
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-5
<PAGE> 62
EXHIBIT B-1
FORM OF VOTING AGREEMENTS
<PAGE> 63
EXHIBIT B-2
PERSONS TO EXECUTE VOTING AGREEMENTS
<TABLE>
<CAPTION>
VOTING COMMON NON-VOTING COMMON
------------------ -----------------
<S> <C> <C>
James L. Clayton 3,290,000 (60.58%) 200,000 (88.1)
Stuart Obermann 195,000 (3.59)
Randall C. Bachmeyer 35,000 (0.64)
Jon Clark 14,000 (0.26)
Rick Harley 300,000 (5.52)
John Cline 30,000 (0.55)
James Little 83,333 (1.53)
James K. Lossett 88,000 (1.62)
Totals 4,177,001 (74.31%)
</TABLE>
<PAGE> 64
EXHIBIT C
LIST OF ASSUMED COMPANY OPTIONS
<TABLE>
<CAPTION>
Name Date of Grant Shares Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Randy Bachmeyer 2/1/99 424,200 $ 0.40
Randall Bachmeyer 1/1/99 100,000 $ 1.50
Kim Brower 2/1/99 5,000 $ 0.40
Chris Buss 2/1/99 45,000 $ 0.40
Simone Campbell 2/1/99 7,500 $ 0.40
Jon Clark 1/1/99 50,000 $ 1.00
Jon Clark 2/1/99 336,100 $ 0.40
David Croom 2/1/99 15,000 $ 0.40
Jeanie DuMont 2/1/99 10,000 $ 0.40
Daniel Foster 2/1/99 13,000 $ 0.40
Michael Lee 2/1/99 20,000 $ 0.40
Desiree' Maurice 2/1/99 22,500 $ 0.40
Marcus Mead 2/1/99 10,000 $ 0.40
Mike Morgan 2/1/99 5,000 $ 0.40
Stuart Obermann 1/1/99 250,000 $ 1.00
Stuart Obermann 2/1/99 239,700 $ 0.40
Kristene Renteria 2/8/99 10,000 $ 0.40
Walter Thames 2/1/99 22,000 $ 0.40
</TABLE>
<PAGE> 65
EXHIBIT D
LIST OF INTRINSIC VALUE COMPANY OPTIONS
<TABLE>
<CAPTION>
Exercise
Name Date of Grant # Shares Price
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Randy Bachmeyer 6/2/98 50,000 $ 1.50
Cheryl Bearden 6/1/98 1,000 $ 1.50
Kim Brower 11/24/97 5,000 $ 1.50
Chris Buss 6/15/98 10,000 $ 1.50
Simone Campbell 1/25/99 15,000 $ 1.50
Jon Clark 3/2/98 10,000 $ 1.50
David Croom 1/26/98 10,000 $ 1.50
Jeanie DuMont 6/1/98 1,000 $ 1.50
Daniel Foster 12/28/98 2,000 $ 1.50
Steve Hoffman 5/11/98 10,000 $ 1.50
Steve Hoffman 1/1/99 7,000 $ 1.50
Stan Johnson 1/11/99 5,000 $ 1.50
Michael Lee 6/28/99 17,000 $ 1.50
Marcus Mead 1/1/99 8,000 $ 1.50
Marcus Mead 2/1/98 10,000 $ 1.50
Mike Morgan 5/4/98 5,000 $ 1.50
Stuart Obermann 4/7/97 200,000 $ 1.00
Troy Reddick 2/16/98 10,000 $ 1.50
Troy Reddick 1/1/99 5,333 $ 1.50
Kristene Renteria 2/8/99 5,000 $ 1.50
Robert Riggle 9/30/96 5,000 $ 1.00
Robert Riggle 12/2/97 5,000 $ 1.50
Walter Thames 12/18/96 10,000 $ 1.00
Walter Thames 2/17/96 40,000 $ 0.30
Desiree' (Turner) Maurice 1/5/98 5,000 $ 1.50
Desiree' (Turner) Maurice 7/19/96 3,000 $ 1.00
Brent Wilkinson 1/1/99 6,000 $ 1.50
Brent Wilkinson 7/13/98 10,000 $ 1.50
</TABLE>
<PAGE> 66
EXHIBIT E
LIST OF NON-COMPENSATORY COMPANY OPTIONS
<TABLE>
<CAPTION>
Exercise
Name Date of Grant # Shares Price
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
JV Balch 3/12/98 30,000 $ 2.50
J. David Brown 3/9/98 8,333 $ 2.50
Lana G. Chaffin 2/1/98 10,000 $ 1.50
Jon Clark 8/22/97 4,000 $ 1.50
Jon Clark 6/15/98 4,000 $ 2.50
Tom Clauseen 3/13/98 50,000 $ 2.50
Greg Clayton 6/1/98 4,667 $ 2.50
Greg Clayton 8/22/97 4,667 $ 1.50
John Cline 3/31/98 10,000 $ 2.50
John Cline 1/12/98 20,000 $ 2.50
John Cline 3/31/98 20,000 $ 1.50
David and Chandara Croom 12/31/97 6,667 $ 2.50
Dick Curtis 3/19/98 10,000 $ 2.50
James D. Davis 3/9/98 16,666 $ 2.50
Rick Harley 8/22/97 33,333 $ 1.50
Tom Holton 3/26/98 20,000 $ 2.50
John and Elaine Hubbard 1/1/98 20,000 $ 2.50
Jemison Investments 3/9/98 141,668 $ 2.50
JHF Holdings, Inc. 3/31/98 20,000 $ 2.50
Michael Lee 3/30/98 6,667 $ 2.50
Jim Little 8/22/97 11,325 $ 1.50
Joe McSorely 3/31/98 20,000 $ 1.50
Matt Mead 4/30/98 13,333 $ 2.50
Marcus Mead 3/31/98 10,000 $ 2.50
Momentum Company, LLC 3/25/98 33,333 $ 2.50
Mountain Shade Devel 3/31/98 20,000 $ 1.50
David Obermann 3/20/98 10,000 $ 2.50
James K. Outland 3/31/98 20,000 $ 1.50
Merritt Pizitz 3/30/98 10,000 $ 2.50
Michael Pizitz 3/30/98 10,000 $ 2.50
Richard Pizitz 3/30/98 10,000 $ 2.50
Portrush Group LLC 4/15/98 16,667 $ 2.50
Portrush Group, LLC 1/2/98 33,333 $ 2.50
Reddick Family Trust 3/25/98 20,000 $ 2.50
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
Exercise
Name Date of Grant # Shares Price
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Jim Reed 3/6/98 10,000 $ 2.50
Richgood Corporation 4/28/98 11,325 $ 2.50
Richgood Corporation 8/22/97 11,325 $ 1.50
Alan Ritchie 3/1/98 20,000 $ 1.50
Alan Ritchie 3/1/98 20,000 $ 2.50
RNR Ventures, LLC 2/1/98 10,000 $ 1.50
RNR Ventures, LLC 2/99 100,000 $ 2.25
RNR Ventures, LLC 2/99 12,500 $ 2.00
Brad Rollow 2/19/98 20,000 $ 2.50
Jack Sayler 3/31/98 20,000 $ 1.50
William Spencer III 3/18/98 33,334 $ 2.50
Larry Stein 3/23/98 100,000 $ 2.50
John Straw 10/23/95 5,000 $ 0.30
Lee Styslinger III 3/26/98 40,000 $ 2.50
Derek Thornton 11/20/97 20,000 $ 2.50
Steve Thornton 8/22/97 20,000 $ 1.50
Steve Thornton 3/6/98 30,000 $ 2.50
Sidney White 2/1/98 10,000 $ 2.50
Sidney R. White, III 2/1/98 2,500 $ 2.50
Sidney R. White, Jr 2/1/98 5,000 $ 2.50
William G. White 2/1/98 2,500 $ 2.50
</TABLE>
The following non-qualified options granted to members of the Board of Directors
for attending meetings of the Board of Directors:
<TABLE>
<CAPTION>
Exercise
Name # Shares Price
- --------------------------------------------------------------------------------
<S> <C> <C>
John Cline 10,000 $ 1.50
Rick Harley 11,000 $ 1.50
Rick Harley 3,000 $ 1.00
Jim Little 3,000 $ 1.00
Jim Little 11,000 $ 1.50
</TABLE>
<PAGE> 68
EXHIBIT F
PERSONS TO EXECUTE EMPLOYMENT AND NONCOMPETITION AGREEMENTS
James L. Clayton (noncompete only)
Stuart Obermann
Randall C. Bachmeyer
Jon Clark
<PAGE> 69
EXHIBIT G
FORM OF SECURITYHOLDER REPRESENTATION STATEMENT
<PAGE> 70
EXHIBIT H
CERTAIN EMPLOYEES
Stuart Obermann
Randy Bachmeyer
Jon Clark
Kristene Renteria
Michael Lee
Walter Thames
Desiree Maurice
David Croom
Chris Buss
<PAGE> 71
EXHIBIT I
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 72
EXHIBIT J
FORM OF ESCROW AGREEMENT
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of July 27, 1999, by and among: MESSAGEMEDIA, INC., a
Delaware corporation ("Parent"); MM2 ACQUISITION CORP., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"); and DECISIVE TECHNOLOGY
CORPORATION, a California 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 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 "purchase."
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. In order to induce Parent to enter into this Agreement and to
consummate the Merger, certain shareholders of the Company listed on Exhibit
B-2 are entering into Voting Agreements, a form of which is attached hereto as
Exhibit B-1, pursuant to which they are agreeing to (i) vote in favor of the
adoption and approval of this Agreement and the approval of the Merger and (ii)
to vote in favor of an amendment to the Company's Articles of Incorporation in
the form attached hereto as Exhibit C (the "Charter Amendment") which will
cause all of the Company's outstanding preferred stock to convert into common
stock prior to the effective time of the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, 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 Delaware General
Corporation Law and California General Corporation Law. At the Effective Time,
all the property, rights, privileges,
1.
<PAGE> 2
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
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, 2595 Canyon Boulevard, Suite 250, Boulder, Colorado
80302, at 10:00 a.m. on August 11, 1999, or as soon as practicable after such
time as the parties agree, but not later than two (2) business days following
satisfaction or waiver of each of the conditions set forth in Section 6 and
Section 7 below (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, together with any required officers'
certificate, conforming to the requirements of the Delaware General Corporation
Law and California General Corporation Law shall be filed with the Secretary of
State of the State of Delaware and the Secretary of State of the State of
California respectively. The Merger shall become effective at the time that
such documents are filed or at such later time as may be specified in such
certificate of merger (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 to conform
to the Certificate of Incorporation of Merger Sub as in effect immediately
prior to the Effective Time;
(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 Merger Sub immediately
prior to the Effective Time shall continue as the directors and officers of the
Surviving Corporation immediately after the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(c), 1.5(d) and 1.10, 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 shareholder of the Company
("Company Shareholder"):
(i) any shares of common stock of the Company (the
"Company Common Stock") then held by the Company (or held in the Company's
treasury) shall be canceled and retired and shall cease to exist at the
Effective Time, and no consideration shall be delivered in exchange therefor;
(ii) any shares of Company Common Stock then held by
Parent or Merger Sub shall be canceled and retired and shall cease to exist at
the Effective Time, and no consideration shall be delivered in exchange
therefor;
2.
<PAGE> 3
(iii) each share of the common stock, $0.001 par
value per share, of Merger Sub then outstanding shall be converted into one
share of common stock of the Surviving Corporation;
(iv) except as provided in clauses "(i)" and "(ii)"
of this Section 1.5(a), each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into the right to
receive a fraction of a share(s) of the common stock (par value $0.001 per
share) of Parent ("Parent Common Stock") equal to a fraction (the "Exchange
Ratio"):
(1) if the Parent Average Stock price is
$19.75 or more, (x) the numerator of which is (i) $50,000,000 minus the dollar
amount of Excluded Expenses divided by (ii) the Parent Average Stock Price and
(y) the denominator of which is the Fully Diluted Number of Company Shares;
(2) if the Parent Average Stock price is
less than $19.75, (x) the numerator of which is 2,531,645 minus the Excluded
Expenses (expressed on an as converted to Parent Common Stock basis using the
Parent Average Stock Price as the measure for the per-share value of the Parent
Common Stock) and (y) the denominator of which is the Fully Diluted Number of
Company Shares.
(b) The numerator of the fraction used to calculate the
Exchange Ratio, in accordance with this Agreement but prior to the deduction of
any Excluded Expenses, is hereinafter referred to as the "Aggregate Parent
Share Number."
(c) If, between the date of this Agreement and the Effective
Time, the outstanding shares of Company Common Stock or Parent Common Stock are
changed into a different number or class of shares by reason of any stock
split, division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction (a "Recapitalization Event"), then the Exchange Ratio shall be
appropriately adjusted to reflect fully the effect of such Recapitalization
Event.
(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 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) The Company will have no shares of Preferred Stock
outstanding immediately prior to the Effective Time.
3.
<PAGE> 4
1.6 STOCK OPTIONS.
(a) At the Effective Time, each stock option that is then
outstanding, whether vested or unvested (a "Company Option"), shall be assumed
by Parent in accordance with the terms (as in effect as of the Effective Time)
of the Company's 1996 Stock Option Plan, the stock option agreement and/or
warrant 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 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 Exchange Ratio, 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 Exchange Ratio, and rounding the resulting exercise price up to
the nearest whole cent, and (d) all restrictions on the exercise of each such
assumed Company Option shall continue in full force and effect, 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 Recapitalization Event after the
Effective Time. The Company and Parent shall take all action that may be
necessary (under the Company's 1996 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. Parent shall file with
the SEC, within thirty (30) days after the Closing Date, a registration
statement on Form S-8 registering shares of Parent Common Stock issuable upon
the exercise of the Company Options assumed by Parent pursuant to this Section
1.6, provided such Company Options are registrable on Form S-8.
(b) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent such Company
Options qualified as incentive stock options prior to the Effective Time. As
soon as practicable after the Effective Time, Parent will issue to each person
who, immediately prior to the Effective Time was a holder of a Company Option
under the Company's 1996 Stock Option Plan, a written document evidencing the
foregoing assumption of such option by Parent.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time
(a) all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all 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 shareholders of the Company, and (b) the
stock transfer books of the Company shall be closed with respect to all shares
of such capital
4.
<PAGE> 5
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 Exchange Agent (as
defined in Section 1.9) or to the Surviving Corporation or Parent, such Company
Stock Certificate shall be canceled and shall be exchanged as provided in
Section 1.9.
1.8 ESCROW
(a) The aggregate number of shares to be placed in escrow
(the "Escrow Shares") as collateral for the indemnification obligations of the
Company pursuant to Section 9 of this Agreement shall be equal to the product
of (x) .187 and (y) the Aggregate Parent Share Number. The Escrow Shares shall
be withheld pro rata from the number of whole shares of Parent Common Stock
that each Company shareholder has the right to receive pursuant to the
provisions of Section 1.5.
(b) The number of Escrow Shares to be withheld from each
Company shareholder shall equal the product of (x) the fraction, the numerator
of which is (i) the number of whole shares of Parent Common Stock that such
shareholder has the right to receive pursuant to the provisions of Section 1.5,
and (ii) the denominator of which is the Aggregate Parent Share Number, minus
the number of shares deducted for Excluded Expenses, minus the number of shares
reserved for issuance upon exercise of the assumed Company Options, and (y) the
aggregate number of Escrow Shares.
1.9 EXCHANGE OF CERTIFICATES.
(a) American Stock Transfer & Trust or such other reputable
bank or trust company selected by Parent prior to the Closing Date shall act as
exchange agent in the Merger (the "Exchange Agent"). Promptly after the
Effective Time, Parent shall deposit with the Exchange Agent certificates
representing the shares of Parent Common Stock issuable pursuant to this
Section 1. The shares of Parent Common Stock so deposited with the Exchange
Agent, together with any dividends or distributions received by the Exchange
Agent with respect to such shares, are referred to collectively as the
"Exchange Fund."
(b) At or as soon as practicable after the Effective Time,
the Exchange Agent will send to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery
of Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, the holder of such Company Stock Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of this Section 1, and the Company Stock
Certificate so surrendered shall be canceled. As soon as
5.
<PAGE> 6
practicable after receipt by the Exchange Agent of the applicable Company Stock
Certificate, the duly executed letter of transmittal and such other documents
as may be reasonably required by the Exchange Agent or Parent, the Exchange
Agent shall deliver to each former Company Shareholder a certificate
representing the number of whole shares of Parent Common Stock that such
shareholder has the right to receive pursuant to the provisions of Section 1.5
less the number of shares to be delivered to the escrow agent (determined in
accordance with Section 1.8(b) above) and (ii) deliver to the escrow agent
pursuant to the Escrow Agreement (as defined below), on behalf and in the name
of each shareholder, a certificate representing such shareholder's
proportionate share of the Escrow Shares. Until surrendered as contemplated by
this Section 1.9(b), each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive upon such
surrender a certificate representing shares of Parent Common Stock as
contemplated by this Section 1 and as adjusted to reflect any claims made
against 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 against any claim that may be made against
the Exchange Agent, Parent or the Surviving Corporation with respect to such
Company Stock Certificate.
(c) 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 until such
holder surrenders such Company Stock Certificate in accordance with this
Section 1.9 (at which time such holder shall be entitled to receive all such
dividends and distributions).
(d) No fractional shares of Parent Common Stock shall be
issued in connection with the Merger, and no cash, certificates or scrip for
any such fractional shares shall be issued. In lieu thereof, the number of
shares otherwise issued or issuable to any holder of capital stock of the
Company (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 rounded to the nearest whole share of Parent Common Stock,
with one-half share or more being rounded up.
(e) 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 the Exchange Agent, 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.
(f) 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) delivered to any public official pursuant to any applicable abandoned
property, escheat or similar law.
6.
<PAGE> 7
1.10 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in
this Agreement, any shares of capital stock of the Company that, as of the
Effective Time, are or may become "dissenting shares" within the meaning of
Section 1300 of the California Corporations Code shall not be converted into or
represent the right to receive Parent Common Stock in accordance with Section
1.5, and the holder or holders of such shares shall be entitled only to such
rights as may be granted to such holder or holders pursuant to California
General Corporation Law; provided, however, that if the status of any such
shares as "dissenting shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5.
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company prior to the Effective Time to require
the Company to purchase shares of capital stock of the Company pursuant to the
California General Corporation Law and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
California General Corporation Law, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand unless Parent shall have
consented in writing to such payment or settlement offer.
1.11 WORKING CAPITAL ADJUSTMENT.
(a) On or within one day after the Closing Date, personnel
assigned by each of the Company and Parent shall jointly inspect all Inventory
of the Company and prepare a physical count of the Closing Inventory.
(b) As soon as practicable following the Closing Date, but
not later than 60 days thereafter, Parent shall determine the actual amount of
the Working Capital (as defined below) as of the Closing Date and shall deliver
to the Securityholders' Agent (as defined in Section 10.1) a certificate (the
"Working Capital Certificate") setting forth the final dollar amount of the
Working Capital and shall make available to the Securityholders' Agent the work
papers used in the preparation thereof. If the Securityholders' Agent agrees
with Parent's determination of Working Capital and if the dollar amount of the
Working Capital as reflected on the Working Capital Certificate is less than
negative $200,000, then the Securityholders' Agent shall authorize the escrow
agent to issue to Parent a sufficient amount of Escrow Shares to cover the
difference between negative $200,000 and the final dollar amount of the Working
Capital set forth on the Working Capital Certificate. The Escrow Shares for
purposes of this Section 1.11 shall be valued at the Parent Average Stock
Price. Any payment to be made under this Section 1.11 shall be made, without
interest thereon, within five business days after final determination of the
amount of the Working Capital as of the Closing Date.
(c) For purposes of this Agreement, "Working Capital" as of
any date shall be deemed to be the aggregate dollar value determined in
accordance with GAAP represented by:
7.
<PAGE> 8
(i) cash, (ii) cash equivalents, (iii) Accounts Receivable (net of an allowance
for bad debts determined in accordance with GAAP), (iv) Inventory and (v)
Prepaid Expenses, less (x) Payables, (y) Accrued Expenses and (z) all other
current liabilities. The calculation of Working Capital shall exclude (i) the
proceeds of the exercise of any Company warrants since April 1, 1999 and (ii)
any transaction expenses incurred by the Company in connection with the
transactions contemplated hereby.
(d) In the event the Parent and the Securityholders' Agent
fail to reach written agreement, within 90 days after the Closing Date, with
respect to the determination of the amount of the Working Capital as of the
Closing Date, then the Parent and the Securityholders' Agent shall (i) retain
as arbitrator Arthur Andersen LLP or, failing their agreement to act as
arbitrator, such other independent accounting firm as may be mutually agreed
upon by the Parent and the Securityholders' Agent to review such matters as to
which written agreement has not been reached and (ii) request such arbitrator
to act as promptly as practicable in accordance with its own rules to resolve
all such disputed matters within 30 days after being retained by the Parent and
the Securityholders' Agent. Upon resolution by such arbitrator to its
satisfaction of all such disputed matters, such arbitrator shall cause to be
prepared and shall deliver to the Parent and the Securityholders' Agent a
certificate setting forth the amount of Working Capital as of the Closing Date.
The decision of such arbitrator shall be final, non-appealable and binding on
the Parent and the Securityholders' Agent, and the fees and expenses, if any,
of such arbitrator shall be paid one-half by Parent and one-half by the
Securityholders' Agent; provided, however, that the Securityholders' Agent
shall have the right to recover from the Escrow Fund for any fees and expenses
of such arbitration.
1.12 INVESTMENT BANKING FEE. Upon the Closing, the Parent shall issue
to William Blair & Company LLC ("William Blair & Company"), in full
satisfaction of certain fee and expense obligations of the Company (except for
reimbursement of certain expenses totaling less than $25,000), a number of
shares of Parent Common Stock equal to $750,000 divided by the Parent Average
Stock Price. Such shares shall be included in the S-3 registration statement
referred to in the Registration Rights Agreement attached hereto as Exhibit F.
Such shares, however, shall not be considered Resale Restricted Stock.
1.13 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. Parent and the Company shall each use
its commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code. From and after
the Effective Time, neither Parent, Merger Sub nor the Company shall take any
action that could reasonably be expected to cause the Merger not to be treated
as a reorganization within the meaning of Section 368(a) of the Code. Company
and Parent agree to file their federal and applicable state income tax returns
consistent with the treatment of the Merger as a reorganization.
1.14 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "purchase."
1.15 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
8.
<PAGE> 9
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
Except as disclosed in a document dated as of the date of
this Agreement and delivered by Company to Parent prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Company Disclosure Schedule"), the Company represents
and warrants, to and for the benefit of the Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts except where the failure to
have such power and authority would not have a Material Adverse Effect on the
Company.
(b) Except as set forth in Part 2.1 of the Disclosure
Schedule, the Company 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, other than the name "Decisive Technology Corporation"
(c) The Company is not and has not been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1 of the Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and could not reasonably be
expected to have a Material Adverse Effect on the Company. The Company is in
good standing as a foreign corporation in each of the jurisdictions identified
in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 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 does not own any controlling interest in any
Entity and, except for the equity interests identified in Part 2.1 of the
Disclosure Schedule, the Company has never owned, beneficially or otherwise,
any shares or other securities of, or any direct or indirect equity interest
in, any Entity. The Company has not agreed and is not obligated to make any
future investment in or capital contribution to any Entity. The Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
9.
<PAGE> 10
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's Articles
of Incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, 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 shareholders of the Company, the board of directors
of the Company and all committees of the board of directors of the Company.
There have been no formal meetings or other proceedings of the shareholders of
the Company, the board of directors of the Company or any committee of the
board of directors of the Company that are not fully reflected in such minutes
or other records. There has not been any violation of any of the provisions of
the Company's Articles of Incorporation or bylaws, and the Company has not
taken any action that is inconsistent in any material respect with any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors. The books of
account, stock and stock option records, minute books and other records of the
Company are accurate, up-to-date and 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:
(i) 38,000,000 shares of Common Stock ($0.001 par value), of which 1,839,174
shares have been issued and are outstanding as of the date of this Agreement;
and (ii) 25,000,000 shares of Preferred Stock ($0.01 par value), of which (x)
1,000,000 shares have been designated Series A Preferred Stock, 1,000,000 of
which are issued and are outstanding as of the date of this Agreement (the
"Series A Preferred"), (y) 3,000,000 shares have been designated Series B
Preferred Stock, 2,002,750 of which are issued and are outstanding as of the
date of this Agreement (the "Series B Preferred"), and (z) 21,000,000 shares
have been designated Series C Preferred Stock, 19,462,810 of which are issued
and are outstanding as of the date of this Agreement (the "Series C
Preferred"). All of the outstanding shares of the Company's capital stock have
been duly authorized and validly issued, and are fully paid and non-assessable.
Part 2.3 of the Disclosure Schedule provides an accurate and complete
description of the terms of each repurchase option that is held by the Company
and to which any of such shares is subject. Upon the filing of the Charter
Amendment immediately prior to the Effective Time, all outstanding shares of
the Company's Preferred Stock will be converted into shares of Common Stock.
(b) The Company has reserved 10,470,267 shares of Company
Common Stock for issuance under its 1996 Stock Option Plan, of which options to
purchase 7,242,933 shares are outstanding as of the date of this Agreement. The
Company has no outstanding warrants to purchase capital stock of the Company.
Part 2.3 of the Disclosure Schedule accurately sets forth, with respect to each
Company Option and warrant that is outstanding as of the date of this
Agreement: (i) the name and mailing address of the holder of such Company
Option or warrant; (ii) the total number of shares of Company Common Stock that
are subject to such Company Option or warrant and the number of shares of
Company Common Stock with respect to which such Company Option or warrant is
immediately exercisable; (iii) the date on which such Company Option or warrant
was granted and the term of such Company Option or warrant; (iv) the vesting
schedule for such Company Option or warrant; (v) the exercise price per share
of Company Common Stock purchasable under such Company Option or warrant; and
(vi)
10.
<PAGE> 11
whether such Company Option has been designated an "incentive stock option" as
defined in Section 422 of the Code. Except as set forth in Part 2.3 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.
(c) All outstanding shares of Company Common Stock and
Preferred Stock, and all outstanding Company Options and warrants, 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.
(d) Except as set forth in Part 2.3 of the Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the California Corporations Code and all other
applicable Legal Requirements, and (ii) all requirements set forth in the
agreements pursuant to which such securities were issued.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following
financial statements and notes (collectively, the "Company Financial
Statements"):
(i) The balance sheets of the Company as of December
31, 1998, 1997 and 1996, and the related audited income statements, statements
of shareholders' equity and statements of cash flows of the Company for the
years then ended, together with the notes thereto; and
(ii) The unaudited balance sheet of the Company as
of March 31, 1999 (the "Unaudited Interim Balance Sheet"), and the related
unaudited income statement of the Company for the three (3) 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 Section 2.4(a)(i))
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)(ii)
do not contain footnotes and are subject to normal and recurring year-end audit
adjustments, which could not reasonably, individually or in the aggregate, be
expected to be material in magnitude). The Company Financial Statements
11.
<PAGE> 12
referred to in Section 2.4(a)(i) shall be identical to those statements on
which PricewaterhouseCoopers LLP will issue an unqualified report and opinion
after the date hereof.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since March 31, 1999:
(a) there has not been any material adverse change in the
Company's business, condition, capitalization, assets, liabilities, operations,
financial performance or prospects, and no event has occurred that has, or
could reasonably be expected to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the
Company's assets (whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities except for repurchases of stock pursuant to
the terms of restricted stock purchase agreements under the Company's 1996
Stock Option Plan;
(d) the Company has not sold, issued, granted or authorized
the issuance of (i) any capital stock or other security (except for Company
Common Stock issued upon the valid exercise of outstanding Company Options in
accordance with the terms of the option agreement pursuant to which such
Company Options are outstanding), (ii) any option or right to acquire any
capital stock or any other security (except for Company Options described in
Part 2.3 of the Disclosure Schedule), 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
1996 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 the Company's Articles of
Incorporation or bylaws, and the Company has not effected or been a party to
any Acquisition Transaction, recapitalization, reclassification of shares,
stock split, division or subdivision of shares, reverse stock split,
consolidation of shares or similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) since March 31, 1999 the Company has not made any capital
expenditure that exceeds $5,000 individually or $25,000 when added to all other
capital expenditures made on behalf of the Company since March 31, 1999;
(i) the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any Contract that is a
Material Contract (as defined in Section
12.
<PAGE> 13
2.10(a)), or (ii) amended or prematurely terminated, or waived any material
right or remedy under, any such Material Contract;
(j) the Company has not (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 the Company's past practices;
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any material account
receivable or other indebtedness;
(l) the Company has not 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 the Company's past practices;
(m) the Company has not (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money except for travel or
similar advances made to employees or consultants in connection with their
employment or consulting duties in the ordinary course of business, which is
consistent with past practices and trade payables not in excess of not in
excess of $10,000 in the aggregate and in the ordinary course of business,
consistent with past practices;
(n) the Company has not (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) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced, become a party to or
settled any Legal Proceeding;
(r) the Company has not 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 committed to take any of
the actions referred to in clauses "(c)" through "(r)" above.
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 assets reflected
on the Unaudited Interim Balance
13.
<PAGE> 14
Sheet; (ii) all assets referred to in Parts 2.1, 2.7 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; (iii) all other assets reflected in the
Company's books and records as being owned by the Company; and (iv) all assets,
intangible or otherwise, necessary to conduct and continue the Company's
current business. 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) minor 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.
(b) Part 2.6 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.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information, including bank name, bank contact information, account number,
authorized signatories and most recent available balance, with respect to 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 March 31, 1999. Except as
set forth in Part 2.7(b) of the Disclosure Schedule, 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 March 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,
and (ii) are current and are reasonably expected by the Company to be collected
in full when due, without any counterclaim or set off (net of an allowance for
doubtful accounts and sales returns not to exceed $25,000 in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
(b) The Company does not own any real property or any
interest in real property, except for the leasehold created under the real
property lease 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.
14.
<PAGE> 15
Part 2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of
less than $10,000), and identifies the license agreement under which such
Proprietary Asset is being licensed to the Company. Except as set forth in Part
2.9(a)(iv) of the Disclosure Schedule, the Company 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, 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. Except as set
forth in Part 2.9(a)(v) of the Disclosure Schedule, the Company is not
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)(vi) of the Disclosure
Schedule, the Company has not developed jointly with any other Person any
Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken all measures and precautions
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) and otherwise to maintain and protect the
value of all Company Proprietary Assets. Except as set forth in Part 2.9(b) of
the Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Disclosure Schedule) 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. The
Company is not infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or made any unlawful
use of, or 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 of the knowledge of the Company, 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) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of the Company;
and (ii) 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 Company 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 the Company, and, to the best of the knowledge of
the Company, there is no basis for any such claim. The Company has established
adequate reserves on the Unaudited Interim Balance Sheet to cover all costs
15.
<PAGE> 16
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 the Company to conduct its business in
the manner in which such business has been and is being conducted. Except as
set forth in Part 2.9(e) of the Disclosure Schedule, (i) the Company has not
licensed any of the Company Proprietary Assets to any Person on an exclusive
basis, and (ii) the Company has not 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, (i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical to
one of the forms of Proprietary Information Agreement or Confidential
Information and Invention Assignment Agreement previously delivered to Parent,
and (ii) all current and former consultants and independent contractors to the
Company have executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to one of the forms of Proprietary Information
Agreement or Confidential Information and Invention Assignment Agreement
previously delivered to Parent.
(g) Except as set forth in Part 2.9(g)(i) of the Disclosure
Schedule, each computer, item of computer related hardware, computer program
and other item of software (whether installed on a computer or on any other
piece of equipment, including firmware) that is owned, licensed or used by the
Company for its internal business operations is Year 2000 Compliant. Except as
set forth in Part 2.9(g)(ii) of the Disclosure Schedule, each computer program
and other item of software that has been designed, developed, sold, licensed or
otherwise made available to any Person by the Company is Year 2000 Compliant.
Except as set forth in Part 2.9(g)(iii) of the Disclosure Schedule, the Company
has conducted sufficient Year 2000 compliance testing for each computer, item
of computer related hardware, computer program and item of software referred to
in the preceding two sentences to be able to determine whether such computer,
item of computer related hardware, computer program and item of software is
Year 2000 Compliant, and has obtained warranties or other written assurances
from each of its suppliers to the effect that the products and services
provided by such suppliers to the Company is Year 2000 Compliant. As used in
this Section 2.9, "Year 2000 Compliant" means, with respect to a computer, item
of computer related hardware, computer program or other item of software (i)
the functions, calculations, and other computing processes of the computer,
program or software (collectively, "Processes") perform in a consistent and
correct manner without interruption regardless of the date on which the
Processes are actually performed and regardless of the date input to the
applicable computer system, whether before, on, or after January 1, 2000; (ii)
the computer, item of computer related hardware, program or software accepts,
calculates, compares, sorts, extracts, sequences, and otherwise processes date
inputs and date values, and returns and displays date values, in a consistent
and correct manner regardless of the dates used whether before, on, or after
January 1, 2000; (iii) the computer, item of computer related hardware, program
or software accepts and responds to year input, if any, in a manner that
resolves any ambiguities as to century in a defined, predetermined, and
appropriate manner;
16.
<PAGE> 17
(iv) the computer, item of computer related hardware, program or software
stores and displays date information in ways that are unambiguous as to the
determination of the century; and (v) leap years will be determined by the
following standard (a) if dividing the year by 4 yields an integer, it is a
leap year, except for years ending in 00, but (b) a year ending in 00 is a leap
year if dividing it by 400 yields an integer.
(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 the Company to any Person contains any "back
door," "time bomb," "Trojan 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 Company Contract relating to the employment
of, or the performance of services by, any current or former employee,
consultant or independent contractor except for any "at will" employment
relationships or agreements for performance of services pursuant to which the
Company is not obligated to pay amounts exceeding $5,000; any Contract pursuant
to which the Company is or may become obligated to make any severance,
termination or similar payment to any current or former employee or director;
and any Contract pursuant to which the Company is or may become obligated to
make any bonus or similar payment (other than payments in respect of salary) to
any current or former employee or director;
(ii) each Company Contract relating to the
acquisition, transfer, use, development, sharing or license of any technology
or any Proprietary Asset;
(iii) each Company Contract imposing any restriction
on the Company's right or ability (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 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;
(iv) each Company Contract creating or involving any
agency relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the
acquisition, issuance or transfer of any securities;
(vi) each Company Contract relating to the creation
of any material Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or
incorporating any guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
17.
<PAGE> 18
(viii) each Company Contract creating or relating to
any partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) each Company 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);
(x) any other Company Contract that was entered into
outside the ordinary course of business or was inconsistent with the Company's
past practices;
(xi) any other Company Contract that has a term of
more than 60 days and that may not be terminated by the Company (without
penalty) within 60 days after the delivery of a termination notice by the
Company;
(xii) any Contract which provides for
indemnification of any officer, director, employee or agent;
(xiii) any other Company 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 $10,000 in the aggregate, or (b) the
performance of services having a value in excess of $10,000 in the aggregate;
(xiv) any Contract imposing any confidentiality
obligation on the Company except for agreements with customers which provide
for confidentiality of customer data and analysis conducted by Company for
customer;
(xv) any Contract (not otherwise identified in
clauses "(i)" through "(xvi)" of this Section 2.10(a)) that could reasonably be
expected to have a material effect on the business, condition, capitalization,
assets, liabilities, operations, financial performance or prospects of the
Company or to any of the transactions contemplated by this Agreement;
(xvi) any Contract for which the Company must obtain
a Consent in connection with the transactions contemplated by this Agreement;
and
(xvii) any other Contract, if a breach of such
Contract could reasonably be expected to have a Material Adverse Effect on the
Company.
(Contracts in the respective categories described in clauses "(i)" through
"(xvii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written 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 Company 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
commercially reasonable best knowledge of the Company, is enforceable by the
Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of
18.
<PAGE> 19
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) the Company has not violated or breached, or
committed any default in each case in any material respect with respect to such
Company Contract under, any Company Contract, and, to the commercially
reasonable best knowledge of the Company, no other Person has breached or
materially violated, or committed any default under any Company Contract;
(ii) to the commercially reasonable best 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 breach or material violation of any of the
provisions of any Material Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Material Contract, (C) give any Person
the right to accelerate the maturity or performance of any Material Contract,
or (D) give any Person the right to cancel, terminate or modify any Material
Contract;
(iii) since December 31, 1997, the Company has not
received any notice or other communication regarding any actual or possible
breach or material violation of, or default under, any Company Contract; and
(iv) the Company has not waived any of its material
rights under any Company Contract.
(d) No Person is renegotiating, or has a right pursuant to
the terms of any Company Contract to renegotiate, any amount paid or payable to
the Company 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 the
Company to conduct its business in the manner in which its business is
currently being conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and
provides a brief description of each proposed Material Contract as to which any
bid, offer, award, written proposal, term sheet or similar document has been
submitted or received by the Company since January 1, 1999.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
(h) The Company has entered into no Government Contracts.
2.11 LIABILITIES. The Company has no material 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
19.
<PAGE> 20
Unaudited Interim Balance Sheet; (b) accounts payable, accrued salaries or
other immaterial liabilities that have been incurred by the Company since March
31, 1999 in the ordinary course of business and consistent with the Company's
past practices; (c) liabilities under the Company Contracts identified in Part
2.10 of the Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at
all times since the Company's inception 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 the Company. Except as set forth in Part 2.12 of the
Disclosure Schedule, since the Company's inception, the Company has not
received any notice or other communication from any Governmental Body regarding
any actual or possible material violation of, or material 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 Company, and
the Company has delivered 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 Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times since the Company's inception 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 the Company's inception, the Company has not received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
material 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) All Tax Returns required to be filed by or on behalf of
the Company 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 all material respects 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 the Closing
Date. The Company has delivered to Parent accurate and complete copies of all
Company Returns filed since the Company's inception.
(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 March 31, 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.
20.
<PAGE> 21
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part 2.14
of the Disclosure Schedule, there have been no examinations or audits of any
Company Return. The Company has delivered to Parent accurate and complete
copies of all audit reports and similar documents (to which the Company has
access) relating to the Company Returns. Except as set forth in Part 2.14 of
the Disclosure Schedule, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or
any other Person), and no such extension or waiver has been requested from the
Company.
(d) Except as set forth in Part 2.14 of the Disclosure
Schedule, no claim or Proceeding is pending or has been threatened against or
with respect to the Company 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 the Company 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 Company and
with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of the Company except liens
for current Taxes not yet due and payable. The Company has not entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code
or any comparable provisional state or foreign Tax laws. The Company has not
been, and the Company will not 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 the Company 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 or any comparable provisional state or foreign Tax laws, other than
the payments listed on Part 2.14(e) of the Disclosure Schedule for which
shareholder approval meeting the requirements of section 280G(b)(5) of the Code
are obtained prior to the Closing Date. The Company is not, and has never been,
a party to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract.
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 the Company for
the benefit of any current or former employee of the Company ("Employee"),
except for Plans which would not require the Company to make payments or
provide benefits having a value in excess of $25,000 in the aggregate.
21.
<PAGE> 22
(b) Except as set forth in Part 2.15(b) of the Disclosure
Schedule, the Company 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 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) The Company 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 multi-employer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered 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 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 record
keeping 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) The Company is not 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. The Company has never been a
member of an "affiliated service group" within the meaning of Section 414(m) of
the Code. The Company has never made a complete or partial withdrawal from a
multi-employer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal
22.
<PAGE> 23
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) The Company does not have 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) in a manner that would 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 or has applied for (or has time remaining to apply for) a
determination letter within the period permitted such that retroactive remedial
amendments may be made under Code section 401(b) and the Company is not aware
of any reason why any such determination letter could be revoked.
(k) Except as set forth 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 the Company (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.
All of the Company's employees are "at will" employees.
23.
<PAGE> 24
(m) 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) The Company 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) Except as set forth in Part 2.15(o) of the Disclosure
Schedule, the Company has good labor relations, and has no knowledge of any
facts indicating that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse effect
on the Company's labor relations, or (ii) any of the Company's employees
intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by the Company of all permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof. The Company has not received any notice
or other communication (in writing or otherwise), whether from a Governmental
Body, citizens group, employee or otherwise, that alleges that the Company is
not in compliance with any Environmental Law, and, to the commercially
reasonable best knowledge of the Company, there are no circumstances that could
reasonably be expected to prevent or interfere with the Company's compliance
with any Environmental Law in the future. To the commercially reasonable best
knowledge of the Company (a) all property that is leased to, controlled by or
used by the Company, and all surface water, groundwater and soil associated
with or adjacent to such property is free of any material environmental
contamination of any nature, (b) none of the property leased to, controlled by
or used by the Company contains any underground storage tanks, asbestos,
equipment using PCBs, underground injection wells, and (c) none of the property
leased to, controlled by or used by the Company contains any septic tanks in
which process wastewater or any Materials of Environmental Concern have been
disposed. The Company has never sent or transported, or arranged to send or
transport, any Materials of Environmental Concern to a site that, pursuant to
any applicable Environmental Law (i) has been placed on the "National
Priorities List" of hazardous waste sites or any similar state list, (ii) is
otherwise designated or identified as a potential site for remediation,
cleanup, closure or other environmental remedial activity, or (iii) is subject
to a Legal Requirement to take "removal" or "remedial" action as detailed in
any applicable Environmental Law or to make payment for the cost of cleaning up
the site. To the Company's commercially reasonable best knowledge, no current
or prior owner of any property leased or controlled by the Company has received
any notice or other communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or the Company is not in compliance with any
Environmental Law. All Governmental Authorizations currently held by the
Company 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
24.
<PAGE> 25
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern; and (ii)
"Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and
any other substance that is now regulated by any Environmental Law or that is
known generally to pose 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 the
Company and 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 the Company's inception, the Company has not 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: (a) no Related Party has, and no Related Party has at
any time since the Company's inception had, any direct or indirect interest in
any material asset used in or otherwise relating to the business of the
Company; (b) no Related Party is, or has at any time since the Company's
inception been, indebted to the Company; (c) since the Company's inception, no
Related Party has entered into, or has had any direct or indirect financial
interest in, any material Contract, transaction or business dealing involving
the Company; (d) no Related Party is competing, or has at any time since the
Company's inception competed, directly or indirectly, with the Company; and (e)
no Related Party has any claim or right against the Company (other than rights
under Company Options and rights to receive compensation for services performed
as an employee of the Company); provided, that ownership of no more than one
percent (1% ) of the outstanding voting stock of a publicly traded corporation
and no more than 5% of any other entity shall not be deemed a "direct or
indirect financial interest" for purposes of this Section 2.18. (For purposes
of the Section 2.18 each of the following shall be deemed to be a "Related
Party": (i) each individual who is, or who has at any time since the Company's
inception been, an officer or director of the Company; (ii) each member of the
immediate family of each of the individuals referred to in clause "(i)" above;
and (iii) any trust or other Entity (other than the Company) in which any one
of the individuals referred to in clauses "(i)" and "(ii)" 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 of the Disclosure
Schedule, there is no pending Legal Proceeding, and (to the best of the
knowledge of the Company no Person has threatened to commence any Legal
Proceeding: (i) that involves the Company or any of the assets owned or used by
the Company or any Person whose liability the Company 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 commercially reasonable best knowledge
of the Company, except as set forth in Part 2.19 of the Disclosure
25.
<PAGE> 26
Schedule, 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 of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree
to which the Company, or any of the assets owned or used by the Company, is
subject. To the commercially reasonable best knowledge of the Company, no
officer or other employee of the Company 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 Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
requisite 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 all necessary action
on the part of the Company and its board of directors; subject only to approval
of the Merger by shareholders of the Company. The board of directors of the
Company (at a meeting duly called and held) has (a) determined (pursuant to a
unanimous vote of all members of the board of directors of the Company) that
the Merger is advisable and fair and in the best interests of the Company and
its shareholders, (b) authorized and approved (pursuant to a unanimous vote of
all members of the board of directors of the Company) the execution, delivery
and performance of this Agreement by the Company and approved (pursuant to a
unanimous vote of all members of the board of directors of the Company) the
Merger, (c) recommended (pursuant to a unanimous vote of all members of the
board of directors of the Company) the approval of this Agreement and the
Merger by the holders of Company Common Stock and the Company's Preferred Stock
and directed that this Agreement and the Merger be submitted for approval by
the Company's shareholders, and (d) adopted (pursuant to a unanimous vote of
all members of the board of directors of the Company) a resolution having the
effect of causing the Company not to be subject to any state takeover law or
similar Legal Requirement that might otherwise apply to the Merger or any of
the other transactions contemplated by this Agreement. 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 the Company's Articles of Incorporation or
bylaws, or (ii) any resolution adopted by the Company's shareholders,
the Company's board of directors or any committee of the Company's
board of directors;
26.
<PAGE> 27
(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 the Company, or any of
the assets owned or used by the Company, 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 the Company or that
otherwise relates to the Company's business or to any of the assets
owned or used by the Company;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Company
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 Company Contract, (ii) accelerate the maturity or performance
of any such Company Contract, or (iii) cancel, terminate or modify any
such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the
Company (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 the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not 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 the filing of
the Merger Agreement with the Delaware Secretary of State and Agreement of
Merger with the California Secretary of State.
2.22 FULL DISCLOSURE.
(a) The representations and warranties made by Company in
this Agreement (as amended by the Disclosure Schedule) do not, and the
certificate referred to in Section 6.5(o) 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 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.
(b) The information supplied by the Company for inclusion in
the information statement to be delivered to the Company's shareholders will
not, as of the date of the information statement or as of the date of the
Company Shareholders' written consent, (i) contain any statement that is
inaccurate or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make such information (in light
of the circumstances under which it is provided) not false or misleading.
27.
<PAGE> 28
2.23 NO DISCUSSIONS. Neither the Company nor any representative of the
Company, is, or has at any time since May 15, 1999 been, engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating
to any Acquisition Proposal.
2.24 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the shares of Company Common Stock and a majority of the shares of Preferred
Stock outstanding on the record date (the "Required Company Shareholder Vote")
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement, the Merger, the Charter Amendment
and the other transactions contemplated by this Agreement.
2.25 FINANCIAL ADVISOR. Except for the fees payable to William Blair &
Company referred to in Section 1.12 hereof, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company. The
Company has furnished to Parent accurate and complete copies of all agreements
under which any such fees, commissions or other amounts have been paid or may
become payable and all indemnification and other agreements related to the
engagement of William Blair & Company.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and
warrant to the Company and the Company Shareholders as follows:
3.1 ORGANIZATION, STANDING AND POWER. 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: (a)
to conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all
Contracts by which it is bound. Each of Parent and Merger Sub is duly qualified
to do business as a foreign corporation, and is in good standing, under the
laws of all jurisdictions where the nature of its business requires such
qualification and where the failure to be so qualified would have a Material
Adverse Effect on Parent or Merger Sub.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company,
including through the SEC EDGAR system, 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 January 1, 1999 and the date of this Agreement (the "Parent SEC
Documents"), which are all of the documents (other than preliminary material)
that Parent was required to file with the SEC since such date. 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 light of the
circumstances under which they were made, not misleading.
28.
<PAGE> 29
(b) The consolidated financial statements contained in the
Parent SEC Documents: (i) complied as to form in all material respects with
applicable accounting requirements and 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 expected
to be 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. There has been no material change in Parent's
accounting policy except as described in the notes to the Parent financial
statements.
3.3 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the requisite right, power and authority to perform their obligations under
this 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.
3.4 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock
to be issued pursuant to this Agreement will, when issued in accordance with
the provisions of this Agreement, be validly issued, fully paid and
nonassessable.
3.5 GOVERNMENTAL AUTHORIZATION. Parent has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant,
or other authorization of a Governmental Body that is required for the
operation of Parent's business ("Parent Authorizations"), and all of such
Parent Authorizations are in full force and effect, except where the failure to
obtain or have any of such Parent Authorizations are not reasonably expected to
have a Material Adverse Effect on Parent.
3.6 COMPLIANCE WITH LAWS. Parent has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state, local or foreign statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business,
except for such violations or failures to comply as could not reasonably be
expected to have a Material Adverse Effect on Parent.
3.7 NO MATERIAL ADVERSE CHANGE. Between the date of the balance sheet
included in Parent's most recently filed report on Form 10-Q and the date of
this Agreement, except as disclosed in Parent's most recently filed report on
Form 10-Q, there has not occurred any material adverse change in the business,
financial condition or results of operations of Parent. For purposes of this
section, a change in the trading price of Parent's Common Stock, as reported by
the Nasdaq National Market or any other automated quotation system or exchange,
changes in
29.
<PAGE> 30
economic conditions or changes in the industry and markets in which Parent
competes shall not constitute a material adverse change, whether occurring at
any time or from time to time.
3.8 LEGAL PROCEEDINGS. There is no pending Legal Proceeding, and to
the knowledge of Parent, no Person has threatened to commence any Legal
Proceeding, 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.
3.9 FULL DISCLOSURE. The representations and warranties made by Parent
and Merger Sub do not and the certificates of the Parent and Merger Sub
referred to in Section 7.3 will not, (i) contain any information that is false
or misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
3.10 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):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of Parent's or Merger Sub's Certificate of
Incorporation or bylaws, or (ii) any resolution adopted by Parent's or
Merger Sub's shareholders, board of directors or any committee
thereof;
(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 Parent, or any of the
assets owned or used by Parent, 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 Parent or that otherwise
relates to Parent's business or to any of the assets owned or used by
the Company;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any
agreement of Parent filed or incorporated by reference in the Parent
SEC Documents.
3.11 Except as set forth in Part 2.21 of the Disclosure Schedule, the
Company is not and will not 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,
30.
<PAGE> 31
except for the filing of the Merger Agreement with the Delaware Secretary of
State and Agreement of Merger with the California
3.12 INTERIM OPERATIONS OF SUB. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only
as contemplated by this Agreement.
4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; 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 the Company, and with such additional financial, operating and other data
and information regarding the Company, as Parent may reasonably request.
Without limiting the generality of the foregoing, during the Pre-Closing
Period, the Company shall promptly provide Parent with copies of:
(a) all material operating and financial reports prepared by
the Company and its Subsidiaries for the Company's senior management, including
(a) copies of the unaudited monthly consolidated balance sheets of the Company
and the related unaudited monthly consolidated statements of operations,
statements of shareholders' equity and statements of cash flows and (b) copies
of any sales forecasts, marketing plans, development plans, discount reports,
write-off reports, hiring reports and capital expenditure reports prepared for
the Company's senior management;
(b) any written materials or communications sent by or on
behalf of the Company to its shareholders;
(c) any material notice, document or other communication sent
by or on behalf of the Company to any party to any Company Contract or sent to
the Company by any party to any Company Contract (other than any communication
that relates solely to routine commercial transactions between the Company and
the other party to any such Company Contract and that is of the type sent in
the ordinary course of business and consistent with past practices);
(d) any notice, report or other document filed with or sent
to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(e) any material notice, report or other document received by
the Company from any Governmental Body.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing
Period:
31.
<PAGE> 32
(a) the Company 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) the Company shall use all reasonable efforts to preserve
intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and
goodwill with all suppliers, customers, landlords, creditors,
employees and other Persons having business relationships with the
Company;
(c) the Company shall use commercially reasonable best
efforts to keep in full force all insurance policies identified in
Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly
(but in no event less frequently than weekly) to Parent concerning the
status of the Company's business;
(e) the Company shall not declare, accrue, set aside or pay
any dividend or make any other distribution in respect of any shares
of capital stock, and shall not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities (except that
the Company may repurchase Company Common Stock from former employees
and consultants pursuant to the terms of existing restricted stock
purchase agreements);
(f) the Company shall not 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 or consultants 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 1996 Stock Option Plan, (ii) any provision of any agreement
evidencing any outstanding Company Option, or (iii) any provision of
any restricted stock purchase agreement;
(h) the Company shall not amend or permit the adoption of any
amendment to the Company's Articles of Incorporation or bylaws, or
effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock
split, division or subdivision of shares, reverse stock split,
consolidation of shares or similar transaction;
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure,
except for capital expenditures that, when added to all other capital
expenditures made on behalf of the Company during the Pre-Closing
Period, do not exceed $10,000 in the aggregate;
(k) the Company shall not (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 Material
32.
<PAGE> 33
Contract, or (ii) amend or prematurely terminate, or waive or exercise
any material right or remedy under, any such Contract;
(l) the Company shall not (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 the Company pursuant to
Contracts that are not Material Contracts except in the ordinary
course of business and consistent with past practice;
(m) the Company shall not (i) lend money to any Person
(except that the Company may make routine travel advances to employees
and consultants in the ordinary course of business or (ii) incur or
guarantee any indebtedness for borrowed money;
(n) the Company shall not (i) establish, adopt or amend any
employee benefit plan (except for the termination of the Company's
401(k) plan), (ii) pay any bonus or make any profit-sharing payment,
cash incentive payment or similar payment to, or 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;
(o) the Company shall not change any of its methods of
accounting or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence, settle or willingly
become a party to any Legal Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company.
4.3 NO NEGOTIATION. During the Pre-Closing Period, neither the Company
nor any of its directors, officers, employees, shareholders or other Company
Representatives, 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
33.
<PAGE> 34
(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 the Company during the Pre-Closing Period. Notwithstanding the
foregoing provisions provisions of this Section 4.3 above, if at any time prior
to the approval of this Agreement and the Merger by the shareholders of the
Company, the Board of Directors of the Company determines, in good faith after
receipt of advice from outside counsel, that the Board's fiduciary duties under
applicable law require it to do so, the Company in response to a proposal that
has been determined by it to be a Superior Offer that was not solicited by it
and that did not otherwise result from a breach of this Section 4.3, and
subject to the Company giving Parent at least two business days written notice
of its intention to do so, may (x) furnish information with respect to the
Company to any person making a Superior Offer pursuant to a customary
confidentiality agreement containing terms no less restrictive than the terms
of the confidentiality agreement entered into between the Company and Parent,
provided that a copy of all such information is delivered simultaneously to
Parent, and (y) engage in negotiations regarding such proposal. In the event
the Company receives a Superior Offer, nothing contained in this Agreement
shall prevent the Board of Directors of the Company from amending or
withdrawing its recommendation of the Merger to the Company's shareholders, if
the Board determines in good faith, after consultation with outside legal
counsel, that such action is required by its fiduciary duties under applicable
law.
5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger and the other transactions contemplated by this
Agreement. The Company shall (upon request) promptly deliver to Parent a copy
of each such filing made, each such notice given and each such Consent obtained
by the Company during the Pre-Closing Period.
5.2 COMPANY SHAREHOLDER CONSENT. The Company shall, in accordance with
its Articles of Incorporation and bylaws and the applicable requirements of the
California Corporation Code, prepare and distribute a written consent of its
shareholders for approval of the Charter Amendment, the Merger and this
Agreement (the "Company Shareholder Consent"). The Company Shareholder Consent
shall be obtained as promptly as practicable and in any event within 12 days
after execution of this agreement. The Company shall ensure that the Company
Shareholder Consent is obtained in compliance with all applicable Legal
Requirements. The Company's obligation to obtain shareholder consent in
accordance with this Section 5.2 shall not be limited or otherwise affected by
the commencement, disclosure, announcement or submission of any Superior Offer
or other Acquisition Proposal, or by any withdrawal, amendment or modification
of the recommendation of the board of directors of the Company with respect to
the Merger.
5.3 STOCK OPTIONS.
34.
<PAGE> 35
(a) Subject to Section 5.3(b), at the Effective Time, all
rights with respect to Company Common Stock under each Company Option then
outstanding shall be converted into and become rights with respect to Parent
Common Stock, and Parent shall assume each such Company Option in accordance
with the terms (as in effect as of the closing date) of the stock option plan
under which it was issued and the stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each Company Option assumed
by Parent may be exercised solely for shares of Parent Common Stock, (ii) the
number of shares of Parent Common Stock subject to each such Company Option
shall be equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounding down to the nearest whole share, (iii) the per share
exercise price under each such Company Option shall be adjusted by dividing the
per share exercise price under such Company Option by the Exchange Ratio and
rounding up to the nearest cent and (iv) any restriction on the exercise of any
such Company Option shall continue in full force and effect and the term,
exercisability, vesting schedule and other provisions of such Company Option
shall otherwise remain unchanged; provided, however, that each Company Option
assumed by Parent in accordance with this Section 5.3(a) shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, division or subdivision of shares, stock dividend, reverse stock
split, consolidation of shares, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time. Parent shall file with
the SEC, within as soon as practicable after the date on which the Merger
becomes effective, and in any event within thirty (30) calendar days after the
Effective Time, a registration statement on Form S-8 relating to the shares of
Parent Common Stock issuable with respect to the Company Options assumed by
Parent in accordance with this Section 5.3(a), which may be legally registered
on a Form S-8 and shall use its reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as the Company
options remain outstanding.
(b) The Company shall take all action that may be necessary
(under the plans pursuant to which Company Options are outstanding and
otherwise) to effectuate the provisions of this Section 5.3 and to ensure that,
from and after the Effective Time, holders of Company Options have no rights
with respect thereto other than those specifically provided in this Section
5.3.
5.4 CONVERSION AND EXERCISE. At or prior to the Closing, the Company
shall cause all outstanding shares of the Preferred Stock of the Company to be
converted into Company Common Stock in accordance with the Company's articles
of incorporation and the Charter Amendment. At or prior to the Closing, the
Company shall cause the holders of all outstanding warrants to purchase shares
of the Company's capital stock to exercise such warrants in accordance with
their terms for cash, and to cause any shares of preferred stock issued upon
exercise of such warrants to be converted into Company Common Stock. All
proceeds from the exercise of such warrants shall be applied, in the order as
follows, only (i) to pay off any bank or other debt, (ii) to pay off any notes
payable outstanding, and (iii) to pay any transaction related expenses. In the
event that such expenses are paid from the warrant proceeds, such expenses
shall still be considered "Excluded Expenses" for purposes of this Agreement.
5.5 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law, during
the Pre-Closing Period, the Company and the Parent shall not (and shall not
permit any of their
35.
<PAGE> 36
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 the other party's prior
written consent.
5.6 BEST EFFORTS. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 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 7 to be satisfied on a
timely basis.
5.7 TAX MATTERS. Prior to the Closing, Parent and the Company shall
execute and deliver to Venture Law Group, a professional corporation, tax
representation letters reasonably acceptable to Venture Law Group (which will
may be relied upon in connection with any tax opinion which such firm may
render to the Company Shareholders).
5.8 SEVERANCE AND NONCOMPETITION AGREEMENTS. Prior to the date of this
Agreement, the Company shall have caused each of Messrs. Altomare, Tilson and
Bonham to execute and deliver to the Company severance agreements in a form
reasonably acceptable to Parent. At or prior to the Closing, the Company shall
cause John Chisholm to execute and deliver a noninterference agreement in a
form reasonably acceptable to Parent. At or prior to the Closing, the Company
shall cause Messrs. Sammann and McNenny to execute and deliver amended or new
agreements providing for specified severance compensation in the event that
they are terminated following the Effective Time.
5.9 TERMINATION OF COMPANY INVESTOR RIGHTS AGREEMENT. Prior to the
Closing the Company and the parties to the Second Amended and Restated Investor
Rights Agreement dated March 5, 1998 by and between the Company and certain
investors in the Company (the "Rights Agreement") shall enter into an
agreement, reasonably satisfactory in form and content to Parent (and
conditioned and effective upon the Closing), terminating all of each such
investor's rights under the Rights Agreement.
5.10 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.
5.11 LISTING. Parent shall use reasonable efforts to cause the shares
of Parent Common Stock being issued pursuant to this Agreement to be approved
for listing (subject to notice of issuance) on the Nasdaq National Market.
5.12 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent on or prior to the Closing
the resignation of each officer and director of each of the Company.
5.13 SECURITYHOLDER REPRESENTATION STATEMENTS; APPOINTMENT OF
PURCHASER REPRESENTATIVE. Each securityholder of the Company who is to receive
Parent Common Stock in connection with this Agreement shall complete and
execute a securityholder representation statement, which shall, among other
things, provide certain representations and warranties to
36.
<PAGE> 37
Parent, and appoint The Portola Group, Inc. to serve as such securityholder's
purchaser representative in the event that such securityholder is not an
"accredited investor." A form of such securityholder representation statement
is attached as Exhibit D to this Agreement.
5.14 SECURITIES ACT EXEMPTION. The Parent Common Stock to be issued
pursuant to this Agreement initially will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on the
exemption set forth in Section 4(2) and Rule 506 of Regulation D thereunder.
5.15 STOCK RESTRICTIONS. In addition to any legend imposed by
applicable state securities laws or by any contract that continues in effect
after the Effective Time, the certificates representing shares of Parent Common
Stock issued pursuant to this Agreement shall bear a restrictive legend (and
stop orders shall be placed against the transfer thereof with the Parent's
Transfer Agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
The certificates representing shares of Parent Common Stock issued pursuant to
this Agreement that are Restricted Resale Stock shall bear a restrictive legend
(and stop orders shall be placed against the transfer thereof with the Parent's
Transfer Agent), stating substantially as follows
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH CERTAIN VOLUME
LIMITATIONS PURSUANT TO THE TERMS OF A CERTAIN AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION DATED JULY 27, 1999, A COPY
OF WHICH WILL BE PROVIDED TO THE HOLDER OF THIS CERTIFICATE
UPON REQUEST.
5.16 REGISTRATION ON FORM S-3; ADDITIONAL STOCK RESTRICTIONS. During
the Pre-Closing Period, the Parent and Company shall each use its commercially
reasonable efforts to file, as soon as practicable after the Closing Date but
in any event within 30 days of the Closing Date, a registration statement on
Form S-3 with the Securities and Exchange Commission covering the resale of
shares of Parent Common Stock issued in connection with this Agreement. Any
such registration shall be subject to the terms and conditions set forth in the
Registration Rights Agreement attached hereto as Exhibit F. Except for (i) the
Parent Common Stock issued to William Blair & Company and (ii) the Parent
Common Stock issued upon the exercise of the warrants referred to in Section
5.4, all shares eligible for registration on the above-mentioned registration
statement shall be deemed Restricted Resale Stock.
37.
<PAGE> 38
5.17 BLUE SKY LAWS. Parent shall take such steps as may be necessary
to comply with the securities blue sky laws of all jurisdictions that are
applicable to the issuance of the Parent Common Stock pursuant to hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities blue sky laws of all jurisdictions that are
applicable in connection with the issuance of the Parent Common Stock pursuant
to hereto.
5.18 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Parent and Company
shall each promptly notify the other party in writing of:
(i) the discovery by the Parent or Company 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 Parent or Company,
respectively, in this Agreement;
(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 Parent or 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
the Parent or Company pursuant to this Agreement; 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 this Section 5.18 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. 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.
5.19 NASDAQ STOCKHOLDER APPROVAL REQUIREMENTS. Any other provisions of
this Agreement notwithstanding, in no event shall Parent issue, in connection
with the Merger and the transactions contemplated by this Agreement, shares of
Parent Common Stock in excess of 5% of the shares of Parent Common Stock
outstanding immediately prior to the Effective Time of the Merger without
obtaining all stockholder approvals as may be required under the rules of the
Nasdaq Stock Market.
38.
<PAGE> 39
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, 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 (without giving effect to
any "Material Adverse Effect" or other materiality qualifications, or any
similar qualifications, contained or incorporated directly or indirectly 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 update to the Disclosure Schedule, and
without giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Company is 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 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the requisite vote under applicable law and the Company's
Articles of Incorporation. The Charter Amendment shall have been duly approved
by the requisite vote under applicable law and the Company's Articles of
Incorporation.
6.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
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 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) Voting Agreements in the form of Exhibit B-1, executed by
the Persons identified on Exhibit B-2;
(b) Severance agreements in a form reasonably acceptable to
Parent executed by the individuals identified in Section 5.8 hereof;
(c) Noninterference agreement (including a waiver of
intellectual property rights) in a form reasonably acceptable to
Parent executed by Mr. Chisholm;
(d) Securityholder Representation Statements in the form of
Exhibit D, executed by each of the Company's non-accredited
securityholders;
39.
<PAGE> 40
(e) Evidence of termination of the Investor Rights Agreement
identified in Section 5.9;
(f) confidential invention and assignment agreements,
reasonably satisfactory in form and content to Parent, executed by all
employees and former employees of the Company and by all consultants
and independent contractors and former consultants and former
independent contractors to the Company who have not already signed
such agreements;
(g) the statement referred to in Section 5.10(a), executed by
the Company;
(h) the Escrow Agreement in the form of Exhibit G, executed
by the Securityholders' Agent on behalf of each of the Company
Shareholders, and also executed by the escrow agent (the "Escrow
Agreement:);
(i) 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 Landmark Investments Limited;
(j) a legal opinion of Venture Law Group, in a form
reasonably acceptable to Parent and its counsel;
(k) a certificate executed on behalf of the Company by its
Chief Executive Officer confirming 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 on the Closing Date and that the
conditions set forth in Sections 6.1, 6.2, 6.3, 6.4, 6.8 and 6.9 have
been duly satisfied;
(l) written resignations of all officers, directors of the
Company, effective as of the Effective Time;
(m) a market stand-off from each Major Investor (other than
Frank Sammann) agreeing to not to sell or dispose of his or her shares
of Parent Common Stock, during the period commencing with the filing
by Parent of a registration statement for an underwritten public
offering and ending on such date as may be specified by the managing
underwriter of such offering, provided that such period shall not
exceed (i) with respect to Parent's first underwritten public offering
after the date of this Agreement, 180 days following the closing of
the public offering or (ii) with respect to the second underwritten
public offering, 90 days following the closing of the public offering;
provided further that the market stand-off agreement shall apply only
to Parent's first two underwritten public offerings that commence
within twelve months of the Effective Time where Parent's executive
officers, directors and 5% stockholders have entered into similar
market stand-off agreements;
(n) the Charter Amendment shall have been filed with the
Secretary of State of the State of California and shall have become
effective;
40.
<PAGE> 41
(o) the Registration Rights Agreement in the form of Exhibit
F, executed by the Securityholder Agent on behalf of each of the
Company Shareholders (the "Registration Rights Agreement"); and
(p) certificate of merger executed by the Company and Merger
Sub to be filed with the Secretary of State of the State of Delaware
and a certificate of merger executed by the Company to be filed with
the Secretary of State of the State of California in accordance with
Section 1.3.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.10(b).
6.7 LISTING. The shares of Parent Common Stock to be issued pursuant
to this Agreement shall have been approved for listing (subject to notice of
issuance) on the Nasdaq National Market.
6.8 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.
6.9 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.10 EMPLOYEES. None of the individuals identified on Exhibit E shall
have ceased to be employed by, or notified the Company of their intent to
terminate their employment with, the Company.
6.11 SECURITIES EXEMPTION. The issuance of Parent Common Stock in
accordance with this Agreement shall be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereunder and/or
Rule 506 of Regulation D.
6.12 TERMINATION OF EMPLOYEE PLANS. Prior to the Closing, the
Company's board of directors shall have authorized the termination of the
Company's 401(k) plan, contingent on the effectiveness of the Merger.
6.13 DEBT PAYOFF. The Company shall have paid off all outstanding debt
for money borrowed and terminated all existing bank lines of credit.
6.14 DISSENTERS' RIGHTS. Holders of not more than 5% of the
outstanding shares of the Company's capital stock shall not have exercised, nor
shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
41.
<PAGE> 42
The obligations of the Company to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, 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 and in each of the
other agreements and instruments delivered by 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 (without giving effect to
any materiality or similar qualifications contained or incorporated directly or
indirectly 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 or incorporated directly or indirectly 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 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 reasonably acceptable to the Company and its
counsel;
(b) a certificate executed on behalf of Parent by its
President or its Chief Financial Officer to the effect that, as of the
Effective Time, each of the conditions set forth in Section 7.1 and
7.2 above has been satisfied with respect to Parent;
(c) a certificate executed by the Secretary or Assistant
Secretary of Parent certifying: (1) resolutions duly adopted by the
Board of Directors of Parent authorizing the execution of this
Agreement and the execution, performance and delivery of all
agreements, documents and transactions contemplated hereby; and (2)
the incumbency of the officers of Parent executing this Agreement and
all agreements and documents contemplated hereby;
(d) a certificate executed on behalf of Merger Sub by its
President or its Chief Financial Officer to the effect that, as of the
Effective Time, each of the conditions set forth in Section 7.1 and
7.2 above has been satisfied with respect to Merger Sub;
(e) the Registration Rights Agreement, in the form of Exhibit
F, executed by Parent; and
(f) a certificate executed by the Secretary or Assistant
Secretary of Merger Sub certifying: (1) resolutions duly adopted by
the Board of Directors and the sole stockholder of Merger Sub
authorizing the execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby; and (2) the incumbency of the officers of Merger
Sub executing this Agreement and all agreements and documents
contemplated hereby.
42.
<PAGE> 43
7.4 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.
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 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement by Parent
shall have been obtained and shall be in full force and effect.
7.7 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
7.8 GOVERNMENTAL APPROVALS. Other than the filings contemplated in
Section 2.21, all approvals of government and government agencies necessary to
consummate the transactions hereunder shall have been received, the absence of
which would have the effect of making the Merger illegal or otherwise
prohibiting the consummation of the Merger.
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 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);
(c) by Parent, if Company shall materially breach any of its
representations, warranties or obligations hereunder and such breach
shall not have been cured within ten calendar days of receipt by
Company of written notice of such breach, provided that Parent is not
in material breach of any of its representations, warranties or
obligations hereunder, and provided further, that no cure period shall
be required for a breach which by its nature cannot be cured;
(d) by Company, if Parent shall materially breach any of its
representations, warranties or obligations hereunder and such breach
shall not have been cured within ten
43.
<PAGE> 44
calendar days following receipt by Parent of written notice of such
breach, provided that Company is not in material breach of any of its
representations, warranties or obligations hereunder, and provided
further, that no cure period shall be required for a breach which by
its nature cannot be cured;
(e) by Parent if the Closing has not taken place on or before
August 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);
(f) by the Company if the Closing has not taken place on or
before August 31, 1999 (other than as a result of the failure on the
part 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); or
(g) by the mutual consent of Parent and the Company.
(h) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(i) by the Company if the Parent Average Stock Price as of
the Scheduled Closing Time is less than $7.00.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a) or Section 8.1(c), 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) or Section 8.1(d), 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 and 8.2, all further obligations of the parties under this
Agreement shall terminate; provided, however, that: (a) neither the Company 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) the parties shall, in all events, remain bound by
and continue to be subject to Section 5.5.
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) shall
survive the Closing and shall expire fifteen months after the Closing Date;
provided, however, that if, at any time prior to the fifteenth
44.
<PAGE> 45
month following the Closing Date, any Indemnitee (acting in good faith)
delivers to the Securityholders' 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 in accordance with the Escrow Agreement
based on such alleged inaccuracy or breach, then the claim asserted in such
notice shall survive past the fifteen-month period following the Closing until
such time as such claim is fully and finally resolved. All representations and
warranties made by Parent and Merger Sub shall survive the Closing and shall
expire nine months after the Closing Date.
(b) The representations, warranties, covenants and
obligations of the Company (as modified by the Disclosure Schedule delivered as
of the date of this Agreement), 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. The
representations and warranties of the Parent and the rights and remedies that
may be exercised by the Company Shareholders shall not be limited or otherwise
affected by or as a result of the information furnished to, or any
investigation made by or knowledge of, any of the Company Shareholders 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 COMPANY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the Company Shareholders, jointly and severally, shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate
and reimburse each of the Indemnitees for, any Damages that 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 or in the
officers' 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 giving effect to any update to the Disclosure Schedule delivered
by the Company to Parent prior to the Closing); (ii) any breach of any covenant
or obligation of the Company (including the covenants set forth in Sections 4
and 5); (iii) any Excluded Expenses to the extent not offset as of the Closing
against the Aggregate Parent Share Number pursuant to Section 1.5 above or (iv)
any Legal Proceeding relating to any inaccuracy or breach or expense 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, subject to the provisions of the Escrow
Agreement).
45.
<PAGE> 46
(b) The Company Shareholders acknowledge and agree 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.
9.3 THRESHOLD; CEILING.
(a) The Company Shareholders 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 such inaccuracy
or breach and all other Damages arising from any other 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 $150,000 in the aggregate. If the total amount of such Damages exceeds
$150,000, then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for all of such Damages. The provisions of this
Section 9.3(a) shall not apply to any claims made by any Indemnitee regarding
reimbursement of costs incurred in connection with (i) Excluded Expenses and
(ii) the termination of any Company employee prior to the Effective Time.
(b) With the exception of claims based upon fraud, the
maximum liability of each Company Shareholder under Section 9.2(a) shall be
equal to the value of the shares of Parent Common Stock placed in escrow by
such Company Shareholders pursuant to Section 1.8 of this Agreement determined
in accordance with the terms of the Escrow Agreement.
9.4 EXCLUSIVE REMEDY. With the exception of claims based upon fraud,
from and after the Closing, recourse of Parent to the shares of Parent Common
Stock held in escrow pursuant to the Escrow Agreement shall be the sole and
exclusive remedy of Parent and the other Indemnitees for Damages for any
matters covered by this Article 9.
9.5 NO CONTRIBUTION. Each Company Shareholder 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 the Surviving Corporation 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 officers' closing
certificate.
9.6 INTEREST. Any Company Shareholder who is required to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9 and in accordance with the Escrow Agreement 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 Company
Shareholder first received notice of a claim for recovery by such Indemnitee
and ending on the date on which the liability of such Company Shareholder to
such Indemnitee is fully satisfied by such Shareholder) at a floating rate
equal to the rate of interest publicly announced by Bank of America, N.T. &
S.A. from time to time as its prime, base or reference rate.
46.
<PAGE> 47
9.7 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Parent or against any other Person) with
respect to which any of the Company Shareholders may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9, Parent shall give the Securityholders' Agent prompt notice of
commencement of any such Legal Proceeding. The Parent shall have the right, at
its election, to proceed with the defense of such claim or Legal Proceeding on
its own, provided that, the Company Shareholders shall have the right at their
own expense to participate in, but not control, such defense. 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
Company Shareholders;
(b) each Company Shareholder 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
Securityholders' Agent (as defined in Section 10.1); provided,
however, that such consent shall not be unreasonably withheld.
9.8 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 SECURITYHOLDERS' AGENT. In the event that the Merger is approved,
effective upon such vote and without any further act of any shareholder, the
Company Shareholders shall be deemed to have approved, among other matters, the
indemnification and escrow terms set forth in Section 9, the Working Capital
Adjustment provisions of Section 1.11 hereof, the terms of the Escrow Agreement
and the terms of the Registration Rights Agreement, and shall irrevocably
appoint Eric DiBenedetto as their agent for all purposes in connection
therewith (the "Securityholders' Agent"), including to give and receive notices
and communications, 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 the Escrow Agreement and comply with orders of
courts and awards of arbitrators with respect to indemnification claims, and to
take all actions necessary or appropriate in the judgment of the
Securityholders' Agent for the accomplishment of the foregoing. Eric
DiBenedetto hereby accepts his appointment as the Securityholders' Agent.
Parent shall be entitled to deal exclusively with the Securityholders' Agent on
all matters relating to Section 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 Company Shareholder by the
Securityholders' Agent (including, without limitation, the execution of the
Escrow Agreement and the Registration Rights Agreement on behalf of the
47.
<PAGE> 48
Company Shareholders) and on any other action taken or purported to be taken on
behalf of any Company Shareholder by the Securityholders' Agent, as fully
binding upon such Company Shareholder. If the Securityholders' Agent shall die,
become disabled or otherwise be unable to fulfill his responsibilities as agent
of the Company Shareholders, then the Company Shareholders shall, in accordance
with the Escrow Agreement, appoint a successor agent and, promptly thereafter,
shall notify Parent of the identity of such successor. Any such successor shall
become the "Securityholders' Agent" for purposes of Section 9 and this Section
10.1. If for any reason there is no Securityholders' Agent at any time, all
references herein to the Securityholders' Agent shall be deemed to refer to the
Company Shareholders.
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 the Company'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 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,
and (d) the consummation of the Merger; provided, however, that upon the
successful Closing of the transactions contemplated by this Agreement, Parent
agrees to pay transaction expenses of the Company Shareholders (without any
adjustment to the purchase price) in an amount equal to the lesser of (i) fifty
percent (50%) of the legal and accounting fees and expenses incurred by the
Company (exclusive of any fees and expenses paid to William Blair & Company) or
(ii) $50,000. Transaction fees and expenses not paid by Parent in accordance
with the preceding proviso shall be "Excluded Expenses." If Excluded Expenses
are not paid in cash by the Company Shareholders and are paid by the Parent or
the Company, the amount of such Excluded Expenses (i) shall reduce the
Aggregate Parent Share Number in accordance with Section 1.5 hereof or (ii)
shall be paid out of the Escrow Fund.
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
48.
<PAGE> 49
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:
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
(303) 440-0303 (fax)
Attention: Chief Executive Officer
WITH A COPY TO:
Cooley Godward LLP
2595 Canyon Boulevard
Suite 250
Boulder, Colorado 80302
(303) 546-4099 (fax)
Attention: James H. Carroll, Esq.
IF TO THE COMPANY:
Decisive Technology Corporation
1991 Landings Drive
Mountain View, CA 94043
(650) 237-4411 (fax)
Attention: Patrick B. McNenny
WITH A COPY TO:
Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
(650) 233-8386 (fax)
Attention: Mark A. Medearis, Esq.
IF TO THE SECURITYHOLDERS' AGENT:
Eric DiBenedetto
Convergence Partners
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
(650) 854-3015 (fax)
49.
<PAGE> 50
WITH A COPY TO:
Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
(650) 233-8386 (fax)
Attention: Mark A. Medearis, Esq.
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.5, on and at all times after the Closing Date, the
Company shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in the
Company's possession that relates to the business of the Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence to this Agreement.
10.8 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.
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
Colorado (without giving effect to principles of conflicts of laws), except
that the Merger and matters of corporate governance shall be governed by the
laws of Delaware or California, as appropriate.
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any); the Company Shareholders
and their respective personal representatives, executors, administrators,
estates, heirs, 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 Shareholders
(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 9.8); and the respective successors and assigns
(if any) of the foregoing. Parent may freely assign any or all of its rights
under this Agreement (including its indemnification rights under Section 9 and
the Escrow Agreement), 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 breach 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 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.
50.
<PAGE> 51
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 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.
10.15 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.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.5,
1.6, 1.12 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).
10.17 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
non-disclosure agreements executed on behalf of Parent and the Company on
February 23, 1999 and May 11, 1999 shall not be superseded by this Agreement
and shall remain in effect in accordance with their terms until the earlier of
(a) the Effective Time, or (b) the date on which such non-disclosure agreements
are terminated in accordance with their terms.
10.18 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.
51.
<PAGE> 52
(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.
52.
<PAGE> 53
The parties hereto have caused this Agreement to be executed and
delivered as of July 27, 1999.
MESSAGEMEDIA, INC.,
a Delaware corporation
By: /s/Larry Jones
---------------------------------
Print name: Larry Jones
Title: President
MM2 ACQUISITION CORP.,
a Delaware corporation
By: /s/Larry Jones
---------------------------------
Print name: Larry Jones
Title: President
DECISIVE TECHNOLOGY CORPORATION
a Delaware corporation
By: /s/Frank Sammann
---------------------------------
Print name: Frank Sammann
Title: President
SECURITYHOLDERS' AGENT
By: /s/Eric DiBenedetto
---------------------------------
Eric DiBenedetto,
as Securityholders' Agent
53.
<PAGE> 54
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACCOUNTS RECEIVABLE. "Accounts Receivable" shall mean as of any date
any trade accounts receivable, notes receivable, bid or performance deposits,
employee advances and other miscellaneous receivables associated with the
Company's business as of such date, other than from an affiliate of the
Company.
ACCRUED EXPENSES. "Accrued Expenses" shall mean as of any date accrued
payroll and benefits and other accrued expenses as would appear on a balance
sheet of the Company as of such date prepared in accordance with GAAP
consistently applied, including those described in Schedule 1.2 but excluding
any amounts payable to affiliates of the Company and any compensation to
employees or others contingent upon or payable as a result of the transactions
contemplated hereby.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any
capital stock or other equity security of the Company (other than
common stock issued to employees of the Company, upon exercise of
Company Options or otherwise, in routine transactions in accordance
with the Company's past practices), (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital
stock or other equity security of the Company (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 the
Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer,
proposal or inquiry (other than an offer or proposal by Parent) contemplating
or otherwise relating to any Acquisition Transaction.
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.
CLOSING INVENTORY. "Closing Inventory" shall mean all Inventory
relating to the business of the Company on the Closing Date.
1.
<PAGE> 55
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
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.
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.
EXCLUDED EXPENSES. "Excluded Expenses" shall mean (i) any fees and
expenses payable to William Blair & Company (including but not limited to those
fees described in Section 1.12 hereof), (ii) any fees and expenses payable to
any other purchaser representative, financial advisor, investment banker,
broker or finder, and (iii) any other transaction fees and expenses of the
Company and the Company Shareholders (other than the amounts agreed to be paid
by Parent, not to exceed $50,000 pursuant to Section 10.3 hereof).
FULLY DILUTED NUMBER OF COMPANY SHARES. "Fully Diluted Number of
Company Shares" means the sum of (i) the aggregate number of shares of capital
stock of the Company
2.
<PAGE> 56
outstanding immediately prior to the Effective Time, plus (ii) the aggregate
number of shares of capital stock of the Company (if any) issuable upon the
exercise of any option or other right to acquire capital stock of the Company,
or the conversion of any convertible securities, outstanding immediately prior
to the Effective Time. The Fully Diluted Number of Company Shares shall include
all stock options held by David Norman as of the date of this Agreement.
GAAP. "GAAP" shall mean generally accepted accounting principles in
the United States of America.
GOVERNMENT AUTHORIZATION. "Government 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.
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 could be
reasonably expected to acquire any right or interest.
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).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Parent; (b) Parent's current and future affiliates (including the Surviving
Corporation); (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.
INVENTORY. "Inventory" shall mean the inventory of the Company,
including raw materials, supplies, work in process and finished goods.
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.
3.
<PAGE> 57
MAJOR INVESTORS. "Major Investors" shall mean those individuals and
entities identified on Exhibit B-2.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on a party 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
officers' 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 a
party's business, condition, assets, liabilities, operations, financial
performance or prospects.
PARENT AVERAGE STOCK PRICE. "Parent Average Stock Price" shall mean
the average of the closing sales price of a share of Parent Common Stock as
reported on the Nasdaq National Market for each of the twenty consecutive
trading days ending on and including the trading day immediately preceding the
Scheduled Closing Time.
PAYABLES. "Payables" as of any date shall mean any of the accounts
payable associated with the Company as of such date in accordance with GAAP
consistently applied, other than to an affiliate of the Company.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PREPAID EXPENSES. "Prepaid Expenses" as of any date shall mean
payments made by Company with respect to its business, other than to an
affiliate of the Company, which constitute prepaid expenses of the Company in
accordance with GAAP consistently applied.
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, 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.
RESTRICTED RESALE STOCK. "Restricted Resale Stock" shall mean shares
of Parent Common Stock issued as consideration for the Merger that are subject
to restrictions on resale in accordance with the following volume limitations:
(i) upon the effectiveness of a registration statement registering such shares
of Parent Common Stock, any Person holding Restricted Resale Stock may sell up
to 4.5% of the shares of Parent Common Stock issuable to such Person pursuant
to this Agreement; (ii) during period between three months and six months
following the Closing Date any Person holding Restricted Resale Stock may sell
up to an additional 15% (aggregating 19.5%) of the shares of Parent Common
Stock issuable to such Person pursuant to this Agreement; (iii) during period
between six months and nine months following the Closing Date, any Person
holding Restricted Resale Stock may sell up to an additional 18% (aggregating
4.
<PAGE> 58
37.5%) of the shares of Parent Common Stock issuable to such Person pursuant to
this Agreement; (iv) during period between nine months and twelve months
following the Closing Date, any Person holding Restricted Resale Stock may sell
up to an additional 18% (aggregating 55.5%) of the shares of Parent Common
Stock issuable to such Person pursuant to this Agreement; (v) during period
between twelve months and fifteen months following the Closing Date, any Person
holding Restricted Resale Stock may sell up to an additional 20% (aggregating
75.5%) of the shares of Parent Common Stock issuable to such Person pursuant to
this Agreement; and (vi) during period following the fifteenth month after the
Closing Date, any Person holding Restricted Resale Stock may sell up to an
additional 24.5% (aggregating 100%) of the shares of Parent Common Stock
issuable to such Person pursuant to this Agreement; provided, however, in no
event may any Person sell more than the total number of shares that they hold
that are vested at the time of such sale; provided, further, no Person may sell
any shares that are otherwise subject to other resale restrictions where such
sale would be in violation of such other resale restrictions. Except for (i)
the Parent Common Stock issued to William Blair & Company and (ii) the Parent
Common Stock issued to the holders of warrants referred to in Section 5.4
hereof, all shares eligible for registration on the above-mentioned
registration statement shall be deemed Restricted Resale Stock.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
SUPERIOR OFFER. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the
outstanding shares of Company Common Stock on terms that the board of directors
of the Company determines, in its reasonable judgment, based upon the written
advice of its financial advisor, to be more favorable to the Company's
shareholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not committed and is
not likely to be obtained by such third party on a timely basis.
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.
5.
<PAGE> 59
EXHIBIT B-1
FORM OF VOTING AGREEMENTS
1.
<PAGE> 60
EXHIBIT B-2
PERSONS TO EXECUTE VOTING AGREEMENTS
Helix Investments
SOFTBANK Ventures
Hanna Capital Management
John Chisholm
Convergence Partners
Partech International
Frank Sammann
1.
<PAGE> 61
EXHIBIT C
FORM OF CHARTER AMENDMENT
2.
<PAGE> 62
EXHIBIT D
FORM OF SECURITYHOLDER REPRESENTATION STATEMENT
3.
<PAGE> 63
EXHIBIT E
CERTAIN EMPLOYEES
Kelley Wood
Peter Murton
Lori Iventosch James
Eleanor Duff
Alex Garbagnati
Ryan Day
4.
<PAGE> 64
EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT
5.
<PAGE> 65
EXHIBIT G
FORM OF ESCROW AGREEMENT
6.
<PAGE> 66
===============================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
MESSAGEMEDIA, INC.,
a Delaware corporation;
MM2 ACQUISITION CORP.,
a Delaware corporation;
and
DECISIVE TECHNOLOGY CORPORATION,
a California corporation;
---------------------------
Dated as of July 27, 1999
---------------------------
===============================================================================
<PAGE> 67
EXHIBITS
Exhibit A - Certain definitions
Exhibit B1 - Form of Voting Agreement
Exhibit B2 - Persons to execute Voting Agreements
Exhibit C - Form of Company Charter Amendment
Exhibit D - Form of Securityholder Representation Statement
Exhibit E - Certain employees
Exhibit F - Registration Rights Agreement
Exhibit G - Form of Escrow Agreement
1.
<PAGE> 68
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<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 Stock Options...................................................................................4
1.7 Closing of the Company's Transfer Books.........................................................4
1.8 Escrow..........................................................................................5
1.9 Exchange of Certificates........................................................................5
1.10 Dissenting Shares...............................................................................7
1.11 Working Capital Adjustment......................................................................7
1.12 Investment Banking Fee..........................................................................8
1.13 Tax Consequences................................................................................8
1.14 Accounting Treatment............................................................................8
1.15 Further Action..................................................................................8
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................9
2.1 Due Organization; No Subsidiaries; Etc..........................................................9
2.2 Articles of Incorporation and Bylaws; Records..................................................10
2.3 Capitalization, Etc............................................................................10
2.4 Financial Statements...........................................................................11
2.5 Absence of Changes.............................................................................12
2.6 Title to Assets................................................................................13
2.7 Bank Accounts; Receivables.....................................................................14
2.8 Equipment; Leasehold...........................................................................14
2.9 Proprietary Assets.............................................................................14
2.10 Contracts......................................................................................17
2.11 Liabilities....................................................................................19
2.12 Compliance with Legal Requirements.............................................................20
2.13 Governmental Authorizations....................................................................20
</TABLE>
i.
<PAGE> 69
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
2.14 Tax Matters....................................................................................20
2.15 Employee and Labor Matters; Benefit Plans......................................................21
2.16 Environmental Matters..........................................................................24
2.17 Insurance......................................................................................25
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
2.23 No Discussions.................................................................................28
2.24 Vote Required..................................................................................28
2.25 Financial Advisor..............................................................................28
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................................28
3.1 Organization, Standing and Power...............................................................28
3.2 SEC Filings; Financial Statements..............................................................28
3.3 Authority; Binding Nature of Agreement.........................................................29
3.4 Valid Issuance.................................................................................29
3.5 Governmental Authorization.....................................................................29
3.6 Compliance With Laws...........................................................................29
3.7 No Material Adverse Change.....................................................................29
3.8 Legal Proceedings..............................................................................30
3.9 Full Disclosure................................................................................30
3.10 Non-Contravention; Consents....................................................................30
3.12 Interim Operations of Sub......................................................................31
4. CERTAIN COVENANTS OF THE COMPANY........................................................................31
4.1 Access and Investigation.......................................................................31
4.2 Operation of the Company's Business............................................................31
4.3 No Negotiation.................................................................................33
5. ADDITIONAL COVENANTS OF THE PARTIES.....................................................................34
5.1 Filings and Consents...........................................................................34
</TABLE>
ii.
<PAGE> 70
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
5.2 Company Shareholder Consent....................................................................34
5.3 Stock Options..................................................................................34
5.4 Conversion and Exercise........................................................................35
5.5 Public Announcements...........................................................................35
5.6 Best Efforts...................................................................................36
5.7 Tax Matters....................................................................................36
5.8 Severance and Noncompetition Agreements........................................................36
5.9 Termination of Company Investor Rights Agreement...............................................36
5.10 FIRPTA Matters.................................................................................36
5.11 Listing........................................................................................36
5.12 Resignation of Officers and Directors..........................................................36
5.13 Securityholder Representation Statements; Appointment of Purchaser Representative..............36
5.14 Securities Act Exemption.......................................................................37
5.15 Stock Restrictions.............................................................................37
5.16 Registration on Form S-3; Additional Stock Restrictions........................................37
5.17 Blue Sky Laws..................................................................................38
5.18 Notification; Updates to Disclosure Schedule...................................................38
5.19 Nasdaq Stockholder Approval Requirements.......................................................38
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB............................................39
6.1 Accuracy of Representations....................................................................39
6.2 Performance of Covenants.......................................................................39
6.3 Shareholder Approval...........................................................................39
6.4 Consents.......................................................................................39
6.5 Agreements and Documents.......................................................................39
6.6 FIRPTA Compliance..............................................................................41
6.7 Listing........................................................................................41
6.8 No Restraints..................................................................................41
6.9 No Legal Proceedings...........................................................................41
6.10 Employees......................................................................................41
</TABLE>
iii.
<PAGE> 71
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
6.11 Securities Exemption...........................................................................41
6.12 Termination of Employee Plans..................................................................41
6.13 Debt Payoff....................................................................................41
6.14 Dissenters' Rights.............................................................................41
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY......................................................41
7.1 Accuracy of Representations....................................................................42
7.2 Performance of Covenants.......................................................................42
7.3 Documents......................................................................................42
7.4 Listing........................................................................................43
7.5 No Restraints..................................................................................43
7.6 Consents.......................................................................................43
7.7 No Legal Proceedings...........................................................................43
7.8 Governmental Approvals.........................................................................43
8. TERMINATION.............................................................................................43
8.1 Termination Events.............................................................................43
8.2 Termination Procedures.........................................................................44
8.3 Effect of Termination..........................................................................44
9. INDEMNIFICATION, ETC....................................................................................44
9.1 Survival of Representations, Etc...............................................................44
9.2 Indemnification by Company Shareholders........................................................45
9.3 Threshold; Ceiling.............................................................................46
9.4 Exclusive Remedy...............................................................................46
9.5 No Contribution................................................................................46
9.6 Interest.......................................................................................46
9.7 Defense of Third Party Claims..................................................................47
9.8 Exercise of Remedies by Indemnitees Other Than Parent..........................................47
10. MISCELLANEOUS PROVISIONS................................................................................47
10.1 Securityholders' Agent.........................................................................47
10.2 Further Assurances.............................................................................48
10.3 Fees and Expenses..............................................................................48
</TABLE>
iv.
<PAGE> 72
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
10.4 Attorneys' Fees................................................................................48
10.5 Notices........................................................................................48
10.6 Confidentiality................................................................................50
10.7 Time of the Essence............................................................................50
10.8 Headings.......................................................................................50
10.9 Counterparts...................................................................................50
10.10 Governing Law..................................................................................50
10.11 Successors and Assigns.........................................................................50
10.12 Remedies Cumulative; Specific Performance......................................................50
10.13 Waiver.........................................................................................51
10.14 Amendments.....................................................................................51
10.15 Severability...................................................................................51
10.16 Parties in Interest............................................................................51
10.17 Entire Agreement...............................................................................51
10.18 Construction...................................................................................51
</TABLE>
v.
<PAGE> 73
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT OF REGISTRATION RIGHTS ("Agreement") is made as of
August 9, 1999 between MESSAGEMEDIA, INC., a Delaware corporation ("Parent"),
James Clayton, James Clayton as the Securityholders' Agent (as defined below)
for the benefit of Holders (as defined below) of Revnet Systems, Inc., an
Alabama corporation (the "Company"), acquiring shares of Parent Common Stock
pursuant to that Agreement and Plan of Merger and Reorganization, dated as of
July 22, 1999 (the "Reorganization Agreement"), among Parent, the Company and
MM1 Acquisition Corp., an Alabama corporation and wholly-owned subsidiary of
Parent ("Merger Sub"), and in consideration of such Holders approving the
Reorganization Agreement and the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Reorganization Agreement, the parties mutually agree as
follows:
SECTION 1
REGISTRATION
1.1 "HOLDER" means: (i) a Holder of the Company to whom shares of
Common Stock of Parent are issued pursuant to the Reorganization Agreement, (ii)
the Escrow Agent (as defined in the Reorganization Agreement), or (iii) a
transferee to whom registration rights granted under this Agreement are assigned
pursuant to Section 6.3 of this Agreement.
1.2 "REGISTRABLE SECURITIES" means for each Holder the number of shares
of Parent Common Stock issued to such Holder pursuant to 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 (including shares of Parent Common Stock issued to
the Escrow Agent pursuant to Sections 1.8 of the Reorganization Agreement), in
each case rounded to the nearest integral amount, and for all Holders the sum of
the Registrable Securities held by them; provided, however, that Registrable
Securities shall cease to be Registrable Securities when (i) a registration
statement covering such Registrable Securities shall have become effective under
the Securities Act of 1933, as amended (the "1933 Act"), and such Registrable
Securities shall have been disposed of in accordance with such registration
statement, or (ii) with respect to a Holder, at such time as all of the
Registrable Securities held by such Holder can be sold by such Holder in a
three-month period in accordance with Rule 144 under the 1933 Act, as such rule
may be amended from time to time, or any successor rule or regulation ("Rule
144"). The Holders desiring to sell shares pursuant to Rule 144 shall provide
such Rule 144 representation letters in usual and customary form as may
reasonably be requested by Parent's counsel to provide such opinion.
1.3 REGISTRATION. Parent shall use its commercially reasonable efforts
to 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 Securities within thirty (30)
1.
<PAGE> 2
days following the Effective Time; provided, however, that each Holder shall
provide all such information and materials and take all such action as may be
required in order to permit Parent to comply with all applicable requirements of
the Securities Act, the Exchange Act, and of the SEC, and to obtain any desired
acceleration of the effective date of such registration statement, such
provision of information and materials to be a condition precedent to the
obligations of Parent pursuant to this Agreement. Parent shall not be required
to effect more than one (1) registration pursuant to this Section 1.3. The
offerings made pursuant to such registration shall not be underwritten. Parent
shall use its reasonable efforts to have such Registration Statement declared
effective as soon as practicable following the Effective Time. The Holders shall
furnish such information as Parent may reasonably request in connection with the
preparation of the Registration Statement. Upon registration of the Registrable
Securities with the SEC in accordance with this Agreement, the Registrable
Securities may be sold in accordance with the Registration Statement under the
1933 Act. Parent shall use its reasonable efforts to cause such Registration
Statement to remain effective until the earlier of (i) the date on which all
Registrable Securities covered by the Registration Statement have been sold to
the public pursuant to the Registration Statement, (ii) such time as which all
Registrable Securities covered by the Registration Statement may be sold
pursuant to Rule 144 within a three-month period, or (iii) two (2) years after
the Closing Date.
OTHER SHARES. Parent may include in any registration statement under
this Section 1 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).
SECURITYHOLDERS' AGENT. Securityholders' Agent shall be that certain
person appointed by the shareholders of the Company pursuant to Section 10.1 of
the Reorganization Agreement.
SECTION 2
PARENT'S OBLIGATIONS
In connection with the Registration Statement referred to in Section
1.3, Parent shall:
2.1 REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to the Registrable Securities and thereafter
use its commercially reasonable efforts to cause such Registration Statement to
become and remain effective for the period set forth in Section 1.3.
2.2 AMENDMENTS AND SUPPLEMENTS. Prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the period set forth in Section 1.3 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 such Registration Statement.
2.
<PAGE> 3
2.3 COPIES OF OFFERING DOCUMENTS. Furnish to the Holders such numbers
of copies of such registration statements, prospectuses, and any amendments and
supplements thereto, in conformity with the requirements of the 1933 Act, such
documents incorporated by reference in such Registration Statement and such
other documents as the Holders reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities, but only while
Parent shall be required under the provisions hereof to cause the registration
statement to remain effective.
2.4 MISLEADING PROSPECTUS. Promptly notify each Holder, at any time
when a prospectus relating thereto covered by such registration statement is
required to be delivered under the 1933 Act, upon Parent becoming aware that the
prospectus included in such 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 as soon as
practicable thereafter use commercially reasonable efforts to prepare and file
with the SEC and furnish to such Holder 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 Securities, 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 commercially 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 Holders may reasonably request, all from time to time to
enable each such Holder to sell the Registrable Securities owned by it without
registration under the 1933 Act pursuant to the exemption provided by Rule 144.
2.6 PIGGYBACK REGISTRATIONS.
(a) NOTICE AND PARTICIPATION. Parent shall notify James Clayton in
writing at least ten (10) days prior to the filing of its first underwritten
registration statement under the Securities Act for purposes of a public
offering of securities of Parent (including, but not limited to, registration
statements relating to secondary offerings of securities of Parent, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford James Clayton an opportunity to include in such
registration statement all or part of such Registrable Securities held by James
Clayton. If James Clayton desires to include in any such registration statement
all or any part of the Registrable Securities held by him, he shall, within ten
(10) days after the above-described notice from Parent, so notify Parent in
writing. Such notice shall state the intended method of disposition of the
Registrable Securities by him.
(b) UNDERWRITING. The right of James Clayton to be included in a
registration pursuant to this Section 2.6 shall be conditioned upon James
Clayton's participation in such underwriting and the inclusion of James
Clayton's Registrable Securities in the underwriting to the extent provided
herein. If James Clayton proposes to distribute his Registrable Securities
through such underwriting, he shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by Parent. Notwithstanding any
3.
<PAGE> 4
other provision of the Agreement, if the underwriter determines in good faith
that marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to Parent; second, to all holders of Parent Common
Stock that have registration rights on a pro rata basis based on the total
number of Registrable Securities held by such holders, including James Clayton;
and third, to any shareholder of Parent (other than a holder with registration
rights) on a pro rata basis. No such reduction shall (i) reduce the securities
being offered by Parent for its own account to be included in the registration
and underwriting. If James Clayton disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to Parent and
the underwriter, delivered at least twenty (20) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
(c) RIGHT TO TERMINATE REGISTRATION. Parent shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.6
prior to the effectiveness of such registration whether or not James Clayton has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by Parent in accordance with Section
5 hereof.
2.7 BLUE SKY FILINGS. Parent shall 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
Holders, 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 HOLDER'S OBLIGATIONS
In connection with the Registration Statement referred to in Section
1.3 or Section 2.6, the Holders 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 Holder shall promptly provide to Parent such
information concerning such Holder, such Holder's 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 Securities pursuant to the
Registration Statement covering such shares until the Holders' 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 Securities in such Holder's possession at the time of
receipt of such notice.
4.
<PAGE> 5
3.3 NO PRELIMINARY PROSPECTUS. No Holder and no person or entity acting
on his or her behalf (other than an underwriter selected by Parent or approved
by Parent) shall offer any Registrable Securities by means of any preliminary
prospectus.
3.4 SUSPENSION OF PROSPECTUS. Each Holder will be required to notify
Parent in writing at least two (2) business days prior to a disposition of
Registrable Securities pursuant to the Registration Statement of his or her
intent to dispose of such Registrable Securities. At any time within such two
(2) business day period, Parent may restrict disposition of such Registrable
Securities, in which event such Holder will not be able to dispose of such
Registrable Securities, provided that: (i) Parent shall have delivered a notice
in writing to such Holder stating that a delay in the disposition of such
Registrable Securities is necessary because Parent, in its reasonable judgment,
has determined that such sales would require public disclosure by Parent of
material nonpublic information that Parent deems it advisable not to disclose;
provided, however, that no such delay shall be imposed unless Parent shall
equally prohibit during the period of such delay any sale of Parent's securities
by all executive officers and directors of Parent; (ii) in the event of the
delivery of the notice described in (i) above by Parent, Parent shall use its
commercially reasonable efforts to amend the registration statement and/or amend
or supplement the related prospectus if necessary and to take all other actions
necessary to allow the proposed sale to take place as promptly as possible after
the conditions referred to in the notice have ceased to exist or have been
disclosed; and (iii) Parent shall not restrict dispositions under (i) above for
a period exceeding forty-five (45) days during any calendar quarter.
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 Holders' 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 Holders' rights to make sales pursuant to an effective registration
pursuant to Section 1) for a period of not more than forty-five (45) days;
provided, however, that Parent shall not use the right described in this Section
4.1 more than once in any calendar quarter.
SECTION 5
EXPENSES AND INDEMNIFICATION
5.1 EXPENSES. Parent shall pay all of the out-of-pocket expenses
incurred, other than underwriting discounts and commissions and counsel to the
selling shareholders, in connection with any registration of Registrable
Securities pursuant to this Agreement, including, without
5.
<PAGE> 6
limitation, all SEC and blue sky registration and filing fees, printing
expenses, transfer agents' and registrars' fees, and the reasonable fees and
disbursements of Parent's outside counsel and independent accountants.
5.2 OTHER EXPENSES. Parent shall pay all registration and filing fees
attributable to the Registrable Securities and the listing fee payable to the
Nasdaq National Market.
5.3 INDEMNIFICATION. In the event any Registrable Securities 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 Holder, his heirs, successors and
assigns, any underwriter (as defined in the 1933 Act) for such Holder, any agent
of a Holder or underwriter, and each person, if any, who controls such Holder 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 such 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 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 Holder, his
heirs, successors and assigns, underwriter, agent 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
such 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 Holder or (ii) if the person asserting any such loss, claim, damage,
liability or action who purchased the Registrable Securities 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 Securities to
such person because of the failure of such Holder, agent 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
prospectus 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 Holder, agent, underwriter or
controlling person and shall survive the transfer of the Registrable Securities
by such Holder.
(b) INDEMNIFICATION BY HOLDERS. To the extent permitted by law,
the Holders will severally (but not jointly and pro rata) indemnify and hold
harmless Parent, its successors and assigns, its officers and directors, any
underwriter (as defined in the 1933 Act) requested by the Holders, and each
person, if any, who controls Parent or any such underwriter requested by the
Holders within the meaning of the 1933 Act or the 1934 Act, against any losses,
claims,
6.
<PAGE> 7
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 such 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 the Holders expressly for use in such
registration by such Holder, or (ii) the failure of any Holder or any
underwriter requested by the Holders at or prior to the written confirmation of
the sale of the Registrable Securities to send or arrange delivery of a copy of
an amended preliminary prospectus 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 Securities
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). The
Holders 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 requested by the Holders or controlling person and shall survive the
transfer of the Registrable Securities by such Holder.
(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
7.
<PAGE> 8
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. All notices, requests and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or one business day
after being sent by a nationally recognized overnight delivery service to the
Holders at their respective addresses of record with Parent's transfer agent,
and to Parent at its address stated in the Reorganization Agreement. Notices may
also be given by facsimile and shall be effective on the date transmitted if
confirmed within 48 hours thereafter by a signed original sent in the manner
provided in the preceding sentence.
6.2 AMENDMENT OF REGISTRATION RIGHTS. The Securityholders' Agent or
Holders of a majority of the Registrable Securities from time to time
outstanding may, with the written consent of Parent, amend the registration
rights granted hereunder.
6.3 PARTIES IN INTEREST. No Holder may assign his rights under this
Agreement without the express prior written consent of Parent, provided,
however, that (i) upon the death of a Holder, his rights under this Agreement
shall be transferred to the person(s) who receive his Parent Common Stock under
the laws of descent and distribution, and (ii) a Holder may assign his rights
under this Agreement to any organization qualified under Section 501(c)(3) of
the Internal Revenue Code to which the Holder transfers Registrable Securities
or in connection with an estate planning transaction. 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.
6.4 WAIVERS. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of, or
shall preclude any other or further exercise of, any right, power or remedy.
6.5 SEVERABILITY. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
6.6 SECTION HEADINGS. Section headings in this Agreement are for
convenience of reference only, do not constitute a part of this Agreement, and
shall not affect its interpretation.
6.7 REFERENCES. All words used in this Agreement shall be construed to
be of such number and gender as the context requires. The terms "it" and "its"
as used herein include entities as well as masculine and feminine persons.
Unless a particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection of this Agreement.
8.
<PAGE> 9
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
MESSAGEMEDIA, INC.
/s/ Larry Jones
----------------------------------
By: Larry Jones
-------------------------------
Title: President and Chief Executive
Officer
---------------------------
SECURITYHOLDERS' AGENT:
/s/ James Clayton
----------------------------------
James Clayton
/s/ James Clayton
----------------------------------
James Clayton
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT OF REGISTRATION RIGHTS ("Agreement") is made as of
August 16, 1999 between MESSAGEMEDIA, INC., a Delaware corporation ("Parent"),
William Blair & Company LLC, and Eric DiBenedetto, as the Securityholders' Agent
(as defined below) for the benefit of Holders (as defined below) of capital
stock of Decisive Technology Corporation, a California corporation (the
"Company"), acquiring shares of Parent Common Stock pursuant to that Agreement
and Plan of Merger and Reorganization, dated as of July 27 1999 (the
"Reorganization Agreement"), among Parent, the Company and MM2 Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger
Sub") and in consideration of such Holders approving the Reorganization
Agreement and the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Reorganization Agreement, the parties mutually agree as
follows:
SECTION 1
REGISTRATION
1.1 "HOLDER" means: (i) a holder of shares of capital stock of the
Company to whom shares of Common Stock of Parent are issued pursuant to the
Reorganization Agreement, (ii) the Escrow Agent (as defined in the
Reorganization Agreement), (iii) William Blair & Company LLC with respect to the
shares of Common Stock of Parent issued pursuant to Section 1.12 of the
Reorganization Agreement or (iv) a transferee to whom registration rights
granted under this Agreement are assigned pursuant to Section 6.3 of this
Agreement.
1.2 "MAJOR INVESTORS" shall mean those individuals and entities
identified on Exhibit B-2 of the Reorganization Agreement.
1.3 "REGISTRABLE SECURITIES" means for each Holder the number of shares
of Parent Common Stock issued to such Holder pursuant to 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 (including shares of Parent Common Stock issued to
the Escrow Agent pursuant to Sections 1.8 of the Reorganization Agreement), in
each case rounded to the nearest integral amount, and for all Holders the sum of
the Registrable Securities held by them; provided, however, that Registrable
Securities shall cease to be Registrable Securities when (i) a registration
statement covering such Registrable Securities shall have become effective under
the Securities Act of 1933, as amended (the "1933 Act"), and such Registrable
Securities shall have been disposed of in accordance with such
1.
<PAGE> 2
registration statement and in accordance with the 1933 Act, or (ii) with respect
to a Holder, at such time as all of the Registrable Securities held by such
Holder can be sold by such Holder in a three-month period in accordance with
Rule 144 under the 1933 Act, as such rule may be amended from time to time, or
any successor rule or regulation ("Rule 144").
1.4 REGISTRATION. Parent shall use its commercially reasonable best
efforts to 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 Securities as soon as reasonably practicable but in
any event within thirty (30) days following the Effective Time; provided,
however, that each Holder shall provide all such information and materials and
take all such action as may be reasonably required in order to permit Parent to
comply with all applicable requirements of the 1933 Act, the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and of the SEC, and to obtain any
desired acceleration of the effective date of such registration statement, such
provision of information and materials to be a condition precedent to the
obligations of Parent pursuant to this Agreement. Parent shall not be required
to effect more than one (1) registration pursuant to this Section 1.4. The
offerings made pursuant to such registration shall not be underwritten. Parent
shall use its commercially reasonable best efforts to have such Registration
Statement declared effective as soon as practicable following the Effective
Time. The Holders shall furnish such information as Parent may reasonably
request in connection with the preparation of the Registration Statement. Upon
registration of the Registrable Securities with the SEC in accordance with this
Agreement, the Registrable Securities may be sold in accordance with the
Registration Statement under the 1933 Act. Parent shall use its reasonable
efforts to cause such Registration Statement to remain effective until the
earlier of (i) the date on which all Registrable Securities covered by the
Registration Statement have been sold to the public pursuant to the Registration
Statement, (ii) such time as which all Registrable Securities covered by the
Registration Statement may be sold pursuant to Rule 144 within a three-month
period, or (iii) two (2) years after the Closing Date.
1.5 OTHER SHARES. Parent may include in any registration statement
under this Section 1 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).
1.6 SECURITYHOLDERS' AGENT. Securityholders' Agent shall be that
certain person appointed by the shareholders of the Company pursuant to Section
10.1 of the Reorganization Agreement.
SECTION 2
PARENT'S OBLIGATIONS
In connection with the Registration Statement referred to in Section
1.4, Parent shall:
2.1 REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to the Registrable Securities and thereafter
use its commercially reasonable best efforts to cause such Registration
Statement to become and remain effective for the period set forth in Section
1.4.
2.
<PAGE> 3
2.2 AMENDMENTS AND SUPPLEMENTS. Prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the period set forth in Section 1.4 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 such Registration Statement.
2.3 COPIES OF OFFERING DOCUMENTS. Promptly furnish to the Holders such
numbers of copies of such registration statements, prospectuses, and any
amendments and supplements thereto, in conformity with the requirements of the
1933 Act, such documents incorporated by reference in such Registration
Statement and such other documents as the Holders reasonably request, in order
to facilitate the public sale or other disposition of the Registrable
Securities, but only while Parent shall be required under the provisions hereof
to cause the registration statement to remain effective.
2.4 MISLEADING PROSPECTUS. Promptly notify each Holder, at any time
when a prospectus relating thereto covered by such registration statement is
required to be delivered under the 1933 Act, upon Parent becoming aware that the
prospectus included in such 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 as soon as
practicable thereafter use its commercially reasonable best efforts to prepare
and file with the SEC and furnish to such Holder 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 Securities,
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 commercially reasonable best efforts to file in a
timely manner any reports required to be filed by it under the 1933 Act and the
1934 Act, and take such further action as the Holders may reasonably request,
all from time to time to enable each such Holder to sell the Registrable
Securities owned by it without registration under the 1933 Act pursuant to the
exemption provided by Rule 144.
2.6 PIGGYBACK REGISTRATIONS.
(a) NOTICE AND PARTICIPATION. For a period of twelve months
following the date of this Agreement, Parent shall notify all Holders who are
also Major Investors in writing at least ten (10) days prior to the filing of
any registration statement under the 1933 Act for purposes of an underwritten
public offering of securities of Parent (including, but not limited to,
registration statements relating to secondary offerings of securities of
Parent, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the 1933 Act) and will afford each such Holder an opportunity to
include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from Parent, so
notify Parent in writing. Such notice shall state the
3.
<PAGE> 4
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by Parent, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
the next registration statement as may be filed by Parent with respect to
underwritten offerings of its securities, all upon the terms and conditions set
forth herein; provided such registration statement is filed within twelve months
of the date of this Agreement, and further provided that such rights shall not
attach to more than two underwritten registrations of Parent.
(b) UNDERWRITING. The right of any such Holder to be included in a
registration pursuant to this Section 2.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by Parent.
Notwithstanding any other provision of the Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to Parent; second, to all holders
of Parent Common Stock (including the Major Investors) that have similar
piggyback registration rights on a pro rata basis based on the total number of
Registrable Securities held by such holders; and third, to any shareholder of
Parent (other than a holder with registration rights). No such reduction shall
(i) reduce the securities being offered by Parent for its own account to be
included in the registration and underwriting. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to Parent and the underwriter, delivered at least twenty (20)
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing person shall be
deemed to be a single "HOLDER", and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(c) RIGHT TO TERMINATE REGISTRATION. Parent shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.6
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by Parent in accordance with Section
5 hereof.
2.7 BLUE SKY FILINGS. Parent shall 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
Holders, 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.
4.
<PAGE> 5
2.8 EARNING STATEMENT. To make generally available to its
securityholders an earning statement satisfying the provisions of Section 11(a)
of the 1933 Act and Rule 158 not later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
SECTION 3
THE HOLDER'S OBLIGATIONS
In connection with the Registration Statement referred to in Section
1.4 or Section 2.6, the Holders 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 Holder shall promptly provide to Parent such
information concerning such Holder, such Holder's 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 Securities pursuant to the
Registration Statement covering such shares until the Holders' 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 Securities in such Holder's possession at the time of
receipt of such notice.
3.3 NO PRELIMINARY PROSPECTUS. No Holder and no person or entity acting
on his or her behalf (other than an underwriter selected by Parent or approved
by Parent) shall offer any Registrable Securities by means of any preliminary
prospectus.
3.4 SUSPENSION OF PROSPECTUS. Each Holder will be required to notify
Parent in writing at least two (2) business days prior to a disposition of
Registrable Securities pursuant to the Registration Statement of his or her
intent to dispose of such Registrable Securities. At any time within such two
(2) business day period, Parent may restrict disposition of such Registrable
Securities, in which event such Holder will not be able to dispose of such
Registrable Securities, provided that: (i) Parent shall have delivered a notice
in writing to such Holder stating that a delay in the disposition of such
Registrable Securities is necessary because Parent, in its reasonable judgment,
has determined that such sales would require public disclosure by Parent of
material nonpublic information that Parent deems it advisable not to disclose;
provided, however, that no such delay shall be imposed unless Parent shall
equally prohibit during the period of such delay any sale of Parent's securities
by all executive officers and directors of Parent and by all other holders of
the Company's restricted stock covered by resale registration statements; (ii)
in the event of the delivery of the notice described in (i) above by Parent,
Parent shall use its
5.
<PAGE> 6
commercially reasonable best efforts to amend the registration statement and/or
amend or supplement the related prospectus if necessary and to take all other
actions necessary to allow the proposed sale to take place as promptly as
possible after the conditions referred to in the notice have ceased to exist or
have been disclosed; and (iii) Parent shall not restrict dispositions under (i)
above, Section 2.4 and Section 4.1 for a period exceeding, in the aggregate,
forty-five (45) days during any calendar quarter.
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 Holders' 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 Holders' rights to make sales pursuant to an effective registration
pursuant to Section 1) for a period of not more than forty-five (45) days;
provided, however, that Parent shall not use the right described in this Section
4.1, Section 2.4 and Section 3.4(i) for a period exceeding, in the aggregate,
forty-five (45) days during any calendar quarter.
SECTION 5
EXPENSES AND INDEMNIFICATION
5.1 EXPENSES. Parent shall pay all of the out-of-pocket expenses
incurred, other than underwriting discounts and commissions and counsel to the
selling shareholders, in connection with any registration of Registrable
Securities pursuant to this Agreement, including, without limitation, all SEC
and blue sky registration and filing fees, printing expenses, transfer agents'
and registrars' fees, and the reasonable fees and disbursements of Parent's
outside counsel and independent accountants.
5.2 OTHER EXPENSES. Parent shall pay all registration and filing fees
attributable to the Registrable Securities and the listing fee payable to the
Nasdaq National Market.
5.3 INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable
Securities 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 Holder, his heirs, successors and
assigns, any underwriter (as defined in the 1933 Act) for such Holder, and each
person, if any, who controls such Holder or underwriter within the meaning of
the 1933 Act or the 1934 Act, against any losses, claims,
6.
<PAGE> 7
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
such 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 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 Holder, his heirs,
successors and assigns, underwriter 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 such 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 Holder
or (ii) if the person asserting any such loss, claim, damage, liability or
action who purchased the Registrable Securities 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 Securities to such
person because of the failure of such Holder 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 prospectus 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 Holder, underwriter or controlling person and shall
survive the transfer of the Registrable Securities by such Holder.
(b) INDEMNIFICATION BY HOLDERS. To the extent permitted by law, the
Holders will severally (but not jointly and pro rata) indemnify and hold
harmless Parent, its successors and assigns, its officers and directors, any
underwriter (as defined in the 1933 Act) requested by the Holders, and each
person, if any, who controls Parent or any such underwriter requested by the
Holders 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 such 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 Holder expressly for use
in such registration by such Holder, or (ii) the failure of any Holder or any
underwriter requested by the Holders at or prior to the written confirmation of
the sale of the Registrable Securities to send or arrange delivery of a copy of
an amended preliminary prospectus 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 Securities
which is the subject thereof and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact made in
7.
<PAGE> 8
such preliminary prospectus was corrected in the amended preliminary prospectus
or the final prospectus (or the final prospectus as amended and supplemented).
The Holders 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 requested by the Holders or controlling person
and shall survive the transfer of the Registrable Securities by such Holder.
(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.
(d) CONTRIBUTION. If a claim for indemnification under this Section 5.3
is unavailable to an indemnified party because of a failure or refusal of a
court of competent jurisdiction to enforce such indemnification in accordance
with its terms (by reason of public policy or otherwise), then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of any such loss,
claim, damage, liability or action referred to therein in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the statements or omissions that resulted
in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a
8.
<PAGE> 9
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.3(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 6
OTHER PROVISIONS
6.1 NOTICES. All notices, requests and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or one business day
after being sent by a nationally recognized overnight delivery service to the
Holders at their respective addresses of record with Parent's transfer agent,
and to Parent at its address stated in the Reorganization Agreement. Notices may
also be given by facsimile and shall be effective on the date transmitted if
confirmed within 48 hours thereafter by a signed original sent in the manner
provided in the preceding sentence.
6.2 AMENDMENT OF REGISTRATION RIGHTS. The Holders of a majority of the
Registrable Securities from time to time outstanding may, with the written
consent of Parent, amend the registration rights granted hereunder.
6.3 PARTIES IN INTEREST. This Agreement shall be binding upon each of
the parties hereto and each of their respective permitted successors and
assigns, if any. No Holder may assign such Holder's rights under this Agreement
without the express prior written consent of Parent, provided, however, that (i)
upon the death of a Holder, such Holder's rights under this Agreement shall be
transferred to the person(s) who receive such Holder's Parent Common Stock under
the laws of descent and distribution, (ii) a Holder may assign such Holder's
rights under this Agreement to any organization qualified under Section
501(c)(3) of the Internal Revenue Code to which the Holder transfers Registrable
Securities or in connection with an estate planning transaction, (iii) a Holder
may transfer its rights under this Agreement to any transferee of 50,000 or more
of the Registrable Securities (subject to appropriate adjustment based on stock
dividends, stock splits and other similar transactions after the date hereof)
who agrees in writing to be bound by the terms of this Agreement to the same
extent as if such transferee were a Holder hereunder and subject to such
Holder's prior delivery to Parent of an opinion of counsel in form reasonably
satisfactory to the Parent to the effect that the transfer of Registrable
Securities was made in compliance with all applicable federal and state
securities laws and (iv) a pro rata distribution of Registrable Securities
without additional consideration to the general and limited partners,
shareholders or trust beneficiaries of a Holder shall not be deemed a sale or
transfer for purposes of this Section 6.3 and such persons shall be entitled to
the same rights under this Agreement as the initial Holder from which the
Registrable Securities were received were entitled to and shall be deemed a
Holder for the purposes of this Agreement. Any person receiving Registrable
Securities from a Major Investor shall take such securities
9.
<PAGE> 10
subject to the provisions of the lock-up agreement referred to in Section 6.5 of
the Reorganization Agreement. 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 Holders; Parent; and the respective
successors and assigns, if any, of the foregoing.
6.4 WAIVERS. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of, or
shall preclude any other or further exercise of, any right, power or remedy.
6.5 SEVERABILITY. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
6.6 SECTION HEADINGS. Section headings in this Agreement are for
convenience of reference only, do not constitute a part of this Agreement, and
shall not affect its interpretation.
6.7 REFERENCES. All words used in this Agreement shall be construed to
be of such number and gender as the context requires. The terms "it" and "its"
as used herein include entities as well as masculine and feminine persons.
Unless a particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection of this Agreement.
10.
<PAGE> 11
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
MESSAGEMEDIA, INC.
/s/ Larry Jones
--------------------------------------------
By: Larry Jones
-----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
SECURITYHOLDERS' AGENT:
/s/ Eric DiBenedetto
--------------------------------------------
Eric DiBenedetto, as the Securityholders'
Agent
WILLIAM BLAIR & COMPANY LLC
/s/ WILLIAM BLAIR & COMPANY LLC
--------------------------------------------
By: W. Rick Stearns
-----------------------------------------
Title: Associate
-------------------------------------
11.
<PAGE> 1
EXHIBIT 99.1
================================================================================
MessageMedia Completes Acquisition of Revnet Systems Inc.
BOULDER, COLO -- August 10, 1999 - MessageMedia Inc. (NASDAQ: MESG), a leading
provider of e-mail-based customer relationship management and direct marketing
services, announced today it has completed the acquisition of Revnet Systems
Inc. of Huntsville, AL. Revnet Systems stockholders approved all terms and
conditions of the agreement. Early last June, MessageMedia originally announced
its intent to acquire Revnet Systems, a leading developer and supplier of e-mail
marketing software and services.
ABOUT MESSAGEMEDIA INC.
MessageMedia (NASDAQ: MESG) is a leading provider of e-mail-based customer
relationship management and direct marketing services. The Company offers a
comprehensive suite of outsource messaging services for information delivery,
e-commerce services, permission-based direct marketing and ongoing customer
communications using industry standard Internet protocols. MessageMedia's
customer portfolio includes clients from the financial services, publishing,
direct marketing, retailing and electronic commerce industries. Clients include
E*TRADE, Reader's Digest, GeoCities, Intuit, CMP Media, Yahoo!, Barclays Bank
and Bertelsmann.
SOFTBANK and its affiliates own approximately 49% of the outstanding common
stock of MessageMedia Inc. Pequot Capital Management, a Connecticut-based
research-intensive investment firm with more than $5 billion in assets under
management, is also a major investor in MessageMedia.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act. With
the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties. These risk factors include, but are not limited to, the
integration of a new senior management team, MessageMedia's limited operating
history, the integration of recent acquisitions, risks associated with pending
and future acquisitions, the anticipated fluctuations in operating results, the
uncertain acceptance of new services being offered, and undeveloped and rapidly
changing market and other factors detailed in MessageMedia's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 1998 and its most recent Quarterly Report on Form
10-Q. All companies and product names are trademarks of their respective owners.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. MessageMedia undertakes no
obligation to release publicly the result of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
<PAGE> 1
EXHIBIT 99.2
================================================================================
MessageMedia Completes Acquisition of Decisive Technology
BOULDER, COLO -- August 17, 1999 - MessageMedia Inc. (NASDAQ: MESG), a leading
provider of e-mail-based customer relationship management and direct marketing
services, announced today it has completed the acquisition of Decisive
Technology Corporation of Mountain View, CA. Decisive Technology's shareholders
approved all terms and conditions of the agreement. Early last June,
MessageMedia originally announced its intent to acquire Decisive Technology, a
leading provider of Internet-based survey and customer feedback services to some
of the world's largest technology and Internet companies.
ABOUT MESSAGEMEDIA INC.
MessageMedia (NASDAQ: MESG) is a leading provider of e-mail-based customer
relationship management and direct marketing services. The Company offers a
comprehensive suite of outsource messaging services for information delivery,
e-commerce services, permission-based direct marketing and ongoing customer
communications using industry standard Internet protocols. MessageMedia's
customer portfolio includes clients from the financial services, publishing,
direct marketing, retailing and electronic commerce industries. Clients include
E*TRADE, Reader's Digest, GeoCities, Intuit, CMP Media, Yahoo!, Barclays Bank
and Bertelsmann.
SOFTBANK and its affiliates own approximately 44% of the outstanding common
stock of MessageMedia Inc, after taking into account the acquisition of Decisive
Technology. Pequot Capital Management, a Connecticut-based research-intensive
investment firm with more than $5 billion in assets under management, is also a
major investor in MessageMedia.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act. With
the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties. These risk factors include, but are not limited to, the
integration of a new senior management team, MessageMedia's limited operating
history, the integration of recent acquisitions, risks associated with pending
and future acquisitions, the anticipated fluctuations in operating results, the
uncertain acceptance of new services being offered, and undeveloped and rapidly
changing market and other factors detailed in MessageMedia's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 1998 and its most recent Quarterly Report on Form
10-Q. All companies and product names are trademarks of their respective owners.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. MessageMedia undertakes no
obligation to release publicly the result of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
