<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FEBRUARY 28, 2000 (DECEMBER 11, 1999)
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
SAGENT TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 333-71369 94-3225290
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
800 West El Camino Real, Suite 300
Mountain View, CA 94040
(Address of principal executive offices) (Zip code)
(650) 493-7100
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 11, 1999, Sagent completed its merger with Qualitative
Marketing Software, Inc. (QMS). The merger was accounted for as a pooling of
interests. Sagent issued approximately 2.1 million shares of common stock in
exchange for all outstanding stock of QMS. Sagent also assumed all options to
purchase QMS stock which were converted into options to purchase approximately
438,000 shares of Sagent stock.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
(a) Financial Statements of Business Acquired.
(1) The audited balance sheets of Qualitative Marketing
Software, Inc. as of December 31, 1999 and 1998 and the results of its
operations and its cash flows for the years then ended are filed as an amendment
to the initial report filed December 22, 1999.
(2) The unaudited balance sheets of Qualitative Marketing
Software, Inc. as of September 30, 1999 and the results of its operations and
cash flows for the nine months ended September 30, 1999 and September 30, 1998
are filed as an amendment to the initial report filed December 22, 1999.
(b) Unaudited Pro Forma Combined Condensed Statements of Operations
(1) The unaudited pro forma combined condensed balance sheet as
of September 30, 1999 are filed as an amendment to the initial report filed
December 22, 1999.
(2) The unaudited pro forma combined condensed statements of
operations for the nine months ended September 30, 1999 and the year ended
December 31, 1998 are filed as an amendment to the initial report filed December
22, 1999.
<PAGE> 4
Report of Independent Certified Public Accountants
To the Stockholders
Qualitative Marketing Software, Inc., and subsidiary
Clearwater, Florida
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Qualitative
Marketing Software Inc., and Subsidiary (the "Company") at December 31, 1997 and
1998, and the results of their operations, changes in shareholders' equity and
their cash flows for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
February 24, 2000
<PAGE> 5
QUALITATIVE MARKETING SOFTWARE, INC.
BALANCE SHEETS
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 365 $ 290 $ 454
Accounts receivable 1,393 1,170 1,745
Prepaid expenses and other current assets 575 788 641
------- ------- -------
Total current assets 2,333 2,248 2,840
======= ======= =======
Property and equipment, net 593 788 1,125
Software development costs, net of accumulated
amortization of approximately $0, $231, and
$1,876 (unaudited), respectively 667 1,645 0
Goodwill, net of accumulated amortization of
approximately $37, $111, and $165 (unaudited),
respectively 704 630 576
Deferred charges and other assets 104 110 194
------- ------- -------
Total assets $ 4,401 $ 5,421 $ 4,735
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 430 $ 1,421 $ 1,097
Accrued expenses and other liabilities 753 451 4,544
Deferred revenue 926 1,231 1,215
Current portion of long-term debt and
capital leases 118 974 974
------- ------- -------
Total current liabilities 2,227 4,077 7,830
======= ======= =======
Long-term debt and capital lease obligations 811 397 669
Deferred revenue, long-term 458 319 319
Deferred taxes 31 -- --
Commitments and contingencies (Note 9)
Mandatorily redeemable 6% preferred stock,
$100 par value, 357.08 shares authorized,
issued, and outstanding, due October 1, 2000 36 36 36
Shareholders' equity
Common stock, $0.001 par value; shares
authorized; 79 SHARES issued and outstanding 8 8 8
Treasury stock, at cost (11) (11) (11)
Additional paid-in capital 2,004 3,114 3,427
Accumulated deficit (1,163) (2,519) (7,543)
------- ------- -------
Total shareholders' equity 838 592 (4,119)
======= ======= =======
Total liabilities and shareholders' equity $ 4,401 $ 5,421 $ 4,735
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENTS OF OPERATIONS
IN THOUSANDS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- ---------------------
1997 1998 1998 1999
------ ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue 5,244 7,958 6,206 7,975
Cost of revenue 361 2,144 1,414 3,648
------ ------- ------ -------
Gross profit 4,883 5,814 4,792 4,327
Operating expenses 4,991 7,080 5,055 9,159
------ ------- ------ -------
Loss from operations (108) (1,266) (263) (4,832)
Interest income 2 7 -- --
Interest expense (44) (111) (81) (192)
Other income (expense) -- (186) 14 --
------ ------- ------ -------
Net loss before income tax
(provision)/benefit $ (150) $(1,556) $ (330) $(5,024)
Benefit (provision) for
income taxes (138) 200 200 --
------ ------- ------ -------
Net loss (288) (1,356) (130) (5,024)
====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
IN THOUSANDS
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY TOTAL
---------------- PAID-IN ACCUMULATED STOCK, SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT AT COST EQUITY
------ ------ ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 72 7 1,279 (875) (11) 400
Issuance of common stock 4 1 725 -- -- 725
Net loss -- -- -- (288) -- (288)
--- --- ------ ------- ---- -------
Balances, December 31, 1997, as restated 76 8 2,004 (1,163) (11) 837
Issuance of common stock 4 -- 850 -- -- 851
Stock options granted -- -- 262 -- -- 262
Dividends on preferred stock -- -- (2) -- -- (2)
Net loss -- -- -- (1,356) -- (1,356)
--- --- ------ ------- ---- -------
Balances, December 31, 1998 80 8 3,114 (2,519) (11) 592
Issuance of common stock (unaudited) 1 -- 313 -- -- 313
Net loss (unaudited) -- -- -- (5,024) -- (5,024)
--- --- ------ ------- ---- -------
Balances, September 30, 1999 (unaudited) 81 $8 $3,427 $(7,543) $(11) $(4,119)
=== === ====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 8
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
IN THOUSANDS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ -----------------
1997 1998 1998 1999
------ ------- ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(288) $(1,356) $(130) $(5,024)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 197 566 152 2,028
Stock-based compensation expense 287 262 215 196
Changes in assets and liabilities
Accounts receivable (684) 282 (143) (574)
Prepaid expenses deferred charges
and other assets 188 (275) (1,923) (178)
Accounts payable 215 991 604 (324)
Accrued liabilities 495 (335) 41 4,091
Deferred revenue 459 163 407 (14)
----- ------- ----- ------
Net cash provided by (used in) operating activities 869 298 (777) 201
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (250) (63) (378) (621)
Capitalized software development (1,209)
Acquisition of Smarter Software (667)
----- ------- ----- ------
Net cash used in investing activities (917) (1,272) (378) (621)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 788 261 313
Proceeds from borrowings 573 226 766 441
Payment of debt (196) (115) (146) (170)
------ ------- ----- ------
Net cash provided by financing activities 377 899 881 584
----- ------- ----- ------
Net increase (decrease) in cash and cash equivalents 329 (75) (274) 164
Cash and cash equivalents
Beginning of period 36 365 365 290
----- ------- ----- ------
End of period $ 365 $ 290 $ 91 $ 454
===== ======= ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
QUALITATIVE MARKETING SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Qualitative Marketing Software, Inc. was formed and incorporated in Delaware in
1994. The principal operation of the Company is creating software and
demographic database packages for use by marketing customers for screening
potential clients by geographic, economic or other characteristics.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Qualitative
Marketing Software, Inc. and its wholly owned subsidiary, Smarter Software, Inc.
(the "Company"). All significant intercompany accounts and transactions are
eliminated in consolidation.
REVENUE RECOGNITION
For the year ended December 31, 1997, revenue from the sale of software was
recognized in accordance with Statement of Position ("SOP") 91-1, Software
Review Recognition. Beginning January 1, 1998, revenue from the sale of software
is recognized in accordance with SOP 97-2, "Software Revenue Recognition." SOP
97-2 provides guidance for the recognition of revenue for sales of computer
software. Under SOP 97-2, revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is determinable and
collectibility is probable. Adoption of SOP 97-2 did not have a significant
impact on the Company's revenue recognition policy. Under the provisions of SOP
97-2, the Company recognizes revenue from software license fees upon the
delivery and acceptance of the programs by the customer. Revenue from data and
maintenance contracts is recognized as the services are performed ratably over
the contract period. Revenue from professional consulting services is recognized
as the services are provided. Costs associated with the deferred revenue are
recorded as deferred charges and are recognized ratably over the contract
period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include certain highly liquid investments with
original maturities of three months or less as well as all cash on hand and in
banks.
PROPERTY AND EQUIPMENT
Property and equipment acquisitions are recorded at cost. Depreciation of
property and equipment has been computed using the straight-line method over the
estimated useful lives of the assets, normally five to seven years. Upon sale or
retirement of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and the difference between the
carrying value and any proceeds realized on disposition is charged or credited
operations. Maintenance and repairs are charged to expense as incurred, while
renewals and betterments are capitalized.
RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE COSTS
Research and development costs are expensed as incurred. As required by
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," the
Company expenses costs for the development of new software products and
substantial enhancements to existing software products as incurred until
technological
<PAGE> 10
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
feasibility is established, at which time further development costs are
capitalized. Capitalization of software costs ceases when the product is
available for general release to customers.
Capitalized software costs are recorded at cost less accumulated amortization
and are being amortized using the straight-line method over the estimated
economic lives of the products, normally three years. Included in cost of
revenues is amortization expense associated with capitalized software costs of
approximately $231 for the year ended December 31, 1998. No amortization expense
was recorded for the year ended December 31, 1997, as the capitalized software
was not available for general release to customers. For the nine months ended
September 30, 1999 and 1998, amortization expense was $1,645 (unaudited) and
$173 (unaudited), respectively.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the
assets acquired from Smarter Software, Inc. and is being amortized using the
straight-line method over ten years. The Company periodically assesses the
carrying value of its goodwill in order to determine whether an impairment has
occurred, taking into account the forecasted cash flows to be generated by the
assets to which the goodwill applies. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds discounted cash flows. No impairment
losses have been recognized by the Company.
Included in depreciation and amortization expenses is amortization expense
associated with goodwill of approximately $74 and $37 for the years ended
December 31, 1998 and 1997, respectively. For the nine months ended September
30, 1999 and 1998, amortization expense was $54 (unaudited) and $83 (unaudited),
respectively.
ADVERTISING EXPENSE
The costs incurred for advertising and promotion are expensed when incurred.
Included in selling, general and administrative expenses are advertising
expenses of approximately $255 and $173 for the years ended December 31, 1998
and 1997, respectively. For the nine months ended September 30, 1999 and 1998,
advertising expenses were $100 (unaudited) and $191 (unaudited), respectively.
INCOME TAXES
The Company accounts for income taxes under the principles of SFAS No. 109,
"Accounting for Income Taxes." Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
carrying amounts and tax bases of assets and liabilities using enacted tax rates
in effect in the years in which the differences are expected to reverse.
Valuation allowances are established, as necessary, to reduce deferred tax
assets to the amount that is more likely than not to be realized.
UNAUDITED INTERIM FINANCIAL DATA
The interim financial data as of September 30, 1999 and for the nine months
ended September 30, 1999 and 1998 is unaudited; however, in the opinion of
management, the interim data includes all adjustments consisting only of normal
recurring adjustments, necessary to present fairly the Company's financial
position as of September 30, 1999 and the results of its operations for the nine
months ended September 30, 1999 and 1998.
LONG-LIVED ASSETS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" requires the Company to review long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net undiscounted cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
discounted cash flows. No impairment losses have been recognized by the Company.
<PAGE> 11
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
STOCK OPTIONS
The Company accounts for the issuance of stock options in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. Consequently,
compensation expense is being recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. SFAS No. 123,
"Accounting for Stock-Based Compensation" permits entities to recognize as
expense over the vesting period, the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosures
for employee stock option grants made as if the fair-value-based method defined
in SFAS No. 123 had been applied. The Company has elected to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosures required
by SFAS No. 123.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. DEFERRED CHARGES AND OTHER ASSETS
The components of deferred charges and other assets included in current assets
are as follows at December 31:
<TABLE>
<CAPTION>
1997 1998 9/30/99
(unaudited)
---- ---- -----------
<S> <C> <C> <C>
Draws against commissions $144 $ 49 $128
Tax asset -- 166 --
Prepaid insurance 25 26 48
Deferred charges 318 437 328
Notes receivable 30 20 --
Other 59 90 138
---- ---- ----
$576 $788 $642
==== ==== ====
</TABLE>
The components of deferred charges and other assets which are not current assets
are as follows at December 31:
<TABLE>
<CAPTION>
1997 1998 9/30/99
(unaudited)
---- ---- -----------
<S> <C> <C> <C>
Deferred charges $ 42 $ 32 $ 97
Deposits 31 58 98
Notes receivable 30 10 --
---- ---- ----
$103 $110 $195
==== ==== ====
</TABLE>
<PAGE> 12
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1997 1998 9/30/99
(unaudited)
---- ---- -----------
<S> <C> <C> <C>
Computer equipment $ 737 $1,127 $1,823
Furniture and fixtures 120 163 194
Other 130 124 20
------ ------ ------
987 1,414 2,037
Less accumulated depreciation (394) (626) (912)
------ ------ ------
$ 593 $ 788 $1,125
====== ====== ======
</TABLE>
Depreciation expense related to property and equipment was approximately $232
and $160 for the years ended December 31, 1998 and 1997, respectively. For the
nine months ended September 30, 1999 and 1998, depreciation expense was $286
(unaudited) and $174 (unaudited), respectively.
The Company leases certain equipment under agreements that are classified as
capital leases. The cost of assets under capital leases recorded in the property
and equipment accounts of the Company and the related accumulated amortization
included in accumulated depreciation was approximately $567 and $134,
respectively, as of December 31, 1998, and $174 and $26, respectively, as of
December 31, 1997. For the nine months ended September 30, 1999, cost and
accumulated depreciation was $1,102 (unaudited) and $326 (unaudited),
respectively.
4. ACCRUED LIABILITIES
The components of accrued liabilities, included in current liabilities, are as
follows at December 31:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Accrued payroll $248 $247
Accrued payroll taxes 117 --
Income tax payable 132 --
Customer deposits 180 --
Other accrued liabilities 76 204
---- ----
$451 $753
==== ====
</TABLE>
<PAGE> 13
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
5. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
--------- -----
<S> <C> <C>
Uncollateralized note payable to stockholder, interest payable
quarterly at CitiBank N.A. "prime" plus 1% (8.75% at December
31, 1998), principal due at maturity in September 2000 $ 91 $ 29
Various uncollateralized notes payable to stockholders, interest
payable quarterly at 9%, principal due at maturity through
December 2002 66 64
Uncollateralized note payable to stockholder, interest payable
quarterly at 10%, principal due at maturity in October 1997 7 7
Various uncollateralized notes payable to stockholders, bearing
interest at 9%, monthly principal and interest payments through
January 2000 54 74
Open line of credit with financial institution, interest payable at
CitiBank, N.A. "base" rate plus 1% (8.75% at December 31,
1998), due December, 1999, secured by a commercial security
agreement dated March 19, 1996 555 --
$750,000 line of credit with financial institution, originally due
April 1999, extended to August 30, 1999, collateralized by the
assets of the Company and guaranteed by three stockholders of
the Company,interest payable monthly at CitiBank N.A. "base"
rate plus 1% (8.75% at December 31, 1998) -- 750
Various capital lease obligations, interest at 10%, collateralized
by leased equipment and guaranteed by three stockholders of the
Company, monthly payments through 2001 157 448
-------- -----
Total long-term debt and capital leases 930 1,372
Less current portion of long-term debt and capital leases (119) (974)
-------- -----
Long-term debt and capital leases, net of current maturities $ 811 $ 398
======== =====
</TABLE>
<PAGE> 14
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
The scheduled maturities of long-term debt and minimum future capital lease
payments at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LONG-TERM LEASE
DEBT OBLIGATIONS
--------- -----------
<S> <C> <C>
1999 $792 $220
2000 118 195
2001 -- 95
2002 14 --
---- ----
$924 510
====
Less amount representing interest on obligations under capital lease (62)
Present value of minimum lease payments (including $182,127 ----
due within one year) $448
====
</TABLE>
The terms of the Company's line of credit contain various restrictive covenants.
As of December 31, 1998 and 1997, the Company was either in compliance with
these covenants or has received the appropriate waivers.
The Company recorded interest expense of approximately $24 and $30 on related
party debt as of December 31, 1998 and 1997, respectively.
6. INCOME TAXES
The provision for income taxes consists of the following for the year ended
December 31:
<TABLE>
<CAPTION>
1997 1998
----- ----
<S> <C> <C>
Federal income taxes:
Current (benefit) $ 126 $(200)
Deferred -- --
----- ----
Total federal income taxes (126) 200
----- ----
State income taxes:
Current 11 --
Deferred -- --
----- ----
Total state income taxes 11 --
----- ----
Total income tax benefit $137 (200)
===== ====
</TABLE>
<PAGE> 15
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS
At December 31, 1998 and 1997, the tax effect of the temporary differences that
give rise to the significant portions of the deferred tax assets and deferred
tax liabilities are as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
Deferred tax asset:
<S> <C> <C>
Deferred revenue $ 575 $ 598
Deferred compensation 115 231
Net operating loss -- 264
Deferred tax liability:
Depreciation (35) (40)
-------- --------
655 1,053
Less: valuation allowance (655) (1,053)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
</TABLE>
The Company's income tax expense (benefit) differed from the statutory Federal
rate of 35% as follows:
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Income taxes using the Federal statutory rate $(53) $(544)
State taxes, net of Federal benefit (8) (78)
Permanent differences -- 24
Changes in valuation allowance 198 398
Provision for income taxes 137 (200)
</TABLE>
As of December 31, 1998, the Company had a net operating loss carryforward of
approximately $661 to offset future taxable income. These net operating losses
expire in 2018. The Company has increased its valuation allowance by $398 from
1997 to 1998.
Realization of deferred tax assets is primarily dependent upon generating
sufficient taxable income prior to the expiration of the net operating loss
carryforwards. The Company has provided a full valuation allowance related to
the realizability of the asset. The valuation is based on evidence that it is
more likely than not that the deferred tax asset will not be realized. Such
valuation allowance may be increased or decreased in the future based on the
likelihood of achieving future taxable earnings. The income tax provision
computed by applying the federal statutory rate to income before taxes and the
actual provision for income taxes differ due primarily to the valuation
allowance.
7. MANDATORILY REDEEMABLE PREFERRED STOCK
The Company's 6% preferred stock is redeemable at $100 per share plus declared
and unpaid dividends at the option of the Company. Redemption is required upon
failure by the Company to pay dividends for any two consecutive months or on
October 1, 2000, whichever occurs first. Dividends on the preferred stock are
cumulative from the date of issuance and are to be paid monthly by the Company.
At December 31, 1998, the Company had received a waiver from the preferred stock
shareholder for violation of the dividend payment requirements.
8. PROFIT SHARING PLAN
During 1995, the Company adopted a qualified 401(k) profit sharing plan (the
"Plan") for the benefit of its employees. Employees are eligible to participate
in the Plan after completing six months of employment and reaching at least
twenty-one years of age. Employees may defer up to 15% of their
<PAGE> 16
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
total compensation up to the maximum allowed on an annual basis under IRS
regulations of $10 for the year ended December 31, 1998. The Company is not
required to match any deferrals; however, the Company may, at its discretion,
make profit sharing contributions to the Plan. Vesting of the Company's
contribution is on a graduated schedule, with full vesting after the fifth year
of service with the Company. The Company did not make a matching contribution to
the Plan for the years ended December 31, 1998 and 1997.
9. OPERATING LEASES COMMITMENTS AND CONTINGENCIES
The Company has several noncancelable operating leases, primarily for office
space and office equipment, that expire at various dates through 2002. These
leases require the Company to pay all executory costs such as maintenance and
insurance. Rental expense approximated $592 for operating leases for the year
ended December 31, 1998.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1998 are approximately:
<TABLE>
<S> <C>
1999 $ 528
2000 273
2001 233
2002 216
------
$1,250
======
</TABLE>
Subsequent to December 31, 1998, the Company entered into a noncancelable lease
agreement for additional office space, which requires monthly lease payments of
approximately $45, adjusted for inflation, through July 2004.
LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of its business. It is the opinion of management (based on
advice of legal counsel) that such litigation and claims will be resolved
without material adverse effect on the Company's financial position, results of
operations, or cash flows.
10. STOCK PURCHASE AGREEMENTS
The Company and the principal stockholders have entered into a stock buy-sell
agreement. In the event of death or withdrawal from active employment with the
Company, the stockholder must sell and the Company must redeem all of the
withdrawing stockholder's shares. The redemption value of the shares and the
payout periods vary dependent upon the reason for termination. The Company owns
life insurance policies and disability insurance on the stockholders, to be used
to fund a death or disability buy-out.
11. STOCK OPTIONS
The board of directors (the "Board") of the Company has authorized the issuance
of stock options to various employees. The Board administers the stock options,
selects the eligible employees and eligible participants to whom options will be
granted, determines the number of shares subject to any such options and
interpret, construes and implements the provisions of the stock option plan. The
Board also determines the price to be paid for the shares upon exercise of each
option, the period within which each option may be exercised, and the terms and
conditions of each option.
<PAGE> 17
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
Compensation expense resulting from stock options is measured at the grant date
based upon the difference between the exercise price and the market value of the
common stock as determined by an independent third party. During 1997, the
Company granted 4,664 stock options to employees at an option price ranging from
$54.00 to $157.50. During 1998, the Company granted 5,250 stock options to
employees at an option price ranging from $54.00 to $168.75. Compensation
expense of approximately $262 and $287 was recognized as of December 31, 1998
and December 31, 1997, respectively, in connection with these options. The
vesting periods on these options range from immediately to three years.
A summary of the stock option activity is below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
OUTSTANDING, JANUARY 1, 1997 5 $ 5.00
Granted 5 97.93
---
OUTSTANDING AS OF DECEMBER 31, 1997 10 $ 50.59
Granted 5 161.49
---
OUTSTANDING AS OF DECEMBER 31, 1998 15 $ 89.12
OPTIONS EXERCISABLE AT:
December 31, 1997 7
December 31, 1998 8
</TABLE>
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in recognizing expense for stock based compensation. Had
compensation cost for the Company's stock options grant been determined based on
the minimum value method at the date of grant, consistent with the provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net loss
would have been increased to the pro forma amounts shown below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
------ ----
<S> <C> <C>
NET LOSS:
As presented $288 $1,355
As adjusted (unaudited) $506 $1,532
</TABLE>
The weighted average fair value of options granted during 1998 and 1997
estimated on the date of grant using the Black-Scholes option-pricing method was
$206.29 and $203.39, respectively. The fair value of 1998 and 1997 options
granted is estimated on the date of grant using the following assumptions: no
dividend yield, expected volatility of 60%, risk-free interest rate range of
4.55% to 571% depending on grant date and an expected life ranging from 3 to 10
years.
<PAGE> 18
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
The following table summarizes information about stock options outstanding under
the stock option plan at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER NUMBER
EXERCISE OUTSTANDING REMAINING EXERCISABLE
PRICES (IN THOUSANDS) CONTRACTUAL LIFE (IN THOUSANDS)
- -------- -------------- ---------------- --------------
<S> <C> <C> <C>
$ 5.00 5 2 to 7 years 5
54.00 2 2 to 7 years 2
90.00 1 2 years 1
154.00 1 2 years 1
157.50 1 2 to 4 years 1
168.75 5 3 to 4 years --
</TABLE>
12. ACQUISITION OF SMARTER SOFTWARE, INC.
On July 1, 1997, the Company acquired the outstanding stock of Smarter Software,
Inc. ("Smarter"), a Texas software company.
The purchase agreement called for issuing 4 shares of Quality Marketing
Software, Inc. unregistered, restricted common stock, valued by management at
$725, to the shareholders of Smarter in exchange for 80 shares of Smarter common
stock representing 100% of the stock of that company.
The acquisition was structured to comply with the provisions of Sec. 368 of the
Internal Revenue Code as a Type B tax-free corporate reorganization.
This acquisition has been accounted for as an asset purchase and, accordingly,
the operations of Smarter have been included in the Company's consolidated
operating results since its acquisition date. The cost of this acquisition has
been allocated on the bases of the estimated fair market values of the assets
acquired and the liabilities assumed. This purchase price allocation included
goodwill of approximately $740 which is being amortized on a straight-line basis
over ten years.
Unaudited pro forma operating results for the Company, assuming the acquisition
of Smarter occurred on January 1, 1997, are as follows:
<TABLE>
<CAPTION>
1997
------
<S> <C>
Revenues $5,439
Net loss $ 328
</TABLE>
13. SUBSEQUENT EVENT
On December 11, 1999, the Company was acquired by Sagent Technology, Inc.
("Sagent") for approximately 2.1 million shares of Sagent's common stock valued
at approximately $70 million.
<PAGE> 19
QUALITATIVE MARKETING SOFTWARE, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
IN THOUSANDS EXCEPT PER SHARE DATA
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
On December 11, 1999, Sagent completed its merger with Qualitative
Marketing Software, Inc. (QMS). The merger was accounted for as a pooling of
interests. Sagent issued approximately 2.1 million shares of common stock in
exchange for all outstanding stock of QMS. Sagent also assumed all options to
purchase QMS stock which were converted into options to purchase approximately
438,000 shares of Sagent stock.
The following unaudited pro forma combined condensed balance sheets,
statements of operations and cash flows give effect to the merger between Sagent
and QMS accounted for on a pooling-of-interests basis and are based on each
company's respective historical balance sheets and statements of operations. The
pro forma combined condensed consolidated statements of operations assume the
merger occurred at the beginning of the earliest year presented.
The results of operations of Sagent and QMS for the years ended December
31, 1998 and the nine months September 30, 1999 have been derived from their
respective historical financial statements. The pro forma financial statements
should be read in conjunction with the accompanying notes thereto and with the
historical financial statements and related notes thereto.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if the merger had been consummated at the beginning of
the earliest period presented, nor is it necessarily indicative of future
operating results.
<PAGE> 20
SAGENT TECHNOLOGY, INC., AND QUALITATIVE MARKETING SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
(amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
SAGENT QMS Adjustments Combined
-------- ------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,222 $ 454 $ $ 5,676
Marketable securities 36,795 36,795
Accounts receivable, net 6,924 1,745 8,669
Other current assets 4,711 641 5,352
-------- ------ --- -------
Total current assets 53,652 2,840 56,492
Property and equipment, net 2,424 1,125 3,549
Other assets, net 3,311 770 4,081
-------- ------ --- -------
Total assets $ 59,387 $4,735 $-- $64,122
======== ====== === =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued
liabilities and current
portion of long-term
obligations $ 8,160 $6,615 $-- $14,775
Deferred revenues 2,048 1,215 3,263
-------- ------ --- -------
Total current
liabilities 10,208 7,830 18,038
Long term debt and capital leases 669 669
Deferred revenue, long-term 319 319
Mandatorily redeemable 6% preferred
stock, $100 par value, 357.08
shares authorized issued and
outstanding, due October 1, 2000 36 36
Shareholders' equity:
Capital stock 25 8 (6) [1] 27
Additional paid in capital 81,571 3,427 (5) [1] 84,993
Treasury stock (11) 11 [1] --
Shareholder notes receivable (2,919) (2,919)
Accumulated translation adj 98 98
Accumulated deficit (29,596) (7,543) (37,139)
-------- ------ --- -------
Total shareholders'
equity 49,179 (4,119) -- 45,060
-------- ------ --- -------
Total liabilities and
shareholders' equity $ 59,387 $4,735 $-- $64,122
======== ====== === =======
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
<PAGE> 21
SAGENT TECHNOLOGY, INC., AND QUALITATIVE MARKETING SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(amount in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
SAGENT QMS Adjustments Combined
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Product $16,517 $ 5,486 $22,003
Service and support 7,475 2,489 9,964
------- ------- -------
Total revenue 23,992 7,975 31,967
------- ------- -------
Cost of revenue:
Product 349 1,889 2,238
Service and support 3,504 1,759 5,263
------- ------- -------- -------
Total cost of revenue 3,853 3,648 7,501
------- ------- -------- -------
Gross profit 20,139 4,327 24,466
Operating expenses:
Sales and marketing 13,416 4,348 17,764
Research and development 5,273 4,310 9,583
General and administrative 3,004 501 3,505
------- ------- -------- -------
Total operating expenses 21,693 9,159 30,852
------- ------- -------- -------
Income (loss) from operations (1,554) (4,832) (6,386)
Other income, net 583 (192) 391
------- ------- -------- -------
Net income (loss) (971) (5,024) (5,995)
======= ======= ======== =======
Net income per share - basic $ (0.29)
=======
Net income per share - diluted $ (0.30)
=======
Shares used in per share
calculations - basic 20,368
=======
Shares used in per share
calculations - diluted 20,094
=======
</TABLE>
See notes to unaudited proforma combined condensed financial statements.
<PAGE> 22
SAGENT TECHNOLOGY, INC., AND QUALITATIVE MARKETING SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(amount in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
SAGENT QMS Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Product $ 10,459 $ 5,154 -- $ 15,613
Service and support 6,584 2,804 -- 9,388
-------- ------- --------- --------
Total revenue 17,043 7,958 -- 25,001
-------- ------- --------
Cost of revenue:
Product 143 445 588
Service and support 4,923 1,699 248 [2] 6,870
-------- ------- --------- --------
Total cost of revenue 5,066 2,144 248 7,458
-------- ------- --------- --------
Gross profit 11,977 5,814 (248) 17,543
Operating expenses:
Sales and marketing 12,037 5,851 (1,968)[2] 15,920
Research and development 6,013 672 1,746 [2] 8,431
General and administrative 5,186 557 (20)[2] 5,723
Acquired in-process technology 2,425 -- 2,425
-------- ------- --------- --------
Total operating expenses 25,661 7,080 (242) 32,499
-------- ------- --------- --------
Income (loss) from operations (13,684) (1,266) (6) (14,956)
Other income, net (17) (90) 6 [2] (101)
-------- ------- --------- --------
Net income (loss) (13,701) (1,356) -- (15,057)
======== ======= ========= ========
Net income per share - basic $ (2.50)
========
Net income per share - diluted $ (2.60)
========
Shares used in per share
calculations - basic 6,026
========
Shares used in per share
calculations - diluted 5,797
========
</TABLE>
See notes to unaudited proforma combined condensed financial statements.
<PAGE> 23
SAGENT TECHNOLOGY, INC., AND QUALITATIVE MARKETING SOFTWARE, INC.
AND VINCA CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma combined condensed consolidated balance sheets
and statements of operations combine the results of Sagent's and QMS's financial
position and operations for the years ended December 31, 1998, and the nine
months ended September 30, 1999.
2. UNAUDITED PRO FORMA COMBINED NET INCOME PER SHARE
The unaudited pro forma combined basic and diluted net loss per share is
based on the combined weighted average number of common shares of Sagent and QMS
common stock for each period. QMS weighted average shares are based upon the
share exchange ratio of 25.909 of Sagent common stock. The assumed share
exchange ratio of 25.909 shares is calculated based on the number of shares of
QMS common stock and options to purchase QMS common stock outstanding as of
December 11, 1999. Options, warrants and shares subject to repurchase were not
included in the diluted net loss per share because the effect would be
antidilutive.
3. PRO FORMA UNAUDITED COMBINED SHARES OUTSTANDING
These unaudited pro forma combined condensed financial statements
reflect the issuance of shares of Sagent common stock in exchange for the net
assets of QMS Corporation as of September 30, 1999.
The following table details the pro forma share issuance in connection
with the acquisition as of September 30, 1999:
<TABLE>
<S> <C>
Number of shares of Sagent common stock issued for QMS net assets 2,075
Number of shares of Sagent common stock outstanding as of September 30, 1999 25,486
------
Number of Sagent common shares outstanding after the completion of acquisition 27,561
======
</TABLE>
4. PRO FORMA ADJUSTMENTS
The unaudited pro forma combined condensed financial statements of
Sagent give effect to the following pro forma adjustments:
[1] To eliminate QMS capital stock and treasury stock which was
exchanged for approximately 2.1 million shares of Sagent stock.
[2] To reclassify certain allocated overhead costs reported in QMS's
audited statement of operations for the year ended December 31,
1998 to conform to Sagent's overhead allocation policy.
5. TRANSACTION COSTS AND MERGER RELATED EXPENSES
Sagent estimates it will incur direct transaction costs of approximately
$6.9 million associated with the merger, consisting of severance pay;
outplacement costs; attorney, accountant, and other professional fees;
elimination of duplicate systems and equipment, travel, compensation expense for
options issued by QMS at prices below fair value, and other related charges.
These nonrecurring transaction costs have been charged to operations during the
quarter ended December 31, 1999. There can be no assurance that Sagent and QMS
will not incur additional charges associated with the merger or that management
will be successful in its efforts to integrate the operations of the two
companies.
<PAGE> 24
(c) Exhibits.
---------
<TABLE>
<S> <C>
2.1 Acquisition agreement dated December 12, 1999 between Sagent
Technology, Inc. and Qualitative Marketing Software, Inc.
99.1 Press release dated December 13, 1999.
</TABLE>
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAGENT TECHNOLOGY, INC.
(Registrant)
/s/ Virginia Walker
VIRGINIA WALKER
Executive Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Acquisition agreement dated December 11, 1999 between Sagent Technology, Inc.
and Qualitative Marketing Software, Inc.
99.1 Press release dated December 13, 1999.
</TABLE>
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SAGENT TECHNOLOGY, INC.,
FLOCO ACQUISITION CORP.,
QUALITATIVE MARKETING SOFTWARE, INC.
AND
CERTAIN OF THE STOCKHOLDERS
OF QUALITATIVE MARKETING SOFTWARE, INC.
DATED AS OF DECEMBER 11, 1999
<PAGE> 2
EXECUTION COPY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INDEX OF EXHIBITS...............................................................................iv
ARTICLE I THE MERGER.............................................................................2
1.1 The Merger........................................................................2
1.2 Closing; Effective Time...........................................................2
1.3 Effect of the Merger..............................................................2
1.4 Certificate of Incorporation; Bylaws..............................................2
1.5 Directors and Officers............................................................3
1.6 Effect on Capital Stock...........................................................3
1.7 Dissenting Shares.................................................................4
1.8 Surrender of Certificates.........................................................5
1.9 No Further Ownership Rights in Company Common Stock or Company
Preferred Stock................................................................6
1.10 Lost, Stolen or Destroyed Certificates............................................7
1.11 Taking of Necessary Action; Further Action........................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJOR STOCKHOLDERS..............7
2.1 Organization of the Company.......................................................8
2.2 Company Capital Structure.........................................................8
2.3 Subsidiaries and Investments......................................................9
2.4 Authority.........................................................................9
2.5 No Conflict; No Default; Consents.................................................9
2.6 Intentionally Omitted............................................................10
2.7 Company Financial Statements.....................................................10
2.8 No Undisclosed Liabilities.......................................................11
2.9 No Changes.......................................................................11
2.10 Tax and Other Returns and Reports................................................12
2.11 Restrictions on Business Activities..............................................13
2.12 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.....................................................................13
2.13 Intellectual Property............................................................14
2.14 Agreements, Contracts and Commitments............................................18
2.15 Interested Party Transactions....................................................19
2.16 Governmental Authorization.......................................................19
2.17 Litigation.......................................................................20
2.18 Accounts Receivable..............................................................20
2.19 Minute Books.....................................................................20
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C> <C>
2.20 Brokers' and Finders' Fees.......................................................20
2.21 Insurance........................................................................20
2.22 Compliance With Laws.............................................................20
2.23 Complete Copies of Materials.....................................................21
2.24 Binding Agreements; No Default...................................................21
2.25 Environmental Matters............................................................21
2.26 Employee Matters and Benefit Plans...............................................22
2.27 Representations Complete.........................................................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................25
3.1 Organization of Parent and Merger Sub............................................26
3.2 Capital Structure of Parent and Merger Sub.......................................26
3.3 Authority........................................................................26
3.4 No Conflict; No Default; Consents................................................27
3.5 Representations Complete.........................................................27
3.6 Securities and Exchange Commission Documents.....................................28
3.7 Interim Operations of Merger Sub.................................................28
3.8 Absence of Certain Changes or Events.............................................28
3.9 Brokers' and Finders' Fees.......................................................28
ARTICLE IV ADDITIONAL AGREEMENTS................................................................29
4.1 Expenses.........................................................................29
4.2 Public Disclosure................................................................29
4.3 FIRPTA...........................................................................29
4.4 Legal Requirements...............................................................29
4.5 Blue Sky Laws....................................................................29
4.6 Best Efforts; Additional Documents and Further Assurances........................29
4.7 Indemnification..................................................................30
4.8 Employee Agreements..............................................................30
4.9 Declaration of Registration Rights...............................................30
4.10 Release of Security Interests....................................................30
ARTICLE V CONDITIONS TO THE MERGER..............................................................31
5.1 Conditions to Obligations of Each Party to Effect the Merger.....................31
5.2 Additional Conditions to Obligations of Company..................................31
5.3 Additional Conditions to the Obligations of Parent and Merger Sub................32
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C> <C>
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER....................................................33
6.1 Termination......................................................................33
6.2 Effect of Termination............................................................34
6.3 Amendment........................................................................34
6.4 Extension; Waiver................................................................34
ARTICLE VII GENERAL PROVISIONS..................................................................34
7.1 Notices..........................................................................34
7.2 Interpretation...................................................................35
7.3 Counterparts.....................................................................35
7.4 Miscellaneous....................................................................36
7.5 Governing Law....................................................................36
7.6 Attorneys' Fees..................................................................36
7.7 Resolution of Disputes; Stipulation Regarding Confidentiality....................36
7.8 Rules of Construction............................................................36
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of December 11, 1999, by and among (i) Sagent Technology, Inc.,
a Delaware corporation ("Parent"), (ii) Floco Acquisition Corp., a Delaware
corporation ("Merger Sub") and a wholly owned subsidiary of Parent, (iii)
Qualitative Marketing Software, Inc., a Delaware corporation (the "Company"),
and (iv) Paul Wray, George Rebhan and J. Beach Clow each individually as
stockholders of the Company (the "Major Stockholders").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub believe
that it is in the best interests of each company and their respective
stockholders that the Company and Merger Sub combine into a single company
through the statutory merger of the Merger Sub with and into the Company in
accordance with the terms and conditions contained herein (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. The Company has 80,013 shares of common stock, par value $1.00
per share (the "Company Common Stock"), and 357.08 shares of
preferred stock, par value $100.00 per share (the "Company
Preferred Stock"), issued and outstanding as of the date hereof
and held of record by those individuals listed on Exhibit A
(collectively, the "Stockholders").
C. As of the date hereof, the Company has 16,912 shares of Company
Common Stock (the "Option Shares") subject to unexercised options
(each, a "Company Option") granted by the Company to those
individuals listed on Exhibit A (collectively, the "Option
Holders").
D. Pursuant to the Merger, among other things, (i) the outstanding
shares of Company Common Stock shall be converted into shares of
the common stock, par value $0.001 per share, of Parent (the
"Parent Common Stock") at the rate determined herein, (ii) the
outstanding shares of Company Preferred Stock shall be converted
into shares of Parent Common Stock at the rate determined herein,
and (iii) the outstanding Company Options shall be assumed by
Parent and converted into options to purchase Parent Common Stock
at the rate determined herein.
E. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and other agreements in
connection with the Merger and the other transactions
contemplated hereby.
F. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
<PAGE> 6
G. Concurrently herewith, the Major Stockholders have entered into,
executed and delivered to Parent the Noncompetition Agreements,
substantially in the form attached hereto as Exhibit D.
NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit B (the "Certificate of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
the Merger Sub shall be merged with and into the Company, the separate corporate
existence of the Merger Sub shall cease and the Company shall continue as the
surviving corporation under the laws of the State of Delaware. As a result of
the Merger, the Company shall become a wholly owned, direct subsidiary of
Parent. The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The Closing of the transactions
contemplated hereby (the "Closing") shall take place at 3:00 p.m., California
time at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, California, 94304 on December 11, 1999, or at such other time,
date and location as the parties hereto agree (the "Closing Date"). On the next
business day after the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing the Certificate of Merger with the Secretary of
State of the State of Delaware, in accordance with the relevant provisions of
Delaware Law. The Merger shall become effective immediately upon the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
(the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Closing,
at the Effective Time, the Certificate of Incorporation of Merger Sub shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Merger
-2-
<PAGE> 7
Sub shall be amended to read as follows: "The name of the corporation is
Qualitative Marketing Software, Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by Delaware Law and such
Bylaws.
1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation as of the Effective Time, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation as of the Effective Time, each to
hold office in accordance with the Bylaws of the Surviving Corporation.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company, the Option
Holders and the Stockholders, the following shall occur:
(a)(i) Conversion of Company Common Stock and Company Preferred
Stock. Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a) and the shares held in treasury) will be
cancelled and extinguished and be converted automatically into the right to
receive a number of shares of Parent Common Stock equal to (i) (A)
$59,964,225.00 divided by (B) the average of the closing prices (the "Average
Price") of the Parent Common Stock traded on the NASDAQ National Market System
for the 20 trading days prior to the Effective Time (ii) divided by the sum of
(A) the total number of shares of Company Common Stock outstanding as of the
Effective Time plus (B) the total number of Option Shares outstanding as of the
Effective Time. Such quotient shall be referred to in this Agreement as the
"Common Exchange Ratio." Each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares, (as defined and to the extent provided in Section 1.7(a)) will be
cancelled and extinguished and be converted automatically into the right to
receive a number of shares of Parent Common Stock equal to (i) (A) $35,775.00
divided by (B) the Average Price divided by (ii) 357.08. Such quotient shall be
referred to herein as the "Preferred Exchange Ratio." For purpose of this
Agreement, the Common Exchange Ratio and the Preferred Exchange Ratio shall be
referred to collectively as the "Exchange Ratio." The Average Price, the Common
Exchange Ratio and the Preferred Exchange Ratio are set forth on Exhibit A
hereto.
(ii) Acquisition of Company Options. At the Effective Time,
each outstanding option to purchase shares of Company Common Stock (each a
"Company Option") under the option agreements on Section 2.14(e) of the
Disclosure Schedule (the "Company Option Agreements") entered into between the
Company and its Option Holders, will be assumed by Parent. Each Company Option
so assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Company Option Agreements
immediately prior to
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<PAGE> 8
the Effective Time, except that (i) such Company Option will be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time (thus treating all
such Company Options as being fully vested immediately prior to the Effective
Time in the amount of shares of Company Common Stock set forth on Exhibit A)
multiplied by the Common Exchange Ratio, rounded down to the nearest whole
number of shares of Parent Common Stock, and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Option will be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Common Exchange
Ratio, rounded up to the nearest whole cent. Promptly after the Effective Time,
Parent will issue to each Option Holder a document evidencing the foregoing
assumption of such Company Option by Parent.
(b) Capital Stock of Merger Sub. Each share of common stock,
$0.001 par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
share of common stock of the Surviving Corporation.
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock or Company Preferred Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Common Stock or Company Preferred Stock occurring after
the date hereof and prior to the Effective Time.
(d) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but 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 promptly after the Effective Time an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the Average Price.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of the Company held by a holder who has
perfected appraisal rights for such shares in accordance with Delaware Law
("Dissenting Shares") shall not be converted into or represent a right to
receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such appraisal rights as are granted pursuant to
Delaware Law.
(b) Notwithstanding the provisions of Section 1.7(a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
the Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common
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<PAGE> 9
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(d) and any dividends or distributions payable pursuant to Section
1.8(e), in each case without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demand received by the Company to require the Company to purchase shares
of the Company Common Stock or Company Preferred Stock pursuant to the
applicable provisions of Delaware Law and (ii) the opportunity to participate in
all negotiations and proceedings with respect to such demands. Unless otherwise
required by Delaware Law, the Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any such demands
or offer to settle or settle any such demands. 1.8 Surrender of Certificates.
(a) Exchange Agent. ChaseMellon Shareholder Services, L.L.C.
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Parent Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock and Company Preferred Stock.
(c) Exchange Procedures. At or before the Effective Time, each
holder of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock or Company Preferred Stock shall surrender to the Parent for cancellation
the Certificates, duly endorsed to Parent or accompanied by duly executed stock
powers or assignments separate from certificate transferring title to such
shares to Parent. Promptly after the Effective Time, and against receipt of such
Certificates, the Parent or Exchange Agent, as the case may be, shall issue to
each tendering holder of a Certificate a certificate for the number of shares of
Parent Common Stock to which such holder is entitled pursuant to the Merger,
cash for fractional shares, if any, as may be required pursuant to Section
1.6(d) and any dividends or distributions payable pursuant to Section 1.8(e) and
the Certificate so surrendered shall forthwith be cancelled.
To the extent that any holder of a Certificate does not so surrender such
Certificate at or before the Effective Time, then promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each such holder of
record of a Certificate or Certificates, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(d) and any dividends or distributions payable pursuant to Section
1.8(e). Upon surrender of a Certificate for cancellation to the Exchange Agent
after the Effective Time, or to such other agent or agents as
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<PAGE> 10
may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
holder of such Certificate shall be entitled to receive in exchange therefore a
certificate representing the number of whole shares of Parent Common Stock to
which such holder is entitled pursuant to the Merger, cash for fractional
shares, if any, as may be required pursuant to Section 1.6(d) and any dividends
or distributions payable pursuant to Section 1.8(e) and the Certificate so
surrendered shall forthwith be cancelled. Until so surrendered, each outstanding
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 full 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 in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(d).
(d) Delivery of Parent Common Stock. The Parent Common Stock to
be issued pursuant to the share exchange under Section 1.8(c) shall be delivered
to the holders of Certificates in such denominations as set forth on Exhibit A
hereto.
(e) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock.
(f) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it will be a
condition of the issuance thereof that the 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 certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the 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.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Parent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares of Parent
Common Stock, Company Common Stock or Company Preferred Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.9 No Further Ownership Rights in Company Common Stock or Company
Preferred Stock. All shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company
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<PAGE> 11
Common Company Stock or Company Preferred Stock in accordance with the terms
hereof (including any cash paid in respect thereof) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock and Company Preferred Stock and, from and after the Effective Time,
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock and Company Preferred
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock or Company Preferred
Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of Parent Common
Stock and cash for fractional shares, if any, as may be required pursuant to
Section 1.6(d) and any dividends or distributions payable pursuant to Section
1.8(e); 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 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 certificates alleged to
have been lost, stolen or destroyed.
1.11 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 and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJOR
STOCKHOLDERS
As of the Closing Date (unless otherwise indicated herein), the Company and the
Major Stockholders represent and warrant to Parent and Merger Sub, subject to
the exceptions set forth in the Disclosure Schedule attached hereto as Exhibit C
(the "Disclosure Schedule"), as set forth below in this Article II. Whenever the
words "to the knowledge of" or "known to" or similar phrases are used in this
Article II with respect to a particular fact or circumstance, they shall mean
(even if the knowledge is attributed in this Article II solely to the Company)
actual knowledge of any of the Major Stockholders of such particular fact or
circumstance, or knowledge by any of the Major Stockholders of other facts or
circumstances from which a reasonable person should have known of such
particular fact or circumstance. The disclosures made on the Disclosure Schedule
shall not,
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<PAGE> 12
by the fact of their disclosure, be deemed to acknowledge that disclosure of
such information is required under this Article II. To the extent a disclosure
item is included on one Section of the Disclosure Schedule, it shall not be
necessary for the Company to repeat it on a separate Section of the Disclosure
Schedule.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the requisite corporate power to own its property and
to carry on its business as it is now being conducted and as proposed to be
conducted by the Company. The Company is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing necessary, except
as set forth on Section 2.1 of the Disclosure Schedule and except where the
failure to be so duly qualified or licensed would not have a Material Adverse
Effect on the Company. For purposes of this Agreement, the term "Material
Adverse Effect" means any occurrence or effect that would be reasonably likely
to have a material adverse effect on the business, assets (including intangible
assets), financial condition or results of operations of the party to this
Agreement referred to. The Company has made available to Parent at the Closing a
true and correct copy of its Certificate of Incorporation and Bylaws, each as
amended to date.
2.2 Company Capital Structure. The authorized capital stock of the
Company consists of 100,000 shares of Company Common Stock and 357.08 shares of
Company Preferred Stock. As of the date hereof, there are 80,013 shares of
Company Common Stock and 357.08 shares of Company Preferred Stock issued and
outstanding held by the persons, and in the amounts, set forth in Section 2.2 of
the Disclosure Schedule. As of the date hereof, there are 356 shares of Company
Common Stock held in treasury. As of the date hereof, there are 16,912 shares of
the Company Common Stock reserved for issuance upon the exercise of the Company
Options. Section 2.2 of the Disclosure Schedule sets forth the following
information with respect to each such Company Option: (i) the date on which each
such Company Option was granted; (ii) the number of shares of Company Common
Stock subject to each such Company Option; (iii) the exercise price for each
such Company Option; and (vi) the name of the Option Holder. The Company has
made available to Parent accurate and complete copies of all Company Option
Agreements evidencing the Company Options listed on Section 2.2 of the
Disclosure Schedule. Except as set forth in Section 2.2 of the Disclosure
Schedule, all outstanding shares of Company Common Stock and Company Preferred
Stock have been duly authorized and validly issued, and are fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound. Except as set forth in Section
2.2 of the Disclosure Schedule, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement.
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<PAGE> 13
2.3 Subsidiaries and Investments. Set forth in Section 2.3 of the
Disclosure Schedule is a list of each of the Company's subsidiaries (the
"Subsidiaries" and individually a "Subsidiary"). Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation (as set forth in Section 2.3 of the
Disclosure Schedule), and has the requisite corporate power to own or lease all
of its property and to carry on its business as it is now being conducted. Also
set forth in Section 2.3 of the Disclosure Schedule is a list of jurisdictions
in which each Subsidiary is qualified or licensed to do business as a foreign
corporation. Such jurisdictions are the only jurisdictions where the character
of the properties owned, leased or operated by each Subsidiary or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed would not have a Material Adverse
Effect on the Subsidiary and the Company, taken as a whole. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned, of record
and beneficially, by the Company, free and clear of all liens, encumbrances,
equities, options or claims whatsoever. Except for the shares of capital stock
of each Subsidiary issued in the Company's name, no Subsidiary has outstanding
any other equity securities or securities options, warrants or rights of any
kind, convertible into, exchangeable for, or otherwise entitling any person to
acquire, equity securities of such Subsidiary. Neither the Company nor any
Subsidiary owns, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
2.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and the other documents contemplated
hereunder to which the Company will be a party (collectively, the "Company
Transaction Documents") and, subject only to the approval of the Merger by the
Stockholders under the provisions of Delaware Law, the Company's Certificate of
Incorporation and the Stock Restriction and Retirement Agreement (as listed on
Section 2.2 of the Disclosure Schedule), to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Company Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and , assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies. Each of the Company Transaction Documents, when executed and delivered
by the Company shall be, assuming the due authorization, execution and delivery
by Parent and Merger Sub if applicable, the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
2.5 No Conflict; No Default; Consents. Except as set forth in Section
2.5 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company do not and the Company Transaction Documents when executed and
delivered by the Company will not, and the consummation of the transactions
contemplated hereby and thereby by the Company will not,
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<PAGE> 14
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of the Certificate of Incorporation or Bylaws, each as amended as
of the date hereof, of the Company, (ii) any material mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
or license to which the Company or any of its properties or assets are subject,
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets except to the
extent such conflict, violation, default or other effect would not, in the case
of clauses (ii) and (iii) above, have a Material Adverse Effect on the Company
or would not prevent, prohibit or materially obstruct the ability of any of the
Company, Major Stockholders, Parent or Merger Sub to consummate the transactions
contemplated hereby or in any of the Company Transaction Documents. Except as
set forth in Section 2.5 of the Disclosure Schedule, no consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity"), or any third party,
including a party to any agreement with the Company, is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement, any Company Transaction Document or the consummation of the
transactions contemplated hereby or thereby, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country, (iii) the approval of this Agreement and the Merger by
the Stockholders (which approval must include approval by Stockholders holding
more than 60% of the outstanding shares of the Company Common Stock and by the
Stockholder holding the outstanding shares of the Company Preferred Stock), and
(iv) such other consents, authorizations, waivers, filings, approvals,
registrations, orders and declarations which, if not obtained or made, would not
have a Material Adverse Effect on the Company or would not prevent or materially
delay consummation of the Merger or otherwise prevent the Company from
performing its obligations under this Agreement.
2.6 Intentionally Omitted.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule
sets forth the Company's audited consolidated balance sheet as of December 31,
1998 and the related audited consolidated statements of income and cash flows
for the twelve-month period ended December 31, 1998 (the "Year-End Financials")
and the Company's unaudited consolidated balance sheet as of September 30, 1999,
and the related unaudited statements of income and cash flows for the nine-month
period ended September 30, 1999 (the "Interim Financials"). Except as set forth
on Section 2.7 of the Disclosure Schedule, the Year-End Financials are correct
in all material respects and have been prepared in accordance with GAAP applied
on a basis consistent throughout the periods indicated therein (except as may be
indicated in the notes thereto). Except as set forth on Section 2.7 of the
Disclosure Schedule, the Interim Financials are correct in all material respects
and have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated therein, subject to normal year-end
adjustments. The Year-End Financials and the Interim Financials present fairly
in all material respects the consolidated financial condition and consolidated
operating results of the Company and any consolidated Subsidiaries as of the
dates and during the periods indicated therein. The Company's unaudited balance
sheet as of September 30, 1999 shall be hereinafter referred to as the "Company
Current Balance Sheet."
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<PAGE> 15
2.8 No Undisclosed Liabilities. The Company does not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are material and (i) have not been reflected in the Company
Current Balance Sheet, (ii) have not been specifically described in this
Agreement or in Section 2.8 of the Disclosure Schedule or elsewhere on the
Disclosure Schedule or (iii) are not normal or recurring liabilities incurred
since September 30, 1999 in the ordinary course of business consistent with past
practices.
2.9 No Changes. Except as disclosed on Section 2.9 of the Disclosure
Schedule, since the date of the Company Current Balance Sheet, there has not
been, occurred or arisen any:
(a) material adverse change in the financial condition,
liabilities, assets or business of the Company;
(b) amendments or changes in the Certificate of Incorporation or
Bylaws of the Company;
(c) capital expenditure by the Company, either individually or in
the aggregate, exceeding $5,000;
(d) destruction, damage to, or loss of any assets of the Company
(whether or not covered by insurance) that constitutes a Material Adverse Effect
on the Company;
(e) labor trouble or claim of wrongful discharge of which the
Company has received written notice or which is known to the Company, or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or any
negotiations or discussions relating thereto;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any of its shares of capital stock;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors or employees, or
the declaration, payment, or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such person , except for normal increases of cash compensation and
bonuses as set forth on Section 2.9(i) of the Disclosure Schedule;
(j) acquisition, sale or transfer of any material asset of the
Company other than in the ordinary course of business;
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(k) amendment or termination of any material contract, agreement
or license to which the Company is a party;
(l) loan by the Company to any person or entity, or guaranty by
the Company of any loan;
(m) waiver or release of any material right or claim of the
Company in excess of $10,000 on an individual basis, including any write-off or
other compromise of any account receivable of the Company;
(n) the commencement or notice or threat of commencement of any
governmental proceeding against or investigation of the Company or its affairs,
to the best of the Company's knowledge;
(o) other event or condition of any character that has or might
reasonably be expected to have a Material Adverse Effect on the Company; or
(p) issuance or sale by the Company of any of its shares or of
any other of its securities except the grant of Company Options as set forth on
Section 2.2 of the Disclosure Schedule.
2.10 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities relating to taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Section 2.10
of the Disclosure Schedule:
(i) To the Company's knowledge, as of the Closing Date, the
Company has prepared and timely filed (or caused to be prepared and timely
filed) or made a timely request for extension for all federal, state, local and
foreign returns, estimates, information statements and reports (collectively the
"Returns") required to be filed by the Company with any Tax authority relating
to any and all Taxes concerning or attributable to the Company or its operations
and such Returns are true and correct in all material respects and have been
completed in all material respects in accordance with applicable law.
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(ii) To the Company's knowledge, as of the Closing Date, it:
(A) has paid or accrued all Taxes it is required to pay or accrue and (B) will
have withheld and timely remitted with respect to its employees all federal and
state income Taxes, FICA, FUTA and other Taxes required to be withheld and
remitted.
(iii) There are no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes other than Liens for Taxes not yet
due and payable.
(iv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is properly reflected on the Company's tax books and records.
(v) The Company has established (and until the Effective Time
will establish) on its books and records reserves (to be specifically designated
as an increase to current liabilities) that are adequate for the payment of all
Taxes not yet due and payable.
(vi) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(vii) The Company is not a party to any tax-sharing or
allocation agreement, nor does the Company owe any amount under any tax-sharing
or allocation agreement.
(viii) No representation is made herein regarding the size and
availability of net operating losses of the Company. 2.11 Restrictions on
Business Activities. Except as set forth in Section 2.11 of the Disclosure
Schedule, there is no material agreement, judgment, injunction, order or decree
binding upon the Company which has the effect of prohibiting or materially
impairing any business practice of the Company, any acquisition of property by
the Company or the conduct of business by the Company as currently conducted.
2.12 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) Except as set forth in Section 2.12(a) of the Disclosure
Schedule, the Company neither owns nor leases any real property.
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used in its business.
Section 2.12(b) of the Disclosure Schedule sets forth as to all assets and
leasehold interests all Liens thereon except for (i) such imperfections of title
and encumbrances, if any, which are not substantial in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby, and (ii) Liens for Taxes not yet due and payable.
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(c) Section 2.12(c) of the Disclosure Schedule set forth all
material equipment (the "Equipment") owned or leased by the Company. The
Equipment is, taken as a whole, (i) adequate for the conduct of the business of
the Company consistent with its past practice, (ii) suitable for the uses to
which it is currently employed, (iii) in good operating condition except for
ordinary wear and tear, (iv) regularly and properly maintained, and (v) not
obsolete, dangerous or in need of renewal or replacement, except for renewal or
replacement in the ordinary course of business.
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
"Intellectual Property" shall mean any or all of the
following, in any form and embodied in any media: (i) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, records, data and mask works, (ii) inventions (whether or not
patentable), improvements, and technology, (iii) proprietary and confidential
information, trade secrets and know how, (iv) databases, data compilations and
collections and technical data, (v) logos, trade names, trade dress, trademarks
and service marks, (vi) domain names, web addresses and sites, and (vii) tools,
methods and processes.
"Intellectual Property Rights" shall mean worldwide common
law and statutory rights associated with (i) patents and patent applications,
(ii) copyrights, copyrights registrations and copyrights applications and
"moral" rights, (iii) the protection of trade and industrial secrets and
confidential information, (iv) other proprietary rights relating to intangible
intellectual property, (v) trademarks, trade names and service marks, (vi)
analogous rights to those set forth above, and (vii) divisions, continuations,
renewals, reissuances and extensions of the foregoing (as applicable) now
existing or hereafter filed, issued or acquired.
"Company Intellectual Property" shall mean any Intellectual
Property and Intellectual Property Rights that are owned by or exclusively
licensed to the Company.
"Registered Intellectual Property Rights" shall mean
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected by recordation with any state, government or other public
legal authority.
(b) Section 2.13(b) of the Disclosure Schedule lists all
Registered Intellectual Property Rights owned by, or filed in the name of, the
Company (the "Company Registered Intellectual Property") and lists any
proceedings or actions before any court or tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property except for
any proceeding or action which, if adversely determined, would not have a
Material Adverse Effect on the Company; provided, however, that none of such
Company Registered Intellectual Property has been registered
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by the Company with any state government or other public legal authority.
Section 2.13 (b) of the Disclosure Schedule also lists and identifies all
computer software that is owned by the Company (collectively, the "Owned
Software") and all computer software (other than Owned Software) that is used by
the Company for any purpose whatsoever in its business as presently conducted
(collectively, the "Licensed Software"). The Owned Software and the Licensed
Software are collectively referred to as the "Software".
(c) Each item of Company Intellectual Property owned by the
Company, including all Company Registered Intellectual Property listed in
Section 2.13(b) of the Disclosure Schedule, is free and clear of any Liens
except for Liens for Taxes not yet due and payable, and is exclusively owned by
the Company.
(d) To the extent that any material Intellectual Property has
been developed or created independently or jointly by any person other than the
Company for which the Company has, directly or indirectly, paid, the Company has
a written agreement with such person with respect thereto and each is as set
forth on Section 2.13(d) of the Disclosure Schedule, and the Company thereby
has obtained exclusive ownership of or has obtained a license to use all such
Intellectual Property and associated Intellectual Property Rights by operation
of law, by agreement or by valid assignment.
(e) The Company has not transferred ownership of or granted any
license of or right to use or authorized the retention of any rights to use any
Intellectual Property or Intellectual Property Rights that is or was Company
Intellectual Property, to any other person, except for those contracts, licenses
and agreements described in Section 2.13(g) or listed on Section 2.13(g) of the
Disclosure Schedule.
(f) Except (i) for Intellectual Property the absence of which
would not have a Material Adverse Effect on the Company, and (ii) widely
available business software used in the Company's business, the Company
Intellectual Property constitutes all of the Intellectual Property used in
and/or necessary to the conduct of the business of the Company as it currently
is conducted, including, without limitation, the design, development,
manufacture, use, import and sale of products, technology and services
(including products, technology or services currently under development). To the
knowledge of the Company, the Company has valid licenses to all software owned
by third parties that is used in and/or necessary to the operation of the
Company's products as they are currently used, and the Company is not in default
with respect to any such license.
(g) Except for "shrink-wrap" and similar widely available
third-party commercial end-user licenses, the contracts, licenses and agreements
listed in Section 2.13(g) of the Disclosure Schedule include all material
contracts, licenses and agreements to which the Company is a party with respect
to any Company Intellectual Property owned by the Company. No person who has
licensed Intellectual Property or Intellectual Property Rights to the Company
has ownership rights or license rights to improvements made by the Company in
such licensed Intellectual Property.
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(h) Section 2.13(h) of the Disclosure Schedule lists all material
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property Rights of any person other than the Company.
(i) To the knowledge of the Company, except as set forth in
Section 2.13(i) of the Disclosure Schedule, the operation of the business of the
Company as it currently is conducted, including but not limited to the design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company, does not infringe or misappropriate the
Intellectual Property Rights of any person, violate the rights of any person
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under the laws of any jurisdiction. Except as set forth in
Section 2.13(i) of the Disclosure Schedule the Company has not received notice
from any person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of the Company infringes or misappropriates the Intellectual Property Rights of
any person or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor to the knowledge of the Company and the Major
Stockholders is there any reasonable basis therefor).
(j) Each material item of Company Registered Intellectual
Property is valid and subsisting, and, except as set forth on Section 2.13(j) of
the Disclosure Schedule all necessary, currently due registration, maintenance
and renewal fees due in connection with such Company Registered Intellectual
Property have been paid and all necessary documents and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property. Except as set forth
in Section 2.13(j) of the Disclosure Schedule there are no actions that must be
taken by the Company within sixty (60) days of the scheduled Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Company Registered
Intellectual Property. In each case in which the Company has acquired any
Intellectual Property Rights from any person, the Company has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property and the associated Intellectual Property Rights (including
the right to seek past and future damages with respect thereto) to the Company
and, to the maximum extent provided for by, and in accordance with, applicable
laws and regulations, the Company has recorded each such assignment with the
relevant governmental authorities, including the PTO, the U.S. Copyright Office,
or their respective equivalents in any relevant foreign jurisdiction, as the
case may be.
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<PAGE> 21
(k) Except as set forth in Section 2.13(k) of the Disclosure
Schedule, there are no contracts, licenses or agreements between the Company and
any other person with respect to Company Intellectual Property under which there
is any dispute known to the Company regarding the scope of such contract,
license or agreement, or performance under such contract, license or agreement
including with respect to any payments to be made or received by the Company
thereunder which, if adversely determined, would not have a Material Adverse
Effect on the Company.
(l) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property.
(m) Except as set forth in Section 2.13(m) of the Disclosure
Schedule, the Company has taken all reasonable steps in order to protect the
Company's rights in confidential information and trade secrets of the Company or
confidential information or trade secrets of third parties provided to the
Company. Except as set forth in Section 2.13(m) of the Disclosure Schedule all
current and former employees, consultants and contractors of the Company who
have or have had access to confidential, proprietary or trade secret information
of the Company ("Recipients") have entered into proprietary information,
confidentiality or assignment of inventions agreements (or similar types of
agreements) with the Company. Section 2.13(m) of the Disclosure Schedule
contains a list of all Recipients indicating those who have signed the
agreements and those who have not entered into such agreements and a description
of the type of each such agreement.
(n) No material Company Intellectual Property or service of the
Company is subject to any proceeding or outstanding decree, order or judgment,
or, with respect to agreements only, except as would not have a Material Adverse
Effect on the Company, any stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(o) Except as set forth in Section 2.13(i) of the Disclosure
Schedule no (i) product, technology, service or publication of the Company, (ii)
material published or distributed by the Company or (iii) conduct or statement
of the Company knowingly constitutes obscene material, a defamatory statement or
material, false advertising or, except as would not have a Material Adverse
Effect on the Company, otherwise violates any law or regulation.
(p) All of the Company's products (including products currently
under development) will record, store, process, calculate and present calendar
dates falling on and after (and if applicable, spans of time including) January
1, 2000, and will calculate any information dependent on or relating to such
dates in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
All of the Company's software products (i) will lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000 and (ii) will be interoperable with other products used and
distributed by the Company that
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may deliver records to the Company's products or receive records from the
Company's products, or interact with the Company's products, including but not
limited to back-up and archived data. To the Company's knowledge all of the
Company's internal computer and technology products and systems are Year 2000
Compliant. 2.14 Agreements, Contracts and Commitments. Except as disclosed in
Section 2.14 of the Disclosure Schedule or elsewhere in the Disclosure Schedule,
the Company does not have and is not a party to:
(a) any collective bargaining agreements,
(b) any agreements that contain any unpaid severance liabilities
or obligations,
(c) any bonus or incentive compensation plans or arrangements,
except for commission plans with sales persons,
(d) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization, in each case which is not terminable by the Company on thirty (30)
days notice without liability to the Company, except to the extent general
principles of wrongful termination law may limit the Company's ability to
terminate employees at will,
(e) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(f) any fidelity or surety bond or completion bond,
(g) any lease of personal property having a value individually in
excess of $25,000,
(h) any agreement of indemnification or guaranty not entered into
in the ordinary course of business except for agreements for indemnification
provided by the Company to licensees or other third parties in connection with
the sale or license of the Company's software products or services,
(i) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in its business or compete with
any entity except for agreements not to compete provided by the Company to
licensees or other third parties in connection with the sale or license of the
Company's software products or services,
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<PAGE> 23
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000, over the
life of any such agreement, contract or commitment,
(k) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets of the Company not in the
ordinary course of business or the disposition or acquisition of any ownership
interest in any corporation, partnership, joint venture or other business
enterprise,
(l) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by the Company or extension of credit by the Company, including
guaranties referred to in clause (h) hereof,
(m) any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $5,000 or more,
(n) any construction contracts,
(o) any distribution, joint marketing or development agreement,
(p) any other agreement, contract or commitment which involves
the payment of $50,000 or more by the Company and is not cancelable without
penalty within thirty (30) days, or
(q) any agreement which has a value of $50,000 or more. The
Company has not breached, and has not received in writing any claim, and none of
the Major Stockholders has received any written notice that the Company has
breached, any of the material terms or conditions of any material agreement,
contract or commitment to which it is bound that is required to be disclosed in
Section 2.14 of the Disclosure Schedule in such manner as would permit any other
party to cancel or terminate the same.
2.15 Interested Party Transactions. Except as disclosed in Section 2.15
of the Disclosure Schedule, no officer or director of the Company or person who
owns at least five percent (5%) of the issued and outstanding Company Common
Stock (nor any parent, child or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
which furnished or sold, or furnishes or sells, services or products which the
Company furnishes or sells or proposes to furnish or sell, or (ii) any interest
in any entity which purchases from or sells or furnishes to the Company any
goods or services, or (iii) a beneficial interest in any contract or agreement
described in Section 2.13; provided that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section 2.15.
2.16 Governmental Authorization. Section 2.16 of the Disclosure Schedule
accurately lists each material federal, state, county, local or foreign
governmental consent, license, permit,
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<PAGE> 24
grant, or other authorization issued to the Company (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of its business or the holding of any
such interest, except where the absence of which would have a Material Adverse
Effect on the Company or would prevent, prohibit or materially impede the
ability of the Company, the Major Stockholders, Parent or Merger Sub to complete
the transactions contemplated hereby or in the Company Transaction Documents
(herein collectively called "Company Authorizations"). To the best of the
Company's knowledge, except as set forth in Section 2.16 of the Disclosure
Schedule the Company Authorizations are in full force and effect and constitute
all Company Authorizations required to permit the Company to operate or conduct
its business or hold any interest in its properties, except where the absence of
which would have a Material Adverse Effect on the Company or would prevent,
prohibit or materially impede the ability of the Company, the Major
Stockholders, Parent or Merger Sub to complete the transactions contemplated
hereby or in the Company Transaction Documents.
2.17 Litigation. Except as set forth as Schedule 2.17 of the Disclosure
Schedule, to the best of the Company's knowledge, there is no action, suit,
claim or proceeding of any nature pending or threatened against the Company, its
properties or any of its officers or directors, in their capacities as agents of
the Company. To the best of the Company's knowledge, there is no investigation
pending or, to the Company's knowledge, threatened against the Company, its
properties or any of its officers or directors, in their capacities as agents of
the Company, by or before any Governmental Entity. To the best of the Company's
knowledge, no Governmental Entity has at any time challenged or questioned the
legal right of the Company to manufacture, offer or sell any of its products in
the present manner or style thereof.
2.18 Accounts Receivable. The Company has made available to Parent a
list of all accounts receivable of the Company as of September 30, 1999 along
with a range of days elapsed since invoice.
2.19 Minute Books. Except as set forth in Section 2.19 of the Disclosure
Schedule, the minute books of the Company made available to counsel for Parent
contain complete and accurate minutes of all meetings of directors and
Stockholders or actions by written consent since the time of incorporation of
the Company.
2.20 Brokers' and Finders' Fees. Except as disclosed in Section 2.20 of
the Disclosure Schedule, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.21 Insurance. Section 2.21 of the Disclosure Schedule sets forth a
list of insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company.
2.22 Compliance With Laws. Except as disclosed in Section 2.22 of the
Disclosure Schedule, and except as to matters of which the Company has no
knowledge or which do not either individually or in the aggregate result in a
Material Adverse Effect with respect to the Company, the Company has complied
with, is not in violation of, and has not received any notices of violation with
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respect to, any federal, state or local statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its business
assets.
2.23 Complete Copies of Materials. The Company has delivered or made
available to Parent or its counsel true and complete copies of each document (or
summaries of same) referenced in the Disclosure Schedule.
2.24 Binding Agreements; No Default. Each of the contracts, agreements
and other instruments set forth in the Disclosure Schedule to which the Company
is a party is a legal, binding, and enforceable obligation by or against the
Company in accordance with its terms (assuming such contract, agreement or
instrument has been duly authorized, executed and delivered by the other
party(ies) thereto and except to the extent that its non-enforceability would
not have a Material Adverse Effect on the Company), and to the Company's
knowledge no party with whom the Company has an agreement or contract is in
material default thereunder or has breached any material terms or provisions
thereof (subject to all applicable bankruptcy, insolvency, reorganization and
other laws applicable to creditors' rights and remedies, all rules of law
governing specific performance and injunctive relief and to the exercise of
judicial discretion in accordance with general principles of equity).
2.25 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any amount of
any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law as radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"), but excluding janitorial supplies properly and safely
maintained. No Hazardous Materials are present, as a result of the deliberate
actions of the Company or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased except for such
Hazardous Materials which would not have a Material Adverse Effect on the
Company.
(b) Hazardous Materials Activities. Except as would not have a
Material Adverse Effect on the Company, the Company has not illegally
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company illegally disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(any or all of the foregoing being collectively referred to as "Hazardous
Materials Activities") in violation of any rule,
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regulation, treaty or statute promulgated by any Governmental Entity in effect
on or before the date hereof to prohibit, regulate or control Hazardous
Materials or any Hazardous Material Activity.
(c) Permits. Except as would not have a Material Adverse Effect
on the Company, the Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of any Hazardous Material Activities by the Company
and other businesses of the Company as such activities and businesses are
currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending or, to the
Company's knowledge, threatened against the Company concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Company.
The Company has no knowledge of any fact or circumstance which could reasonably
be expected to involve the Company in any environmental litigation or impose
upon the Company any environmental liability in each case which would have a
Material Adverse Effect on the Company.
2.26 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.26(a)(i) below (such definition shall only
apply to this Section 2.26), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "Company Employee Plan" shall refer to any plan, program,
policy, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, written
or otherwise, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which is or has been
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any "Employee" (as defined below), and pursuant
to which the Company or any Affiliate has or may have any material liability,
contingent or otherwise;
(iii) "Consultant" shall mean any person with whom the Company
currently has a Consulting Agreement;
(iv) "Consulting Agreement" shall mean any agreement pursuant
to which the Company has hired a Consultant;
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<PAGE> 27
(v) "Employee" shall mean any current employee, officer, or
director of the Company or any Affiliate;
(vi) "Employee Agreement" shall refer to each management,
employment, severance, relocation, repatriation, expatriation, visa, work permit
or similar agreement or contract between the Company or any Affiliate and any
Employee;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(x) "Pension Plan" shall refer to each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 2.26(b) of the Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan, each Employee
Agreement and each Consulting Agreement. The Company does not have any stated
plan or commitment to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to enter into any Company Employee Plan or Employee Agreement.
(c) Documents. The Company has provided or made available to
Parent (i) correct and complete copies of all documents embodying each Company
Employee Plan and each Employee Agreement including all amendments thereto; (ii)
the most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan; (iii) the three most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; and (iv) the most recent summary
plan description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Company
Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Section
2.26(d) of the Disclosure Schedule, (i) the Company has performed in all
material respects all material obligations required to be performed by it under
each Company Employee Plan and each Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
material compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company
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Employee Plan; (iii) there are no actions, suits or claims pending, or, to the
knowledge of the Company, threatened (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; (iv) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to the Company, Parent or any of its Affiliates (other than ordinary
administration expenses typically incurred pursuant to an amendment or a
termination event); (v) there are no inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is subject
to any penalty or tax with respect to any Company Employee Plan under Section
402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed
to any Multiemployer Plan.
(g) PBGC Compliance. The Company has paid all premiums (and
interest charges and penalties for late payment, if applicable) due the Pension
Benefit Guaranty Corporation ("PBGC") with respect to each Pension Plan for each
plan year they are up for which premiums are required. The Company has not
engaged in, nor is it a successor or parent corporation to an entity that has
engaged in, a transaction described in Section 4069 of ERISA. There has been no
"reportable event" (as defined in Section 4043(b) of ERISA and the PBGC
regulations under such Section) with respect to any Pension Plan. No filing has
been made by the Company with the PBGC, and no proceeding has been commenced by
the PBGC, to terminate any Pension Plan. To the knowledge of the Company, no
condition exists and no event has occurred that would constitute grounds for the
termination of any Pension Plan by the PBGC.
(h) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute.
(i) Effect of Transaction.
(i) Except as set forth on Section 2.26(i)(i) of the
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement or Consulting Agreement that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, stock option vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
may be required by statute.
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(ii) No payment or benefit which will or may be made by the
Company or any of its Affiliates with respect to any Employee pursuant to the
terms of any Employee Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. The Company (i) is in compliance in all
material respects with all material applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees and Consultants; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, 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).
(k) Labor. No work stoppage or labor strike against the Company
is pending or, to the best knowledge of the Company, threatened. The Company is
not involved in or, to the knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act
which would, individually or in the aggregate, directly or indirectly have a
Material Adverse Effect on the Company. The Company is not presently, nor has it
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no collective bargaining
agreement is being negotiated by the Company.
2.27 Representations Complete. None of the representations or warranties
made by the Company, nor any statement made in the Disclosure Schedule or any
certificate furnished by the Company pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact at the Effective Time, 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 at the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the Company
and the Major
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Stockholders as follows:
3.1 Organization of Parent and Merger Sub. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Parent has the requisite corporate power to own
its property and to carry on its business as it is now being conducted and as
proposed to be conducted by Parent. Parent is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed would not have a Material
Adverse Effect on Parent. Parent has made available to the Company at the
Closing true and correct copies of the Certificate of Incorporation and Bylaws,
each as amended to date, of each of Parent and Merger Sub.
3.2 Capital Structure of Parent and Merger Sub.
(a) The authorized stock of Parent consists of 70,000,000 shares
of Common Stock, par value $0.001 of which 25,751,698 shares were issued and
outstanding as of December 6, 1999, and 5,000,000 shares of Preferred Stock,
none of which are issued or outstanding as of December 6, 1999. The authorized
capital stock of Merger Sub consists of 1,000 shares of Common Stock, par value
$0.001, 1,000 shares of which, as of the date hereof, are issued and outstanding
and are held by Parent. All such shares have been duly authorized, and all such
issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. As of December 6,
1999, there were 3,276,000 shares of Common Stock reserved for issuance under
Parent's Amended 1995 Stock Option Plan, 2,440,000 shares of Common Stock
reserved for issuance under Parent's 1999 Stock Option Plan, 150,000 shares of
Common Stock reserved for issuance under Parent's Director Option Plan, and
450,000 shares reserved for issuance under Parent's Employee Stock Purchase Plan
and no shares of Common Stock issuable upon exercise of outstanding warrants.
Except as set forth above, there are no other options, warrants or other rights
to purchase any of the Parent's authorized and unissued capital stock.
(b) When issued and delivered in accordance with this Agreement,
the shares of Parent Common Stock to be issued pursuant to the Merger will be
duly authorized, validly issued, fully paid, non-assessable and free of any
preemptive or similar right, and will be issued in compliance with all
applicable federal or state securities laws.
3.3 Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and the other documents
contemplated hereunder to which Parent or Merger Sub will be a party
(collectively, the "Parent Transaction Documents") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Parent Transaction Documents by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and, assuming
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the due authorization, execution and delivery by the Company and Major
Stockholders, constitutes the valid and binding obligation of Parent and Merger
Sub, enforceable against them in accordance with its terms, subject to (i) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. Each of the Parent Transaction Documents, when
executed and delivered by Parent and Merger Sub shall be, assuming the due
authorization, execution and delivery by the Company and the Major Stockholders,
as applicable, the valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.4 No Conflict; No Default; Consents. The execution and delivery of
this Agreement by Parent and Merger Sub, and the Parent Transaction Documents
when executed and delivered will not, and the consummation of the transactions
contemplated hereby and thereby by Parent and Merger Sub will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Certificate of Incorporation or Bylaws, each as amended as of the date
hereof, of Parent or Merger Sub, (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise, or
license to which Parent or any of its properties or assets are subject, or (iii)
any, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or its properties or assets except to the extent such
conflict, violation, default or other effect would not, in the case of clauses
(ii) and (iii) above, have a Material Adverse Effect on Parent or would not
prevent, prohibit or materially obstruct the ability of Parent or Merger Sub to
consummate the transactions contemplated hereby or in any of the Parent
Transaction Documents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with any Governmental Entity or any third
party to any agreement with Parent, is required by or with respect to Parent or
Merger Sub in connection with the execution and delivery of this Agreement, any
Parent Transaction Document or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the Certificate of Merger with
the Delaware Secretary of State, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign country
and (iii) such other consents, authorizations, waiver, filings, approvals,
registrations, orders and declarations which, if not obtained or made, would not
have a Material Adverse Effect on Parent, would not prevent or materially delay
consummation of the Merger or otherwise prevent Parent or Merger Sub from
performing its obligations under this Agreement.
3.5 Representations Complete. None of the representations or warranties
made by Parent or Merger Sub in this Article III, nor any statement made in any
list or other statement separately certified by Parent or Merger Sub, or in any
certificate furnished by Parent pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact at the Effective Time, or
omits or will omit 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 at the Effective Time.
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3.6 Securities and Exchange Commission Documents. Parent has provided
the Company with true and complete copies of (i) all documents filed by Parent
with the Securities and Exchange Commission (the "Parent Commission Documents")
from May 26, 1999 through the date hereof (the "Filing Period") and (ii) any
amendments or modifications to the Parent Commission Documents which have not
yet been filed with the Securities and Exchange Commission but are required to
be filed. As of their respective filing dates, the Parent Commission Documents
complied with the requirements of the Securities Exchange Act of 1934, as
amended, and the Securities Act of 1933, as amended, and none of the Parent
Commission Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading except to the extent corrected by a subsequently filed
Parent Commission Document prior to the date hereof. The financial statements of
Parent, including the notes thereto, included in the Parent Commission Documents
(the "Parent Financial Statements") were complete and correct in all material
respects as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Securities and Exchange Commission with respect thereto
as of their respective dates, and have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other (except as may
be indicated in the notes thereto or, in the case of unaudited statements
included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the
Securities and Exchange Commission). The Parent Financial Statements fairly
present the consolidated financial condition and operating results of Parent and
its subsidiaries at the dates and during the periods indicated therein (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in Parent accounting policies except as described in
the notes to the Parent Financial Statements. Except as described in the Parent
Commission Documents, to the best of Parent's knowledge, there is no action,
suit, claim or proceeding of any nature pending against Parent.
3.7 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purposes of engaging in the transactions contemplated by this Agreement, and
has (i) engaged in no other business activities, (ii) not conducted any
operations other than in connection with the transactions contemplated by this
Agreement, and (iii) not incurred any material liabilities other than in
connection with the transactions contemplated by this Agreement.
3.8 Absence of Certain Changes or Events. Since September 30, 1999 and
through the Effective Time, (i) Parent has conducted its business in the
ordinary course consistent with past practices, and (ii) there has not been any
occurrences, events or other circumstances that, individually or in the
aggregate, has had or could have a Material Adverse Effect on Parent and its
subsidiaries, taken as a whole.
3.9 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Expenses. In the event the Merger is not consummated, all expenses
incurred in connection with the Merger and this Agreement shall be the
obligation of the party incurring such expenses; provided if the Merger shall
fail to close for any reason within the control of the Company or Parent, such
party shall reimburse the other for all expenses incurred in connection with the
Merger and this Agreement.
4.2 Public Disclosure. Unless otherwise required by law, prior to the
Effective Time no disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby
shall be made by any party hereto unless approved by Parent and the Company
prior to release, provided that such approval shall not be unreasonably
withheld, subject, in the case of Parent, to Parent's obligation to comply with
applicable securities laws and subject, in the case of the Company, to
disclosure to the Stockholders, the Option Holders and the following third
parties after the execution of a nondisclosure agreement acceptable to the
Parent: Republic Bank, Concentrex Incorporated, Geographic Data Technology, Inc.
and American Equity Properties, Inc..
4.3 FIRPTA. Upon request by Parent after the Effective Time, the Company
shall use its best efforts to deliver to the Internal Revenue Service a notice
that it is not a "United States Real Property Holding Corporation" as defined in
and in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2).
4.4 Legal Requirements. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement and will promptly cooperate with
and furnish information to any party hereto necessary in connection with any
such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any Governmental Entity or
other person, required to be obtained or made in connection with the taking of
any action contemplated by this Agreement.
4.5 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
4.6 Best Efforts; Additional Documents and Further Assurances. Each of
the parties to this Agreement shall each use its best efforts to effectuate the
transactions contemplated hereby and to
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fulfill and cause to be fulfilled the conditions to closing under this
Agreement. Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
4.7 Indemnification. Parent shall either (i) cause the Surviving
Corporation to continue to indemnify or (ii) directly indemnify the persons who
are currently officers and directors of the Company substantially in accordance
with the Certificate of Incorporation and Bylaws of the Company as they are
currently in effect and the provisions of Delaware Law for action or inaction by
such person prior to the Merger. In addition, Parent hereby agrees to indemnify
and hold the Major Stockholders harmless against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses (collectively, "Major Stockholder Damages")
incurred by the Major Stockholder as a result of (i) any guarantee of the
capital leases of the Company by the Major Stockholders as set forth on Section
4.7 of the Disclosure Schedule, (ii) any personal guarantees executed by the
Major Stockholders in favor of Republic Bank and (iii) any claim or lawsuit by
Corum Ltd. against the Major Stockholders resulting from that certain letter of
understanding dated July 20, 1998; provided that the indemnity provided herein
shall not apply to any Major Stockholder Damages incurred as a result of fraud,
gross negligence or willful misconduct on the part of any Major Stockholder. For
so long as the insurer under the Company's officer and director indemnification
insurance policy is willing to continue such insurance policy after the Merger
at approximately the same premium as currently in effect, the Parent shall
continue such policy in effect until the third anniversary of the Closing.
4.8 Employee Agreements. After the Effective Time, the Company shall use
its best efforts to cause each employee of and consultant to the Company to sign
promptly a Proprietary Rights and Confidentiality Agreement in Parent's standard
form.
4.9 Declaration of Registration Rights. Parent hereby grants to the
Stockholders the registration rights set forth on Exhibit G hereto. Parent shall
also file a registration statement on Form S-8 registering the shares of Parent
Common Stock subject to the Options at substantially the same time as the filing
of the registration statement to be filed in accordance with the Declaration of
Registration Rights.
4.10 Release of Security Interests. The Major Stockholders shall use
their reasonable best efforts to have all liens, encumbrances and security
interests in favor of Republic Bank terminated as promptly as practicable after
payment by Parent of the amounts due and payable to Republic Bank under the loan
agreement described in Section 2.5 of the Disclosure Schedule.
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ARTICLE V
CONDITIONS TO THE MERGER
5.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by all of the Stockholders of the Company
entitled to vote and the sole Stockholder of Merger Sub.
(b) Board Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Board of Directors of the
Company, Parent and Merger Sub.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or limiting or restricting the
operation of the business of the Company following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
(d) Non-Competition Agreements. Parent shall have entered into
non-competition agreements with Paul Wray, George Rebhan and Beach Clow
substantially in the form attached hereto as Exhibit D.
(e) Approval. Parent, Company and Merger Sub shall have timely
obtained all necessary approvals from Governmental Entities. 5.2 Additional
Conditions to Obligations of Company. The obligations of the Company to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by the Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and Parent shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
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(b) Certificate of Parent. The Company shall have been provided
with a certificate executed on behalf of Parent by its Chief Financial Officer
to the effect that, as of the Effective Time:
(i) all representations and warranties made by Parent and
Merger Sub under this Agreement are true and complete in all material respects;
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Parent and Merger Sub on or before such date have
been so performed in all material respects; and
(iii) the transactions contemplated by this Agreement have
been approved by the Board of Directors of Parent.
(c) Legal Opinion. The Company shall have received a legal
opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel
to Parent, substantially in the form of Exhibit F hereto.
5.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of such time and the
Company shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Effective Time.
(b) Certificate of the Company. Parent shall have been provided
with a certificate executed on behalf of the Company by its President to the
effect that, as of the Effective Time:
(i) all representations and warranties made by the Company
under this Agreement are true and complete in all material respects;
(ii) all covenants, obligations and conditions of this
Agreement to be performed by the Company on or before such date have been so
performed in all material respects; and
(iii) attached to such certificate are true and correct copies
of the Company's Certificate of Incorporation, as certified by the Delaware
Secretary of State, Bylaws and
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resolutions of the Company's Board of Directors and Stockholders approving the
transactions contemplated by this Agreement.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in order to assign the agreements with
Concentrex Incorporated, Geographic Data Technology, Inc. and American Equity
Properties, Inc.
(d) Legal Opinion. Parent shall have received a legal opinion
from legal counsel to the Company, in substantially the form of Exhibit E.
(e) No Material Adverse Changes. There shall not have occurred
any material adverse change in the business, properties, results of operations
or financial condition of the Company since September 30, 1999.
(f) Dissenters. No holders of the Company Common Stock or Company
Preferred Stock shall have exercised, or shall continue to have the right to
exercise, appraisal rights under Delaware Law with respect to the transactions
contemplated by this agreement.
(g) Release of Security Interests. The Company shall have
received a pay off letter, substantially in the form attached hereto as Exhibit
G from Republic Bank.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent if (i) it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and such breach has not been cured within five business
days after written notice to the Company or (ii) there shall be any final action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental Entity, which would
prohibit Parent's or the Company's ownership or operation of all or a material
portion of the business of the Company, or compel Parent or the Company to
dispose of or hold separate all or a material portion of the business or assets
of the Company or Parent as a result of the Merger.
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(c) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and such breach has not been cured within five
days after written notice to Parent;
(d) by any party hereto if: (i) the Closing has not occurred by
February 1, 2000; (ii) there shall be a final, non-appealable order of a federal
or state court in effect preventing consummation of the Merger; (iii) there
shall be any final action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make consummation of the Merger illegal; or (iv)
if the Company's Stockholders do not approve the Merger. Where action is taken
to terminate this Agreement pursuant to this Section 6.1, it shall be sufficient
for such action to be authorized by the Board of Directors (as applicable) of
the party taking such action.
6.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 6.1, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Merger Sub, the Company or the
Major Stockholders or their respective officers, directors or Stockholders,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
6.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
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(a) if to Parent or Merger Sub, to:
Sagent Technology, Inc.
800 W. El Camino Real
Suite 300
Mountain View, CA 94040
Attn: Chief Executive Officer
Tel: (650) 815-3100
Fax: (650) 815-3266
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Tel: (650) 493-9300
Fax: (650) 493-6811
(b) if to the Company, to:
Qualitative Marketing Software, Inc.
28050 U.S. Highway 19 North
Suite 500
Clearwater, FL 33761-2630
Tel: (727) 725-9727
Fax: (727) 669-5895
with a copy to:
Stichter, Riedel, Blain & Prosser, P.A
110 East Madison Street
Suite 200
Tampa, Florida 33602
Attn: Charles Postler, Esq.
Facsimile: (813) 229-1811
Telephone: (813) 229-0144
(c) if to a Stockholder, to the address of such Stockholder
listed on Exhibit A
7.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or
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<PAGE> 40
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
7.4 Miscellaneous. This Agreement and the documents and instruments and
other agreements among the parties hereto including the Disclosure Schedule (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
7.5 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California. All parties hereto agree to service of documents commencing any suit
therein may be made as provided in Section 7.1.
7.6 Attorneys' Fees. If any party to this Agreement brings an action
against another party to this Agreement to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover its reasonable
costs and expenses, including attorneys' fees and costs, incurred in connection
with such action, including any appeal of such action.
7.7 Resolution of Disputes; Stipulation Regarding Confidentiality(a) .
The parties hereto each agree to work together in good faith to resolve any
disputes which may arise under this Agreement. Such attempts at resolution will
be made at the level of a person to person meeting between the presidents of
Parent and the Company and the Major Stockholders. Each party agrees that it
will not initiate any litigation against any other party hereto regarding the
subject matter of this Agreement for at least sixty (60) days following such
person to person meeting between the presidents of Parent and the Company and
the Major Stockholders except for (i) motions for a temporary restraining order
or other preliminary equitable relief and (ii) circumstances in which a delay
for such period would result in such action being barred as a result of the
relevant statute of limitations expiring. In the event any litigation is
initiated in compliance with this Section, the parties agree jointly to
stipulate to the court that all proceedings in such action be kept confidential.
7.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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<PAGE> 41
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, and the Major Stockholders,
have caused this Agreement to be signed by themselves or their duly authorized
respective officers, all as of the date first written above.
"PARENT"
SAGENT TECHNOLOGY, INC.
By:
---------------------------------------
Name:
Title:
"COMPANY"
QUALITATIVE MARKETING SOFTWARE, INC.
By:
---------------------------------------
Name:
Title:
"MERGER SUB"
FLOCO ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
MAJOR STOCKHOLDERS
------------------------------------------
Paul Wray
------------------------------------------
George Rebhan
------------------------------------------
J. Beach Clow
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
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<PAGE> 1
EXHIBIT 99.1
SAGENT DELIVERS CUSTOMER INTELLIGENCE AS eSERVICE THROUGH
ACQUISITION OF QUALITATIVE MARKETING SOFTWARE, INC.
Acquisition Provides Real-time Customer Intelligence Over the Web
MOUNTAIN VIEW, CALIF. -- DECEMBER 13, 1999 -- Sagent Technology, Inc. (Nasdaq:
SGNT), a leading provider of real-time ebusiness intelligence solutions,
announced today that it has acquired Qualitative Marketing Software, Inc.
(QMSoft), a privately held company that delivers real-time value-added customer
information and Marketing eServices by hosting data on over 125 million
households on the web. Together, the companies help eBusinesses use the web to
better understand their prospects and customers, optimize revenue and
profitability, and maximize company effectiveness by combining valuable
real-time customer marketing data with eMarketing expertise.
Under the terms of the agreement, Sagent will issue approximately 2.5 million
shares of its common stock to the shareholders of QMSoft, giving the transaction
a value of $70 million based on Sagent's closing price of $27.875 on December
10, 1999. The shares issued represent approximately 8.7% of Sagent's fully
diluted shares outstanding. The transaction will be accounted for as a pooling
of interests. The combined company has over 850 customers and more than 300
employees.
Together, the companies are now able to deliver a single 360-degree view of the
customer, based not only on historical transactions and clickstream data, but
also incorporating demographic, credit, geographic and other information on more
than 125 million households -- in real time. This enables eBusinesses to better
target their marketing programs to customers while they are at the point of
sale.
QMSoft's Real-time eServices offer new ways of bringing Sagent's products to
market, allowing the company to make applications -- and even specific
transactions -- available over the web on a fee-for-service basis. The result is
a more complete set of solutions for Sagent's customers, and more flexibility in
purchasing those solutions.
"Sagent provides a powerful platform for customers who rely on our real-time
eService offerings", said Paul Wray, President QMSoft. "At the same time,
QMSoft's value-added content enhances Sagent's current and future CRM offerings
in Retail Banking, Financial Services, eCommerce, Insurance and other markets."
"One of the most compelling aspects of this acquisition is that the two
organizations are extremely complementary," said Ken Gardner, President and CEO
of Sagent Technology, Inc. "Sagent offers a suite of web-enabled CRM
applications and a high performance platform, and QMSoft provides value-added
customer data to help eBusinesses target profitable customers in real time."
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ABOUT SAGENT TECHNOLOGY
Sagent Technology (NASDAQ: SGNT) is a leading provider of real-time eBusiness
Intelligence Solutions that enable Global 2000 enterprises to win, retain, and
grow new customers and improve operational effectiveness. Sagent provides
products, services, and value-added content that help businesses collect,
analyze, understand, and act on customer and operational information in
real-time.
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Sagent powers more than 320 customer-driven organizations around the world and
across such diverse industries as e-commerce, financial services, healthcare,
and telecommunications. These include such market leaders as Sony Online
Entertainment, CommerceOne, DrugStore.com, Mapquest, Barnes & Noble,
Outpost.com, Ticketmaster, United Healthcare, and AT&T. Sagent has numerous
strategic relationships, including ADP, Advent, Microsoft, Siebel, and
USinternetworking. Sagent is headquartered in Mountain View, California, and can
be reached at www.sagent.com.
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ABOUT QUALITATIVE MARKETING SOFTWARE
Qualitative Marketing Software (www.QMSoft.com) delivers current, comprehensive
customer-centric information to eBusinesses in real time via the Internet.
QMSoft's Centrus suite of products and services allows eBusinesses to enhance
interactions with the customer in real time to improve the effectiveness of one
to one Internet marketing campaigns. QMSoft serves a diverse customer base of
more than 100,000 users through 600+ clients, ranging from mid-sized companies
to large multi-entity corporations. QMSoft has been named to Deloitte & Touche's
prestigious "Fast 500" national program, a ranking of the nation's 500
fastest-growing technology companies.
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CONTACTS:
Sagent Technology, Inc.
Virginia Walker, Chief Financial Officer
(650) 815-3175
Morgen-Walke Associates, Inc.
Kevin Nyland, Randy Jensen
(415) 296-7383
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This press release contains certain forward-looking statements that are based
largely on Sagent's current expectations and are subject to a number of risks
and uncertainties. Actual results and events could differ significantly from
those discussed in the forward-looking statements. A list of factors that could
affect actual results can be found in the company's initial public offering
prospectus dated April 14, 1999 and the company's Form 10-Q for the quarter
ended September 30, 1999.
Sagent is a registered trademark of Sagent Technology, Inc.
All other trademarks are the property of their respective owners.
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