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EXHIBIT 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of August 8, 2000, among Critical Path, Inc., a California
corporation ("Parent"), Prince Acquisition Corp., a California corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and PeerLogic, Inc., a
California corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
Common Stock and Preferred Stock of the Company ("Company Capital Stock") and
all outstanding options and other rights to acquire or receive shares of Company
Capital Stock shall be converted into the shares of or rights to receive shares
of Common Stock of Parent ("Parent Common Stock").
C. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain affiliates of the Company are entering into Voting Agreements in
substantially the form attached hereto as Exhibit A (the "Voting Agreement").
D. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions.
E. 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").
F. The parties intend for the Merger to be accounted for financial
accounting purposes as a purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the
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terms and conditions of this Agreement and the applicable provisions of
California law, including the California General Corporation Law (the "CGCL"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation and as a wholly owned subsidiary of Parent. The Company,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation".
Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date". On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing an Agreement of Merger with the California Secretary of
State (the "Agreement of Merger"), a form of which is attached hereto as Exhibit
B, in accordance with the relevant provisions of applicable law. The date and
time the Merger becomes effective in accordance with the provisions of the CGCL
is the "Effective Time".
Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the CGCL. 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.
Articles of Incorporation; Bylaws.
Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the Articles of Incorporation of Merger Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
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.
Directors and Officers. The director(s) of Merger Sub immediately prior
to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles 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, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
Shares to Be Issued; Effect on Capital Stock. Subject to the provisions
of Section 1.6(d)(iv), the number of shares of Parent Common Stock to be issued
in exchange for the acquisition by Parent of all outstanding Company Common
Stock and Company Preferred shall be 6,400,000 (the "Stock Consideration"). No
adjustment shall be made in the number of shares of Parent Common Stock issued
in the Merger as a result of any cash proceeds received by the Company from the
date hereof
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to the Closing Date pursuant to the exercise of options to acquire Company
Capital Stock. Subject to the terms and conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any action on the part of
Merger Sub, the Company or the holder of any shares of the Company Capital
Stock, the following shall occur:
Conversion of Company Common Stock. Each share of Common Stock of the
Company ("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a))) will be converted automatically into that
number of shares of Parent Common Stock as is equal to the Exchange Ratio (as
defined in paragraph (h) below).
Conversion of Company Preferred Stock. Each share of Series B Preferred
Stock of the Company ("Series B Preferred"), Series C Preferred Stock of the
Company ("Series C Preferred") and Series D Preferred Stock of the Company
("Series D Preferred", and together with the Series B Preferred and Series C
Preferred (the "Company Preferred") issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Preferred to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a))) will be converted automatically into that
number of shares of Parent Common Stock as is equal to the Exchange Ratio (as
defined in paragraph (h) below) multiplied by the number of shares of Company
Common Stock into which such share of Company Preferred would convert pursuant
to an automatic conversion as described in the Company's Restated Articles of
Incorporation ("Articles of Incorporation").
Cancellation of Parent-Owned and Company-Owned Stock. Each share of
Company Capital Stock owned by Merger Sub, Parent, the Company or any direct or
indirect wholly-owned subsidiary of Parent or of the Company immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof; provided, however, that such shares shall have the effect of reducing
the Stock Consideration ("Converted Shares"). Notwithstanding the cancellation
of the Converted Shares pursuant to the preceding sentence, the cancellation of
such Converted Shares (i) shall not reduce the Stock Consideration for purposes
of calculating the Outstanding Common Amount or the Exchange Ratio and (ii)
shall have the effect of reducing the Stock Consideration actually payable by
Parent pursuant to Section 1.8.
Stock Options. At the Effective Time, all options to purchase Company
Common Stock then outstanding under the Company's stock option plans listed on
Schedule 2.20(b) (such plans will be referred to collectively as the "Option
Plan"), or otherwise, shall be assumed by Parent in accordance with provisions
described below.
At the Effective Time, each outstanding option to purchase shares of
Company Common Stock under the Option Plan or otherwise, whether vested or
unvested (each a "Company Option"), shall be, in connection with the Merger,
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 Option Plan and/or as provided in the respective option agreements
governing such
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Company Option immediately prior to the Effective Time, except that (A) such
Company Option shall 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 regardless of
whether the Company Option is vested or unvested immediately prior to the
Effective Time multiplied by the Exchange Ratio (as defined in paragraph (h)
below), rounded down to the nearest whole number of shares of Parent Common
Stock and (B) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Option shall 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 Exchange Ratio, rounded up to the nearest whole cent.
It is the intention of the parties that the Company Options assumed by
Parent qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent the Company Options qualified
as incentive stock options immediately prior to the Effective Time.
Promptly following the Effective Time, Parent will issue to each holder
of an outstanding Company Option a document evidencing the foregoing assumption
of such Company Option by Parent.
In the event that any Company Options are exercised prior to the
Effective Time, then the Stock Consideration shall be increased by an amount
equal to the number of shares of Company Common Stock issued upon such exercise
multiplied by the Exchange Ratio.
The parties understand that the Company has granted options to
individuals who as of the date of this Agreement may not have executed and
returned the paperwork and stock option agreements to the Company as required to
document the outstanding option grants. Therefore, it is the intention of the
parties that the term "Company Option" as used in this Agreement have the
meaning ascribed to it in Section 1.6(d) and shall include only those options to
purchase shares of Company Common Stock that are identified on Schedule 2.2(b)
and all such options shall be evidenced by a stock option agreement that is
executed by the Company prior to the date of this Agreement and signed by the
optionee within the time frame provided in the applicable stock option plan or
stock option agreement.
Capital Stock of Merger Sub. Each share of Common Stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
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 Capital Stock), reorganization, recapitalization or
other like change with respect to Parent Common Stock or Company Capital Stock
occurring or with a record date after the date hereof and prior to the Effective
Time.
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Fractional Shares. No fraction of a share of Parent Common Stock will
be issued, but in lieu thereof, each holder of shares of Company Capital 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 be entitled to receive from Parent an amount of cash
(rounded down to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the ten (10) consecutive trading days ending on the second
trading day immediately prior to the Closing, as reported on the Nasdaq National
Market.
Definitions.
Escrow Consideration. The "Escrow Consideration" shall mean 0.1
multiplied by the Stock Consideration; provided, however, that such amount shall
be reduced by the number of shares of Parent Common Stock calculated by
multiplying (i) the aggregate number of shares of Company Common Stock held by
holders of less than 1,001 shares of Company Common Stock ("Non-Indemnifying
Shareholders"), times (ii) the Exchange Ratio, times (iii) 0.1.
Exchange Ratio. The "Exchange Ratio" shall mean the Stock Consideration
divided by the Outstanding Common Amount.
Outstanding Common Amount. The "Outstanding Common Amount" shall mean
the aggregate number of shares of Company Common Stock outstanding as of the
signing of this Agreement (taking into account all shares of Company Preferred
that shall be converted into Company Common Stock as of the Effective Time).
The Company represents and warrants that the Outstanding Common Amount
immediately prior to signing this Agreement is 15,669,775. The Company
acknowledges that Parent is relying on this number for purposes of calculating
the Exchange Ratio and that no qualifications, whether contained in this
Agreement, any schedules or exhibits attached to this Agreement or any other
document delivered by the Company, shall have the effect of modifying such
amount. The parties agree that any inaccuracy in the Outstanding Common Amount
shall be deemed to be a mistake of fact and that the Exchange Ratio shall be
recalculated to take into account any such inaccuracy. In the event that, as a
result of recalculating the Exchange Ratio, the Parent is required to issue more
shares of Parent Common Stock than would have been issued had there been no
inaccuracy in the Outstanding Common Amount (such additional shares being
referred to herein as the "Excess Shares"), the Parent shall be entitled to
receive an amount of shares from the Escrow Agent equal to the Excess Shares
which shall be taken from the Escrow Shares without giving effect to Section
7.4(c) below.
Dissenting Shares.
Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock held by a holder who has demanded and perfected
appraisal or dissenters' rights for such shares in accordance with the CGCL and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares"), shall not be converted
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into or represent Parent Common Stock pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by the CGCL.
Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Capital Stock who demands appraisal of such shares under the
CGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only Parent Common Stock, and cash in lieu of
fractional shares as provided in Section 1.6, without interest thereon.
The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Company Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to the CGCL and received by
the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the CGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal of capital stock of the
Company or offer to settle or settle any such demands.
Surrender of Certificates.
Exchange Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company reasonably acceptable to the Company to act as exchange
agent (the "Exchange Agent") in the Merger.
Parent to Provide Common Stock. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, the aggregate number of shares of Parent Common Stock
issuable pursuant to Section 1.6 in exchange for outstanding shares of Company
Capital Stock; provided that on behalf of the holders of Company Capital Stock,
Parent shall deposit into an escrow account a number of shares of Parent Common
Stock equal to the Escrow Amount out of the Stock Consideration otherwise
issuable to holders of Company Capital Stock pursuant to Section 1.6. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock (other than holders of Dissenting Shares on whose behalf no shares
will be deposited into the escrow account) shall be in proportion to the
aggregate number of shares of Parent Common Stock which such holder would
otherwise be entitled to receive under Section 1.6 by virtue of ownership of
outstanding shares of Company Capital Stock.
Exchange Procedures. Promptly after the Effective Time, Parent shall
cause to be mailed to each holder of record of a certificate or certificates
(the "Certificates") which immediately prior to the Effective Time represented
outstanding shares of Company Capital Stock whose shares were converted into
shares of Parent Common Stock pursuant to Section 1.6, (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. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent
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or agents as 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 therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock,
if any, to be deposited in the Escrow Fund (as defined in Section 7.5 below) on
such holder's behalf pursuant to Section 7.5 hereof), plus cash in lieu of
fractional shares in accordance with Section 1.6, to which such holder is
entitled pursuant to Section 1.6, and the Certificate so surrendered shall
forthwith be canceled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VII hereof, Parent
shall cause to be distributed to the Escrow Agent a certificate or certificates
representing that number of shares of Parent Common Stock equal to the Escrow
Amount which shall be registered in the name of the Escrow Agent.
Notwithstanding the provisions contained in Section 1.6(g), any fractional share
that would otherwise result from the issuance of a certificate representing the
shares of Parent Common Stock to be deposited into escrow pursuant to Article
VII hereof shall be rounded down to the nearest whole share and any fraction of
a share that would otherwise result from the issuance of a certificate
representing the remaining shares of Parent Common Stock which each such
shareholder would otherwise be entitled to receive under Section 1 by virtue of
ownership of outstanding shares of Company Common Stock shall be rounded up to
the nearest whole share. Such shares shall be owned beneficially and of record
by the holders on whose behalf such shares were deposited in the Escrow Fund and
shall be available to compensate Parent as provided in Article VII. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Capital 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 Capital 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 and this Section 1.8(c). Parent shall use
its reasonable efforts to cause the Exchange Agent to issue to each Company
shareholder the Parent Common Stock pursuant to Section 1.6 within five (5)
business days after the Exchange Agent receives all documents necessary to
effect such exchange, properly completed, guaranteed (in the event that shares
of Parent Common Stock are requested to be registered in names other than the
registered holder of Company Common Stock or Company Preferred) and presented
for transfer, from each such shareholder.
Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time 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.
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 therefor is registered, it
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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.
No Liability. Notwithstanding anything to the contrary in this Section
1.8, none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to a holder of shares of Parent Common Stock or Company Capital
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital 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 Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital 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 canceled and exchanged as
provided in this Article I.
Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Capital 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; 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 or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) be accounted for financial reporting purposes as a purchase. The parties to
this Agreement hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations. No party to this Agreement shall take any action inconsistent with
such treatment.
Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such 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.
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties
to Parent and Merger Sub, subject to such exceptions as are specifically
disclosed in the disclosure schedules (referencing the appropriate section
number) supplied by the Company to Parent (the "Company Schedules") and dated as
of the date hereof. Any information disclosed on the Company Schedules under any
section number set forth therein shall be deemed to be disclosed and
incorporated into any other section under the Company Schedules where such
disclosure would on its face reasonably be deemed to apply. For purposes of this
Article II, the "Company" shall mean the Company and its subsidiaries unless the
context otherwise requires.
Organization of the Company. Except as set forth on Schedule 2.1, the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company and each of its subsidiaries has the corporate power
to own its properties and to carry on its business as now being conducted. The
Company and each of its subsidiaries is duly qualified or licensed to do
business and 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
for such failures to be so duly qualified or licensed and in good standing that
would not, either individually or in the aggregate have a Material Adverse
Effect on Company. The Company has delivered a true, correct and complete copy
of its Articles of Incorporation and Bylaws, each as amended to date, to Parent.
Company Capital Structure.
Subject to the disclosures in Schedule 2.2(a)-1, the authorized capital
stock of the Company consists of 30,000,000 common shares of which 3,665,341 are
issued and outstanding and 20,000,000 preferred shares of which 8,250,000 shares
of Series B Preferred are issued and outstanding, 7,046 shares of Series C
Preferred are issued and outstanding, and 3,747,388 shares of Series D Preferred
are issued and outstanding. The Company's capital stock is held by the persons,
with the domicile addresses and in the amounts set forth on Schedule 2.2(a)-1.
Except as to the corporate matters described on Schedule 2.2(a)-2, all of the
Company Capital Stock is duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in the Articles of Incorporation, the
Company Capital Stock is not subject to preemptive rights. By virtue of the
transactions contemplated hereby, other than the rights of the persons
identified on Schedule 2.2(a)-1, and other than persons who duly exercise
dissenters' rights, no person shall have any rights of rescission or any other
claims against the Surviving Corporation or Parent based on their ownership or
their purposed ownership of equity interests of or rights to receive equity
interests of the Company.
The Company has reserved 4,500,000 shares of Common Stock for issuance
to employees and consultants pursuant to the Option Plan, of which 3,715,906
shares are subject to unexercised
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Company Options as of the date of this Agreement, which are reflected in
executed option agreements or in resolutions of the Board of Directors or
compensation committee of the Company prior to the date hereof and 784,094
shares remain available for future grant as of the date of this Agreement. The
Company has not issued options outside its Option Plan and has not reserved any
shares of Common Stock for issuance upon exercise of outstanding Company Options
granted outside the Option Plan. Except as disclosed on Schedule 2.2(a)-1, all
options to purchase equity securities of the Company granted by the Company have
been in compliance with Rule 701 promulgated under the Securities Act. Schedule
2.2(b)-1 sets forth for each Company Option granted as of the date of this
Agreement the name of the holder of such option, the state of domicile of such
holder, the number of shares of Common Stock subject to such option, the
exercise price of such option and the vesting schedule for such option. Schedule
2.2(b)-2 sets forth the extent to which the Company Options are vested to date
and whether the exercisability of such Company Option will be accelerated and
become exercisable by the transactions contemplated by this Agreement. Except
for the Company Options described in Schedules 2.2(b), as of the date of this
Agreement there are no options, warrants, calls, rights, commitments or
agreements of any character (including without limitation promissory notes
purporting to be convertible), written or oral, 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. Except for the Company
Options described in Schedule 2.2(b), as of the date of this Agreement, there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by which it is
bound obligating the Company to grant, extend, accelerate the vesting of, change
the price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. The holders of Company Options have been or will
be given, or shall have waived, any required notice prior to the Merger. As a
result of the Merger and the assumption of all Company Options pursuant to
Section 1.6(d), Parent will be the record and sole beneficial owner of all
Company Capital Stock and rights to acquire or receive Company Capital Stock.
Subsidiaries. The Company has the subsidiaries identified on Schedule
2.3. Other than the subsidiaries identified on Schedule 2.3, the Company does
not otherwise own and has never otherwise owned any shares of capital stock or
any interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity. With respect
to each subsidiary identified on Schedule 2.3, the Company owns, either directly
or indirectly, 100% of the voting and 100% of the equity interests in such
subsidiary. Except as described in Schedule 2.3, neither the Company, nor any
such subsidiary has granted any options or other rights to acquire equity in any
such subsidiary.
Authority; No Conflicts; Required Filings.
Subject only to the approval of the Merger and this Agreement by the
Company's shareholders, the Company has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is a majority of the
outstanding shares of Company Common Stock, a majority of the outstanding shares
of Company
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Preferred, voting as a separate class, and a majority of the outstanding shares
of Series D Preferred, voting as a separate series of Company Preferred. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of
this Agreement and the Merger by the Company's shareholders. The Company's Board
of Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
Except as set forth on Schedule 2.4, subject only to the approval of
the Merger and this Agreement by the Company's shareholders and compliance with
the requirements set forth in paragraph 2.4(c), the execution and delivery of
this Agreement by the Company does not, and, as of the Effective Time, the
performance by the Company of its obligations under this Agreement 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 (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation or
Bylaws of the Company or (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or its properties or assets.
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict), is required at or prior to the
Effective Time by or with respect to the Company in connection with the
Company's execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except (i) for the filing of the Agreement of
Merger with the California Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws, (iii)
expiration or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iv) filings or notifications with foreign governmental entities and the
rules and regulations under applicable foreign law, and (v) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 2.4 and (vi) where the failure to obtain such consents,
approvals, authorizations or permits, to make such filings or notifications, (x)
would not prevent consummation of the Merger or otherwise prevent the Company
from performing its obligations under this Agreement or (y) would, individually
or in the aggregate, (A) not have a Material Adverse Effect on the Company, (B)
not result in a loss of a material benefit, and (C) not result in a liability in
excess of $25,000 in the aggregate.
Company Financial Statements. Schedule 2.5 sets forth the Company's
unaudited balance sheet as of December 31, 1999 (the "Balance Sheet") and the
related unaudited statements of operations and cash flows for the twelve-month
period then ended and the Company's unaudited balance sheet dated as of June 30,
2000 and the unaudited statements of operations and cash flows
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for the six-month period ended June 30, 2000 (collectively, the "Company
Financials"). The Company Financials have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other. The Company
Financials fairly present the financial condition and operating results of the
Company and its Subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated
therein, subject, in the case of the unaudited financial statements, to the
absence of footnotes and normal year-end adjustments, which will not be material
in amount or significance.
No Undisclosed Liabilities. Except as set forth on Schedule 2.6, the
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with GAAP), which individually or in the
aggregate, (a) has not been reflected in the Balance Sheet or other Company
Financials or specifically referenced in the Schedules hereto, or (b) has not
arisen in the ordinary course of the Company's business since December 31, 1999,
consistent with past practices and in the aggregate exceed $100,000.
No Changes. Except as set forth in Schedule 2.7, from December 31, 1999
to the date of this Agreement, there has not been, occurred or arisen any:
transaction by the Company except in the ordinary course of business
and consistent with past practices;
amendments or changes to the Articles of Incorporation or Bylaws of the
Company;
capital expenditure or commitment by the Company of $100,000 in any
individual case or $250,000 in the aggregate;
destruction of, damage to or loss of any material assets, business or
customer of the Company (whether or not covered by insurance);
labor trouble or claim of wrongful discharge or other unlawful labor
practice;
change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
revaluation by the Company of any of its assets;
declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
increase from the comparable rates or values in effect during fiscal
year 1999 in the salary or other compensation payable or to become payable by
the Company, having a value in excess of
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$50,000, to any of its officers, directors, employees, independent
contractors or consultants in each case who have annual compensation in excess
of $100,000 after giving effect to such increases, 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 as
otherwise contemplated by this Agreement;
sale, lease, license or other disposition of any of the assets or
properties of the Company, except in the ordinary course of business and
consistent with past practices;
amendment (other than an extension of time or an increase in amount
payable to the Company) or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
loan by the Company to any person or entity (other than intercompany
loans), incurring by the Company of any indebtedness, guaranteeing by the
Company of any indebtedness, issuance or sale of any debt securities of the
Company or guaranteeing of any debt securities of others except for advances to
employees for travel and business expenses in the ordinary course of business,
consistent with past practices and except for advances under the Company's
existing revolving credit agreement (which agreement has not been amended since
December 31, 1999);
waiver or release of any right or claim of the Company, including any
write-off or other compromise of any account receivable of $50,000 or more in
the aggregate of the Company;
commencement or notice or to the Company's knowledge threat of
commencement of any lawsuit or proceeding against or investigation of the
Company or its affairs;
notice of any claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.11 below) or of infringement by
the Company of any third party's Intellectual Property rights;
issuance or sale by the Company of any of its shares of capital stock,
or securities exchangeable, convertible or exercisable therefor, or of any other
of its securities, except for options granted in the ordinary course of business
and Company Common Stock issued upon the exercise of options;
material change in pricing or royalties charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company, other than such changes as
are in the ordinary course of business and consistent with past practice;
event or condition of any character that has or would be reasonably
expected to have a Material Adverse Effect on the Company; or
agreement by the Company or any officer or employees thereof to do any
of the things described in the preceding clauses (a) through (r) (other than
negotiations with Parent and its
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representatives regarding the transactions contemplated by this Agreement).
Tax and Other Returns and Reports.
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 and impositions,
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.
Tax Returns and Audits.
The Company as of the Effective Time will have prepared and filed all
required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true and
correct and have been completed in accordance with applicable law, except to the
extent that such failures to file, to be true and correct or to be completed in
accordance with applicable law, as applicable, individually or in the aggregate
would not result in liability to the Company or the Surviving Corporation in
excess of $50,000 or otherwise have a Material Adverse Effect on the Company.
The Company as of the Effective Time: (A) will have paid or accrued all
Taxes it is required to pay or accrue and (B) will have withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
To the Company's knowledge, there is no Tax deficiency outstanding,
proposed or assessed against the Company that is not adequately reserved for and
reflected on the Company Financials, nor has the Company executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
To the Company's knowledge, no audit or other examination of any Return
of the Company is in progress as of the date of this Agreement, nor has the
Company been notified as of or prior to the date of this Agreement of any
request for such an audit or other examination.
The Company has no knowledge of any basis for the assertion of any
liabilities for unpaid federal, state, local or foreign Taxes which have not
been accrued or reserved against on the Balance Sheet whether asserted or
unasserted, contingent or otherwise attributable to the Company, its assets or
operations.
The Company has provided to Parent copies of all federal and state
income and all state sales and use Tax Returns for all periods since December
31, 1993.
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There are (and as of immediately following the Closing there will be)
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.
The Company has no knowledge of any basis for the assertion of any
claim relating or attributable to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company.
None of the Company's assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
Except as set forth on Schedule 2.8(b), as of the Effective Time, there
will not be any contract, agreement, plan or arrangement to which the Company is
a party, including but not limited to the provisions of this Agreement, covering
any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
The Company has not filed any consent agreement under Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
The Company is not a party to a tax sharing or allocation agreement nor
does the Company owe any amount under any such agreement.
The Company is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(c ) Consolidated Returns; Tax Liability of Others;
Partnership Tax. The Company has (a) never been a member of an affiliated group
(within the meaning of Code ss.1504(a)) filing a consolidated federal income Tax
Return (other than a group the common parent of which was Company), (b) no
liability for the Taxes of any person (other than Company or any of its
Subsidiaries) under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise
and (c) never been a party to any joint venture, partnership or other agreement
that could be treated as a partnership for Tax purposes.
(d ) Distributing or Controlled Corporation. The Company has
not constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of this Agreement
or (y) in a distribution which could otherwise constitute part of a "plan" or
"Series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
Restrictions on Business Activities. There is no agreement (noncompete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
could be expected to have the effect of
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<PAGE> 16
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
Title to Properties; Absence of Liens and Encumbrances.
The Company owns no real property, nor has it ever owned any real
property. Schedule 2.10(a) sets forth a list of all real property currently,
leased by the Company, the name of the lessor and the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate annual
rental and/or other fees payable under any such lease, and there are no other
agreements with respect to such leases between the parties thereto. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms and there is not, under any of such
leases, any existing default by the Company (or to the Company's knowledge, by
the other party to such lease) or event of default (or event which with notice
or lapse of time, or both, would constitute such a default).
The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials and except for liens for Taxes not
yet due and payable, municipal and zoning ordinances, easements for public
utilities and such imperfections of title and encumbrances, if any, which are
not material 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.
Intellectual Property.
For the purposes of this Section 2.11, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor
and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries
("Patents); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know
how, technology, technical data and customer lists, and all
documentation embodying or evidencing any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor and all
other rights corresponding thereto throughout the world ("Copyrights");
(iv) all mask works, mask work registrations and applications therefor,
and any equivalent or similar rights in semiconductor masks, layouts,
architectures or topology ("Maskworks"); (v) all industrial designs and
any registrations and applications therefor throughout the world; (vi)
all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and
all goodwill associated therewith
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throughout the world ("Trademarks"); (vii) all databases and data
collections and all rights therein throughout the world; and (viii) all
computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of
the foregoing is recorded; (ix) all World Wide Web addresses, sites and
domain names; and (x) any similar, corresponding or equivalent rights
to any of the foregoing anywhere in the world. Notwithstanding the
above, Intellectual Property does not include any of the items defined
above that are in the public domain or otherwise not proprietary to any
person, or any property which is readily available to any person
through the purchase of software or other product that can be purchased
at retail subject only to a shrink wrap or click wrap license. In
addition, Intellectual Property does not include any item defined above
which is (i) immaterial to the business of the Company or (ii) licensed
by the Company from a third party and as to which there are alternative
products available in the market, the purchase or use of which by the
Company would not result in a material delay in the development or sale
of the Company's products and would not, in the aggregate, cost in
excess of $25,000 to replace.
"Business" means the business of the Company, including the
manufacture, use, licensing, distribution and sale of any products or
technology or the provision of any services by the Company, as
currently conducted, as conducted since the inception of the Company,
or as reasonably is contemplated to be conducted by the Company in the
future.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by or licensed to the Company.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) Patents, including applications
therefor; (ii) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other
registrations or applications related to Trademarks; (iii) Copyrights
registrations and applications to register Copyrights; (iv) Mask Work
registrations and applications to register Mask Works; and (v) any
other Company Intellectual Property owned by the Company that is the
subject of an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state, government
or other public legal authority at any time.
Schedule 2.11(b) lists all Registered Intellectual Property in whole or
in part owned by or filed in the name of the Company (the "Company Registered
Intellectual Property").
Each item of Company Intellectual Property owned by the Company,
including all Company Registered Intellectual Property listed on Schedule
2.11(b), is free and clear of any encumbrance, including any lien or security
interest other than (i) Liens for Taxes not yet due and payable and (ii)
end-user licenses granted by the Company pursuant to its standard form or forms
of end-user license(s) or other agreements that do not materially differ
therefrom. Copies of the Company's standard form end user licenses are attached
hereto as Schedule 2.11(c).
The Company owns exclusively, and has good title to, all copyrighted
works that are software products of the Company or other works of authorship
that the Company otherwise purports to own.
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<PAGE> 18
Except for end-user licenses granted by the Company pursuant to its
standard form of end-user license(s) (or agreements that do not materially
differ therefrom), 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 that is, or was, Company Intellectual Property, to any
other person.
The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of the Business including (i)
the making, using, selling, marketing, or importing of any product or device,
(ii) the practice of any process, (iii) the offering or performance of any
service, or (iv) the copying, display, performance, distribution, creation of
derivative works of, or the exploitation of any device or work, including any of
the foregoing with respect to products, technology or services currently under
development by Company.
The contracts, licenses and agreements listed on Schedule 2.11(g)
include all material contracts, licenses and agreements (other than end-user
licenses granted to the Company pursuant to its standard form of end-user
license) pursuant to which any Person, including any Affiliate of Company, has
licensed any Intellectual Property to the Company. The Company is not in breach
of any of the foregoing contracts, licenses and agreements and, to the knowledge
of the Company, no other party to such contracts, licenses and agreements is in
breach thereof.
The contracts, licenses and agreements listed on Schedule 2.11(h)
include all contracts and agreements pursuant to which any Person, including any
third party developer or consultant, has developed any device or technology,
authored any work, or otherwise created any thing in which any Intellectual
Property rights might arise, either separately or jointly with the Company or
any other Person, which the Company uses, possess or which the Company believes
it owns.
The contracts, licenses and agreements listed on Schedule 2.11(i)
include all material contracts, licenses and agreements pursuant to which the
Company has licensed or transferred to any third person or any Affiliate of the
Company any material Company Intellectual Property other than end-user licenses
granted by the Company pursuant to its standard form of end-user license. The
Company is not in breach of any of the foregoing contracts, licenses and
agreements and, to the knowledge of the Company, no other party to such
contracts, licenses and agreements is in breach thereof.
The consummation of the transaction contemplated by this Agreement will
not cause or obligate Surviving Corporation (i) to grant to any third party any
rights or licenses with respect to any Intellectual Property of Parent; or (ii)
pay any royalties or other amounts in excess of those being paid by Company
prior to the Closing.
Schedule 2.11(k) lists all material agreements, licenses and contracts
pursuant to which Company has agreed to indemnify, hold harmless, or otherwise
agree to be liable for any losses cost or damages of, a third party with respect
to any Company Intellectual Property or product or service of Company.
To the Company's knowledge, except as set forth on Schedule 2.11(l),
all material Company
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Intellectual Property, including any item thereof, will be fully transferable,
alienable or licensable by, Company without restriction and without payment of
any kind to any third party.
Except as set forth on Schedule 2.11(m), the consummation of the
transactions contemplated by this Agreement will not result in the loss of, or
otherwise adversely affect, any ownership rights of Company in any Company
Intellectual Property or result in the breach or termination of any license,
contract or agreement to which Company is a party respecting any material
Company Intellectual Property.
To the Company's knowledge, the operation of the Business, including
(i) the making, using, selling, marketing, or importing of any product or
device, (ii) the practice of any process, (iii) the offering or performance of
any service, or (iv) the copying, distribution, performance, display, creation
of derivative works of, or the exploitation of any device or work, including any
of the foregoing with respect to products, technology or services currently
under development by Company, does not, and will not when conducted in
substantially the same manner following the Closing by Buyer, infringe or
misappropriate the Intellectual Property of any person, violate the rights of
any person, or constitute unfair competition or trade practices under the laws
of any jurisdiction, and the Company has not received written notice from any
person claiming that such operation or any act, product, technology or service
of the Business infringes or misappropriates the Intellectual Property of any
Person or to the Company's knowledge constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the Company aware of any
basis therefor). Without limiting the foregoing, the Company has not
misappropriated the trade secrets of, or infringed the Copyright or Mask Work of
any third party.
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 litigation or other legal proceeding known to the Company regarding the
scope of such agreement, or performance under such contract, license or
agreement including with respect to any payments to be made or received by the
Company thereunder.
To the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property owned by the Company.
To the Company's knowledge, no Company Intellectual Property owned by
the Company or product, technology or service of the Business is subject to any
proceeding or outstanding decree, order, judgment, agreement or 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.
Schedule 2.11(r) lists all action, including the payment of any fees,
that to the Company's knowledge must be performed by, or on behalf of, the
Company in the ninety-day period following the Closing Date to comply with any
statutory requirements or fees for, perfection of, preservation of, or
continuation of any rights of Company with respect to any Company Intellectual
Property, including the filing of any patent applications, response to Patent
Office actions or payment of fees, including renewal fees.
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The Company has not claimed small business status, or other particular
status in the application for any Registered Company Intellectual Property which
claim of status was not at the time made, or which has since become inaccurate
or false or that will no longer be true and accurate as a result of the Closing.
All software products of the Company were written and created solely by
either (i) employees of the Company acting within the scope of their employment
or (ii) by third parties who have validly assigned all of their rights,
including Intellectual Property rights in such products to the Company, and to
the Company's knowledge, no third party owns or has any rights to the software
products or any Intellectual Property rights therein.
The Company has no knowledge of any facts or circumstances that would
render any Company Intellectual Property owned by the Company invalid or
unenforceable. Without limiting the foregoing, Company knows of no information,
materials, facts, or circumstances, including any information or fact that would
constitute prior art, that would render any of the Company Registered
Intellectual Property invalid or unenforceable, or would adversely effect any
pending application for any Company Registered Intellectual Property and the
Company has not misrepresented, or failed to disclose, and is not aware of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Register Intellectual Property that would constitute
fraud or a material misrepresentation with respect to such application or that
would otherwise effect the validity or enforceability of any Company Registered
Intellectual Property.
The Company has taken all reasonable steps under the circumstances to
protect the confidentiality and trade secret status of any material confidential
information of the Company and knows of no basis on which it could be claimed
that the Company has failed to protect the confidentiality of any material
Confidential Information of the Company.
All employees of the Company who have contributed to the development of
the Company Intellectual Property owned by the Company have entered into valid
and binding agreements with the Company sufficient to vest title in the Company
of all Intellectual Property created by such employee in the scope of his or her
employment with the Company.
Agreements, Contracts and Commitments. Except as set forth on Schedules
2.2(b), 2.4, 2.12 or 2.20(b), as of the date of this Agreement, the Company does
not have, is not a party to nor is it bound by:
any collective bargaining agreements,
any agreements or arrangements that contain any severance pay or
similar post-employment liabilities or obligations,
any bonus, deferred compensation, pension, profit sharing or retirement
plans, or any other employee benefit plans or arrangements,
any employment or consulting agreement with an employee or individual
consultant or
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salesperson or consulting or sales agreement with a firm or other organization,
any agreement or plan, including, without limitation, any stock option
plan, stock appreciation rights 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,
any fidelity or surety bond or completion bond,
any lease of personal property involving annual payments by the Company
in any individual case in excess of $50,000,
any agreement of indemnification or guaranty other than pursuant to the
Company's standard end-user license agreement, which is attached to the Company
Schedule,
any agreement containing any covenant limiting the freedom of the
Company to engage in any line of business or to compete with any person,
any agreement relating to capital expenditures and involving payments
required to be made by the Company after the date of this Agreement in excess of
$150,000,
any agreement relating to the disposition or acquisition by the Company
after the date of this Agreement of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
by or extension of credit by or to the Company,
any purchase order or contract for the purchase of raw materials (not
including in-license of technology) involving $5,000 or more,
any construction contracts,
any distribution, joint marketing or development agreement which cannot
be canceled without penalty upon notice of sixty (60) days or less,
Except for escrow agreements identified on Schedule 2.12, any agreement
pursuant to which the Company has granted or may grant in the future, to any
party a source-code license or option or other right to use or acquire
source-code, or
any other agreement that involves payments by the Company of $100,000
or more or is not cancelable without penalty in excess of $25,000 within thirty
(30) days.
Except as specifically disclosed in the Company Schedule, the Company
is not in breach,
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<PAGE> 22
violation or default under, and the Company has not between December 31, 1999
and the date of this Agreement received any written notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.12 or Schedule
2.11 (any such agreement, contract or commitment, a "Contract") (except for
notices relating to breaches, violations or defaults that have been cured or
corrected in all material respects). Assuming due execution by the other parties
thereto, each Contract is in full force and effect and except as otherwise
disclosed in the Company Schedules is not subject to any default thereunder of
which the Company has knowledge by any party obligated to the Company pursuant
thereto. Schedule 2.12(A) identifies each Contract that requires a consent,
waiver or approval to preserve all rights of, and benefits to, the Surviving
Corporation under such Contract as a result of entering into this Agreement or
effecting the Merger or the other transactions contemplated by this Agreement
(each a "Required Consent").
Interested Party Transactions. Except as set forth in Schedule 2.13, to
the Company's knowledge, no officer or director of the Company (nor any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
economic interest), has or has had, directly or indirectly, (i) an economic
interest in any entity which furnished or sold, or furnishes or sells, services
or products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from, or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11;
provided, that (x) ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
Compliance with Laws. Except as set forth in Schedule 2.14, the Company
has complied in all material respects with, is not in material violation of, and
has not received any notices of violation with respect to, any foreign, federal,
state or local statute, law or regulation.
Litigation. Except as set forth in Schedule 2.15, there is no action,
suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. To the Company's knowledge,
there is no investigation pending or threatened against the Company, its
properties or any of its officers or directors by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of the Company to develop, offer or sell any of its products in the
present manner or style thereof.
Insurance. With respect to the insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
is otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
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Minute Books. Except as set forth in Schedule 2.17, the minute books of
the Company provided to counsel for Parent are the only minute books of the
Company and contain a reasonably accurate summary of all meetings of directors
(or committees thereof) and shareholders or actions by written consent since the
time of incorporation of the Company.
Environmental Matters.
Hazardous Material. The Company has not: (i) operated any underground
storage tanks, and has no knowledge of the existence, at any time, of any
underground storage tank (or related piping or pumps), at any property that the
Company has at any time owned, operated, occupied or leased; or (ii) released
any amount of any substance that has been designated by any Governmental Entity
or by applicable foreign federal, state or local law to be 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, the Federal Water Pollution Control Act, as amended,
the Clean Air Act, as amended, and the regulations promulgated pursuant to said
laws, (a "Hazardous Material"). No Hazardous Materials are present, as a result
of the deliberate actions or omissions 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.
Hazardous Materials Activities. The Company has not 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 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, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Hazardous Material or any
Hazardous Materials Activities of the Company. The Company is not aware of any
fact or circumstance which would reasonably be likely to involve the Company in
any environmental litigation or impose upon the Company any environmental
liability.
Brokers' and Finders' Fees; Third Party Expenses. 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. Schedule 2.19 sets
forth the principal terms and conditions of any agreement, written or oral, with
respect to such fees. Schedule 2.19 sets forth the Company's reasonable estimate
as of the date of this Agreement of all Third Party Expenses (as defined in
Section 5.4) expected to be incurred by the Company in connection with the
negotiation and effectuation of the terms and conditions of this
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Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.20(a)(i) below (such definition shall only apply to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
"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;
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended;
"Company Employee Plan" shall refer to any plan, program, policy,
practice, 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, whether
formal or informal, funded or unfunded and whether or not legally binding,
including without limitation, each "employee benefit plan", within the meaning
of Section 3(3) of ERISA which is or has been, during the past six years (there
shall be no time limitation for Pension Plans, Multiemployer Plans and plans or
arrangements that currently provide for or have provided for retiree medical
benefits), 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 would reasonably be
expected to have any material liability contingent or otherwise;
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended;
"Employee" shall mean any current, former, or retired employee,
officer, or director of the Company or any Affiliate;
"Employee Agreement" shall refer to each management, employment,
severance, consulting, relocation, repatriation, expatriation, visa, work permit
or similar agreement or contract between the Company or any Affiliate and any
Employee or consultant;
"IRS" shall mean the Internal Revenue Service;
"International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by the Company or any Affiliate, whether
informally or formally, or with respect to which the Company or any Affiliate
will or may have any liability, for the benefit of Employees who perform
services outside the United States;
"Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and
"Pension Plan" shall refer to each Company Employee Plan which is an
"employee pension
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benefit plan", within the meaning of Section 3(2) of ERISA.
Schedule. Schedule 2.20 contains an accurate and complete list of each
Company Employee Plan and each Employee Agreement. Except as set forth in
Schedule 2.20, the Company does not have any obligation to establish, adopt or
enter into any new Company Employee Plan or Employee Agreement (other than in
the normal course of business), 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).
Documents. The Company has provided to or made available to Parent (i)
correct and complete copies of all documents embodying or relating to each
Company Employee Plan and each Employee Agreement including all amendments
thereto and written interpretations thereof; (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; (iv) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (v) 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; (vi) all IRS determination letters and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Company
Employee Plan; (vii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any Material Adverse Effect to
the Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
Employee Plan Compliance. Except as set forth in Schedule 2.20(d), (i)
the Company has performed in all material respects all 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 substantial 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 Employee Plan;
(iii) there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; and (iv) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time, except in the case of an
International Employee Plan which cannot be terminated under applicable law, in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses and other
liabilities typically incurred in 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 Section 4975
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<PAGE> 26
through 4980 of the Code.
Pension Plans. Except as set forth in Schedule 2.20, 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.
Collectively Bargained, Multiemployer and Multiple Employer Plans. At
no time has the Company or an Affiliate contributed to or been obligated to
contribute to any Multiemployer Plan. Neither the Company, nor any Affiliate has
at any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.
No Post-Employment Obligations. Except as set forth in Schedule
2.20(g), no Company Employee Plan provides, or reflects or represents any
liability to provide retiree health to any person for any reason, except as may
be required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
Effect of Transaction.
Except as set forth in Schedule 2.4 or Schedule 2.20, 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, trust
or loan as in effect prior to the Closing that will or could reasonably be
expected to result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
Except as set forth in Schedule 2.8 or 2.20, no payment or benefit
which will or may be made by the Company or Parent or any of their respective
affiliates in connection with the Merger with respect to any Employee will be
characterized as an "excess parachute payment", within the meaning of Section
280G(b)(1) of the Code.
International Employee Plan. Except as set forth in Schedule 2.20(b),
the Company does not now, nor has it ever had the obligation to, maintain,
establish, sponsor, participate in, or contribute to any International Employee
Plan.
2.21 Accounts Receivables. Except as set forth in Schedule 2.21, the
Company's accounts receivable as identified on the Company's unaudited June 30,
2000 balance sheet are, subject to an allowance for doubtful accounts consistent
with past practice, valid and enforceable claims and are, to the knowledge of
the Company, subject to no set-off or counterclaim and collectible in the
ordinary course of business. No such accounts receivable are from any of the
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Company's officers, directors, consultants, employees, agents or stockholders.
2.22 Representations Complete. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor any
statement made in any Schedule or certificate furnished by the Company pursuant
to this Agreement, or furnished in or in connection with documents mailed or
delivered to the shareholders of the Company in connection with soliciting their
consent to this Agreement and the Merger, contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Organization and Qualification; Subsidiaries. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing,
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, except
where the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Each of Parent and Merger Sub is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Except as set forth in Section 3.1 of the Parent Schedule, each of Parent and
Merger Sub is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect on Parent.
Articles of Incorporation and Bylaws. Parent has previously furnished
to Company complete and correct copies of its Articles of Incorporation and
Bylaws as amended to date. Such Articles of Incorporation and Bylaws and
equivalent organizational documents of each of its Subsidiaries are in full
force and effect. Parent is not in violation of any of the provisions of the
Parent Charter Documents, and no subsidiary of Parent is in violation of any of
its equivalent organizational documents.
Capitalization. The authorized capital stock of Parent consists of (i)
150,000,000 shares of Parent Common Stock, par value $0.001 per share, and (ii)
5,000,000 shares of Preferred Stock, par value $0.001 per share ("Parent
Preferred Stock"). The Parent has sought and received approval from its
shareholders to increase its authorized capital stock to 500,000,000 shares of
Common Stock and has received approval to change its state of incorporation to
Delaware. Parent may effect such changes at any time. As of June 30, 2000, (i)
63,522,693 shares of Parent Common Stock were
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issued and outstanding, (ii) 977,607 shares of Parent Common Stock were reserved
for future issuance pursuant to Parent's employee stock purchase plan and (iii)
23,561,485 shares of Parent Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Parent Common Stock ("Parent
Options") (please note, however, that this number does not include options
assumed in Parent's acquisition of Netmosphere, which closed on June 23, 2000)
and (iv) 4,120,667 shares remain available for future grant as of June 30, 2000.
As of the date hereof, one share of Parent Preferred Stock is issued and
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, no par value, all of which, as of the date hereof, are issued
and outstanding and held by Parent. All of the outstanding shares of Parent's
and Merger Sub's respective capital stock have been duly authorized and validly
issued and are fully paid and non-assessable. The Parent Common Stock issuable
upon completion of this transaction will be, when issued in accordance with the
terms hereof, duly authorized, validly issued, fully paid and non-assessable.
Authority Relative to this Agreement. Each of Parent and Merger Sub has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery thereof by
Company, constitutes the legal and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms.
No Conflict; Required Filings and Consents.
The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub shall
not, (i) conflict with or violate any provision of the Articles of
Incorporation, Bylaws or equivalent organizational documents of Parent or Merger
Sub, (ii) subject to compliance with the requirements set forth in Section
3.5(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Merger Sub or by which it or their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Parent's or Merger Sub's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of
Parent or Merger Sub pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Merger Sub is a party or by which Parent or Merger
Sub or their respective properties are bound or affected.
The execution and delivery of this Agreement and the Agreement of
Merger by Parent and Merger Sub do not, and the performance of this Agreement by
Parent and Merger Sub will not,
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require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity or third party (so as not to trigger
any conflict) except (i) for applicable requirements, if any, of the Securities
Act, the Exchange Act, Blue Sky Laws, the pre-merger notification requirements
of the HSR Act and of foreign governmental entities and the rules and
regulations thereunder, the rules and regulations of Nasdaq, and the filing and
recordation of the Merger Documents as required by California law and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, (x) would not prevent consummation of the
Merger or otherwise prevent Parent or Merger Sub from performing their
respective obligations under this Agreement or (y) could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
SEC Filings; Financial Statements.
Parent has made available to Company a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Parent with the SEC on or after January 29, 1999 (the "Parent SEC
Reports"), which are all the forms, reports and documents required to be filed
by Parent with the SEC since that date. The Parent SEC Reports (A) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (B) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Parent's subsidiaries is required to file any reports or
other documents with the SEC.
Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, do not contain footnotes as permitted by Form 10-Q of the
Exchange Act) and each fairly presents in all material respects the consolidated
financial position of Parent and its Subsidiaries at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal year end adjustments which were not or are not expected
to be material in amount.
Since the date of the balance sheet included in Parent's report on Form
10-Q for the period ended March 31, 2000, and until the date hereof, there has
not occurred any Material Adverse Effect on Parent.
Tax Returns and Audits. Except as set forth in Section 3.7 of the
Parent Schedules:
Parent and each of its Subsidiaries have timely filed all Returns
relating to Taxes required to be filed by the Parent and each of its
Subsidiaries with any Tax authority prior to the date hereof, except such
Returns as to which the potential consequences of a failure to file are in the
aggregate not material to the Parent. The Parent and each of its Subsidiaries
have paid all Taxes shown to be due on such Returns.
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The Parent and each of its Subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income Taxes,
Taxes pursuant to the Federal Insurance Contribution Act, Taxes pursuant to the
Federal Unemployment Tax Act and other Taxes required to be withheld, except
such Taxes which are not material to the Parent.
Neither the Parent nor any of its Subsidiaries has been delinquent in
the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against the Parent or any of its Subsidiaries,
nor has the Parent or any of its Subsidiaries executed any unexpired waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
No audit or other examination of any Return of the Parent or any of its
Subsidiaries by any Tax authority is presently in progress, nor has the Parent
or any of its Subsidiaries been notified in writing of any request for such an
audit or other examination.
No adjustment relating to any Returns filed by the Parent or any of its
Subsidiaries has been proposed in writing, formally or informally, by any Tax
authority to the Parent or any of its Subsidiaries or any representative
thereof.
Neither the Parent nor any of its Subsidiaries has any liability for
any material unpaid Taxes which has not been accrued for or reserved on the
Parent balance sheet included in the Parent's report on Form 10-Q for the period
ending March 31, 2000, whether asserted or unasserted, contingent or otherwise,
which is material to the Parent, other than any liability for unpaid Taxes that
may have accrued since December 31, 1999 in connection with the operation of the
business of the Parent and its Subsidiaries in the ordinary course.
Neither the Parent nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Parent or any of its Subsidiaries.
Neither the Parent nor any of its Subsidiaries is party to or has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement or
arrangement other than between the Parent and its Subsidiaries.
None of the Parent's or its Subsidiaries' assets is tax exempt use
property within the meaning of Section 168(h) of the Code.
Neither the Parent nor any of its Subsidiaries has distributed the
stock of any corporation in a transaction satisfying the requirements of Section
355 of the Code since April 16, 1997. The stock of neither the Parent nor any of
its Subsidiaries has been distributed in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997.
Board Approval. The Board of Directors of Parent has, as of the date of
this Agreement (i) approved this Agreement and the transactions contemplated
hereby and (ii) determined that the
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Merger is in the best interests of the shareholders of Parent and is on terms
that are fair to such shareholders.
Absence of Litigation. There are no claims, actions, suits or
proceedings pending or, to the knowledge of Parent, threatened (or, to the
knowledge of Parent, any governmental or regulatory investigation pending or
threatened) against Parent or any of its Subsidiaries or any properties or
rights of Parent or any of its Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, except for such litigation that would not have a Material Adverse
Effect.
Merger Sub. Merger Sub has been formed solely for the purpose of
executing and delivering this Agreement and consummating the transactions
contemplated hereby. Since the date of its incorporation. Merger Sub has neither
engaged in or transacted any business of activity of any nature whatsoever other
than activities related to its corporate organization and the execution and
delivery of this Agreement. Merger Sub has no assets or properties or debts,
liabilities or obligations of any kind whatsoever, and other than this
Agreement, is not a party to any contract, agreement or undertaking of any
nature. The authorized capital stock of Merger Sub consists of 1,000 share of
Merger Sub Common Stock, of which 1,000 shares are issued and outstanding. All
of the issued and outstanding shares of Merger Sub Common Stock are owned of
record and beneficially by Parent, free and clear of any encumbrance.
CONDUCT PRIOR TO THE EFFECTIVE TIME
Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of (i) the termination of this
Agreement and (ii) the Effective Time, the Company agrees (except to the extent
that Parent shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed and except as contemplated by this Agreement)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, consistent with its
Business Plan dated June, 2000 which has been provided to Parent prior to the
date hereof or as otherwise set forth on Schedule 4.1, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any material event or occurrence
whether or not in the ordinary course of its business. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement and the Effective Time, except as expressly contemplated by
this Agreement or disclosed in Schedule 4.1, the Company shall not, without the
prior written consent of Parent during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
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and the Effective Time (which consent shall not be unreasonably withheld or
delayed); provided, that if Parent fails to respond within three (3) business
days to a written request by the Company to take an action that is otherwise
prohibited pursuant to Sections 4.1(c), (i) or (q), such failure to provide
timely refusal shall be deemed to be a waiver of the applicable Section 4.1(c),
(i) or (q) for purposes of the actions identified in such notice only;
Transfer to any person or entity any rights to the Company Intellectual
Property Rights (other than pursuant to End-User Licenses in the ordinary course
of business), provided that it is understood and agreed that the license of
source code will not be deemed to be in the ordinary course of business;
Enter into or amend any agreements pursuant to which any other party is
granted marketing, distribution or similar rights of any type or scope with
respect to any products of the Company;
Amend or otherwise modify (or agree to do so), except in the ordinary
course of business, or violate the terms of, any of the agreements set forth or
described in the Company Schedules;
Commence any litigation;
Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
Capital Stock, or split, combine or reclassify any of its Capital Stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of Capital Stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its Capital
Stock (or options, warrants or other rights exercisable therefor) other than
repurchases made in accordance with agreements referred to on the Company
Schedules;
Other than (1) repurchases made in accordance with agreements referred
to on the Company Schedules, (2) the documentation of stock option grants
representing shares of the Company's Common Stock that the Board of Directors of
the Company (or the Compensation Committee thereof) has resolved to grant as of
the date of this Agreement, (3) the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Company Options or
currently outstanding shares of Company Preferred Stock, or (4) issue, grant,
deliver or sell or authorize or propose the issuance, grant, delivery or sale
of, or purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
Cause or permit any amendments to its Articles of Incorporation or
Bylaws;
Acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
Acquire or agree to acquire any assets in an amount in excess of
$100,000 in the case of a
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single transaction or in excess of $250,000 in the aggregate in any 30-day
period;
Sell, lease, license or otherwise dispose of any of its properties or
assets, except in the ordinary course of business;
Incur any indebtedness for borrowed money or guarantee any such
indebtedness outside the ordinary course of business or issue or sell any debt
securities of the Company or guarantee any debt securities of others;
Grant any severance or termination pay (i) to any director or officer
or (ii) to any other employee, except payments made pursuant to standard written
agreements previously disclosed to Parent on the Company Schedules;
Adopt or amend any employee benefit plan except as required by law, or
enter into any employment contract, pay or agree to pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates of its employees or, except in the ordinary course of business
consistent with past practices, extend employment offers;
Revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business;
Pay, discharge or satisfy, in an amount in excess of $100,000 (in any
one case) or $250,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto or incurred in the ordinary course of business since the
date thereof) or expenses consistent with the provisions of this Agreement
incurred in connection with any transaction contemplated and permitted hereby;
Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes in excess of
$25,000, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
Enter into any strategic alliance or any material development or joint
marketing agreement;
Take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code; or (s) Take, or
agree in writing or otherwise to take, any of the actions described in Sections
4.1(a) through (r) above, or any other action that would prevent the Company
from performing or cause the Company not to perform its covenants hereunder.
No Solicitation. Until the earlier of (i) the Effective Time and (ii)
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, the Company will not (nor will the
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Company permit any of the Company's officers, directors, agents, representatives
or affiliates to) directly or indirectly, take any of the following actions with
any party other than Parent and its designees: (a) solicit, conduct discussions
with or engage in negotiations with any person, relating to the possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its capital stock or
assets, (b) provide information with respect to it to any person, other than
Parent, relating to the possible acquisition of the Company (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets, (c) enter into an agreement
with any person, other than Parent, providing for the acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its capital stock or assets or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
capital stock or assets by any person, other than by Parent. In addition to the
foregoing, if the Company receives prior to the Effective Time or the
termination of this Agreement any offer or proposal relating to any of the
above, the Company shall immediately notify Parent thereof, including
information as to the identity of the offeror or the party making any such offer
or proposal and the specific terms of such offer or proposal, as the case may
be, and such other information related thereto as Parent may reasonably request.
ADDITIONAL AGREEMENTS
California Permit; Shareholder Meeting.
As promptly as practicable after the execution of this Agreement,
Parent shall prepare the necessary documents and Parent shall apply to obtain a
permit (a "California Permit") from the California Commissioner of Corporations
(after a hearing before such Department) pursuant to Section 25121 of the
California Corporate Securities Law of 1968, so that the issuance of the Parent
Common Stock in the Merger shall be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of the
exemption from registration contained in Section 3(a)(10) thereof. The Company
shall cooperate with, and provide information to, Parent in connection with
Parent's application for the California Permit and shall prepare an information
statement to be mailed to the Company's shareholders concurrently with the
notice of any hearing. The Company and Parent will respond to any comments from
the California Commissioner of Corporations and use their reasonable best
efforts to have the California Permit granted as soon as practicable after such
filing. As promptly as practicable after the date of this Agreement, Parent
shall prepare and make such filings as are required under applicable Blue Sky
laws relating to the transactions contemplated by this Agreement.
As promptly as practicable after the receipt of a California Permit,
the Company shall submit this Agreement and the transactions contemplated
hereby, including without limitation the Merger, to the Company's shareholders
for approval and adoption as provided by the CGCL and the
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Company's Articles of Incorporation and Bylaws. The information submitted to the
Company's shareholders shall be subject to review and approval by Parent and
shall include information regarding the Company, the terms of the Merger and
this Agreement and the unanimous recommendation of the Board of Directors of the
Company in favor of the Merger, this Agreement and the transactions contemplated
hereby.
If (i) for any reason the California Permit is not issued, (ii) in the
opinion of Parent, after consultation with Counsel, proceeding with the
application to receive the California Permit is not practicable, or (iii) if the
exemption provided by Section 3(a)(10) of the Securities Act is not available
with respect to the issuance of the Parent Common Stock in connection with the
Merger, then Parent shall, as soon as practicable, prepare and file with the SEC
a Form S-4 Registration Statement (the "Form S-4 Registration Statement") with
respect to the issuance of the Parent Common Stock in connection with the
Merger. Each of the Company and Parent shall use all reasonable efforts to have
the Form S-4 Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. The Company will use its
reasonable efforts to cause the proxy statement or information statement
included in the Form S-4 Registration Statement to be mailed to the Company's
shareholders as promptly as practicable after the Form S-4 Registration
Statement is declared effective under the Securities Act, and to call and hold a
meeting of the Company's shareholders to vote on a proposal to adopt and approve
this Agreement and the transactions contemplated hereby, including without
limitation the Merger.
Access to Information. Subject to any applicable contractual
confidentiality obligations (which the Company shall use its reasonable efforts
to cause to be waived) each party shall afford the other parties and their
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of such
party's properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) as the other parties may reasonably
request; provided, however, that it shall be deemed to not be reasonable to
request access to either party's trade secrets or source code or identification
of such party's prospects. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
Confidentiality.
None of the parties hereto will release, publish, reveal or disclose,
directly or indirectly, any business or technical information (or both) of the
other parties designated orally or in writing as "Confidential" or "Proprietary"
(or in like words), including, but not limited to, computer programs, know-how,
designs, inventions, new products, marketing and advertising methods, supplier
agreements, customer lists, pricing policies, financial information, employee
information, strategies or other information related to its business or its
customers (referred to as "Evaluation Material"), except: (i) to such company's
directors, officers, employees, financial advisors, legal counsel, independent
certified public accountants or other agents, advisors or representatives as
will require access thereto on a need-to-know basis for the purpose of the
negotiations contemplated and who
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will agree to be bound by the terms of this Section 5.3; and (ii) with the prior
written consent of the other companies and then only to the extent specified in
such consent.
The parties agree to take all reasonable precautions to safeguard the
confidentiality of the Evaluation Material. Neither company will make, or permit
to be made, except in furtherance of their due diligence contemplated hereby,
any copies, abstracts or summaries of the Evaluation Material. In addition, all
such Evaluation Material will be used solely for the purpose of due diligence in
connection with consummating the transactions contemplated hereby and will not
be otherwise used to the detriment of the other party, in competition with the
other party.
The restrictions on disclosure of information contained in this Section
5.3 do not extend to any item of information that (i) is publicly known at the
time of its disclosure, (ii) is lawfully received from a third party not bound
in a confidential relationship with the disclosing party, (iii) is published or
otherwise made known to the public by the disclosing party or (iv) can be shown
to have been developed independently by the receiving party without reference to
any Evaluation Material. Upon written request or the termination of this
Agreement without closing the proposed acquisition, the parties will return all
writings, documents and materials containing Evaluation Material with a letter
confirming that the Evaluation Material has in no way been reproduced or copied
or that all annotated copies and derivative works have been destroyed. Each
party understands that the other parties will not have an adequate remedy at law
for a breach or threatened breach by such party of the terms of this Section
5.3. Each party therefore agrees that if there is any such breach or threatened
breach, the other parties may, in addition to any other legal or equitable
remedies available to them, obtain an injunction or restraining order to enjoin
such party from the breach or threatened breach of this Section 5.3.
Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses (it being understood
that (a) Third Party Expenses of the Company will include, without limitation,
all fees and expenses payable to Jones, Day, Reavis & Pogue, Lehman Brothers,
Inc., Milstein Brothers Capital Advisors, LLC, PL Escrow Advisors, Inc. and
PriceWaterhouseCoopers LLP in connection with their representation of the
Company with respect to the Merger, and (b) if the Closing occurs, the
reasonable Third Party Expenses referred to in clause (a) of this sentence will
be paid by Parent or the Surviving Corporation, and not by the Shareholders);
provided, however, that under no circumstances shall Parent or the Surviving
Corporation be obligated to pay Third Party Expenses of the Company in excess of
$3.5 million.
Public Disclosure. Upon execution and delivery of this Agreement by the
parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Merger. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
Dealers, Inc., prior to the Effective Time, no disclosure (whether or not in
response to an inquiry) of the subject
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matter of this Agreement shall be made by any party hereto unless approved by
Parent prior to release, provided that such approval shall not be unreasonably
withheld.
Consents. The Company will use its commercially reasonable efforts to
obtain the consents, waivers and approvals under any of the Contracts identified
on Schedule 2.12(a) as may be required in connection with the Merger.
FIRPTA Compliance. On the Closing Date, the Company shall deliver to
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement;
provided, that Parent shall not be required to agree to any divestiture by
Parent or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates material to Parent,
in Parent's reasonable judgement, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and capital stock.
Notification of Certain Matters. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time except as contemplated by this
Agreement (including the Company Schedules) and (ii) any failure of the Company
or Parent, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
Additional Documents and Further Assurances. Each party hereto, at the
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
Form S-8. Parent shall file within 30 days after the Closing a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options promptly after the Closing
Date, provided, that the Company provides all necessary information
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within its control for the preparation of such registration statement.
NMS Listing. Parent shall cause to be listed on the Nasdaq National
Market the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
Cooperation With Financial Statements. The Company will use its best
efforts to cause the Company's management and its independent auditors to
facilitate on a timely basis (i) the preparation of historical and pro forma
financial statements as required by Parent to comply with applicable SEC
regulations, and (ii) the review of the Company's and PriceWaterhouseCoopers'
audit work papers, including the examination of selected interim financial
statements and data. The Company shall deliver to Parent, within ten (10)
business days of the date hereof, the Company's audited Balance Sheet and the
related audited statements of operation and cash flows for the twelve-month
period ended December 31, 1999.
Employee Benefits. Parent shall take such commercially reasonable
actions as are necessary, including amending Parent's plans to allow eligible
employees of the Company to participate in the benefit programs of Parent, or
alternative benefits programs substantially comparable to those applicable to
employees of Parent on similar terms, as soon as practicable after the Effective
Time. Without limiting the generality of the foregoing, (i) to the extent that
any employee of the Company becomes eligible to participate in any employee
benefit plan of Parent after the Effective Time, Parent, the Surviving
Corporation and their subsidiaries shall credit such employee's service with the
Company, to the same extent as such service was credited under the similar
employee benefit plans of the Company immediately prior to the Effective Time,
for purposes of determining eligibility to participate in and vesting under, and
for purposes of calculating benefits under, such employee benefit plan of
Parent, and (ii) to the extent permitted by such employee benefit plan of Parent
and applicable law, Parent, the Surviving Corporation and its subsidiaries shall
waive any pre-existing condition limitations, waiting periods or similar
limitations under such employee benefit plan of Parent and shall provide each
such employee with credit for any co-payments previously made and any
deductibles previously satisfied.
Indemnification. Parent shall indemnify the directors and officers of
the Company on the same terms as are provided to the directors and officers of
the Company on the date hereof pursuant to indemnification agreements (which
have been furnished to the Parent) and the Company's Bylaws as in effect on the
date hereof.
Six-Month Restriction on Sale. The number of shares of Parent Common
Stock held by certain affiliates of the Company identified on Schedule 5.16
hereto (each, a "Restricted Affiliate") for purposes of this Section 5.16 after
the Closing shall be aggregated with the number of shares of Parent Common Stock
subject to any option or options held by each such Restricted Affiliate. Until a
date six calendar months after the Effective Date, such Restricted Affiliate
shall not sell, make any short sale of, transfer, loan, grant any option for the
purchase of or otherwise dispose of (each, a "Transfer"), in a single calendar
month, a number of shares of Parent Common Stock in excess of (a) (i) one-sixth
(1/6) of the Parent Common Stock to be received by such Restricted Affiliate in
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connection with the transactions contemplated hereby times (ii) the number of
calendar months (rounded up to the next whole month) elapsed since the Effective
Date, minus (b) the number of such shares of Parent Common Stock previously
transferred in accordance with this Section 5.16; provided, however, that each
Restricted Affiliate shall be permitted to enter into hedging transactions for
no more than 40% of the Parent Common Stock to be received by such Restricted
Affiliate if, and only if, such Restricted Affiliate engages in such hedging
transactions with one of the following investment bankers: Goldman Sachs & Co.,
FleetBoston Robertson Stephens, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation or Lehman Brothers Inc.
5.17 Restrictive Legend. Each Restricted Affiliate shall receive six
certificates, each of which shall represent 1/6 of the shares of Parent Common
Stock to be received by such Restricted Affiliate (other than shares placed in
Escrow). One certificate, representing 1/6 of such Restricted Affiliate's shares
of Parent Common Stock shall have no legends placed on such certificate. The
remaining 5 certificates, each representing 1/6 of such Restricted Affiliate's
shares (other than the shares placed in Escrow pursuant to Section 7.5) shall
contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER PURSUANT TO AN AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OFAUGUST 8, 2000 (COPIES OF WHICH MAY BE OBTAINED BY CONTACTING THE
ISSUER OF THIS CERTIFICATE AT ITS PRINCIPAL PLACE OF BUSINESS). THE SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF COMPLIANCE WITH THE TERMS THEREOF.
SUCH RESTRICTION SHALL CEASE TO BE IN EFFECT AFTER [Date].
The date referred to in the above legend shall vary with each such
certificate delivered to each such shareholder such that one certificate shall
have a date that is one calendar month after the Effective Date, one certificate
shall have a date that is two calendar months after the Effective Date, one
certificate shall have a date that is three calendar months after the Effective
Date, and so on until all 5 certificates have been printed with legends
identifying the 5 subsequent months following the Effective Date and
representing 5/6ths of such shareholder's shares. The legend contained in this
Section shall be removed from a certificate at the end of the applicable date
referred to above for such certificate, but shall not be removed in any other
circumstance without Parent's prior written consent (which consent shall not be
unreasonably withheld or delayed and shall be granted if such legend is no
longer appropriate).
Tax Matters. Neither the Parent nor Merger Sub shall take any action
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, the Company and Parent each shall file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice ("DOJ") Notification and Report Forms relating to
the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. The Company and Parent each
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shall promptly (a) supply the other with any information which may be required
in order to effectuate such filings and (b) supply any additional information
which reasonably may be required by the FTC, the DOJ or the competition or
merger control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate; provided, however, that Parent shall not be
required to agree to any divestiture by Parent or the Company or any of Parent's
Subsidiaries or affiliates of shares of capital stock or of any business, assets
or property of Parent or its Subsidiaries or affiliates or of the Company, its
affiliates, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.
Shareholder Approval of Section 280G Payments. Each Party hereto shall
take all commercially reasonable actions necessary to obtain shareholder
approval of certain payments to the Company's employees in accordance with the
shareholder approval procedures of Code Section 280G, if such shareholder
approval is required by such Section to enable Parent to deduct any such
payments from its tax returns.
Shareholder Meetings. Parent agrees that it and its directors shall not
directly or indirectly call a general or special meeting of shareholders of the
Company, propose any resolution of the Company or otherwise direct the vote of
the shareholders who are parties to the Voting Agreement or exercise the proxy
delivered in connection therewith (other than for any meeting or resolution in
connection with, or for the purposes of, the Merger or Merger Agreement) from
the date hereof until the earlier of (i) such time as the transactions
contemplated by the Merger Agreement are effective and (ii) the date that the
Merger Agreement is terminated in accordance with its terms.
CONDITIONS TO THE MERGER
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 Closing of the following
conditions:
Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the shareholders of the Company by the requisite vote
under applicable law and the Company's Articles of Incorporation.
No Injunctions or Restraints; Illegality; HSR Act. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect. All
waiting periods under the HSR Act shall have expired or been terminated early.
Tax Opinions. Parent and the Company shall each have received written
opinions from their
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respective tax counsel to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties to
this Agreement agree to make reasonable Tax representations as requested by such
counsel for the purpose of rendering such opinions.
Nasdaq Listing. The shares of Parent Common Stock issuable to
shareholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq Stock Market upon official notice of
issuance.
California Permit. The California Commissioner of Corporations shall
have issued the California Permit and the exemption provided by Section 3(a)(10)
of the Securities Act shall be available with respect to the issuance of the
Parent Common Stock in the Merger, or the Form S-4 Registration Statement shall
have become effective in accordance with the provisions of the Securities Act,
and no stop order shall have been issued by the SEC with respect to the Form S-4
Registration Statement.
Additional Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall have been true and
correct in all material respects as of the Closing, except for (A) changes
contemplated or permitted by this Agreement and (B) except for those
representations and warranties that address matters only as of a particular date
(which shall have been true and correct as of such date). The Company shall have
received a certificates with respect to the foregoing signed on behalf of Parent
and Merger Sub by duly authorized officers thereof.
Agreements and Covenants. Parent and Merger Sub shall have performed or
complied (which performance or compliance shall be subject to Parent's or Merger
Sub's ability to cure as provided in Section 8.1(e) below) in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective Time, and the
Company shall have received a certificate to such effect signed on behalf of the
Parent and Merger Sub by duly authorized officers thereof.
Material Adverse Change. There shall not have occurred or failed to
have occurred an event that constitutes a Material Adverse Effect with respect
to Parent since March 31, 2000.
Legal Opinion. The Company shall have delivered the legal opinions from
Wilson Sonsini Goodrich & Rosati, legal counsel to Parent, in substantially the
form attached as Exhibit C.
Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following
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conditions, any of which may be waived, in writing, exclusively by Parent:
Representations and Warranties. The representations and warranties of
the Company contained in this Agreement (i) shall have been true and correct as
of the date of this Agreement and (ii) shall have been true and correct in all
material respects as of the Closing, except for (A) changes contemplated or
permitted by this Agreement and (B) except for those representations and
warranties that address matters only as of a particular date (which shall have
been true and correct as of such date). Parent shall have received a certificate
with respect to the foregoing signed on behalf of the Company by a duly
authorized officer of the Company.
Agreements and Covenants. The Company shall have performed or complied
(which performance or compliance shall be subject to the Company's ability to
cure as provided in Section 8.1(d) below) in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Effective Time, and Parent and Merger Sub shall
have received a certificate to such effect signed on behalf of the Company by a
duly authorized officer of the Company.
Third Party Consents. [Reserved]
Legal Opinion. Parent shall have delivered the legal opinions from
Jones, Day, Reavis & Pogue, legal counsel to the Company, in substantially the
form attached as Exhibit D.
Material Adverse Change. There shall not have occurred or failed to
have occurred, an event that constitutes a Material Adverse Effect with respect
to the Company since December 31, 1999.
Escrow Agreement. The Shareholders' Representatives (as defined in the
Escrow Agreement) shall have entered into an Escrow Agreement substantially in
the form attached hereto as Exhibit F (the "Escrow Agreement").
Dissenters' Rights. Holders of outstanding shares of Company Capital
Stock as of the record date, representing in the aggregate, more than 5% of such
shares shall not have exercised, nor shall they have any continued right to
exercise, appraisal, dissenters' or similar rights under applicable law with
respect to their shares by virtue of the Merger.
Resignation of Directors and Officers. All directors and officers of
the Company shall have resigned their respective offices as directors and
officers of the Company effective as of the Effective Time.
Company Shareholders who own in excess of 95% of the Company's Capital
Stock shall have executed a release of claims in form and substance reasonably
acceptable to Parent.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
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INDEMNIFICATION; ESCROW
Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules), and all
of Parent's and Merger Sub's representations and warranties in this Agreement
and in any instrument delivered pursuant to this Agreement, shall survive the
Merger and continue until 5:00 p.m., California time, on the first anniversary
of the Closing Date, except that the representations and warranties set forth in
sections 2.8, 2.11, 2.18 and 2.20 shall survive until the expiration of the
applicable statutes of limitation periods.
Obligation of the Company to Indemnify, Reimburse, etc. Subject to the
provisions of Section 7.4 hereof, the Company, its successors and assigns,
jointly and severally, shall indemnify, reimburse, defend, protect and hold
harmless Parent and Merger Sub and each of their successors and assigns and each
of their respective directors, officers, employees, affiliates, agents, and
their respective successors and assigns (each a "Parent Indemnitee") from and
against any claims, losses, liabilities, damages, causes of action, costs and
expenses (including reasonable attorney's, accountant's, consultant's and
expert's fees and expenses) (collectively "Losses") resulting from, imposed
upon, incurred or suffered by any of them, directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty (as modified by the Company Schedules), covenant or
agreement of the Company, contained in this Agreement.
Obligation of Parent to Indemnify, Reimburse, etc. Subject to the
provisions of Section 7.4 hereof, Parent and Merger Sub and their respective
successors and assigns, jointly and severally, shall indemnify, reimburse,
defend, protect and hold harmless the Shareholders and their successors and
assigns and each of their directors, officers, employees, affiliates, agents,
and their respective successors and assigns (each a "Shareholder Indemnitee")
from and against any Losses resulting from, imposed upon, incurred or suffered
by any of them, directly or indirectly, based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of Parent, contained in this Agreement.
Limits on Indemnification, Reimbursement, etc..
Absent fraud or willful misconduct of any party (for which there shall
be no limitation of liability of any party), no Parent Indemnitee and no
Shareholder Indemnittee shall have any right to seek or obtain indemnification,
reimbursement or defense under this Agreement or the Escrow Agreement until
Losses which would otherwise be indemnifiable hereunder, and have been incurred
by such party and other indemnitees associated with or related to such party,
exceed $1,000,000, after which such party or parties to be indemnified hereunder
shall be entitled to receive indemnification for all Losses in excess of such
$1,000,000 amount. In addition (absent fraud or willful misconduct), neither
Parent nor any Shareholder shall have any liability under this Article VII
unless the Losses incurred by a Parent Indemnitee or a Shareholder Indemnitee,
as the case may be, in connection with a claim for indemnification or
reimbursement exceed $50,000, and the Losses
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related thereto shall be disregarded for purposes of determining whether the
deductible set forth in this Section 7.4(a) has been met.
Absent fraud or willful misconduct of the Company, from and after the
Closing, recourse of the Parent Indemnitees to the Escrow Amount in the Escrow
Fund shall be the sole and exclusive remedy of the Parent Indemnitees for any
obligations of the Company, its successors and assigns arising under Section
7.2.
If any legal proceedings are instituted or any claim or demand is
asserted by any third party in respect of which a party may seek indemnification
pursuant to the provisions of this Article VII, such party seeking
indemnification shall promptly cause written notice of the assertion of any such
claim to be made to the party from whom indemnification is sought. The party
from whom indemnification is sought shall have the right, at such party's option
and expense (except as otherwise provided herein), to control the defense,
negotiations or settlement of any such claim, and in such case, the indemnified
party shall have the right consult in (but not control) such defense,
negotiations or settlement; provided, however, that the indemnifying party shall
not agree to any compromise, settlement or consent to entry to judgment or
otherwise impose any obligations on the indemnified party without the prior
written consent of the indemnified party in indemnified party's sole discretion
unless the sole relief is monetary damages that are paid in full by the
indemnifying party or are otherwise satisfied without any obligation of Parent.
If the indemnifying party does not so elect to defend any such third party
claim, the indemnified party shall have the right but not the obligation to do
so (and any failure by the indemnified party to defend any such claim shall not
prejudice such party's right to indemnification pursuant to this Article VII),
and in such case, the indemnifying party shall have the right to consult in (but
not control) such defense, negotiation or settlement.
In order to effect the provision of this Section 7.4 on the Effective
Date the Board of Directors of the Company shall designate to Parent a
representative of the Company (collectively, the "Company Representative") who
shall act on behalf of the Company with respect to the indemnification matters
hereunder. The Company Representative may exercise all rights of the Company as
indemnifying party, including the right to control the defense of and
compromise, settle or consent to the entry of judgment in respect of matters as
provided herein. All reasonable out-of-pocket expenses incurred by the Company
Representative in connection with defending, settling or compromising any such
matter shall be payable from the Escrow Amount.
Absent fraud or willful misconduct, no party hereto shall be entitled
to recover punitive damages with respect to any breach of any representation or
warranty or non-performance of any obligation under this Agreement (or otherwise
relating to the transactions contemplated hereby), and under no circumstances
shall such damages be considered Losses under this Article VII.
To the extent that any indemnifying party makes or is required to make
any indemnification or reimbursement payment to any indemnified party, the
indemnifying party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the indemnified party may have against any
other
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person with respect to any Losses, circumstances or matters to which such
indemnification or reimbursement payment is directly or indirectly related. Each
indemnified party shall permit the indemnifying party to use the name of the
indemnified party in any transaction or in any proceeding or other matter
involving any of such rights or remedies; and the indemnified party shall take
such actions as the indemnifying party may reasonably request for the purpose of
enabling the indemnifying party to perfect or exercise the indemnifying party's
right of subrogation hereunder.
Escrow Arrangements. Concurrent with the Effective Time, the Escrow
Consideration shall be placed in an escrow fund (the "Escrow Fund"), to be
governed by the terms of the Escrow Agreement. The Escrow Fund shall be
available to (a) compensate Parent and its affiliates for Losses for which
Parent or its affiliates are entitled to indemnification under this Article VII
and to (b) reimburse expenses incurred by the Company Representative pursuant to
Section 7.4(c). The terms and conditions of the Escrow Fund shall be set forth
more fully in the Escrow Agreement.
TERMINATION, AMENDMENT AND WAIVER
Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
by mutual written consent of the Company and Parent;
by Parent or the Company, by written notice to the other parties, if:
(i) the Effective Time has not occurred by October 31, 2000 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); provided, however, that if Parent shall file or
cause to be filed the Form S-4 Registration Statement in accordance with Section
5.1, then Parent shall make available to the Company the Interim Loan no later
than October 31, 2000 and the reference to October 31, 2000 in this sentence
shall be replaced with January 15, 2001; (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity that would make consummation of the Merger
illegal;
by Parent, by written notice to the other parties, if there shall be
any 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: (i) prohibit Parent's or the Company's ownership or operation of any
portion of the business of the Company or (ii) compel Parent or the Company to
dispose of or hold separate, as a result of the Merger, any material portion of
the business or assets of the Company or Parent;
by Parent, by written notice to the other parties, if it is not in
material breach of its obligations under this Agreement and there has been a
breach of any representation, warranty,
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covenant or agreement contained in this Agreement on the part of the Company and
as a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b),
as the case may be, would not then be satisfied; provided, however, that if such
breach is curable by the Company within thirty (30) days through the exercise of
its commercially reasonable best efforts, then for so long as the Company
continues to exercise such commercially reasonable best efforts Parent may not
terminate this Agreement under this Section 8.1(d) unless such breach is not
cured within thirty (30) days (but no cure period shall be required for a breach
which by its nature cannot be cured);
by the Company, by written notice to the other parties, if it is not in
material breach of its obligations under this Agreement and there has been a
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of Parent or Merger Sub and as a result of such breach the
conditions set forth in Section 6.2(a) or 6.2(b), as the case may be, would not
then be satisfied; provided, however, that if such breach is curable by Parent
or Merger Sub within thirty (30) days through the exercise of its reasonable
best efforts, then for so long as Parent or Merger Sub continues to exercise
such reasonable best efforts the Company may not terminate this Agreement under
this Section 8.1(e) unless such breach is not cured within thirty (30) days (but
no cure period shall be required for a breach which by its nature cannot be
cured).
For purposes of this Section 8.1, the term "Interim Loan" shall mean a
loan from Parent to the Company in the principal amount of $10,000,000, having a
maturity date of October 31, 2002, bearing simple interest at the applicable
federal rate, with interest payable on October 31, 2001 and at maturity.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and, except
as set forth in this Section 8.2, there shall be no liability or obligation on
the part of Parent, Merger Sub or the Company, or their respective officers,
directors or shareholders, provided, that each party shall remain liable for any
willful breaches of this Agreement prior to its termination; and provided
further that, the provisions of Sections 5.3, 5.4 and 5.5 and Article IX of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
Amendment. Except as is otherwise required by applicable law after the
shareholders of the Company approve this Agreement, 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.
Extension; Waiver. At any time prior to the Effective Time, Parent and
Merger Sub, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party 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
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waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
GENERAL PROVISIONS
Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (a) on the date of delivery, if delivered
personally or (b) two business days after sent, if sent by commercial delivery
service, or mailed by registered or certified mail (return receipt requested)
or, (c) on the date of delivery, if sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Parent or Merger Sub, to:
Critical Path, Inc.
320 First Street
San Francsico, CA 94105
Attention: President
Telephone No.: (415) 808-8800
Facsimile No.: (415) 808-8777
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark L. Reinstra
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
if to the Company, to:
PeerLogic, Inc.
555 De Haro Street
Suite 300
San Francisco, CA 94107
Attention: President
Telephone No.: (415) 626-4545
Facsimile No.: (415) 626-4710
with a copy to:
Jones, Day, Reavis & Pogue
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2727 North Harwood
Dallas, TX 75201-1515
Attention: Stephen Fluckiger
Telephone No.: (214) 220-3939
Facsimile No.: (214) 969-5100
Interpretation; Knowledge; Material Adverse Effect.
The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
word "agreement" when used herein shall be deemed in each case to mean any
contract, commitment or other agreement, whether oral or written, that is
binding at law or in equity. 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.
As used in this Agreement, the phrase "to the best of [a party's]
knowledge," "to [a party's] knowledge," "[a party] is not aware," and similar
phrases shall mean the actual knowledge of the officers and directors of such
party, after careful consideration of the matters set forth in the
representation that is so qualified and a reasonably diligent review of all
files, documents, agreements and other materials in such person's possession or
subject to his or her control.
For purposes of this Agreement, the term "Material Adverse Effect" when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with other
changes, events, violations, inaccuracies, circumstances or effects, that is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity and
its subsidiaries taken as a whole it being understood that none of the following
alone shall be deemed, in and of itself, to constitute a Material Adverse
Effect: (a) a change in the market price or trading volume of the entity's
Common Stock, (b) any effects, changes, events, circumstances or conditions
(including, without limitation, litigation, a loss of suppliers or customers,
delays in customer orders, a disruption in business relationships or a loss of
employees) as a result of the public announcement or pendency of the
transactions contemplated hereby or (c) changes in general economic conditions
or changes affecting the industry generally in which such entity operates.
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 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.
Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (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 (other than the Shareholder Indemnittees and those persons referred
to in Section 5.15) any rights or remedies
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hereunder; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided, except that Parent and Merger Sub may assign
their respective rights and delegate their respective obligations hereunder to
their respective affiliates as long as such assignment or delegation does not
adversely affect the rights of the Company shareholders.
Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
No Implied Representations. Parent and the Company acknowledge that,
except as expressly provided in Articles II and III, and except as expressly
provided in any document delivered by a party hereto to any other party hereto
in connection with the transactions contemplated hereby, none of the parties
(and no other person) has made or is making any representations or warranties
whatsoever, implied or otherwise.
Other Remedies. Except as otherwise provided herein (including in
Section 7.4), any and all remedies herein expressly conferred upon a party will
be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy; provided,
however, absent fraud or willful misconduct, as to matters to which
indemnification is provided in Article VII hereof, such indemnification shall be
the sole remedy.
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
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.
Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
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Share Legends. All certificates representing any of the shares of
Parent Common Stock to be issued pursuant to this Agreement shall have endorsed
thereon any legend required by Federal or state securities laws.
(Remainder of page intentionally left blank)
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
PEERLOGIC, INC. CRITICAL PATH, INC.
By: By:
--------------------------------- --------------------------------------
President and Chief Executive Officer President and Chief Executive Officer
PRINCE ACQUISITION CORP.
By:
---------------------------------
President and Chief Executive Officer
***REORGANIZATION AGREEMENT***
<PAGE> 52
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CRITICAL PATH, INC.
PRINCE ACQUISITION CORP.
AND
PEERLOGIC, INC.
DATED AS OF AUGUST 8, 2000
<PAGE> 53
EXHIBIT A
VOTING AGREEMENT
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EXHIBIT B
AGREEMENT OF MERGER
(TO BE AGREED)
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<PAGE> 55
EXHIBIT C
LEGAL OPINION: COUNSEL TO CRITICAL PATH, INC.
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EXHIBIT D
LEGAL OPINION: COUNSEL TO PEERLOGIC, INC.
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EXHIBIT E
ESCROW AGREEMENT
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