EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
MICROMUSE INC.
SALAMANDER ACQUISITION CORP.
and
NETOPS CORPORATION
Dated as of June 21, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS...................................................... 2
SECTION 1.01 Certain Defined Terms............................. 2
ARTICLE II THE MERGER...................................................... 6
SECTION 2.01 The Merger........................................ 6
SECTION 2.02 Closing........................................... 6
SECTION 2.03 Effective Time.................................... 6
SECTION 2.04 Effect of the Merger.............................. 6
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors
and Officers of Surviving Corporation............. 6
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............. 7
SECTION 3.01 Conversion of Shares.............................. 7
SECTION 3.02 Exchange of Shares Other than Treasury Shares..... 9
SECTION 3.03 Stock Transfer Books.............................. 11
SECTION 3.04 No Fractional Share Certificates.................. 11
SECTION 3.05 Certain Adjustments............................... 12
SECTION 3.06 Lost, Stolen or Destroyed Certificates............ 12
SECTION 3.07 Exemption from Registration....................... 12
SECTION 3.08 Registration Rights............................... 12
SECTION 3.09 Taking of Necessary Action; Further Action........ 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 15
SECTION 4.01 Organization and Qualification; Subsidiaries...... 16
SECTION 4.02 Certificate of Incorporation and Bylaws........... 16
SECTION 4.03 Capitalization.................................... 16
SECTION 4.04 Authority Relative to This Agreement.............. 17
SECTION 4.05 No Conflicts; Required Filings and Consents....... 17
SECTION 4.06 Permits; Compliance with Laws..................... 18
SECTION 4.07 Financial Statements.............................. 19
SECTION 4.08 Absence of Certain Changes or Events.............. 19
SECTION 4.09 Employee Benefit Plans; Labor Matters............. 20
SECTION 4.10 Certain Tax Matters............................... 23
SECTION 4.11 Contracts......................................... 23
SECTION 4.12 Litigation........................................ 25
SECTION 4.13 Environmental Matters............................. 25
SECTION 4.14 Intellectual Property............................. 25
SECTION 4.15 Taxes............................................. 29
SECTION 4.16 Insurance......................................... 30
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SECTION 4.17 Properties; Bank Accounts......................... 31
SECTION 4.18 Affiliates........................................ 31
SECTION 4.19 Brokers........................................... 32
SECTION 4.20 Certain Business Practices........................ 32
SECTION 4.21 Section 203 of the Delaware Code Not Applicable... 32
SECTION 4.22 Business Activity Restriction..................... 33
SECTION 4.23 Customers and Suppliers........................... 33
SECTION 4.24 Employee Matters.................................. 33
SECTION 4.25 Compliance with Regulation D; Stockholders........ 34
SECTION 4.26 Representations Complete.......................... 34
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......... 34
SECTION 5.01 Organization and Qualification; Subsidiaries...... 34
SECTION 5.02 Capitalization.................................... 35
SECTION 5.03 Authority Relative to this Agreement.............. 35
SECTION 5.04 No Conflict; Required Filings and Consents........ 36
SECTION 5.05 SEC Filings; Financial Statements................. 36
SECTION 5.06 Absence of Certain Changes or Events.............. 37
SECTION 5.07 Brokers........................................... 37
SECTION 5.08 Form S-3 Eligibility; Rule 144 Compliance......... 37
SECTION 5.09 Representations Complete.......................... 37
ARTICLE VI COVENANTS....................................................... 38
SECTION 6.01 Conduct of Business by the Company Pending the
Closing .......................................... 38
SECTION 6.02 Notices of Certain Events......................... 40
SECTION 6.03 Access to Information; Confidentiality............ 40
SECTION 6.04 No Solicitation of Transactions................... 41
SECTION 6.05 Tax-Free Transaction.............................. 41
SECTION 6.06 Further Action; Consents; Filings................. 42
ARTICLE VII ADDITIONAL AGREEMENTS.......................................... 42
SECTION 7.01 Public Announcements.............................. 42
SECTION 7.02 Employee Benefit Matters.......................... 43
SECTION 7.03 Stock Options..................................... 43
SECTION 7.04 Legend............................................ 44
SECTION 7.05 Information Statement............................. 44
SECTION 7.06 Meeting of Stockholders........................... 45
SECTION 7.07 Other Employment Agreements....................... 46
SECTION 7.08 Tax Returns....................................... 46
SECTION 7.09 Option Grants..................................... 46
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SECTION 7.10 Retention Bonuses................................. 46
SECTION 7.11 Form S-8 Registration Statement................... 47
ARTICLE VIII CONDITIONS TO THE MERGER...................................... 47
SECTION 8.01 Conditions to the Obligations of Each Party to
Consummate the Merger............................. 47
SECTION 8.02 Conditions to the Obligations of the Company...... 48
SECTION 8.03 Conditions to the Obligations of Parent and
Merger Sub ....................................... 48
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................... 51
SECTION 9.01 Termination....................................... 51
SECTION 9.02 Effect of Termination............................. 52
SECTION 9.03 Amendment......................................... 52
SECTION 9.04 Waiver............................................ 52
SECTION 9.05 Expenses.......................................... 52
ARTICLE X INDEMNIFICATION AND ESCROW....................................... 53
SECTION 10.01 Escrow Fund....................................... 53
SECTION 10.02 Indemnification................................... 53
SECTION 10.03 Procedures........................................ 54
SECTION 10.04 Limitations....................................... 56
SECTION 10.05 Escrow Period..................................... 56
SECTION 10.06 Stockholders' Agent............................... 56
ARTICLE XI GENERAL PROVISIONS.............................................. 57
SECTION 11.01 Duration of Survival of Representations and
Warranties ....................................... 57
SECTION 11.02 Notices........................................... 58
SECTION 11.03 Severability...................................... 59
SECTION 11.04 Assignment; Binding Effect; Benefit............... 59
SECTION 11.05 Incorporation of Exhibits......................... 59
SECTION 11.06 Governing Law..................................... 60
SECTION 11.07 Waiver of Jury Trial.............................. 60
SECTION 11.08 Headings; Interpretation.......................... 60
SECTION 11.09 Counterparts...................................... 60
SECTION 11.10 Entire Agreement.................................. 60
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ANNEXES AND SCHEDULES
ANNEX A Form of Voting Agreement
ANNEX B Form of Stockholder Representation Letter
ANNEX C Form of Escrow Agreement
ANNEX D-1 Form of Opinion of Counsel to Parent
ANNEX D-2 Form of Opinion of Counsel to the Company
ANNEX E Form of Proprietary Information Agreement
ANNEX F Certificate of Incorporation of Merger Sub
ANNEX G Bylaws of Merger Sub
Schedule I Persons executing Voting Agreement
Schedule II Parent Shares to be Delivered
Schedule III Employees
Schedule IV Certain Employees
Schedule V Agreements requiring consent
Schedule VI Agreements to be terminated
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June
21, 2000 (as amended, supplemented or otherwise modified from time to time, this
"Agreement"), among MICROMUSE INC., a Delaware corporation ("Parent"),
SALAMANDER ACQUISITION CORP., a Delaware corporation and a direct wholly owned
subsidiary of Parent ("Merger Sub"), and NETOPS CORPORATION, a Delaware
corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, the boards of directors of Parent and the Company have
determined that it is advisable and in the best interests of their respective
companies and stockholders to enter into a business combination by means of the
merger of Merger Sub with and into the Company (the "Merger") and have approved
and adopted this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, each of the
persons listed on Schedule I hereto has executed and delivered a voting
agreement substantially in the form attached hereto as Annex A (the "Voting
Agreement"), pursuant to which, among other things, such person has agreed to
vote all of the shares set forth opposite the name of such person in favor of
the Merger and this Agreement;
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "Delaware Code"), Parent will acquire all of the capital stock of
the Company through the Merger; and
WHEREAS, for United States Federal income tax purposes, it is
intended that the Merger shall qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (together with
the rules and regulations promulgated thereunder, the "Code"), and that this
Agreement shall be, and hereby is, adopted as a plan of reorganization for
purposes of Section 368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms
Unless the context otherwise requires, the following terms, when
used in this Agreement, shall have the respective meanings specified below (such
meanings to be equally applicable to the singular and plural forms of the terms
defined):
"Affiliate" shall mean, with respect to any person, any other person
that controls, is controlled by or is under common control with the first
person.
"Blue Sky Laws" shall mean state securities or "blue sky" laws.
"Business Day" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in New York.
"Company Disclosure Schedule" shall mean the disclosure schedule
delivered by the Company to Parent prior to the execution of this Agreement and
forming a part hereof.
"Company Intellectual Property" shall mean all United States,
foreign and international patents (including without limitation all patents,
patent applications, and any and all divisions, continuations,
continuations-in-part, reissues, re-examinations and extensions thereof, and all
invention registrations and disclosures); trademarks, service marks and trade
names (including without limitation all goodwill, common law rights and
governmental or other registrations or applications for registration pertaining
thereto), designs, trade dress and Internet domain names; copyrights (including
without limitation all common law rights and governmental or other registrations
or applications for registration pertaining thereto, and renewal rights
therefor); sui generis database rights; ideas, inventions, technology, know-how,
show-how, trade secrets, systems, processes, works of authorship, databases,
mask works, content, graphics, statistical models, algorithms, modules, computer
programs, computer software (including without limitation all software
incorporated in or relating to the Autodetect(TM), Distributed Status
Monitor(TM) and Visionary(TM) products), source and object code of such
software, technical documentation, business methods, work product, intellectual
and industrial property licenses, and all other tangible or intangible
information or materials that are currently used, or currently proposed or
planned to be used, in the Company's business or the business of any Subsidiary.
"Company Material Adverse Effect" shall mean any change in or effect
on the business of the Company or any of its Subsidiaries that, individually or
in the aggregate (taking into account all other such changes or effects), is, or
is reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole; provided that a termination of the Master
Service Agreement
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and related agreements with Bear Stearns & Co. Inc. or its affiliates after the
date hereof shall not be deemed to constitute a Company Material Adverse Effect;
provided, further, that continued operating losses and cash flow losses of the
Company, consistent with such losses in the first five months of 2000, shall not
be deemed to constitute, and shall not be taken into account in determining
whether there has been, a Company Material Adverse Effect.
"Company Stock Plan" shall mean the NetOps Corporation 1997
Long-Term Incentive Plan.
"Competing Transaction" shall mean any of the following involving
the Company (other than the Merger):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 20% or more of the assets of the Company and its
Subsidiaries, taken as a whole, in a single transaction or series of
transactions;
(iii) any tender offer or exchange offer for 20% or more of
the outstanding voting securities of the Company or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) having been formed that
beneficially owns or has the right to acquire beneficial ownership of, 20%
or more of the outstanding voting securities of the Company;
(v) any solicitation in opposition to the approval of this
Agreement by the Stockholders of the Company; or
(vi) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing.
"$" shall mean United States Dollars.
"Environmental Law" shall mean any Law and any enforceable judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Material, as in effect as
of the date hereof.
"Environmental Permit" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Expenses" shall mean, with respect to any party hereto, all
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its Affiliates) reasonably incurred by such party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of its obligations pursuant to this Agreement and the
consummation of the Merger, the filings of any required HSR Act notice and all
other matters related to the transactions contemplated hereby and the closing of
the Merger.
"Governmental Entity" shall mean any United States Federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"Governmental Order" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"Hazardous Material" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
"IRS" shall mean the United States Internal Revenue Service.
"Law" shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.
"Parent Common Stock" shall mean the common stock, par value $.01
per share, of Parent.
"Parent Disclosure Schedule" shall mean the disclosure schedule
delivered by Parent to the Company prior to the execution of this Agreement and
forming a part hereof.
"Parent Material Adverse Effect" shall mean any change in or effect
on the business of Parent or any of its Subsidiaries that, individually or in
the aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and its
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Subsidiaries, taken as a whole; provided, however, that any change in the market
price or trading volume of the Parent Common Stock after the date hereof shall
not be deemed in itself to constitute, and shall not be taken into account in
determining whether there has been or will be, a Parent Material Adverse Effect.
"Person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, limited liability partnership,
syndicate, person (including, without limitation, a "person" as defined in
Section 13(d)(3) of the Exchange Act), trust, association, entity or government
or political subdivision, agency or instrumentality of a government.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission.
"Subsidiary" shall mean, with respect to any person, any
corporation, partnership, limited partnership, limited liability company,
limited liability partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary of such
person) owns, directly or indirectly, a majority of the stock or other equity
interests.
"Tax" shall mean (i) any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or taxing authority,
including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges; (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, combined,
consolidated or unitary group for any taxable period; and (iii) any liability
for the payment of amounts of the type described in (i) or (ii) as a result of
being a transferee of, or a successor in interest to, any Person or as a result
of an express or implied obligation to indemnify any person.
"Tax Return" shall mean any return, statement or form (including,
without limitation, any estimated tax reports or return, withholding tax reports
or return and information report or return) required to be filed with respect to
any Taxes.
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ARTICLE II
THE MERGER
SECTION 2.01 The Merger
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware Code, at the Effective Time (as
defined in Section 2.03), Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the Merger
as a wholly owned Subsidiary of Parent (the "Surviving Corporation").
SECTION 2.02 Closing
Unless this Agreement shall have been terminated and the Merger
herein contemplated shall have been abandoned pursuant to Section 9.01 and
subject to the satisfaction or waiver of the conditions set forth in Article
VIII, the consummation of the Merger shall take place as promptly as practicable
(and in any event within three Business Days) after satisfaction or waiver of
the conditions set forth in Article VIII, at a closing (the "Closing") to be
held at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New York,
New York 10019, unless another date, time or place is agreed to by Parent and
the Company.
SECTION 2.03 Effective Time
At and after the time of the Closing, the parties shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with the relevant provisions of, the
Delaware Code (the date and time of such filing, or such later date and time as
may be set forth therein, being the "Effective Time").
SECTION 2.04 Effect of the Merger
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of the Delaware Code. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Company as the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Company as the
Surviving Corporation.
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation
Unless otherwise agreed to by Parent and the Company before the
Effective Time, at the Effective Time:
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(a) (i) the Certificate of Incorporation of Merger Sub, which is
attached hereto as Annex F, in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation and (ii)
the Bylaws of Merger Sub, which are attached hereto as Annex G, in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation, in each case, until thereafter amended as provided by Law and such
Certificate of Incorporation or Bylaws;
(b) the officers of Merger Sub immediately prior to the Effective
Time shall serve in their respective offices of the Surviving Corporation from
and after the Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal; and
(c) the directors of Merger Sub immediately prior to the Effective
Time shall serve as the directors of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or appointed
and qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Conversion of Shares
At the Effective Time, by virtue of the Merger, and without any
action on the part of Parent, Merger Sub, the Company or the holders of any of
the following securities:
(a) Except in the case of shares, if any, held by persons who have
not agreed to vote such shares in favor of the Merger and this Agreement and
have perfected dissenters' rights in accordance with the Delaware Code
("Dissenting Shares"):
(i) each share of Series A Preferred Stock, par value $0.01
per share (the "Series A Preferred Stock") issued and outstanding
immediately prior to the Effective Time, and all rights in respect
thereof, shall forthwith cease to exist and be converted into the sum of
(x) the fraction of a share of Parent Common Stock (A) the numerator of
which shall equal such number of shares of Parent Common Stock which, when
multiplied by ninety-seven percent (97%) of the Parent Stock Price (as
defined below), is equivalent to $2,006,778 (the "Series A Preference
Amount") and (B) the denominator of which shall be the number of issued
and outstanding shares of Series A Preferred Stock and (y) the fraction of
a share of Parent Common Stock equal to the product of (A) the number of
shares of Company Common Stock (as defined below) into which such share of
Series A Preferred Stock is convertible immediately prior to the Effective
Time and (B) the Exchange Ratio (as defined below);
(ii) each share of Series B Preferred Stock, par value $0.01
per share (the "Series B Preferred Stock" and, along with the Series A
Preferred Stock, the
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"Company Preferred Stock") issued and outstanding immediately prior to the
Effective Time, and all rights in respect thereof, shall forthwith cease
to exist and be converted into the sum of (x) the fraction of a share of
Parent Common Stock (A) the numerator of which shall equal such number of
shares of Parent Common Stock which, when multiplied by ninety-seven
percent (97%) of the Parent Stock Price (as defined below), is equivalent
to $6,491,554 (the "Series B Preference Amount" and, along with the Series
A Preference Amount, the "Preference Amount") and (B) the denominator of
which shall be the number of issued and outstanding shares of Series B
Preferred Stock and (y) the fraction of a share of Parent Common Stock
equal to the product of (A) the number of shares of Company Common Stock
into which such share of Series B Preferred Stock is convertible
immediately prior to the Effective Time and (B) the Exchange Ratio (as
defined below); and
(iii) each share of common stock, par value $0.01 per share,
of the Company ("Company Common Stock") issued and outstanding immediately
prior to the Effective Time (excluding those to be canceled in accordance
with Section 3.01(c)), and all rights in respect thereof, shall forthwith
cease to exist and be converted into a fraction of a share (the "Exchange
Ratio") of Parent Common Stock:
(x) the numerator of which shall equal such number of
shares of Parent Common Stock which, when multiplied by the
Parent Stock Price is equivalent to the difference between (A)
$17,600,000 (the "Purchase Price") (as adjusted as provided in
Section 9.05) and (B) the Preference Amount; and
(y) the denominator of which shall be the number of
Fully Diluted Shares (as defined below).
The aggregate number of shares of Parent Common Stock to be issued pursuant to
this Section 3.01(a) shall be referred to herein as the "Merger Shares." Each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time that is restricted or not fully vested shall upon such conversion
and exchange have the same restrictions or vesting arrangements applicable to
such shares prior to the conversion, except for such acceleration provisions as
may be triggered by the consummation of the Merger contemplated by this
Agreement and as set forth in Section 4.03 of the Company Disclosure Schedule
and agreed to by Parent. An aggregate of twenty percent (20%) of the Merger
Shares shall be subject to escrow pursuant to Article X hereof (the "Escrow
Shares").
(b) As used herein, (i) "Parent Stock Price" shall mean the closing
price for a share of Parent Common Stock as quoted on the Nasdaq Stock Market
for the trading day of June 19, 2000 and (ii) "Fully Diluted Shares" shall mean
all of the issued and outstanding shares of Company Common Stock at the
Effective Time, plus the number of shares of Company Common Stock issuable upon
exercise, exchange or conversion of all vested options, warrants, convertible
securities or other rights or obligations of the Company outstanding at the
Effective Time that may, at any time, require the Company to issue shares of its
capital stock, other than
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such options to purchase an aggregate of 257,661 shares of Company Common Stock
held by Mark Garber, Richard Ray, Phillip Vant and Jackie Gentile, which are to
be assumed by Parent pursuant to Section 7.03(a)(ii).
(c) Each share of Company Common Stock or Company Preferred Stock
held in the treasury of the Company or owned by any wholly owned Subsidiary of
the Company immediately prior to the Effective Time shall be canceled and
retired and no shares of stock or other securities of Parent, the Surviving
Corporation or any other corporation shall be issuable, and no payment of other
consideration shall be made, with respect thereto.
(d) Each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation. From and after the Effective Time,
each outstanding certificate theretofore representing shares of Merger Sub
common stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation common stock into which
such shares of Merger Sub common stock shall have been converted. Promptly after
the Effective Time, the Surviving Corporation shall issue to Parent a stock
certificate representing 100 shares of Surviving Corporation common stock in
exchange for the certificate that formerly represented shares of Merger Sub
common stock, which shall be surrendered by Parent and canceled.
(e) Any Dissenting Shares shall not be converted into Parent Common
Stock but shall instead be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the Delaware Code. The Company agrees that, except with the
prior written consent of Parent, or as required under the Delaware Code, it will
not voluntarily make any payment with respect to, or settle or offer to settle,
any such purchase demand. Each holder of Dissenting Shares who, pursuant to the
provisions of the Delaware Code, becomes entitled to payment of the fair value
for shares of Company Common Stock or Company Preferred Stock shall receive
payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to such provisions). If, after the Effective
Time, any Dissenting Shares shall lose their status as Dissenting Shares, Parent
shall issue and deliver, upon surrender by such holder of Dissenting Shares of a
Company Certificate (as defined below), the number of shares of Parent Common
Stock to which such shareholder would otherwise be entitled, less any Escrow
Shares.
SECTION 3.02 Exchange of Shares Other than Treasury Shares
(a) Exchange Agent. ChaseMellon Shareholder Services, L.L.C. shall
act as exchange agent for the Merger (the "Exchange Agent").
(b) Parent to Provide Common Stock. Subject to Section 3.02(c), as
soon as reasonably practicable (but not more than 15 days) after the Effective
Time, Parent shall (i) cause to be delivered to the stockholders of the Company
(the "Stockholders") certificates of Parent Common Stock ("Parent Certificates")
representing the number of whole shares of Parent Common Stock issuable to the
Stockholders pursuant to Section 3.01(a) in exchange for shares
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of Company Common Stock and Company Preferred Stock outstanding immediately
prior to the Effective Time, less any Escrow Shares, in the amounts set forth
opposite their names on Schedule II hereto (such schedule to be completed in
good faith by the parties hereto in accordance with Section 3.01 prior to the
Effective Time) and (ii) cause to be delivered to the Escrow Agent (as defined
in Section 10.01) on behalf of the Stockholders, (A) Parent Certificates
representing the number of whole shares of Parent Common Stock issuable to the
Stockholders and subject to escrow pursuant to Section 3.01(a) in exchange for
shares of Company Common Stock and Company Preferred Stock outstanding
immediately prior to the Effective Time, in the amounts set forth opposite their
names on Schedule II hereto and (B) stock powers, endorsed in blank, with
respect to such Parent Certificates. The Escrow Shares shall be registered in
the name of Stockholders and shall be selected pro rata in accordance with the
percentage of shares of Parent Common Stock which each Stockholder is entitled
to receive pursuant to Section 3.01(a). Holders of interests in the Escrow
Shares shall be entitled to vote such Escrow Shares and shall receive dividends
and distributions with respect to such Escrow Shares. To the extent not used for
such purposes, such Escrow Shares shall be released, all as provided in Article
X hereof and in the Escrow Agreement.
(c) Exchange Procedures. On or prior to the Effective Time, each
holder of record of a certificate or certificates (the "Company Certificates")
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock or Company Preferred Stock, whose shares were converted
into the right to receive shares of Parent Common Stock pursuant to Section
3.01(a) (and cash in lieu of fractional shares), shall surrender each such
Company Certificate for cancellation, together with a letter of transmittal, a
stock power endorsed in blank with respect to such stockholder's shares subject
to escrow and a duly and validly executed Stockholder Representation Letter
substantially in the form attached hereto as Annex B, to Parent or to such other
agent or agents as may be appointed by Parent. The holder of such Company
Certificate shall be entitled to receive in exchange therefor, and Parent shall
cause to be delivered to such holder, as soon as reasonably practicable (but not
more than 15 days) after the Effective Time, a certificate representing the
number of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to Section 3.01(a) (less any shares subject to escrow pursuant
to Section 3.01(a)) and payment in lieu of fractional shares which such holder
has the right to receive under Section 3.04, and the Company Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Company Certificate that, prior to the Effective Time, represented shares of
Company Common Stock or Company Preferred Stock will be deemed from and after
the Effective Time, for all corporate purposes other than the payment of
dividends, to evidence the ownership of the number of whole shares of Parent
Common Stock into which such shares of Company Common Stock or Company Preferred
Stock shall have been so converted and the right to receive an amount of cash in
lieu of the issuance of any fractional shares in accordance with Section 3.04.
(d) Distribution with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall surrender
such Company Certificate. Subject to the effect of applicable escheat
<PAGE>
11
or similar laws, following surrender of any such Company Certificate, there
shall be paid to the record holder of the Parent Certificates issued in exchange
therefor, without interest, at the time of such surrender, the amount of any
such dividends or other distributions with a record date after the Effective
Time theretofore payable (but for the provisions of this Section 3.02(d)) with
respect to such shares of Parent Common Stock.
(e) Transfer of Ownership. If any Parent Certificate is to be issued
in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Company Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a Parent Certificate for
shares of Parent Common Stock in any name other than that of the registered
holder of the Company Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 3.02, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of Parent Common
Stock delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 3.03 Stock Transfer Books
At the Effective Time, the stock transfer book of the Company shall
be closed, and there shall be no further registration of transfers of shares of
the Company Common Stock or Company Preferred Stock thereafter on the records of
any such stock transfer books. In the event of a transfer of ownership of shares
of Company Common Stock or Company Preferred Stock that is not registered in the
stock transfer records of the Company at the Effective Time, a certificate or
certificates representing the number of whole shares of Parent Common Stock into
which such shares of Company Common Stock or Company Preferred Stock shall have
been converted shall be issued to the transferee, if the certificate or
certificates representing such shares of Company Common Stock or Company
Preferred Stock is or are surrendered as provided in Section 3.02(c) hereof,
accompanied by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer tax.
SECTION 3.04 No Fractional Share Certificates
No scrip or fractional share of Parent Common Stock shall be issued
upon the surrender for exchange of Company Certificates. In lieu thereof, each
holder of shares of Company Common Stock or Company Preferred Stock who would
otherwise be entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received by such
holder) shall receive from Parent an amount of cash (rounded to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii) the
Parent Stock Price.
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12
SECTION 3.05 Certain Adjustments
If, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock or Company Common Stock or Company
Preferred Stock shall be changed into a different number of shares by reason of
any reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend payable in stock or other securities shall be declared
thereon with a record date within such period, or the number of shares of
Company Common Stock on a fully diluted basis is in excess of that specified in
Section 4.03 and disclosed in Section 4.03 of the Company Disclosure Schedule
(regardless of whether such excess is a result of an additional issuance of
capital stock or a correction to such Section), then the Exchange Ratio shall be
adjusted accordingly to provide to Parent the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange, dividend or increase.
SECTION 3.06 Lost, Stolen or Destroyed Certificates
In the event any Company Certificates shall have been lost, stolen
or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed Company Certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock as may be required
pursuant to Section 3.01(a); provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificates to deliver a bond
in such sum as it may reasonably direct as indemnity against any claim that may
be made against Parent, the Surviving Corporation or the Exchange Agent with
respect to the Company Certificates alleged to have been lost, stolen or
destroyed.
SECTION 3.07 Exemption from Registration
The shares of Parent Common Stock to be issued in connection with
the Merger will be issued in a transaction exempt from registration under the
Securities Act by reason of Section 4(2) thereof and/or Regulation D promulgated
under the Securities Act and may not be re-offered or resold other than in
conformity with the registration requirements of the Securities Act and such
other Laws or pursuant to an exemption therefrom. The Parent Certificates shall
be legended to the effect described above and shall include such additional
legends as necessary to comply with applicable U.S. federal securities Laws,
Blue Sky Laws and other applicable restrictions.
SECTION 3.08 Registration Rights
(a) S-3 Registration Rights. Parent shall (A) use its reasonable
best efforts to prepare and file a registration statement on Form S-3, or a
registration statement on Form S-1 if Parent is not then eligible under the
Exchange Act to file a registration statement on Form S-3, with the SEC covering
the resale of the Merger Shares (the "Form S-3 Registration Statement") within
ninety (90) days after the Effective Time, and use its commercially reasonable
efforts to (B) cause the SEC to declare the Form S-3 Registration Statement
effective under the Securities Act within one hundred eighty (180) days after
the Effective Date and (C) keep such Form S-3
<PAGE>
13
Registration Statement effective and available for resales until the earlier of
(i) the date on which all of the Merger Shares registered thereunder have been
sold, (ii) the date on which all of the Merger Shares then held by Stockholders
could be sold pursuant to Rule 144(k) under the Securities Act (or any
comparable or successor provision) or (iii) the date that is the six month
anniversary of the date on which such Form S-3 Registration Statement was
declared effective by the SEC (the "Availability Termination Date"), provided,
however, that Parent may suspend the effectiveness of the Form S-3 Registration
Statement for a period of not more than ninety (90) days if, in Parent's
reasonable judgment, Parent would be required to disclose any material actions
taken or proposed to be taken by Parent, which disclosure would have a material
adverse effect on Parent or on such actions, or during any period during which
Parent is instructed, directed, ordered or otherwise requested by any
governmental agency or self-regulatory organization to stop or suspend such
trading or sales; provided that the six month period described in (c)(ii) above
shall be extended by the number of days such Form S-3 Registration Statement is
so suspended; and provided further that Parent agrees to use its commercially
reasonable efforts to have the SEC declare such Form S-3 Registration Statement
effective as soon as reasonably practicable after the conditions that gave rise
to the suspension of the effectiveness of such Form S-3 Registration Statement,
in the reasonable judgment of Parent, no longer exist. All expenses incurred in
connection with the filing of the Form S-3 Registration Statement, other than
brokers' commissions or underwriting discounts payable by the Stockholders but
including the reasonable fees and expenses of one counsel for the Stockholders,
shall be paid for by Parent.
(b) Piggy-back Registration. If, after the Effective Time, Parent
proposes to register any Parent Common Stock under the Securities Act for sale
to the public, whether for its own account or for the account of other security
holders or both (except pursuant to a registration statement on Form S-4 or S-8
(or any substitute form adopted by the SEC) or any other form that does not
permit the inclusion of shares by its security holders), Parent will give
written notice to the Stockholders of its intention to do so and, upon the
written request of any Stockholder given within twenty (20) days after receipt
of any such notice (which request shall specify the number of Merger Shares
intended to be sold or disposed of by such Stockholders and the nature of any
proposed sale or other disposition thereof), Parent will use its commercially
reasonable efforts to cause all Merger Shares that such Stockholders shall have
requested the registration of to be included in such notification or the
registration statement proposed to be filed by Parent; provided, however, that
nothing herein shall prevent Parent from, at any time, abandoning, delaying or
suspending the effectiveness of any such registration. If any such registration
shall be underwritten in whole or in part, Parent may require that the Merger
Shares requested for inclusion pursuant to this Section 3.08 to be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. The number of Merger Shares to be included
in such an underwriting may be reduced (pro rata among the requesting holders
(other than Parent and any other persons demanding registration pursuant to
currently existing rights who are entitled to be protected against any such
reduction) based upon the number of shares so requested to be registered) if and
to the extent that the managing underwriter shall be of the good faith opinion
that such inclusion would adversely effect the marketing of the securities to be
sold by Parent. All expenses of such offering, except the
<PAGE>
14
brokers' commissions or underwriting discounts payable by the Stockholders,
shall be borne by Parent.
(c) Indemnification. (i) In connection with any such registration
effected pursuant to Section 3.08(a) or 3.08(b) hereof, to the extent permitted
by law, Parent will, and hereby does, indemnify and hold harmless, each
Stockholder against any losses, claims, damages or liabilities to which such
Stockholder may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities are registered under the
Securities Act, and preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, and Parent will
reimburse each of the Stockholders for any legal or any other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, liability, action or proceeding; provided, that Parent shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to Parent
through an instrument duly executed by or on behalf of the Stockholders
specifically stating that it is for use in the preparation thereof; and provided
further, however, that Parent shall not be liable to any of the Stockholders, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such
Stockholder's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Merger Shares to such person if
such statement or omission was corrected in such final prospectus and copies of
such final prospectus were delivered to the Stockholders prior to the written
confirmation of the sale of Merger Shares to such person asserting an untrue
statement or alleged untrue statement or omission or alleged omission. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Stockholders and shall survive the transfer of such
securities by the Stockholders.
(ii) Parent may require, as a condition to including any Merger
Shares in any registration statement filed pursuant to this Section 3.08, that
Parent shall have received an undertaking satisfactory to it from the
Stockholders holding such Merger Shares, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in this Section 3.08) Parent,
each director of Parent, each officer of Parent and each other person, if any,
who controls Parent within the meaning of the Securities Act or the Exchange
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or
<PAGE>
15
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to Parent through an instrument duly executed by
the Stockholders specifically stating that it was for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of Parent or
any such director, officer or controlling person and shall survive the transfer
of such securities by the Stockholders.
(c) Contribution. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by
subdivision (i) above is not permitted by applicable law or provides a lesser
sum to the indemnified party than is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations, then in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party as well as
any other equitable considerations. Notwithstanding the foregoing, neither party
shall be required to contribute any amount in excess of the amount the
indemnifying party would have been required to pay to an indemnified party if
the indemnity under this Section 3.08 was available. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 3.08 Taking of Necessary Action; Further Action
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company, the officers
and directors of the Company are fully authorized in the name of their
corporation or otherwise to take, and will use good faith efforts to take, all
such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to Parent, subject to the
exceptions specifically disclosed in writing in the Company Disclosure Schedule,
all such exceptions to be referenced to a specific representation set forth in
this Article IV, that:
<PAGE>
16
SECTION 4.01 Organization and Qualification; Subsidiaries
(a) Each of the Company and its Subsidiaries has been duly organized
and is validly existing and in good standing under the laws of its jurisdiction
of incorporation and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted. Except as set forth in Section 4.01(a) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b) Except as set forth in Section 4.01(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries do not own, directly or indirectly,
an equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation, partnership
or joint venture arrangement or other business entity. The Company is the owner
of all outstanding shares of capital stock of each of the entities set forth in
Section 4.01(b) of the Company Disclosure Schedule and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such Subsidiary are owned by the Company free
and clear of all liens, charges, claims or encumbrances or rights of others.
There are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments, arrangements, or
agreements of any character relating to the issued or unissued capital stock or
other securities of any such Subsidiary, or otherwise obligating the Company or
any such Subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities.
SECTION 4.02 Certificate of Incorporation and Bylaws
True, complete and correct copies of the Company's Certificate of
Incorporation and Bylaws and of the equivalent organizational documents of the
Company's Subsidiaries, each as amended, are included in Section 4.02 of the
Company Disclosure Schedule. Such Certificate of Incorporation, Bylaws and
organizational documents are in full force and effect. Neither the Company nor
any of its Subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation, Bylaws or equivalent organizational documents.
SECTION 4.03 Capitalization
The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 10,000,000 shares of Company
Preferred Stock. As of the date hereof, 4,642,085 shares of Company Common
Stock, and 4,865,384 shares of Company Preferred Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid
and nonassessable. Except for the Company Common Stock and the Preferred
Stock, there are no shares of capital stock or other equity securities of
<PAGE>
17
the Company outstanding. Except as set forth in Section 4.03 of the
Company Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible
securities or other commitments, arrangements or agreements of any
character relating to the issued or unissued capital stock or other
securities of the Company, or otherwise obligating the Company to issue,
transfer or sell any such securities. Except as set forth in Section 4.03
of the Company Disclosure Schedule, there are no acceleration rights
pertaining to any shares of Company Common Stock or Company Preferred
Stock or any options to purchase any such shares of capital stock. Except
as set forth in Section 4.03 of the Company Disclosure Schedule, there are
no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or Company
Preferred Stock. There are no outstanding contractual obligations of the
Company to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other person.
SECTION 4.04 Authority Relative to This Agreement
The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Escrow Agreement (as defined in
Section 8.01(c)), to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Escrow Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the Escrow Agreement or to consummate the
transactions contemplated hereby or thereby (other than the consent of
Stockholders as set forth in Section 7.06 and the filing of the Certificate of
Merger as required by the Delaware Code). This Agreement has been, and the
Escrow Agreement will be, duly and validly executed and delivered by the
Company. This Agreement constitutes, and the Escrow Agreement, when executed and
delivered as contemplated by this Agreement, will constitute, assuming the due
authorization, execution and delivery by each of the other parties hereto and
thereto, legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
SECTION 4.05 No Conflicts; Required Filings and Consents
(a) The execution and delivery of this Agreement and the Escrow
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and thereunder and the consummation of the Merger will
not, (i) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws of the Company or any of the equivalent organizational
documents of any of its Subsidiaries, (ii) conflict with or violate any Law
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected or (iii)
except as set forth in Section 4.05(a)(iii) of the Company Disclosure Schedule,
result in any breach of or constitute a default
<PAGE>
18
(or an event which with the giving of notice or lapse of time or both could
reasonably be expected to become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any material property or asset of the
Company or any of its Subsidiaries or any Stockholder pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
(b) Except as set forth in Section 4.05(b) of the Company Disclosure
Schedule, no filing or registration with, or notification to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated by this Agreement except, (i)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (ii) such filings and consents as may be required under any
Environmental Law pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement, (iii) such filings, registrations, notifications, permits,
authorizations, consents or approvals that result from the specific legal or
regulatory status of Parent or as a result of any other facts that specifically
relate to the business or activities in which Parent is engaged other than the
business of the Company, (iv) such filings as may be required under the HSR Act,
(v) such filings as may be required under the Blue Sky Laws and (vi) such other
filings, registrations, notices, permits, authorizations, consents and approvals
that if not obtained, made or given would not, individually or in the aggregate,
have a Company Material Adverse Effect or impair the Company's ability to
consummate the transactions contemplated hereby.
(c) Except as set forth in Section 4.05(c) of the Company Disclosure
Schedule, no consent of any third party is required by reason of the
transactions contemplated by this Agreement.
SECTION 4.06 Permits; Compliance with Laws
Each of the Company and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Governmental Entity necessary for each of the Company and its Subsidiaries
to own, lease and operate its properties or to offer or perform its services or
to develop, produce, store, distribute and market its products or otherwise to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), except such Permits the absence of which would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect, and, as of the date of this Agreement, none of the Company Permits has
been suspended or canceled nor is any such suspension or cancellation pending
or, to the knowledge of the Company, threatened. All of the Company Permits are
set forth in Section 4.06 of the Company Disclosure Schedule. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, (i) any Law applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected or (ii) any Company Permits, except for such defaults or
violations which
<PAGE>
19
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Section 4.06 of the Company Disclosure Schedule
sets forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries that could reasonably
be expected to result in the suspension or cancellation of any other Company
Permit. Since its inception, neither the Company nor any of its Subsidiaries has
received from any Governmental Entity any written notification with respect to
possible conflicts, defaults or violations of Laws. The Merger will not result
in the suspension or cancellation of any Company Permit.
SECTION 4.07 Financial Statements
(a) Section 4.07 of the Company Disclosure Schedule includes copies
of (i) the audited balance sheets of the Company at December 31, 1999, together
with the related statements of operations, stockholders' equity and cash flows
for the year ended December 31, 1999 and the notes thereto, and (ii) the
unaudited balance sheet of the Company at May 31, 2000, together with the
related statements of operations, stockholders' equity and cash flows for the
five-month period ended May 31, 2000 (collectively, the "Company Financial
Statements"). The Company Financial Statements: (i) were prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods covered thereby (except, in the case
of the unaudited financial statements, for the absence of footnotes); (ii)
present fairly the financial position, results of operations and cash flows of
the Company and its Subsidiaries as of such dates and for the periods then
ended; and (iii) are correct and complete in all material respects, and can be
reconciled with the books of account and records of the Company. The Company
maintains and will continue to maintain an adequate system of internal controls
to enable the Company's independent auditors to certify that the audited
financial statements referred to in clause (i) above have been prepared in
accordance with GAAP.
(b) Except as and to the extent set forth or reserved against on the
balance sheets of the Company as reported in the Company Financial Statements,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet or in notes thereto
prepared in accordance with GAAP, except for liabilities or obligations not
exceeding, either individually or in a series of related transactions, $25,000
incurred in the ordinary course of business consistent with past practice since
May 31, 2000.
SECTION 4.08 Absence of Certain Changes or Events
Except as set forth in Section 4.08 of the Company Disclosure
Schedule or as expressly permitted pursuant to this Agreement, since April 30,
2000, the Company has conducted its business only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Company Material Adverse Effect, (ii) any event that could reasonably be
expected to prevent or materially delay the performance of the Company's
obligations pursuant to this Agreement and the consummation of the Merger by the
Company, (iii) any change by the Company in its accounting methods, principles
or practices, (iv) any
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20
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of Company Common Stock or Company Preferred Stock or any
redemption, purchase or other acquisition of any of the Company's securities,
(v) any increase in the compensation payable or to become payable to its
directors, officers, consultants or employees, any grant of options to, any
grant of any rights to severance or termination pay to, or any employment or
severance agreement entered into which provides benefits upon a change in
control of the Company that would be triggered by the Merger with, any director,
officer, consultant or other employee of the Company or any of its Subsidiaries
who is not currently entitled to such benefits from the Merger, any
establishment, adoption, entering into or amendment of any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer, consultant or employee of
the Company or any of its Subsidiaries, except to the extent required by
applicable Law or the terms of a collective bargaining agreement, or any
entering into or amendment of any contract, agreement, commitment or arrangement
between the Company or any of its Subsidiaries and any of their respective
directors, officers, consultants or employees, (vi) any issuance or sale of any
stock, notes, bonds or other securities, or entering into any agreement with
respect thereto, (vii) any amendment to the Company's Certificate of
Incorporation or Bylaws or any equivalent organizational document of any of the
Company's Subsidiaries, (viii) other than in the ordinary course of business
consistent with past practice, any (x) purchase, sale, assignment or transfer of
any material assets, (y) mortgage, pledge or existence of any lien, encumbrance
or charge on any material assets or properties, tangible or intangible, except
for liens for Taxes not yet delinquent and such other liens, encumbrances or
charges which do not, individually or in the aggregate, have a Company Material
Adverse Effect, or (z) waiver of any rights of material value or cancellation or
any material debts or claims, (ix) any incurrence of any material liability
(absolute or contingent), except for current liabilities and obligations
incurred in the ordinary course of business consistent with past practice, (x)
any incurrence of any damage, destruction or similar loss, whether or not
covered by insurance, materially affecting the business or properties of the
Company or any of its Subsidiaries, (xi) any entering into any transaction of a
material nature other than in the ordinary course of business, consistent with
past practice, or (xii) any negotiation or agreement by the Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (i)
through (xi).
SECTION 4.09 Employee Benefit Plans; Labor Matters
(a) Section 4.09 of the Company Disclosure Schedule lists each
employee benefit fund, plan, program, arrangement and contract (including,
without limitation, any "pension" plan, fund or program, as defined in Section
3(2) of ERISA, and any "employee benefit plan", as defined in Section 3(3) of
ERISA and any plan, program, arrangement or contract providing for severance;
medical, dental or vision benefits; life insurance or death benefits; disability
benefits, sick pay or other wage replacement; vacation, holiday or sabbatical;
pension or profit-sharing benefits; stock options or other equity compensation;
bonus or incentive pay or other material fringe benefits), whether written or
not maintained, sponsored or contributed to or required to be contributed to by
the Company or any of its Subsidiaries (the "Company Benefit Plans"). With
respect to each Company Benefit Plan, the Company has
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21
delivered or made available to Parent a true, complete and correct copy of (i)
such Company Benefit Plan (or, if not written, a written summary of its material
terms) and the most recent summary plan description, if any, related to such
Company Benefit Plan, (ii) each trust agreement or other funding arrangement
relating to such Company Benefit Plan, (iii) the most recent annual report (Form
5500) filed with the IRS with respect to such Company Benefit Plan (and, if the
most recent annual report is a Form 5500R, the most recent Form 5500C filed with
respect to such Company Benefit Plan), (iv) the most recent actuarial report or
financial statement relating to such Company Benefit Plan and (v) the most
recent determination letter, if any, issued by the IRS with respect to such
Company Benefit Plan and any pending request for such a determination letter.
Neither the Company, nor to the knowledge of the Company, any other person or
entity, has any express or implied commitment, whether legally enforceable or
not, to modify, change or terminate any Company Benefit Plan, other than with
respect to a modification, change or termination required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws, including ERISA
and the Code, and contributions required to be made under the terms of any of
the Company Benefit Plans as of the date of this Agreement have been timely made
or, if not yet due, have been properly reflected on the most recent consolidated
balance sheet prior to the date of this Agreement. With respect to the Company
Benefit Plans, no event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any of its Subsidiaries could be subject to any material liability (other
than for routine benefit liabilities) under the terms of, or with respect to,
such Company Benefit Plans, ERISA, the Code or any other applicable Law.
(c) The Company hereby represents that: (i) each Company Benefit
Plan which is intended to qualify under Section 401(a), Section 401(k), Section
401(m) or Section 4975(e)(6) of the Code has received a favorable determination
letter from the IRS as to its qualified status, and each trust established in
connection with any Company Benefit Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and to the knowledge of
the Company, no fact or event has occurred that could adversely affect the
qualified status of any such Company Benefit Plan or the exempt status of any
such trust; (ii) to the knowledge of the Company, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code and other than a transaction that is exempt under a statutory or
administrative exemption) with respect to any Company Benefit Plan that could
result in liability to the Company or any of its Subsidiaries and (iii) each
Company Benefit Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability (other than
(A) liability for ordinary administrative expenses typically incurred in a
termination event or (B) if the Company Benefit Plan is a pension benefit plan
subject to Part 2 of Title I of ERISA, liability for the accrued benefits as of
the date of such termination (if and to the extent required by ERISA) to the
extent that either there are sufficient assets set aside in a trust or insurance
contract to satisfy such liability or such liability is reflected on the most
recent balance sheet included in the Company Financial Statements prior to the
date of this Agreement). No suit, administrative proceeding, action or other
litigation has been brought, or to
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22
the knowledge of the Company, is threatened, against or with respect to any such
Company Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor (other than routine benefits claims).
(d) No Company Benefit Plan is a multiemployer pension plan (as
defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of
ERISA and neither the Company nor any of its Subsidiaries has sponsored or
contributed to or been required to contribute to a multiemployer pension plan or
other pension plan subject to Title IV of ERISA. No material liability under
Title IV of ERISA has been incurred by the Company or any of its Subsidiaries
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or any of its Subsidiaries of incurring or being
subject (whether primarily, jointly or secondarily) to a material liability
thereunder. None of the assets of the Company or any of its Subsidiaries is or
may reasonably be expected to become, the subject of any lien arising under
ERISA or Section 412(n) of the Code.
(e) With respect to each Company Benefit Plan required to be set
forth in the Company Disclosure Schedule that is subject to Title IV or Part 3
of Title I of ERISA or Section 412 of the Code, (i) no reportable event (within
the meaning of Section 4043 of ERISA, other than an event that is not required
to be reported before or within 30 days of such event) has occurred or is
expected to occur, (ii) there was not an accumulated funding deficiency (within
the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the most recently ended plan year of such Company Benefit Plan;
and (iii) there is no "unfunded benefit liability" (within the meaning of
Section 4001(a)(18) of ERISA).
(f) The Company has delivered to Parent true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of the Company and its Subsidiaries, (ii) all severance plans,
agreements, programs and policies of the Company and its Subsidiaries with or
relating to their respective employees, directors or consultants, (iii) all
plans, programs, agreements and other arrangements of the Company and its
Subsidiaries with or relating to their respective employees, directors or
consultants which contain "change of control" provisions, and (iv) a list
setting forth the names and annual salaries of all current employees of the
Company and its Subsidiaries. No payment or benefit which may be required to be
made by the Company or any of its Subsidiaries or which otherwise may be
required to be made under the terms of any Company Benefit Plan or other
arrangement will constitute a parachute payment under Section 280(G)(1) of the
Code, and the consummation of the transactions contemplated by this Agreement
will not, alone or in conjunction with any other possible event (including
termination of employment), (i) entitle any current or former employee or other
service provider of the Company or any of its Subsidiaries to severance benefits
or any other payment, compensation or benefit (including forgiveness of
indebtedness), except as expressly provided by this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation or benefit due any such employee or service provider.
(g) Neither the Company nor any of its Subsidiaries is a party to,
and none of them has any obligations under or with respect to, any collective
bargaining or other labor union contract applicable to persons employed by the
Company or any of its Subsidiaries and no
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23
collective bargaining agreement is being negotiated by the Company or any of its
Subsidiaries or any person or entity that may obligate the Company or any of its
Subsidiaries thereunder. As of the date of this Agreement, there is no labor
dispute, strike, union organizing activity or work stoppage against the Company
or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened which may interfere with the business activities of the Company or
any of its Subsidiaries. As of the date of this Agreement, to the knowledge of
the Company, neither the Company nor any of its Subsidiaries nor any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the businesses of the Company or any of its
Subsidiaries, and there is no charge or complaint filed against the Company or
any of its Subsidiaries by or with the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing.
(h) Except as required by Law, no Company Benefit Plan provides any
of the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. To the knowledge of the Company, each of
the Company and its Subsidiaries is in compliance with (i) the requirements of
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations (including proposed regulations) thereunder and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended, and the regulations (including the proposed
regulations) thereunder.
SECTION 4.10 Certain Tax Matters
Neither the Company nor any of its Affiliates has taken or agreed to
take any action (other than actions contemplated by this Agreement) that could
be expected to prevent the Merger from constituting a "reorganization" under
Section 368(a) of the Code. There is no agreement or plan to which the Company
or any of its Affiliates is a party or other circumstances relating to the
Company or any of its Affiliates that could reasonably be expected to prevent
the Merger from so qualifying as a reorganization under Section 368(a) of the
Code.
SECTION 4.11 Contracts
Except for the contracts and agreements described in Section 4.11 of
the Company Disclosure Schedule (collectively, the "Material Contracts"),
neither the Company nor any of its Subsidiaries is a party to or bound by any
material contract or agreement, including without limitation:
(a) any sales, advertising or agency contract in excess of $25,000
over the life of the contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$25,000 over the life of the contract;
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24
(c) any contract involving future payments of $25,000 or more
(excluding non-exclusive recruitment agreements) that expires less than one year
after the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement
or other contract for the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of the type required to
be capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of $25,000 in
the aggregate;
(f) any contract limiting the freedom of the Company or any of its
Subsidiaries to engage in any line of business or to compete with any other
corporation, partnership, limited liability company, trust, individual or other
entity, or any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Company or any of its
Subsidiaries is a lessor of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property, pursuant to which payments in
excess of $25,000 remain outstanding;
(h) any contract with an Affiliate;
(i) any agreement of guarantee, support, indemnification (other than
as included in sales contracts or non-disclosure agreements in the ordinary
course of business), assumption or endorsement of, or any similar commitment
with respect to, the obligations, liabilities (whether accrued, absolute,
contingent or otherwise) or indebtedness of any other person;
(j) any distribution contract;
(k) any employment or severance contract, arrangement or policy
(including without limitation any collective bargaining contract or union
agreement); or
(l) any stockholders agreement, voting agreement, registration
rights agreement or other agreement to which the Company or any of its
Subsidiaries or any Stockholder is a party (each, a "Stockholder Party
Agreement").
Each of the Company and its Subsidiaries has performed all of the
obligations required to be performed by it and is entitled to all benefits
under, and is not alleged to be in default in respect of, any Material Contract.
Each of the Material Contracts is valid and binding and in full force and effect
with respect to the Company and its Subsidiaries and, to the knowledge of the
Company, the other parties thereto, and there exists no default or event of
default or event, occurrence, condition or act, with respect to the Company or
any of its Subsidiaries, or to the knowledge of the Company, with respect to the
other contracting party, which, with the giving of notice, the lapse of the time
or the happening of any other event or
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25
conditions, would become a default or event of default under any Material
Contract. True, correct and complete copies of all Material Contracts have been
delivered to Parent.
SECTION 4.12 Litigation
Except as set forth in Section 4.12 of the Company Disclosure
Schedule, there is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their respective properties or any
of their respective officers or directors (in their capacities as such). Neither
the Company nor any of its Subsidiaries nor any of the Stockholders is aware of
any facts or circumstances which could reasonably be expected to result in the
denial of insurance coverage under policies issued to the Company or any of its
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations. There is no judgment, decree or order against the Company or any
of its Subsidiaries or, to the knowledge of the Company, any of their respective
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Company Material
Adverse Effect. Section 4.12 of the Company Disclosure Schedule also lists all
litigation that the Company or any of its Subsidiaries has pending against other
parties.
SECTION 4.13 Environmental Matters
Each of the Company and its Subsidiaries is, to the knowledge of the
Company, in compliance with all applicable Environmental Laws and Company
Permits required by Environmental Laws. All past noncompliance, if any, of the
Company and its Subsidiaries with Environmental Laws or Environmental Permits
has been resolved without any pending, ongoing or future obligation, cost or
liability. Neither the Company nor any of its Subsidiaries has released a
Hazardous Material at, or transported a Hazardous Material to or from, any real
property currently or formerly owned, leased or occupied by the Company or any
of its Subsidiaries, in violation of any Environmental Law.
SECTION 4.14 Intellectual Property
(a) Section 4.14(a) of the Company Disclosure Schedule contains a
true, accurate and complete list of the Company's and its Subsidiaries' United
States, foreign or international patents, patent applications, invention
registrations, and invention disclosures (collectively, "Patents"); trademarks
and service marks (whether registered or unregistered), trademark and service
mark applications, trade names, Internet domain names, and Internet domain name
registrations and applications therefor (collectively, "Trademarks"); registered
copyrights (collectively, "Copyrights"); and any other filings or registrations
made, or other formal actions taken, pursuant to Federal, state, local, foreign
or international laws by the Company or any of its Subsidiaries to protect their
respective interests in the Company Intellectual Property. Section 4.14(a) of
the Company Disclosure Schedule includes details of any filings or payments
which must be made, or other actions which must be taken, in respect of the
Patents, Trademarks, Copyrights and other filings, registrations or actions
included in
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26
Company Intellectual Property within twelve (12) months of the Effective Time in
order to protect or preserve existing rights in the same.
(b) Except as provided in Section 4.14(b)(1) of the Company
Disclosure Schedule, each component of the Company Intellectual Property
(including without limitation the items set forth in Section 4.14(a) of the
Company Disclosure Schedule) is: (i) owned solely and exclusively by the Company
or its Subsidiaries, free and clear of any and all mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or charges of any
kind; or (ii) rightfully used or otherwise enjoyed by the Company or its
Subsidiaries pursuant to a valid and enforceable license agreement (a
"License-In Agreement"). A true, accurate and complete list of all License-In
Agreements is set forth in Section 4.14(b)(2) of the Company Disclosure
Schedule. Without limiting the foregoing, the Company and its Subsidiaries have
all rights in the Company Intellectual Property necessary to carry out the
activities currently conducted, or currently proposed or planned to be
conducted, by the Company or its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries is in breach,
violation or default of any License-In Agreement or other license, sublicense,
instrument or agreement relating the Company Intellectual Property to which the
Company or any of its Subsidiaries is a party or otherwise bound, nor will
execution or delivery of this Agreement, or performance of the Company's or its
Subsidiaries' obligations hereunder, result in such a default nor cause the
diminution, termination or forfeiture of any the Company Intellectual Property.
(d) Neither the manufacture, use, sale, reproduction, modification,
adaptation, creation of derivative works, translation, distribution,
transmission, display, performance, or other exercise of rights under, nor the
licensure of, any of the Company Intellectual Property, nor the conduct of the
Company's or its Subsidiaries' businesses in the manner currently conducted or
currently proposed or planned to be conducted, breaches or otherwise violates
any License-In Agreement or other license or other agreement to which the
Company or a Subsidiary is a party, or conflicts with or infringes on any
intellectual property or other right of any person anywhere in the world. No
allegation of such a violation or infringement has been made prior to the date
of this Agreement, and there is no colorable basis for any such claim. To the
knowledge of the Company and its Subsidiaries, no Person has infringed,
misappropriated, or misused any of the Company Intellectual Property and, within
the past three (3) years, neither the Company nor any of its Subsidiaries has
asserted any claim of infringement, misappropriation, or misuse against any
Person.
(e) Section 4.14(e) of the Company Disclosure Schedule contains a
true, accurate and complete list of each agreement under which the Company or
its Subsidiaries grants rights or licenses under any of the Company Intellectual
Property (each a "License-Out Agreement").
(f) Neither the Company nor any of its Subsidiaries has entered into
or is otherwise bound by any consent, forbearance to sue, settlement agreement
or other agreement which limits the Company's or its Subsidiaries' rights to
use, reproduce, display, perform,
<PAGE>
27
modify, adapt, distribute, license, sell or otherwise exploit any of the Company
Intellectual Property.
(g) All of the Company's Patents, Trademarks, Copyrights and other
registrations and applications included in the Company Intellectual Property are
(i) standing in the name of the Company or one of its Subsidiaries, which
ownership has been properly recorded where and as required to secure or ensure
full rights to the same, (ii) valid, subsisting and in good standing without any
fees or filings due with respect thereto, and (iii) not subject to any pending
or actual or threatened interference, opposition, cancellation or other
proceeding before any court or registration authority. To the Company's or its
Subsidiaries' knowledge after due inquiry, no facts or circumstances exist which
could render any of the Patents, Trademarks, Copyrights, registered or
applied-for intellectual property, trade secrets, and any other material
intellectual property included in the Company Intellectual Property invalid,
unenforceable, unprotectable or otherwise ineffectual.
(h) The Company and its Subsidiaries have taken all reasonably
necessary steps to maintain and protect the Company Intellectual Property. In
particular, and without limiting the foregoing, all employees, agents,
consultants, contractors and other Persons who have contributed to or
participated in the creation, conception or development of the Company
Intellectual Property (the "Company Intellectual Property Development
Personnel") have executed agreements obligating them to maintain the Company
Intellectual Property in confidence. Except as set forth in Section 4.14(h)(1)
of the Company Disclosure Schedule, each of the Company Intellectual Property
Development Personnel have executed an agreement, in a form substantially as
provided in Section 4.14(h)(2) of the Company Disclosure Schedule in all
material respects, assigning to the Company or a Subsidiary any rights or claims
they may have to any Company Intellectual Property.
(i) Section 4.14(i) of the Company Disclosure Schedule contains a
true and complete list of all material computer programs, software programs and
applications (including both source and object code), modules, models, tools,
algorithms, databases and related materials currently used, or currently
proposed or planned to be used, in conducting the business of the Company and
its Subsidiaries (the "Company Software Programs"). Except with respect the
Company Software Programs that are licensed to the Company, as set forth
separately in Section 4.14(i) of the Company Disclosure Schedule, the Company or
one of its Subsidiaries is the sole and exclusive owner of the Company Software,
free and clear of all mortgages, pledges, liens, security interests, conditional
sales agreements, encumbrances or charges of any kind. Without limiting the
foregoing, the Company and its Subsidiaries have all rights in the Company
Software Programs necessary to carry out the activities currently conducted, or
currently proposed or planned to be conducted, by the Company or its
Subsidiaries.
(j) All source code and system documentation relating to the Company
Software Programs have been maintained in strict confidence and (i) have been
disclosed by the Company only to those of their respective employees who have a
"need to know" the contents thereof in connection with the performance of their
duties to the Company or a Subsidiary and who have executed a nondisclosure
agreement with the Company or Subsidiary substantially in
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28
the form provided in Section 4.14(j)(1) of the Company Disclosure Schedule, and
(ii) have been disclosed only to those third parties who have executed a
nondisclosure agreement with the Company or a Subsidiary substantially in the
form provided in Section 4.14(j)(2) of the Company Disclosure Schedule.
(k) The Company Software Programs are designed to be "Year 2000
Compliant", meaning that each Company Software Program is designed to:
(i) correctly and unambiguously handle and process date
information before, during and after January 1, 2000. This includes,
without limitation, the ability to correctly and unambiguously accept date
input, provide date output, store and retrieve dates, and perform
calculations of dates or portions of dates;
(ii) correctly process functions that are programmed to
commence and/or end on a particular date, including, without limitation,
month-end, year-end, and leap year dates and any combination thereof,
irrespective of a change in the century identifier;
(iii) function accurately and without interruption before,
during and after January 1, 2000 without any change in operations and/or
parameters associated with the advent of the new century; and
(iv) respond to two-digit date input in a way that resolves
the ambiguity as to the century in a disclosed, defined and predetermined
manner; and to store and provide the output of date information in a way
that is unambiguous as to the century.
(l) Except as set forth in Section 4.14(l) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries owes or will owe any
royalties or fees or other payments to third parties in respect of any Company
Intellectual Property or any use thereof. All royalties, fees or other payments
that have accrued prior to the Effective Time will have been timely paid by the
Company or a Subsidiary prior to the Effective Time.
(m) Except with respect to any third party-produced libraries,
routines and compiler-produced code included in the Company Software Programs
("Third Party Code") , the Company Software Programs do not contain any,
program, routine, device, or other undisclosed feature (other than license keys,
as that term is normally used in the software industry) that is designed to
delete, disable, deactivate, interfere with or otherwise harm the Company
Software Programs or any system in which the Company Software Programs may
operate, including without limitation a bomb, virus, software lock, drop-dead
device, malicious logic, worm, trojan horse, robot, clock, timer, back door or
trap door (any such program, routine, device or other such feature which is
herein referred to as a "Virus"). With respect to Third Party Code, the Company
and its Subsidiaries have a practice of taking reasonable measures, and have
taken all reasonable measures, to identify and eliminate any Virus present in
any Third Party Code before operating such code with other Company Software
Programs or on Company networks. As used in this section, the term "Third Party
Code" does not include any library, routine or compiler-
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29
produced code which is custom produced, or the product of code which has been
custom produced, by a third party for the Company or one of its Subsidiaries.
SECTION 4.15 Taxes
(a) The Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member, have (i) properly completed and
timely filed all Tax Returns required to be filed by them and all such Tax
Returns are true, correct and complete in all material respects, and (ii) duly
paid in full or made adequate accruals in accordance with generally accepted
accounting principles in the Company Financial Statements for the payment of all
Taxes that are due and payable for all periods ending on or before the date
hereof. Except as set forth in Section 4.15(a) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any material
liability for unpaid Taxes accruing after the date of the Company Financial
Statements except for Taxes unpaid but incurred in the ordinary course of
business consistent with past practice.
(b) There is (i) no material claim for Taxes that is a lien against
the property or assets of the Company or any of its Subsidiaries or is being
asserted against the Company or any of its Subsidiaries other than liens for
Taxes not yet due and payable, (ii) no audit, administrative proceeding or court
proceeding with respect to any Taxes or Tax Returns of the Company or any of its
Subsidiaries is being conducted or is pending and no Governmental Entity
responsible for the imposition of any Tax (a "Tax Authority") has asserted
against the Company or any of its Subsidiaries any deficiency or claim for
Taxes; (iii) no extension of the statute of limitations on the assessment of any
Taxes granted by the Company or any of its Subsidiaries and currently in effect,
and (iv) no agreement, contract or arrangement to which the Company or any of
its Subsidiaries is a party that may result in the payment of any amount that
would not be deductible by reason of Sections 162(m), 280G or 404 of the Code.
(c) No claim or notice has ever been submitted by a Tax Authority in
a jurisdiction where the Company or any of its Subsidiaries has not filed Tax
Returns that any of them is or may be subject to taxation by that jurisdiction.
(d) Except as set forth in Section 4.15(d) of the Company Disclosure
Schedule, there has been no change in ownership of the Company or any of its
Subsidiaries that has caused the utilization of any losses of the Company or any
of its Subsidiaries to be limited pursuant to Section 382 of the Code, and any
loss carryovers reflected on the Company Financial Statements are properly
computed and reflected.
(e) Neither the Company nor any of its Subsidiaries has been or will
be required to include any material adjustment in Taxable income for any Tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
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30
(f) Neither the Company nor any of its Subsidiaries has filed or
will file any consent to have the provisions of paragraph 341(f)(2) of the Code
(or comparable provisions of any state Tax laws) apply to the Company or any of
its Subsidiaries.
(g) Except as set forth in Section 4.15 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any Tax
sharing or Tax allocation agreement nor does the Company or any of its
Subsidiaries have any liability or potential liability to another party under
any such agreement, and has not incurred any liability for Taxes of any Person
under Treas. Reg. Section 1.1502.6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
(h) The Company and its Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
(i) No power of attorney has been granted by the Company or any of
its Subsidiaries with respect to any matters relating to Taxes that is currently
in effect.
(j) Neither the Company nor any of its Subsidiaries has settled any
claim, audit or administrative or court proceeding with respect to Taxes.
(k) The Company is a cash basis taxpayer.
(l) Neither the Company nor any of its Subsidiaries has filed any
disclosures under Section 6662 of the Code or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to any
Tax reporting position taken on any Tax Return.
(m) Neither the Company nor any of its Subsidiaries has ever been a
member of a consolidated, combined or unitary group of which the Company was not
the ultimate parent corporation.
(n) Each of the Company and its Subsidiaries has in its possession
receipts for any Taxes paid to foreign Tax authorities. Neither the Company nor
any of its Subsidiaries has ever been a "personal holding company" within the
meaning of Section 542 of the Code or a "United States real property holding
corporation" within the meaning of Section 897 of the Code.
SECTION 4.16 Insurance
Each of the Company and its Subsidiaries is presently insured, and
since inception has been insured, against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. The policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of the Company and its
Subsidiaries provide adequate coverage against loss. There is no material claim
pending under any of such policies as to which coverage has been questioned,
denied or disputed by the underwriters of such policies. The Company has
heretofore furnished to Parent a complete and
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31
correct list as of the date hereof of all insurance policies maintained by the
Company and its Subsidiaries, and has made available to Parent complete and
correct copies of all such policies, together with all riders and amendments
thereto. All such policies are in full force and effect and all premiums due
thereon have been paid to the date hereof. Each of the Company and its
Subsidiaries has complied in all material respects with the terms of such
policies. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
SECTION 4.17 Properties; Bank Accounts
(a) Each of the Company and its Subsidiaries has good and marketable
title, free and clear of all material mortgages, liens, pledges, charges or
other encumbrances to all its properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company Financial
Statements for the fiscal year ended December 31, 1999, as being owned by the
Company or such Subsidiary as of the date thereof, other than (i) any properties
or assets that have been sold or otherwise disposed of in the ordinary course of
business since the date of such financial statements, (ii) liens disclosed in
the notes to such financial statements and (iii) liens arising in the ordinary
course of business after the date of such financial statements. All properties
used in the Company's and its Subsidiaries' operations are reflected in the
balance sheets included in the Company Financial Statements to the extent GAAP
require the same to be reflected. All buildings, and all fixtures, equipment and
other property and assets that are material to its business on a consolidated
basis, held under leases or sub-leases by the Company or any of its Subsidiaries
are held under valid instruments enforceable in accordance with their respective
terms, subject to applicable laws of bankruptcy, insolvency or similar laws
relating to creditors' rights generally and to general principles of equity
(whether applied in a proceeding in law or equity). Substantially all of the
Company's and its Subsidiaries' equipment in regular use has been reasonably
maintained and is in serviceable condition, reasonable wear and tear excepted.
Each of the Company and its Subsidiaries owns or has the valid and subsisting
right to use all assets and properties necessary or advisable to operate their
respective business in the manner presently conducted and as proposed to be
conducted in the financial projections provided by the Company to Parent.
(b) Section 4.17 of the Company Disclosure Schedule sets forth the
names and addresses of all banks and other institutions at which the Company or
any of its Subsidiaries has accounts, deposits or the like, and the names of all
persons authorized to draw on or give instructions with respect thereto or
holding a power-of-attorney on behalf of the Company or any of its Subsidiaries.
Any cash held in such accounts is not subject to any restrictions or limitations
as to withdrawal, other than limits on the authority of the authorized persons.
SECTION 4.18 Affiliates
Section 4.18 of the Company Disclosure Schedule sets forth the names
and addresses of each person who is, in the Company's reasonable judgment, an
affiliate (as such term is used in Rule 145 under the Securities Act or under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment) of the Company or any of its
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32
Subsidiaries. Neither the Company nor any of its Subsidiaries is indebted to,
nor does it owe any contractual commitment or arrangement to, with or for the
benefit of, any director, officer, employee, affiliate or agent of the Company
or any of its Subsidiaries (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses). No current or, to the
knowledge of the Company, former, director, officer, employee, affiliate or
agent of the Company or any of its Subsidiaries is presently or at the Effective
Time shall be, or, in the last three years has been, the direct or indirect
owner of an interest in any corporation, firm, association, or business
organization which is a present competitor, supplier or customer of the Company
or any of their respective Subsidiaries, except for ownership of securities in
publicly traded companies in a capacity other than as an Affiliate. Except for
normal salaries and bonuses and reimbursement of ordinary expenses, since April
30, 2000, neither the Company nor any of its Subsidiaries has made any payments,
loans or advances of any kind, or paid any dividends or distributions of any
kind, to or for the benefit of the Stockholders, or any of their respective
affiliates, associates or family members.
SECTION 4.19 Brokers
(a) Other than Bear Stearns & Co. Inc. (the "Company Financial
Advisor"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries.
(b) Section 4.19 of the Company Disclosure Schedule sets forth true,
complete and correct copies of all agreements between the Company and the
Company Financial Advisor. Except as set forth in Section 4.19 of the Company
Disclosure Schedule, there are no other agreements between the Company and the
Company Financial Advisor.
SECTION 4.20 Certain Business Practices
Neither the Company nor any of its Subsidiaries nor any of their
respective directors, officers, agents or employees (in their capacities as
such) has (i) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment.
SECTION 4.21 Section 203 of the Delaware Code Not Applicable
The Board of Directors of the Company has approved this Agreement
and the transactions contemplated hereby, and such approval is sufficient to
render inapplicable to the this Agreement, the Merger and the transactions
contemplated by this Agreement the provisions of Section 203 of the Delaware
Code. No other state takeover statute or similar statute or regulation applies
or purports to apply to the Merger, this Agreement or the transactions
contemplated by this Agreement.
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33
SECTION 4.22 Business Activity Restriction
There is no non-competition or other similar agreement, commitment,
judgment, injunction, order or decree to which the Company or any of its
Subsidiaries is a party or subject to that has or could reasonably be expected
to have the effect of prohibiting or impairing the conduct of business by the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has entered into any agreement under which the Company or any of
its Subsidiaries is restricted from selling, licensing or otherwise distributing
any of its technology or products to, or providing services to, customers or
potential customers or any class of customers, in any geographic area, during
any period of time or in any segment of the market or line of business.
SECTION 4.23 Customers and Suppliers
Except as set forth in Section 4.23 of the Company Disclosure
Schedule, no customer which individually accounted for more than 3% of the
Company's gross revenues during the 12-month period preceding the date hereof
nor customers which in the aggregate accounted for more than 15% during such
period of such revenues has or have canceled or otherwise terminated, or made
any written threat to the Company to cancel or otherwise terminate or decrease
its or their relationship with the Company, or has or have decreased materially
its or their relationship with the Company or its or their usage of the services
or products of the Company, as the case may be.
SECTION 4.24 Employee Matters
Each of the Company and its Subsidiaries is in compliance in all
material respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. Each of the Company and its
Subsidiaries has withheld all amounts required by Law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing. Neither the Company nor any of its
Subsidiaries is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending claims against the Company or any of its
Subsidiaries under any workers compensation plan or policy or for long term
disability. There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company or any of its Subsidiaries and any of
their respective employees, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any Governmental Entity. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract nor does the Company know of any activities or proceedings of any
labor union to organize any Company employees. To the knowledge of the Company,
no employees of the Company or any of its Subsidiaries are in violation of any
term
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34
of any employment contract, non-disclosure agreement, noncompetition agreement,
or any restrictive covenant to a former employer relating to the right of any
such employee to be employed by the Company or any of its Subsidiaries because
of the nature of the business conducted or presently proposed to be conducted by
the Company or any of its Subsidiaries or to the use of trade secrets or
proprietary information of others. No employees of the Company or any of its
Subsidiaries have given notice to the Company or any of its Subsidiaries, nor
does the Company or any of its Subsidiaries otherwise have knowledge, that any
such employee intends to terminate his or her employment with the Company or any
of its Subsidiaries.
SECTION 4.25 Compliance with Regulation D; Stockholders
The Company is aware that the Parent Common Stock to be issued
pursuant to the Merger will constitute "restricted securities" within the
meaning of the Securities Act. Neither the Company nor, to the knowledge of the
Company, any Stockholder has been presented with or solicited by or through any
leaflet, public promotional meeting, television advertisement or any other form
of general advertising or solicitation in connection and concurrently with the
Merger. No more than 35 stockholders of the Company shall not be "Accredited
Investors" as defined in Rule 501 of the rules and regulations promulgated under
the Securities Act.
SECTION 4.26 Representations Complete
None of the representations or warranties made by the Company herein
or in any Company Disclosure Schedule hereto, or certificate furnished by the
Company pursuant to this Agreement, when all such documents are read together in
their entirety, contains any untrue statement of a material fact, or omits to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby represents and warrants to the
Company, subject to the exceptions specifically disclosed in writing in the
Parent Disclosure Schedule, all such exceptions to be referenced to a specific
representation set forth in this Article V, that:
SECTION 5.01 Organization and Qualification; Subsidiaries
Each of Parent and Merger Sub has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Each of Parent and Merger Sub is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good
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35
standing that could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 5.02 Capitalization
(a) The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock, of which 34,386,620 shares were issued and
outstanding as of April 30, 2000 and 5,000,000 shares of preferred stock, $.01
par value per share, of which none were issued and outstanding as of April 30,
2000. All of the outstanding shares of Parent Common Stock have been validly
issued and are fully paid and nonassessable and not subject to preemptive
rights. The authorized capital stock of Merger Sub consists of 100 shares of
common stock, $.01 par value per share, all of which were issued and outstanding
as of the date hereof.
(b) All of the shares of Parent Common Stock to be issued in
connection with the Merger, when issued in accordance with this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights or similar contractual rights granted by Parent and free of
all Liens other than Liens that may result from acts of the Company's
stockholders.
SECTION 5.03 Authority Relative to this Agreement
Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and the Escrow Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Escrow Agreement by Parent and the consummation by Parent of
the transactions contemplated hereby and thereby, and the execution and delivery
of this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated hereby, have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize this Agreement or the Escrow
Agreement or to consummate such transactions (other than the filing of the
Certificate of Merger as required by the Delaware Code). This Agreement has
been, and the Escrow Agreement will be, duly executed and delivered by Parent.
This Agreement constitutes, and the Escrow Agreement, when executed and
delivered as contemplated by this Agreement, will constitute, assuming the due
authorization, execution and delivery by each of the other parties hereto and
thereto, legal, valid and binding obligations of Parent, enforceable against
Parent in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles. This Agreement has been duly
executed and delivered by Merger Sub and, assuming the due authorization,
execution and delivery by each of the other parties hereto, constitutes a legal,
valid and binding obligation of Merger Sub, enforceable against Merger Sub in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
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36
SECTION 5.04 No Conflict; Required Filings and Consents
(a) The execution and delivery of this Agreement by Parent and
Merger Sub and the execution and delivery of the Escrow Agreement by Parent do
not, and the performance by Parent and Merger Sub of their respective
obligations hereunder and/or thereunder, as the case may be, and the
consummation of the Merger will not, (i) conflict with or violate any provision
of the Certificate of Incorporation or Bylaws of Parent, (ii) conflict with or
violate any Law applicable to Parent or by which any property or asset of Parent
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with the giving of notice or lapse of time or both could
reasonably be expected to become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any material property or asset of
Parent pursuant to any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation.
(b) Assuming the accuracy of the representations and warranties of
the Company set forth in Article IV, except for the filing of the Certificate of
Merger and any applicable federal or state securities filings (including,
without limitation, the filing with the SEC of the Form S-3 Registration
Statement and the Form S-8 Registration Statement (as defined in Section 7.05),
and such filings as may be required under the HSR Act), and except for such
conflicts, violations, breaches or defaults which would not have a Parent
Material Adverse Effect, the execution and delivery of this Agreement by Parent
and Merger Sub do not, and the execution and delivery of the Escrow Agreement by
Parent will not, and the performance by Parent and Merger Sub of their
respective obligations hereunder and the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Parent
with or notification by Parent to, any Governmental Entity.
SECTION 5.05 SEC Filings; Financial Statements.
(a) Parent has timely filed all forms, reports, statements and
documents required to be filed by it with the SEC and the Nasdaq National Market
since December 31, 1998 (collectively, together with any such forms, reports,
statements and documents Parent may file subsequent to the date hereof until the
Effective Time, the "Parent Reports"). Each Parent Report (i) was prepared in
accordance with the requirements of the Securities Act, the Exchange Act or the
Nasdaq National Market, as the case may be, and (ii) did not at the time it was
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary of Parent is subject to the periodic
reporting requirements of the Exchange Act or required to file any form, report
or other document with the SEC, the Nasdaq National Market, any stock exchange
or any other comparable Governmental Entity.
(b) Except as is provided in the Parent Reports, each of the
consolidated financial statements (including, in each case, any notes thereto)
contained in the Parent Reports complied as to form in all material respects
with applicable accounting requirements, was
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37
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto) and each
presented fairly, in all material respects, the consolidated financial position
of Parent and the consolidated Subsidiaries of Parent as at the respective dates
thereof and the consolidated results of operations and cash flows of Parent and
the consolidated Subsidiaries of Parent for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments).
SECTION 5.06 Absence of Certain Changes or Events
Except as disclosed in the Parent Reports filed prior to the date of
this Agreement, since March 31, 2000, there has not been (a) any condition,
event, occurrence or development that has had or would reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect or
which would reasonably be expected to prevent, hinder or materially delay the
ability of Parent or Merger Sub to consummate the Merger, (b) any material
change by Parent in its accounting methods, principles or practices, or (c) any
event pursuant to which Parent has incurred any material liabilities (direct,
contingent or otherwise) or engaged in any material transaction or entered into
any material agreement, in each case, outside of the ordinary course of business
which, individually or in the aggregate, would be reasonably expected to have a
Parent Material Adverse Effect.
SECTION 5.07 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger based upon
arrangements made by or on behalf of Parent.
SECTION 5.08 Form S-3 Eligibility; Rule 144 Compliance
Parent is eligible to use Form S-3 for registration under the
Securities Act, and shall use its reasonable best efforts to remain so eligible
until the Availability Termination Date. Parent shall, when reasonably requested
by any Stockholder, furnish a certificate to such requesting Stockholder stating
that Parent is in compliance with the reporting requirements of Rule 144(c)(1).
SECTION 5.09 Representations Complete
None of the representations or warranties made by Parent herein or
in any certificate furnished by Parent pursuant to this Agreement, when all such
documents are read together in their entirety, contains any untrue statement of
a material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
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ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business by the Company Pending the Closing
The Company agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, (x) the business
of the Company and its Subsidiaries shall be conducted only and the Company
shall not take any action except in the ordinary course of business consistent
with past practice and (y) the Company shall use all reasonable efforts to keep
available the services of such of the current officers, significant employees
and consultants of the Company and its Subsidiaries and to preserve the current
relationships of the Company and its Subsidiaries with such of the corporate
partners, customers, suppliers and other persons with which the Company and its
Subsidiaries has significant business relations in order to preserve
substantially intact their business organization. By way of amplification and
not limitation, the Company shall not, between the date of this Agreement and
the Effective Time, directly or indirectly, do, agree to do or allow, cause or
permit any of its Subsidiaries to do, agree to do or allow, cause or permit any
of the following without the prior written consent of Parent:
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws of the Company or the equivalent organizational documents of any of its
Subsidiaries;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of (i) any shares of
capital stock of the Company or any of its Subsidiaries of any class, or
securities convertible into or exchangeable or exercisable for any shares of
such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or any of
its Subsidiaries or (ii) any property or assets of the Company or any of its
Subsidiaries except sales of inventory in the ordinary course of business
consistent with past practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed money or make
any loans or advances material to the business, assets, liabilities, financial
condition or results of operations of the Company or any of its Subsidiaries;
(iii) terminate, cancel or request any material change in, or agree to any
material change in, any Material Contract or License Agreement; (iv) make or
authorize any capital expenditure, other than capital expenditures in the
ordinary course of business consistent with past practice that have been
budgeted for fiscal year 2000 and disclosed in writing to Parent and that are
not, in the aggregate, in excess of $25,000; or (v) enter into or
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39
amend any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) amend the terms of, repurchase, redeem or otherwise acquire, any
of its securities or any securities or propose to do any of the foregoing;
(g) except for (i) acceleration of vesting of stock options and
restricted stock awards as a result of the Merger, as provided in the Plan or
the resolutions of the Board of Directors of the Company prior to the date
hereof, and (ii) the payments provided for pursuant to Section 7.10 hereof,
increase the compensation payable or to become payable to its directors,
officers, consultants or employees, grant any options to, grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement which provides benefits upon a change in control of the Company that
would be triggered by the Merger with, any director, officer, consultant or
other employee of the Company or any of its Subsidiaries who is not currently
entitled to such benefits from the Merger, establish, adopt, enter into or amend
any collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer, consultant or employee
of the Company or any of its Subsidiaries, except to the extent required by
applicable Law or the terms of a collective bargaining agreement, or enter into
or amend any contract, agreement, commitment or arrangement between the Company
or any of its Subsidiaries and any of their respective directors, officers,
consultants or employees;
(h) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(i) the payment, discharge or satisfaction of such claims, liabilities or
obligations in the ordinary course of business and consistent with past practice
and (ii) the payment, discharge or satisfaction of liabilities reflected or
reserved against on the balance sheet of the Company dated as of May 31, 2000
previously presented to Parent and only to the extent so reflected or reserved;
(i) make any change with respect to the Company's accounting
policies, principles, methods or procedures, including, without limitation,
revenue recognition policies, other than as required by GAAP;
(j) make any material Tax election or settle or compromise any
material Tax liability;
(k) permit any insurance policy naming it as a beneficiary or a loss
payee to be canceled or terminated, except in the ordinary and usual course of
business;
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(l) maintain the books and records of the Company or any of its
Subsidiaries in a manner not consistent with past business practices;
(m) take any action which would materially adversely affect the
goodwill of its suppliers, customers and others with whom it has business
relations;
(n) subject to clause (h) above, fail to pay and perform all of its
debts, obligations and liabilities as and when due and all leases, agreements,
contracts and other commitments to which it is a party in accordance with the
terms and provisions thereof;
(o) fail to comply in all material respects with all Laws that may
be applicable to its business except such failures that would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect; or
(p) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect or prevent the Company from
performing or cause the Company not to perform its covenants hereunder or result
in any of the conditions to the Merger set forth herein not being satisfied.
SECTION 6.02 Notices of Certain Events
Each of Parent and the Company shall give prompt notice to the other
of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Merger; (ii)
any notice or other communication from any Governmental Entity in connection
with the Merger; (iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting Parent or the Company, or that relate to the consummation of
the Merger; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any Material
Contract; and (v) any change that could reasonably be expected to have a Parent
Material Adverse Effect or a Company Material Adverse Effect, or to delay or
impede the ability of either Parent or the Company to perform their respective
obligations pursuant to this Agreement and to effect the consummation of the
Merger.
SECTION 6.03 Access to Information; Confidentiality
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which Parent or the Company or any of their
respective Subsidiaries is a party or pursuant to applicable Law or the
regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this Agreement to the Effective Time, Parent and the Company shall (i)
provide to the other (and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
"Representatives")) access at reasonable times upon prior notice to its
officers, employees, agents, properties, offices and other facilities and to the
books and records thereof, and (ii) furnish promptly such information concerning
its
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41
business, properties, contracts, assets, liabilities and personnel as the other
party or its Representatives may reasonably request. No investigation conducted
pursuant to this Section 6.03 shall affect or be deemed to modify any
representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement with respect to the information disclosed
pursuant to this Section 6.03 or pursuant to the Confidentiality Agreement.
SECTION 6.04 No Solicitation of Transactions
The Company and its Subsidiaries shall not, directly or indirectly,
and shall cause the Company's Representatives not to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing nonpublic
information), any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to the Stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of the
Company's Representatives to take any such action. Any violation of the
restrictions set forth in this Section 6.04 by any Representative of the Company
or any of its Subsidiaries, whether or not such Person is purporting to act on
behalf of the Company or otherwise, shall be deemed to be a breach of this
Section 6.04 by the Company. The Company shall notify Parent promptly if any
proposal or offer, or any inquiry or contact with any person with respect
thereto, regarding a Competing Transaction is made, such notice to include the
identity of the person making such proposal, offer, inquiry or contact, and the
terms of such Competing Transaction, and shall keep Parent apprised, on a
current basis, of the status of such Competing Transaction. The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to a Competing
Transaction. The Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party.
SECTION 6.05 Tax-Free Transaction
From and after the date of this Agreement, each party hereto shall
use reasonable efforts to cause the Merger to qualify, and shall not knowingly
take any actions or cause any actions to be taken which could reasonably be
expected to prevent the Merger from qualifying, as a "reorganization" under
Section 368(a) of the Code.
Without limiting the generality of the foregoing:
(a) Parent has the present intention to continue at least one
significant historic business line of the Company, or use as least a significant
portion of Company's historic business assets in a business, in each case within
the meaning of Treas. Reg.ss. 1.368-1(d); and
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(b) Neither Parent nor any corporation that is a "related person" to
Parent within the meaning of Treas. Reg. 1.368-1(e) has any present plan,
intention or arrangement to redeem or acquire, respectively, an amount of Parent
stock exchanged for Company stock pursuant to the Merger that would cause the
Merger to violate the continuity of shareholder interest requirement set forth
in Treas. Reg. 1.368-1.
SECTION 6.06 Further Action; Consents; Filings
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent or the Company in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger, including those required under the HSR Act and (iii) make all
necessary filings, and thereafter make any other required or appropriate
submissions, with respect to this Agreement and the Merger required under any
applicable Laws. The parties hereto shall cooperate and consult with each other
in connection with the making of all such filings and with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to the HSR Act or any other federal or state
antitrust or fair trade law.
(b) Each of the Company and Parent will give any notices to third
persons, and use reasonable efforts to obtain any consents from third persons
necessary, proper or advisable (as determined in good faith by Parent with
respect to such notices or consents to be delivered or obtained by the Company)
to consummate the transactions contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Public Announcements
Until the earlier of termination of this Agreement or the Effective
Time, Parent and Merger Sub, on the one hand, and the Company and its
Subsidiaries, on the other hand, will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Agreement or the Merger and shall not issue any such press release or make any
such public statement that is not approved by the other party, except as may be
required by Law or the rules of the Nasdaq National Market, in which case the
parties will make reasonable efforts to consult with each other prior to the
making of such public statement.
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SECTION 7.02 Employee Benefit Matters
Unless Parent requests otherwise in writing, the Company shall take
all action necessary to terminate, or cause to terminate, immediately before the
Effective Time, any Company Benefit Plan that is a 401(k) plan or other defined
contribution retirement plan (the "Company 401(k) Plan"). At the Closing, the
Company shall provide Parent (a) executed resolutions of the Board of Directors
of the Company authorizing such termination and (b) an executed amendment to the
Company 401(k) Plan sufficient to assure compliance with all applicable
requirements of the Code and regulations thereunder so that the tax-qualified
status of the Company 401(k) Plan will be maintained at the time of termination.
SECTION 7.03 Stock Options
(a) The Company shall take all reasonable actions necessary so that,
immediately prior to the Effective Time, (i) the options granted by the Company
to purchase Company Common Stock ("Company Stock Options"), which are
outstanding and unexercised immediately prior to the Effective Time and held by
a holder that has executed a notice, in form and substance satisfactory to
Parent, consenting to the cancellation of the Company Stock Options held by such
holder, shall be canceled, provided, that the Company and Parent will each use
commercially reasonable efforts to obtain any necessary consents of holders of
Company Stock Options and (ii) the outstanding Company Stock Options under the
Company Stock Plan, whether vested or unvested, held by holders not employed by
the Company immediately prior to the Effective Time or by holders who, at the
Effective Time, have not executed the consent described in (i) above shall be
assumed by Parent and shall constitute an option to acquire, on the same terms
and subject to the same conditions as were applicable under such Company Stock
Option, the same number of shares of Parent Common Stock as the holder of such
Company Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such option (including any unvested portion thereof)
in full (disregarding any limitation on exercisability thereof) immediately
prior to the Effective Time (rounded downward to the nearest whole number), at a
price per share (rounded upward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of Company Common Stock purchasable
pursuant to such Company Stock Option immediately prior to the Effective Time
divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Stock Option in accordance with the
foregoing. All outstanding rights that the Company may hold immediately prior to
the Effective Time to repurchase unvested shares of Company Common Stock issued
or issuable under the Company Stock Plan (the "Repurchase Options") shall be
assigned to Parent and shall thereafter be exercisable by Parent upon the same
terms and conditions in effect immediately prior to the Effective Time, except
that the shares purchasable pursuant to the Repurchase Options and the purchase
price per share shall be adjusted to reflect the Exchange Ratio.
(b) Except as set forth in Section 4.03 or Section 4.09(f)(ii) of
the Company Disclosure Schedule, the Merger shall not result in the termination
or acceleration of any outstanding Company Stock Options under the Company Stock
Plan that are so assumed by Parent. As promptly as reasonably practicable and in
any event within twenty (20) days after the
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receipt of all option documentation it requires relating to the outstanding
Company Stock Options, Parent will issue to each person who, immediately prior
to the Effective Time, is a holder of an outstanding Company Stock Option under
the Company Stock Plan that is to be assumed by Parent hereunder, a document
evidencing the foregoing assumption of such Company Stock Option by Parent.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery under
Company Stock Options assumed in accordance with this Section 7.03.
(d) The Board of Directors of the Company shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of the Company Stock Plan and the instruments evidencing the
Company Stock Options to be assumed by Parent pursuant to Section 7.03(a), to
provide for the conversion of such Company Stock Options into options to acquire
Parent Common Stock in accordance with this Section 7.03, and to provide that no
consent of the holders of such Company Stock Options is required in connection
with such conversion.
(e) Within five (5) Business Days following the date of this
Agreement, the Company shall make available to Parent a list of all persons who
the Company reasonably believes (i) are, with respect to the Company and as of
the date of this Agreement, "disqualified individuals" (within the meaning of
Section 280G of the Code and the regulations promulgated thereunder), and (ii)
will be receiving payments or benefits (including acceleration of options) in
connection with the Merger including any payments or benefits as a result of
termination of service following the Merger. Within five (5) Business Days prior
to Closing, the Company shall revise such list to reflect any additional
information that the Company reasonably believes would impact the determination
of persons who (A) are, with respect to the Company, such "disqualified
individuals," and (B) will be receiving payments or benefits (including
acceleration of options) in connection with the Merger, including any payments
or benefits as a result of termination of service following the Merger.
SECTION 7.04 Legend
Each Parent Certificate shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR
(ii) AN OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED."
SECTION 7.05 Information Statement
As promptly as reasonably practicable after the execution of this
Agreement, the Company shall prepare an information statement to be mailed to
stockholders of the Company in
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connection with the transactions contemplated hereby (the "Information
Statement"). Parent will cooperate with the Company in the preparation of such
Information Statement, including, without limitation, providing to the Company
all information regarding Parent and its affiliates (including pro forma
financial information regarding Parent and the Company, if necessary, and
information required under Rule 506 of Regulation D under the Securities Act)
necessary for inclusion or incorporation by reference therein. The Company shall
mail the Information Statement to all stockholders of the Company entitled to
receive such notice under the Delaware Code. The Information Statement shall
constitute a disclosure document for the offer and issuance of the shares of
Parent Common Stock to be received by the Stockholders in the Merger and a proxy
statement for solicitation of stockholder approval of the Merger. The
Information Statement shall not, at the time it is mailed to stockholders of the
Company and at all times subsequent thereto (through and including the Effective
Time), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the Effective Time, any event or
information should be discovered by the Company or Parent which should be set
forth in an amendment or supplement to the Information Statement, the Company or
Parent, as applicable, shall promptly inform the Company or Parent, as
applicable, of such occurrence and the parties shall cooperate in mailing to the
Stockholders such amendment or supplement. The Information Statement shall
include the recommendation of the Board of Directors of the Company in favor of
this Agreement and the Merger and the conclusion of the Board of Directors that
the terms and conditions of the Merger are fair and reasonable to the
Stockholders. Anything to the contrary contained herein notwithstanding, the
Information Statement shall not include any information, the form and content of
which information shall not have been approved by the Parent and the Company
prior to such inclusion. Parent agrees that none of the information supplied or
to be supplied by it for inclusion or incorporation by reference in the
Information Statement or any amendment or supplement to the foregoing will, at
the time the Information Statement is first mailed to the stockholders of the
Company and at all times subsequent thereto (through and including the Effective
Time), contain any statement which, at such time and in such light of the
circumstances under which it was made, is false and misleading with respect to
any material fact, or omits to state any material fact necessary in order to
make the statements made in the Information Statement not false or misleading or
omits to state any material fact necessary to correct any statement made by
Parent in such information supplied which has become false or misleading.
SECTION 7.06 Meeting of Stockholders
If necessary to consummate the Merger, the Company shall promptly
after the date hereof take all action necessary in accordance with the Delaware
Code and its Certificate of Incorporation and Bylaws to convene a stockholders
meeting (the "Stockholders Meeting") or to secure the written consent of its
stockholders within thirty (30) days of the date of this Agreement. The Company
shall consult with Parent regarding the date of the Stockholders Meeting and
shall not postpone or adjourn (other than for the absence of a quorum) the
Stockholders Meeting without the consent of Parent. The Company shall use its
best efforts to solicit from the Stockholders proxies in favor of the Merger and
shall take all other action
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necessary or advisable to secure the vote or consent of the Stockholders
required to effect the Merger.
SECTION 7.07 Other Employment Agreements
The Company will use reasonable efforts to assist Parent in causing
Evan Wetstone, Arkaidiy Belousov, David Fiore, Fuat Baran, Cathy Paraggio and
Eric Mermelstein to enter into employment agreements.
SECTION 7.08 Tax Returns
The Parent shall cause to be properly prepared and executed, and the
Parent shall timely file all necessary Tax Returns for the Company as follows:
(i) For all periods ending on or before the Effective Time if the
due date of such Tax Return is after the Effective Time, the returns as so
prepared shall be subject to the review of the Stockholders. Parent shall
provide a copy of any such Tax Return to the Stockholders at least thirty
days prior to filing thereof for review. The returns prepared by Parent
will be filed on a basis consistent with prior periods, subject to
applicable law.
(ii) For all periods beginning before the Effective Time and ending
after the Effective Time, such Tax Return shall be subject to the review
of the Stockholders. Parent shall provide a copy of any such Tax Return to
the Stockholders at least thirty days prior to filing thereof for review.
The returns prepared by Parent will be filed on a basis consistent with
prior periods, subject to applicable law.
SECTION 7.09 Option Grants
As soon as reasonably practicable following the date of this
Agreement and at or prior to the Effective Time, the Board of Directors of
Parent (or, if appropriate, any committee administering Parent's stock option
plan), shall adopt such resolutions or take such other actions as may be
required to effect the following as of the Effective Time: as to those employees
set forth on Section 7.09 of the Parent Disclosure Schedule, grant to such
persons options to purchase the respective number of shares of Parent Common
Stock ("Parent Stock Options") set forth opposite their names on such Schedule,
with an exercise price per share equal to the closing selling price of Parent
Common Stock at the Effective Time.
SECTION 7.10 Retention Bonuses
Parent shall pay an aggregate of up to $750,000 in bonuses (subject
to applicable withholding taxes) ("Additional Retention Bonuses") to the
employees listed in Section 8.03(l) of the Parent Disclosure Schedules (in the
amounts and on such dates as set forth in such Section) that have not terminated
their employment with the Company or Parent, as applicable, or given notice to
the Company or Parent, as applicable, of such termination as of the six month
anniversary of the Effective Time in consideration of continued employment with
Parent or the
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Company, as applicable; provided that as soon as reasonably practicable after
the last day upon which Retention Bonuses (as defined below) may be earned,
Parent shall calculate the amount of Retention Bonuses not paid or payable to
such employees (the "Unpaid Bonuses"), and shall pay the aggregate amount of
Unpaid Bonuses to the Stockholders, ratably in proportion to the number of
Merger Shares received by each Stockholder pursuant to Section 3.01; provided
however that if the Unpaid Bonuses shall in the aggregate be less than $25,000,
then Parent shall contribute the amount thereof to a charity of its choice.
SECTION 7.11 Form S-8 Registration Statement
Parent agrees to file with the SEC a registration statement on Form
S-8 (or any successor form) the "Form S-8 Registration Statement") covering the
shares of Parent Common Stock issuable pursuant to outstanding options under the
Company Stock Plan assumed by Parent as soon as reasonably practicable after the
Effective Time, provided that such Company Stock Options qualify for
registration on such Form S-8 Registration Statement (or any successor form).
Parent shall maintain the effectiveness of such Form S-8 Registration Statement
so as to permit the public resale of the securities covered thereby. The Company
shall cooperate with and assist Parent in the preparation of such Form S-8
Registration Statement.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party to
Consummate the Merger
The obligations of the parties hereto to consummate the Merger are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following conditions:
(a) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity shall
have issued any order, which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting its consummation;
(b) all consents, approvals and authorizations legally required to
be obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization could not reasonably be expected to result in a Parent
Material Adverse Effect or a Company Material Adverse Effect; and
(c) Parent, the Company, Merger Sub, the Stockholders' Agent and the
Escrow Agent (as defined in Section 10.01) shall have executed and delivered an
escrow agreement substantially in the form attached hereto as Annex C (the
"Escrow Agreement").
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SECTION 8.02 Conditions to the Obligations of the Company
The obligations of the Company to consummate the Merger, or to
permit the consummation of the Merger are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following further conditions:
(a) Each of the representations and warranties of Parent contained
in this Agreement shall be true, complete and correct in all material respects
(other than representations and warranties subject to "materiality" or "material
adverse effect" qualifiers, which shall be true, complete and correct in all
respects as so qualified) both when made and on and as of the Effective Time as
if made at and as of the Effective Time (other than representations and
warranties which address matters only as of a certain date, which shall be so
true, complete and correct as of such certain date), and, if the Effective Time
shall occur on a date other than the date hereof, the Company shall have
received a certificate of an officer of Parent to such effect;
(b) Parent shall have performed or complied in all material respects
with all covenants required by this Agreement to be performed or complied with
by it on or prior to the Effective Time and, if the Effective Time shall occur
on a date other than the date hereof, the Company shall have received a
certificate of an officer of Parent to such effect;
(c) As of the Effective Time, the Company shall have received from
Parent and Merger Sub the following documents:
(i) A certificate of existence and good standing from the state of
incorporation as to the corporate status of each of Parent and Merger Sub;
(ii) A true and complete copy of the resolutions, certified by the
Secretary of Parent and Merger Sub, adopted on behalf of each of Parent
and Merger Sub authorizing the execution, delivery and performance of this
Agreement and all transactions contemplated hereby; and
(iii) A certificate from each of Parent and Merger Sub's Secretary
as to the incumbency and signatures of their respective officers who will
execute documents at the Closing or who have executed this Agreement; and
(d) Company shall have received a legal opinion from Brobeck,
Phleger & Harrison LLP, counsel to Parent, substantially in the form of Annex
D-1 hereto.
SECTION 8.03 Conditions to the Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to consummate the Merger
are subject to the satisfaction or waiver of the following further conditions:
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true, complete and correct in all material
respects (other than representations and warranties subject to "materiality" or
"material adverse effect" qualifiers,
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49
which shall be true, complete and correct in all respects as so qualified) both
when made and on and as of the Effective Time as if made at and as of the
Effective Time (other than representations and warranties which address matters
only as of a certain date, which shall be so true, complete and correct as of
such certain date), and, if the Effective Time shall occur on a date other than
the date hereof, Parent shall have received a certificate of an officer of the
Company to such effect;
(b) The Company shall have performed or complied in all material
respects with all covenants required by this Agreement to be performed or
complied with by it, on or prior to the Effective Time and, if the Effective
Time shall occur on a date other than the date hereof, Parent shall have
received a certificate of an officer of the Company to such effect;
(c) Parent shall have received a legal opinion from Meltzer, Lippe,
Goldstein & Schlissel, counsel to the Company, substantially in the form of
Annex D-2 hereto;
(d) There shall have been no Company Material Adverse Effect, and no
event shall have occurred which could reasonably be expected to result in a
Company Material Adverse Effect, since the date of this Agreement;
(e) All consents of third parties required pursuant to the terms of
any Material Contract (other than the contracts listed on Section 4.05(c) as
consents that will not be sought or obtained prior to the Closing) as a result
of the Merger shall have been obtained, including, without limitation, the
consents required pursuant to the terms of the Material Contracts listed on
Schedule V;
(f) The agreements listed on Schedule VI shall have been terminated
by each party thereto;
(g) The aggregate number of shares of Company Common Stock and
Company Preferred Stock held by Stockholders who have perfected dissenting
rights in accordance with the Delaware Code shall be less than five percent (5%)
of the outstanding shares of Company Common Stock immediately prior to the
Effective Time;
(h) Holders of the requisite number of shares of (i) Company Common
Stock and (ii) Company Preferred Stock shall have approved this Agreement and
the transactions contemplated hereby, including the issuance of shares of Parent
Common Stock to holders of Company Preferred Stock;
(i) Each of the employees of the Company listed on Schedule III
hereto shall remain employees of the Company as of the Effective Time and have
executed and delivered an employment agreement substantially in the forms
attached as Section 8.03(i) of the Parent Disclosure Schedule and a proprietary
information agreement substantially in the form attached hereto as Annex E;
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(j) No more than four (4) employees listed on Schedule IV hereto
shall have terminated their employment with the Company or given notice to the
Company of such termination as of the Effective Time;
(k) Each of the Stockholder Party Agreements shall have been
terminated by the parties thereto;
(l) Prior to the Effective Time, the Company shall have incurred the
liability for payment of an aggregate amount of up to $1,250,000 (subject to
applicable withholding taxes) for bonuses ("Initial Retention Bonuses" and, with
Additional Retention Bonuses, "Retention Bonuses") which shall be paid to
employees of the Company in consideration of services previously rendered to the
Company in the amounts and on the dates set forth in Section 8.03(l) of the
Parent Disclosure Schedules;
(m) As of the Effective Time, Parent shall have received from the
Company the following documents:
(i) A certificate of existence and good standing from the state of
incorporation as to the corporate status of the Company and each of its
Subsidiaries;
(ii) A true and complete copy of the Certificate of Incorporation of
the Company and all amendments thereto certified by the state of
incorporation of the Company;
(iii) A true and complete copy of the Bylaws of the Company
certified by the Secretary of the Company;
(iv) A true and complete copy of the equivalent organizational
documents of each of the Subsidiaries of the Company;
(v) A true and complete copy of the resolutions, certified by the
Secretary of the Company, adopted on behalf of the Company authorizing the
execution, delivery and performance of this Agreement and all transactions
contemplated hereby;
(vi) A certificate from the Secretary of the Company that its
Certificate of Incorporation has not been amended since the date of the
certificate described in subsection (ii) above and that nothing has
occurred since the date of issuance of the good standing certificate
specified in subsection (i) above that would adversely affect its
corporate good standing;
(vii) A certificate from the Company's Secretary as to the
incumbency and signatures of the Company's officers who will execute
documents at the Closing or who have executed this Agreement; and
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(viii) Any other documents and instruments as Parent may reasonably
require or desire in order to effectuate the transactions contemplated by
this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination
This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite adoption and
approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and the Company;
(b) by either Parent or the Company, if the Closing shall not have
occurred on or before August 15, 2000; provided, however, that the right to
terminate this Agreement under this Section 9.01(b) shall not be available to
any party whose action or failure to act has been the cause or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement;
(c) by either Parent or the Company, if any Governmental Order,
writ, injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction and shall have become final
and nonappealable;
(d) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue,
incomplete or incorrect, in either case such that the conditions set forth in
Section 8.03 would not be satisfied (a "Terminating Company Breach"); provided,
however, that if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable efforts within ten (10) days and for so
long as the Company continues to exercise such reasonable efforts, Parent may
not terminate this Agreement under this Section 9.01(d); or
(e) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, incomplete or
incorrect, in either case such that the conditions set forth in Section 8.02
would not be satisfied (a "Terminating Parent Breach"); provided, however, that
if such Terminating Parent Breach is curable by Parent through the exercise of
its reasonable efforts within ten (10) days and for so long as Parent continues
to exercise such reasonable efforts, the Company may not terminate this
Agreement under this Section 9.01(e).
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52
The right of any party hereto to terminate this Agreement pursuant
to this Section 9.01 will remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, representatives or agents, whether prior to or after the execution of
this Agreement.
SECTION 9.02 Effect of Termination
Except as provided in Section 9.05, in the event of termination of
this Agreement pursuant to Section 9.01, this Agreement shall forthwith become
void, there shall be no liability under this Agreement on the part of any party
hereto or any of its Affiliates or any of its or their officers or directors,
and all rights and obligations of each party hereto shall cease; provided,
however, that nothing herein shall relieve any party hereto from liability for
the breach of any provisions of this Agreement prior to its termination; and
provided, further, that the provisions of Section 6.03 (Confidentiality), this
Section 9.02, Section 9.05 (Expenses) and Article XI shall remain in full force
and effect and survive any termination of this Agreement.
SECTION 9.03 Amendment
This Agreement may be amended by the parties hereto by action taken
by or on behalf of their respective boards of directors at any time prior to the
Effective Time. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto; provided that no such amendment that is
detrimental to the rights or obligations of any Stockholder shall be deemed
effective until agreed to in writing by the Stockholders so affected.
SECTION 9.04 Waiver
At any time prior to the Effective Time, any party hereto may (a)
extend the time for or waive compliance with the performance of any obligation
or other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby; provided that no such waiver or extension that is detrimental
to the rights or obligations of any Stockholder shall be deemed effective until
agreed to in writing by the Stockholders so affected.
SECTION 9.05 Expenses
All Expenses incurred in connection with this Agreement and the
Merger shall be paid by the party incurring such Expenses, whether or not the
Merger is consummated, provided, however, that if the Merger is consummated, all
Expenses incurred on behalf of the Company and the Stockholders in connection
with this Agreement and the Merger shall be paid by the Parent (subject to the
following sentence). Any Expenses incurred by the Company on behalf of itself
and/or the Stockholders in excess of $1,030,000 (including any fees and expenses
of legal counsel, financial advisors and accountants) shall be paid at Closing
and shall reduce the Purchase Price on a dollar for dollar basis; provided that
to the extent such Expenses are not
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submitted to Parent for payment at least two Business Days prior to the Closing,
such Expenses shall be paid after the Closing out of the Escrow Fund.
ARTICLE X
INDEMNIFICATION AND ESCROW
SECTION 10.01 Escrow Fund
As soon as reasonably practicable after the Effective Time, the
Escrow Shares shall be registered in the name of, and deposited with First Union
National Bank (or its successor in interest or other institution selected by
Parent with the reasonable consent of the Company), as escrow agent (the "Escrow
Agent"), such deposit (together with interest and other income thereon) to
constitute the "Escrow Fund") and to be governed by the terms set forth herein
and in the Escrow Agreement. The Escrow Fund shall be available to compensate
Parent pursuant to the indemnification obligations of the Stockholders.
SECTION 10.02 Indemnification
(a) Subject to the limitations set forth in this Article X, the
Stockholders will, severally but not jointly in proportion to the number of
Merger Shares received by them in the Merger, indemnify and hold harmless
Parent, Merger Sub and the Surviving Corporation and each of their respective
officers, directors, advisors, Affiliates, agents, employees, and each person,
if any, who controls or may control Parent within the meaning of the Securities
Act (hereinafter referred to individually as a "Parent Indemnified Person" and
collectively as "Parent Indemnified Persons") from and against any and all
losses, damages, judgments, settlements, claims, liabilities, costs and
expenses, including, without limitation, Legal Expenses (as defined below), net
of insurance proceeds actually received as of the date of the settlement of the
applicable indemnification claim in respect of such losses, damages, judgments,
settlements, claims, liabilities and expenses (collectively, "Parent Damages")
arising out of, based upon or resulting from any misrepresentation or breach of
or default in connection with any representations, warranties, covenants and
agreements given by or made by any of the Stockholders or the Company in this
Agreement, the Company Disclosure Schedule or any Annex to this Agreement or
certificate delivered pursuant to this Agreement. The Escrow Fund shall be
security for this indemnity obligation, subject to the limitations in this
Agreement. If the Merger is consummated, recovery from the Escrow Fund shall be
the exclusive remedy under this Agreement for any breach or default in
connection with any of the representations, warranties, covenants or agreements
set forth in this Agreement, the Company Disclosure Schedule or any Annex to
this Agreement or certificate delivered pursuant to this Agreement, except in
the event of any fraud or intentional misrepresentation, for which there shall
be no limit.
(b) Subject to the limitations set forth in this Article X, Parent
will indemnify and hold harmless the Stockholders, and each of their respective
officers, directors, advisors, Affiliates, agents, employees, and each person,
if any, who controls or may control a Stockholder within the meaning of the
Securities Act (hereinafter referred to individually as a "Company
<PAGE>
54
Indemnified Person" and collectively as "Company Indemnified Persons" and,
together with Parent Indemnified Persons, "Indemnified Persons") from and
against any and all losses, damages, judgments, settlements, claims,
liabilities, costs and expenses, including, without limitation, Legal Expenses
(as defined below), net of insurance proceeds actually received as of the date
of the settlement of the applicable indemnification claim in respect of such
losses, damages, judgments, settlements, claims, liabilities and expenses
(collectively, "Company Damages"), arising out of, based upon or resulting from
any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given by or made by Parent
in this Agreement, the Parent Disclosure Schedules or any Annex to this
Agreement or certificate delivered pursuant to this Agreement. If the Merger is
consummated, the Company Damages shall not exceed $3,940,000.
(c) Parent and the Company each acknowledges that (i) such Parent
Damages, if any, would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the total number of shares Parent would have agreed to issue in
connection with the Merger and (ii) the Company Damages, if any, would relate to
unresolved contingencies existing at the Effective Time, which if resolved at
the Effective Time would have led to an increase in the total number of shares
Parent would have agreed to issue in connection with the Merger. Nothing in this
Agreement shall limit the liability (i) of the Company or the Parent for any
breach of any representation, warranty or covenant if the Merger does not close,
or (ii) of any Stockholder in connection with any breach by such Stockholder of
the Voting Agreement.
(d) "Legal Expenses" of a Parent Indemnified Person or a Company
Indemnified Person shall mean any and all reasonable out-of-pocket fees, costs
and expenses of any kind incurred by such Parent Indemnified Person or Company
Indemnified Person and its counsel in investigating, preparing for, defending
against or providing evidence, producing documents or taking other action with
respect to any threatened or asserted claim of a third party or Governmental
Entity.
SECTION 10.03 Procedures
(a) All claims for indemnification by any Indemnified Person
pursuant to this Article X shall be made in accordance with the provisions of
this Article X and, to the extent applicable, the Escrow Agreement. Promptly
after receipt by any Indemnified Person of notice of the commencement of any
action in respect of which the Indemnified Person will seek indemnification
hereunder, the Indemnified Person shall notify the Stockholders' Agent (as
defined below) or Parent, as applicable (the "Indemnifying Party") thereof in
writing, but any failure to so notify the Indemnifying Party shall not relieve
it from any liability that it may have to the Indemnified Person except to the
extent the Indemnifying Party shall be materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in the defense of such
action and to assume control of such defense with counsel reasonably acceptable
to the Parent Indemnified Person; provided, however, that:
<PAGE>
55
(i) the Indemnified Person shall be entitled to participate in the
defense of such claim and to employ counsel to assist in the handling of
such claim;
(ii) the Indemnifying Party shall obtain the prior written approval
of the Indemnified Person before entering into any settlement of such
claim or ceasing to defend against such claim, and the Indemnified Party
shall obtain the prior written approval of the Indemnifying Party before
entering into any settlement of such claim provided that each such
approval shall not be unreasonably withheld; and
(iii) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
Indemnified Person of a release from all liability in respect of such
claim.
(b) After written notice by the Indemnifying Party to the
Indemnified Person of its election to assume control of the defense of any such
action, the Indemnifying Party shall not, except as otherwise provided, be
liable to such Indemnified Person hereunder for any Legal Expenses subsequently
incurred by such Indemnified Person in connection with the defense thereof. If
the Indemnifying Party does not assume control of the defense of such claims by
promptly notifying the Indemnified Person of such assumption, the Indemnified
Person shall have the right to defend such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Person therefor in
accordance with the terms hereof. The reimbursement of fees, costs and expenses
required by this Section 10.03 shall be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
(c) Following the Closing, the Indemnifying Party shall control the
defense of any action relating to any federal, state or local tax audit,
controversy or contest based upon, arising out of or resulting from any and all
Taxes for which such party would be required to make an indemnification payment
hereunder provided such Tax relates to any tax period or portion thereof ending
on or before the Effective Date, provided, further, that if the outcome of the
Tax audit, controversy or contest could, in the written opinion of tax counsel,
have a Parent Material Adverse Effect or a Company Material Adverse Effect in
respect of one or more Tax periods subsequent to the Effective Time, the consent
of the Parent shall be required for the Indemnifying Party to take control of
the defense of the audit, controversy or contest. In the event the consent of
the Parent is required, such consent shall not be unreasonably withheld. In the
event the Parent shall not grant such consent, the Parent shall consult with the
Indemnifying Party during the contest and shall not settle the contest without
the consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(d) For purposes of Sections 7.08(i), 708(ii), if applicable, and
10.03(c), Parent shall, upon reasonable notice, at any reasonable time and from
time to time after the Effective Time (i) provide the Indemnifying Party, or as
applicable, the Stockholders, reasonable access, during normal business hours,
to requested historic books and records and historic tax data of the Company
relating to the periods described in Sections 7.08 and 10.03, that are
<PAGE>
56
reasonably required in connection with Sections 7.08 or 10.03(c); and (ii)
furnish, and request the Company's independent tax accountants and legal counsel
to furnish, to the Indemnifying Party, or as applicable, the Stockholders, such
additional tax and other information and documents in possession of such persons
relating to the periods described in Sections 7.08 and 10.03 to the extent
necessary to meet the Company's, the Stockholders' and/or the Indemnifying
Party's obligations under such sections.
SECTION 10.04 Limitations
(a) Notwithstanding the foregoing, neither a Parent Indemnified
Person or a Company Indemnified Person may make a claim for Parent Damages or
Company Damages, as applicable, until the aggregate amount of claims by such
Parent Indemnified Person or Company Indemnified Person, as applicable, exceeds
$197,000; provided, however, that once the aggregate amount of Parent Damages or
Company Damages, as applicable, of such Parent Indemnified Person or Company
Indemnified Person, as applicable, exceeds $197,000, then such Parent
Indemnified Person or a Company Indemnified Person, as applicable, shall have
the right to recover the full amounts due without regard to the threshold.
(b) In no event will the Stockholders or Parent be liable for any
claims alleging consequential damages incurred or suffered by a Parent
Indemnified Person or a Company Indemnified Person, as applicable, with respect
to this Agreement or the transactions contemplated hereby.
SECTION 10.05 Escrow Period
The escrow period shall terminate on the one year anniversary of the
Effective Time (the "Escrow Period"); provided, however, in accordance with the
terms of the Escrow Agreement, a portion of the Escrow Fund that is necessary to
satisfy any claims asserted but unsatisfied prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to expiration of
the Escrow Period, shall remain in the Escrow Fund until such claims have been
resolved.
SECTION 10.06 Stockholders' Agent
(a) Baker Communications Fund, L.P. shall be constituted and
appointed as agent ("Stockholders' Agent") for and on behalf of the Stockholders
to give and receive notices and communications, to authorize delivery to Parent
of the Parent Common Stock or other property from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the Escrow Fund from time to
time upon not less than ten (10) days' prior written notice to Parent. No bond
shall be required of the Stockholders' Agent, and the Stockholders' Agent shall
receive no compensation for his services from the Escrow Fund or Parent. Notices
or communications to or from the Stockholders' Agent shall constitute notice to
or from each of
<PAGE>
57
the Stockholders. It is understood that the Stockholders' Agent shall not have
any voting rights with respect to the Company Common Stock or Company Preferred
Stock, other than with respect to such shares owned by it.
(b) The Stockholders' Agent shall not be liable for any act done or
omitted hereunder as Stockholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Stockholders shall severally indemnify the Stockholders' Agent and hold it
harmless against any loss, liability or expense, including legal fees and
expenses, incurred without gross negligence or bad faith on the part of the
Stockholders' Agent and arising out of or in connection with the acceptance or
administration of its duties hereunder.
(c) The Stockholders' Agent shall have reasonable access to
information about the Company and Parent and the reasonable assistance of the
Company's and Parent's officers and employees for purposes of performing its
duties and exercising its rights hereunder, provided that the Stockholders'
Agent shall treat confidentially and not disclose any nonpublic information from
or about the Company or Parent to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
(d) A decision, act, consent or instruction of the Stockholders'
Agent shall constitute a decision of all Stockholders for whom shares of Parent
Common Stock otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each such Stockholder, and the
Escrow Agent and Parent may rely upon any decision, act, consent or instruction
of the Stockholders' Agent as being the decision, act, consent or instruction of
each and every such Stockholder. The Escrow Agent and Parent are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Stockholders' Agent.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Duration of Survival of Representations and Warranties
The representations and warranties set forth in Article IV (as
modified by the Company Disclosure Schedule) and Article V (as modified by the
Parent Disclosure Schedule) shall survive until the first anniversary of the
Effective Time. The agreements set forth in this Agreement shall terminate at
the Effective Time, except that the agreements set forth in Articles II and III,
Section 6.03 (Confidentiality), Section 6.05 (Tax-Free Transaction), Section
6.06 (Further Action), Section 7.03 (Stock Options), Section 9.03 (Amendment),
Section 9.05 (Expenses), Article X and this Article XI, and the applicable
definitions in Article I, shall survive the Effective Time and the Closing.
<PAGE>
58
SECTION 11.02 Notices
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy or facsimile,
by registered or certified mail (postage prepaid, return receipt requested) or
by a nationally recognized courier service to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.02):
(a) if to the Company or the Stockholders:
Net Ops Corporation
501 Washington Avenue
Pleasantville, NY 10570
Attention: Louis A. Steinberg
Telecopier: (914) 747-7627
with a copy to:
Meltzer, Lippe, Goldstein & Schlissel, P.C.
190 Willis Avenue
Mineola, NY 11501
Attention: David I. Schaffer, Esq.
Telecopier: (516) 747-0653
(b) if to Parent or Merger Sub:
Micromuse Inc.
139 Townsend Street
San Francisco, California 94107
Attention: James De Golia, Esq.
General Counsel
Telecopier: (415) 538-9091
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Eric Simonson, Esq.
Telecopier: (212) 586-7878
<PAGE>
59
(c) if to the Stockholders Agent:
Baker Communications Fund, L.P.
540 Madison Avenue
New York, NY 10022
Attention: Lawrence Bettino
Telecopier: (212) 486-0410
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Stephen Kuhn
Telecopier: (212) 872-1002
SECTION 11.03 Severability
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the Merger is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner to the fullest extent permitted by
applicable Law in order that the Merger may be consummated as originally
contemplated to the fullest extent possible.
SECTION 11.04 Assignment; Binding Effect; Benefit
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
parties hereto. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, other than Article X, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
SECTION 11.05 Incorporation of Exhibits
The Company Disclosure Schedule, the Parent Disclosure Schedule and
all Annexes attached hereto and referred to herein are hereby incorporated
herein and made a part of this Agreement for all purposes as if fully set forth
herein.
<PAGE>
60
SECTION 11.06 Governing Law
This agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York other than conflict of laws
principles thereof directing the application of any law other than that of New
York. Courts within New York, Queens, Bronx, Kings, Richmond, Westchester and
Nassau Counties of the State of New York will have exclusive jurisdiction over
all disputes between the parties hereto arising out of or relating to this
agreement and the agreements, instruments and documents contemplated hereby. The
parties hereby consent to and agree to submit to the jurisdiction of such
courts. Each of the parties hereto waives, and agrees not to assert in any such
dispute, to the fullest extent permitted by applicable law, any claim that (i)
such party is not personally subject to the jurisdiction of such courts, (ii)
such party and such party's property is immune from any legal process issued by
such courts or (iii) any litigation commenced in such courts is brought in an
inconvenient forum.
SECTION 11.07 Waiver of Jury Trial
Each party hereto hereby irrevocably waives all right to trial by
jury in any proceeding (whether based on contract, tort or otherwise) arising
out of or relating to this agreement or any transaction or agreement
contemplated hereby or the actions of any party hereto in the negotiation,
administration, performance or enforcement hereof.
SECTION 11.08 Headings; Interpretation
The descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
SECTION 11.09 Counterparts
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
SECTION 11.10 Entire Agreement
This Agreement (including the Annexes, the Company Disclosure
Schedule and the Parent Disclosure Schedule) and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
MICROMUSE INC.
By: /s/ Gregory Q. Brown
-------------------------------------
Name: Gregory Q. Brown
Title: Chairman of the Board and CEO
SALAMANDER ACQUISITION CORP.
By: /s/ Stephen Allott
-------------------------------------
Name: Stephen Allott
Title: President and CFO
NETOPS CORPORATION
By: /s/ Louis A. Steinberg
-------------------------------------
Name: Louis A. Steinberg
Title: President
<PAGE>
Schedule I
Louis A. Steinberg
Newlight Associates, L.P.
Newlight Associates (BVI), L.P.
Baker Communications Fund, L.P.
John R. Deuel
May Steinberg
Walter Steinberg
<PAGE>
Schedule II
<TABLE>
<CAPTION>
Series A Series B Total
Common Preferred Preferred Merger Escrow Merger
Name Stock Stock Stock Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
Louis A. Steinberg 3,250,000
John R. Deuel 75,000
Steven A. Fancher 25,000
Richard Pekmezian 250,000
May E. Steinberg 25,000
Water Steinberg 250,000
Evan Westone 50,000
Eric Braun 100,000
Edward Young 50,000
Alan Rothschild 2,000
William Nuti 25,000
Barrett Peck 18,750
Dennis Parker 15,000
Newlight Associates, L.P. 115,285 560,400 97,916
Newlight Associates (BVI), L.P. 193,294 939,600 62,340
Baker Communications Fund, LP 3,205,128
Joseph Riccobono 10,000
Adediran Osinloye 5,000
David Fiore 12,500
Mark Garver 160,256
Robert Sadofsky 10,000
</TABLE>
<PAGE>
Schedule III
Employees
Louis A. Steinberg
John Deuel
Charles Tannenbaum
<PAGE>
Schedule IV
Certain Employees
Wetstone
Belousov
Castner
Claprood
Giesen
Jensen
Subramanain
Homberg
Addison
Baran
Carlson
Chaloupka
Dhaliwal
Fiore
James
Novitsky
Osinloye
Patrick
Riccobono
Navratil
Paraggio
Stasko
<PAGE>
Schedule V
Agreements requiring consent
1. Amended and Restated Registration Rights Agreement, dated December 22, 1998
by and among the Company and the investors listed on Schedule A thereto.
2. Consent of Newlight Associates, L.P., Newlight Associates (BVI), L.P. and
Baker Communications Fund, L.P. pursuant to Article IV, Sections 9 and 10 of the
Amended and Restated Certificate of Incorporation dated December 21, 1998.
<PAGE>
Schedule VI
Agreements to be terminated
1. Stock Purchase and Investor Rights Agreement, dated October 20, 1997, by
NetOps and the investors listed on the signature pages thereto, as amended by
the Amendment No. 1 to Stock Purchase and Investor Rights Agreement and Consent
and Waiver, dated December 22, 1998.
2. Series B Preferred Stock Purchase Agreement, dated December 22, 1998 by and
among the Company and the investors listed on the signature pages thereto.
3. Amended and Restated Registration Rights Agreement, dated December 22, 1998
by and among the Company and the investors listed on Schedule A thereto.
4. Amended and Restated Stockholders Agreement, dated December 22, 1998, by and
among the Company and the parties listed on the signature pages thereto.
5. Note and Warrant Purchase Agreement, dated September 29, 1998, by and among
the Company and Newlight Associates, L.P. and Newlight Associates (BVI), L.P.
6. Common Stock Warrant, dated September 29, 1998, between the Company and
Newlight Associates, L.P.
7. Agreement between the Company and Bear Stearns & Co. Inc., dated February 10,
2000.
<PAGE>
Annex A
VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement") is made and entered into as
of June 21, 2000 between Micromuse Inc., a Delaware corporation ("Parent"), and
each of the undersigned stockholders (each, a "Stockholder" and collectively,
the "Stockholders") of NetOps Corporation, a Delaware corporation (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Merger Agreement described below.
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger and
Reorganization dated as of June 21, 2000 by and among Parent, Salamander
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and the Company (such agreement, as it may be amended,
supplemented or otherwise modified from time to time, being hereinafter referred
to as the "Merger Agreement"), Parent has agreed to acquire the outstanding
securities of the Company pursuant to a statutory merger of Merger Sub with and
into the Company, in which outstanding shares of capital stock of the Company
will be converted into shares of common stock of Parent, all as set forth in the
Merger Agreement (the "Transaction");
WHEREAS, as a condition to Parent entering into the Merger Agreement
and consummating the Transaction, Parent has required that certain stockholders
of the Company execute and deliver to Parent a voting agreement upon the terms
set forth herein; and
WHEREAS, each of the Stockholders is, or may become, the registered
and beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act) of
capital stock of Company (the "Shares").
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1. Transfer and Encumbrance.
(a) Each Stockholder represents and warrants to Parent that (i) such
Stockholder is the beneficial owner of the Shares; (ii) the Shares set forth on
the signature page hereto constitute such Stockholder's entire interest in the
outstanding capital stock and voting securities of the Company; (iii) the Shares
are, and will be at all times up until the Expiration Date, free and clear of
any liens, claims, options, charges or other encumbrances; and (iv) such
Stockholder's principal residence or place of business is accurately set forth
on the signature page hereto. As used herein, the term "Expiration Date" shall
mean the earlier to occur of (i) the Effective Time or (ii) termination of the
Merger Agreement in accordance with the terms thereof.
(b) Each Stockholder agrees not to transfer (except as may be
specifically required by court order or by operation of law, in which case the
transferee shall agree to be
<PAGE>
bound hereby), sell, exchange, pledge or otherwise dispose of or encumber any
Shares or any New Shares (as defined below), or to make any offer or agreement
relating thereto, at any time prior to the Expiration Date.
1.2. New Shares. Each Stockholder agrees that any shares of capital
stock or voting securities of the Company that such Stockholder purchases or
with respect to which such Stockholder otherwise acquires beneficial ownership
after the date of this Agreement and prior to the Expiration Date ("New Shares")
shall be subject to the terms and conditions of this Agreement to the same
extent as if they constituted Shares.
2. Agreement to Vote Shares and Take Certain Other Action.
(a) Prior to the Expiration Date, at every meeting of the
stockholders of the Company at which any of the following matters is considered
or voted upon, and at every adjournment or postponement thereof, and on every
action or approval by written consent of the stockholders of the Company with
respect to any of the following matters, each Stockholder shall vote or, using
such Stockholder's best efforts, and to the full extent legally permitted, cause
the holder of record to vote such Stockholder's Shares and any New Shares
(except those Shares or New Shares which are not voting securities):
i. in favor of the consummation of the Merger and the adoption of
the Merger Agreement and any proposal or action which would, or could
reasonably be expected to, facilitate the Merger;
ii. against approval of any proposal made in opposition to or in
competition with consummation of the Merger or the adoption of the Merger
Agreement;
iii. against any Competing Transaction with any party other than an
affiliate of Parent as contemplated by the Merger Agreement;
iv. against any liquidation or winding up of the Company; and
v. against any other proposal or action which would, or could
reasonably be expected to, impede, frustrate, prevent, prohibit or
discourage the Merger (each of (ii) through (v) collectively, an "Opposing
Proposal").
Prior to the Expiration Date, each Stockholder, as the holder of
voting stock of the Company, shall be present, in person or by proxy, or, using
such Stockholder's best efforts and to the full extent legally permitted,
attempt to cause the holder of record to be present, in person or by proxy, at
all meetings of stockholders of the Company at which any matter referred to in
this Section 2(a) is to be voted upon so that all Shares and New Shares are
counted for the purposes of determining the presence of a quorum at such
meetings. The Stockholders agree to receive shares of Parent Common Stock as
consideration for the Merger and shall not seek to assert any appraisal rights.
(b) Between the date of this Agreement and the Expiration Date, no
Stockholder will, and will not permit any entity under such Stockholder's
control to, (i) solicit
2
<PAGE>
proxies or become a "participant" in a "solicitation" (as such terms are defined
in Rule 14A under the Exchange Act) with respect to an Opposing Proposal, (ii)
initiate a stockholders' vote with respect to an Opposing Proposal or (iii)
become a member of a "group" (as such term is used in Section 13(d) of the
Exchange Act) with respect to any voting securities of the Company with respect
to an Opposing Proposal.
(c) Notwithstanding the foregoing, nothing in this Agreement shall
limit or restrict any Stockholder from (i) acting in his capacity as a director
or officer of the Company, to the extent applicable, it being understood that
this Agreement shall apply to each Stockholder solely in his capacity as a
stockholder of the Company or (ii) voting in his or her sole discretion on any
matter other than those matters referred to in Section 2(a).
3. Irrevocable Proxy. Each Stockholder hereby agrees to timely
deliver to Parent a duly executed proxy in the form attached hereto as Annex A
(the "Proxy"), such Proxy to cover the issued and outstanding Shares and all
issued and outstanding New Shares in respect of which such Stockholder is the
record holder and is entitled to vote at each meeting of the stockholders of the
Company (including, without limitation, each written consent in lieu of a
meeting) prior to the Expiration Date. In the event that such Stockholder is
unable to provide any such Proxy in a timely manner, such Stockholder hereby
grants Parent a power of attorney to execute and deliver such Proxy for and on
behalf of such Stockholder, such power of attorney, which being coupled with an
interest, shall survive any death, disability, bankruptcy or any other such
impediment of such Stockholder. Upon the execution of this Agreement by each
Stockholder, such Stockholder hereby revokes any and all prior proxies or powers
of attorney given by such Stockholder with respect to voting of the Shares on
the matters referred to in Section 2(a) and agrees not to grant any subsequent
proxies or powers of attorney with respect to the voting of the Shares on the
matters referred to in Section 2(a) until after the Expiration Date.
4. Representations, Warranties and Covenants of Stockholders. Each
Stockholder hereby represents, warrants and covenants to Parent as follows:
(a) Such Stockholder has full power and legal capacity to execute
and deliver this Agreement and to perform his obligations hereunder. This
Agreement has been duly and validly executed and delivered by such Stockholder
and constitutes the valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except as may
be limited by (i) the effect of bankruptcy, insolvency, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally, or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. The execution and delivery of this Agreement by such Stockholder does
not, and the performance of such Stockholder's obligations hereunder will not,
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any right
to terminate, amend, accelerate or cancel any right or obligation under, or
result in the creation of any lien or encumbrance on any Shares or New Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or the Shares or New Shares
are or will be bound or affected.
3
<PAGE>
(b) Such Stockholder has read Section 6.04 of the Merger Agreement
and understands the Company's restrictions thereunder. Such Stockholder shall
not, until the Expiration Date, directly or indirectly, and shall cause its
Representatives not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to the other Stockholders) that constitutes, or may reasonably be expected
to lead to, any Competing Transaction, or enter into or maintain or continue
discussions or negotiate with any person in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its Representatives to take any such
action. Such Stockholder shall notify Parent promptly if any proposal or offer,
or any inquiry or contact with any person with respect thereto, regarding a
Competing Transaction is made, such notice to include the identity of the person
making such proposal, offer, inquiry or contact, and the terms of such Competing
Transaction, and shall keep Parent apprised, on a current basis, of the status
of such Competing Transaction.
(c) Such Stockholder understands and agrees that if such Stockholder
attempts to transfer, vote or provide any other person with the authority to
vote any of its Shares or any New Shares other than in compliance with this
Agreement, the Company shall not, and such Stockholder hereby unconditionally
and irrevocably instructs the Company to not, permit any such transfer on its
books and records, issue a new certificate representing any such Shares or New
Shares or record such vote unless and until such Stockholder shall have complied
with the terms of this Agreement.
5. Additional Documents. Each Stockholder hereby covenants and
agrees to execute and deliver any additional documents necessary or desirable,
in the reasonable opinion of Parent, to carry out the purpose and intent of this
Agreement.
6. Consent and Waiver. Each Stockholder hereby (a) consents to be
bound by the terms of the Escrow Agreement to be executed as provided in Article
X of the Merger Agreement and further consents to the appointment of Baker
Communications Fund, L.P. as the agent of Stockholders pursuant to and on the
terms to be set forth in the Escrow Agreement, and (b) gives any further
consents or waivers that are reasonably required for the consummation of the
Transaction under the terms of any agreement to which such Stockholder is a
party or pursuant to any rights such Stockholder may have; provided, however,
that such Stockholder shall not be required by this Section 6 to give any
consent or waiver in his capacity as a director or officer of the Company.
7. Termination. This Agreement and the Proxy delivered in connection
herewith and all obligations of the Stockholders hereunder and thereunder shall
terminate and shall have no further force or effect as of the Expiration Date.
8. Miscellaneous.
8.1. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
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<PAGE>
8.2. Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any of
the parties without the prior written consent of the others. This Agreement is
intended to bind the Stockholders solely as securityholders of the Company only
with respect to the specific matters set forth herein.
8.3. Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
8.4. Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
the Stockholders set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to Parent upon any such violation,
Parent shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity and the Stockholders hereby waive any and all defenses which could
exist in their favor in connection with such enforcement and waive any
requirement for the security or posting of any bond in connection with such
enforcement.
8.5. Notices. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given (a) when delivered, if
delivered by hand, (b) one business day after transmitted, if transmitted by a
nationally recognized overnight courier service, (c) when telecopied, if
telecopied (which is confirmed), or (d) three business days after mailing, if
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses:
(a) If to a Stockholder, at the address set forth below such
Stockholder's signature at the end hereof.
(b) if to Parent, to:
Micromuse Inc.
139 Townsend Street
San Francisco, California 94107
Attention: General Counsel
Facsimile No.: (415) 538-9091
Telephone No.: (415) 538-9090
5
<PAGE>
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Eric Simonson, Esq.
Facsimile No.: (212) 586-7878
Telephone No.: (212) 581-1600
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
8.6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts or choice of law
rules of any jurisdiction.
8.7. Entire Agreement. This Agreement and the Proxy contain the
entire understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
8.8. Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
8.9. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
[Signature Page Follows]
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
MICROMUSE INC. STOCKHOLDER
By:________________________________ ________________________________________
Name:______________________________ (Signature)
Title:_____________________________
________________________________________
(Signature of Spouse)
________________________________________
(Print Name of Stockholder)
________________________________________
(Print Street Address)
________________________________________
(Print City, State and Zip)
________________________________________
(Print Telephone Number)
________________________________________
(Social Security or Tax I.D. Number)
Total Number of Shares of Company Common Stock owned on the date hereof:
Common Stock: _________________________
State of Residence:____________________
<PAGE>
ANNEX A TO VOTING AGREEMENT
IRREVOCABLE PROXY
TO VOTE STOCK OF
NETOPS CORPORATION
The undersigned stockholder of NetOps Corporation, a Delaware
corporation ("Company"), hereby irrevocably appoints the members of the Board of
Directors of Micromuse Inc., a Delaware corporation ("Parent"), and each of
them, or any other designee of Parent, as the sole and exclusive attorneys and
proxies of the undersigned, with full power of substitution and resubstitution,
to vote and exercise all voting rights (to the full extent that the undersigned
is entitled to do so) with respect to all of the issued and outstanding shares
of capital stock of the Company that now are owned of record by the undersigned
(collectively, the "Shares"), in accordance with the terms of this Irrevocable
Proxy. The Shares beneficially owned by the undersigned stockholder of the
Company as of the date of this Irrevocable Proxy are listed on the final page of
this Irrevocable Proxy. Upon the undersigned's execution of this Irrevocable
Proxy, any and all prior proxies given by the undersigned with respect to the
voting of any Shares on the matters referred to in the third full paragraph of
this Irrevocable Proxy are hereby revoked and the undersigned agrees not to
grant any subsequent proxies with respect to such matters until after the
Expiration Date (as defined below).
This Irrevocable Proxy is irrevocable, is coupled with an interest,
and is granted in consideration of Parent entering into that certain Agreement
and Plan of Merger and Reorganization (the "Merger Agreement") by and among
Parent, Salamander Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and the Company, which Merger Agreement
provides for the merger of Merger Sub with and into the Company (the "Merger").
As used herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Merger shall become effective in accordance with
the terms and provisions of the Merger Agreement, and (ii) the date of
termination of the Merger Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting rights of the undersigned with respect to the Shares
(including, without limitation, the power to execute and deliver written
consents), at every annual, special or adjourned meeting of the stockholders of
the Company and in every written consent in lieu of such meeting:
(a) in favor of the consummation of the Merger and the adoption of
the Merger Agreement and any proposal or action which would, or could reasonably
be expected to, facilitate the Merger;
(b) against approval of any proposal made in opposition to or in
competition with consummation of the Merger or the adoption of the Merger
Agreement;
<PAGE>
(c) against any Competing Transaction (as defined in the Merger
Agreement) with any party other than an affiliate of Parent as contemplated by
the Merger Agreement;
(d) against any liquidation or winding up of the Company; and
(e) against any other proposal or action which would, or could
reasonably be expected to, impede, frustrate, prevent, prohibit or discourage
the Merger.
The attorneys and proxies named above may not exercise this
Irrevocable Proxy on any other matter except as provided above. The undersigned
stockholder may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
[Signature Page Follows]
<PAGE>
This Irrevocable Proxy is coupled with an interest as aforesaid and
is irrevocable.
Dated: ________, 2000
________________________________________
(Signature of Stockholder)
________________________________________
(Print Name of Stockholder)
Shares beneficially owned:
_______________________ shares of
Company Common Stock
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
<PAGE>
Annex B
STOCKHOLDER REPRESENTATION LETTER
THIS STOCKHOLDER REPRESENTATION LETTER (the "Stockholder's Letter")
is entered into as of the 21st day of June, 2000 between Micromuse Inc., a
Delaware corporation ("Parent"), and the undersigned stockholder (the
"Stockholder") of NetOps Corporation, a Delaware corporation "(NetOps").
RECITALS
A. Parent, Salamander Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and NetOps have entered into
an Agreement and Plan of Merger and Reorganization, dated as of June 21, 2000
(the "Merger Agreement"), pursuant to which Parent has agreed to acquire the
outstanding securities of NetOps pursuant to a statutory merger of Merger Sub
with and into NetOps (the "Merger"). Capitalized terms used and not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement.
B. Upon the consummation of the Merger and in connection therewith,
the outstanding shares of capital stock of NetOps will be converted into, and
undersigned Stockholder will become the owner of, shares of common stock of
Parent (the "Parent Shares").
C. Pursuant to the Merger Agreement, an Escrow Agreement (the
"Escrow Agreement") has been entered into among Parent, merger Sub, NetOps, an
escrow agent and First Union National Bank, as agent (the "Stockholders'
Agent"), on behalf of the stockholders of NetOps (collectively, the
"Stockholders").
D. Concurrently with the execution of the Merger Agreement and as a
condition to Parent entering into the Merger Agreement, certain of the
Stockholders have entered into an agreement to, among other things, vote the
shares of capital stock of NetOps ("NetOps Capital Stock") owned by such person
in favor of the consummation of the Merger and the adoption of the Merger
Agreement and against any Competing Transaction.
E. The undersigned Stockholder understands and acknowledges that
NetOps, Parent and their respective stockholders, as well as legal counsel to
NetOps and Parent, are entitled to rely on (x) the truth and accuracy of the
undersigned Stockholder's representations contained herein and (y) the
undersigned Stockholder's performance of the obligations set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants set forth in the Merger Agreement and in
this Stockholder's Letter, it is hereby agreed as follows:
1. Share Ownership and Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Stockholder represents and warrants to
Parent that, immediately prior to the Effective Time, Stockholder was the
beneficial owner of that
<PAGE>
number of shares of NetOps Capital Stock set forth on the signature page hereto
(the "Shares") and, except as otherwise set forth on the signature page hereto,
(i) held such NetOps Capital Stock at all times since the date set forth on such
signature page, and (ii) did not acquire any shares of NetOps Capital Stock in
contemplation of the Merger. These Shares constituted the Stockholder's entire
interest in the outstanding NetOps Capital Stock. No other person or entity not
a signatory to this Stockholder's Letter had as of the Effective Time, or has, a
beneficial interest in or a right to acquire such Shares or any portion of such
Shares (except, with respect to Stockholders which are partnerships, partners of
such Stockholders). The Shares are, and will be at all times up until the
Effective Time, free and clear of any liens, claims, options, charges or other
encumbrances[, other than repurchase rights in favor of NetOps].
2. Representations, Warranties and Covenants of Stockholder.
(a) Purchase Entirely for Own Account. The Parent Shares being
acquired by Stockholder pursuant to the Merger will be acquired for investment
for Stockholder's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and Stockholder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Stockholder's Letter, Stockholder further represents
that Stockholder does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of such Parent Shares.
(b) Investment Experience. Stockholder has, alone or with its
"purchaser representative" (as defined below), substantial experience evaluating
and investing in securities of companies and acknowledges that it has the
capacity to protect its own interests in connection therewith, can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Merger Shares. If other than an individual,
Stockholder also represents it has not been organized for the purpose of
acquiring the Parent Shares.
(c) Compliance With Regulation D. Stockholder either
(i)(A) is an "accredited investor" within the meaning of Securities
and Exchange Commission ("SEC") Rule 501 of Regulation D, as presently in
effect, or (B) has delivered an Investor Suitability Questionnaire to
Parent describing Stockholder's ability to evaluate an investment in the
Parent Shares, or (C) has appointed a "purchaser representative," as
defined in SEC Rule 501 of Regulation D, to evaluate Stockholder's
investment in the Parent Shares; or.
(ii)(A) is not a "U.S. person" within the meaning of SEC Rule 902 of
Regulation S, as presently in effect and is not acquiring the Parent
Shares for the account or benefit of any U.S. person, and (B) will resell
the Parent Shares only in accordance with the provisions of Regulation S,
pursuant to registration under the Securities Act or pursuant to an
available exemption from registration under the Securities Act, and (C)
will not engage in hedging transactions with regard to the Parent Shares
unless in compliance with the Securities Act.
2
<PAGE>
(d) Restricted Securities. Stockholder understands that the Parent
Shares are characterized as "restricted securities" under the United States
federal securities laws inasmuch as they are being acquired from Parent in a
transaction not involving a public offering and that under such laws and
applicable regulations, such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. In this connection, Stockholder represents that is
familiar with SEC Rule 144 as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
(e) Further Limitations on Disposition. Stockholder agrees not to
offer, sell, exchange, transfer, pledge or otherwise dispose of any of the
Parent Shares unless at that time either:
(i) such transaction is permitted pursuant to the provisions
of Rule 144 under the Securities Act;
(ii) counsel representing the undersigned Stockholder,
reasonably satisfactory to Parent, shall have advised Parent in a written
opinion letter reasonably satisfactory to Parent and Parent's counsel, and upon
which Parent and its counsel may rely, that no registration under the Securities
Act is required in connection with the proposed sale, transfer or other
disposition;
(iii) a registration statement under the Securities Act (a
"Registration Statement") covering the Parent Shares proposed to be old,
transferred or otherwise disposed of, describing the manner and terms of the
proposed sale, transfer or other disposition, and containing a current
prospectus, is filed with the SEC and made effective under the Securities Act;
or
(iv) an authorized representative of the SEC shall have
rendered written advice to the undersigned Stockholder (sought by the
undersigned Stockholder or counsel to the undersigned Stockholder, with a copy
thereof and of all other related communications delivered to Parent) to the
effect that the SEC will take no action, or that the staff of the SEC will not
recommend that the SEC take action, with respect to the proposed offer, sale,
exchange, transfer, pledge or other disposition if consummated.
(g) The Stockholder will observe and comply with the
Securities Act and the General Rules and Regulations thereunder, as now in
effect and as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, exchange, transfer, pledge or
other disposition of the Parent Shares or any part thereof.
(h) Stockholder understands that Stockholder is bound by the
provisions of the Escrow Agreement in the form attached as an annex to the
Merger Agreement, and Article X of the Merger Agreement, and as such,
Stockholder ratifies the appointment of the Stockholder's Agent prior to the
Closing and further agrees to be bound by the terms of the Escrow Agreement and
Article X of the Merger Agreement.
(i) Stockholder agrees that it is solely responsible for
understanding and evaluating the tax risks and consequences of the Merger and
the transactions contemplated
3
<PAGE>
by the Merger Agreement and Stockholder has either consulted with its tax
advisor or determined not to consult with its tax advisor. Stockholder hereby
agrees not to make any claim for damages against or otherwise seek any amount
from Parent or its affiliates, either directly or as a successor in interest to
NetOps, on account of any tax liability, including penalties and interest,
incurred by Stockholder as a result of the merger and the transactions
contemplated by the Merger Agreement.
3. Additional Documents. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent, to carry out the purpose and intent of this
Agreement.
4. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder may have.
5. Confidentiality. Stockholder agrees (i) to hold any information
regarding this Stockholder's Letter and the Merger in strict confidence and (ii)
not to divulge any such information to any third person until such time as the
Merger has been publicly disclosed by Parent; provided, however, that
Stockholder may disclose such information to Stockholder's legal and financial
advisors who agree to be bound by this covenant.
6. Miscellaneous.
6.1 Severability. If any term, provision, covenant or restriction of this
Stockholder's Letter is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Stockholder's Letter shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
6.2 Binding Effect and Assignment. This Stockholder's Letter and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Stockholder's
Letter nor any of the rights, interests or obligations of the parties hereto may
be assigned by either of the parties without the prior written consent of the
other. This Stockholder's Letter is intended to bind Stockholder as a
Stockholder of NetOps only with respect to the specific matters set forth
herein.
6.3 Amendment and Modification. This Stockholder's Letter may not be
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
6.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity and the Stockholder hereby waives any and all defenses which could
exist in its favor in connection
4
<PAGE>
with such enforcement and waives any requirement for the security or posting of
any bond in connection with such enforcement.
6.5 Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Stockholder's Letter
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed by registered or certified mail, postage prepaid, as follows:
(a) If to Stockholder, at the address set forth below Stockholder's
signature at the end hereof.
(b) If to Parent:
Micromuse Inc.
139 Townsend Street
San Francisco, CA 94107
Attention: General Counsel
Facsimile No.: (415) 538-9091
Telephone No.: (415) 538-9090
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, NY 10019
Attention: Eric Simonson, Esq.
Facsimile No.: (212) 586-7878
Telephone No.: (212) 237-2528
(c) if to NetOps, to:
Net Ops Corporation
501 Washington Avenue
Pleasantville, NY 10570
Attention: Louis A. Steinberg
Telephone: (914) 747-7627
with a copy to:
Meltzer, Lippe, Goldstein & Schlissel
190 Willis Avenue
Mineola, NY 11501
Attention: David I. Schaffer, Esq.
Facsimile No.: (516) 747-0653
Telephone No.: (516) 747-0300
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
5
<PAGE>
6.6 Governing Law. This Stockholder's Letter shall be governed by,
construed and enforced in accordance with the laws of the State of New York.
6.7 Entire Agreement. This Stockholder's Letter contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
6.8 Counterparts. This Stockholder's Letter may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
6.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this
Stockholder's Letter.
(Signature page follows)
6
<PAGE>
MICROMUSE INC.
________________________________________
Name:
Title:
STOCKHOLDER
Name:
________________________________________
________________________________________
(Address)
________________________________________
(Telephone Number)
________________________________________
(Social Security or Tax I.D. Number)
Total Number of Shares of NetOps Capital Stock owned on the date hereof:
Common Stock: _______________________________
State of Residence: _________________________
7
<PAGE>
ANNEX C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into as of [ ], 2000,
by and among Micromuse Inc., a Delaware corporation ("Micromuse"), Salamander
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Micromuse ("Merger Sub"), First Union National Bank, as Escrow Agent (the
"Escrow Agent"), NetOps Corporation, a Delaware corporation ("NetOps"), and
Baker Communications Fund, L.P., as Stockholders' Agent, on behalf of each of
the stockholders of NetOps listed on Schedule A hereto (collectively, the
"Stockholders").
WHEREAS, Micromuse, Merger Sub and NetOps have entered into an Agreement
and Plan of Merger and Reorganization dated as of June 21, 2000 (the "Merger
Agreement");
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure various obligations of the Stockholders on the terms and
subject to the conditions set forth in the Merger Agreement and set forth
herein; and
WHEREAS, Micromuse, Merger Sub, Escrow Agent, NetOps and the Stockholders'
Agent (the "Parties") desire to establish the terms and conditions pursuant to
which such escrow account will be established and maintained.
NOW, THEREFORE, the Parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Appointments. First Union National Bank hereby accepts its appointment
as Escrow Agent hereunder. Micromuse hereby appoints its President and Chief
Financial Officer and its Senior Vice President, Secretary and General Counsel
to act, either jointly or individually, on behalf of Micromuse for all purposes
hereunder (each, a "Micromuse Agent"). Each of the Stockholders has heretofore
appointed Baker Communications Fund, L.P. as its agent and representative to act
on behalf of the Stockholders on all matters relating to this Agreement, upon
the terms and subject to the conditions hereinafter set forth (the
"Stockholders' Agent"). The actions of a Micromuse Agent or the Stockholders'
Agent under or pursuant to this Agreement shall be binding on Micromuse and the
Stockholders, respectively.
3. Consent of NetOps. Pursuant to the Merger Agreement, NetOps has
consented to the establishment of this escrow to secure certain obligations
under Article X of the Merger Agreement and certain other obligations in the
manner set forth therein.
4. Escrow and Indemnification.
(a) Escrow of Shares of Parent Common Stock. As soon as reasonably
practicable after the Effective Time, Micromuse shall deposit, on behalf of the
Stockholders, with the Escrow Agent one or more certificates representing an
aggregate of twenty percent (20%) of the shares of Parent Common Stock (the
"Escrow Shares") to be issued pursuant to Section 3.01 of the Merger Agreement,
issued in the name of the Stockholders (along with stock powers, endorsed in
blank, with respect to such Escrow Shares) in the respective amounts set forth
on Schedule A hereto. The Escrow Agent agrees to accept delivery of the Escrow
Shares and to hold the Escrow Shares in an escrow account
<PAGE>
(the "Escrow Account"), on the terms and subject to the conditions of this
Agreement. The Escrow Account shall be an interest bearing account to the extent
of any cash maintained therein.
(b) Distributions and Dividends. All cash dividends and other
distributions on Escrow Shares or additional shares of capital stock issued on
or with respect to the Escrow Shares as a result of stock splits, stock
dividends or other similar capital adjustments to, or recapitalizations on, the
Escrow Shares shall be delivered by Micromuse to the Escrow Agent and
distributed to the Stockholders in proportion to their interests in the Escrow
Shares.
(c) Voting of Shares and Other Rights. All voting rights with
respect to Escrow Shares may be exercised by the Stockholders in accordance with
their proportionate interests therein, and the Escrow Agent shall from time to
time execute and deliver to the Stockholders such proxies, consents or other
documents as may be necessary to enable the Stockholders to exercise such
rights. In the absence of any exercise of such voting rights with respect to
Escrow Shares by the Stockholders, neither the Stockholders' Agent nor the
Escrow Agent shall vote any of the Escrow Shares. While the Escrow Shares remain
in the possession of the Escrow Agent pursuant to the terms of this Agreement,
the Stockholders shall retain and be able to exercise all other incidents of
ownership of the Escrow Shares that are not inconsistent with this Agreement.
(d) Transferability; Sale. The interest of the Stockholders in the
Escrow Shares shall not be assignable or transferable so long as such Escrow
Shares are held by the Escrow Agent hereunder; provided, however, that the
Escrow Agent may sell, transfer, or otherwise dispose of the Escrow Shares
pursuant to Section 5 and 6 hereof, and as otherwise provided in this Agreement.
5. Release of Escrow Shares.
(a) At any time, and from time to time, prior to twelve (12) months
after the Effective Date (the "Termination Date"), Micromuse may make claims, in
the manner set forth in Section 6 hereof, for payment against the Escrow Shares
if it (or any other Indemnified Person) has paid or incurred Damages and is
entitled to indemnification under Article X of the Merger Agreement. The
Stockholders' Agent, on behalf of each of the Stockholders, agrees that the
Stockholders shall indemnify and hold harmless any Indemnified Person for such
Damages pursuant to Section X of the Merger Agreement. Any of the Escrow Shares
to be released pursuant to this Section 5(a), after application of Section 6
hereof, shall be valued in accordance with the terms of this Agreement.
(b) After the Termination Date, upon delivery of a notice executed
jointly by both a Micromuse Agent and the Stockholders' Agent to the Escrow
Agent (subject to the matters provided for in Section 5(c) below), the Escrow
Agent shall deliver and/or submit for transfer, delivery and assignment to each
of the Stockholders such Stockholder's pro rata portion of the Escrow Shares not
subject to outstanding Claim Notices (as defined herein).
(c) Notwithstanding the foregoing, if on the Termination Date a
Micromuse Agent or an Indemnified Person has previously given any Claim Notices
(as defined herein) that have not then been resolved in accordance with Section
6 below, the Escrow Agent shall retain in the Escrow Account an amount of Escrow
Shares having a Fair Market Value (as defined in Section 7 hereof) equal to the
aggregate Claimed Amount (as defined herein) covered by all such Claim Notices
that have not then been resolved. Any Escrow Shares retained in escrow pursuant
to this Section 5(c) shall be disbursed in accordance with the terms of the
resolution of the claims relating to any of the Escrow Shares retained
hereunder.
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<PAGE>
6. Administration of Escrow Account for Indemnification Claims. With
respect to indemnification claims, the Escrow Agent shall administer the Escrow
Account as follows:
(a) The release of Escrow Shares shall be applied to each
Stockholder in the proportion that the Escrow Shares of such Stockholder bears
to the sum of Escrow Shares then remaining in the Escrow. In lieu of releasing
any fractional Escrow Shares, any fraction of a released Escrow Share that would
otherwise be released shall be rounded to the nearest whole share of Parent
Common Stock (with one-half of a share being rounded upward).
(b) If an Indemnified Person has incurred or suffered Damages for
which it is entitled to indemnification by the Stockholders under the Merger
Agreement, the Indemnified Person or a Micromuse Agent shall, prior to the
Termination Date, give written notice of such claim (a "Claim Notice") to the
Stockholders' Agent. The Stockholders Agent shall provide copies of such notice
to the Stockholders. Each Claim Notice shall state the amount of Damages claimed
(the "Claimed Amount") and the basis for such claim.
(c) Claims for indemnification involving a claim or legal proceeding
by a third party shall be made in accordance with the procedures set forth in
the Merger Agreement and the provisions of this Section 6. For indemnification
claims not involving any claim or legal proceeding by a third party, the
procedures herein alone shall apply. Within twenty (20) business days of receipt
by the Stockholders' Agent of a Claim Notice, the Stockholders' Agent shall
provide to the party providing the Claim Notice (with a copy to the Escrow
Agent) a written response (the "Response Notice") in which the Stockholders'
Agent shall either: (i) agree that Escrow Shares having a Fair Market Value (as
computed pursuant to Section 7 below) equal to the full Claimed Amount may be
released from the Escrow Account to the Indemnified Person, (ii) agree that
Escrow Shares having a Fair Market Value equal to part, but not all, of the
Claimed Amount may be released from the Escrow Account to the Indemnified
Person, or (iii) contest that any of the Escrow Shares may be released from the
Escrow Account to the Indemnified Person. The Stockholders' Agent may contest
the release of Escrow Shares having a Fair Market Value equal to all or a
portion of the Claimed Amount only if the Stockholders' Agent has a good faith
belief that all or such portion of the Claimed Amount does not constitute
Damages for which the Indemnified Person is entitled to indemnification under
the Merger Agreement. If no Response Notice is delivered to, and received by the
Escrow Agent and the party providing the Claim Notice prior to twenty (20)
business days of receipt of the Claim Notice, the Stockholders' Agent shall be
deemed to have agreed that Escrow Shares having a Fair Market Value equal to all
of the Claimed Amount may be released to the Indemnified Person from the Escrow
Account. Notwithstanding any terms of this Agreement to the contrary, no Claim
Notice or Response Notice shall be deemed to have been delivered to the Escrow
Agent until it is actually received by the Escrow Agent at the address set forth
in Section 12 hereof.
(d) If the Stockholders' Agent agrees (or is deemed to have agreed)
that Escrow Shares having a Fair Market Value equal to all of the Claimed Amount
may be released from the Escrow Account to the Indemnified Person, the Escrow
Agent shall promptly thereafter transfer, deliver and assign to the Indemnified
Person the Escrow Shares having a Fair Market Value equal to the Claimed Amount
(or such lesser amount of Escrow Shares as are then held in the Escrow Account).
(e) If the Stockholders' Agent agrees that Escrow Shares having a
Fair Market Value equal to part, but not all, of the Claimed Amount (the
"Partial Agreed Amounts") may be released from the Escrow Account to the
Indemnified Person, the Escrow Agent promptly shall transfer, deliver and assign
to the Indemnified Person Escrow Shares having a Fair Market Value equal to the
sum of all Partial Agreed Amounts (or such lesser amount of Escrow Shares as are
then held in the Escrow Account).
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<PAGE>
(f) If the Stockholders' Agent contests the release of Escrow Shares
having a Fair Market Value equal to all or part of the Claimed Amount (the
"Contested Amount"), the Stockholders' Agent and the Indemnified Person shall
attempt promptly and in good faith to agree upon the rights of the parties with
respect to the Contested Amount. If the parties should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
delivered to the Escrow Agent and, if such agreement provides that all or a
portion of the Contested Amount is to be paid to the Indemnified Person, the
Escrow Agent shall promptly transfer, assign and deliver to the Indemnified
Person from the Escrow Account an amount of Escrow Shares having a Fair Market
Value equal to the amount so agreed. If no such agreement can be reached within
15 days, the matter shall be settled by binding arbitration in New York City,
New York. Notwithstanding the foregoing, the parties may defer arbitration to a
mutually agreeable later date. All claims shall be settled by a single
arbitrator mutually agreeable to the Micromuse Agent and the Stockholders'
Agent, or if they cannot agree on a single arbitrator in 20 days, by three
arbitrators, in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association (the "AAA Rules"). The Party against
whom a judgment is made or against whom an award is entered shall pay the costs
of arbitration and the other Party's reasonable out of pocket costs and
expenses, including without limitation, reasonable attorney's fees. The
arbitrator's decision shall relate solely to whether the Indemnified Person is
entitled to receive the Contested Amount (or a portion thereof) pursuant to the
applicable terms of the Merger Agreement and this Agreement. The final decision
of the arbitrator, or a majority of the arbitrators in the case of three
arbitrators, shall be furnished to the Stockholders' Agent and the Micromuse
Agent in writing and shall constitute a conclusive determination of the issue in
question, binding upon the Stockholders and Micromuse, and shall not be
contested by any of them. Such decision may be used in a court of law only for
the purpose of seeking enforcement of the arbitrator's award. Either the
Stockholders' Agent or a Micromuse Agent may deliver a memorandum to the Escrow
Agent setting forth such arbitrator's decision in accordance with the second
sentence of this paragraph. The parties hereto agree that all arbitration
proceedings conducted pursuant to this Agreement shall be held confidential.
(g) After delivery of a Response Notice that the Claimed Amount is
contested by the Stockholders' Agent, the Escrow Agent shall continue to hold in
the Escrow Account an amount of Escrow Shares having a Fair Market Value
sufficient to cover the Contested Amount (up to the amount of Escrow Shares then
available in the Escrow Account), notwithstanding the occurrence of the
Termination Date, until (i) delivery of a copy of a settlement agreement
executed by a Micromuse Agent and the Stockholders' Agent setting forth
instructions to the Escrow Agent as to the release of Escrow Shares that shall
be made with respect to the Contested Amount or (ii) delivery of a copy of the
final award of the arbitrator, or a majority of the arbitrators in the case of
three arbitrators, and the memo referenced in the last sentence of the preceding
paragraph setting forth instructions to the Escrow Agent as to the release of
Escrow Shares that shall be made with respect to the Contested Amount. The
Escrow Agent shall thereupon release Escrow Shares from the Escrow Account (up
to the amount of Escrow Shares then available in the Escrow Account) in
accordance with such agreement or instructions.
7. Valuation of Escrow Shares. For purposes of this Agreement, the Fair
Market Value of each of the Escrow Shares shall be the Parent Stock Price, with
appropriate adjustment to take into account any stock split, reverse stock
split, stock dividend, recapitalization or other similar capital adjustments
with respect to Micromuse's common stock. The Fair Market Value shall be
calculated as set forth above jointly by the Micromuse Agent and the
Stockholders' Agent, and the results of such calculation shall be provided to
the Escrow Agent.
8. Fees and Expenses of the Escrow Agent. Micromuse hereby agrees to pay
all of the Escrow Agent's reasonable fees and expenses, including attorneys
fees, travel expenses, postal and delivery charges, and all other out-of-pocket
expenses, in accepting and performing its appointment as escrow agent hereunder
(collectively, the "Escrow Agent Expenses").
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<PAGE>
9. General Terms and Standards Regarding the Escrow Agent. Notwithstanding
any terms of this Agreement to the contrary, each term of this Agreement,
including without limitation each of the stated duties and responsibilities of
the Escrow Agent set forth herein, shall be subject to the following terms and
conditions:
(a) The duties, responsibilities and obligations of the Escrow Agent
shall be limited to those expressly set forth in this Agreement (and the duty to
exercise reasonable care in the physical safekeeping of any property held in
escrow hereunder), and no implied duties, responsibilities or obligations shall
be read into this Agreement against the Escrow Agent. Without limiting the
generality of the foregoing, the Escrow Agent shall have no duty to take action
to preserve or exercise rights in any property held by it hereunder (including,
without limitation, against prior parties or otherwise).
(b) The Escrow Agent shall not be subject to, bound by, charged with
notice of or be required to comply with or interpret any agreement or document
(including without limitation the Merger Agreement) between or among the
interested parties (whether or not reference to any such other agreement or
documents is expressed herein) other than this Agreement.
(c) The Escrow Agent shall in no instance be under any duty to give
any property held by it hereunder any greater degree of care than it gives its
own similar property. The Escrow Agent shall not be required to invest any funds
held hereunder, and shall not be obligated to pay interest on uninvested funds.
All amounts received by the Escrow Agent (and any credits to the Escrow Account)
shall be conditional upon collection (and actual receipt by the Escrow Agent of
final payment). In no event shall the Escrow Agent have any obligation to
advance funds.
(d) The Escrow Agent may rely upon, and shall be protected in acting
or refraining from acting upon, any written notice, instruction, statement,
request, waiver, order, judgement, certification, consent, receipt or other
paper or document furnished to it (not only as to genuineness, but also as to
its due execution and validity, the genuineness of signatures appearing thereon
and as to the truth and accuracy of any information therein contained), which it
in good faith believes to be genuine and signed or presented by the proper
person.
(e) Neither the Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any error of judgment, or for any act
done or step taken or omitted to be taken by it or any of its directors,
officers or employees, or for any mistake of fact or law, or for anything which
it, or any of its directors, officers or employees, may do or refrain from doing
in connection with or in the administration of this Agreement, unless and except
to the extent the same constitutes gross negligence, bad faith or willful
misconduct on the part of the Escrow Agent. In no event shall the Escrow Agent
be liable for any indirect, punitive, special or consequential damages, or any
amount in excess of the value of the Escrow Shares (as of the date of the action
or omission giving rise to liability).
(f) The Escrow Agent shall not be deemed to have notice of any fact,
claim or demand with respect hereto unless actually known by an officer charged
with responsibility for administering this Agreement or unless in writing
received by the Escrow Agent and making specific reference to this Agreement.
(g) No provision of this Agreement shall require the Escrow Agent to
expend or risk its own funds, or to take any legal or other action hereunder
which might in its judgement involve it in, or require it to incur in connection
with the performance of its duties hereunder, any expense or any financial
liability unless it shall be furnished with indemnification acceptable to it.
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<PAGE>
(h) Any permissive right of the Escrow Agent to take any action
hereunder shall not be construed as duty.
(i) All indemnifications contained in this Agreement shall survive
the resignation or removal of the Escrow Agent, and shall survive the
termination of this Agreement.
(j) The Escrow Agent is not responsible for the recitals appearing
in this Agreement. The recitals shall be deemed to be statements of the
interested parties to this Agreement.
(k) The Escrow Agent has no responsibility for the sufficiency of
this Agreement for any purpose. Without limiting the foregoing, if any security
interest is referred to herein, the Escrow Agent shall have no responsibility
for, and makes no representation or warranty as to, the creation, attachment or
perfection of any such security interest or the sufficiency of this Agreement
therefor.
(l) Nothing in this Agreement shall obligate the Escrow Agent to
qualify to do business or act in any jurisdiction in which it is not presently
qualified to do business, or be deemed to impose upon the Escrow Agent the
duties of a trustee. The duties of the Escrow Agent under this Agreement are
strictly ministerial in nature.
(m) In no event shall the Escrow Agent have any liability for any
failure or inability of any of the interested parties to perform or observe his
or its duties under the Agreement, or by reason of a breach of this Agreement by
either of the interested parties. In no event shall the Escrow Agent be
obligated to take any action against any of the interested parties to compel
performance hereunder.
(n) The Escrow Agent shall in no instance be obligated to commence,
prosecute or defend any legal proceedings in connection herewith. The Escrow
Agent shall be authorized and entitled, however, in any instance to commence,
prosecute or defend any legal proceedings in connection herewith, including
without limitation any proceeding it may deem necessary to resolve any matter or
dispute, to obtain a necessary declaration of rights, or to appoint a successor
upon resignation (and after failure by the interested parties to appoint a
successor, as provided in Section 13).
(o) Whenever the terms hereof call for any notice, payment or other
action on a day which is not a business day, such payment or action may be
taken, or such notice given, as the case may be, on the next succeeding business
day. As used herein, "business day" shall mean any day other than a Saturday or
Sunday, or any other day on which the Escrow Agent is closed for business.
(p) In the event of any ambiguity or uncertainty under this
Agreement, or in any notice, instruction, or other communication received by the
Escrow Agent hereunder, the Escrow Agent may, in its reasonable discretion,
refrain from taking action, and may retain the Escrow Shares, until and unless
it receives written instruction signed by all interested parties, or a decision
by a court of competent jurisdiction which eliminates such uncertainty or
ambiguity.
(q) If at any time Escrow Agent is served with any judicial or
administrative order, judgement, decree, writ or other form of judicial
administrative process which in any way relates to or affects the Escrow Shares
(including but not limited to orders of attachment or garnishment or other forms
of levies or injunctions or stays relating to the Escrow Shares), Escrow Agent
is authorized to comply therewith in any manner as it or its legal counsel
reasonably deems appropriate; and if the Escrow Agent complies with any such
judicial or administrative order, judgement, decree, writ or other form of
judicial or administrative process, Escrow Agent shall not be liable to any of
the Parties hereto or to any
6
<PAGE>
other person or entity notwithstanding that though such order, judgement,
decree, writ or process may be subsequently modified, annulled, set aside,
vacated, found to have been without proper jurisdiction, or otherwise determined
to have been without legal force or effect.
(r) The Escrow Agent shall have no liability for the actions or
omissions of any transfer agent, book-entry depository, nominee, correspondent,
subagent or subcustodian, except to the extent that such action or omission of
any transfer agent, book-entry depository, nominee, correspondent, subagent or
subcustodian was caused by the Escrow Agent's own gross negligence, bad faith or
willful misconduct.
(s) The parties understand that the Escrow Shares are not subject to
an effective registration statement at the time of this Agreement, and that the
Escrow Agent shall not be responsible for fluctuations in the market in
connection with any transfer of the shares. Notwithstanding the foregoing, the
Escrow Shares shall be subject to registration as set forth in Section 3.08 of
the Merger Agreement.
10. Indemnification.
(a) General. Each of the Stockholders (severally as a group) and
Micromuse, jointly and severally, hereby covenant and agree to indemnify the
Escrow Agent for, and to defend and hold harmless the Escrow Agent from and
against, any and every loss, liability, damage, claim, cost and expense of any
nature incurred or suffered by the Escrow Agent and arising out of or in
connection with this Agreement or the administration of this Agreement or the
performance or observance by the Escrow Agent of its responsibilities or
services under this Agreement (including but not limited to reasonable attorneys
fees and other costs and expenses of defending or preparing to defend against
any claim or liability), unless and except to the extent such loss, liability,
damage, cost or expense shall be caused by the Escrow Agent's own willful
misconduct, bad faith or gross negligence; provided, that any indemnification
payment required to be made to the Escrow Agent by the Stockholders should be
made from, and as a charge against, the Escrow Account.
(b) Tax-Related Matters. Each of the Stockholders (severally as a
group) and Micromuse, jointly and severally, agree to assume any and all
obligations imposed now or hereafter by any applicable tax law with respect to
the payment of Escrow Shares under this Agreement, and, without limiting the
generality of Section 10(a) above, hereby agree to indemnify and hold the Escrow
Agent harmless from and against any taxes, additions for late payment, interest,
penalties and other expenses, that may be assessed against the Escrow Agent on
any such payment or other activities under this Agreement. Micromuse and each of
the Stockholders undertake to instruct the Escrow Agent in writing with respect
to the Escrow Agent's responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting in connection with its acting as Escrow Agent under this Agreement.
Each of the Stockholders (severally as a group) and Micromuse, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless from any
liability on account of taxes, assessments or other governmental charges,
including without limitation the withholding or deduction or the failure to
withhold or deduct same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to which the
Escrow Agent may be or become subject in connection with or which arises out of
this Agreement (other than with respect to fees and expenses payable to the
Escrow Agent or the Stockholders' Agent hereunder), including costs and expenses
(including reasonable legal fees), interest and penalties. The interested
parties shall each promptly provide to Escrow Agent with appropriate IRS Forms
W-9 for taxpayer identification number certifications, or Forms W-8 for
nonresident alien certifications in connection with any payments to be made to
them.
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11. Termination. If this Agreement is not terminated pursuant to Section 5
above, this Agreement shall terminate upon the later of the Termination Date or
the distribution by the Escrow Agent of all of the Escrow Account in accordance
with this Agreement, provided that the provisions of Sections 9 and 10 above
shall survive such termination.
12. Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, on the date of transmittal of services via telecopy to the party to
whom notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, or by a nationally recognized courier service, and
properly addressed as follows (or at such other address for a party as shall be
specified by like notice):
To Micromuse at: Micromuse Inc.
139 Townsend Street
San Francisco, California 94107
Attention: James De Golia, Esq.
General Counsel
Telecopy No.: (415) 538-9091
With a copy to: Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, NY 10019
Attention: Eric Simonson, Esq.
Telecopy No.: (212) 586-7878
To the Stockholders Agent: Baker Communications Fund, L.P.
540 Madison Avenue
New York, NY 10022
Attention: Lawrence Bettino
Telecopier: (212) 486-0410
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Stephen Kuhn
Telecopier: (212) 872-1002
To Escrow Agent at: First Union National Bank
NJ3201
21 South Street, 3rd Floor
Morristown, NJ 07960
Tel: (973) 898-7162
Fax: (973) 682-4531
Attention: Linda Schneider
Notwithstanding anything herein to the contrary, any party may give any
notice, request, demand, claim or other communication hereunder by personal
delivery or telecopy, but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth. Copies of any notice, request, demand, claim or other
communication hereunder by personal delivery or telecopy given to the Escrow
Agent by either party, shall be delivered to the other party as soon thereafter
as practicable.
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13. Successor Escrow Agent. (a) In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by
delivering a resignation to the parties, not less than 60 days prior to the date
when such resignation shall take effect. Micromuse may appoint a successor
Escrow Agent with the consent of the Stockholders' Agent, which shall not be
unreasonably withheld. If, within such notice period, Micromuse provides to the
Escrow Agent written instructions with respect to the appointment of a successor
Escrow Agent and directions for the transfer of any Escrow Shares then held by
the Escrow Agent to such successor, the Escrow Agent shall act in accordance
with such instructions and promptly transfer such Escrow Shares to such
designated successor. If no successor is so appointed, the Escrow Agent may
apply to a court of competent jurisdiction for such appointment.
(b) Successor Stockholders' Agent. In the event the Stockholders'
Agent becomes unavailable or unwilling to continue in its capacity herewith, the
Stockholders' Agent may resign and be discharged from its duties or obligations
hereunder by delivering a resignation to the parties, not less than 60 days
prior to the date when such resignation shall take effect. A majority of the
Stockholders in interest may appoint a successor Stockholders' Agent. If no
successor is so appointed, the Stockholders' Agent may apply to a court of
competent jurisdiction for such appointment.
14. Agreements among Stockholders and Stockholders' Agent.
(a) Notwithstanding any contrary provision of this Agreement, it is
agreed by and among the Stockholders and the Stockholders' Agent, that the
Stockholders' Agent shall take and perform each of the following actions only
upon compliance with the written instructions of Stockholders who then own in
the aggregate at least a majority of the Escrow Shares then held in the Escrow
Account: (i) any response to a Claim Notice, (ii) any amendment of this
Agreement, (iii) in the event the Stockholders' Agent has contested the release
of Escrow Shares, any agreement, pursuant to Section 6(f) hereof, upon the
rights of the parties with respect to the Contested Amount, including any
settlement of an arbitration thereunder, and (iv) any agreement upon a successor
Escrow Agent as provided in Section 13 hereof.
(b) In the event of any arbitration pursuant to Section 6(f) hereof,
the Stockholders' Agent will use its best efforts to keep the Stockholders
informed of the progress and status of the arbitration and to consult with the
Stockholders whenever and to the extent practicable as to all material matters
of the arbitration, and will not settle any such arbitration without the
requisite approval as provided in Section 14(a) hereof.
(c) In the event the Stockholders shall not give to the
Stockholders' Agent any necessary instructions as provided in Section 14(a)
hereof at least two business days prior to the date of any action required to be
taken by the Stockholders' Agent under this Agreement, then the Stockholders'
Agent is hereby authorized by the Stockholders to take such actions as in the
exercise of its best business judgment it deems necessary and proper to assert
or protect the rights of the Stockholders under the Merger Agreement and this
Agreement.
(d) Except as otherwise set forth in this Section 14, neither the
Stockholders' Agent nor any of its directors, officers, employees or agents
shall be liable to the Stockholders or anyone else for any error of judgment, or
for any act done or step taken or omitted to be taken by it or any of its
directors, officers, employees or agents, or for any mistake of fact or law, or
for anything which it, or any of its directors, officers, employees or agents,
may do or refrain from doing in connection with this Agreement, unless and
except to the extent the same constitutes gross negligence, bad faith or willful
misconduct on the part of the Stockholders' Agent. In no event shall the
Stockholders' Agent be liable for
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<PAGE>
any indirect, punitive, special or consequential damages, or any amount in
excess of the value of the Escrow Shares (as of the date of the action or
omission giving rise to liability).
(e) Anything to the contrary in this Section 14 notwithstanding, the
Escrow Agent, the Micromuse Agent, Micromuse and any Indemnified Party shall be
entitled to rely on any action purported to be taken by the Stockholders' Agent
pursuant to this Agreement, without regard to whether such action was taken with
the requisite authority of the Stockholders.
(f) For all purposes under this Agreement, the Stockholders' Agent
may rely on the addresses for the respective Stockholders as reflected in the
records of NetOps as of the Effective Time unless any Stockholder provides
written notice of a change in its address to the Stockholders' Agent.
(g) All of the Stockholders' Agent's reasonable expenses, including
attorneys fees, postal and delivery charges and all other out-of-pocket
expenses, in performing its appointment as Stockholders' Agent hereunder shall
be reimbursed to the Stockholders Agent in Escrow Shares out of the Escrow
Account, provided that such expenses to be reimbursed out of the Escrow Account
shall not exceed $10,000.
15. General.
(a) Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
regard to conflict-of-law and choice of law principles and shall be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for the provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire understanding
and agreement of the Parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, written or
oral, between the Parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of a Micromuse Agent, the Escrow Agent and the Stockholders' Agent.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have duly executed this Escrow Agreement
as of the day and year first above written.
MICROMUSE, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
SALAMANDER ACQUISITION CORP.
By:_____________________________________
Name:___________________________________
Title:__________________________________
NETOPS CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
FIRST UNION NATIONAL BANK,
as Escrow Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
BAKER COMMUNICATIONS FUND, L.P.,
as Stockholders' Agent:
By:_____________________________________
Name:___________________________________
Title:__________________________________
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Schedule A
ESCROW SHARES
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Name of Registered Holder Certificate Number Number of Shares
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[List all stockholders]
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Annex D-1
_____ __, 2000
The Stockholders of
Net Ops Corporation
501 Washington Avenue
Pleasantville, NY 10570
Ladies and Gentlemen:
We have acted as counsel for Micromuse Inc., a Delaware corporation
("Parent"), in connection with the merger (the "Merger") of Salamander
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent
("Newco"), with and into NetOps Corporation, a Delaware corporation (the
"Company"), pursuant to the Agreement and Plan of Merger and Reorganization
dated as of June 21, 2000 (the "Merger Agreement") by and among Parent, Newco
and the Company. This opinion is rendered to you pursuant to Section 8.02(d) of
the Merger Agreement. Capitalized terms used herein and not otherwise defined
shall have the same meanings given to such terms in the Merger Agreement.
In connection with this opinion, we have examined originals, or copies of
(i) the executed Merger Agreement; (ii) the executed Escrow Agreement dated the
date hereof by and among Parent, Newco, First Union National Bank, Baker
Communication Fund, L.P. as representative of the stockholders of the Company,
and the Company; (the "Escrow Agreement"); and (iii) such corporate documents or
records of Parent and such other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. The documents
listed as items (i) through (iii) above are referred to herein as the
"Transaction Documents."
In connection with the opinions expressed herein we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by Parent and Newco pursuant to the Merger
Agreement and upon certificates and statements of government officials and of
officers of Parent and Newco. We have reviewed the Certificate of Incorporation
and Bylaws of Parent on file with the United States Securities and Exchange
Commission and have assumed that there have been no amendments to such documents
that have not been so filed. We have assumed for the purposes of this opinion
letter the genuineness of all signatures, the legal capacity of natural persons,
the authenticity of the documents submitted to us as originals, the
<PAGE>
conformity to the original documents of all documents submitted to us as
certified, facsimile or photostatic copies, and the authenticity of the
originals of such copies.
In rendering this opinion letter we have also assumed: (i) that the
Transaction Documents have been duly and validly executed and delivered by or on
behalf of each party thereto other than Parent and Newco, that each party to the
Transaction Documents other than Parent and Newco has the power to enter into
and perform its obligations thereunder and that the Transaction Documents
constitute legal, valid, binding and enforceable obligations of each such party;
(ii) that the representations and warranties made in the Transaction Documents
by the parties thereto other than Parent and Newco are true and correct; and
(iii) that each party to the Transaction Documents other than Parent and Newco
has filed any required state franchise, income or similar tax returns and has
paid any required state franchise, income or similar taxes.
We are expressing no opinion as to (i) compliance by Parent or Newco with
any state or federal antifraud laws, or any federal or state securities or blue
sky laws, or (ii) the tax consequences or accounting treatment of the Merger. In
addition, we express no opinion herein with respect to the application of any
state or federal antitrust laws, including the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
The opinions hereinafter expressed are qualified to the extent that (a)
the enforceability of any of the agreements, documents or obligations referred
to herein may be subject to or affected by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally, and (b) the enforceability of such agreements,
documents or obligations may be limited by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, and public policy, whether applied by a court of law or
equity. We do not express any opinion herein as to the availability of any
equitable or other specific remedy upon breach of any of the agreements,
documents or obligations referred to herein. We render or imply no opinion with
respect to compliance with applicable anti-fraud statutes, rules or regulations
of applicable state or Federal law.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications, and exceptions set forth herein, we
are of the opinion that:
1. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted. Newco is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted.
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2. Parent has full corporate power and authority to execute, deliver, and
perform its obligations under the Merger Agreement and the Escrow Agreement and
to consummate the transactions contemplated thereby. Parent has taken all
requisite corporate action to approve and adopt the Merger Agreement and the
Escrow Agreement and to approve and to authorize the carrying out of the
transactions contemplated thereunder. The Merger Agreement and the Escrow
Agreement have been duly executed and delivered by Parent and constitute legal,
valid and binding obligations of Parent, enforceable against Parent in
accordance with their respective terms; provided that enforceability of the
indemnity obligations contained in such agreements may be limited by applicable
law or public policy.
3. Newco has full corporate power and authority to execute, deliver, and
perform its obligations under the Merger Agreement. Newco has taken all
requisite corporate action to approve and adopt the Merger Agreement and to
approve and to authorize the carrying out of the transactions contemplated
thereunder. The Merger Agreement has been duly executed and delivered by Newco
and constitutes a legal, valid and binding obligation of Newco, enforceable
against Newco in accordance with its terms; provided that enforceability of the
indemnity obligations contained in such agreement may be limited by applicable
law or public policy.
4. The approval of the stockholders of Parent is not required for the
consummation of the transactions contemplated by the Merger Agreement. The
shares of Parent Common Stock to be delivered in exchange for shares of Company
Common Stock and Company Preferred Stock, when issued as contemplated by the
Merger Agreement, (i) will be validly issued, fully paid and non-assessable, and
(ii) will not be issued in violation of any statutory preemptive rights or, to
our knowledge, similar contractual rights granted by Parent.
5. The execution, delivery and performance of the Merger Agreement and the
Escrow Agreement by Parent and the performance of the transactions contemplated
by the Merger Agreement and the Escrow Agreement by Parent and the consummation
of the Merger do not conflict with or constitute a violation under the
Certificate of Incorporation or By-laws of Parent or (a) violate any law, rule
or regulation of which we are aware or any judgment, award, decree or order of
any court or other agency of government known to us or (b) conflict with, result
in a breach of or constitute a default (with due notice or lapse of time or
both) under any indenture, agreement or other instrument to which Parent is a
party or by which Parent or any of its properties are bound and which has been
filed by Parent with the United States Securities and Exchange Commission. The
execution, delivery and performance of the Merger Agreement by Newco and the
performance of the transactions contemplated by the Merger Agreement by Newco
and the consummation of the Merger do not conflict with or constitute a
violation under the Certificate of Incorporation or By-laws of Newco or (a)
violate any law, rule or regulation of which we are aware or any judgment,
award, decree or order of any court or other agency of government known to us or
(b) conflict with, result, in a breach of or constitute a default (with
3
<PAGE>
due notice or lapse of time or both) under any material indenture, agreement or
other instrument to which Newco is a party or by which Newco or any of its
properties are bound.
6. To our knowledge, no private or governmental suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation is
pending before any agency, court or tribunal, foreign or domestic or threatened
against Parent or Newco or any of their respective assets or properties or any
of their respective officers or directors in their capacities as such which
seeks to prohibit, restrain, enjoin or materially alter or delay any of the
transactions contemplated by the Merger Agreement.
Whenever a statement herein is qualified by the expressions "known to us,"
"to our knowledge," "we are not aware" or a similar phrase or expression with
respect to our knowledge of matters of fact, it is intended to mean that our
knowledge is based upon the records, documents, instruments, and certificates
described above and the current actual knowledge of the attorneys in this firm
who have devoted substantive attention to the transactions contemplated by the
Merger Agreement and the Escrow Agreement (but not including any constructive or
imputed notice of any information) and that we have not otherwise undertaken any
independent investigations for the purpose of rendering this opinion.
This opinion relates solely to the laws of the State of New York, the
General Corporation Law of the State of Delaware and applicable Federal laws of
the United States, and we express no opinion with respect to the effect or
applicability of the laws of other jurisdictions.
The opinions expressed herein are solely for your benefit in connection
with the above transactions and may not be delivered to, quoted or relied upon
in any manner or for any purpose by any other person.
Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to Parent or Newco. We assume no obligation to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
Sincerely,
BROBECK, PHLEGER & HARRISON LLP
4
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Annex D-2
FORM OF OPINION OF COUNSEL TO THE COMPANY
1. NetOps Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
2. The authorized capital stock of NetOps Corporation consists of 20,000,000
shares of Common Stock, par value $0.01 per share, and 10,000,000 shares
of Preferred Stock, par value $0.01 per share. Based on our review of the
stock records of NetOps Corporation, as of the Effective Date, 4,642,085
shares of Common Stock, 1,500,000 shares of Series A Preferred Stock and
3,171,667 shares of Series B Preferred Stock are issued and outstanding,
all of which (i) have been duly authorized and are validly issued and,
assuming that the agreed consideration for the Common Stock has been duly
received by NetOps Corporation, fully paid and nonassessable, and (ii) are
held of record by the Stockholders named in Schedule A to the Escrow
Agreement. There are no statutory preemptive rights and except as
disclosed in the Merger Agreement or the disclosure schedules thereto to
our knowledge, there are no other subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities or other
commitments, arrangements or agreements of any character outstanding
relating to the issued or unissued capital stock or other securities of
NetOps Corporation or otherwise obligating NetOps Corporation to issue,
transfer or sell any such securities or to repurchase, redeem or otherwise
acquire any such securities.
3. NetOps Corporation has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Merger Agreement
and the Escrow Agreement and to consummate the transactions contemplated
thereby. NetOps Corporation has taken all necessary corporate action to
approve and adopt the Merger Agreement and the Escrow Agreement and to
approve and to authorize the performance of the transactions contemplated
thereby. The Merger Agreement and the Escrow Agreement have been duly and
validly executed and delivered by NetOps Corporation and constitute the
legal, valid and binding obligations of NetOps Corporation, enforceable
against it in accordance with their respective terms; provided that
enforceability of the indemnity obligations contained in such agreements
may be limited by applicable law or public policy.
4. The execution and delivery of the Merger Agreement and the Escrow
Agreement by NetOps Corporation and the performance by NetOps Corporation
of its obligations thereunder and the consummation of the Merger (a) did
not and will not conflict with or violate any provision of the Certificate
of Incorporation or Bylaws of NetOps Corporation, and (b) did not and will
not violate, result in a breach of or constitute a default (with due
notice or lapse of time or both) under any (i) law, rule or regulation or
any judgment, order or decree specifically naming NetOps Corporation and
known to us, or (ii) agreement or instrument which is identified on the
disclosure schedules to the Merger Agreement to which NetOps Corporation
is a party or by which NetOps Corporation or any of its properties or
assets are bound, other than the agreements or instruments as to which you
have agreed that any requisite consent of the parties thereto
<PAGE>
other than NetOps Corporation to an assignment thereof shall not be
obtained, as specified on such disclosure schedules.
5. To our knowledge, no private or governmental action, suit, proceeding,
claim, arbitration or investigation is pending before any agency, court or
tribunal, foreign or domestic, or threatened against NetOps Corporation
nor any of its properties or any of its officers or directors (in their
capacities as such), and there is no judgment, decree or order against
NetOps Corporation nor any of its properties or any of its officers or
directors (in their capacities as such) that could prevent, restrain,
enjoin or materially alter or delay any of the transactions contemplated
by the Merger Agreement.
2
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Date: ________________________ Annex E
Micromuse Inc.
139 Townsend Street
San Francisco, CA 94107
Subject: PROPRIETARY INFORMATION, INVENTIONS AND
NON-SOLICITATION AGREEMENT
Ladies and Gentlemen:
The following confirms an agreement between Micromuse Inc., a Delaware
corporation (the "Company"), and any successor in interest, and me, which is a
material part of the consideration for my employment by the Company.
1. Proprietary Information. I recognize that the Company is engaged in a
continuous program of research, development, and production. I also
recognize that the Company possesses or has rights to information
developed by me during my employment by the Company which has commercial
value in the Company's business ("Proprietary Information"). By way of
illustration, but not limitation, Proprietary Information includes
inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data,
clinical data, financial data, personnel data, computer programs, customer
and supplier lists, and contacts at or knowledge of customers or
prospective customers of the Company that relate to the business of the
Company.
2. Obligation of Confidentiality. I understand and agree that my employment
creates a relationship of confidence and trust between the Company and me
with respect to (1) all Proprietary Information, and (2) the confidential
information of others with which the Company has a business relationship.
At all times, both during my employment by the Company and after its
termination, I will keep in confidence and trust all such information and
I will not use or disclose any such information without written consent of
the Company, except as may be necessary in the ordinary course of
performing my duties to the Company.
3. Disclosure and Assignment of Inventions. In addition, I hereby agree as
follows:
(a) All Proprietary Information shall be the sole property of the
Company and its assigns, and the Company and its assigns shall be
sole owner of all trade secrets, patents, trademarks, copyrights,
and other rights in connection therewith. I hereby assign to the
Company any rights I may have or acquire in such Proprietary
Information.
(b) All documents, records, apparatus, equipment and other physical
property, whether or not pertaining to Proprietary Information,
furnished to me by the Company or produced by me or others in
connection with my employment shall be and remain the sole property
of the Company. I shall return to the Company all such materials and
property upon termination of my employment by me or by
<PAGE>
the Company for any reason, and I will not take with me any such
material or property or any reproduction thereof upon such
termination.
(c) I will promptly disclose to the Company, or any persons designated
by it, all improvements, inventions, works of authorship, formulas,
ideas, processes, techniques, know-how, and data, whether or not
patentable that relate to the business of the Company (collectively,
"Inventions"), made or conceived, reduced to practice or learned by
me, either alone or jointly with others, during the term of my
employment and for one year thereafter.
(d) All Inventions which I conceive, develop or have developed (in whole
or in part, either alone or jointly with others) and 1) which use or
have used equipment, supplies, facilities or trade secret
information of the Company, or 2) which use or have used the hours
for which I am to be or was compensated by the Company, or 3) which
directly relate at the time of conception or reduction to practice
thereof to the business of the Company or to its actual or
demonstrably anticipated research and development or 4) which result
from any work performed by me for the Company and its assigns to the
fullest extent permitted by law shall be deemed works made for hire,
and the Company and its assigns shall be the sole owner of all
patents, copyrights, and other rights in connection therewith. I
hereby assign to the Company any rights I may have or acquire in
such Inventions. I agree that any Invention made or conceived,
reduced to practice or learned by me, either alone or jointly with
others, within one (1) year after the term of my employment shall be
presumed to be covered by the assignment contained herein. I
understand that I may overcome the presumption by showing that such
Invention does not meet the criteria listed in subsections (1)
through (4) above.
(e) With respect to Inventions described in paragraph (d) above, I will
assist the Company in every proper way (but at the Company's
expense) to obtain and from time to time enforce patents, copyrights
or other rights on said Inventions in any and all countries, and
will execute all documents reasonably necessary or appropriate for
this purpose. This obligation shall survive the termination of my
employment, but the Company shall compensate me at a reasonable rate
after such termination for time actually spent by me at the
Company's request on such assistance. In the event that the Company
after reasonable effort is unable for any reason whatsoever to
secure my signature to any document reasonably necessary or
appropriate for any of the forgoing purposes, (including renewals,
extensions, continuations, divisions or continuations in part), I
hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents, as my agents and attorneys-in-fact,
to act on my behalf and instead of me, but only for the purpose of
executing and filing any such document and doing all other lawfully
permitted acts to accomplish the forgoing purposes with the same
legal force and effect as if executed by me.
(f) I understand that this Agreement does not require assignment of
rights to an Invention for which no equipment, supplies, facility,
or trade secret information of
2
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the Company was used and which was developed entirely on my own
time, unless the Invention relates 1) directly to the business of
the Company at the time of conception, or 2) to the Company's actual
or demonstrably anticipated research or development. However, I will
disclose any Inventions as required by paragraph (c) above in order
to permit the Company to determine such issues as may arise. Such
disclosures shall be received in confidence by the Company.
(g) In the event any dispute arises as to whether an Invention relates
to the business of the Company, the parties hereby agree to resolve
such dispute by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association in new
York, New York.
4. Other Business Activities. So that the Company may be aware of the extent
of any other demands upon my time and attention, I will disclose to the
Company (such disclosure to be held in confidence by the Company) the
nature and scope of any other business activity in which I am or become
engaged during the term of my employment. During the term of my
employment, I will not engage in any business activity which is related to
the Company's business or its actual or demonstrably anticipated research
and development.
5. Non-Solicitation of Employees, Customers, and Others. I will not now or in
the future disrupt, damage, impair or interfere with the business of the
Company, whether by way of interfering with or raiding its employees,
disrupting its relationships with customers, agents, vendors, distributors
or representatives, or otherwise. During my employment with the Company
and for one (1) year thereafter, I will not encourage or solicit any
employee of the Company to leave the Company for any reason; provided,
however, that this obligation shall not affect any responsibility I may
have as an employee of the Company with respect to the bona fide hiring
and firing of Company personnel.
6. Prior Invention. As a matter of record I hereby assign to Company all
Inventions and improvements that relate to the business of Quallaby
Corporation which have been made or conceived or first reduced to practice
by me, alone or jointly with others, during my employment by Quallaby
Corporation or that were incorporated into or made a part of the products
or other intellectual property of Quallaby Corporation.
7. Obligations to Former Employers. I represent that my execution of this
Agreement, my employment with the Company and my performance of my
proposed duties to the Company in the development of its business will not
violate any obligations I may have to any former employer or any third
party, including any obligations to keep confidential any proprietary or
confidential information. I have not entered into, and I will not enter
into, any agreement which conflicts with or would, if performed by me,
cause me to breach this Agreement. I represent that Exhibit A attached
hereto is a complete schedule of all material agreements that I have or
had with my former employers. I further represent that I have no knowledge
of any pending or threatened litigation to which the Company may become a
party by virtue of my association with the Company. I further agree to
immediately inform the Company of any such pending or threatened
litigation should it come to my attention during the course of my
employment.
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8. Confidential Information of Former Employers. In the course of performing
my duties to the Company, I will not utilize any proprietary or
confidential information of any former employer nor violate any written or
oral, express or implied agreement with any former employer.
9. United States Government Obligations. I acknowledge that the Company from
time to time may have agreements with other persons or with the United
States Government, or agencies thereof, which impose obligations or
restrictions on the Company regarding inventions made during the course of
work under such agreements or regarding the confidential nature of such
work. I agree to be bound by all such obligations and restrictions which
are made known to me and to take all action necessary to discharge the
obligations of the Company under such agreements.
10. Miscellaneous.
(a) If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions shall be
construed, if possible, so as to be enforceable under applicable
law, or else such provision shall be excluded from this Agreement
and the balance of the Agreement shall be interpreted as if such
provision were excluded and shall be enforceable in accordance with
its terms.
(b) No delay or omission by the Company in exercising any right
hereunder will operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar
to or waiver of any right on any other occasion.
(c) I expressly consent to be bound by the provisions hereof for the
benefit of the Company or any subsidiary or affiliate thereof to
whose employ I may be transferred without the necessity that this
Agreement be reassigned at the time of such transfer.
(d) This Agreement shall be effective as of the commencement of my
employment relationship and shall be governed and construed under
the laws of the State of New York without regards to the application
of choice of law rules.
(e) This Agreement shall be effective as of the earlier of the first day
on which I receive Proprietary Information or the first day of my
employment by the Company. This Agreement shall be binding upon me,
my heirs, executors, assigns and administrators and shall inure to
the benefit of the Company and its successors and assigns.
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Employee Signature: __________________________
Printed Name: ________________________________
Social Security #_____________________________
Accepted and Agreed to:
MICROMUSE INC.
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
5
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Exhibit A
Material Agreements
<PAGE>
Annex F
CERTIFICATE OF INCORPORATION
OF
SALAMANDER ACQUISITION CORP.
ARTICLE I.
The name of this Corporation is Salamander Acquisition Corp.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware and the County of Kent is 9 East Loockerman Street, Dover, Delaware
19901 and the name of the registered agent at that address is National
Registered Agent, Inc.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV.
The name of the Corporation's incorporator is Adam Braverman and the
incorporator's mailing address is Brobeck, Phleger & Harrison LLP, 1633
Broadway, 47th Floor, New York, New York 10019.
ARTICLE V.
This Corporation is authorized to issue one hundred (100) shares of stock,
par value $0.01 per share, all of which shall be designated "Common Stock."
ARTICLE VI.
A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
any improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the
<PAGE>
personal liability of directors then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware as so amended.
Any repeal or modification of the foregoing provisions of this Article VI
by the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE VII.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE VIII.
Election of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
ARTICLE IX.
The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be fixed from time to time by, or in the
manner provided in, the Bylaws of the Corporation or in an amendment thereof
duly adopted by the Board of Directors of the Corporation or by the stockholders
of the Corporation.
ARTICLE X.
Meetings of stockholders of the Corporation may be held within or without
the State of Delaware, as the Bylaws of the Corporation may provide. The books
of the corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors of the Corporation or in
the Bylaws of the Corporation.
ARTICLE XI.
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation.
2
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________________________________________
Adam Braverman,
Incorporator
3
<PAGE>
Annex G
BYLAWS
OF
SALAMANDER ACQUISITION CORP.,
a Delaware corporation
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office shall be at the office
of National Registered Agents, Inc., 9 East Loockerman Street in the City of
Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated on an annual basis by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Any other proper business may be transacted
at the annual meeting.
Section 2. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 3. Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, or cause a third party to prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be
<PAGE>
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 4. Special Meetings. Special meetings of the stockholders of this
corporation, for any purpose or purposes, unless otherwise prescribed by statute
or by the Certificate of Incorporation, shall be called by the President or
Secretary at the request in writing of a majority of the members of the Board of
Directors or holders of a majority of the total voting power of all outstanding
shares of stock of this corporation then entitled to vote, and may not be called
absent such a request. Such request shall state the purpose or purposes of the
proposed meeting.
Section 5. Notice of Special Meetings. As soon as reasonably practicable
after receipt of a request as provided in Section 4 of this Article II, written
notice of a special meeting, stating the place, date (which shall be not less
than ten nor more than sixty days from the date of the notice) and hour of the
special meeting and the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such special
meeting.
Section 6. Scope of Business at Special Meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the chairman of the meeting or
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting as provided in Section 5 of this Article
II.
Section 8. Qualifications to Vote. The stockholders of record on the books
of the corporation at the close of business on the record date as determined by
the Board of Directors and only such stockholders shall be entitled to vote at
any meeting of stockholders or any adjournment thereof.
Section 9. Record Date. The Board of Directors may fix a record date for
the determination of the stockholders entitled to notice of or to vote at any
stockholders' meeting and at any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action. The record date shall not be more
than sixty nor less than ten days before the date of such meeting, and not more
than sixty days prior to any other action. If no record date is fixed by the
Board of Directors, the record date for determining stockholders
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entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 10. Action at Meetings. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of applicable law or of the Certificate of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 11. Voting and Proxies. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. Each proxy shall be revocable unless expressly provided therein
to be irrevocable and unless it is coupled with an interest sufficient in law to
support an irrevocable power.
Section 12. Action by Stockholders Without a Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered to the corporation by delivery to its registered office in the State
of Delaware (by hand or by certified or registered mail, return receipt
requested), to its principal place of business, or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded provided, however, that action by written consent to
elect directors, if less than unanimous, shall be in lieu of holding an annual
meeting only if all the directorships to which directors could be elected at an
annual meeting held at the effective time of such action are vacant and are
filled by such action. Prompt notice of the taking of corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take the action were delivered to the
corporation by delivery to its registered office in the State of Delaware (by
hand or by certified or registered mail, return receipt requested), to its
principal place of business, or to an officer or agent of the corporation having
custody of the book in which proceedings or meetings of stockholders are
recorded.
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ARTICLE III.
DIRECTORS
Section 1. Powers. The business of the corporation shall be managed by or
under the direction of its Board of Directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
applicable law or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 2. Number; Election; Tenure and Qualification. The number of
directors which shall constitute the whole board shall be fixed from time to
time by resolution of the Board of Directors or by the Stockholders at an annual
meeting of the Stockholders (unless the directors are elected by written consent
in lieu of an annual meeting as provided in Article II, Section 12); provided
that the number of directors shall be not less than 1 nor more than 5. With the
exception of the first Board of Directors, which shall be elected by the
incorporator, and except as provided in the corporation's Certificate of
Incorporation or in Section 3 of this Article III, the directors shall be
elected at the annual meeting of the stockholders by a plurality vote of the
shares represented in person or by proxy and each director elected shall hold
office until his successor is elected and qualified unless he shall resign,
become disqualified, disabled, or otherwise removed. Directors need not be
stockholders.
Section 3. Vacancies and Newly Created Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director. The directors so chosen shall serve
until the next annual election and until their successors are duly elected and
shall qualify, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by applicable
law. If, at the time of filling any vacancy or any newly created directorship,
the directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 4. Location of Meetings. The Board of Directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Meeting of Newly Elected Board of Directors. The first meeting
of each newly elected Board of Directors shall be held immediately following the
annual meeting of stockholders and no notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held at
such time, the meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by
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the Board of Directors; provided that any director who is absent when such a
determination is made shall be given notice of such location.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the President on two days' notice to each director by mail,
overnight courier service or facsimile; special meetings shall be called by the
President or Secretary in a like manner and on like notice on the written
request of two directors unless the Board of Directors consists of only one
director, in which case special meetings shall be called by the President or
Secretary in a like manner and on like notice on the written request of the sole
director. Notice may be waived in accordance with Section 229 of the General
Corporation Law of the State of Delaware.
Section 8. Quorum and Action at Meetings. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute or by
the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 10. Telephonic Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 11. Committees. The Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Section 12. Committee Authority. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may
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authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to (a) approving, adopting or recommending to the stockholders, any action or
matter expressly required by the General Corporation Law of the State of
Delaware to be submitted to stockholders for approval, or (b) adopting, amending
or repealing any Bylaw of the corporation. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
Section 13. Committee Minutes. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when required to
do so by the Board of Directors.
Section 14. Directors Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 15. Resignation. Any director or officer of the corporation may
resign at any time. Each such resignation shall be made in writing and shall
take effect at the time specified therein, or, if no time is specified, at the
time of its receipt by either the Board of Directors, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective unless expressly so provided in the resignation.
Section 16. Removal. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws or applicable law, any director or the entire Board
of Directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors.
ARTICLE IV.
NOTICES
Section 1. Notice to Directors and Stockholders. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the corporation that the notice
has been given shall in the absence of fraud, be prima facie evidence of the
facts stated therein. Notice to directors may also be given by telephone,
facsimile or telegram (with confirmation of receipt).
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Section 2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. The written waiver need not specify the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at the meeting is not a waiver of
any right to object to the consideration of matters required by the General
Corporation Law of the State of Delaware to be included in the notice of the
meeting but not so included, if such objection is expressly made at the meeting.
ARTICLE V.
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary, a Treasurer
or Chief Financial Officer and such other officers with such other titles as the
Board of Directors shall determine. The Board of Directors may elect from among
its members a Chairman or Chairmen of the Board and a Vice Chairman of the
Board. The Board of Directors may also choose one or more Vice-Presidents,
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person, unless the Certificate of Incorporation or these Bylaws
otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect a President, a Secretary, a
Treasurer and such other officers with such other titles as the Board of
Directors shall determine.
Section 3. Appointment of Other Agents. The Board of Directors may appoint
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 4. Compensation. The salaries of all officers of the corporation
shall be fixed by the Board of Directors or a committee thereof. The salaries of
agents of the corporation shall [be fixed by the Board of Directors] [, unless
fixed by the Board of Directors, be fixed by the President or any Vice-President
of the corporation].
Section 5. Tenure. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the directors of the Board of Directors. Any vacancy occurring in
any office of the corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board and Vice-Chairman of the Board. The
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which the Chairman shall be present. The
Chairman shall have and may exercise
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such powers as are, from time to time, assigned to the Chairman by the Board of
Directors and as may be provided by law. In the absence of the Chairman of the
Board, the Vice Chairman of the Board, if any, shall preside at all meetings of
the Board of Directors and of the stockholders at which the Vice Chairman shall
be present. The Vice Chairman shall have and may exercise such powers as are,
from time to time, assigned to such person by the Board of Directors and as may
be provided by law.
Section 7. President. The President shall be the Chief Executive Officer
of the corporation unless such title is assigned to another officer of the
corporation; in the absence of a Chairman and Vice Chairman of the Board, the
President shall preside as the chairman of meetings of the stockholders and the
Board of Directors; and the President shall have general and active management
of the business of the corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President [or any Vice
President] shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
Section 8. Vice-President. In the absence of the President or in the event
of the President's inability or refusal to act, the Vice-President, if any (or
in the event there be more than one Vice-President, the Vice-Presidents in the
order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting shall have all the powers of and be subject to
all the restrictions upon the President. The Vice-President shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
Section 9. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision the Secretary shall be subject. The
Secretary shall have custody of the corporate seal of the corporation and the
Secretary, or an Assistant Secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
Secretary's signature or by the signature of such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by such officer's signature.
Section 10. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
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Section 11. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors[, President or Chief Executive Officer],
taking proper vouchers for such disbursements, and shall render to the
President, Chief Executive Officer and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all such
transactions as Treasurer and of the financial condition of the corporation. If
required by the Board of Directors, the Treasurer shall give the corporation a
bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the Treasurer's office and for the restoration to
the corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the possession or under the control of the Treasurer that
belongs to the corporation.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if there be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE VI.
CAPITAL STOCK
Section 1. Certificates. The shares of the corporation shall be
represented by a certificate, unless and until the Board of Directors adopts a
resolution permitting shares to be uncertificated. Certificates shall be signed
by, or in the name of the corporation by, (a) the Chairman of the Board, the
Vice-Chairman of the Board, the President or a Vice-President, and (b) the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
certifying the number of shares owned by such stockholder in the corporation.
Certificates may be issued for partly paid shares and in such case upon the face
or back of the certificates issued to represent any such partly paid shares, the
total amount of the consideration to be paid therefor and the amount paid
thereon shall be specified.
Section 2. Class or Series. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative,
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participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware
Corporation Law or a statement that the corporation will furnish without charge,
to each stockholder who so requests, the powers, designations, preferences and
relative participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 3. Signature. Any of or all of the signatures on a certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 5. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
Section 6. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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Section 7. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the applicable provisions, if any, of the Certificate of
Incorporation, may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property or
in shares of capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the Board
of Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the Board of Directors shall think conducive to the interest of the
corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Seal. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 5. Loans. The Board of Directors of this corporation may, without
stockholder approval, authorize loans to, or guaranty obligations of, or
otherwise assist, including, without limitation, the adoption of employee
benefit plans under which loans and guarantees may be made, any officer or other
employee of the corporation or of its subsidiary, including any officer or
employee who is a director of the corporation or its subsidiary, whenever, in
the judgment of the Board of Directors, such loan, guaranty or assistance may
reasonably be expected to benefit the corporation. The loan, guaranty or other
assistance may be with or without interest, and may be unsecured, or secured in
such manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation.
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ARTICLE VIII.
INDEMNIFICATION
Section 1. Scope. The corporation shall, to the fullest extent permitted
by Section145 of the General Corporation Law of the State of Delaware, as that
Section may be amended and supplemented from time to time, indemnify any
director, officer, employee or agent of the corporation, against expenses
(including attorneys' fees), judgments, fines, amounts paid in settlement and/or
other matters referred to in or covered by that Section, by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Section 2. Advancing Expenses. Expenses (including attorneys' fees)
incurred by a present or former director or officer of the corporation in
defending a civil, criminal, administrative or investigative action, suit or
proceeding by reason of the fact that such person is or was a director, officer,
employee or agent of the corporation (or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized by
relevant provisions of the General Corporation Law of the State of Delaware;
provided, however, the corporation shall not be required to advance such
expenses to a director (i) who commences any action, suit or proceeding as a
plaintiff unless such advance is specifically approved by a majority of the
Board of Directors, or (ii) who is a party to an action, suit or proceeding
brought by the corporation and approved by a majority of the Board of Directors
which alleges willful misappropriation of corporate assets by such director,
disclosure of confidential information in violation of such director's fiduciary
or contractual obligations to the corporation, or any other willful and
deliberate breach in bad faith of such director's duty to the corporation or its
stockholders.
Section 3. Liability Offset. The corporation's obligation to provide
indemnification under this Article VIII shall be offset to the extent the
indemnified party is indemnified by any other source including, but not limited
to, any applicable insurance coverage under a policy maintained by the
corporation, the indemnified party or any other person.
Section 4. Continuing Obligation. The provisions of this Article VIII
shall be deemed to be a contract between the corporation and each director of
the corporation who serves in such capacity at any time while this bylaw is in
effect, and any repeal or modification thereof shall not affect any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or thereafter brought
based in whole or in part upon any such state of facts.
Section 5. Nonexclusive. The indemnification and advancement of expenses
provided for in this Article VIII shall (i) not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement or
vote of stockholders or disinterested directors or otherwise, both as to action
in their official capacities and as to action
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in another capacity while holding such office, (ii) continue as to a person who
has ceased to be a director and (iii) inure to the benefit of the heirs,
executors and administrators of such a person.
Section 6. Other Persons. In addition to the indemnification rights of
directors, officers, employees, or agents of the corporation, the Board of
Directors in its discretion shall have the power on behalf of the corporation to
indemnify any other person made a party to any action, suit or proceeding who
the corporation may indemnify under Section 145 of the General Corporation Law
of the State of Delaware.
Section 7. Definitions. The phrases and terms set forth in this Article
VIII shall be given the same meaning as the identical terms and phrases are
given in Section 145 of the General Corporation Law of the State of Delaware, as
that Section may be amended and supplemented from time to time.
ARTICLE IX.
AMENDMENTS
Except as otherwise provided in the Certificate of Incorporation, these
Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, by the
holders of a majority of the outstanding voting shares or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new Bylaws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal Bylaws.
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