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As filed with the Securities and Exchange Commission on December 3, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BEA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0394711
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2315 North First Street
San Jose, California 95131
(408) 570-8000
(Address, including zip code, and telephone number, including area code, of
registrar's principal executive offices)
William T. Coleman III
Chairman, President and Chief Executive Officer
2315 North First Street
San Jose, California 95131
(408) 570-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Cori M. Allen, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Title of Shares to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered Aggregate Price Per Share Aggregate Offering Price Registration
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<S> <C> <C> <C> <C>
Common Stock, $.001
par value................. 1,163,627 shares $84.625 $98,471,934.88 $25,996.60
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(1) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) based on the average of the high and
low reported sales prices on the Nasdaq National Market on November
30, 1999.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file an amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer of sale is not permitted.
Subject to Completion, dated December 3, 1999
Prospectus
BEA Systems, Inc.
1,163,627 Shares of Common Stock
1,163,627 shares of our common stock were issued to former stockholders of
The Theory Center, Inc. as payment for the acquisition by us of The Theory
Center, Inc. Some of these stockholders may wish to sell these shares in the
future, and this prospectus allows them to do so. We will not receive any of the
proceeds from any sale of shares by these stockholders, but we have agreed to
bear the expenses of registration of the shares by this prospectus. Share
numbers in this prospectus do not reflect our 2-for-1 stock split to be effected
December 19, 1999 in the form of a stock dividend payable to record holders of
our stock as of November 19, 1999.
Our stock is listed on the Nasdaq National Market under the
symbol: BEAS
The last sale price of the common stock on the Nasdaq National Market on
December 2, 1999 was $96.6875 per share.
_______________________________
Investing in the common stock involves a high level of investment risk. See
"Risk Factors" beginning on page 6 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
_______________________________
December _____, 1999
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TABLE OF CONTENTS
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Page
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Available Information................................... 3
Incorporation of Certain Documents by Reference......... 3
The Company............................................. 4
Use of Proceeds......................................... 6
Risk Factors............................................ 6
Selling Stockholders.................................... 14
Plan of Distribution.................................... 15
Experts................................................. 15
Legal Matters........................................... 15
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this prospectus in
connection with the offer described in this prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the selling stockholders. Neither the delivery of
this prospectus nor any sale made under this prospectus shall under any
circumstances create any implication that there has been no change in the
affairs of BEA Systems, Inc. since the date hereof or since the date of any
documents incorporated herein by reference. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the securities to which it relates, or an offer or solicitation in any state to
any person to whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the Act we
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information filed can be inspected and copied at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a web site
(http://www.sec.gov) containing reports, proxy and information statements and
other information of registrants, including ours, that file electronically with
the Commission. In addition, the Common Stock is listed on the Nasdaq National
Market and similar information concerning us can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 9513 Key West
Avenue, Rockville, Maryland 20850.
We have filed with the Commission a registration statement on Form S-3 (of
which this prospectus is a part) under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares being offered by this
prospectus. This prospectus does not contain all of the information set forth in
this registration statement, some portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement,
each of these statements are qualified in all respects by this reference and the
exhibits and schedules thereto. For further information regarding us and the
shares being offered by this prospectus, reference is hereby made to the
registration statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended
January 31, 1999;
b. The Company's Quarterly Reports on Form 10-Q for the quarters
ended April 30, 1999 and July 31, 1999; and
c. The description of the Registrant's Common Stock contained in the
Company's registration statement on Form 8-A (File No. 000-22369).
Each document we file pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein (or in the applicable prospectus supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
prospectus is delivered upon written or oral request. Requests should be
directed to Kevin A. Faulkner, Senior Director-Investor Relations, 2315 North
First Street, San Jose 95131, telephone number: (408) 570-8000.
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THE COMPANY
BEA Systems, Inc. is a leading provider of e-commerce platform software.
Our award-winning e-commerce transaction platform, coupled with our consulting,
education and support services, helps companies launch reliable e-commerce
initiatives quickly. Our solutions help companies of all sizes build e-commerce
infrastructures that leverage existing investments and provide the foundation
for running a successful integrated e-business. We provide transactional,
messaging, and distributed object-based software, an industry-leading Java Web
application server, as well as a suite of Enterprise Java Bean components, for
developing and deploying these initiatives.
Our E-Commerce Transaction Platform includes:
. BEA Tuxedo(R) -- One of the leading transaction application servers
for building and managing high-performance and reliable e-commerce
applications.
. BEA WebLogic(R) -- A family of application servers for rapidly and
easily building, deploying, and managing component-based e-commerce
applications.
. BEA Commerce Foundation -- Reusable components that enable rapid
assembly of e-commerce applications that can be adapted quickly to
take advantage of new opportunities or provide new competitive
advantages.
. BEA eLink(TM) -- For integrating new Web applications in real time
with back-office systems, packaged applications, and other businesses
across the Web.
In addition, BEA offers education, customer support, and professional
services to help small companies and large corporations develop their Web
architectures, build applications for their e-commerce systems and to write
reliable e-commerce applications in the Java language and the EJB Java object
model.
Our products are marketed and sold worldwide through a network of sales
offices, as well as hardware vendors, independent software vendors and systems
integration companies that are BEA distribution partners and software
distributors. Our products have been adopted in a wide variety of industries,
including banking and finance, telecommunications, retail, Internet,
manufacturing, transportation, package delivery, insurance and government. Our
products serve as a platform or integration tool for applications such as
billing, provisioning, customer service, electronic funds transfers, ATM
networks, securities trading, Web-based banking, Internet sales, supply chain
management, scheduling and logistics, and hotel, airline and rental car
reservations. Licenses for our products are typically priced on a per-user,
per-application basis, but we also offer licenses priced per server CPU and
time-based enterprise licenses.
Over the past decade, the information systems of many large organizations
have evolved from traditional mainframe-based systems to distributed computing
environments. This evolution is driven by the benefits offered by distributed
computing, including lower incremental technology costs, faster application
development and deployment, increased flexibility, and improved access to
business information. Despite these benefits, large-scale mission-critical
applications that enable and support fundamental business processes, such as
airline reservations, credit card processing, and customer billing and support
systems have largely remained in mainframe environments. For several decades,
the high levels of reliability, scalability, security, manageability and control
required for these complex, transactional-intensive systems have been provided
by mainframe middleware. Mainframe environments, however, suffer from several
shortcomings, including inflexibility, lengthy development and maintenance
cycles, and limited, character-based user interfaces. Increasingly, these
shortcomings are forcing many organizations to seek out solutions, such as those
offered by us, that will enable them to overcome the limitations of distributed
computing for mission-critical applications while providing the robust computing
infrastructure previously unavailable outside the mainframe environment.
As a result, the information technology infrastructures of large
corporations are typically characterized by mixed environments that may include
mainframes, mini-computers, servers running on platforms such as UNIX and
Windows NT, databases from a variety of vendors, data warehouses, personal
computers, mainframe terminals, automated teller machines, point-of-sale devices
and credit card readers, all of which are dispersed geographically across the
enterprises' many facilities. The various applications used by these
corporations typically run on several different computers, and may need to
access data from, or update data in, a number of different databases.
In addition, many businesses are incorporating the World Wide Web into
these infrastructures. Businesses use the Internet as a means of selling
products to consumers and other businesses, opening new accounts and scheduling
service installation, providing account information and customer care, enabling
reservations, funds transfers, bill payments and securities trading, and
gathering information about customers and their buying habits. Many businesses
also use intranets for functions such as inventory control, decision support,
logistics, reservations, customer care and provisioning, and sometimes use
extranets to make similar information and applications available throughout
their supply chain. Additional value can be obtained
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from these applications by fully integrating Web-based applications with
existing enterprise applications, such as shipping, inventory control, billing,
payroll, and general ledger.
We provide a broad family of cross-platform middleware solutions for
enterprise applications. Our products and services enable mission-critical,
distributed applications to work seamlessly in client/server, Internet and
legacy environments. Customers use our products as a deployment platform for
custom and packaged applications, as a means for robust enterprise application
integration of mainframe, server and Web-based applications, and as a deployment
platform for Web-based applications. We also provide reusable Enterprise Java
Beans components that provide common e-commerce funtionality, such as "shopping
cart," order management, product catalogs, pricing and work flow management.
Customers also rely on our services offerings to develop components and custom
applications, to customize packaged applications and to integrate applications.
The total number of licensees using our products and solutions is greater
than 3,000 worldwide. Our target end-user customers are organizations with
sophisticated, high-end information systems with numerous, often geographically-
dispersed users and diverse, heterogeneous computing environments. Typical
customers are mainframe-reliant, have large-scale client/server implementations
that handle very high volumes of business transactions, or have Web-based
applications with large and unpredictable usage volumes.
We were incorporated in Delaware in January 1995 under the name BEA
Enterprises, Inc. and changed our name to BEA Systems, Inc. in September 1995.
References to "BEA" or the "Company" refer to BEA Systems, Inc., our
subsidiaries and predecessor entities acquired in previous acquisitions. Our
headquarters are located at 2315 North First Street, San Jose, California,
95131, and its telephone number is (408) 570-8000.
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USE OF PROCEEDS
All of the shares being offered under this prospectus are offered by the
selling stockholders, and we will not receive any of the proceeds from the sale
of the shares. This registration statement is intended to satisfy certain of
our obligations under our merger agreement with The Theory Center. Under that
agreement, we have agreed to pay expenses of registration of these shares under
federal and state securities laws.
RISK FACTORS
You should carefully consider the following risk factors in evaluating an
investment in the common stock. This prospectus includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. All statements in this prospectus other than statements
of historical fact are "forward-looking statements" for purposes of these
provisions, including any statements of the plans and objectives for future
operations and any statement of assumptions underlying any of the foregoing. In
some cases, forward-looking statements can be identified by the use of
terminology such as "may," "will," "expects," "plans," "anticipates,"
"estimates," "potential," or "continue," or the negative thereof or other
comparable terminology. Our actual results could differ materially from these
projected or assumed in these forward-looking statements because of risks and
uncertainties, including risks and uncertainties described in the risk factors
below and elsewhere in this prospectus. We assume no obligation to update any
such forward-looking statement or reason why actual results might differ.
Significant unanticipated fluctuations in our quarterly revenues and operating
results may not meet securities analysts' or investors' expectations and result
in a decline in our stock price.
Although we have had significant revenue growth in recent quarters, our
growth rates may not be sustainable. If our revenues, operating results,
earnings or future projections are below the levels expected by securities
analysts, our stock price is likely to decline. Our stock price is also subject
to the volatility generally associated with software and technology stocks and
may also be affected by broader market trends unrelated to our performance.
We expect to experience significant fluctuations in our future quarterly
revenues and operating results as a result of many factors, including:
. the size and timing of customer orders
. introduction or enhancement of our products or our competitors' products
. general economic conditions, which can affect our customers' capital
investment levels and the length of our sales cycle
. a widely-predicted freeze in deployment of new computer systems by large
corporations in the last quarter of calendar year 1999 and first quarter
of 2000, related to remediation of the Year 2000 problem
. recent hiring ahead of demand
. the structure, timing and integration of acquisitions of businesses,
products and technologies
. the terms and timing of financing activities
. market acceptance of middleware products
. the lengthy sales cycle for our products
. technological changes in computer systems and environments
. whether we are able to develop, introduce and market new products on a
timely basis
. changes in our competitors' product offerings and pricing policies, and
customer order deferrals in anticipation of new products and product
enhancements from BEA or competitors
. whether we are able to expand our sales and marketing programs
. the mix of our products and services sold and mix of distribution
channels
. whether we are able to meet our customers' service requirements
. costs associated with acquisitions, including the acquisition of The
Theory Center
. the impact and duration of deteriorating economic and political
conditions in Asia
. loss of key personnel
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. fluctuations in foreign currency exchange rates
. interpretations of the accounting pronouncements on software revenue
recognition.
Industry sources widely predict that many large corporations will stop
deploying new computer systems in late 1999 and early 2000, in order to avoid
disrupting their computer systems before the Year 2000. Large corporations
represent the majority of our customer base, and a material portion of our
license fees come from new computer system deployments. We are monitoring our
customer base, especially customers expected to place orders in late 1999, to
determine their plans and have been informed by some of our customers that they
intend to stop deploying new computer systems. We are also taking several
management steps to reduce our exposure to Year 2000 deployment delays, such as
providing special incentives to our sales force during this time and focusing on
transactions that are not dependent on new deployments of pending projects.
However, if the Year 2000 related delays in deployments are larger than we
anticipate, last longer than we anticipate, or involve more of our targeted
customers than we anticipate, our revenues in late 1999 or early 2000 could be
materially lower than expected. Furthermore, certain of our customers who
originally intended to delay deployments in late 1999 have informed us that they
may accelerate their deployments. This could result in an unusual fluctuation of
orders, in which an unusually large number of orders are received in mid or late
1999, then an unusual decrease in orders in subsequent quarters. Customer
behavior, and consequently our orders, during this period will be unusually
difficult to forecast.
As a result of all of these factors, we believe that quarterly revenues and
operating results are difficult to forecast and period-to-period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of trends or future performance.
Our revenues are derived principally from large orders as customers deploy
our products throughout their organizations or chose to standardize on our
products for their system architecture. Increases in the dollar size of
individual license transactions also increase the risk of fluctuation in future
quarterly results. If we cannot generate large customer orders, or customers
delay or cancel such orders in a particular quarter, it will have a material
adverse effect on our revenues and, more significantly on a percentage basis,
our net income or loss in that quarter. Moreover, we typically receive and
fulfill a majority of our orders within the quarter, with the substantial
majority of our orders received in the last month of each fiscal quarter. As a
result, we may not learn of revenue shortfalls until late in a fiscal quarter,
after it is too late to adjust expenses for that quarter. Additionally, our
operating expenses are based in part on our expectations for future revenues and
are relatively fixed in the short term. Any revenue shortfall below our
expectations could have an immediate and significant adverse effect on our
results of operations.
Our limited operating history and need to continue to integrate our acquisitions
makes it difficult to predict our future results
We were incorporated in January 1995 and therefore have a limited operating
history. We have generated revenues to date primarily from sales of BEA TUXEDO,
a software product to which we acquired worldwide distribution rights in
February 1996, and from fees for related software products and services. We have
also acquired a number of businesses, technologies and products, most recently
The Theory Center. Our limited operating history and the need to integrate a
number of separate and independent business operations subject our business to
numerous risks. At October 31, 1999, we had an accumulated deficit of
approximately $189.1 million. In addition, in connection with certain
acquisitions completed prior to October 31, 1999, we recorded approximately
$265.5 million as intangible assets. Under Generally Accepted Accounting
Principles, these intangible assets are required to be amortized in future
periods. Approximately $202.9 million of these assets have been amortized as of
October 31, 1999 and we expect to amortize the remaining approximately $62.6
million in future periods through our fiscal year ending January 31, 2003. We
expect to amortize $11.0 million of such intangible assets over the remaining
quarter of the fiscal year ending January 31, 2000 and $ 39.0 million in the
fiscal year ended January 31, 2001. If we acquire additional businesses,
products and technologies in the future, we may report additional, potentially
significant expenses. If future events cause the impairment of any intangible
assets acquired in our past or future acquisitions, we may have to write off
expenses sooner than we expect. Because of our limited operating history and
ongoing write-offs associated with our prior acquisitions, there can be no
assurance that we will be profitable in any future period and recent operating
results should not be considered indicative of future financial performance.
If we cannot successfully integrate our past and future acquisitions, our
revenues may decline and expenses may increase
From our inception in January 1995, we have made several strategic
acquisitions. Integration of acquired companies, divisions and products involves
the assimilation of potentially conflicting operations and products, which
divert the attention of our management team and may have a material adverse
effect on our operating results in future quarters. We acquired Leader Group,
Inc. ("Leader Group") and a business unit of Penta Systems Technology, Inc.
("Penta") in the quarter ended April 30,
<PAGE>
1998, NCR's TOP END technology in June 1998, the Entersoft Systems Corporation
("Entersoft") in July 1998, WebLogic, Inc. ("WebLogic") in September 1998,
Component Systems, LLC in May 1999, Technology Resource Group, Inc. ("TRG") in
July 1999, Avitek, Inc. ("Avitek") in August 1999 and The Theory Center ("TTC")
in November 1999. While we intend to make additional acquisitions in the future,
there may not be suitable companies, divisions or products available for
acquisition. Our acquisitions entail numerous risks, including the risk we will
not successfully assimilate the acquired operations and products, or retain key
employees of the acquired operations. There are also risks relating to the
diversion of our management's attention, and difficulties and uncertainties in
our ability to maintain the key business relationships the acquired entities
have established. In addition, if we undertake future acquisitions, we may issue
dilutive securities, assume or incur additional debt obligations, incur large
one-time expenses, and acquire intangible assets that would result in
significant future amortization expense. Any of these events could have a
material adverse effect on our business, operating results and financial
condition.
Recently, the Financial Accounting Standards Board ("FASB") voted to
eliminate pooling of interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion of
the purchase price for any future acquisitions that must be charged to the
Company's cost of revenues and operating expenses in the periods following any
such acquisitions. As a consequence, the Company's results of operations in
periods following any such acquisitions could be materially adversely affected.
Although these changes would not directly affect the purchase price for any of
these acquisitions, they would have the effect of increasing the reported
expenses associated with any of these acquisitions. To that extent, these
changes may make it more difficult for the Company to acquire other companies,
product lines or technologies.
Our revenues are derived primarily from two main product and services lines, and
a decline in demand or prices for either could substantially adversely affect
our operating results
We currently derive the majority of our license and service revenues from
BEA TUXEDO and from related products and services. Although we expect these
products and services to continue to account for the majority of our revenues in
the immediate future, we believe that BEA WebLogic will become an increasingly
important revenue source. As a result, factors adversely affecting the pricing
of or demand for BEA TUXEDO and BEA WebLogic, such as competition, product
performance or technological change, could have a material adverse effect on our
business and consolidated results of operations and financial condition.
The lengthy sales cycle for our products makes our revenues susceptible to
substantial fluctuations
Our customers typically use our products to implement large, sophisticated
applications that are critical to their business, and their purchases are often
part of their implementation of a distributed or Web-based computing
environment. Customers evaluating our software products face complex decisions
regarding alternative approaches to the integration of enterprise applications,
competitive product offerings, rapidly changing software technologies and
limited internal resources due to other information systems requirements. For
these and other reasons, the sales cycle for our products is lengthy and is
subject to delays or cancellation over which we have little or no control. We
have experienced a significant increase in the number of million and multi-
million dollar license transactions. In some cases, this has resulted in more
extended customer evaluation and procurement processes, which in turn have
lengthened the overall sales cycle for our products. Moreover, in contrast,
during the second half of fiscal 1999, an increasing number of our customers
began negotiating licenses to use our enterprise application solutions as an
architectural platform for several applications. These architectural commitments
are larger in scope and potential revenue than single application transactions.
In some cases, these architectural commitments also have longer sales cycles
than our typical single application transactions, because of both the customer's
decision cycle in adopting an architectural platform and heightened corporate
approval requirements for larger contracts. We believe general economic
conditions that impact customers' capital investment decisions also affect our
sales cycles. In addition, industry sources widely predict that large
corporations will stop deploying new computer systems in late 1999 and early
2000, in order to avoid disrupting their computer systems before the Year 2000.
If our customers stop deploying new computer systems, our revenues could be
materially reduced and our operating results could be materially adversely
affected, especially in the fourth quarter of calendar year 1999 (our fiscal
Year 2000) and the first quarter of calendar 2000. Any significant change in
customer buying decisions or sales cycles for our products could have a material
adverse effect on our business, results of operations and financial condition.
Although we use a standard license agreement which meets the revenue
recognition criteria under current generally accepted accounting principles, we
must often negotiate and revise terms and conditions of this standard agreement,
particularly in larger license transactions. Negotiation of mutually acceptable
terms and conditions can extend the sales cycle and, in certain situations, may
require us to defer recognition of revenue on the license. In addition, while we
do not expect the Statement of Position 97-2, Software Revenues Recognition,
("SOP 97-2") and SOP 98-4 and SOP 98-9, which amend certain provisions of SOP
97-2, to have a material impact on our revenues and earnings, detailed
implementation guidelines of the standard have not
<PAGE>
yet been issued. Once issued, such detailed guidance could lead to unanticipated
changes in our current revenues recognition practices and such changes could
have an adverse impact on revenues and earnings.
If we do not effectively compete with new and existing competitors, our revenues
and operating margins will decline
The market for application server and integration software, and related
software components and services is highly competitive. Our competitors are
diverse and offer a variety of solutions directed at various segments of this
marketplace. These competitors include operating system vendors such as IBM, Sun
Microsystems and database vendors such as Oracle. Microsoft has released a
product that includes certain basic application server functionality and has
announced that it intends to include application server and integration
functionality in future versions of its operating systems, including Windows
2000. In addition, there are companies offering and developing application
server and integration software products and related services that directly
compete with products we offer. Further, software development tool vendors
typically emphasize the broad versatility of their toolsets and, in some cases,
offer complementary software that supports these tools and performs basic
application server and integration functions. Last, internal development groups
within prospective customers' organizations may develop software and hardware
systems that may substitute for those we offer. A number of our competitors and
potential competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition
and a larger installed base of customers than us.
Our principal competitors currently include hardware vendors who bundle
their own application server and integration software products, or similar
products, with their computer systems and database vendors that advocate
client/server networks driven by the database server. IBM and Sun Microsystems
are the primary hardware vendors who offer a line of application server and
integration solutions for its customers. IBM's sale of application server and
integration functionality along with its IBM proprietary hardware systems
requires us to compete with IBM in its installed base, where IBM has certain
inherent advantages due to its significantly greater financial, technical,
marketing and other resources, greater name recognition and the integration of
its enterprise application server and integration functionality with its
proprietary hardware and database systems. We need to differentiate our products
based on functionality, interoperability with non-IBM systems, performance and
reliability, and establish our products as more effective solutions to
customers' needs. Oracle is the primary relational database vendor offering
products that are intended to serve as alternatives to our enterprise
application server and integration solutions.
Microsoft has announced that it intends to include certain application
server and integration functionality in future versions of its Windows 2000
operating system. Microsoft has also introduced a product that includes certain
basic application server functionality. The bundling of competing functionality
in versions of Windows requires us to compete with Microsoft in the Windows
marketplace, where Microsoft has certain inherent advantages due to its
significantly greater financial, technical, marketing and other resources, its
greater name recognition, its substantial installed base and the integration of
its application server and integration functionality with Windows. We need to
differentiate our products from Microsoft's based on scalability, functionality,
interoperability with non-Microsoft platforms, performance and reliability, and
need to establish our products as more effective solutions to customers' needs.
We may not be able to successfully differentiate our products from those offered
by Microsoft, and Microsoft's entry into the application server and integration
market could materially adversely affect our business, operating results and
financial condition.
In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of our current and prospective customers. Accordingly, it is possible that
new competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect our ability to sell additional software licenses and
maintenance, consulting and support services on terms favorable to us. Further,
competitive pressures could require us to reduce the price of our products and
related services, which could materially adversely affect our business,
operating results and financial condition. We may not be able to compete
successfully against current and future competitors and any failure to do so
would have a material adverse effect upon our business, operating results and
financial condition.
If we fail to adequately protect our intellectual property rights, competitors
may use our technology and trademarks, which could weaken our competitive
position, reduce our revenues and increase our costs
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. It is possible that other companies could successfully
challenge the validity or scope of our patents and that our patents may not
provide a competitive advantage to us.
<PAGE>
As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technology without
authorization, or develop similar technology independently. In particular, we
have, in the past, provided certain hardware OEMs with access to our source
code, and any unauthorized publication or proliferation of this source code
could materially adversely affect our business, operating results and financial
condition. It is difficult for us to police unauthorized use of our products,
and although we are unable to determine the extent to which piracy of our
software products exists, software piracy is a persistent problem. Effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. The protection of our proprietary rights may not be adequate
and our competitors could independently develop similar technology, duplicate
our products, and they could design around patents and other intellectual
property rights we hold.
Third parties could assert that our software products and services infringe
their intellectual property rights, which could expose us to increased costs and
litigation
It is possible that third parties could claim our current or future
products infringe their rights. Any such claims, with or without merit, could
cause costly litigation that could absorb significant management time, which
could materially adversely effect our business, operating results and financial
condition. These type of claims might require us to enter into royalty or
license agreements. If required, we may not be able to obtain such royalty or
license agreements, or obtain them on terms acceptable to us, which could have a
material adverse effect upon our business, operating results and financial
condition.
Our international operations expose us to greater management, collections,
currency, intellectual property, regulatory and other risks
International revenues accounted for 31 and 33 percent of our consolidated
revenues for the quarters ended October 31, 1999 and 1998, respectively. We sell
our products and services through a network of branches and subsidiaries located
in 27 countries worldwide. In addition, we also market through distributors in
Europe and the Asia/Pacific region. We believe that our success depends upon
continued expansion of our international operations. Our international business
is subject to a number of risks, including unexpected changes in regulatory
practices and tariffs, greater difficulties in staffing and managing foreign
operations, longer collection cycles, seasonality, potential changes in tax
laws, greater difficulty in protecting intellectual property and the impact of
fluctuating exchange rates between the US dollar and foreign currencies in
markets where BEA does business, in particular the French franc, the German
mark, the British pound, the Japanese yen, the Australian dollar and the Korean
won. General economic and political conditions in these foreign markets may also
impact our international revenues. Since the late summer of 1997, a number of
Pacific Rim countries have experienced economic, banking and currency
difficulties that has led to economic downturns in those countries. Among other
things, the decline in value of Asian currencies, together with difficulties
obtaining credit, has resulted in a decline in the purchasing power of our Asian
customers, which in turn has resulted in the delay of orders for our products
from certain Asian customers and is likely to result in further delays and,
possibly the cancellation, of such orders. We anticipate that weak Asian
conditions may adversely impact our financial results. It is difficult for us to
predict the extent of the future impact of these conditions. There can be no
assurances that these factors and other factors will not have a material adverse
effect on our future international revenues and consequently on our business and
consolidated financial condition and results of operations.
If we are unable to manage our growth, our business will suffer
We have continued to experience a period of rapid and substantial growth
that has placed, and if such growth continues would continue to place, a strain
on the Company's administrative and operational infrastructure. We have
increased the number of our employees from 120 employees in three offices in the
United States at January 31, 1996 to over 1,600 employees in over 72 offices in
28 countries at October 31, 1999. Our ability to manage our staff and growth
effectively requires us to continue to improve our operational, financial and
management controls, reporting systems and procedures. In this regard, we are
currently updating our management information systems to integrate financial and
other reporting among our multiple domestic and foreign offices. In addition, we
intend to continue to increase our staff worldwide and to continue to improve
the financial reporting and controls for our global operations. It is possible
we will not be able to successfully implement improvements to our management
information and control systems in an efficient or timely manner and that,
during the course of this implementation, we could discover deficiencies in
existing systems and controls. If we are unable to manage growth effectively,
our business, results of operations and financial condition will be materially
adversely affected.
<PAGE>
If the market for middleware and application servers and integration software
does not grow as quickly as we expect, our revenues will be harmed
We sell our products and services in the middleware and application server
and integration markets. These markets are emerging and are characterized by
continuing technological developments, evolving industry standards and changing
customer requirements. Our success is dependent in large part on acceptance of
our products by large customers with substantial legacy mainframe systems,
customers establishing a presence on the Web for commerce, and developers of
web-based commerce applications. Our future financial performance will depend in
large part on continued growth in the number of companies extending their
mainframe-based, mission-critical applications to an enterprise-wide distributed
computing environment and to the Internet through the use of application server
and integration technology. There can be no assurance that the markets for
application server and integration technology and related services will continue
to grow. If these markets fail to grow or grow more slowly than we currently
anticipate, or if we experience increased competition in these markets, our
business, results of operations and financial condition will be adversely
affected.
Year 2000 issues could negatively affect our business
It is possible that our current products contain undetected errors or
defects associated with Year 2000 date functions that may result in material
costs or liabilities to us, moreover, our software directly and indirectly
interacts with a large number of other hardware and software systems. Some of
our customers are running product versions that are not Year 2000 compliant. We
have been encouraging our customers to migrate to current product versions. We
are unable to predict to what extent our business may be affected if our
software or the systems that operate in conjunction with our software experience
a material Year 2000 related failure. Any Year 2000 defect in our products or
the software and hardware systems with which our products operate, as well as
any Year 2000 errors caused by older non-current products that were not upgraded
by our customers, could expose us to litigation that could have a material
adverse impact on us. The risks of such litigation may be particularly acute due
to the mission-critical applications for which our products are used. Some
commentators have stated that a significant amount of litigation will arise out
of Year 2000 compliance issues, and we are aware of a growing number of lawsuits
against other software vendors. Because of the unprecedented nature of such
litigation, it is uncertain whether or to what extent we may be affected by it.
We could also experience serious unanticipated negative consequences caused
by undetected Year 2000 defects in our internal systems, including third party
software and hardware products. Internal systems are primarily composed of
third-party software and third-party hardware which contain embedded software
and our own software products. For example we could experience a (i) corruption
of data contained in our internal information systems or a (ii) failure of
hardware, software, or other information technology systems, causing an
interruption or failure of normal business operations. Any such events could
have a material adverse impact on our operating results. In addition, we could
experience serious unanticipated negative consequences caused by the failure of
services or products provided by third parties that are critical to the
continued our day-to-day operation, such as electrical power, telecommunications
services, and shipping services (particularly outside of countries such as the
United States where Year 2000 remediation has progressed the furthest), which
consequences could have a material adverse effect on our business operations.
In addition, a widely-predicted freeze in deployment of new computer
systems by large corporations in the second half of calendar year 1999 related
to remediation of the Year 2000 problem could result in an unusual fluctuation
of orders, with a temporarily positive impact on the number of orders that were
received in late 1999, followed by an unusual decrease in orders in subsequent
quarters.
If we lose key personnel or cannot hire enough qualified personnel, it will
adversely affect our ability to manage our business, develop new products and
increase revenue
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel including the Company's founders, Messrs.
William T. Coleman III, Alfred S. Chuang and key members of management.
Competition for these types of employees is intense, and it is possible that we
will not be able to retain our key employees and that we will not be successful
in attracting, assimilating and retaining qualified candidates in the future. As
we seek to expand our global organization, the hiring of qualified sales,
technical and support personnel will be difficult due to the limited number of
qualified professionals. Failure to attract, assimilate and retain key personnel
would have a material adverse effect on our business, results of operations and
financial condition.
Our failure to maintain ongoing sales through distribution channels will result
in lower revenues
<PAGE>
To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as system platform
companies, packaged application software developers, systems integrators and
independent consultants, independent software tool vendors and distributors. Our
ability to achieve revenue growth in the future will depend in large part on our
success in expanding our direct sales force and in further establishing and
expanding relationships with distributors, ISVs, OEMs and systems integrators.
In particular, a significant part of our strategy is to embed our technology in
products our ISV customers offer. We intend to seek distribution arrangements
with additional ISVs to embed our middleware and Web application servers
technology in their products. It is possible that we will not be able to
successfully expand our direct sales force or other distribution channels,
secure license agreements with additional ISVs on commercially reasonable terms
or at all, and otherwise further develop our relationships with indirect
distribution channels. Moreover, even if we succeed in these endeavors, it still
may not increase our revenues. If we invest resources in these types of
expansion and our revenues do not correspondingly increase, our business,
results of operations and financial condition will be materially and adversely
affected.
We rely on informal relationships with a number of consulting and systems
integration firms to enhance our sales, support, service and marketing efforts,
particularly with respect to implementation and support of our products as well
as lead generation and assistance in the sale process. We will need to expand
our relationships with third parties in order to support license revenues
growth. Many such firms have similar, and often more established, relationships
with our principal competitors. It is possible that these and other third
parties will not provide the level and quality of service required to meet the
needs of our customers, that we will not be able to maintain an effective, long
term relationship with these third parties, and that these third parties will
not successfully meet the needs of our customers.
If we do not develop and enhance new and existing products to keep pace with
technological, market and industry changes, our revenues may decline
The market for our products is highly fragmented, competitive with
alternative computing architectures, and characterized by continuing
technological developments, evolving industry standards and changing customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards or changes in customer requirements could
render our existing products obsolete and unmarketable. As a result, our success
depends upon our ability to enhance existing products, respond to changing
customer requirements and develop and introduce in a timely manner new products
that keep pace with technological developments and emerging industry standards.
It is possible that our products will not adequately address the changing needs
of the marketplace and that we will not be successful in developing and
marketing enhancements to our existing products or products incorporating new
technology on a timely basis. Failure to develop and introduce new products, or
enhancements to existing products, in a timely manner in response to changing
market conditions or customer requirements, will materially and adversely affect
our business, results of operations and financial condition.
If our products contain software defects, it could harm our revenues and expose
us to litigation
The software products we offer are internally complex and, despite
extensive testing and quality control, may contain errors or defects, especially
when we first introduced them. We may need to issue corrective releases of our
software products to fix these defects or errors. These defects and errors could
also cause damage to our reputation, loss of revenues, product returns or order
cancellations, or lack of market acceptance of our products. Accordingly, these
defects and errors could have a material and adverse effect on our business,
results of operations and financial condition.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in our
license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale and
support of our products entails the risk of such claims, which could be
substantial in light of customers' use of such products in mission-critical
applications. If a claimant brings a product liability claim against us, it
could have a material adverse effect on our business, results of operations and
financial condition.
Our products interoperate with many parts of complicated computer systems,
such as mainframes, servers, personal computers, application software,
databases, operating systems and data transformation software. Failure of anyone
of these parts due to the Year 2000 problem could cause all or large parts of
computer systems to fail. In such circumstances, it may be difficult to
determine which part failed, and it is likely that customers will bring a
lawsuit against several suppliers. Even if our software is not at fault, we
could suffer material expense and material diversion of management time in
defending any such lawsuits. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Year 2000 Compliance".
<PAGE>
Warburg, Pincus Ventures, L.P. and our current management can control matters
requiring stockholder approval
As of October 31, 1999, our officers and directors and their affiliates, in
the aggregate, had voting control over approximately 55 percent of our voting
Common Stock. In particular, Warburg, Pincus Ventures, L.P. had effective
voting control over approximately 48 percent of our voting Common Stock
(assuming the conversion of the non-voting Class B Common Stock owned by
Warburg, Pincus). As a result, these stockholders would be able to control
matters requiring majority stockholder approval, including the election of
directors and approval of significant corporate transactions. The voting power
of Warburg combined with our officers and directors under certain circumstances
could've the effect of delaying, or preventing a change in control.
We have substantial debt outstanding which could affect our ability to obtain
additional working capital and which requires substantial cash payments
In connection with our sale of 4% Convertible Subordinated Notes in June
and July 1998, we incurred $250 million in long-term indebtedness. Our principal
and interest payment obligations increased substantially because of this
indebtedness. The degree to which we are leveraged could materially and
adversely affect our ability to obtain financing for working capital,
acquisitions or other purposes and could make us more vulnerable to industry
downturns and competitive pressures. These notes are convertible into Common
Stock, which conversion could cause substantial dilution to stockholders and
would increase the number of shares eligible for sale in the market, but would
eliminate the need for the Company to repay the principal amount of such
converted notes. There can be no assurance, however, that any of these notes
will be converted. Our ability to meet our debt service obligations will be
dependent upon our future performance, which will be subject to financial,
business and other factors affecting our operations, many of which are beyond
our control.
We will require substantial amounts of cash to fund scheduled payments of
interest on these notes, payment of the principal amount of these notes at
maturity, payment of principal and interest on our other indebtedness, future
capital expenditures and any increased working capital requirements. If we
cannot meet our cash requirements out of cash flow from operations, there can be
no assurance that we will be able to obtain alternative financing. If we cannot
obtain such financing, our ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results or
to fund capital expenditures or increased working capital requirements may be
adversely affected. Any failure by us to satisfy our obligations with respect to
these notes at maturity (with respect to payments of principal) or prior thereto
(with respect to payments of interest or required repurchases) would constitute
a default under the indenture entered into in connection with the issuance of
these notes and could cause a default under agreements governing our other
indebtedness, if any.
Recent accounting pronouncements could cause us to defer revenue
The American Institute of Certified Public Accountants has issued a series
of recent pronouncements which address revenue recognition in the software
industry, including SOP 97-2, SOP 98-4, and SOP 98-9. These pronouncements
principally focus on concepts versus specific implementation guidance. We
believe we are in compliance with these standards, but the software industry and
the accounting profession are currently discussing a wide range of potential
interpretations which may result in the issuance of more pronouncements or
interpretive guidance. As future guidance becomes available or if the software
industry broadly adopts certain practices which are different than the Company's
current revenue recognition practices which could have a material adverse effect
on our business practices, financial condition, or results of operations.
We have not fully assessed our ability to comply with SOP 98-9 using
current business practices. However, the Company believes that SOP 98-9 may
require significantly more revenues to be deferred for certain types of
transactions.
<PAGE>
SELLING STOCKHOLDERS
The following table provides the names of and the number of shares of
Common Stock beneficially owned by each Selling Stockholder, and the number of
shares of Common Stock beneficially owned by each Selling Stockholder upon
completion of the offering or offerings pursuant to this prospectus, assuming
each Selling Stockholder offers and sells all of its or his/her respective
Shares. Selling Stockholders may, however, offer and sell all, or some or none
of their Shares. Under some circumstances, the respective donees, pledgees and
transferees or other successors in interest of the Selling Stockholders may also
sell the shares listed below as being held by the Selling Stockholders. No
Selling Stockholder beneficially owns one percent or greater of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering Offered After the Offering
----------------- ------------------
Number of Shares Number of Shares Number of Shares
----------------- ---------------- ------------------
<S> <C> <C> <C>
Daniel Lemberg................................ 164,684 164,684 0
Gregg S. Hymowitz............................. 85,042 85,042 0
Kenneth P. Birman............................. 79,727 79,727 0
Daniel Bock................................... 66,496 66,496 0
Robert Hoag................................... 63,782 63,782 0
Daniel & Robert Bock.......................... 53,949 53,949 0
William Lindsey............................... 53,151 53,151 0
John Belizaire................................ 43,649 43,649 0
William W. Lee................................ 43,649 43,649 0
Julian Pelenur................................ 43,649 43,649 0
Joseph A. M. Pilkerton........................ 43,649 43,649 0
J. Mitchell Hull.............................. 39,864 39,864 0
Michael Toporek............................... 39,864 39,864 0
Walter Grossman............................... 26,576 26,576 0
Keith Liu..................................... 26,576 26,576 0
Fali Rubenstein............................... 26,576 26,576 0
Arthur Spurrell............................... 26,576 26,576 0
Laura Spurrell................................ 26,576 26,576 0
Jay Associates................................ 21,261 21,261 0
Yeshiva Beth Hillel........................... 21,261 21,261 0
Lebow Family Revocable Trust.................. 18,603 18,603 0
Irving N. Segal............................... 15,945 15,945 0
Abe Sher...................................... 13,819 13,819 0
Jacob Koval................................... 13,288 13,288 0
Sheldon and Ruth Perl......................... 10,630 10,630 0
Premier Ideas Incorporated.................... 10,630 10,630 0
Wolf Sicherman................................ 7,973 7,973 0
Navidec, Inc.................................. 7,087 7,087 0
Melvin Blatman................................ 5,315 5,315 0
Rose Blatman.................................. 5,315 5,315 0
E80S Partners................................. 5,315 5,315 0
Judy Grossman c/f C. Grossman................. 5,315 5,315 0
Judy Grossman c/f L. Grossman................. 5,315 5,315 0
Carol Labi.................................... 5,315 5,315 0
Wayne I. Maggin............................... 5,315 5,315 0
Stephen and Rosalyn Meadow.................... 5,315 5,315 0
Adam M. Palley................................ 5,315 5,315 0
Kay Silverman Revocable Trust................. 5,315 5,315 0
Peter Stone................................... 5,315 5,315 0
Jeffrey Toporek............................... 5,315 5,315 0
Lawrence Wolfe................................ 5,315 5,315 0
</TABLE>
* Less than 1%
<PAGE>
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
holders of up to 1,163,627 shares of Common Stock. These shares were issued in
connection with the merger agreement between BEA and The Theory Center, Inc..
This prospectus has been prepared in connection with registering these shares to
allow for sales of these shares by the applicable selling stockholders to the
public as required by the terms of this merger agreement. We have registered the
shares for sale pursuant to the terms of the merger agreement, but registration
of these shares does not necessarily mean that any of these shares will be
offered and sold by the holders thereof.
We will not receive any proceeds from this offering. The shares may be sold
from time to time to purchasers directly by any of the selling stockholders, or
under some circumstances, donees, pledgees, transferees or other successors in
interest ("Transferees") thereof. Alternatively, the selling stockholders, or
Transferees thereof, may from time to time offer the shares through dealers or
agents, who may receive compensation in the form of commissions from the selling
stockholders, or Transferees thereof, and/or the purchasers of the shares for
whom they may act as agent. The selling stockholders, or Transferees thereof,
and any dealers or agents that participate in the distribution of the shares may
be deemed to be "underwriters" within the meaning of the Securities Act and any
profit on the sale of the shares by them and any commissions received by any
such dealers or agents might be deemed to be underwriting commissions under the
Securities Act of 1933.
At a time a particular offer of the shares is made, a prospectus
supplement, if required, will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the selling stockholders, or Transferees thereof, and any
other required information. The shares may be sold from time to time at varying
prices determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
The shares may also be sold in one or more of the following transactions:
(a) block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (b) purchases
by any such broker-dealer as principal and resale by such broker-dealer for its
own account pursuant to a prospectus supplement; (c) ordinary brokerage
transactions and transactions in which any such broker-dealer solicits
purchasers; (d) sales "at the market" to or through a market maker or into an
existing trading market, on an exchange or otherwise, for such shares; and (e)
sales in other ways not involving market makers or established trading markets,
including direct sales to purchasers. In effecting sales, broker-dealers engaged
by the selling stockholders may arrange for other broker-dealers to participate.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual report on form 10-K for
the year ended January 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered pursuant
to this prospectus will be passed upon for the Company by Morrison & Foerster
LLP, Palo Alto, California. Certain attorneys at Morrison & Foerster LLP own an
aggregate of approximately 12,000 shares of Common Stock of the Company.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses payable by
the Company in connection with the issuance and distribution of the Common Stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee................................................... $ 29,997
Printing and duplicating fees..................................................... 10,000
Legal fees and expenses........................................................... 15,000
Accounting fees and expenses...................................................... 12,000
Miscellaneous expenses............................................................ 5,000
-----------
*Total....................................................................... $ 71,997
===========
</TABLE>
*None of the expenses listed above will be borne by the selling stockholders.
Item 15. Indemnification Of Directors And Officers
Under Section 145 of the General Corporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation provides
that the liability of its directors for monetary damages shall be eliminated to
the fullest extend permissible under Delaware law. Pursuant to Delaware law,
this includes elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to the Registrant and its Stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of non-
monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the securities laws or state or
federal environmental laws. The Registrant maintains a policy of directors' and
officers' liability insurance that insures the Company's directors and officers
against the cots of defense, settlement or payment of a judgment under certain
circumstances.
Pursuant to written agreement between the respective Selling stockholders
and the Company, the directors and officers of the Company are indemnified by
such Selling stockholders against certain civil liabilities that they may incur
under the Securities Act in connection with this registration statement and the
related prospectus.
ITEM 16. Exhibits
4.1 - Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's registration statement on Form SB-2
(File No. 333-20791))
4.2 - Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to
Registrant's registration statement on Form SB-2 (File No. 333-20791))
5.1 - Opinion of Morrison & Foerster LLP
10.1 - Agreement and Plan of Reorganization among BEA Systems, Inc. and The
Theory Center, Inc. and BEA Acquisition Corp., dated as of November 10, 1999
23.1 - Consent of Ernst & Young LLP, Independent Auditors
23.2 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
24.1 - Power of Attorney (included on signature page hereto)
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement:
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) any deviation from the low or high and of the estimated
maximum offering price may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate changes in volume and
price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
these securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby further undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, when applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California on December 3, 1999.
BEA SYSTEMS, INC.
By: /s/ William T. Coleman III
-----------------------------------
Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints William T. Coleman, III and
Steve L. Brown as his/her true and lawful attorneys-in-fact and agents, jointly
and severally, with full power of substitution and resubstitution, for and in
his/her stead, in any and all capacities, to sign on his/her behalf the
registration statement on Form S-3 in connection with the sale by BEA Systems,
Inc. of shares of offered securities, and to execute any amendments thereto
(including post-effective amendments) or certificates that may be required in
connection with this registration statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission and granting unto said attorneys-in-fact and
agents, jointly and severally, the full power and authority to do and perform
each and every act and thing necessary or advisable to all intents and purposes
as he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, jointly and severally, or his/her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement on Form S-3 has been signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William T. Coleman III Chief Executive Officer, Chairman of the Board and December 3, 1999
----------------------------------- Director (Principal Executive Officer)
William T. Coleman III
/s/ Steve L. Brown Executive Vice President and Chief Financial Officer December 3, 1999
----------------------------------- (Principal Financial and Accounting Officer)
Steve L. Brown
/s/ Alfred S. Chuang President and Chief Operating Officer, Director December 3, 1999
-----------------------------------
Alfred S. Chuang
/s/ Carol A. Bartz Director December 3, 1999
-----------------------------------
Carol A. Bartz
/s/ Cary J. Davis Director December 3, 1999
-----------------------------------
Cary J. Davis
/s/ Stewart K.P. Gross Director December 3, 1999
-----------------------------------
Stewart K.P. Gross
/s/ William H. Janeway Director December 3, 1999
-----------------------------------
William H. Janeway
/s/ Dean O. Morton Director December 3, 1999
-----------------------------------
Dean O. Morton
</TABLE>
<PAGE>
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
December 3, 1999
BEA Systems, Inc.
2315 North First Street
San Jose, CA 95113
Ladies and Gentlemen:
At your request, we have examined the registration statement on Form S-3
filed by BEA Systems, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on December 3, 1999 (the "registration
statement") relating to the registration under the Securities Act of 1933, as
amended, of up to 1,163,627 shares of the Company's common stock, $.001 par
value (the "Stock"), being offered by certain selling stockholders specified
therein (the "Selling Stockholders").
As counsel to the Company, we have examined the proceedings taken by the
Company and the Selling Stockholders in connection with the sale by the Selling
Stockholders of up to 1,163,627 shares of Stock.
It is our opinion that the 1,163,627 shares of Stock that may be sold are
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the registration
statement and further consent to all references to us in the registration
statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
dated as of November 10, 1999
by and between
BEA SYSTEMS, INC., a Delaware corporation,
BEA ACQUISITION CORP., a Delaware corporation, and
THE THEORY CENTER, INC., a Delaware corporation
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of November
10, 1999, by and among BEA Acquisition Corp., a Delaware corporation
("Acquisition Subsidiary"), BEA Systems, Inc., a Delaware corporation ("BEA")
and The Theory Center, Inc., a Delaware corporation ("Seller").
RECITALS
A. Seller is in the business of providing Enterprise JavaBeans component
products and services for developing electronic business applications (the
"Business").
B. BEA and Seller desire to merge (the "Merger") Acquisition Subsidiary
with and into Seller with Seller being the surviving corporation (the "Surviving
Corporation") of the Merger.
C. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and for financial accounting
purposes shall be accounted for as a purchase transaction.
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
ARTICLE 1
MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement
and in accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined hereinafter), Acquisition Subsidiary will be merged
with and into Seller, with Seller being the Surviving Corporation of the Merger
and becoming a wholly-owned subsidiary of BEA, and the separate corporate
existence of Acquisition Subsidiary shall cease.
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the consummation of the Merger and the other transactions contemplated hereby
(the "Closing") shall take place as promptly as practicable (and in any event
within five (5) business days) after the satisfaction or waiver of the
conditions set forth in Article 7 hereof, at the offices of Morrison & Foerster
LLP, 1290 Avenue of the Americas, New York, New York 10104, or such other place
and time as the parties may otherwise agree, and the date of the Closing is
referred to herein as the "Closing Date."
1.3 Filing of Merger Documents; Effective Time. At the Closing, the
parties shall cause the Merger to be consummated by executing and filing a duly
executed Certificate of
<PAGE>
Merger (the "Certificate of Merger") with respect to the Merger with the
Secretary of State of the State of Delaware, in such form as BEA and Seller
reasonably determine is required by and in accordance with the relevant
provisions of the DGCL. The time upon which such filing is effective in
accordance with the DGCL shall be referred to herein as the "Effective Time."
1.4 Effect of Merger. At the Effective Time, the effect of the Merger
shall be as provided in the DGCL. Without limiting the generality of the
foregoing, at the Effective Time:
(a) The Certificate of Incorporation and the Bylaws of Seller, as
in effect immediately prior to the Closing Date, shall become the Certificate of
Incorporation of the Surviving Corporation, unless and until amended in
accordance with their terms and as provided by law.
(b) The officers and directors of Acquisition Subsidiary shall
become the officers and directors of the Surviving Corporation, each to hold
their respective positions in accordance with the Certificate of Incorporation
and Bylaws of the Surviving Corporation until his successor is duly elected and
qualified.
1.5 Tax and Accounting Treatment. The parties hereto acknowledge and
agree that the Merger contemplated hereby shall be treated as a purchase
transaction for accounting purposes. The parties also acknowledge and agree that
the Merger is intended to be a reorganization under Section 368(a) of the Code;
each party shall use all commercially reasonable efforts to cause the Merger to
be treated as a reorganization; and neither party shall take any action which is
inconsistent with such treatment. 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.
ARTICLE 2
CONVERSION OF STOCK
2.1 Consideration; Conversion of Stock.
2.1.1 For the purposes of this Agreement "Consideration" means
2,050,000 shares of common stock $.001 par value per share of BEA ("BEA Common
Stock") minus (x) the Loan Adjustment Shares, if any, and (y) the Option and
Warrant Adjustment Shares, if any, all such consideration to be paid at the time
and in the manner set forth herein. At the Effective Time, by virtue of the
Merger, and without further action by any person or entity, all of the shares of
Seller Stock (as hereinafter defined) issued and outstanding immediately prior
to the Effective Time, other than shares held in Seller's treasury, any such
shares held by BEA or Acquisition Subsidiary, and any Dissenting Shares, shall
be converted into and become the right to receive the Consideration in
accordance with this Article 2. At the Effective time all shares of Seller Stock
held by Seller as treasury stock or held by BEA or Acquisition Subsidiary shall
be canceled and no payment shall be made with respect thereto. Each issued and
outstanding share of capital stock of Acquisition Subsidiary shall, at the
Effective Time, be automatically converted into one share of Seller Common Stock
(as hereinafter defined). For the purposes hereof, the term "Seller
2
<PAGE>
Stock" shall mean all issued and outstanding shares of Seller's common stock
("Seller Common Stock") as of the Effective Time, after giving effect to (x) the
exercise of all options to acquire Seller Common Stock (other than Employee
Options to acquire 1,128,125 shares of Seller Common Stock) and (y) the
conversion or exercise of all outstanding securities convertible or exercisable
into Seller Common Stock (other than Employee Options to acquire 1,128,125
shares of Seller Common Stock).
2.1.2 The shares of BEA Common Stock comprising the Consideration
shall be allocated among each holder of shares of Seller Stock outstanding
immediately prior to the Effective Time based upon the ratio of the number of
shares of Seller Common Stock held by such holder to the total shares of Seller
Stock outstanding immediately prior to the Effective Time.
2.1.3 "Stock Conversion Factor" means the quotient obtained by
dividing (i) 2,050,000 shares of BEA Common Stock minus the Loan Adjustment
Shares, if any, by (ii) 10,355,791.
2.2 Payment of Consideration.
2.2.1 On the Closing Date, subject to Section 2.2.2, BEA shall
issue and deliver to the holders of Seller Stock certificates representing the
number of shares of BEA Common Stock comprising the Consideration (other than
the Escrowed Shares (as hereinafter defined)), allocated to such stockholders in
accordance with Schedule 2.2.1 delivered by Seller to BEA concurrent with the
--------------
execution and delivery of this Agreement.
2.2.2 On or prior to the Closing Date, BEA shall authorize one or
more persons to act or shall itself act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective Time, BEA shall
cause the Exchange Agent to mail to all former holders of record of Seller Stock
instructions for surrendering their certificates representing Seller Stock in
exchange for a certificate or certificates representing shares of BEA Common
Stock. Upon surrender of a Seller Stock certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by BEA, the
holder of such certificate shall be entitled to receive in exchange therefor
(subject to Section 2.2.4) a certificate representing that number of whole
shares of BEA Common Stock into which the shares of Seller Stock theretofore
represented by such certificate so surrendered shall have been converted
pursuant to the provisions of this Agreement, and the certificate so surrendered
shall forthwith be canceled. Until surrendered in accordance with the provisions
of this Section, each Seller Stock certificate shall represent for all purposes
shares of BEA Common Stock. BEA Common Stock into which Seller Stock shall be
converted in the Merger shall be deemed to have been issued at the Effective
Time. If any BEA Common Stock certificates are to be issued in a name other than
that in which the Seller Stock certificate surrendered is registered, it shall
be a condition of such exchange that the person requesting such exchange shall
deliver to the Exchange Agent any transfer or other taxes required by reason of
the issuance of certificates for such shares of BEA Common Stock in a name other
than that of the registered holder of the certificate so surrendered or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
3
<PAGE>
2.2.3 No certificates representing fractional shares of BEA Common
Stock shall be issued upon the surrender or exchange of Seller Stock
certificates. No fractional interest shall entitle the owner to vote or to any
rights of a security holder. In lieu of fractional shares, each holder of shares
of Seller Stock who would otherwise have been entitled to a fractional share of
BEA Common Stock, will receive upon surrender of a Seller Stock certificate or
certificates, as the case may be, an amount in cash (without interest)
determined by multiplying such fraction by $37.00. BEA shall not be liable to
any holder of shares of Seller Stock for any cash in lieu of fractional
interests delivered to a public official pursuant to applicable escheat or
abandoned property laws.
2.2.4 On the Closing Date, BEA shall cause the transfer agent for
the BEA Common Stock to deposit 10.5% of the aggregate number of shares of BEA
Common Stock comprising the Consideration (the "Escrowed Shares") with an escrow
agent selected by BEA and reasonably satisfactory to Seller (the "Escrow Agent")
to be held and disbursed by the Escrow Agent in accordance with the terms of an
escrow agreement to be entered into at the Closing among BEA, the Escrow Agent,
Seller and the Stockholders' Representatives, substantially in the form attached
hereto as Exhibit 2.2.4 (the "Escrow Agreement").
-------------
2.3 Options.
2.3.1 At the Effective Time, any and all outstanding and
unexercised Employee Options (as defined in Section 3.3.2) shall cease to
represent a right to acquire shares of Seller Common Stock and shall be
converted automatically into an option or warrant, as the case may be, to
purchase shares of BEA Common Stock in an amount and at an exercise price
determined as provided below:
(a) The number of shares of BEA Common Stock subject to the new
option or warrant shall be equal to the product of the number of shares of
Seller Common Stock subject to the original option or warrant and the Stock
Conversion Factor, provided that any fractional shares of BEA Common Stock
resulting from such multiplication shall be rounded to the nearest share; and
(b) The exercise price per share of BEA Common Stock under the new
option or warrant shall be equal to the quotient obtained by dividing the
exercise price per share of Seller Common Stock under the original option or
warrant by the Stock Conversion Factor, provided that such exercise price shall
be rounded to the nearest cent.
2.3.2 The adjustment provided herein with respect to any options
that are "incentive stock options" (as defined in the Code) shall be and is
intended to be effected in a manner consistent with Section 424(b) of the Code.
The duration and other terms of each new option and warrant shall be the same as
the original option or warrant as modified by Section 2.3.1 hereof, except that
all references to Seller shall be deemed to be references to BEA.
2.3.3 Prior to the Closing Date and except for any Employee
Options, Seller shall use all reasonable efforts to cause all outstanding
Warrants and Options (as hereinafter defined), to be exercised (and all shares
of Seller Common Stock required to be issued pursuant
4
<PAGE>
to such exercise to be validly and fully issued as fully paid, nonassessable
shares) or terminated, such that, as of the Effective Time, (a) no options,
warrants or other rights to acquire any shares of Seller's capital stock or any
securities convertible into shares of Seller's capital stock are outstanding,
other than the Employee Options and (b) no person or entity other than the
holders of Seller Common Stock shall have any right, title or interest in or to
the ownership of Seller or any securities issued by Seller, all of which holders
shall have no such, right, title or interest in or to Seller, other than their
ownership of Seller Common Stock.
2.4 Taxes and Closing Costs. All transfer, sales and use taxes imposed
by any governmental entity or with respect to or as the result of the Merger
shall be paid by Seller and accrued prior to the Closing Date. Except as
provided above and subject to Section 10.5, each party shall bear their own
costs in connection with the transactions contemplated hereby.
2.5 Appraisal Rights. If holders of any shares of Seller Stock (i) are
entitled to dissent from the Merger and demand appraisal of any such Seller
Stock in accordance with the provisions of the DGCL concerning the right of such
holders to dissent from the Merger and demand appraisal of their Seller Stock or
(ii) have properly exercised appraisal rights with respect to their Seller Stock
in accordance with Section 262 of the DGCL ("Dissenting Holders"), any Seller
Stock held by a Dissenting Holder as to which appraisal has been so demanded or
for which such dissenter's rights have been properly exercised ("Dissenting
Shares") shall not be converted as described in Section 2.1, but shall, from and
after the Closing, represent only the right to receive such consideration as may
be determined to be due to such Dissenting Holder pursuant to the DGCL;
provided, however, that each share of Seller Stock held by a Dissenting Holder
who shall, after the Closing, withdraw his demand for appraisal or lose his
right of appraisal with respect to such shares of Seller Stock, in either case
pursuant to the DGCL, shall not be deemed Dissenting Shares but shall be deemed
to be converted, as of the Effective Time, into the right to receive BEA Common
Stock in accordance with Section 2.1 hereof. Seller shall give BEA (i) prompt
notice of any written demands under Section 262 of the DGCL with respect to any
shares of capital stock of Seller, any withdrawal of any such demands and any
other instruments served pursuant to the DGCL and received by Seller and (ii)
the opportunity to direct all negotiations and proceedings with respect to any
demands under Section 262 of the DGCL with respect to any shares of capital
stock of Seller. Seller shall cooperate with BEA concerning, and shall not
voluntarily make any payments with respect to, or offer to settle or settle, any
such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to BEA and Acquisition Subsidiary
that the following facts and circumstances are true and correct, as of the date
of this Agreement, subject to the limitations and exceptions set forth on the
Disclosure Schedule delivered by Seller to BEA concurrent with the execution and
delivery of this Agreement and attached hereto (the "Seller Disclosure
Schedule"). Whenever the term "to Seller's knowledge" or similar expression
appears in any representation or warranty in this Article 3, it means to the
actual knowledge of Seller's directors and officers and Mr. Steve Lemas, after
reasonable inquiry and investigation.
5
<PAGE>
Whenever the term "Seller has received no notice" or like expression appears in
any representation or warranty in this Article 3, it means that none of Seller's
directors and officers or Mr. Steve Lemas has received actual oral or written
notice of the matter to which such term is applied, after having made reasonable
inquiry as to whether notice has been received. Whenever the term "material
adverse effect" on Seller appears herein it shall mean any adverse effect on the
business, financial condition, operations or results of operations of Seller.
3.1 Organization. Seller: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; (ii) has
all necessary corporate power to own and lease its properties, to carry on its
business as now being conducted and to enter into and perform this Agreement and
all of the other documents and agreements contemplated hereby; and (iii) is
qualified to do business in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business, operations or financial
condition of Seller. Seller has no Subsidiaries (as hereinafter defined) and
holds no right, title or interest in or to any other corporation, company,
partnership, trust, limited liability company or other entity.
3.2 Authority and Consents. The execution and performance of this
Agreement and the other documents to be executed by Seller pursuant to the terms
hereof will not result in a violation of Seller's Certificate of Incorporation
or Bylaws. Seller has full power and authority (corporate and otherwise) to
enter into this Agreement and the other documents to be executed by Seller and
to carry out the transactions contemplated by this Agreement and such other
documents. This Agreement and the other documents to be executed by Seller
pursuant to the terms hereof and their execution and delivery to Acquisition
Subsidiary and BEA have been duly authorized by the Board of Directors of
Seller, and, subject to Section 5.5, no further corporate action prior to the
Closing shall be necessary on the part of Seller or its stockholders to effect
the Merger or to make this Agreement and the other documents to be executed by
Seller pursuant to the terms hereof and the transactions contemplated by this
Agreement and such other documents valid and binding upon Seller. Upon the
filing of the Certificate of Merger with the Secretary of State for the State of
Delaware, the Merger shall be immediately and automatically effective without
further action by any person or entity. This Agreement and the other documents
to be executed by Seller pursuant to the terms hereof do and will constitute a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with their respective terms, subject as to enforcement only: (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
generally; and (ii) to general principles of equity.
Seller has delivered to BEA true, complete and correct copies of (i) its
Certificate of Incorporation, as amended to date, certified by the appropriate
official of the jurisdiction of incorporation, (ii) its Bylaws, as amended to
date, and (iii) its stock ledger. The Certificate of Incorporation and Bylaws of
Seller are in full force and effect and Seller is in full compliance with the
provisions thereof.
6
<PAGE>
3.3 Capitalization and Title to Shares.
3.3.1 Seller is authorized to issue Twenty-five Million
(25,000,000) shares of Seller Common Stock and Five Million (5,000,000) shares
of preferred stock, of which 7,620,000 shares of Seller Common Stock and no
shares of preferred stock are issued and outstanding. Such shares are owned of
record by the persons and in the amounts set forth on Section 3.3.1 of the
Seller Disclosure Schedule. No other class of capital stock of Seller is
authorized or outstanding. All of the issued and outstanding shares of Seller's
capital stock are duly authorized and are validly issued, fully paid,
nonassessable and free of pre-emptive rights. None of the issued and outstanding
shares of Seller have been issued in violation of any federal or state law or
any preemptive rights or rights to subscribe for or purchase securities.
3.3.2 Section 3.3.2 of the Seller Disclosure Schedule includes a
true and complete list of all outstanding rights, subscriptions, warrants,
calls, preemptive rights, options or other agreements of any kind to purchase or
otherwise receive from Seller any shares of the capital stock or any other
security of Seller, and all outstanding securities of any kind convertible into
or exchangeable for such securities (all such rights, subscriptions, warrants,
calls, options, agreements and convertible securities, collectively, "Warrants
and Options"). True and complete copies of all instruments (or the form of such
instruments) referred to in this Section 3.3.2 have been previously furnished to
BEA. There are no stockholder agreements, voting trusts, proxies or other
agreements or understandings with respect to the outstanding shares of capital
stock of Seller to which Seller is a party. Except for the options and warrants
listed on Section 3.3.2 of the Seller Disclosure Schedule under the heading
"Options to be Converted at Closing" ("Employee Options"), all outstanding
unexercised Warrants and Options shall terminate at the Effective Time.
3.3.3 Seller does not own beneficially any shares of capital stock
of BEA.
3.4 Title to Assets. Seller has good and marketable title to all of its
tangible and intangible assets and properties reflected as owned on the balance
sheet included in the Financial Statements and all such assets and properties
are free and clear of all liens, charges, encumbrances, security interests and
interests of others, except for (a) any lien for current taxes not yet due and
payable, (b) any statutory liens, (c) minor liens that have arisen in the
ordinary course of business that do not (individually or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Seller or (d) the lien in connection with the BEA
Loan (collectively, "Liens").
3.5 Properties. Seller does not now own, and never has owned, any real
property and does not have any options or contractual obligations to purchase or
acquire any interest in real property. Seller has a valid leasehold interest in
all of the buildings, structures and leasehold improvements, and owns or has a
valid leasehold interest in all equipment and other tangible property used in
the conduct of its business, all of which are in good and sufficient operating
condition and repair, ordinary wear and tear excepted. There is no equipment
located on the premises of Seller that is on loan from another party.
7
<PAGE>
3.6 Consents and Approvals of Government Authorities. Except for the
filing of the Certificate of Merger and the consent of Seller's stockholders, no
consent, approval or authorization of, or declaration, filing, notice or
registration with, any governmental agency, regulatory authority or other Person
(as defined hereinafter) is required in connection with the execution, delivery
and performance of this Agreement or any of the other documents contemplated
hereby by Seller or the consummation of the transactions contemplated herein and
therein.
3.7 Accounts Receivable/Prepayable. Subject to the allowances with
respect to accounts receivable set forth on the balance sheet included in the
Financial Statements, all accounts receivable reflected on such balance sheet
and all accounts receivable arising subsequent thereto, have arisen in the
ordinary course of business of Seller, represent valid and enforceable
obligations due to Seller, have been and are reasonably expected to be fully
collectible in the ordinary course of business in the aggregate recorded amounts
thereof in accordance with their terms and are not subject to any set-off,
counterclaim or future performance obligation on the part of Seller.
3.8 Contracts and Other Agreements. Section 3.8 of the Seller Disclosure
Schedule sets forth a list of the following contracts and other agreements to
which Seller is a party or by or to which Seller or Seller's assets or
properties are bound or subject:
(a) any agreement or series of related agreements requiring
aggregate payments after the date hereof by or to Seller of more than $25,000;
(b) any agreement with or for the benefit of any current or
former officer, director, stockholder, employee or consultant of Seller;
(c) any agreement with any labor union or association representing
any employee of Seller;
(d) any agreement for the purchase or sale of materials, supplies,
equipment, merchandise or services that contains an escalation, renegotiation or
redetermination clause or that obligates Seller to purchase all or substantially
all of its requirements of a particular product from a supplier, or for periodic
minimum purchases of a particular product from a supplier;
(e) any agreement for (i) sale of any of the assets or properties
of Seller, other than in the ordinary course of business or (ii) for the grant
to any person of any options, rights of first refusal, or preferential or
similar rights to purchase any such assets or properties other than stock option
and warrant agreements or instruments listed in Section 3.3.2 of the Seller
Disclosure Schedule or pursuant to subsection (b) of this Section 3.8;
(f) any partnership or joint venture agreement;
(g) any agreement of surety, guarantee or indemnification, other
than agreements in the ordinary course of business with respect to obligations
in an aggregate amount not in excess of $25,000;
8
<PAGE>
(h) any agreement containing covenants of Seller not to compete in
any line of business, in any geographic area or with any person or covenants of
any other person not to compete with Seller or in any line of business of
Seller;
(i) any agreement granting or restricting the right of Seller to
use any Intellectual Property (as defined hereinafter);
(j) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(k) any agreement with any holder of securities of Seller as such
(including, without limitation, any agreement containing an obligation to
register any of such securities under any federal or state securities laws);
(l) any agreement obligating Seller to deliver services or product
enhancements or containing a "most favored nation" pricing clause;
(m) any agreement relating to the acquisition by Seller of any
operating business or the capital stock of any other person;
(n) any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee (other than
arrangements to pay commission or fees to employees in the ordinary course of
business);
(o) any agreement or note relating to or evidencing outstanding
indebtedness for borrowed money;
(p) any lease, sublease or other agreement under which Seller is
lessor or lessee of any real property or equipment or other tangible property
with respect to obligations in excess of $25,000;
(q) Except for agreements to provide maintenance, upgrades, bug
fixes, error corrections or similar work product that are ordinary and customary
for the software industry and that are related to the Seller products which have
been delivered as of the date hereof, any agreement that requires Seller to
deliver, or undertake the development of, any new product, customized product,
substantial upgrade, new version or similar work product where such delivery or
development requires Seller to utilize substantial personnel or financial
resources; and
(r) any other material agreement whether or not made in the
ordinary course of business.
True and complete copies of all the contracts and other agreements
(and all amendments, waivers or other modifications thereto) set forth on the
Seller Disclosure Schedule have been furnished to BEA. Each of such contracts is
valid, subsisting, in full force and effect, binding upon Seller, and to the
best knowledge of Seller, binding upon the other parties thereto in accordance
with their terms, and Seller is not in default under any of them, nor, to the
best
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knowledge of Seller, is any other party to any such contract or other agreement
in default thereunder, nor does any condition exist that with notice or lapse of
time or both, would constitute a default thereunder, except, in each case, such
defaults as would not, individually or in the aggregate, have a material adverse
effect on the Seller.
3.9 Compliance with Laws.
3.9.1 Seller has all licenses, permits, franchises, orders or
approvals of any federal, state, local or foreign governmental or regulatory
body required for the conduct of the Business, except where not having such
license, permit, franchise, order or approval would not reasonably be expected
to result in a material adverse effect on the Seller (collectively, "Permits");
such Permits are in full force and effect; and no proceeding is pending or, to
the knowledge of Seller, threatened to revoke or limit any Permit.
3.9.2 Seller is not in violation of any applicable law, ordinance
or regulation or any order, judgment, injunction, decree or other requirement of
any court, arbitrator or governmental or regulatory body, Seller has not
received notice of, and there has not been any citation, fine or penalty imposed
against Seller for, any such violation or alleged violation.
3.10 Bank Accounts and Powers of Attorney. Section 3.10 of the Seller
Disclosure Schedule identifies all bank and brokerage accounts of Seller,
whether or not such accounts are held in the name of Seller, lists the
respective signatories therefor and lists the names of all persons holding a
power of attorney from Seller and a summary of the terms thereof.
3.11 Agreement Will Not Cause Breach or Violation. Neither the execution
nor delivery of this Agreement or the other documents contemplated hereby by
Seller, nor performance by Seller of the terms and provisions of this Agreement
or such other documents will (a) conflict with or result in a breach or
violation of any of the terms, conditions or provisions of any Permit or any
judgment, order, injunction, decree, regulation or ruling of any court or
governmental authority to which Seller or any assets of Seller are subject or of
any contract to which Seller is a party or any agreement, contract, or
commitment to which Seller is a party or by which it is bound, except where such
violation would not reasonably be expected to have a material adverse effect on
the Seller, or (b) give any person or entity the right to terminate or modify
any material contract to which Seller is a party, or accelerate any material
obligation or indebtedness of Seller thereunder.
3.12 Financial Statements. Seller has previously delivered to BEA the
audited financial statements of Seller at June 30, 1999, (including the
footnotes thereto). Such financial statements are collectively referred to
herein as the "Financial Statements." The Financial Statements have been
prepared from, and are in accordance with, the books and records of Seller and
present fairly, in all material respects, the financial position and the results
of operations of Seller as of the dates and for the periods indicated, in each
case in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved, except as otherwise stated
therein and subject to normal year end audit adjustments, which are not, in the
aggregate, material.
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3.13 No Undisclosed Liabilities. Seller has no liabilities (whether known
or unknown, absolute or contingent, liquidated or unliquidated, or due or to
become due), except for (i) liabilities shown on the balance sheet included in
the Financial Statements, (ii) current liabilities which have arisen since the
date of the balance sheet included in the Financial Statements in the ordinary
course of the operation of the Business and not in excess of $1,003,000 in the
aggregate and (iii) contractual liabilities pursuant to the agreements set forth
in Section 3.8 of the Seller Disclosure Schedule incurred in the ordinary course
of operation of the Business that are not required by GAAP to be reflected on a
balance sheet (or in the notes thereto).
3.14 Customers. Section 3.14 of the Seller Disclosure Schedule sets forth
Seller's customers (and the approximate dollar amount of sales for such year)
who accounted for all of Seller's sales for Seller's 1998 fiscal year and for
fiscal 1999 through September 30, 1999.
3.15 Transactions with Management. No officer or director of Seller has
(whether directly or indirectly through another entity in which such person has
an interest, other than as the holder of less than one percent (1%) of a class
of securities of a publicly traded company) any interest in (a) any property or
assets of Seller (except as a stockholder) or (b) to the knowledge of Seller,
any current competitor, customer or supplier of Seller or (c) to the knowledge
of Seller, any person which is currently a party to any contract with Seller
involving any amount in excess of $25,000.
3.16 Absence of Certain Changes. To the knowledge of senior management of
Seller, since June 30, 1999, there have been no material adverse changes in the
condition, financial or otherwise, of any of the assets or any of the
liabilities, business, prospects or operations of Seller or the Business, other
than changes in the ordinary course of business which in the aggregate have not
been materially adverse to the business, finances or operations of Seller or
changes in the economy in general (or in the overall industry in which Seller
operates). Without limiting the foregoing, since June 30, 1999, except as set
forth in Section 3.16 of the Seller Disclosure Schedule:
(a) Seller has not materially altered the nature of the Business as
carried on or made any material change in the products and services it supplies;
(b) Seller has not borrowed or agreed to borrow any funds or
incurred, or assumed or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability, except trade payables
incurred in the ordinary course of business and the BEA Loan;
(c) Seller has not paid, discharged or satisfied any claim,
liability or obligation other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business and other than the payment of
obligations to Fleet National Bank in the original principal amount of $30,000;
(d) Seller has not permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Lien of any kind;
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(e) Seller has not written down the value of any inventory or
written off as uncollectible any notes or accounts receivable, except for write-
downs and write-offs in the ordinary course of business, none of which is
material;
(f) Seller has not cancelled any debts or waived any claims or
rights of substantial value, waived any statute of limitation or sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except sales of inventory in the
ordinary course of business;
(g) Seller has not licensed or disposed of or permitted to lapse
any rights to the use of any Seller Intellectual Property;
(h) Seller has not granted any increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee;
(i) Seller has not amended any Employee Plan or adopted any new
Employee Plan;
(j) Seller has not made any capital expenditure or commitment
therefor in excess of $25,000 individually or $125,000 in the aggregate;
(k) Seller has not paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors or any Affiliate or associate of any of its
officers, directors or stockholders;
(l) Seller has not made any change in the accounting policies or
practices of Seller;
(m) Seller has not entered into any other transaction, other than
in the ordinary course of business;
(n) Seller has not issued any shares of its capital stock or any
other securities or made any redemption or other acquisition of any capital
stock of Seller or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of Seller,
except pursuant to the exercise of outstanding Employee Options;
(o) there have been no losses or damage to any of Seller's assets
due to fire or other casualty, whether or not insured, amounting to more than
$25,000, in the aggregate;
(p) Seller has not accelerated the vesting of any options, warrants
or other rights to acquire any shares of its capital stock; and
(q) Seller has not agreed, whether in writing or otherwise, to do
any of the foregoing.
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3.17 Intellectual Property.
3.17.1 Section 3.17.1 of the Seller Disclosure Schedule contains a
correct and complete list of all material Seller Intellectual Property,
specifying as to each, as applicable: (i) the nature of such Intellectual
Property; (ii) the owner of such Intellectual Property; (iii) the jurisdictions
by or in which such Intellectual Property is recognized without regard to
registration or has been issued or registered or in which an application for
such issuance or registration has been filed, including the respective
registration or application numbers; and (iv) licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which any Person
is authorized to use such Intellectual Property, including the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
3.17.2 The Seller Intellectual Property constitutes all Intellectual
Property used in or necessary to conduct the business to the same extent and in
the same manner as presently conducted and as presently anticipated by Seller to
be conducted. The Seller Intellectual Property will be owned or available for
use by the Seller on identical terms and conditions immediately following the
Closing. No Seller Intellectual Property is involved in any interference or re-
examination or cancellation or opposition proceeding and Seller has not been
notified or alerted that any such proceeding will hereafter be commenced. Except
as set forth in Section 3.17.2 of the Seller Disclosure Schedule, Seller has no
knowledge of any basis for provoking or initiating an interference or opposition
proceeding with respect to any Intellectual Property held or used by others, and
to the knowledge of Seller none of the Seller Intellectual Property is being
infringed by others.
3.17.3 The Seller has not been a defendant in any action, suit,
investigation or proceeding relating to, or otherwise been notified of, any
alleged claim or infringement of the Seller Intellectual Property, and Seller
has not and is not now infringing on the intellectual property rights of others.
To the knowledge of Seller, there is no continuing infringement by any other
Person of any Seller Intellectual Property. Except as set forth on Section
3.17.3 of the Seller Disclosure Schedule, the Seller has not entered into any
agreement to indemnify any other Person against any charge of infringement,
misappropriation or other conflict with respect to any Intellectual Property.
3.17.4 The Seller has delivered to BEA correct and complete copies
of all Seller patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) relating to Seller Intellectual Property and
has made available to BEA correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
Seller Intellectual Property. With respect to all Intellectual Property that the
Seller owns:
(a) all registered patents, copyrights and trademarks included in
the Seller Intellectual Property are valid and in full force and all
applications listed on Section 3.17.1 of the Seller Disclosure Schedule as
pending have been prosecuted in good faith as required by law and are in good
standing;
(b) the Seller possesses all right, title, and interest in and to
the item;
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(c) the item is not subject to any outstanding lien, judgment,
order, decree, stipulation, injunction, or charge; and
(d) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demands pending or to the knowledge of the Seller is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the Intellectual Property.
3.17.5 The Seller has supplied BEA with correct and complete copies
of all material licenses, sublicenses, agreements, and permissions (as amended
to date) with respect to all Intellectual Property. With respect to all such
Intellectual Property:
(a) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(b) the license, sublicense, agreement, or permission will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
(c) Seller is not, and to the knowledge of Seller, no other party
to any such license, sublicense, agreement, or permission, is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(d) Seller has not, and to the knowledge of Seller, no other party
to any such license, sublicense, agreement, or permission has repudiated any
provision thereof;
(e) with respect to each sublicense, the representations and
warranties set forth in subsections (a) through (d) above are true and correct
with respect to the underlying license;
(f) no underlying item of any Intellectual Property is subject to
any outstanding lien, judgment, order, decree, stipulation, injunction, or
charge; and
(g) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the knowledge of the Seller
is threatened, which challenges the legality, validity, or enforceability of the
underlying item of the Intellectual Property.
3.17.6 To the Seller's knowledge, no employee of the Seller is
subject to any secrecy or noncompetition agreement or any agreement or
restriction of any kind that would impede in any material way the ability of
such employee to carry out fully all activities of such employee in furtherance
of the business of the Seller as currently operated and as anticipated by Seller
to be operated after the Closing Date. To the Seller's knowledge, no third party
has claimed that any person employed by or affiliated with the Seller has
violated or may be violating any of the terms or conditions of his past
employment, noncompetition or nondisclosure agreement with such third party, or
disclosed or may be disclosing or utilized or may be utilizing any trade secret
or proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees. Each employee, officer and consultant of
the Seller has executed a
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proprietary information and inventions agreement in the form provided to BEA. To
Seller's knowledge, none of its employees are in violation of any such
agreement.
3.18 Product Warranties and Returns. Seller has not made any warranties or
guarantees relating to its products that will be in effect as of the Closing
Date. During the twelve (12) month period ended on the date of the balance sheet
included in the Financial Statements, Seller has received no customer complaints
pursuant to which Seller gave credit or accepted a product return.
3.19 Litigation. None of Seller, or to the knowledge of Seller, any
officer, director, stockholder, employee or agent of Seller, is a party to any
pending or, to Seller's knowledge, threatened action, suit, arbitration,
mediation, proceeding or investigation, at law or in equity or otherwise in, for
or by any court or other governmental body or any arbitration, mediation or
similar forum (collectively, "Litigation"); nor to the knowledge of Seller does
any basis exist for any such Litigation. Seller is not subject to any decree,
judgment, order, law or regulation of any court or other governmental body which
would reasonably be expected to have a material adverse effect on the Seller or
which could prevent the transactions contemplated by this Agreement.
3.20 Personnel. (a) Section 3.20 of the Seller Disclosure Schedule lists
all Employee Plans and the names, current salary rates, bonuses paid during the
last fiscal year, and accrued vacation and sick leave for all the employees of
Seller.
(b) None of the Employee Plans is a plan described in Section 3(35)
of ERISA or a plan subject to the minimum funding standards set forth in Section
302 of ERISA and Section 412 of the Code (collectively, a "Defined Benefit
Plan"), and neither Seller nor any Member of the Controlled Group has ever
sponsored, maintained or contributed to, or ever been obligated to contribute
to, a Defined Benefit Plan.
(c) None of the Plans is a plan described in Section 3(37) of ERISA
(a "Multiemployer Plan"), and neither Seller nor any Member of the Controlled
Group has ever contributed to, or ever been obligated to contribute to, a
Multiemployer Plan.
(d) Seller does not maintain or contribute to any plan that
provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Sections 601 through 608 of ERISA.
(e) Each Employee Plan which is an "employee benefit plan," as
defined in Section 3(3) of ERISA, complies in all material respects with the
requirements provided by any and all statutes, orders or governmental rules and
regulations currently in effect and applicable to the Employee Plan, including
but not limited to ERISA and the Code.
(f) All reports, forms and other documents required to be filed
with any government entity or furnished to employees, former employees or
beneficiaries with respect to any Employee Plan (including without limitation,
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and furnished and are accurate.
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(g) Each of the Employee Plans that is intended to qualify under
Section 401(a) of the Code has been determined by the Internal Revenue Service
so to qualify after January 1, 1989, and each trust maintained pursuant thereto
has been determined by the Internal Revenue Service to be exempt from taxation
under Section 501 of the Code. To the knowledge of Seller, nothing has occurred
since the date of the Internal Revenue Service's favorable determination letter
that could adversely affect the qualification of the Employee Plan and its
related trust.
(h) All contributions to Employee Plans, and all amounts payable to
employees and former employees as salary, bonuses, and accrued vacation and sick
leave for all periods ending prior to the Closing Date (including periods from
the first day of the current plan year to the Closing Date) have been made prior
to the Closing Date by Seller or have been properly accrued on Seller's books
and records in accordance with GAAP.
(i) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Employee Plans for plan years ending on or before the Closing Date.
(j) With respect to each Employee Plan:
(1) To the Seller's knowledge, no prohibited transactions (as
defined in Section 406 or 407 of ERISA or Section 4975 of the Code) have
occurred for which an exemption is not available and which would reasonably be
expected to have a material adverse effect on Seller;
(2) To the Seller's knowledge, no action or claims (other than
routine claims for benefits made in the ordinary course of plan administration
for which plan administrative review procedures have not been exhausted) are
pending, threatened or imminent against or with respect to the Employee Plan,
any employer who is participating (or who has participated) in any Employee Plan
or any fiduciary (as defined in Section 3(21) of ERISA) of the Employee Plan and
which would reasonably be expected to have a material adverse effect on Seller;
and
(3) it provides that it may be amended or terminated at any
time and, except for benefits protected under Section 411(d) of the Code, all
benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by Seller at any time without liability.
(k) Neither Seller nor any Member of the Controlled Group has any
material liability or is threatened with any material liability (whether joint
or several) (i) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or
4979 of the Code, or (ii) for a fine under Section 502 of ERISA.
(l) All of the Employee Plans, to the extent applicable, are in
compliance with the continuation of group health coverage provisions contained
in Section 4980B of the Code and Sections 601 through 608 of ERISA.
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(m) True, correct and complete copies of each Employee Plan have
been made available to Purchaser, and true, correct and complete copies of all
reports, forms and other documents required to be filed with any governmental
entity or furnished to employees, former employees or beneficiaries (including,
without limitation, summary plan descriptions, Forms 5500 and summary annual
reports for all plans subject to ERISA, but excluding individual account
statements and tax forms) have been made available to Purchaser. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by the type of agreements
required to be listed in Section 3.20 of the Seller Disclosure Schedule.
(n) All expenses and liabilities relating to all of the Employee
Plans have been, and will on the Closing Date be, properly accrued on Seller's
books and records in accordance with generally accepted accounting principles.
3.21 OSHA. Without limiting Section 3.9, Seller has at all times been in
compliance with and has not violated any federal, state or local statutes, laws,
regulations or rules relating to occupational health or safety, including,
without limitation, the rules and regulations of the Occupational Safety and
Health Administration ("OSHA"). No investigation or claim has at any time been
commenced or pending against Seller or the Business by OSHA or any similar state
or local agency and, to Seller's knowledge, no basis exists for any such
investigation or claim. No claim has at any time been made by any current or
former employee of Seller relating to occupational health or safety.
3.22 Taxes. (a) All Tax Returns required to be filed prior to the date
hereof with respect to the Seller and the Business have been timely filed, and
all such tax returns are true, accurate and complete in all material respects.
All material Taxes due and payable by or with respect to Seller or the Business
for the periods prior to the Closing Date have been or will be paid by Seller or
provided for on its books prior to the Closing. With respect to each taxable
period of Seller, (i) either such taxable period has been audited by the
relevant taxing authority or the time for assessing or collecting Taxes with
respect to each such taxable period has closed and each taxable period is not
subject to review by any relevant taxing authority; (ii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
amount of Taxes has been asserted in writing or assessed by any taxing authority
against Seller; (iii) Seller has no pending consent to extend the time in which
any Taxes may be assessed or collected by any taxing authority; (iv) Seller has
not requested or been granted an extension of the time for filing any Tax Return
to a date later than the Closing Date; (v) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending or,
to the knowledge of Seller threatened against or with respect to Taxes; (vi)
there are no Liens for Taxes (other than for current Taxes not yet due and
payable) upon any of Seller's assets; and (vii) true, correct and complete
copies of all income, franchise and sales Tax Returns filed by or with respect
to Seller for the past three years have been furnished or made available to BEA.
Seller has not agreed to, or is required to, make any adjustments under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Seller has complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has duly and
timely withheld from employee salaries, wages and other compensation and has
paid over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for
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all periods under all applicable laws. Seller is not a party to any tax sharing
agreement or similar document or arrangement. The Seller has not executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law. The Seller is not subject to any private letter ruling or
comparable rulings of any taxing authority. Seller has no liability for the
Taxes of any person pursuant to Section 1.1502-6 of the Treasury Regulations
promulgated under the Code or comparable provisions of any taxing authority in
respect of any consolidated, combined or unitary Tax Return. No consent under
Section 341(f) of the Code has been filed with respect to Seller. The amount of
Seller's liability for unpaid Taxes for all periods ending on or before the date
of this Agreement does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) solely with
respect to Seller, as such accruals are reflected on the Financial Statements as
of the date of this Agreement, and the amount of Seller's liability for unpaid
Taxes for all periods ending on or before the Closing Date shall not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) solely with respect to Seller, as such
accruals are reflected on the Financial Statements as of the Closing Date.
Seller is not a party to any safe harbor lease within the meaning of Section
168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and
Fiscal Responsibility Act of 1982. Seller is not nor has it been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code and neither BEA nor the Acquisition Subsidiary is required to withhold tax
from the Consideration by reason of Section 1445 of the Code. Seller has not
entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense
pursuant to Sections 162(m) or 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code.
(b) As used in this Agreement, "Tax" or "Taxes" shall include
all (x) federal, state, local or foreign income, franchise, property, sales,
excise, withholding and other taxes or similar governmental charges, including
any interest, penalties or additions with respect thereto, (y) liability for the
payment of any amounts of the type described in (x) as a result of being a
member of an affiliated, consolidated, combined or unitary group, and (z)
liability for the payment of any amounts as a result of being party to any tax
sharing agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any amounts of the
type described in clause (x) or (y). As used in this Agreement, "Tax Return" or
"Tax Returns" shall include any tax return, declaration or estimated tax, tax
report or other tax statement, or any similar filing, including any schedule,
attachment or amendment thereto.
3.23 Insurance. Section 3.23 of the Seller Disclosure Schedule
constitutes a list of all insurance policies and bonds in force with respect to
Seller or Seller's assets showing for each such policy or bond: (i) the owner
and loss-payee; (ii) the coverage of such policy or bond; (iii) the amount of
premium properly allocable to such policy or bond; (iv) the name of the insurer;
and (v) the termination date of the policy or bond. Copies of all such insurance
policies and bonds have been furnished to BEA. All such insurance policies and
bonds are in full force and effect.
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3.24 Environmental Liability. Without limiting Section 3.9, at all times
Seller has complied in all material respects with all applicable environmental
and hazardous waste laws, orders, regulations, rules and ordinances adopted,
imposed or promulgated by any governmental or regulatory entity having
jurisdiction over any property owned or leased by Seller. Neither Seller nor to
the knowledge of Seller any portion of any property owned or leased by Seller is
in violation of any federal, state or local law, ordinance or regulation
relating to industrial hygiene, worker safety, environmental protection,
hazardous materials or waste or toxic materials. Prior to the date hereof, to
the knowledge of Seller, there has been no spill, release or discharge of any
Hazardous Materials (as defined below) on, under or about any property owned or
leased by Seller. No current use of any property owned or leased by Seller
constitutes a public or private nuisance. All environmental licenses, permits,
clearances, covenants and authorizations required for the Business have been
obtained by Seller and are in full force and effect. To the knowledge of
Seller, any handling, generation, transportation, storage, treatment or use of
Hazardous Material that has occurred on or about any property owned or leased by
Seller has been in compliance with all laws, regulations and orders relating to
Hazardous Materials. As used herein, the term "Hazardous Materials" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local government authority, the State of Delaware, any other state or the
United States Government. All property owned or leased by Seller, including,
without limitation, the soil and groundwater on or under such property, is, to
the knowledge of Seller, free of Hazardous Materials. To the knowledge of
Seller, no notification of release of Hazardous Materials pursuant to applicable
law has been received by Seller as to any of such property. No wastes generated
by Seller have ever been sent directly or indirectly to any site listed or
formally proposed for listing federal or state list of hazardous substances
sites requiring investigation or clean-up. Seller has not received from any
governmental authority or third party any requests for information, notices of
claim, demand letters, or other notification that they or it are or is or may be
potentially responsible with respect to any investigation or clean-up of
Hazardous Materials. Seller has no knowledge of any fact or circumstance that
could involve Seller or BEA in any environmental litigation or proceeding or
impose any environmental liability upon Seller or BEA. Section 3.24 of the
Seller Disclosure Schedule contains a true and complete list of all
environmental surveys, tests and reports performed with respect to the property
owned or leased by Seller by or on behalf of Seller (including, without
limitation, all soil and groundwater surveys, tests and reports).
3.25 Products.
3.25.1 Each of the products produced, developed or sold by the Seller
is, and at all times up to and including the sale thereof by the Seller has been
(a) in compliance in all material respects with all applicable federal, state,
and local laws and regulations and (b) conforms in all material respects to any
promises or affirmations of fact made on the container or label for such product
or in connection with its sale, subject to returns, repairs, defects and
allowances in the ordinary course which would not reasonably be expected to have
a material adverse effect on the Seller.
3.25.2 There is no material design defect with respect to any of such
products and, to the knowledge of the Seller, each of such products contains
adequate warnings, presented
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in a reasonably prominent manner, in accordance with applicable laws, rules and
regulations and current industry practice with respect to its contents and use.
3.25.3 Section 3.25.3 of the Seller Disclosure Schedule contains a
list of all proprietary software developed by the Seller and currently sold,
licensed or otherwise used by the Seller in its business, and any and all
enhancements, upgrades, customizations, modifications and maintenance thereof
(the "Software").
3.25.4 The Software and, to the knowledge of Seller, any non-
proprietary software used by the Seller, is free from significant programming
errors and operates in substantial conformity with its user documentation and
other descriptions and standards applicable thereto provided by the Seller, and
the Software does not contain any virus, timer, clock, counter or other limiting
design, instruction or routine, that would erase data, programming or become
inoperable or otherwise incapable of being used in the full manner for which it
was designed and created nor has Seller been informed that the non-proprietary
software has any such problems.
3.26 Year 2000.
3.26.1 To the knowledge of Seller, all of the computer software,
computer firmware, computer hardware (whether general or special purpose), and
other similar or related items of automated, computerized, and/or software
system(s) that are used or relied on by the Seller in the conduct of the
Business will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries; and
3.26.2 All of the products and services sold, licensed, rendered, or
otherwise provided by the Seller in the conduct of the Business will not
malfunction, will not cease to function, will not generate incorrect data, and
will not produce incorrect results when processing, providing, and/or receiving
(i) date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries.
3.27 Representations Complete. The representations and warranties of
Seller contained in this Article 3 do not contain any untrue statement of a
material fact and do not omit to state any material fact necessary to make such
representations and warranties, in light of the circumstances under which they
were made, not misleading. There is no fact known to Seller that has not been
disclosed to BEA in this Agreement that is reasonably likely to have a material
adverse effect on Seller's business, operations, financial condition or
otherwise.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUBSIDIARY AND BEA
Acquisition Subsidiary and BEA hereby, jointly and severally, represent and
warrant to Seller that the following facts and circumstances are true and
correct:
4.1 Authorization; Etc. Each of Acquisition Subsidiary and BEA: (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) has all necessary corporate power to own and
lease its properties, to carry on its business as now being conducted and to
enter into and perform this Agreement and all of the other documents and
agreements contemplated hereby; and (iii) is qualified to do business in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, operations or financial condition of Acquisition
Subsidiary or BEA, as applicable. Each of Acquisition Subsidiary and BEA has
full corporate power and authority to enter into this Agreement and the other
documents contemplated hereby and to carry out the transactions contemplated
hereby and thereby. Each of Acquisition Subsidiary and BEA has taken all
required action by law to authorize the execution and delivery of this Agreement
and the other documents contemplated hereby and the transactions contemplated
hereby and thereby, and each of this Agreement and the other documents
contemplated hereby is a valid and binding obligation of Acquisition Subsidiary
and/or BEA, as applicable, enforceable against it in accordance with its terms,
subject as to enforcement only: (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other similar laws of general applicability relating
to or affecting creditors' rights generally; and (ii) to general principles of
equity.
4.2 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate any
provisions of the Certificate of Incorporation or Bylaws of Acquisition
Subsidiary or BEA, violate, or be in conflict with, or constitute a default
under or cause the acceleration of the maturity of any debt or obligation
pursuant to, any agreement or commitment to which Acquisition Subsidiary or BEA
is a party or by which Acquisition Subsidiary or BEA is bound, or violate any
statute or law or any judgment, decree, order, regulation, or rule of any court
or governmental authority.
4.3 Capitalization. As of the date hereof, the authorized capital stock
of BEA consists of 250,000,000 shares of BEA Common Stock and 5,000,000 shares
of preferred stock. 60,854,208 shares of BEA Common Stock and 17,824,000 shares
of BEA's Class B Common Stock were validly issued and outstanding as of November
4, 1999, and no shares of BEA Common Stock have been issued since that date,
except for issuances from the exercise of employee stock options. No shares of
preferred stock are issued or outstanding. Subject in part to the accuracy of
the representations of Seller and the stockholders of Seller contained in the
Investment Representation Letters, all shares of BEA Common Stock to be issued
in connection with the transactions contemplated hereby will be issued and
granted in compliance with all applicable securities laws and other applicable
legal requirements.
4.4 SEC Filings; Financial Statements. BEA has delivered to Seller
accurate and complete copies of any report, registration statement and
definitive proxy statement filed by BEA
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with the Securities and Exchange Commission (the "SEC") after May 1, 1999 (the
"BEA SEC Documents") and will make available to Seller accurate and complete
copies of all such reports and registration statements filed after the date
hereof and prior to the Closing. All statements, reports, schedules, forms and
other documents required to have been filed by BEA with the SEC have been so
filed. 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):
(x) each of the BEA 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 (y) none of the BEA 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. The consolidated
financial statements contained in the BEA SEC Documents: (x) complied as to form
in all material respects with the published rules and regulations of the SEC
applicable thereto; (y) 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 normal and recurring year-end audit adjustments which will not,
individually or in the aggregate, be material in amount); and (z) fairly
present, in all material respects, the consolidated financial position, in all
material respects, of BEA and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of BEA and its subsidiaries
for the periods covered thereby. To the knowledge of senior management of BEA,
no material adverse change in BEA's business or financial condition, taken as a
whole, has occurred since its most recently filed Form 10-Q, except (i) as
disclosed in any BEA SEC Document filed or amended after the date of such Form
10-Q, (ii) as disclosed to Seller, or (iii) for any changes in the economy in
general (or in the overall industry in which BEA operates) or in any stock
market or trading system (including, without limitation, any change in the value
of any trading indices with respect thereto).
4.5 Valid Issuance. The BEA Common Stock to be issued by BEA pursuant to
the transactions contemplated hereby will, when issued in accordance with the
provisions of this Agreement, be duly authorized, validly issued, fully paid and
nonassessable.
4.6 Consents and Approvals of Government Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement or the other documents
contemplated hereby by BEA or Acquisition Subsidiary and the consummation of the
transactions contemplated hereby or thereby.
4.7 Absence of Certain Changes or Events. Since July 31, 1999, except as
disclosed in the BEA SEC Documents or disclosed to the senior management of the
Seller, BEA has conducted its business in all material respects only in the
ordinary course, and there has not been (i) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of BEA's capital stock (except for regular
quarterly cash dividends) or (ii) any split, combination or reclassification of
any of its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock.
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4.8 Representations Complete. The representations and warranties of
Acquisition Subsidiary and BEA contained in this Article 4 do not contain any
untrue statement of a material fact and do not omit to state any material fact
necessary to make such representations and warranties, in light of the
circumstances under which they were made, not misleading.
ARTICLE 5
SELLERS' COVENANTS
5.1 Access to Properties and Records. Throughout the period between the
date of this Agreement and the Closing Date (or termination of this Agreement),
Seller shall give to BEA and BEA's authorized representatives reasonable access,
during business hours, to its facilities, and shall provide BEA and its
representatives with all records, documents and information reasonably required
by BEA relating to Seller and/or the Business. Without limiting the foregoing,
BEA shall be permitted to interview during regular business hours all employees
of Seller.
5.2 Conduct of the Business Prior to Closing Date. Between the date of
this Agreement and the Closing (or termination of this Agreement), and except as
otherwise required by this Agreement:
5.2.1 The Business shall be operated in the ordinary course
consistent with past practices and in a normal businesslike fashion (including,
without limitation, its normal accounts receivable practice), and Seller shall
take such actions as are in its business judgment reasonably necessary to
facilitate a smooth transition of the control of operation of the Business from
Seller to BEA at the Closing. Seller shall use all commercially reasonable
efforts to preserve and maintain the Business and Seller's goodwill, including
relationships with employees, suppliers and customers. Seller shall maintain
quantities of inventories in a manner consistent with prior practice and in a
normal businesslike fashion. In addition, Seller shall maintain records and
books of account for the Business consistent with past practices and in a normal
businesslike fashion, and shall continue to carry insurance as set forth in
Section 3.23 of the Seller Disclosure Schedule.
5.2.2 Without the prior written consent of BEA, Seller shall not take
(or permit to be taken) any action which would cause any material change in any
of the items and matters covered by the representations and warranties set forth
in Article 3, including, without limitation:
(a) incurring or becoming subject to, or agreeing to incur or become
subject to, any obligation or liability (absolute or contingent), except (x)
current liabilities incurred, and obligations under contracts entered into, in
the ordinary course of business consistent with past practices and (y) the BEA
Loan;
(b) mortgaging, pledging or assuming any Lien, or agreeing to do so,
in respect to any of its assets;
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(c) waiving or compromising any material rights or any material debt
owed to Seller;
(d) entering into any transactions, other than in the ordinary course
of business consistent with past practices;
(e) increasing the rate of compensation (including bonuses) payable
or to become payable to any employees, except in the ordinary course of
business, but only with respect to employees whose compensation (including
bonuses) after giving effect to any such increase does not exceed $35,000;
(f) amending any Employee Plan, except as necessary or desirable to
comply with applicable laws, or adopting any new Employee Plan;
(g) terminating or amending any contract to which it is a party,
unless terminated or amended in the ordinary course of business consistent with
past practices and not material to the Business of Seller;
(h) introducing any new method of accounting with respect to the
Business or any of the assets or liabilities of Seller (assumed or not assumed)
(including, without limitation, any change in depreciation or amortization
policies or rates);
(i) making any capital expenditures or entering into commitments for
capital expenditures exceeding, in the aggregate, Fifty Thousand Dollars
($50,000);
(j) without BEA's prior consent (which consent BEA shall not
unreasonably withhold or delay), hiring or terminating management employees,
except in the ordinary course of business, but only with respect to employees
whose compensation (including bonuses) does not exceed $35,000;
(k) except as set forth in Section 3.2.2 of the Seller Disclosure
Schedule, issuing any shares of its capital stock or options thereon or other
securities, other than issuances upon exercise of Employee Options, or making
any redemption or other acquisition of any capital stock of Seller or any
declaration, setting aside, or payment of any dividend or distribution of any
kind with respect to any shares of capital stock of Seller; or
(l) commencing, settling or compromising any litigation, except those
related to insured claims or arising in the ordinary course of business
consistent with past practices.
5.3 Advice of Developments. Seller shall have continuing obligations
after the date of this Agreement through the Closing Date (or the termination of
this Agreement) to advise BEA of all significant matters concerning itself and
the Business.
5.4 No Solicitation. Seller will not (i) solicit, initiate or encourage
discussions with any person, other than BEA, relating to the possible
acquisition of Seller or all or a material portion of the assets or capital
stock of Seller or any merger or other business combination with Seller or (ii)
except to the extent reasonably required by fiduciary obligations under
applicable
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law as advised in writing by independent legal counsel, participate in any
negotiations regarding, or furnish to any other person information with respect
to, any effort or attempt by any other person to do or to seek any such
transaction. Seller agrees to inform BEA in reasonable detail within one
business day of its receipt of any offer, proposal or inquiry relating to any
such transaction.
5.5 Stockholder Consent. Seller shall, in accordance with applicable law,
use all commercially reasonable efforts to obtain, no later than ten (10) days
after the date hereof, the approval of the holders of the requisite number of
shares of Seller's capital stock required to approve this Agreement and the
transactions contemplated hereby under applicable law. Without limiting the
generality of the preceding sentence, Seller shall cause its board of directors
to recommend to Seller's stockholders a vote in favor of the adoption of this
Agreement and the Merger, unless the board of directors shall determine, based
on the written opinion of counsel, that such recommendation will not be
consistent with its fiduciary duties under applicable law.
5.6 Satisfaction of Conditions. Seller shall take or cause to be taken
all commercially reasonable actions necessary to satisfy all conditions to BEA's
obligations to close and consummate the transactions contemplated by this
Agreement.
5.7 Consents. On or prior to the Closing Date, Seller shall (a) notify
all persons required to be notified pursuant to applicable law or any of the
Permits or contracts to which Seller is a party of the transactions contemplated
hereunder, in the form and manner required thereunder, and (b) obtain the
consent of all persons whose consent is required pursuant to applicable law or
any of the Permits or contracts to which Seller is a party in connection with
the consummation of the transactions contemplated hereby, in the form and manner
required thereunder.
5.8 Notification of Certain Matters. Without limiting Section 5.3, Seller
shall give prompt notice to BEA of the occurrence or non-occurrence of any event
which causes or is likely to cause any representation or warranty made by Seller
herein to be untrue or inaccurate or any covenant, condition or agreement
contained herein not to be complied with or satisfied (provided, however, that
any such disclosure shall not in any way be deemed to (a) amend, modify or in
any way affect the representations, warranties and covenants made by such party
in or pursuant to this Agreement, (b) or alter or waive any rights of
Acquisition Subsidiary or BEA with respect to the breach thereof).
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5.9 Voting Agreement. Seller shall use all commercially reasonable
efforts, on behalf of BEA and pursuant to the request of BEA, to cause each
Seller stockholder named in Section 5.9 of the Seller Disclosure Schedule to
execute and deliver to BEA a Voting Agreement substantially in the form of
Exhibit 5.9 attached hereto concurrent with the execution of this Agreement.
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ARTICLE 6
BEA'S COVENANTS
6.1 Registration Statement.
6.1.1 BEA shall file or cause to be filed with the Commission, within
ten (10) business days following the Closing, a registration statement on
Form S-3 (the "Registration Statement") to cover resales of the shares (the
"Registered Shares") of BEA Common Stock to be issued to the holders of Seller
Stock pursuant hereto, other than the Escrowed Shares and the Restricted BEA
Shares (as defined in Section 7.1.12). BEA shall use its best efforts to cause
such Registration Statement to be declared effective as soon as practicable
thereafter. BEA shall use its best efforts to keep such Registration Statement
continuously effective, supplemented and amended to the extent necessary to
ensure that it is available for resales of the Registered Shares for a period
ending on the earlier of (x) twelve months from the effective date of the
Registration Statement, (y) the sale of all securities covered by the
Registration Statement or (z) the date on which all of the securities covered
under the Registration Statement are saleable pursuant to Rule 144 of the Act.
6.1.2 BEA will bear the costs of all Registration Expenses. For the
purposes hereof, "Registration Expenses" shall mean all expenses incident to
BEA's preparation and filing of the Registration Statement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with federal securities laws or state blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of custodians and fees
and disbursements of counsel for BEA and all independent certified public
accountants, and other persons retained by BEA.
6.1.3 In connection with the registration and sale of the Registered
Shares BEA will:
(a) prepare and file with the SEC the Registration Statement as set
forth above;
(b) provide to each holder of Seller Stock a copy of the Registration
Statement and related Prospectus, including each preliminary Prospectus, and
each amendment and supplement thereto.
(c) use its best efforts to register or qualify the Registered Shares
under such other securities or blue sky laws of such jurisdictions as each
holder of Seller Stock may reasonably request and do any and all other acts and
things which may be reasonably necessary or advisable to enable each holder of
Seller Stock to consummate the disposition in such
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jurisdictions of the Registered Shares owned by such holder; provided, however,
that BEA will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(d) Upon the occurrence of any event that would cause the
Registration Statement (i) to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) to be not effective and useable
for resale of the Registered Shares during the period that such Registration
Statement is required to be effective and useable, BEA upon knowledge of such an
event, shall as promptly as practicable (A) notify each holder of Seller Stock
that such event has occurred and (B) file an amendment to the Registration
Statement, in the case of clause (i), correcting any such misstatement or
mission, and, in the case of either clause (i) or (ii), use its best efforts to
cause such amendment to be declared effective and such Registration Statement to
become useable as soon as practicable thereafter;
(e) Notwithstanding anything to the contrary in Section 6.1.3, BEA
may prohibit offers and sales of the Registered Shares pursuant to the
Registration Statement at any time if (A) (i) it is in possession of material
non-public information, (ii) the Board of Directors of BEA determines based on
advice of counsel that such prohibition is necessary in order to avoid a
requirement to disclose such material non-public information, and (iii) the
Board of Directors of BEA determines in good faith that disclosure of such
material non-public information would not be in the best interests of BEA and
its stockholders or (B) BEA has made a public announcement relating to an
acquisition or business combination transaction including BEA and/or one or more
of its subsidiaries (i) that is material to BEA and its subsidiaries taken as a
whole, and (ii) the Board of Directors of BEA determines in good faith that
offers and sales of the Registered Shares pursuant to the Registration Statement
prior to the consummation of such transaction (or such earlier date as the Board
of Directors shall determine) is not in the best interests of BEA and its
stockholders (the period during which any such prohibition of offers and sales
of Registered Shares pursuant to the Registration Statement is in effect
pursuant to clause (A) or (B) of this subparagraph (e) is referred to herein as
a "Suspension Period"). A Suspension Period shall commence on and include the
date on which BEA provides written notice to holders of Seller Stock covered by
the Registration Statement that offers and sales of Registered Shares cannot be
made thereunder in accordance with this Section 6.1.3 and shall end three
business days after the earlier to occur of (x) the date on which such material
information is disclosed to the public or ceases to be material or BEA is able
to so comply with its disclosure obligations and SEC requirements, or (y) 45
days after written notice is provided by BEA to the holders of Seller Stock of
such Suspension Period. Each notice shall state to the extent, if any, as is
practicable, an estimate of the expected duration of the Suspension Period;
(f) Each holder of Seller Stock shall furnish to BEA such information
regarding the distribution of its Registered Shares as is required by law to be
disclosed in the Registration Statement (the "Requisite Information") prior to
effecting any sale pursuant to such Registration Statement. Each holder of
Seller Stock as to which any Registration Statement is being effected agrees
during the period that such Registration Statement is effective to furnish
promptly to BEA all information required to be disclosed in order to make any
Requisite
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Information previously furnished to BEA by such holder of Seller Stock not
materially misleading or necessary to cause such Registration Statement not to
omit a material fact with respect to such holder of Seller Stock necessary in
order to make the statements therein not misleading;
(g) Each holder of Seller Stock agrees that, upon receipt of any
notice from BEA of the existence of any fact of the kind described in
subparagraphs 6.1.3(d) or 6.1.3(e) hereof (an "Amendment Notice"), such holder
of Seller Stock will forthwith discontinue disposition of Registered Shares
until such holder's receipt of (i) copies of the supplemented or amended
Prospectus contemplated by subparagraph 6.1.3(d) hereof, or until counsel for
BEA shall have determined that such disclosure is not required due to subsequent
events, (ii) notice in writing from BEA that the use of the Prospectus may be
resumed, (iii) copies of any additional or supplemental filings with respect to
the Prospectus, or (iv) the expiration of the Suspension Period. In the event
BEA shall give any such notice, the time period regarding the filing of the
Registration Statement set forth in subparagraph 6.1.1 hereof shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to subparagraph 6.1.3(e) hereof to and including
the date when each holder of Seller Stock covered by such Registration Statement
shall have received the copies of the supplemented or amended Prospectus
contemplated by this subparagraph 6.1.3(g); and
(h) BEA agrees to use its best efforts to cause the Registered Shares
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
holders of Seller Stock to consummate the disposition of such Registered Shares,
subject to the proviso contained in subparagraph 6.1.3(c) above, and cause all
Registered Shares to be listed on each securities exchange or national quotation
system on which BEA Common Stock is then listed.
6.1.4 Registration Indemnification.
(a) BEA agrees to indemnify, to the extent permitted by law, each
holder of Seller Stock against all losses, claims, damages, liabilities and
expenses including, without limitation, reasonable attorneys' fees, caused by
any untrue or alleged untrue statement of material fact contained in the
Registration Statement, any prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to BEA by such holder expressly for use
therein or by such holder's negligence, willful misconduct or failure to deliver
a copy of the Registration Statement or prospectus or any amendments or
supplements thereto.
(b) In connection with the Registration Statement, each holder of
Registered Shares will furnish to BEA in writing such information and affidavits
as BEA reasonably requests for use in connection with the Registration Statement
or prospectus contained therein and, to the extent permitted by law, will
indemnify BEA, its directors and officers and each person who controls BEA
(within the meaning of the Act) against any and all losses, claims, damages,
liabilities and expenses, including, without limitation, reasonable attorneys'
fees,
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caused by any untrue or alleged untrue statement of material fact contained in
the Registration Statement, any prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages, liabilities and
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission furnished in writing to BEA for use therein or such
holder's failure to provide the prospective purchaser with a copy of the current
prospectus; provided, however, that the obligation to indemnify will be several,
not joint and several among the holders of Seller Stock, and the liability of
each holder will be limited to the net amount received by such holder of Seller
Stock from the sale of Registered Shares pursuant to the Registration Statement.
6.1.5 In the event that the Escrowed Shares, upon their release from
escrow, and the Restricted BEA Shares, upon the expiration of the restrictions
contained in the agreement referred to in Section 7.1.12, are not then
immediately saleable pursuant to Rule 144 of the Act, BEA shall file or cause to
be filed with the Commission, promptly following the written request of any
holder of any such shares a registration statement on Form S-3 (an "Additional
Registration Statement"), or amend and continue the effectiveness of the
Registration Statement, to cover resales of all such shares (the "Additional
Registered Shares"). BEA shall use its best efforts to cause such Additional
Registration Statement to be declared effective as soon as practicable
thereafter. BEA shall use its best efforts to keep the Additional Registration
Statement, or the Registration Statement, as applicable, continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of the Additional Registered Shares for a period ending on the
earlier of (x) six months from the effective date of either the Additional
Registration Statement or the amendment to the Registration Statement covering
the Additional Registered Shares, as applicable, (y) the sale of all securities
covered by the Additional Registration Statement or the amended Registration
Statement, as applicable, or (z) the date on which all of the securities covered
under the Additional Registration Statement or the amended Registration
Statement, as applicable, are saleable pursuant to Rule 144 of the Act. Sections
6.1.2 through 6.1.4 inclusive shall be applicable to the Additional Registration
in a manner similar to that of the Registration Statement. Notwithstanding the
foregoing, BEA shall not be required to effectuate more than two Additional
Registration Statements pursuant to this Section, one upon the expiration of the
restrictions contained in the agreement referred to in Section 7.1.12 and one
upon the final release of the Escrowed Shares upon termination of the Escrow
Agreement.
6.2 Consents. On or prior to the Closing Date, Acquisition Subsidiary and
BEA shall (a) notify all persons required to be notified by Acquisition
Subsidiary or BEA pursuant to applicable law of the transactions contemplated
hereby, in the form and manner required thereunder, and (b) obtain the consent
of all persons whose consent is required to be obtained by Acquisition
Subsidiary or BEA pursuant to applicable law in connection with the consummation
of the transactions contemplated hereby, in the form and manner required
thereunder.
6.3 Advice of Developments. BEA shall have continuing obligations after
the date of this Agreement through the Closing Date to advise Seller of any
event, fact or circumstance which has a material adverse effect on the business,
operations or financial condition of BEA.
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6.4 Satisfaction of Conditions. BEA shall take or cause to be taken all
commercially reasonable actions necessary to satisfy all conditions to Seller's
obligations to close and consummate the transactions contemplated by this
Agreement.
6.5 Registration Statement Covering Option Shares. BEA shall file or
cause to be filed with the Commission, within a reasonable time following the
Closing, a registration statement on Form S-8 (or any successor form) respecting
Employee Options converted into options for BEA Common Stock as provided for
herein.
6.6 Notification of Certain Matters. Without limiting Section 6.3, BEA
shall give prompt notice to Seller of the occurrence or non-occurrence of any
event which causes or is likely to cause any representation or warranty made by
BEA herein to be untrue or inaccurate or any covenant, condition or agreement
contained herein not to be complied with or satisfied (provided, however, that
any such disclosure shall not in any way be deemed to (a) amend, modify or in
any way affect the representations, warranties and covenants made by such party
in or pursuant to this Agreement, (b) or alter or waive any rights of Seller
with respect to the breach thereof).
6.7 Elimination of the Principals' Guaranties. BEA shall use all
commercially reasonable efforts to eliminate, promptly following the Closing,
the personal liability of each of John Belizaire, Mauricio Aguilar Alvarez,
Joseph Pilkerton, William Lee and Julian Pelenur with respect to obligations of
Seller secured by the guaranties made by any of them listed in Section 6.7 of
the Seller Disclosure Schedule, and BEA shall indemnify each of them, pursuant
to the provisions of Section 8, with respect to any amounts paid in respect of
such guaranties after the Closing.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to BEA's Obligation to Close. BEA's obligations to
consummate the transactions contemplated by this Agreement shall be subject to
the full satisfaction of following conditions, each of which conditions may be
waived in writing by BEA:
7.1.1 Escrow Agreement. Seller and the Stockholders'
Representatives shall have executed and delivered to BEA the Escrow Agreement;
and Seller shall have executed and delivered any and all other documents
reasonably required by BEA to effect the transactions contemplated hereby.
7.1.2 Representations and Warranties True. The representations and
warranties of Seller contained in this Agreement shall be true in all material
respects at the Closing Date as though made at such time.
7.1.3 Performance of Covenants. Seller shall have performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
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7.1.4 Certificate. Seller shall have delivered to BEA a certificate
executed by its chief executive officer certifying as to (a) Seller's
satisfaction of the conditions set forth in Sections 7.1.2, 7.1.3 and 7.1.5
hereof and (b) the results of the vote by Seller's stockholders to approve the
transactions contemplated hereby pursuant to Section 5.5.
7.1.5 No Material Changes. There shall not have been any material
adverse change in the assets, liabilities, business, operations or financial
conditions of Seller from the date hereof to the Closing Date.
7.1.6 Consents. All consents or approvals required for the
consummation of the transactions contemplated hereby, including any required
consents of the parties to any contract to which Seller is a party, shall have
been obtained and delivered at the Closing.
7.1.7 Opinion. Seller shall have delivered to BEA an opinion of its
counsel with respect to the matters covered by Sections 3.1, 3.2, 3.3, 3.6, 3.8,
3.9, 3.11 and 3.19 of this Agreement in form and content reasonably acceptable
to BEA and containing customary exclusions, exceptions and qualifications.
7.1.8 Investment Representation Letters. BEA shall have received
from each holder of Seller Common Stock an investment representation letter in
substantially the form of Exhibit 7.1.8 and the issuance of the BEA Common Stock
-------------
as contemplated hereby shall, in the opinion of counsel to BEA, be exempt from
the registration requirements of the Securities Act of 1933, as amended.
7.1.9 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted by the requisite
vote of the stockholders of Seller pursuant to the DGCL.
7.1.10 Employment Agreements. Each of John Belizaire, Mauricio
Aguilar Alvarez, Joseph Pilkerton, William Lee and Julian Pelenur (the
"Founders") shall have entered into employment agreements substantially in the
form attached hereto as Exhibits 7.1.10.
---------------
7.1.11 Offer Letters. Substantially all of the employees of Seller
shall have accepted employment with BEA in accordance with the terms of offer
letters previously delivered by BEA to Seller.
7.1.12 Founders' Transfer Restrictions. Each of the Founders shall
have entered into an agreement with and reasonably acceptable to BEA to the
effect that, prior to January 15, 2001, each such person shall not (i) sell,
offer to sell, contract to sell, or make any short sale or pledge with respect
to, any Restricted BEA Shares, (ii) purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of any Restricted BEA Shares or any convertible securities into or exchangeable
or exercisable for or any rights to purchase or acquire capital stock of BEA, or
(iii) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences or ownership of the Restricted BEA
Shares, whether any such transaction described in any of the foregoing clauses
is to be settled by delivery of capital stock of the Company or such other
securities, in
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cash or otherwise. For purposes of this Section, with respect to any Founder the
term "Restricted BEA Shares" shall mean the shares of BEA Common Stock received
by such Founder in the Merger in respect of the unvested shares of Seller Common
Stock held by such Founder immediately prior to the date hereof (as determined
under the certain Stockholders Agreement dated January 10, 1999) and, for
purposes of calculating the Restricted BEA Shares, all Escrowed Shares shall be
ignored.
7.2 Conditions to Seller's Obligations at the Closing. Seller's
obligations to consummate the transactions contemplated by this Agreement shall
be subject to the following conditions, each of which conditions may be waived
in writing by Seller:
7.2.1 Instruments. BEA and/or Acquisition Subsidiary, as
applicable, shall have executed and delivered to Seller the Escrow Agreement (in
the case of BEA) and any and all other documents reasonably required by Seller
to effect the transactions contemplated hereby.
7.2.2 Representations and Warranties True. The representations and
warranties of Acquisition Subsidiary and BEA contained in this Agreement shall
be true in all material respects at the Closing as though made at such time.
7.2.3 Performance of Covenants. Acquisition Subsidiary and BEA
shall have performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with by them
at or prior to the Closing Date.
7.2.4 Certificate. BEA shall have delivered to Seller a certificate
executed by an officer of BEA certifying as to BEA's and Acquisition
Subsidiary's satisfaction of the conditions set forth in Sections 7.2.2, 7.2.3
and 7.2.6.
7.2.5 Opinion. BEA shall have delivered to Seller an opinion of its
counsel in form and content substantially in the Form of Exhibit 7.2.5.
-------------
7.2.6 No Material Changes. There shall not have been any material
adverse change in the assets, liabilities, business, operations or financial
conditions of BEA from the date hereof to the Closing Date, nor shall there
exist any condition which would reasonably be expected to result in such a
material adverse change, except for any changes in the economy in general (or in
the overall industry in which BEA operates) or in any stock market or trading
system (including, without limitation, any change in the value of any trading
indices with respect thereto).
7.2.7 Tax Opinion. Seller shall have received an opinion of its tax
counsel, Fulbright & Jaworski, L.L.P., based on reasonably requested
representation letters and customary assumptions, dated the Closing Date, to the
effect that for U.S. federal income tax purposes the Merger will qualify as a
Reorganization within the meaning of Section 368(a) of the Code.
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ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival. The representations and warranties of Seller contained in
this Agreement or in any certificate delivered pursuant hereto shall survive
until the six month anniversary of the Closing (the "Expiration Date"); except
that the representations and warranties in Sections 3.1, 3.2, 3.3 and 3.17 shall
survive until the thirty (30) month anniversary of the Closing. The
representations and warranties of Acquisition Subsidiary and BEA contained in
this Agreement or in any certificate delivered pursuant hereto, shall survive
until the Expiration Date, except that the representations and warranties in
Section 4.4 shall survive until twelve months after the effective date of the
Registration Statement (plus the length of any extension pursuant to Section
6.1.3(g)) and the representations and warranties in Section 4.5 shall extend
indefinitely.
8.2 Seller's Indemnity. Seller shall indemnify, defend, protect and hold
harmless BEA (and BEA's Subsidiaries and Affiliates and their respective
officers, directors, stockholders, employees and agents the "BEA Indemnities")
from and against any and all losses, costs, expenses, liabilities, obligations,
claims, demands, causes of action, suits, settlements and judgments of every
nature, including the costs and expenses associated therewith and reasonable
attorneys', consultants' and witness fees incurred in connection therewith ("BEA
Damages"), which arise out of: (i) the breach of any representation or warranty
made by Seller under Article 3 of this Agreement (including the Seller
Disclosure Schedule) or any certificate delivered by Seller pursuant to this
Agreement; (ii) the non-performance, partial or total, of any covenant made by
Seller pursuant to this Agreement; (iii) the conduct of the Business prior to
the Closing Date in breach of any covenant set forth in Article 5 hereof, or
(iv) any BEA Damages relating to or arising out of the matter set forth as Item
2 to Schedule 3.17.2 of the Seller Disclosure Schedule or the breach of the
representations and warranties contained in that certain representation letter
relating to the same matter dated as of the date hereof and delivered to BEA by
Seller and the Founders; provided, that for purposes of determining the amount
of BEA Damages for the breach of any representation, warranty or covenant in
this Agreement that contains a materiality qualifier, such representation,
warranty or covenant shall be deemed breached where the BEA Damages relating
thereto, individually or in the aggregate, are in excess of $25,000 (which BEA
Damages, once such $25,000 threshold has been surpassed, shall be included in
full in determining whether the aggregate amount of BEA Damages exceeds the
$250,000 limitation set forth in Section 8.6(a).
8.3 BEA's Indemnity. Acquisition Subsidiary and BEA shall, jointly and
severally, indemnify, defend, protect and hold harmless Seller and Seller's
Affiliates and their respective officers, directors, stockholders, employees and
agents (the "Seller Indemnitees") from and against any and all losses, costs,
expenses, liabilities, obligations, claims, demands, causes of action, suits,
settlements and judgments of every nature, including the costs and expenses
associated therewith and reasonable attorneys', consultants' and witness fees
incurred in connection therewith ("Seller Damages"; and when used together with
or in the alternative to BEA Damages, "Damages"), which arise out of: the breach
by Acquisition Subsidiary or BEA of any certification, representation or
warranty made by Acquisition Subsidiary or BEA pursuant to this Agreement or any
certificate delivered by BEA pursuant to this Agreement; or the non-
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performance, partial or total, of any covenant made by Acquisition Subsidiary or
BEA pursuant to this Agreement.
8.4 Indemnity Procedures.
8.4.1 In the event that at any time or from time to time after the
Closing Date a person or entity entitled to indemnification pursuant to Section
8.2 or 8.3 (any such person or entity, an "Indemnitee") shall sustain a loss of
any nature whatsoever against which such Indemnitee is indemnified under this
Agreement, such Indemnitee shall notify the party required to provide such
indemnification (in the case of any Seller Indemnitees, the "Seller's
Representatives" and in the case of any BEA Indemnitees, the "BEA
Representative", either such party, as applicable, the "Indemnitor") in writing
of any such loss so sustained, and Indemnitor shall within thirty (30) days
after transmittal of such notice pay to such Indemnitee the amount of such loss
so sustained, subject to their right to contest any third-party claim as
hereinafter provided in Section 8.4.2.
8.4.2 Promptly after receipt by an Indemnitee of written notice of
a claim or the commencement of any proceeding against it, such Indemnitee shall,
if a claim in respect thereof is to be made against an Indemnitor under Section
8.2 or 8.3, give written notice to the Indemnitor of the commencement thereof,
but the failure so to notify the Indemnitor shall not relieve it of any
liability that it may have to any Indemnitee, except to the extent the
Indemnitor demonstrates that the defense of such action is or has been
prejudiced thereby. In case any such proceeding shall be brought against an
Indemnitee and it shall give notice to the Indemnitor of the commencement
thereof, the Indemnitor shall be entitled to participate therein and, to the
extent that it shall wish (unless the Indemnitor is also a party to such
proceeding and the Indemnitee determines in good faith that joint representation
would be inappropriate) to assume the defense thereof with counsel which is
reasonably satisfactory to such Indemnitee and, after notice from the Indemnitor
to such Indemnitee of its election so to assume the defense thereof, the
Indemnitor shall not be liable to such Indemnitee under such Section for any
fees of such counsel or any other expenses with respect to the defense of such
proceeding, in each case, subsequently incurred by such Indemnitee in connection
with the defense thereof. If an Indemnitor assumes the defense of such
proceeding, (a) no compromise or settlement thereof may be effected by the
Indemnitor without the Indemnitee's reasonable consent unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any person or entity and no effect on any other claims that may be made against
the Indemnitee, and (ii) the sole relief provided is monetary damages that are
paid in full by the Indemnitor; and (b) the Indemnitor shall have no liability
with respect to any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld). If notice is given to an
Indemnitor of the commencement of any proceeding and it does not, within fifteen
(15) business days after the Indemnitee's notice is given, give notice to the
Indemnitee of its election to assume the defense thereof, the Indemnitor shall
be bound by any determination made in such action or any compromise or
settlement thereof effected by the Indemnitee. Notwithstanding the foregoing, if
an Indemnitee determines in good faith that there is a reasonable probability
that a proceeding may adversely affect it or its Affiliates, other than as a
result of monetary damages, such Indemnitee may, by notice to the Indemnitor,
assume the exclusive right to defend, compromise or settle such proceeding, but
the Indemnitor shall not be bound by any determination of a
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proceeding so defended or any compromise or settlement thereof effected without
its consent (which shall not be unreasonably withheld).
8.4.3 If any Indemnitor contests or challenges any claim or action
asserted against an Indemnitee referred to in this Article, it shall do so at
its own cost and expense, holding Indemnitee harmless from all costs, fees,
expenses, debts, liabilities and charges in connection with such contest; and
shall hold Indemnitee's business and assets free and harmless from any
attachment, execution, judgment, lien or other legal process.
8.5 Other Remedies. Except with respect to any fraudulent or intentional
misrepresentation or breach, the rights of indemnification of an Indemnitee
shall be limited to the provisions of this Article, and the provision of this
Article shall be exclusive of, any other indemnification provided for under this
Agreement and any other rights or remedies at law or in equity which may accrue
to an Indemnitee.
8.6 Limitations on Indemnification. Notwithstanding the foregoing, the
right to indemnification under this Section 8 shall be subject to the following
terms:
(a) No indemnification shall be payable pursuant to Section 8.2 or
Section 8.3 unless and until the amount of all claims for indemnification
pursuant to the applicable Section exceeds $250,000 in the aggregate, whereupon
indemnification pursuant to such Section shall be payable for all such claims
without any deduction.
(b) No indemnification shall be payable pursuant to Section 8.2 or
Section 8.3 after the Expiration Date, except with respect to (i) claims made
prior to the Expiration Date, but not resolved by the Expiration Date and (ii)
claims made with respect to any breach of Sections 3.1, 3.2, 3.3 and 3.17, which
may be made at any time until the thirty (30) month anniversary of the Closing
Date.
(c) Except as provided in Section 8.6(d), all indemnification
claims under Section 8.2 shall be satisfied solely from the shares held pursuant
to the Escrow Agreement and no person shall have any right to recovery directly
from any person who was a holder of Seller Stock immediately prior to the
Effective Time. Without limitation of the foregoing, the maximum liability of
any former holder of Seller Stock for any breach of a representation, warranty
or covenant of Seller shall be limited to those shares in which such holder has
an interest that are held pursuant to the Escrow Agreement.
(d) The limitations of Section 8.6(a), (b) and (c) shall not apply
in the case of a fraudulent or intentional misrepresentation or breach by any
party, but no person shall be liable for any such misrepresentation or breach by
any other person (except to the extent of its share of the shares held under the
Escrow Agreement).
(e) In determining the amount of any indemnity, there shall be
taken into account any tax benefit, insurance proceeds or other similar recovery
or offset realized, directly or indirectly, by the party to be indemnified.
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8.7 Characterization of Indemnity Payments. Unless otherwise required by
applicable law, the parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an adjustment to
the purchase price. Seller agrees to indemnify BEA for taxes imposed on or with
respect to an indemnification payment made by any Seller Indemnitee pursuant to
this Article 8 to the extent it is required by applicable law to treat such
indemnification payments for tax purposes other than as an adjustment to the
purchase price.
ARTICLE 9
TERMINATION
9.1 Grounds for Termination. This Agreement may be terminated at any time
prior to the Closing:
9.1.1 by mutual written agreement of Seller and BEA; or
9.1.2 by either Seller or BEA if the Merger shall not have been
consummated on or before November 30, 1999; or
9.1.3 by BEA in the event of a material breach by Seller of any of
its covenants, representations or warranties under this Agreement; or
9.1.4 by Seller in the event of a material breach by BEA or
Acquisition Subsidiary of any of their respective covenants, representations or
warranties under this Agreement.
9.2 Effect of Termination. If this Agreement is terminated as permitted
by Section 9.1, except as set forth in the next sentence, the parties hereto
shall have no further obligations to each other, provided that no such
termination shall impair, limit or affect, in any manner, any liability of any
party hereto for any breach of any covenant, representation or warranty set
forth in this Agreement, accrued as of the date of such termination. The
provisions of Articles 8 and 10 shall survive any termination hereof pursuant to
Section 9.1.
ARTICLE 10
MISCELLANEOUS
10.1 Announcements. Seller agrees that it shall make no press release or
other public announcements regarding this Agreement without BEA's prior consent.
10.2 Finders and Brokers. Each party hereby represents and warrants to the
others that neither it nor its representatives have taken, nor will they take,
any action that would cause the other parties hereto to have any obligation or
liability to any person for or made any arrangements for the payment of any
finders' fees, brokerage fees, agents' commissions, or like payments in
connection with the transactions contemplated hereby, except pursuant to the
agreement between Seller and SG Cowen Securities Corporation listed on Section
-------
3.8 of the
- ----------
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Disclosure Schedule (the "SG Cowen Agreement"). Each party shall indemnify and
- -------------------
hold harmless the others from any claim that is asserted by any person for a
finder's fee or like payment with respect to this Agreement arising from any
act, representation or promise of the indemnifying party or its representative,
other than the SG Cowen Agreement.
10.3 Amendment. Subject to applicable law, this Agreement may only be
amended or supplemented by written agreement of Seller and BEA.
10.4 Waiver of Compliance. Any failure of Seller, on the one hand, or
BEA, on the other, to comply with any provision of this Agreement may be
expressly waived in writing by BEA or Seller, respectively, but such waiver or
failure to insist upon strict compliance with such provision shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure. No
failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
10.5 Expenses. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, brokers, finders,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated; provided, however, that if the Merger is
consummated such fees and expenses billed to or incurred by Seller in connection
with this Agreement and the transactions contemplated hereby shall be borne by
the holders of Seller Stock and not Seller or BEA to the extent that such fees
and expenses exceed $1,700,000. To the extent that such fees and expenses of
Seller exceed $1,700,000, BEA shall be entitled to deduct from the Escrow Shares
that number of shares (or cash) with a value equal to such amount as calculated
pursuant to the terms of the Escrow Agreement, notwithstanding any other
provision therein.
10.6 Survival of Representations and Warranties. The respective
representations and warranties of each party contained herein shall not be
deemed waived or otherwise affected by any investigation made by or on behalf of
the other party and such representations and warranties shall survive the
Closing and the consummation of the Merger contemplated hereby as provided in
Article 8. All statements contained in this Agreement or the Seller Disclosure
Schedule or in any certificate, delivered pursuant hereto shall be deemed
representations or warranties, as the case may be (as such terms are used in
this Agreement), of the party making such statements.
10.7 Notices. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed as
follows:
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To Seller at:
The Theory Center
One Winthrop Square
Boston, MA 02110
Attn: John Belizaire
With a copy to:
Fulbright & Jaworski LLP
666 Fifth Avenue
New York, New York 10103
Attn: Merrill M. Kraines
Robert E.L. deButts, Jr.
To BEA at:
BEA Systems, Inc.
2315 North First Street
San Jose, CA 95131
Attn: General Counsel and Donna Starks
With a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104-0050
Attn.: John Kennedy
John L. Cleary II
Notice of change of address shall be effective only when done in accordance
with this Section. All notices complying with this Section shall be deemed to
have been received on the date of delivery or on the third business day after
mailing.
10.8 Assignment; Successors and Assigns. Except as otherwise provided
herein, each party agrees that it will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any right or obligation under this Agreement. Any purported assignment,
transfer, or delegation in violation of this Section shall be null and void.
Subject to the foregoing limits on assignment and delegation, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Except for those enumerated above, this
Agreement does not create, and shall not be construed as creating, any rights or
claims enforceable by any person or entity not a party to this Agreement.
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10.9 Governing Law. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the internal law of the State of New York.
10.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.11 Headings. The headings of the Sections and Articles of this
Agreement and Table of Contents are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement.
10.12 Entire Agreement. The parties intend that the terms of this
Agreement, including the Seller Disclosure Schedule and other documents referred
to herein, shall be the final expression of their agreement with respect to the
subject matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement shall
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative,
or other legal proceeding involving this Agreement.
10.13 Performance by BEA. BEA shall cause Acquisition Subsidiary to
perform all of its covenants and obligations hereunder.
10.14 Severability. If any provision of this Agreement, or the
application thereof to any Person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places, and circumstances shall remain in full force and effect.
10.15 Rules of Construction. The parties acknowledge that each party has
read and negotiated the language used in this Agreement. The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.
10.16 Additional Documents. Each of the parties agree, without further
consideration, to execute and deliver such other documents and take such further
action as may be reasonably required to effectuate the provisions of this
Agreement.
10.17 Dispute Resolution. Any dispute, controversy or claim between the
parties relating to, or arising out of or in connection with, this Agreement (or
any subsequent agreements or amendments thereto), including as to its existence,
enforceability, validity, interpretation, performance, breach or damages,
including claims in tort, whether arising before or after the termination of
this Agreement, shall be settled only by binding arbitration pursuant to the
Commercial Arbitration Rules, as then amended and in effect, of the American
Arbitration Association (the "Rules"), subject to the following:
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10.17.1 The arbitration shall take place in New York, New York.
10.17.2 There shall be three arbitrators, who shall be selected under
the normal procedures prescribed in the Rules, except that one such arbitrator
shall be a certified public accountant and one (1) such arbitrator (who shall
chair the arbitration panel) shall be a member of the American Board of Trial
Advocates or the American College of Trial Lawyers.
10.17.3 Subject to legal privileges, each party shall be entitled to
discovery in accordance with the Federal Rules of Civil Procedure.
10.17.4 At the arbitration hearing, each party may make written and
oral presentations to the arbitrator, present testimony and written evidence and
examine witnesses.
10.17.5 The arbitrators' decision shall be in writing, shall be
binding and final and may be entered and enforced in any court of competent
jurisdiction.
10.17.6 No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, exemplary or punitive damages.
10.17.7 Each party to the arbitration shall pay one-half of the fees
and expenses of the arbitrators and the American Arbitration Association.
10.17.8 The arbitrators shall not have the power to amend this
Agreement.
10.18 Exhibits. All Exhibits attached hereto shall be deemed to be a part
of this Agreement and are fully incorporated in this Agreement by this
reference.
10.19 Certain Definitions. For purposes of this Agreement, the following
capitalized terms shall have the respective meanings ascribed to such terms in
this Section:
"Affiliate" or "Associate" shall have the meaning assigned thereto in Rule
--------- ---------
405, as presently promulgated under the Securities Act of 1933, as amended.
"BEA Loan" shall mean the loan from BEA to Seller evidenced by that certain
--------
Promissory Note and Security Agreement, dated October 19, 1999.
"Employee Options" shall have the meaning set forth in Section 3.3.2.
----------------
"Employee Plans" shall mean (i) all "employee benefit plans" within the
--------------
meaning of Section 3(3) of ERISA, and (ii) all other employee benefit, bonus or
other incentive compensation, stock option, stock purchase, stock appreciation,
severance pay, lay-off or reduction in force, change in control, sick pay,
vacation pay, salary continuation, retainer, leave of absence, educational
assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which
Seller or any Member of the Controlled Group maintains, to which any of them
contributes, or for which any of them has any material obligation or material
liability.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Intellectual Property" shall mean any trademark, copyright, service mark,
---------------------
trade name, patent, maskworks, inventions, trade secrets, know-how, processes,
manufacturing or marketing procedures, net lists, documentation, schematics,
technology, algorithms, computer software programs or applications (in both
source code and object code form), and tangible and intangible proprietary
information or material (including any registrations or applications for
registration of any of the foregoing).
"Loan Adjustment Shares" shall mean a number of shares of BEA Common Stock
----------------------
equal to the quotient arrived at by dividing (x) the aggregate principal amount,
plus all accrued and unpaid interest through the Closing Date, owed to BEA by
Seller under the BEA Loan by (y) $37.00.
"Member of the Controlled Group" shall mean each trade or business, whether
------------------------------
or not incorporated, which would be treated as a single employer with Seller
under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.
"Option and Warrant Adjustment Shares" shall mean a number of shares of BEA
------------------------------------
Common Stock equal to the product of (x) the number of shares of Seller Common
Stock underlying all outstanding Options and Warrants immediately prior to the
Closing, other than 1,128,125 shares underlying Employee Options, and (y) the
Stock Conversion Factor.
"Person" shall include any individual, partnership, joint venture,
------
corporation, trust, unincorporated organization, any other entity and any
government or any department or agency thereof, whether acting in an individual,
fiduciary, or other capacity.
"Seller Intellectual Property" shall mean all Intellectual Property owned
----------------------------
or licensed and used or held for use by the Seller.
"Stockholders' Representatives" shall mean John Belizaire and Michael
-----------------------------
Toporek.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first written above.
THE THEORY CENTER, INC. BEA ACQUISITION CORP.
By:_________________________ By:__________________________________
Name: Name:
Title: Title:
BEA SYSTEMS, INC.
By:_________________________
Name:
Title:
42
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedule Name
-------- ----
<S> <C>
Schedule 2.2.1 Consideration to
Stockholders of Seller
Section 3.3.1 - Seller Disclosure Schedule List of Stockholders
Section 3.3.2 - Seller Disclosure Schedule Outstanding Warrants and Options
Section 3.8 - Seller Disclosure Schedule Material Agreements
Section 3.10 - Seller Disclosure Schedule Accounts
Section 3.11 - Seller Disclosure Schedule No Breaches, Etc.
Section 3.13 - Seller Disclosure Schedule No Undisclosed Liabilities
Section 3.14 - Seller Disclosure Schedule Customers
Section 3.16 - Seller Disclosure Schedule Certain Changes
Section 3.17.1 - Seller Disclosure Schedule Seller Intellectual Property
Section 3.17.2 - Seller Disclosure Schedule Intellectual Property
Infringement/Litigation
Section 3.17.3 - Seller Disclosure Schedule Intellectual Property Indemnification
Agreements
Section 3.18 - Seller Disclosure Schedule Product Warranties and Returns
Section 3.20 - Seller Disclosure Schedule Personnel
Section 3.23 - Seller Disclosure Schedule Insurance
Section 3.24 - Seller Disclosure Schedule Environmental Reports
Section 3.25.3 - Seller Disclosure Schedule Software
Section 5.2.1 - Seller Disclosure Schedule Conduct of Business Pending Closing
Section 5.9 - Seller Disclosure Schedule Seller Stockholders Party to Voting
Agreement
Exhibit Name
------- ----
Exhibit 2.2.4 Form of Escrow Agreement
Exhibit 5.9 Form of Voting Agreement
Exhibit 7.1.8 Form of Investment Representation
Letter
Exhibits 7.1.10 Form of Employment Agreement
Exhibit 7.2.5 Form of Opinion of Morrison &
Foerster LLP
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of BEA Systems, Inc.
for the registration of shares of its common stock, issued in connection with
its acquisition of The Theory Center, and to the incorporation by reference
therein of our report dated February 23, 1999, with respect to the consolidated
financial statements and schedule of BEA Systems, Inc. included in its Annual
Report (Form 10-K) for the year ended January 31, 1999 filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
December 1, 1999
