<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
February 27, 1998
------------------------------------------------
Date of Report (Date of earliest event reported)
ROGUE WAVE SOFTWARE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-28900 93-1064214
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
850 SW 35th Street
Corvallis, Oregon 97333
----------------------------------------
(Address of principal executive offices)
(541) 754-3010
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISK AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HERE. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO THOSE DISCUSSED UNDER THE
HEADING "RISK FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K. READERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE HEREOF.
THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE THE RESULTS OF ANY REVISION
TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
On February 27, 1998, SR Acquisition Corp. ("Merger Sub"), a wholly
owned subsidiary of Rogue Wave Software, Inc. ("Rogue Wave"), was merged with
and into Stingray Software, Inc. ("Stingray") pursuant to an Agreement and
Plan of Merger and Reorganization dated as of January 19, 1998 by and among
Rogue Wave, Merger Sub, Stingray and the stockholders of Stingray (the
"Merger Agreement"). The terms of the Merger Agreement were determined
through arms' length negotiaions between Rogue Wave and Stingray.
The merger of Merger Sub with and into Stingray (the "Merger") became
effective at the time of filing of Articles of Merger with the North Carolina
Secretary of State on February 27, 1998 (the "Effective Time"). At the
Effective Time: (i) Merger Sub ceased to exist; (ii) Stingray, as the
surviving corporation in the Merger, became a wholly owned subsidiary of
Rogue Wave; and (iii) subject to the provisions of the Merger Agreement
relating to the payment of cash in lieu of fractional shares, each share of
Stingray Common Stock outstanding immediately prior to the Effective Time was
converted into 1,651,845 shares of Rogue Wave Common Stock, par value $.001
per share. Cash in lieu of fractional shares totaled $13.44. Each share of
Merger Sub common stock outstanding immediately prior to the merger was
converted into one share of common stock of Stingray.
In addition, pursuant to the Merger Agreement, as of the Effective Time,
all rights with respect to Stingray Common Stock under outstanding stock
options to purchase Stingray Common Stock were converted into and became
rights with respect to Rogue Wave Common Stock and Rogue Wave assumed each
such outstanding Stingray stock option in accordance with the terms of the
stock option plan under which it was issued and the stock option agreement by
which it is evidenced. By virtue of the assumption by Rogue Wave of such
Stingray stock options, from and after the Effective Time: (i) each Stingray
stock option assumed by Rogue Wave may be exercised solely for Rogue Wave
Common Stock; (ii) the number of shares of Rogue Wave Common Stock subject to
each such assumed option is equal to the number of shares of Stingray Common
Stock subject to such option immediately prior to the Effective Time
multiplied by approximately 0.734153886, rounding to the nearest whole share
of Rogue Wave Common Stock; and (iii) the per share exercise price under each
such assumed option is equal to the per share exercise price in effect
immediately prior to the Effective Time divided by approximately 0.734153886,
rounding to the nearest cent.
Pursuant to the terms of a Registration Rights Agreement by and among
the Company and the former stockholders of Stingray, such stockholders have
been granted the right to require the Company to register a portion of the
shares issued pursuant to the Merger Agreement under Federal and state
securities laws under certain circumstances and at certain times.
<PAGE>
Each of the former shareholders of Stingray that was also an employee of
Stingray has accepted employment with Rogue Wave. The Merger is intended to
be a tax-free reorganization under the Internal Revenue Code of 1986, as
amended, and will be accounted for as a pooling of interests.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF STINGRAY SOFTWARE, INC.
The financial statements of Stingray Software, Inc. required to be filed
pursuant to Item 7(a) of Form 8-K were not available at the time of filing of
this Current Report on Form 8-K and will be filed on a Form 8-K/A as soon as
practicable, but in no even later that 60 days after the date this Form 8-K
is required to be filed.
(b) PRO FORMA FINANCIAL INFORMATION
The Pro Forma Financial Information required to be filed pursuant to
Item 7(b) of Form 8-K was not available at the time of filing of this Current
Report on Form 8-K and will be filed with the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998 as soon as practicable, but
in no even later that 60 days after the date this Form 8-K is required to be
filed.
(c) EXHIBITS
2.1 Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a North
Carolina corporation, Stingray Software, Inc., a North Carolina
corporation and the shareholders of Stingray Software, Inc., dated as of
January 19, 1998.
2.2 Articles of Merger and Plan of Merger dated February 27, 1998, filed
with the Secretary of State of North Carolina on February 27, 1998.
4.1 Form of Registration Rights Agreement between Rogue Wave Software, Inc.
and the former shareholders of Stingray Software, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROGUE WAVE SOFTWARE, INC.
Dated: February 27, 1998 By: /s/ Michael Scally
-----------------------------------
Michael Scally
President and Chief Operating Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
2.1 Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a
North Carolina corporation, Stingray Software, Inc., a North
Carolina corporation and the shareholders of Stingray Software,
Inc., dated as of January 19, 1998.
2.2 Articles of Merger and Plan of Merger dated February 27, 1998,
filed with the Secretary of State of North Carolina on February 27,
1998.
4.1 Form of Registration Rights Agreement between Rogue Wave Software,
Inc. and the former shareholders of Stingray Software, Inc.
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
ROGUE WAVE SOFTWARE, INC.,
a Delaware corporation;
SR ACQUISITION CORP.,
a North Carolina corporation
STINGRAY SOFTWARE, INC.,
a North Carolina corporation;
and
THE SHAREHOLDERS OF STINGRAY SOFTWARE, INC.
_______________________________
Dated as of January 19, 1998
_______________________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
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 Employee Stock Options . . . . . . . . . . . . . . . . . . . . . .3
1.7 Closing of the Company's Transfer Books . . . . . . . . . . . . .3
1.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . .4
1.9 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . .5
1.10 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . .5
1.11 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.12 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . .6
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS. . . .6
2.1 Due Organization; No Subsidiaries; Etc. . . . . . . . . . . . . .6
2.2 Articles of Incorporation and Bylaws; Records . . . . . . . . . .7
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . .7
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .8
2.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . .9
2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Bank Accounts; Receivables . . . . . . . . . . . . . . . . . . . 11
2.8 Equipment; Leasehold . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Proprietary Assets . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Compliance with Legal Requirements . . . . . . . . . . . . . . . 16
2.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . 16
2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . 17
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 20
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.18 Related Party Transactions . . . . . . . . . . . . . . . . . . . 21
2.19 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . 21
2.20 Authority; Binding Nature of Agreement . . . . . . . . . . . . . 22
2.21 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . 22
2.22 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 23
3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS . . . . . 23
3.1 Requisite Power and Authority . . . . . . . . . . . . . . . . . 23
3.2 Investment Representations . . . . . . . . . . . . . . . . . . . 23
3.3 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . 24
3.4 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 25
3.5 Reliance Upon Representations, Warranties and Covenants . . . . 25
3.6 Pooling of Interest . . . . . . . . . . . . . . . . . . . . . . 25
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . . . . . . . 26
4.1 SEC Filings; Financial Statements . . . . . . . . . . . . . . . 26
4.2 Authority; Binding Nature of Agreement . . . . . . . . . . . . . 26
4.3 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Organization and Standing . . . . . . . . . . . . . . . . . . . 27
4.5 Authority, Approval and Enforceability . . . . . . . . . . . . . 27
4.6 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Compliance with Other Instruments . . . . . . . . . . . . . . . 28
4.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 28
4.9 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . 28
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 29
5. CERTAIN COVENANTS OF THE COMPANY AND THE SHAREHOLDERS . . . . . . . . . 29
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . 29
5.2 Operation of the Company's Business . . . . . . . . . . . . . . 29
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.3 Notification; Updates to Disclosure Schedule . . . . . . . . . . 31
5.4 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.5 Filings and Consents . . . . . . . . . . . . . . . . . . . . . . 32
5.6 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . 33
5.7 General Release . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10 Proprietary Information Agreements . . . . . . . . . . . . . . . 38
5.11 FIRPTA Matters . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.12 Registration Rights Agreement . . . . . . . . . . . . . . . . . 39
5.13 Removal of Personal Guarantees . . . . . . . . . . . . . . . . . 39
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 . . . . . . . . . . . . . . . . . . . . 40
6.6 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . 40
6.7 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.8 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 41
6.9 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.10 Audited Financials . . . . . . . . . . . . . . . . . . . . . . . 41
6.11 Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . 41
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . 41
7.2 Performance of Covenants and Obligations . . . . . . . . . . . . 42
7.3 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.5 Payment for Non Competition Agreements . . . . . . . . . . . . . 42
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.6 Termination of Stock Appreciation Rights . . . . . . . . . . . . 42
8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Termination Procedures . . . . . . . . . . . . . . . . . . . . . 44
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 44
8.4 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . 44
9. INDEMNIFICATION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Survival of Representations, Etc. . . . . . . . . . . . . . . . 44
9.2 Indemnification by Shareholders . . . . . . . . . . . . . . . . 45
9.3 Threshold; Ceiling . . . . . . . . . . . . . . . . . . . . . . . 46
9.4 Satisfaction of Indemnification Claim . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . 48
10.1 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 48
10.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 48
10.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . 49
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 49
10.7 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . 49
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
iv.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.16 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . 51
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 51
10.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 51
v.
<PAGE>
Exhibit A Shareholders
Exhibit B Certain Definitions
Exhibit C Escrow Agreement
Exhibit D Registration Rights Agreement
Exhibit E Form of Opinion of Daniels & Daniels
Exhibit F Form of Opinion of Cooley Godward LLP
<PAGE>
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of January 19, 1998, by and among: ROGUE WAVE
SOFTWARE, INC., a Delaware corporation ("Parent"); SR ACQUISITION CORP., a
North Carolina corporation ("Merger Sub"), STINGRAY SOFTWARE, INC., a North
Carolina corporation (the "Company"); and each of the shareholders of the
Company listed on Exhibit A (each a "Shareholder" and, collectively, the
"Shareholders"). Certain other capitalized terms used in this Agreement are
defined in Exhibit B.
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 North
Carolina 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").
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. The Shareholders own a total of 2,250,000 shares of the Common Stock
(with no par value) of the Company ("Company Common Stock") constituting all
of the outstanding common stock of the Company.
AGREEMENT
The parties to this Agreement agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the North Carolina
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, 3000 Sand Hill Road, Building 3, Suite 230,
Menlo Park, California 94025 at 10:00 a.m. on February 28, 1998, or at such
other time, place and date during the period from February 14, 1998 through
February 28, 1998 as Parent and the Company may mutually agree (the
"Scheduled Closing
1.
<PAGE>
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 plan of merger
conforming to the requirements of Section 55-11-05 of the North Carolina
Business Corporation Act shall be filed with the Secretary of State of the
State of North Carolina. The Merger shall become effective at the time such
certificate of merger is filed with and accepted by the Secretary of State of
the State of North Carolina (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 Incorporation 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 the Surviving Corporation
immediately after the Effective Time shall be as follows: Thomas Keffer
shall serve as a director and as President and Chief Executive Officer and
Robert M. Holburn, Jr. shall serve as a director and Secretary and Chief
Financial Officer.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(c), 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:
(i) each share of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to be an outstanding and
issued share and shall be converted into the right to receive that number of
shares of common stock (par value $.001 per share) of Parent ("Parent Common
Stock") equal to the ratio of (i) the difference between (A) 19.99% of the
outstanding shares of Parent Common Stock on the Closing Date, minus (B) the
number of shares of Parent Common Stock into which outstanding options under
the Company's Stock Option Plan will represent the right to acquire on the
Closing Date; divided by (ii) the number of shares of Company Common Stock
outstanding on the Closing Date. The ratio is sometimes referred to herein
as the "Exchange Ratio."
(ii) each share of the common stock (par value $.001 per
share) of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation.
(b) 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
2.
<PAGE>
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 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
that is then outstanding under the Company's 1997 Stock Award Plan (the
"Stock Option Plan"), whether vested or unvested (a "Company Option"), shall
be assumed by Parent in accordance with the terms (as in effect as of the
date of this Agreement) of the Company's Stock Option Plan and the stock
option agreement by which such Company Option is evidenced. All rights with
respect to Company Common Stock under outstanding Company Options shall
thereupon be converted into rights with respect to Parent Common Stock.
Accordingly, from and after the Effective Time, (a) each Company Option
assumed by Parent may be exercised solely for shares of Parent Common Stock,
(b) the number of shares of Parent Common Stock subject to each such assumed
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 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 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 ninety (90) 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.
At or prior to the Effective Time, each Stock Appreciation Right that is
then outstanding under the Company's Stock Option Plan shall be cashed out by
Parent in accordance with Section 7.6 hereof and terminated.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock
that were outstanding immediately prior to the Effective Time shall cease to
have any rights as shareholders of the Company, and the stock transfer books
of the Company shall be closed with respect to all shares of such capital
stock outstanding immediately prior to the Effective Time. No further
transfer of
3.
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any such shares of the Company's capital stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a
valid certificate previously representing any of such shares of the Company's
capital stock (a "Company Stock Certificate") is presented to the Surviving
Corporation or Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, the
holders of Company Stock Certificates shall surrender their Company Stock
Certificates in exchange for one or more certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to Parent for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by Parent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor one or
more certificates 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. Until surrendered as contemplated by this Section 1.8, each
Company Stock Certificate shall be deemed, from and after the Effective Time,
to represent only the right to receive upon such surrender one or more
certificates representing shares of Parent Common Stock (and cash in lieu of
any fractional share of Parent Common Stock) as contemplated by this Section
1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the
owner of such lost, stolen or destroyed Company Stock Certificate to provide
an appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of any fractional share shall be paid to any such
holder, until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.8 (at which time such holder shall be entitled
to receive all such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any holder of
capital stock of the Company who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock issuable to such holder) shall, upon surrender
of such holder's Company Stock Certificate(s), be paid in cash the dollar
amount (rounded to the nearest whole cent), without interest, determined by
multiplying such fraction by the closing price of Parent Common Stock on the
Nasdaq National Market on the date hereof.
4.
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(d) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable
to any holder or former holder of capital stock of the Company pursuant to
this Agreement such amounts as Parent or the Surviving Corporation may be
required to deduct or withhold therefrom under the Code or under any
provision of state, local or foreign tax law. To the extent such amounts are
so deducted or withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person to whom such amounts would
otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company for any shares
of Parent Common Stock (or dividends or distributions with respect thereto),
or for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Each certificate representing Shares shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition
to any legend required under applicable state securities laws or as provided
elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
(g) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Shareholder thereof if the Shareholder
shall have obtained an opinion of counsel (which counsel may be counsel to
the Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(h) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.10 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests" under Opinion No. 16 of
the Accounting Principles Board.
1.11 ESCROW.
5.
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(a) As soon as practicable after the Effective Time, 10% of the
Parent Common Stock to be issued in the Merger (collectively, the "Escrow
Shares"), without any act of any shareholder of the Company, will be
registered in the name of the Shareholders and will be deposited with the
Secretary of Parent (the "Escrow Agent"), such deposit to constitute an
escrow fund (the "Escrow Fund") to be governed by the terms set forth herein
and the Escrow Agreement of even date herewith attached hereto as Exhibit C
(the "Escrow Agreement"). The Escrow Fund shall be available to indemnify
the Indemnitees as provided in Section 9. In connection with the deposit of
the Escrow Shares in the Escrow Fund, each Shareholder shall execute and
deliver to the Escrow Agent an appropriate stock power with a "Medallion"
signature guarantee.
(b) Subject to the following requirements, the Escrow Fund shall
remain in existence until the expiration of nine (9) months from the
Effective Time (the "Escrow Period"). Upon the expiration of such Escrow
Period, the Escrow Fund shall terminate with respect to all Escrow Shares;
PROVIDED, HOWEVER, that the number of Escrow Shares, which, in the reasonable
judgment of Parent, subject to the subsequent resolution of the claim in the
matter in the manner provided in the Escrow Agreement, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
delivered to the Escrow Agent prior to the expiration of such Escrow Period
shall remain in the Escrow Fund (and the Escrow Fund shall remain in
existence) until such claims have been resolved. As soon as all such claims
have been resolved, the Escrow Agent shall deliver to the Shareholders all
Parent Common Stock remaining in the Escrow Fund and not required to satisfy
such claims. Deliveries of Parent Common Stock to the Shareholders pursuant
to this Section 1.10(b) and the Escrow Agreement shall be made in proportion
to their respective original contributions to the Escrow Fund.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Parent with full right, title and possession of and to all rights and
property of Merger Sub and the Company, the officers and directors of the
Surviving Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take such action.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
The Company and the Shareholders jointly and severally represent and
warrant, to and for the benefit of the Indemnitees, and except as set forth
on the Disclosure Schedule attached hereto, 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 North Carolina 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.
6.
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(b) 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 "Stingray Software, 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 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.
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) 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 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
10,000,000 shares of Common Stock (no par value), of which 2,250,000 shares
have been issued and are outstanding as of the date of this Agreement. All
of the outstanding shares of Company Common Stock have been duly authorized
and validly issued, and are fully paid and non-assessable. Part 2.3 of the
Disclosure Schedule provides an accurate and complete description of
7.
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the terms of each repurchase option which is held by the Company and to which
any of such shares is subject.
(b) The Company has reserved 337,500 shares of Company Common
Stock for issuance under its Stock Option Plan, of which options to purchase
67,950 shares are outstanding as of the date of this Agreement. In addition,
38,780 Stock Appreciation Rights issued pursuant to the Stock Option Plan 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 and Stock
Appreciation Right ("SAR") that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Company Option or SAR; (ii) the
total number of shares of Company Common Stock that are subject to such
Company Option and the number of shares of Company Common Stock with respect
to which such Company Option is immediately exercisable, or the number of
SARs held by such holder and the number of those rights that are immediately
exercisable; (iii) the date on which such Company Option or SAR was granted
and the term of such Company Option or SAR; (iv) the vesting schedule for
such Company Option or SAR; (v) the exercise price per share of Company
Common Stock purchasable under such Company Option or the Fair Market Value
of the SAR on the date of grant; 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 and the Shareholders,
condition or circumstance that may give rise to or provide a basis for the
assertion of a valid 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 all
outstanding Company Options and SARs 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) 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 North Carolina 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"):
8.
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(i) The audited balance sheets of the Company as of December
31, 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 sheets of the Company as of
December 31, 1997 (the "Statement Date"), and the related unaudited income
statements, statements of shareholders' equity and statements of cash flows
of the Company for the year 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 financial
statements referred to in 2.4(a)(i) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered. The financial statements referred to in
Section 2.4(a)(ii) do not contain all of the required footnotes and are
subject to normal and recurring year-end audit adjustments, which will not,
individually or in the aggregate, be material in magnitude.
2.5 ABSENCE OF CHANGES. Since the Statement Date:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations, financial
performance or prospects, and, to the best of the knowledge of the Company
and the Shareholders, 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, other than distributions to Shareholders made to cover their
proportional tax liability incurred as Shareholders of the Company, and has
not repurchased, redeemed or otherwise reacquired any shares of capital stock
or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock
issued upon the exercise of outstanding Company Options), (ii) any option or
right to acquire any capital stock or any other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under, (i) any provision of its
Stock Option Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option or SAR, or (iii) any
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restricted stock purchase agreement, other than those Company Options that
will automatically accelerate exercisability upon the consummation of the
Merger;
(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, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) other than the purchase of Objective Grid software for
$1,000,000, the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
the Statement Date, exceeds $100,000;
(i) the Company has not, other than license agreements for
software in the Company's standard form, (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 (x) 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 or (y)
the acquisition of rights or assets required under this Agreement;
(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 (other than
pursuant to routine travel advances made to employees in the ordinary course
of business), or (ii) incurred or guaranteed any indebtedness for borrowed
money;
(n) 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;
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(o) the Company has not changed any of its methods of accounting
or accounting practices in any respect, except for changes necessary to
conform to accounting methods or procedures used by Parent;
(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 2.7(b) and 2.9 of the Disclosure Schedule and all of the Company's
rights under the Contracts identified in Part 2.10 of the Disclosure
Schedule; and (iii) all other assets reflected in the Company's books and
records as being owned by the Company. 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 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 the Statement Date. 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 the Statement
Date and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from bona fide transactions entered into in
the ordinary course of business, (ii) are current and will be collected in
full when due, without any counterclaim or set off (net of an allowance for
doubtful accounts not to exceed $25,000 in the aggregate).
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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. 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. The Company is not obligated to make any payment to any Person for
the use of any Company Proprietary Asset. The Company has not developed
jointly with any other Person any Company Proprietary Asset with respect to
which such other Person has any rights. Portions of the Company Proprietary
Assets are derived from the public domain or are freeware, and no ownership
is asserted by the Company or the Shareholders with respect to such portions.
(b) The Company has taken all reasonable 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. The Company has not
(other than pursuant to license agreements on the Company's standard form or
otherwise identified in Part 2.10(a)(ii) 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) To the best knowledge of the Company and the Shareholders,
none of the Company Proprietary Assets infringes or conflicts with any
Proprietary Asset owned or used by any other Person. To the best knowledge
of the Company and the Shareholders, the Company is
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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 and the
Shareholders, 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) (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 made to the
Company or the Shareholders 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 and
the Shareholders, 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. (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) (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 the Special Terms of Employment 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 the form of the
Transfer of Copyright Agreement previously delivered to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies (except for
Company contracts individually in an amount or having a value less than
$10,000):
(i) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset (other than any software license in the Company's standard
form);
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(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) each Company Contract constituting or relating to a
Government Contract or Government Bid (other than any software license in the
Company's standard form);
(xi) any other Company Contract that was entered into
outside the ordinary course of business or was inconsistent with the
Company's past practices;
(xii) 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; and
(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.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" 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 (b) of the Disclosure
Schedule provides an accurate description of the terms of
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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 and the
Shareholders, 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(c) of the Disclosure Schedule:
(i) to the best of the knowledge of the Company and the
Shareholders, 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 and the Shareholders, 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 and the
Shareholders, 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 inception, the Company has not received any
notice or other communication regarding any actual or possible violation or
breach of, or default under, any Company Contract; and
(iv) the Company has not waived any of its material rights
under any Material Contract.
(d) Except as set forth in Part 2.10(d) of the Disclosure
Schedule, 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(f) 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, 1998 and not in the
ordinary course of business.
(g) Part 2.10(g) of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
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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 or accrued salaries
that have been incurred by the Company since the Statement Date 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. To the best knowledge of the
Company and the Shareholders, the Company is, and has at all times since
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. Since 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 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 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 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 inception.
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(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 the Statement Date 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. 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.
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) 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. 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. 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 employee of the Company ("Employee"), except
for Plans which would not
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require the Company to make payments or provide benefits having a value in
excess of $10,000 in the aggregate.
(b) The Company does not maintain, sponsor or contribute to, and,
to the best of the knowledge of the Company and the Shareholders, 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);
(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 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 and the Shareholders, 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
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meaning of Section 414(m) of the Code. To the best of the knowledge of the
Company and the Shareholders, 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) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities
on the Unaudited Interim Balance Sheet, and (iii) benefits the full cost of
which are borne by current or former Employees (or the Employees'
beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in
all material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and neither the Company nor any of the Shareholders is aware
of any reason why any such determination letter should be revoked.
(k) 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.
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(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) The Company has good labor relations, and none of the
Shareholders has any reason to believe 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. To the best knowledge of the Company, 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
and Shareholders, 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 and the Shareholders, 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 Schedules. 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.
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Since 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. (a) No Related Party has, and no
Related Party has at any time since 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 inception
been, indebted to the Company; (c) since 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 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 of the Shareholders; (ii)
each individual who is, or who has at any time since inception been, an
officer of the Company; (iii) each member of the immediate family of each of
the individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any
trust or other Entity (other than the Company) in which any one of the
individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or
in which more than one of such individuals collectively hold), beneficially
or otherwise, a material voting, proprietary or equity interest.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and to the best
knowledge of the Company and the Shareholders, 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 and the Shareholders, 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) 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. None of the Shareholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business or to any of the
assets owned or used by the Company. To the best of the knowledge of the
Company and the Shareholders, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other
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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. 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. 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) to the best knowledge of the Company and the Shareholders,
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) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of the Company's Stock Option
Plan or the option agreements outstanding thereunder; or
(f) 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,
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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 otherwise provided for in this Agreement for filings related to the
execution of this Agreement and as may be required upon or after the Closing,
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.
2.22 FULL DISCLOSURE. This Agreement (including the Disclosure Schedule)
does not, and the Shareholders' Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact or
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder hereby represents and warrants to Parent and Merger Sub as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company and the Shareholders set forth
in Section 2 of this Agreement):
3.1 REQUISITE POWER AND AUTHORITY. Shareholder has all necessary power
and authority under all applicable provisions of law to execute and deliver
this Agreement and to carry out its provisions. All action on Shareholder's
part required for the lawful execution and delivery of this Agreement has
been or will be effectively taken prior to the Closing. Upon execution and
delivery, this Agreement will be the valid and binding obligation of
Shareholder, enforceable in accordance with its terms.
3.2 INVESTMENT REPRESENTATIONS. Shareholder understands that shares of
Parent Common Stock to be issued in the Merger (the "Shares") have not been
registered under the Securities Act. Shareholder also understands that the
Shares are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Shareholder's
representations contained in this Agreement. Shareholder hereby represents
and warrants as follows:
(a) SHAREHOLDER BEARS ECONOMIC RISK. Shareholder has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to Parent so that he is capable of evaluating
the merits and risks of his investment in the Company and has the capacity to
protect his own interests. Shareholder must bear the economic risk of this
investment indefinitely unless the Shares are registered pursuant to the
Securities Act, or an exemption from registration is available. Shareholder
understands that, other than as required pursuant to the Registration Rights
Agreement, Parent has no present intention of registering the Shares.
Shareholder also understands that there is no assurance that
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any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow Shareholder to
transfer all or any portion of the Shares under the circumstances, in the
amounts or at the times Shareholder might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Shareholder is acquiring the
Shares for Shareholder's own account for investment only, and not with a view
towards their distribution.
(c) SHAREHOLDER CAN PROTECT ITS INTEREST. Shareholder represents
that by reason of his business or financial experience, Shareholder has the
capacity to protect his own interests in connection with the transactions
contemplated in this Agreement. Further, Shareholder is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement.
(d) PARENT INFORMATION. Shareholder has received and read the
Parent SEC Documents and has had an opportunity to discuss Parent's business,
management and financial affairs with directors, officers and management of
Parent and has had the opportunity to review Parent's operations and
facilities. Shareholder has also had the opportunity to ask questions of and
receive answers from, Parent and its management regarding the terms and
conditions of this investment.
(e) RULE 144. Shareholder acknowledges and agrees that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
Shareholder has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market (as said term is
defined under the Exchange Act) and the number of shares being sold during
any three-month period not exceeding specified limitations.
(f) RESIDENCE. Shareholder resides in the state or province
identified in the address of Shareholder set forth on Exhibit A.
3.3 TRANSFER RESTRICTIONS. Each Shareholder acknowledges and agrees
that the Shares are subject to restrictions on transfer as follows:
(a) Each Shareholder agrees not to make any disposition of all or
any portion of the Shares unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
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(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Shareholder shall have notified the
Company of the proposed disposition and shall have furnished the Company with
a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such Shareholder
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act. It is agreed that the
Company will not require opinions of counsel or require subsequent
transferees to be bound by the terms of this Agreement for transactions made
pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Shareholder which is to the Shareholder's
family member or trust for the benefit of such Shareholder; provided that in
each case the transferee will be subject to the terms of this Agreement to
the same extent as if he were an original Shareholder hereunder.
3.4 ACCOUNTING TREATMENT. Shareholder understands and agrees that it is
intended that the Merger will be treated as a "pooling of interests" in
accordance with generally accepted accounting principles and the applicable
General Rules and Regulations published by the SEC. Shareholder further
understands that Shareholder may be deemed to be an "affiliate" of the
Company for purposes of application of the pooling-of-interests requirements,
although nothing contained herein should be construed as an admission of
either such conclusion. Accordingly, the shares of Company Common Stock
held, and Parent Common Stock to be held, may only be disposed of in
conformity with the limitations described hereon.
3.5 RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS.
Shareholder has been informed that the treatment of the Merger as a pooling
of interests for financial accounting purposes is dependent upon the accuracy
of Shareholder's representations and warranties set forth herein, and upon
Shareholder's compliance with Shareholder's covenants set forth herein.
Shareholder understands that the representations, warranties and covenants of
Shareholder set forth herein will be relied upon by Parent, the Company and
their respective counsel and accounting firms.
3.6 POOLING OF INTEREST. Notwithstanding any other provision of this
Agreement to the contrary, Shareholder will not sell, transfer, exchange,
pledge or otherwise dispose of, or in any other way reduce Shareholder's risk
of ownership or investment in, or make any offer or agreement relating to any
of the foregoing with respect to, any Company Common Stock or any rights,
options or warrants to purchase Company Common Stock, or any Parent Common
Stock: (i) during the thirty-day period immediately preceding the Closing
Date of the Merger and (ii) until such time after the Effective Time of the
Merger as Parent has publicly released a report including the combined
financial results of Parent and for a period of at least thirty days of
combined operations of Parent and the Company within the meaning of
Accounting Series Release No. 130, as amended, of the SEC. Nothing in this
paragraph will be deemed to prohibit charitable contributions of such
securities without consideration to transferees who agree to all of the
restrictions in this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub jointly and severally represent and warrant
to the Company and the Shareholders as follows:
4.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement
(on a form other than Form S-8) and definitive proxy statement filed by
Parent with the SEC between November 21, 1996 and the date of this Agreement
(the "Parent SEC Documents"). As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing): (i) each of the Parent SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(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.
4.2 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 shareholders is needed to approve the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
4.3 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.
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4.4 ORGANIZATION AND STANDING. Each of the Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business
as now conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure
to so qualify would have a Material Adverse Effect. Whenever used in this
Section 4, "Material Adverse Effect" shall mean a material adverse effect on
the business, properties, prospects, condition (financial or otherwise) or
results in operations of Parent and its subsidiaries, taken as a whole.
4.5 AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) The execution and delivery by each of Parent and Merger Sub,
as the case may be, of this Agreement does not, and the performance and
consummation of the Transactions will not, result in or give rise to (with or
without the giving of notice or the lapse of time, or both) any conflict
with, breach or violation of, or default, termination, forfeiture or
acceleration of obligations under, any terms or provisions of its (i)
Certificate of Incorporation or Bylaws, as the case may be, (ii) to the best
of Parent's knowledge, any statute, rule, regulation or any judicial,
governmental, regulatory or administrative decree, order or judgment
applicable to them, or (iii) any material agreement, lease or other
instrument to which its is a party or to which it or any of its assets may be
bound and which has been filed as an exhibit to any of the Parent SEC
Documents.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required
by or with respect to Parent or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation by Parent or Merger Sub of
the transactions contemplated hereby or thereby, except for (a) the filing of
this Agreement and officers' certificates with the Delaware Secretary of
State and the North Carolina Secretary of State and appropriate documents
with the relevant authorities of other states in which Parent and Merger Sub
are qualified to do business, (b) such consents, approvals orders,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the offer and sale of
Parent Common Stock pursuant to this Agreement, (c) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the HSR Act.
(c) This Agreement is a legal, valid and binding obligation of
Parent and/or Merger Sub, enforceable against them in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general equitable principles.
4.6 CAPITALIZATION. The authorized capital stock of Parent consists of
35,000,000 shares of Parent Common Stock and 5,000,000 shares of Parent
Preferred Stock. At the close of business of January 14, 1998, 8,436,456
shares of Parent Common Stock and no shares of Parent Preferred Stock were
outstanding. The Parent Common Stock is listed on the Nasdaq National
Market. All the outstanding shares of Parent Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. The shares of
Parent Common Stock to be
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issued to the Company as contemplated hereunder are (i) duly authorized and
(ii) when issued and exchanged pursuant to the terms of this Agreement, will
be validly issued, fully paid, nonassessable and not subject to any
preemptive rights. The authorized capital stock of Merger Sub consists of
100 shares of common stock, all of which are validly issued, fully paid and
nonassessable and owned by Parent. Except for the shares issuable pursuant
to Parent's equity incentive plans, there are not any options, warrants,
calls, conversion rights, commitments or agreements of any character to which
Parent or Merger Sub is a party or by which either of them may be bound
obligating Parent to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the capital stock of Parent or obligating
Parent to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement.
4.7 COMPLIANCE WITH OTHER INSTRUMENTS. Parent is not in violation of
any term of its Certificate of Incorporation or Bylaws, or in any material
respect of any agreement filed as an exhibit to any registration statements
or reports filed with the SEC by Parent, and to the best of its knowledge, is
not in violation of any order, statute, rule or regulation applicable to
Parent. To the best of Parent's knowledge, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will not conflict with or result in any violation of any material statute,
law, rule, regulation, judgment, order, decree or ordinance applicable to
Parent or Merger Sub or their respective properties or assets, or conflict
with or result in any breach or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit, under (i)
any provision of the Certificate of Incorporation or Bylaws of parent or
Merger Sub or (ii) any material agreement, contract, note, mortgage,
indenture, lease, instrument, permit, concession, franchise or license to
which Parent or Merger Sub is a party or by which Parent or Merger Sub or
their respective properties or assets may be bound or affected and filed as
an exhibit to any registration statement or report filed with the SEC by
Parent.
4.8 NO MATERIAL ADVERSE CHANGE. Since September 30, 1997, Parent has
conducted its business in the ordinary course and there has not occurred: (i)
any material adverse change in the business or properties of the Parent; (ii)
any amendments or changes in the Certificate of Incorporation or Bylaws of
Parent or Merger Sub; (iii) any damage, destruction or loss, whether covered
by insurance or not, materially and adversely affecting the properties or
businesses of Parent; or (iv) any sale of a material amount of property by
Parent, except in the ordinary course of business.
4.9 ACCOUNTING MATTERS. To the best of Parent's knowledge, neither
Parent nor any of its affiliates has taken or agreed to take any action that
would adversely affect the ability of Parent to account for the transactions
contemplated hereunder as a pooling of interests.
4.10 LITIGATION. To the best knowledge of Parent, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or threatened,
against Parent or Merger Sub which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions
contemplated hereunder.
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4.11 ENVIRONMENTAL MATTERS. To the best knowledge of Parent, Parent is
in compliance in all material respects with all applicable Environmental
Laws, which compliance includes the possession by Parent of all permits and
other Governmental Authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof. Parent 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 Parent is not in compliance with any Environmental Law, and, to the best
of the knowledge of Parent, there are no circumstances that may prevent or
interfere with Parent's compliance with any Environmental Law in the future.
To the best of the knowledge of Parent, no current or prior owner of any
property leased or controlled by Parent 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 Parent is not in compliance with any Environmental Law. For
purposes of this Section 4.11: (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
regulations 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.
5. CERTAIN COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 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.
5.2 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 reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
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(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, other than distributions to Shareholders made to cover their proportional
tax liability incurred as Shareholders of the Company, and shall not repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities;
(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, (y) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options, and (z) to issue shares of Company
Common Stock upon the conversion of shares of Series A Preferred Stock);
(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 Stock Option
Plan, (ii) any provision of any agreement evidencing any outstanding Company
Option or SAR, or (iii) any provision of any restricted stock purchase
agreement, other than those Company Options that will automatically accelerate
exercisability upon consummation of the Merger;
(h) neither the Company nor any of the Stockholders shall amend or
permit the adoption of any amendment to the Company's Certificate of
Incorporation or bylaws, or effect or permit the Company to become a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split 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 outside of
the ordinary course of business, 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 $50,000 per month, excluding the
purchase of the Objective Edit software;
(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 any
material right or remedy under, any such Contract;
(l) except for transactions in the ordinary course of business, the
Company shall not (i) acquire, lease or license any right or other asset from
any other Person (except as
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otherwise required under this Agreement), (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 and may, consistent with its past practices, allow employees to
acquire Company Common Stock in exchange for promissory notes upon exercise of
Company Options), or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not, without the prior written consent of
Parent, (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, other than as disclosed in the Disclosure Schedules, or
(iii) hire any new employee whose aggregate annual compensation is expected to
exceed $100,000;
(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 material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
5.3 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 or any of the Stockholders 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 or any of the Stockholders 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;
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(iii) any breach of any covenant or obligation of this Agreement
by the Company or any of the Shareholders; 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 5.3(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) except as
provided in Section 9.2, determining the accuracy of any of the representations
and warranties made by the Company or any of the Shareholders in this Agreement,
or (ii) determining whether any of the conditions set forth in Section 6 has
been satisfied.
5.4 NO NEGOTIATION. During the Pre-Closing Period, neither the
Company nor any of the Stockholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material
inquiry, proposal or offer relating to a possible Acquisition Transaction that
is received by the Company or any of the Stockholders during the Pre-Closing
Period.
5.5 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.
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5.6 POOLING OF INTERESTS. No party to this Agreement shall take any
action that could reasonably be expected to have an adverse effect on the
ability of Parent to account for the Merger as a "pooling of interests."
5.7 GENERAL RELEASE. Separate and apart from, and not in
consideration of the Parent Common Stock issued to the Shareholders under
Section 1.5 under this Agreement, and in order to induce Parent and the Company
to consummate the transactions contemplated by this Agreement, each Shareholder
severally covenants and agrees as follows:
(a) RELEASE. Each Shareholder, for himself and for each of such
Shareholder's Associated Parties (as defined in Section 5.7(b)), hereby
generally, irrevocably, unconditionally and completely releases and forever
discharges each of the Releasees (as defined in Section 5.7(b)) from, and hereby
irrevocably, unconditionally and completely waives and relinquishes, each of the
Released Claims (as defined in Section 5.7(b)).
(b) DEFINITIONS.
(i) The term "Associated Parties," when used herein with
respect to a Shareholder, shall mean and include: (i) such Shareholder's
predecessors, successors, executors, administrators, heirs and estate; (ii) such
Shareholder's past, present and future assigns, agents and representatives;
(iii) each entity that such Shareholder has the power to bind (by such
Shareholder's acts or signature) or over which such Shareholder directly or
indirectly exercises control; and (iv) each entity of which such Shareholder
owns, directly or indirectly, at least 50% of the outstanding equity,
beneficial, proprietary, ownership or voting interests.
(ii) The term "Releasees" shall mean and include: (i) Parent;
(ii) the Company; (iii) each of the direct and indirect subsidiaries of Parent
and the Company; (iv) each other affiliate of Parent and the Company; and (v)
the successors and past, present and future assigns, directors, officers,
employees, agents, attorneys and representatives of the respective entities
identified or otherwise referred to in clauses "(i)" through "(iv)" of this
sentence, other than the Shareholders.
(iii) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by a Shareholder in such Shareholder's capacity as
a shareholder, director, officer or employee of the Company or in any other
capacity; and (iii) any claim, right or cause of action based upon any breach of
any express, implied, oral or written contract or agreement.
(iv) The term "Released Claims" shall mean and include each and
every Claim that (i) any Shareholder or any Associated Party of any Shareholder
may have had in the past, may now have or may have in the future against any of
the Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of the Closing. The term "Released Claims" shall not include any claims arising
out of or related
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to the Shareholders' or any Shareholder's Associated Party's rights under
this Agreement or the transactions contemplated hereby (excluding only such
Shareholder's rights, if any, under the Merger Agreement).
(c) CIVIL CODE SECTION 1542. Each Shareholder (a) represents,
warrants and acknowledges that such Shareholder has been fully advised by his
attorney of the contents of Section 1542 of the Civil Code of the State of
California, and (b) hereby expressly waives the benefits thereof and any rights
such Shareholder may have thereunder. Section 1542 of the Civil Code of the
State of California provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
Each Shareholder also hereby waives the benefits of, and any rights such
Shareholder may have under, any statute or common law principle of similar
effect in any jurisdiction.
(d) FURTHER REPRESENTATIONS AND WARRANTIES. Each Shareholder further
represents and warrants that:
(i) such Shareholder has not assigned, transferred, conveyed
or otherwise disposed of any Claim against any of the Releasees, or any direct
or indirect interest in any such Claim, in whole or in part;
(ii) to the best of such Shareholder's knowledge, no other
person or entity has any interest in any of the Released Claims;
(iii) no Associated Party of such Shareholder has or had any
Claim against any of the Releasees;
(iv) no Associated Party of such Shareholder will in the future
have any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(v) this General Release has been duly and validly executed
and delivered by such Shareholder;
(vi) this General Release is a valid and binding obligation of
such Shareholder and such Shareholder's Associated Parties, and is enforceable
against such Shareholder and each of such Shareholder's Associated Parties in
accordance with its terms;
(vii) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of such Shareholder, threatened against such Shareholder or any of such
Shareholder's Associated Parties that challenges or
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would challenge the execution and delivery of this General Release or the
taking of any of the actions required to be taken by such Shareholder under
this General Release;
(viii) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Shareholder or any of such
Shareholder's Associated Parties is a party or by which such Shareholder or any
of such Shareholder's Associated Parties is bound, or (ii) result in a violation
or any law, rule, regulation, treaty, ruling, directive, order, arbitration
award, judgment or decree to which such Releasor or any of such Shareholder's
Associated Parties is subject; and
(ix) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Shareholder or any of such
Shareholder's Associated Parties in connection with the execution and delivery
of this General Release or the performance hereof.
(e) INDEMNIFICATION. Without in any way limiting any of the rights
or remedies otherwise available to any Releasee, each Shareholder shall
severally indemnify and hold harmless each Releasee against and from any loss,
damage, injury, harm, detriment, lost opportunity, liability, exposure, claim,
demand, settlement, judgment, award, fine, penalty, tax, fee, charge or expense
(including attorneys' fees) that is directly or indirectly suffered or incurred
at any time by such Releasee, or to which such Releasee otherwise becomes
subject at any time, and that arises directly or indirectly out of or by virtue
of, or relates directly or indirectly to, (a) any failure on the part of such
Shareholder to observe, perform or abide by, or any other breach of, any
restriction, covenant, obligation, representation, warranty or other provision
contained herein, or (b) the assertion or purported assertion of any of the
Released Claims by such Shareholder or any of such Shareholder's Associated
Parties.
(f) MISCELLANEOUS.
(i) If any provision of this Section or any part of any such
provision is held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity or
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Section. If any provision of this
Section or any part of such provision is held to be unenforceable against any
Shareholder, then the unenforceability of such provision or part thereof against
such Releasor shall not affect the enforceability thereof against any other
Shareholder. Each provision of this Section is separable from every other
provision of this Section and this Agreement, and each part of each provision of
this Section is separable from every other part of such provision.
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(ii) Any legal action or other legal proceeding relating to
this Section or the enforcement of any provision of this Section may be brought
or otherwise commenced by any Releasee in any state or federal court located in
the State of Colorado. Each Shareholder:
(1) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the State of Colorado
in connection with any such legal proceeding;
(2) agrees that each state and federal court located in the
State of Colorado shall be deemed to be a convenient forum; and
(3) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in the State of Colorado, any claim that such Shareholder is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Section or the subject matter of this Section may not be
enforced in or by such court.
Nothing contained in this Section shall be deemed to limit or otherwise affect
the right of any Releasee (1) to commence any legal proceeding or to otherwise
proceed against any of the Shareholders or any other person or entity in any
other forum or jurisdiction, or (2) to raise this Release as a defense in any
legal proceeding in any other forum or jurisdiction.
5.8 NON-COMPETITION. Separate and apart from, and not in consideration
of the Parent Common Stock issued to the Shareholders under Section 1.5 under
this Agreement, and in consideration of the payment described in Section 7.5
and in order to induce Parent to consummate the transactions contemplated by
this Agreement, each Shareholder severally covenants and agrees as follows:
(a) ACKNOWLEDGMENTS BY SHAREHOLDER. Shareholder acknowledges that
the promises and restrictive covenants he is providing in this Section are
reasonable and necessary to Parent's protection of its legitimate interests
in its acquisition of the Company pursuant to this Agreement, including but
not limited to the Company's goodwill. Shareholder acknowledges that
Shareholder is exchanging all of Shareholder's shares of stock of the Company
for shares of Parent Common Stock in this transaction.
(b) NONCOMPETITION. During the period commencing on the Closing Date
and continuing until the date one (1) year after the Closing Date (the
"Noncompete Period"), Shareholder shall not, directly or indirectly, provide any
service (as an employee, consultant or otherwise), support, product or
technology to any person or entity, if such service, support, product or
technology involves or relates to, in any material respect, object-oriented
developer tools for Windows programmers (each, a "Restricted Business");
provided, however, that nothing in this Section 5.8 shall prevent Shareholder
from providing services, support, products or technology to any person or entity
while employed by the Company, Parent or any of Parent's Subsidiaries, so long
as Shareholder is providing such services, support, products and technology
solely in Shareholder's capacity as, and solely in the course of discharging
Shareholder's duties
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and responsibilities as, an employee of the Company, Parent or any of
Parent's Subsidiaries; provided further, that nothing shall prevent
Shareholder from writing books, magazine or journal articles, publicly
speaking or providing training in the Restricted Business.
(c) NONSOLICITATION. Shareholder further agrees that during the
Noncompete Period, Shareholder will not:
(i) directly or indirectly, personally or through others,
encourage, induce, attempt to induce, solicit or attempt to solicit (on
Shareholder's own behalf or on behalf of any other person or entity) any
employee of the Company, Parent or any of Parent's subsidiaries to leave his or
her employment with the Company, Parent or any or Parent's subsidiaries;
(ii) employ, or permit any entity over which Shareholder
exercises any control, to employ such employee who has terminated his or her
employment with the Company, Parent or any of Parent's subsidiaries during the
Noncompete Period; or
(iii) directly or indirectly, personally or through others,
approach, contact, solicit, advise or do (or attempt to do) business with, or
otherwise interfere with the relationship of the Company, Parent or any of
Parent's subsidiaries with, any person or entity who is, was or is reasonably
anticipated to become a customer or client of the Company, Parent or any of
Parent's subsidiaries with respect to any Restricted Business.
(d) INDEPENDENCE OF OBLIGATIONS. The covenants of Shareholder set
forth in this Section shall be construed as independent of any other agreement
or arrangement between Shareholder, on the one hand, and the Company or Parent,
on the other. The existence of any claim or cause of action by Shareholder
against the Company or Parent shall not constitute a defense to the enforcement
of such covenants against Shareholder.
(e) SPECIFIC PERFORMANCE. Shareholder agrees that in the event of
any breach or threatened breach by Shareholder of any covenant, obligation or
other provision contained in this Section, Parent and the Company shall be
entitled (in addition to any other remedy that may be available to them) 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.
(f) NON-EXCLUSIVITY. The rights and remedies of Parent and the
Company under this Section are not exclusive of or limited by any other rights
or remedies which Parent or the Company may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not alternative).
Without limiting the generality of the foregoing, the rights and remedies of
Parent and the Company under this Section, and the obligations and liabilities
of Shareholder hereunder, are in addition to their respective rights, remedies,
obligations and liabilities under the law of unfair competition,
misappropriation of trade secrets and the like. This Agreement does not limit,
and is not limited by, the terms of the Employment Agreement or the terms of any
other agreement between Shareholder and Parent or the Company or any affiliate
of Parent or the Company.
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(g) INDEMNIFICATION. Without in any way limiting any of the rights
or remedies otherwise available to Parent or the Company, Shareholder shall hold
harmless and indemnify each of Parent and the Company from and against, and
shall compensate and reimburse each of Parent and the Company for, any loss,
damage, injury, decline in value, lost opportunity, liability, exposure, claim,
demand, settlement, judgment, award, fine, penalty, tax, fee (including
reasonable attorneys' fees) charge, cost (including costs of investigation) or
expense of any nature (collectively, the "Damages") which are directly or
indirectly suffered or incurred at any time by Parent or the Company, or to
which Parent or the Company otherwise becomes subject (regardless of whether or
not such Damages relate to a third-party claim), and that arise from or are
directly or indirectly connected with any breach of any covenant or obligation
of Shareholder contained in this Section.
(h) SEVERABILITY. If any provision of this Section or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) such
invalidity of enforceability of such provision or part thereof shall not affect
the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Section is separable from every other provision of this
Section, and each part of each provision of this Section is separable from every
other part of such provision.
(i) AMENDMENTS. This Section of the Agreement may not be amended,
modified, altered, or supplemented other than by means of a written instrument
duly executed and delivered on behalf of Parent and each Shareholder.
5.9 PUBLIC ANNOUNCEMENTS. Neither the Company nor any of the
Shareholders shall 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 Parent will use reasonable efforts to consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger.
5.10 PROPRIETARY INFORMATION AGREEMENTS. At or prior to the Closing,
each of the Shareholders and each of the Employees shall execute and deliver to
the Company and Parent a Proprietary Information Agreement in the Company's
standard form.
5.11 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.
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5.12 REGISTRATION RIGHTS AGREEMENT. At the Closing, Parent and each of
the Shareholders shall execute and deliver the Registration Rights Agreement in
the form of Exhibit D.
5.13 REMOVAL OF PERSONAL GUARANTEES. Parent, the Company and the
Shareholders shall take all commercially reasonable efforts to cause Wachovia
Bank to release the Shareholders from their personal guarantees with respect to
(i) the Company's line of credit with Wachovia Bank (ii) the Company's Merchant
accounts with American Express and Visa/MasterCard, and (iii) the Company's
leases with AT&T and Advanta Atcom.
5.14 ASSIGNMENT OF INTELLECTUAL PROPERTY. The Company shall use their
best efforts to secure Objective Edit for a price not to exceed $35,000. In the
event that the Company is unable to secure Objective Edit for $35,000 or less,
the threshold figure of $250,000 set forth in Section 9.3(a) shall be reduced by
$35,000 and shall thereafter be $215,000.
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 and the Shareholders 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 and the Shareholders are required to comply with or to perform
under this Agreement 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 affirmative vote of 100% of the shares of Company
Common Stock entitled to vote with respect thereto.
6.4 CONSENTS. All Consents required to be obtained by the Company or
the Shareholders 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.
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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) Escrow Agreement in the form of Exhibit C, executed by the
Shareholders;
(b) Proprietary Information Agreements in the Company's standard
form, executed by the Shareholders and those Employees who will continue their
employment with the Company after the Merger;
(c) the Registration Rights Agreement in the form of Exhibit D,
executed by the Shareholders;
(d) a legal opinion of Daniels & Daniels, dated as of the Closing
Date, in the form of Exhibit E;
(e) a certificate executed by the Shareholders and containing the
representation and warranty of each Shareholder that each of the
representations and warranties set forth in Sections 2 and 3 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 and 6.4 have been duly
satisfied (the "Shareholders' Closing Certificate");
(f) a letter from KPMG Peat Marwick, dated as of the Closing Date,
confirming that Parent may account for the Merger as a "pooling of interests" in
accordance with generally accepted accounting principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of the
SEC; and
(g) a letter from Coopers & Lybrand, dated as of the Closing Date,
confirming management's assertion that the Company is "poolable" in accordance
with generally accepted accounting principles, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC; and
(h) written resignations of all directors of the Company, effective
as of the Effective Time.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.10.
6.7 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. No
action shall have been taken, and no statute, rule, regulation or order shall
have been enacted, promulgated or issued or deemed applicable to the Merger by
any governmental entity which would (i) make the consummation of the Merger
illegal; (ii) prohibit Parent's or the Company's ownership or operation of all
or a material portion of the business or
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assets of Parent or the Company, or compel Parent or the Company to dispose
of or hold separate all or a material portion of the business or assets of
the Company or Parent as a result of the Merger or (iii) render Parent,
Merger Sub or the Company unable to consummate the Merger, except for any
waiting provisions.
6.8 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.
6.9 DUE DILIGENCE. Parent shall have completed business, technical,
legal and financial due diligence on the Company and its products and the
results of such due diligence shall be acceptable to Parent.
6.10 AUDITED FINANCIALS. The Company shall deliver audited financial
statements as of December 31, 1997 and for the one-year period then ended and
unaudited financial statements for each quarter in the year ended December 31,
1997, prepared in accordance with generally accepted accounting principles.
Such audited financial statements shall include an opinion of the Company's
accountants that such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
their results of operations and their cash flows for the one-year period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Such financial statements shall show that for the quarter ended December 31,
1997 the Company's total revenue was at least $1.650 million and its net income,
before taxes, was at least $340,000. Such financial statements shall also show
that for the year ended December 31, 1997 the Company's total revenue was at
least $4.5 million and its net income, before taxes, was at least $950,000.
6.11 VALUATION REPORT. Wessels, Arnold & Henderson L.L.C. shall have
delivered to Parent a report concluding that the valuation of the Company is
commensurate with the consideration being offered by Parent.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders 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 shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(without giving effect to any materiality or similar qualifications contained in
such representations and warranties).
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7.2 PERFORMANCE OF COVENANTS AND OBLIGATIONS. 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, including the obligation of Parent to secure
any required Consents (if any), shall have been complied with and performed in
all respects.
7.3 DOCUMENTS. The Company and the Shareholders shall have received
the following documents:
(a) the Escrow Agreement in the form of Exhibit C, executed by
Parent;
(b) the Registration Rights Agreement in the form of Exhibit D,
executed by Parent;
(c) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in the form of Exhibit F; and
(d) a certificate executed by Parent and containing the
representation and warranty of Parent that each of the representations and
warranties set forth in Section 4 is accurate in all respects as of the Closing
Date as if made on the Closing Date and that the conditions set forth in
Sections 7.1, 7.2, and 7.3 have been duly satisfied (the "Parent's Closing
Certificate");
7.4 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. No
action shall have been taken, and no statute, rule, regulation or order shall
have been enacted, promulgated or issued or deemed applicable to the Merger by
any governmental entity which would (i) make the consummation of the Merger
illegal; (ii) prohibit Parent's or the Company's ownership or operation of all
or a material portion of the business or assets of Parent or the Company, or
compel Parent or the Company to dispose of or hold separate all or a material
portion of the business or assets of the Company or Parent as a result of the
Merger or (iii) render Parent, Merger Sub or the Company unable to consummate
the Merger, except for any waiting provisions.
7.5 PAYMENT FOR NON COMPETITION AGREEMENTS.
Parent shall have paid the following amounts in consideration of
the covenant not to compete made by each of the Shareholders: 1) M. Scot
Wingo - $50,000; 2) Aris Antanas Buinevicius - $65,000; and 3) R. Dean
Hallman - $65,000.
7.6 TERMINATION OF STOCK APPRECIATION RIGHTS. Parent shall have paid
to each SAR holder in cash, at or prior to the Closing, an amount equal to fifty
percent (50%) of the appreciation in value of the Company's Common Stock from
the date the SAR was granted to the date of Closing. For the purpose of valuing
the appreciation of the SAR, Parent shall use the
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closing price of Parent Common Stock on the date hereof, as adjusted to
reflect the exchange ratio hereunder.
7.7 TAX OPINION. The Shareholders shall have received an opinion of
counsel of their choosing that for federal income tax purposes, the Merger will
constitute a reorganization within the meaning of Section 368 of the Code.
Notwithstanding the foregoing, in the event that the Company and the
Shareholders are unable to secure the required opinion because they cannot
engage satisfactory counsel to render such opinion (for any reason other than
the fact that, for federal income tax purposes, the Merger does not constitute a
reorganization within the meaning of Section 368 of the Code), this Section 7.6
shall be of no force and effect.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to
the Closing:
(a) by Parent if:
(i) at or after the Scheduled Closing Time if any condition
set forth in Section 6 has not been satisfied by the Scheduled Closing Time (or
any amendment thereto) (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);
(ii) Parent reasonably determines on a good faith basis 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);
(iii) the Closing has not taken place on or before February 28,
1998 (or any amendment thereto) (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);
(iv) M. Scot Wingo, Aris Antanas Buinevicius or R. Dean Hallman
ceases to be employed full-time by the Company;
(v) more than eight (8) of the employees of the Company listed
on Schedule 2.10(a)(i) cease to be employed full-time by the Company, excluding
those employees noted on the Disclosure Schedule to be on probation or employed
by the Company in a sales capacity;
(vi) The Company fails to achieve at least 50% of its projected
revenue for the quarter ending March 31, 1998 by February 28, 1998.
(b) by the Company or the Shareholders if (i) at or after the
Scheduled Closing Time if any condition set forth in Section 7 has not been
satisfied by the Scheduled Closing Time, (ii) the Company reasonably determines
on a good faith basis that the timely satisfaction of any condition set forth in
Section 7 has become impossible (other than as a result
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of any failure on the part of the Company or any of the Stockholders 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 (iii) the
Closing has not taken place on or before February 28, 1998 (or any amendment
thereto) (other than as a result of the failure on the part of the Company or
any of the Stockholders to comply with or perform any covenant or obligation
set forth in this Agreement); or
(c) by the mutual consent of Parent, the Company and the
Shareholders.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), 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 or the Shareholders wish to terminate this Agreement
pursuant to Section 8.1(b), the Company or the Shareholders shall deliver to
Parent a written notice stating that the Company or the Shareholders is
terminating this Agreement and setting forth a brief description of the basis on
which the Company or the Shareholders is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 8.1, all further obligations of the parties under this Agreement
shall terminate; provided, however, that: (a) neither 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 5.9.
8.4 TERMINATION FEE. If Parent refuses to complete the Closing for
any reason other than (i) the Company's or the Shareholders' failure to meet the
Closing conditions set forth in Section 6 (other than the pursuant to the
completion of due diligence closing condition set forth in Section 6.9), (ii) a
breach of the Agreement by either the Company or the Shareholders, or (iii)
pursuant to the Termination provisions of this Section 8; Parent shall pay to
the Company a termination fee of $500,000. If Parent refuses to complete the
closing because the condition set forth in Section 6.11 is not met, Parent shall
pay to the Company a termination fee of $100,000.
9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Shareholders
(including the representations and warranties set forth in Sections 2 and 3 and
the representations and warranties set forth in the Shareholders' Closing
Certificate) shall survive the Closing and shall expire on the first anniversary
of the Closing Date; provided, however, that if, at any time prior to the first
anniversary of the Closing Date, any Indemnitee (acting in good faith) delivers
to the Agent a written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the Shareholders
(and setting forth in reasonable detail the basis for such Indemnitee's belief
that such an inaccuracy or breach may exist) and asserting
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a claim for recovery under Section 9.2 based on such alleged inaccuracy or
breach, then the claim asserted in such notice shall survive the first
anniversary of the Closing until such time as such claim is fully and finally
resolved. All representations and warranties made by Parent and Merger Sub
shall terminate and expire as of the Effective Time, and any liability of
Parent or Merger Sub with respect to such representations and warranties
shall thereupon cease.
(b) The representations, warranties, covenants and obligations of the
Company and the Shareholders, 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 unless set forth on the
Disclosure Schedules. The representations, warranties, covenants and obligations
of Parent, and the rights and remedies that may be exercised by the Company and
the Shareholders, 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,
the Company, the Shareholders or any of their Representatives, other than the
Parent SEC Documents.
(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 and the Shareholders in this Agreement.
9.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Sections 9.1(a)
and 9.3), the Shareholders, severally and not jointly, 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 Sections 2 and 3 or in the
Shareholders' 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 or any of the Shareholders (including the covenants
set forth in Section 5); or (iii) any Legal Proceeding relating to any
inaccuracy or breach of the type referred to in clause "(i)" or "(ii)" above
(including any Legal Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 9 but excluding any Legal
Proceeding in which a final determination is made that an inaccuracy or breach
of the type referred to in "(i)" or "(ii)" above did not occur).
(b) The 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
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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 Shareholders shall not be required to make any
indemnification payment pursuant to Section 9.2(a) for any Section 9.2 Breach
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 $250,000 in the aggregate. If the total
amount of such Damages exceeds $250,000, then the Indemnitees shall be entitled
to be indemnified against the full amount of such Damages and not merely the
portion of such Damages exceeding $250,000. Notwithstanding the foregoing, the
Shareholder shall be required to make the full amount of any indemnification
payments required for Damages that arise from any individual Section 9.2 Breach
where the Damages from any such individual section 9.2 Breach are in excess of
$75,000.
(b) The maximum liability of each Shareholder under Section 9.2(a)
for breaches of the representations and warranties set forth in Sections 2 and 3
shall be equal to the product of (i) the number of shares of Parent Common Stock
received by such Shareholder in the Merger minus the number of shares such
Shareholder is entitled to register pursuant to the Registration Rights
Agreement, multiplied by (ii) the closing price of Parent Common Stock on the
Nasdaq National Market on the date hereof.
9.4 SATISFACTION OF INDEMNIFICATION CLAIM. In the event any
Shareholder shall have any liability (for indemnification or otherwise) to any
Indemnitee under this Section 9, such Shareholder shall satisfy such liability
by delivering to such Indemnitee (i) the aggregate dollar amount of such
liability or (ii) sufficient shares of Parent Common Stock, valued at the
closing price of Parent Common Stock on the Nasdaq National Market on the
Closing Date, necessary to cover the amount of such liability.
9.5 NO CONTRIBUTION. Each 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 Shareholders' Closing
Certificate.
9.6 INTEREST. Any Shareholder who is required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9
with respect to any Damages shall also be liable to such Indemnitee for interest
on the amount of such Damages (for the period commencing as of the date on which
such Shareholder first received notice of a claim for recovery by such
Indemnitee and ending on the date on which the liability of such Shareholder to
such Indemnitee is fully satisfied by such Shareholder) at a floating rate equal
to the rate of
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interest publicly announced by Bank of America, N.T. & S.A. from time to time
as its prime, base or reference rate.
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 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. 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 Shareholders;
(b) each 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 Agent (as defined in Section
10.1); provided, however, that such consent shall not be unreasonably withheld.
Parent shall give the 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 Agent shall not limit any of
the obligations of the Shareholders under this Section 8 (except to the extent
such failure materially prejudices the defense of such Legal Proceeding).
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.
47.
<PAGE>
10. MISCELLANEOUS PROVISIONS
10.1 AGENT. The Shareholders hereby irrevocably appoint M. Scot Wingo
as their agent for purposes of Section 9 (the "Agent"), and M. Scot Wingo hereby
accepts his appointment as the Agent. Parent shall be entitled to deal
exclusively with the 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
Shareholder by the Agent, and on any other action taken or purported to be taken
on behalf of any Shareholder by the Agent, as fully binding upon such
Shareholder. If the Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Shareholders, then the Shareholders
shall, within ten days after notice of such death or disability, appoint a
successor agent and, promptly thereafter, shall notify Parent of the identity of
such successor. Any such successor shall become the "Agent" for purposes of
Section 9 and this Section 10.1. If for any reason there is no Agent at any
time, all references herein to the Agent shall be deemed to refer to the
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 the Company shall
bear and pay all fees and expenses of the Shareholders incurred with respect to
(a), (b), (c) and (d) above, and PROVIDED, FURTHER, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company and the Shareholders (including all such fees, costs and expenses
incurred prior to the date of this Agreement and including the amount of all
special bonuses and other amounts that may become payable to any officers of the
Company or other Persons in connection with the consummation of the transactions
contemplated by this Agreement) exceeds $150,000 in the aggregate, such fees,
costs and expenses shall be borne and paid by the Shareholders and not by the
Company. If Closing does occur, invoices for properly documented Company and
Shareholders fees, costs and expenses submitted to Parent, either by
Shareholders or the Company, shall be paid within the later of ten (10) days of
the date of the Closing or of receipt of such invoices by Parent.
48.
<PAGE>
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent: Rogue Wave Software, Inc.
4900 Pearl East Circle, Suite 107
Boulder, CO 80301
Attention: Robert M. Holburn, Jr.
Facsimile: (303) 491-9137
if to the Company: Stingray Software, Inc.
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
Attention: M. Scot Wingo
Facsimile: (___) ___-____
with a copy to: Walter E. Daniels, Esq.
Daniels & Daniels, P.A.
P.O. Drawer 12218
Research Triangle Park, NC 27713
if to any of the Shareholders: M. Scot Wingo
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
with a copy to: Walter E. Daniels, Esq.
Daniels & Daniels, P.A.
P.O. Drawer 12218
Research Triangle Park, NC 27713
10.6 CONFIDENTIALITY. On and at all times after the Closing Date until
the date five (5) years from the Closing Date, each Shareholder shall keep
confidential, and shall not use or disclose to any other Person, any non-public
document or other non-public information in such Shareholder's possession that
relates to the business of the Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
49.
<PAGE>
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.10 GOVERNING LAW. Unless otherwise indicted to the contrary, this
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of Delaware (without giving effect to
principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any); the 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's 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), 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.
10.13 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
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 party 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
50.
<PAGE>
executed and delivered on behalf of such party; 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 party 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 parties 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 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.
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.
(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.
51.
<PAGE>
The parties hereto have caused this Agreement to be executed and
delivered as of January 19, 1998.
ROGUE WAVE SOFTWARE, INC.,
a Delaware corporation
By: /s/ Thomas Keffer
-------------------------------
Title: CEO
-------------------------------
SR ACQUISITION CORP.,
a North Carolina corporation
By: /s/ Thomas Keffer
-------------------------------
Title: CEO
-------------------------------
STINGRAY SOFTWARE, INC.,
a North Carolina corporation
By: /s/ M. Scot Wingo
-------------------------------
Title: President
-------------------------------
/s/ M. Scot Wingo
-----------------------------------
M. SCOT WINGO
/s/ Aris Antanas Buinevicius
-----------------------------------
ARIS ANTANAS BUINEVICIUS
/s/ R. Dean Hallman
-----------------------------------
R. DEAN HALLMAN
SIGNATURE PAGE
<PAGE>
EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ------------------------------------- ---------------------
<S> <C>
M. Scot Wingo 750,000
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
Aris Antanas Buinevicius 750,000
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
R. Dean Hallman 750,000
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
</TABLE>
<PAGE>
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
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.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger
and Reorganization to which this Exhibit B 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 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.
2.
<PAGE>
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Parent on behalf of the
Company and the Shareholders.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor
or higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire
any right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall
mean any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
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;
provided, however, that the Shareholders shall not be deemed to be
"Indemnitees."
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.
3.
<PAGE>
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 Shareholders' 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.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or
other intellectual property right or intangible asset; or (b) right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
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.
4.
<PAGE>
ARTICLES OF MERGER
OF SR ACQUISITION CORP.
INTO
STINGRAY SOFTWARE, INC.
Pursuant to the provisions of Section 55-11-05 of the General Statutes of
North Carolina, Stingray Software, Inc., a North Carolina corporation (the
"Surviving Corporation"), hereby submits these Articles of Merger for the
purpose of merging SR Acquisition Corp., a North Carolina corporation (the
"Merging Corporation"), into the Surviving Corporation:
(1) The merger of the Merging Corporation into the Surviving Corporation
(the "Merger") shall be effected pursuant to the terms of the Plan of
Merger in the form attached hereto as EXHIBIT A (the "Plan of
Merger").
(2) The Plan of Merger was duly approved by the sole shareholder of the
Merging Corporation and by the shareholders of the Surviving
Corporation as required by the Chapter 55 of the General Statutes of
North Carolina as of the 27th day of February, 1998.
(3) The Merger will become effective upon the filing of these Articles of
Merger with the North Carolina Secretary of State.
SURVIVING COPRORATION:
STINGRAY SOFTWARE, INC.
By: /s/ M. Scot Wingo
-------------------
Name: M. Scot Wingo
-------------------
Title: President
-------------------
1.
<PAGE>
PLAN OF MERGER
THIS PLAN OF MERGER, dated as of February 27, 1998 (the "Merger
Agreement"), is made and entered into by ROGUE WAVE SOFTWARE, INC., a Delaware
corporation ("Acquiror"), SR ACQUISITION CORP., a North Carolina corporation
("Acquiror Sub"), and STINGRAY SOFTWARE, INC., a North Carolina corporation
("Target" or "Surviving Corporation") (Target and Acquiror Sub being hereinafter
collectively referred to as the "Constituent Corporations").
RECITALS
A. Acquiror, Acquiror Sub and Target have entered into an Agreement and
Plan of Merger and Reorganization, dated as of January 19, 1998 (the
"Reorganization Agreement"), providing, among other things, for the execution
and filing of this Merger Agreement and the merger of Acquiror Sub with and into
Target upon the terms set forth in the Reorganization Agreement and this Merger
Agreement (the "Merger").
B. The respective Board of Directors of each of the Constituent
Corporations deems it advisable and in the best interests of each of such
corporations and their respective shareholders that Acquiror Sub be merged with
and into Target.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained in this Merger Agreement, Acquiror and the Constituent Corporations
hereby agree that Acquiror Sub shall be merged with and into Target in
accordance with the provisions of the laws of the State of North Carolina, upon
the terms and subject to the conditions set forth as follows:
ARTICLE I
SECTION 1. THE MERGER
1.1 FILING. This Merger Agreement, together with Articles of Merger
(the "Articles of Merger") required by the North Carolina Business Corporation
Act (the "North Carolina Law"), shall be filed by the Surviving Corporation with
the Secretary of State of the State of North Carolina at the time specified in
the Reorganization Agreement.
1.2 EFFECTIVENESS. The Merger shall become upon filing of the
Articles of Merger with the Secretary of State of the State of North Carolina.
(the "Effective Time").
1.3 MERGER. At the Effective Time, Acquiror Sub shall be merged into
Target and the separate corporate existence of Acquiror Sub shall thereupon
cease. Target shall be the Surviving Corporation in the Merger and the separate
corporate existence of Target, with all of its purposes, objects, rights,
privileges, powers, immunities and franchises, shall continue unaffected and
unimpaired by the Merger.
1.4 FURTHER ACTION. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Merger Agreement or to vest the Surviving Corporation with the full right, title
and possession to all assets, property, rights,
1.
<PAGE>
privileges, immunities, powers and franchises of either or both of the
Constituent Corporations, the officers and directors of the Surviving
Corporation are fully authorized in the name of either or both of the
Constituent Corporations or otherwise to take all such action.
ARTICLE II
SECTION 2. CORPORATE GOVERNANCE MATTERS
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Acquiror Sub in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation unless and until amended
as provided by law.
2.2 BYLAWS. The Bylaws of Acquiror Sub in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation unless
and until amended as provided by law.
2.3 DIRECTORS. The Board of Directors of the Surviving Corporation
at and after the Effective Time, each of whom will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Articles of Incorporation and Bylaws
of the Surviving Corporation, or as otherwise provided by law, shall be as
follows:
Thomas Keffer
Robert M. Holburn, Jr.
2.4 OFFICERS. The officers of the Surviving Corporation at and after
the Effective Time, each of whom will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law, are as follows:
NAME: TITLE:
----- ------
Thomas Keffer Chief Executive Officer
Michael Scally President
Robert M. Holburn, Jr. Chief Financial Officer, Secretary
ARTICLE III
SECTION 3. MANNER OF CONVERTING SHARES OF THE CONSTITUENT CORPORATIONS
3.1 CONVERSION OF TARGET COMMON STOCK. At the Effective Time, each
then outstanding share of Common Stock, no par value per share, of Target (the
"Target Common Stock"), other than shares of Target Common Stock that are held
by shareholders who have not
2.
<PAGE>
voted such shares in favor of the Merger, shall cease to be an existing and
issued share and shall become and be converted into, by virtue of the Merger
and without any action on the part of Acquiror, Acquiror Sub, Target or the
holder thereof, that number of shares of the common stock, $0.001 par value
per share, of Acquiror (the "Acquiror Common Stock") equal to the fraction:
(A) having a numerator equal to 1,701,732; and (B) having a denominator equal
to the Target Share Amount (as defined below). For purposes of this Merger
Agreement, the "Target Share Amount" shall be the aggregate number of shares
of Target Common Stock outstanding immediately prior to the Effective Time
(including any such shares that are subject to a repurchase option or risk of
forfeiture under any restricted stock purchase agreement or other agreement)
plus the aggregate number of shares of Target Common Stock subject to options
outstanding immediately prior to the Effective Time.
3.2 ACQUIROR SUB COMMON STOCK. At the Effective Time, each then
outstanding share of common stock, no par value per share, of Acquiror Sub shall
cease to be an existing and issued share and shall become and be converted into,
by virtue of the Merger and without any action on the part of Acquiror, Acquiror
Sub or Target, one share of Target Common Stock and the aggregate of such shares
shall constitute the only outstanding shares of capital stock of the Surviving
Corporation.
3.3 CLOSING OF TARGET TRANSFER BOOKS. On and after the Effective
Time, holders of certificates representing shares of Target Common Stock issued
and outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of Target and the share transfer books of Target shall be
closed with respect to shares of Target Common Stock issued and outstanding
immediately prior to the Effective Time and no further transfer of such shares
shall thereafter be made on such share transfer books. If, after the Effective
Time, valid certificates previously representing such shares are presented to
Acquiror or Target, they shall be exchanged as provided in Section 3.1.
3.4 RECEIPT OF MERGER CONSIDERATION. At the Effective Time, each
certificate for Target Common Stock issued and outstanding immediately prior to
the Effective Time shall no longer be issued and outstanding but shall represent
solely the right to receive shares of the Acquiror Common Stock into which the
shares of Target Common Stock it theretofore represented shall become converted
pursuant to Section 3.1 (or the holder thereof's right to dissent pursuant to
Article 13 of the North Carolina Law and Section 3.6 hereof); provided, however,
that customary and appropriate certifications and indemnities allowing exchange
against lost or destroyed certificates shall be provided. Upon surrender of a
stock certificate representing Target Common Stock to Acquiror, Acquiror shall
deliver to the holder of such certificate the Acquiror Common Stock to which
such holder is entitled pursuant to Section 3.1 hereof.
3.5 NO FRACTIONAL SHARES. No fractional shares of Acquiror Common
Stock will be issued in connection with the Merger and no certificate therefor
will be issued. In lieu of such fractional shares, any holder of Target Common
Stock who would otherwise receive a fractional share shall, upon surrender of
his certificate or certificates representing Target Common Stock, be paid an
amount in cash (without interest) equal to the value of such fractional share of
Acquiror Common Stock, deemed for purposes of this Merger Agreement to be such
fraction multiplied by the closing price of the Acquiror Common Stock on the
Nasdaq National Market
3.
<PAGE>
on the date hereof. Acquiror will, subject to any applicable statute of
limitation or abandoned property or similar law, until three months after the
Effective Time, pay to such holders, upon surrender of their certificates
representing Target Common Stock outstanding immediately prior to the
Effective Time, the cash value of such fractions so determined, without
interest.
3.6 DISSENTING SHARES. Notwithstanding anything in this Merger
Agreement to the contrary, shares of Target Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by
shareholders who have not voted such shares in favor of the Merger shall not be
canceled and converted into the Merger Consideration unless and until such
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, such holder's dissent and appraisal rights under the North Carolina Law.
If such holder shall have so failed to perfect, or shall have effectively
withdrawn or lost such rights, such holder's shares of Target Common Stock shall
thereupon be deemed to have been canceled and converted as described in Section
3.1 on the Effective Time, and each such share shall represent solely the right
to receive the Acquiror Common Stock into which the shares of Target Common
Stock if theretofore constituted shall have been converted pursuant to Section
3.1. From and after the Effective Time, no shareholder who has exercised such
shareholder's right to dissent as provided in Article 13 of the North Carolina
Law shall be entitled to vote such holder's shares for any purpose or to receive
payment of dividends or other distributions with respect to such holder's shares
(except dividends and other distributions payable to shareholders of record at a
date which is prior to the Effective Time).
ARTICLE IV
SECTION 4. TERMINATION. Notwithstanding the approval of this Merger
Agreement by the shareholders of Acquiror Sub and Target, this Merger Agreement
shall terminate forthwith in the event that the Reorganization Agreement shall
be terminated as therein provided.
[THIS SPACE INTENTIONALLY LEFT BLANK]
4.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement of Merger
as of the date first written above.
ATTEST: ROGUE WAVE SOFTWARE, INC.
a Delaware corporation
By: /s/ Robert M. Holburn, Jr. By: /s/ Michael Scally
-------------------------- --------------------------
Its Secretary Michael Scally, President
ATTEST: SR ACQUISITION CORP.
a North Carolina corporation
By: /s/ Robert M. Holburn, Jr. By: /s/ Michael Scally
-------------------------- --------------------------
Its Secretary Michael Scally, President
ATTEST: STINGRAY SOFTWARE, INC.
a North Carolina corporation
By: /s/ Aris Antanas Buinevicius By: /s/ W. Scot Wingo
-------------------------- --------------------------
Its Secretary W. Scot Wingo, President
5.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 27th day of February 1998, by and among ROGUE WAVE SOFTWARE, INC., a
Delaware corporation (the "Company"), and the persons and entities set forth on
the signature page hereto. Such persons and entities shall be referred to
hereinafter as the "Stockholders" and each individually as a "Stockholder."
RECITALS
WHEREAS, the Company has entered into an Agreement and Plan of Merger and
Reorganization with Stingray Software, Inc. ("Stingray") and the stockholders of
Stingray (the "Stockholders"), dated as of January 19, 1998 (the "Acquisition
Agreement"), pursuant to which the Company will issue shares of the Company's
Common Stock (the "Shares") to the Stockholders in connection with the merger of
Stingray into a subsidiary of the Company; and
WHEREAS, the Acquisition Agreement provides that the Stockholders be
granted certain registration rights with respect to up to 450,000 of the Shares
as set forth in the Agreement;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Acquisition Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities.
"REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means up to 450,000 of the Shares.
Notwithstanding the foregoing, Registrable Securities shall not include (i) any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction or (ii) any securities
which may be sold by a Holder under Rule 144 during any ninety (90) day period.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 3.1, 3.2 and 3.3 hereof, including, without
limitation, all registration and
1.
<PAGE>
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"SEC" OR "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"SHARES" shall mean the Company's Common Stock issued to the
Stockholders pursuant to the Acquisition Agreement.
SECTION 2. RESTRICTIONS ON TRANSFER.
2.1 Each Holder agrees not to make any disposition of all or any portion
of the Registrable Securities (or the Common Stock issuable upon the conversion
thereof) unless and until the transferee has agreed in writing for the benefit
of the Company to be bound by this Section 2.1, provided and to the extent such
Sections are then applicable and:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (B) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144.
(c) Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (A) a partnership to its partners in accordance
with partnership interests, or (B) to the Holder's family member or trust for
the benefit of an individual Holder, provided the transferee will be subject to
the terms of this Section 2.1 to the same extent as if he were an original
Holder hereunder.
2.2 Each certificate representing the Shares shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise imprinted
with legends substantially similar to the following (in addition to any legend
required under applicable state securities laws or as provided elsewhere in the
Agreement):
2.
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
2.3 The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
2.4 Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
SECTION 3. REGISTRATION RIGHTS.
3.1 AUTOMATIC FORM S-3 REGISTRATION.
(a) Not later than ten (10) days after the First Permissible Sale
Date (as defined below), the Company shall file a registration statement with
respect to up to 300,000 of the Registrable Securities. The number of
Registrable Securities each Holder may include in such registration shall be
determined by the unanimous consent of the Holders. In the event that the
Holders cannot agree on the allocation of Registrable Securities to be
registered, each Holder shall be permitted to register his pro rata share of
Registrable Securities then outstanding. In connection with the filing of such
registration statement, the Company shall, as soon as practicable after the
First Permissible Sale Date, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's
Registrable Securities as are specified in such request, provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 3.1: (i) if Form S-3 is not
available for such offering by the Holders, (ii) if the Company shall furnish to
the Holders a certificate signed by the Chairman of the Board of Directors of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days, provided
that such right to delay a request shall be exercised by the Company no more
than once; or (iii) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance. For the
purpose of the foregoing clause
3.
<PAGE>
(ii), it is agreed that no registration of shares hereunder will be deemed
seriously detrimental to the Company or its shareholders solely due to the
number of shares proposed to be sold pursuant to such Form S-3 Registration.
(b) Notwithstanding any other provision of this Agreement, the
Purchasers understand that there may be periods during which the Company's Board
of Directors may determine, in good faith, that it is in the best interest of
the Company and its stockholders to defer disclosure of non-public information
until such information has reached a more advanced stage and that during such
periods sales of Registrable Securities and the effectiveness of any
registration statement covering Registrable Securities may be suspended or
delayed. Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
development of any non-public information, such holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
holder's receipt of copies of an appropriately supplemented or amended
prospectus and, if so directed by the Company, such holder will use its best
efforts to deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the applicable
time period during which a Registration Statement is to remain effective shall
be extended by the number of days during the period from and including the date
of the giving of such notice to and including the date when each seller of a
Registrable Security covered by such registration statement shall have received
the copies of the appropriate supplemented or amended prospectus.
(c) The "First Permissible Sale Date" shall mean the date after the
Effective Time of the Merger on which Parent has publicly released a financial
report including the combined financial results of Parent covering a period of
at least thirty days of combined operations of Parent and the Company within the
meaning of Accounting Series Release No. 130, as amended of the SEC.
3.2 ADDITIONAL DEMAND REGISTRATION. In case the Company shall receive
from any Holder or Holders of a majority of the Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to any remaining Registrable
Securities owned by such Holder or Holders, after the date sixty (60) days
subsequent to the last day of effectiveness of the registration statement
described in Section 3.1 above, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days
4.
<PAGE>
after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 3.2: (i) if Form S-3 is
not available for such offering by the Holders, (ii) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion
in such registration, propose to sell Registrable Securities at an aggregate
price to the public of less than $500,000, (iii) if the Company shall furnish
to the Holders a certificate signed by the Chairman of the Board of Directors
of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such Form S-3 Registration to be effected at such
time, in which event the Company shall have the right to defer the filing of
the Form S-3 registration statement until such time as any material
non-public information about the Company has been disclosed to the public or
ceases to be material and in any case for a period of not more than ninety
(90) days after receipt of the request of the Holder or Holders under this
Section 3.2, provided that such right to delay a request shall be exercised
by the Company no more than once in any 12-month period; (iv) if the Company
has already effected one (1) registration on Form S-3 for the Holders
pursuant to this Section 3.2 (in addition to the automatic Form S-3
registration statement to be effected pursuant to the Acquisition Agreement,
as described in Section 3.1 above or (v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance. For the purpose of the foregoing clause (ii), it
is agreed that no registration of shares hereunder will be deemed seriously
detrimental to the Company or its shareholders solely due to the number of
shares proposed to be sold pursuant to such Form S-3 Registration.
(c) Notwithstanding any other provision of this Agreement, the
Holders understand that the limitations described in Section 3.1(b) above shall
also apply to the requested demand registration.
(d) The number of Registrable Securities each Holder may include in
such registration shall be determined by the unanimous consent of the Holders.
In the event that the Holders cannot agree on the allocation of Registrable
Securities to be registered, each Holder shall be permitted to register his pro
rata share of Registrable Securities then outstanding.
3.3 PIGGYBACK REGISTRATION. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, 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 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 fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the 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 the Company, such Holder shall nevertheless
continue
5.
<PAGE>
to have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the
Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 3.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 3.3 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 the Company. 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 the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders
(provided, however, that such Holders will participate pro rata with any holders
of piggyback registration rights under the Company's Amended and Restated
Investor Rights Agreement, as amended); and third, to any shareholder of the
Company (other than a Holder) on a pro rata basis. If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw therefrom
by written notice to the Company and the underwriter, delivered at least ten
(10) 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.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 3.3 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 the Company in
accordance with Section 3.4 hereof.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 3.1, 3.2 and 3.3 shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered.
3.5 OBLIGATIONS OF THE COMPANY. The Company shall, as expeditiously as
reasonably possible:
6.
<PAGE>
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use commercially reasonable efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of either the Registrable Securities registered
thereunder, keep such registration statement effective for up to thirty (30)
days (or such longer period in the event of a blackout period as described in
Section 3.1(b)).
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company 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.
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which 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.
3.6 ADDITIONAL COVENANTS OF THE COMPANY. The Company shall,
(a) Make all filings (including electronic filings) required to be
made with the SEC under the Securities Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), or the regulations thereunder, on or before
the due dates for such filings.
(b) Maintain the registration of its common stock under the 1934 Act.
(c) Maintain its listing under on the Nasdaq National Market.
3.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 3 shall terminate and be of no further force and effect upon
the earlier of (i) the date that the second registration statement filed
pursuant to this Agreement has been effective for 30 days during which the
stockholders have not been prevented from selling securities pursuant to Section
3.1(b); or (ii) one (1) year after the date of this Agreement.
7.
<PAGE>
3.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 3.1, 3.2 or 3.3:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
and each person, if any, who controls such Holder within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended, (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the Company:
(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,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the 1934 Act or any state securities law
in connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, 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; provided however, that the indemnity agreement contained in
this Section 3.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder under an instrument
duly executed by such Holder and stated to be specifically for use in
8.
<PAGE>
connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 3.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided further, that in no event shall any indemnity under this
Section 3.9 exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
3.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 3.9, 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 noticed, 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, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 3.9.
(d) If the indemnification provided for in this Section 3.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
9.
<PAGE>
(e) The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any indemnified party if a copy of the Final Prospectus was furnished
to the indemnified party, the indemnified party had an obligation to furnish
such Final Prospectus to the person asserting the loss, liability, claim or
damage and the indemnified party did not so furnish the Final Prospectus to the
person asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Securities Act.
(f) The obligations of the Company and Holders under this Section 3.9
shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
3.10 NO ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 3 may not be
assigned by a Holder to any transferee or assignee of Registrable Securities.
SECTION 4. MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
4.2 TERMINATION. This Agreement shall terminate and be of no further
force and effect one (1) year after the date of this Agreement. The termination
of this Agreement for any reason shall not affect the rights and obligations of
the parties pursuant to Section 3.9 hereof for any transaction occurring prior
to the termination of this Agreement.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
4.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
4.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at a majority of the Registrable Securities, provided that the Company may,
without the consent of any other party hereto, amend this Agreement to grant
registration rights hereunder to other persons or entities acquiring or holding
shares of the Company's Common Stock.
10.
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(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
4.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
4.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page or at
such other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
4.8 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date set forth in the first paragraph hereof.
ROGUE WAVE SOFTWARE, INC. STOCKHOLDERS:
By: /s/ Thomas Keffer /s/ M. Scot Wingo
--------------------------- ---------------------------
Thomas Keffer, President M. SCOT WINGO
4900 Pearl East Circle, Suite 107 9001 Aerial Center Drive, Suite 110
Boulder, CO 80301 Morrisville, NC 27560
/s/ Aris Antanas Buinevicius
---------------------------
ARIS ANTANAS BUINEVICIUS
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
/s/ R. Dean Hallman
---------------------------
R. DEAN HALLMAN
9001 Aerial Center Drive, Suite 110
Morrisville, NC 27560
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
