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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 5, 1999
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SILKNET SOFTWARE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-25491 02-0478949
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
50 Phillippe Cote Street
Manchester, NH 03101
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (603) 625-0070
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 5, 1999, Silknet Software, Inc. ("Silknet") completed the
acquisition of InSite Marketing Technology, Inc., a privately held Delaware
corporation ("InSite"), by means of a merger (the "Merger") of InSite
Acquisition Corp. ("Merger Sub"), a Delaware corporation and wholly owned
subsidiary of Silknet, with and into InSite, pursuant to the Agreement and Plan
of Merger and Reorganization dated as of October 5, 1999 (the "Merger
Agreement") by and among Silknet, Merger Sub, InSite, Stefania Nappi as
Indemnification Representative and the stockholders of InSite listed on the
signature pages thereto. As a result of the Merger, InSite became a wholly owned
operating subsidiary of Silknet. The Merger was effected by the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware on
October 5, 1999.
InSite develops, markets and supports customer-centric, Web-based
marketing and sales software, which identifies and integrates the buying style
of the customer and the selling style of the company to assist the customer
through the buying process. Silknet intends to utilize InSite's personalization
technology with Silknet's e-business solutions to offer an integrated line of
Web-based e-commerce, customer service and sales and marketing software that
will enhance e-business initiatives by focusing on the customer experience.
Under the Merger Agreement, each outstanding share of common stock of
InSite ("InSite Common Stock") was converted into the right to receive 0.030236
shares of common stock of Silknet ("Silknet Common Stock") (subject to payment
of cash in lieu of any fractional shares). Each holder of InSite Common Stock
who is otherwise entitled to a fraction of a share of Silknet Common Stock will
receive cash in lieu thereof, equal to such fraction multiplied by $36.397. An
aggregate of 590,708 shares of Silknet Common Stock will be issued in exchange
for all of the outstanding common stock and options to purchase common stock of
InSite.
As a result of the Merger, the former stockholders of InSite will
receive an aggregate of 497,128 shares of Silknet Common Stock and an aggregate
of $258.12 in cash in lieu of fractional shares of Silknet Common Stock in
exchange for all of the shares of InSite Common Stock issued and outstanding at
the effective time of the Merger. Pursuant to the Merger Agreement and an Escrow
Agreement dated as of October 5, 1999 (the "Escrow Agreement") by and among
Silknet, American Stock Transfer & Trust Company, as escrow agent, and Stefania
Nappi, as Indemnification Representative, an aggregate of 49,713 of such shares
were placed in an escrow account to secure certain indemnification obligations
of the former stockholders of InSite to Silknet under the Merger Agreement. The
shares of Silknet Common Stock issued in connection with the Merger were issued
in reliance on exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act"). As a result, all such shares are subject to
restrictions on transfer under the applicable provisions of the Securities Act
and will carry a legend reflecting such restrictions. Pursuant to a Registration
Rights Agreement dated as of October 5, 1999 between the former stockholders of
InSite and Silknet (the "Registration Rights Agreement"), Silknet has granted
the former stockholders of InSite rights to register under the Securities Act
the shares of Silknet Common Stock received in connection with the Merger, under
certain circumstances and subject to certain conditions.
Also, pursuant to the terms of the Merger Agreement, upon the effective
time of the Merger, Silknet assumed InSite's obligations under InSite's 1997
Stock Option Plan and all stock options of InSite outstanding as of the
effective time of the Merger. The shares of InSite Common Stock subject to such
stock options were converted into shares of Silknet Common Stock at the rate of
0.030236 shares of Silknet Common Stock for each share of InSite Common Stock.
Options to purchase an aggregate of 3,095,055 shares of InSite Common Stock were
exchanged and converted into options to purchase an aggregate of 93,580 shares
of Silknet Common Stock.
The terms of this transaction and the consideration received by
InSite's stockholders were the result of arm's-length negotiations between the
representatives of Silknet and InSite and took into account
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various factors concerning the relative valuations of the businesses and the
common stock of Silknet and InSite. The source of the consideration for this
acquisition came from the authorized capital stock of Silknet, and to the extent
that cash was paid for fractional shares, from Silknet's cash on hand. The terms
of the Merger and the exchange of InSite Common Stock for Silknet Common Stock
are more fully described in the Merger Agreement, the Escrow Agreement and the
Registration Rights Agreement. Copies of the Merger Agreement, the Escrow
Agreement and the Registration Rights Agreement are filed as Exhibit 2.1,
Exhibit 2.2, and Exhibit 4.1, respectively, to this report and are incorporated
herein by reference.
The acquisition of InSite is intended to qualify a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended. Silknet will account for the transaction as a pooling-of-interests.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Statements contained in the second paragraph of this Report on Form 8-K
that are not historical fact may constitute forward-looking statements and are
made under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Silknet's actual results of operations and financial
condition may in the future vary significantly from those stated in any
forward-looking statements. Factors that may cause such differences include, but
are not limited to, the risks, uncertainties and other information discussed
within this Report on Form 8-K and other risks identified in Silknet's
Securities and Exchange Commission filings.
The following factors, among others, could cause actual results to
differ materially from those set forth in forward-looking statements contained
or incorporated by reference in this report and presented by management from
time to time. Such factors, among others, may have a material adverse effect
upon Silknet's business, results of operations and financial condition:
Difficulty of Integrating Two Companies. In connection with Silknet's
acquisition of InSite, the successful integration of the operations, personnel
and product lines of the two companies is important to the future financial
performance of the combined enterprise. The anticipated benefits of the
acquisition may not be achieved unless, among other things, the operations of
InSite are successfully combined with those of Silknet in a timely manner. The
diversion of the attention of management, and any difficulties encountered in
the transition process, could have an adverse impact on the revenues, financial
condition and results of operations of the combined enterprise. Silknet may not
be able to successfully or timely integrate InSite and its services and products
into Silknet's operations. The inability of management to successfully integrate
the operations of the companies could have a material adverse effect upon the
business, financial condition and results of operations of Silknet.
Difficulty of Integrating InSite Product Lines. As part of its product
plans following the acquisition of InSite, Silknet expects to integrate InSite's
personalization technology with Silknet's product offerings. Such integration
can be costly, and may result in unanticipated delays or difficulties.
Successful product integration may require further development expenses and
further expenditures for sales and marketing campaigns associated with
advertising the new, complementary product offerings. There is no assurance that
the InSite personnel can be successfully assimilated with Silknet's personnel,
or that the InSite personnel will continue to remain with Silknet following the
acquisition. Silknet has no assurance that its existing customers will purchase
the new InSite product lines, once integrated, or that Silknet will be able to
attract new customers with the added InSite product capabilities. While
management believes that InSite's technology enhances Silknet's existing product
offerings and expands its addressable markets, delays or difficulties associated
with this product integration or the loss of InSite key personnel could have a
material adverse effect on Silknet's business and results of operations.
Uncertainties Relating to Integration of Operations. Silknet believes
that the acquisition of InSite will result in long-term strategic benefits.
However, the realization of these benefits will depend on
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whether management can integrate the operations of Silknet and InSite in an
efficient and effective manner. Among other things, Silknet must integrate the
respective companies' products, technologies, distribution channels and key
personnel. Furthermore, Silknet must coordinate the sales, marketing and
research and development efforts of InSite. The difficulties of integrating
InSite may be increased by the need to coordinate organizations with distinct
cultures and dispersed operations. The effective integration of the various
operations will depend on the ability of Silknet to attract and retain InSite's
key management, sales, marketing and research and development personnel. The
integration of operations following the acquisition will require significant
attention of management and thus may distract attention from other day-to-day
operations of Silknet.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. None required.
(b) PRO FORMA FINANCIAL INFORMATION. None required.
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger and Reorganization
dated as of October 5, 1999 by and among
Silknet Software, Inc., InSite Acquisition
Corp., InSite Marketing Technology, Inc.,
Stefania Nappi as Indemnification
Representative and the stockholders of InSite
Marketing Technology, Inc.
listed on the signature pages thereto.
2.2 Escrow Agreement dated as of October 5, 1999 by
and among Silknet Software, Inc., American Stock
Transfer & Trust Company, as escrow agent, and
Stefania Nappi, as Indemnification Representative.
4.1 Registration Rights Agreement dated as of
October 5, 1999 between Silknet Software, Inc.
and the stockholders of InSite Marketing
Technology, Inc.
that are signatories thereto.
99.1 Press Release of Silknet Software, Inc. dated
October 5, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this current report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
SILKNET SOFTWARE, INC.
By: /s/ Patrick J. Scannell, Jr.
----------------------------------------
Patrick J. Scannell, Jr.
Vice President, Chief Financial Officer,
Treasurer and Secretary
Dated: October 20, 1999
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger and Reorganization dated as of
October 5, 1999 by and among Silknet Software, Inc., InSite
Acquisition Corp., InSite Marketing Technology, Inc.,
Stefania Nappi as Indemnification Representative and the
stockholders of InSite Marketing Technology, Inc. listed on
the signature pages
thereto.
2.2 Escrow Agreement dated as of October 5, 1999 by and among Silknet
Software, Inc., American Stock Transfer & Trust Company, as
escrow agent, and Stefania Nappi, as Indemnification
Representative.
4.1 Registration Rights Agreement dated as of October 5, 1999,
between Silknet Software, Inc. and the stockholders of InSite
Marketing Technology, Inc. that are signatories thereto.
99.1 Press Release of Silknet Software, Inc. dated October 5, 1999.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
SILKNET SOFTWARE, INC.
INSITE ACQUISITION CORP.,
INSITE MARKETING TECHNOLOGY, INC.,
THOSE SHAREHOLDERS LISTED ON THE SIGNATURE PAGE HERETO, AND
STEFANIA NAPPI, AS INDEMNIFICATION REPRESENTATIVE
DATED AS OF OCTOBER 5, 1999
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
TABLE OF CONTENTS
Page
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ARTICLE I.........................................................................................................1
Section 1.1 The Merger........................................................................................1
Section 1.2 Effective Time....................................................................................1
Section 1.3 Effects of the Merger.............................................................................1
Section 1.4 Certificate of Incorporation; By-Laws; Directors and Officers of the Surviving Corporation........1
Section 1.5 Written Consent of the Shareholders of the Company................................................1
Section 1.6 Closing; Consummation of the Merger...............................................................2
ARTICLE II........................................................................................................2
Section 2.1 Conversion of Company Shares......................................................................2
Section 2.2 Delivery of Merger Consideration..................................................................3
Section 2.3 Dissenting Company Shares.........................................................................5
Section 2.4 No Fractional Shares..............................................................................5
Section 2.5 Adjustments.......................................................................................5
Section 2.6 Stock Options.....................................................................................6
ARTICLE III.......................................................................................................6
Section 3.1 Organization and Qualification....................................................................6
Section 3.2 Capitalization....................................................................................7
Section 3.3 Authority Relative to this Agreement..............................................................7
Section 3.4 Non-Contravention.................................................................................7
Section 3.5 Reports and Financial Statements..................................................................7
Section 3.6 Validity of Parent Common Stock...................................................................8
Section 3.7 Consents and Approvals of Governmental Authorities................................................8
Section 3.8 Litigation........................................................................................8
Section 3.9 Undisclosed Liabilities...........................................................................8
Section 3.10 Intellectual Property............................................................................8
Section 3.11 Agreement from Certain Affiliates of Parent......................................................9
Section 3.12 Pooling...........................................................................................9
ARTICLE IV........................................................................................................9
Section 4.1 Organization and Qualification....................................................................9
Section 4.2 Capitalization....................................................................................9
Section 4.3 Subsidiaries.....................................................................................10
Section 4.4 Authority Relative to this Agreement.............................................................10
Section 4.5 Non-Contravention................................................................................11
Section 4.6 Required and Other Consents......................................................................11
Section 4.7 Financial Statements and Reports.................................................................11
Section 4.8 Title to Properties and Assets...................................................................12
Section 4.9 Absence of Certain Changes or Events.............................................................12
Section 4.10 Disclosure of Liabilities.......................................................................13
Section 4.11 Accounts, Notes and Receivables.................................................................14
Section 4.12 Litigation......................................................................................14
Section 4.13 Agreements......................................................................................14
Section 4.14 Licenses and Permits............................................................................15
Section 4.15 Intellectual Property...........................................................................15
Section 4.16 Employees.......................................................................................18
Section 4.17 Enforceability of Contracts, etc. ..............................................................19
Section 4.18 Taxes...........................................................................................20
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Section 4.19 Insurance.......................................................................................21
Section 4.20 Books and Records...............................................................................21
Section 4.21 Compliance with Governmental Regulations........................................................21
Section 4.22 Environmental Compliance........................................................................21
Section 4.23 Warranties......................................................................................21
Section 4.24 Real Estate.....................................................................................22
Section 4.25 Bank Accounts...................................................................................22
Section 4.26 Employee Benefit Plans..........................................................................22
Section 4.27 Consents and Approvals of Governmental Authorities..............................................22
Section 4.28 Conflicts of Interest...........................................................................22
Section 4.29 Accuracy of Representations.....................................................................23
Section 4.30 Agreement from Certain Affiliates of the Company................................................23
ARTICLE IV-A.....................................................................................................23
ARTICLE V........................................................................................................25
Section 5.1 Conduct of Business by the Company Pending the Merger............................................25
Section 5.2 Access and Information; Confidentiality..........................................................26
Section 5.3 Reasonable Efforts...............................................................................27
Section 5.4 No Solicitation..................................................................................27
Section 5.5 Public Announcements.............................................................................27
Section 5.6 Insurance........................................................................................27
Section 5.7 Pooling..........................................................................................28
Section 5.8 Shareholder Approval.............................................................................28
Section 5.9 Required Notifications...........................................................................28
Section 5.10 Section 16 Matters..............................................................................28
Section 5.11 Changes to Certificate of Incorporation or By-laws..............................................28
Section 5.12 Tax Matters.....................................................................................28
ARTICLE VI.......................................................................................................29
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.......................................29
Section 6.2 Conditions to Obligation of the Company and the Company Shareholders to Effect the Merger........29
Section 6.3 Conditions to Obligations of Parent and Merger Sub to Effect the Merger..........................30
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ARTICLE VII......................................................................................................32
Section 7.1 Survival of Representations, Warranties and Covenants............................................32
ARTICLE VIII.....................................................................................................33
Section 8.1 Termination......................................................................................33
Section 8.2 Effect of Termination............................................................................33
Section 8.3 Amendment........................................................................................34
Section 8.4 Waiver...........................................................................................34
ARTICLE IX.......................................................................................................34
Section 9.1 Brokers..........................................................................................34
Section 9.2 Notices..........................................................................................34
Section 9.3 Subsidiaries.....................................................................................34
Section 9.4 Headings.........................................................................................34
Section 9.5 Entire Agreement; Assignment.....................................................................34
Section 9.6 Parties in Interest..............................................................................35
Section 9.7 Validity.........................................................................................35
Section 9.8 Counterparts.....................................................................................35
Section 9.9 Expenses.......................................................................................35
Section 9.10 Governing Law...................................................................................35
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SIGNATURES
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EXHIBITS
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EXHIBIT A Certificate of Merger
EXHIBIT B Form of Escrow Agreement
EXHIBIT C Form of Opinion to be Issued by Testa, Hurwitz & Thibeault, LLP
EXHIBIT D Form of Registration Rights Agreement
EXHIBIT E Form of Opinion to be Issued by Foley, Hoag & Eliot LLP EXHIBIT F-1 Form of Founder
Noncompetition, NonSolicitation, NonDisclosure and Invention Agreement
EXHIBIT F-2 Form of Noncompetition, NonSolicitation, NonDisclosure and
Invention Agreement to be
signed by Stefania Nappi
EXHIBIT F-3 Form of Officers and Key Employees NonSolicitation, NonDisclosure and Invention
Agreement
EXHIBIT F-4 Form of Marketing Technology Employee NonDisclosure and Invention Agreement
EXHIBIT G Indemnification Obligations
EXHIBIT H Parent Affiliate Agreement
EXHIBIT I Company Affiliate Agreement
EXHIBIT J Letter of Transmittal
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
Agreement and Plan of Merger and Reorganization, dated as of October 5,
1999, by and among Silknet Software, Inc., a Delaware corporation ("PARENT"),
InSite Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Parent ("MERGER SUB"), InSite Marketing Technology, Inc., a Delaware
corporation (the "COMPANY"), those certain shareholders of the Company set forth
on the signature pages hereto, and Stefania Nappi, as Indemnification
Representative (the "INDEMNIFICATION REPRESENTATIVE").
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Subject to the terms and conditions hereof,and
in accordance with the Delaware General Corporation Law (the "DCL"), Merger Sub
will be merged in accordance with Section 251 of the DCL with and into the
Company (the "MERGER"), as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VI hereof. Following the Merger,
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") under the laws of the State of Delaware and the separate corporate
existence of Merger Sub shall cease.
SECTION 1.2 EFFECTIVE TIME. The Merger shall become effective upon the
filing of a duly executed Certificate of Merger substantially in the form of
Exhibit A hereto (the "CERTIFICATE OF MERGER") with the Secretary of State of
the State of Delaware in accordance with Section 251(c) of the DCL (the date and
time of such filing being hereinafter referred to as the "EFFECTIVE TIME").
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DCL. As of the Effective Time, the Company shall
be a wholly-owned subsidiary of Parent. The Merger is intended to be a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE").
SECTION 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. The Certificate of Incorporation of the
Surviving Corporation (other than Article First thereof) shall, from and after
the Effective Time, be as set forth in the Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time until changed as
permitted by law or by such Certificate of Incorporation. The By-laws of the
Surviving Corporation shall, from and after the Effective Time, be the by-laws
of the Merger Sub as in effect immediately prior to the Effective Time until
changed as permitted by law, by the Certificate of Incorporation of the
Surviving Corporation or by such By-laws. At the Effective Time, each director
of the Company shall cease to hold such office, and the directors of the
Surviving Corporation shall be the directors of Merger Sub immediately prior to
the Effective Time, each of whom shall hold such office until the next annual
meeting of shareholders of the Surviving Corporation and until his or her
successor shall have been elected or appointed and qualified to serve, or
otherwise as provided in the Certificate of Incorporation or By-laws of the
Surviving Corporation. At the Effective Time, the officers of Merger Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, in the same capacity or capacities, to serve until his or her
successor shall have been duly elected and qualified to serve.
SECTION 1.5 WRITTEN CONSENT OF THE SHAREHOLDERS OF THE COMPANY. The
Company will take all action necessary in accordance with applicable law and its
Certificate of Incorporation and By-laws to solicit from each holder of capital
stock of the Company outstanding on the date of this Agreement the approval of
this Agreement, the Merger and all the transactions contemplated hereby, by the
shareholders of the Company, by means of a Written Consent of Shareholders (the
"COMPANY'S SHAREHOLDERS' CONSENT"). The record date set for such solicitation
shall be the date of this Agreement. The Company shall use its best efforts to
obtain such shareholder approval as soon as possible, and seek waivers of
appraisal or dissenters' rights. The Company represents and warrants that its
Board of Directors, at a meeting duly called and held, has (i) approved the
Merger and this
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Agreement and declared its advisability and (ii) resolved to recommend to the
shareholders of the Company that they adopt this Agreement, the Merger and all
the transactions contemplated hereby.
SECTION 1.6 CLOSING; CONSUMMATION OF THE MERGER. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall take place:
(a) at the offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125
High Street, Boston, Massachusetts 02110, on or before October 5, 1999, or (b)
at such other date and place as Parent and the Company may agree. The date of
the Closing, determined pursuant to this Section 1.6, is hereinafter referred to
as the "CLOSING DATE." If all conditions set forth in Article VI hereof are
determined to be satisfied (or duly waived) at the Closing, as soon as
practicable the parties hereto will cause the Merger to be consummated by the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, in such form as required by and executed in accordance with the
requirements of the DCL, and the Closing shall be consummated.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF SHARES; DISSENTING SHARES
SECTION 2.1 CONVERSION OF COMPANY SHARES.
(a) Subject, without limitation, to the provisions of Section
2.2 hereof, at the Effective Time, (i) all of the shares of common stock, $.001
par value per share, of the Company (the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, (the "COMPANY SHARES")
(excluding any Company Shares held by Parent or Merger Sub or any other
subsidiary of Parent or by the Company, which shares shall be canceled in the
Merger, and Dissenting Company Shares (as defined in Section 2.3 hereof)) shall
automatically, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into shares of common stock, $.01 par value per
share, of Parent (the "PARENT COMMON STOCK") in accordance with Section 2.1(c))
(rounded down to the nearest whole share), and cash (rounded to the nearest
whole cent) in lieu of fractional shares, if any, pursuant to Section 2.4 below,
and (ii) all Outstanding Options (as defined in Section 2.6 hereof) shall be
assumed by Parent and shall automatically, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into options to
purchase shares of Parent Common Stock in accordance with Section 2.6 (such
Parent Common Stock and cash being referred to herein as the "MERGER
CONSIDERATION").
(b) The number of shares of Parent Common Stock to be issued in
exchange for the acquisition of all Company Shares and Outstanding Options (as
defined in Section 2.6 hereof) shall be 590,708 shares of Parent Common Stock
(equal to the quotient obtained by dividing $21,500,000 less the amount of
expenses of the Company and its stockholders in excess of the amount thereof
payable by Parent as set forth in Section 9.9 by the average of the closing
prices of the Parent Common Stock in the Nasdaq National Market during the sixty
trading days ending on the second trading day before the execution of this
Agreement, the "MERGER PRICE"), provided that such number shall be adjusted to
the extent required by Section 2.5 herein. Such number of shares is herein
referred to as the "CONSIDERATION SHARES". The Consideration Shares shall be
delivered in exchange for all outstanding shares of capital stock of the Company
of any kind, class or series, and all securities convertible or exchangeable for
any class or series of capital stock, including all options, warrants,
convertible securities, purchase rights or commitments, accrued, declared or
cumulative dividends, and whether such rights or securities are vested or
unvested, exercisable or unexercisable, accrued or contingent. Parent shall not
be obligated to deliver any Parent Common Stock in excess of the Consideration
Shares in exchange for all of the capital stock of the Company, including any
Outstanding Options or outstanding warrants or other rights to purchase or
acquire capital stock of the Company.
(c) The ratio at which one Company Share and each Outstanding Option
will be converted into shares of Parent Common Stock at the Effective Time is
herein called the "CONVERSION RATIO" and shall be calculated as set forth in
this Section 2.1(c). Subject to Section 2.4, at the Effective Time, each Company
Share and each Outstanding Option shall be converted into the right to receive
that number (which may be a fraction) of shares of Parent Common Stock that
equals the quotient (rounded to the nearest one millionth) obtained by dividing
the Consideration Shares (as may be adjusted pursuant to Section 2.5) by the
number of Company Shares and number
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of shares of Company Common Stock issuable upon the exercise of Outstanding
Options. Each holder of Company Shares (each, a "COMPANY SHAREHOLDER") shall be
entitled to receive that aggregate number of shares of Parent Common Stock equal
to the Conversion Ratio multiplied by the number of Company Shares held by such
holder immediately prior to the Effective Time, subject to Section 2.4 herein.
As of the Effective Time, all such Company Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Company Shares shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration in respect thereof. Each holder of Outstanding Options shall be
entitled to receive an option to purchase shares of Parent Common Stock as
determined pursuant to Section 2.6 hereof.
(d) At the Effective Time, each Company Share held by the
Company shall automatically, by virtue of the Merger, be retired and returned to
the status of authorized and unissued shares of capital stock of the Company
without payment of any consideration therefor and without any conversion
thereof.
(e) At the Effective Time, each Company Share held by Parent
or Merger Sub or any other subsidiary of Parent shall automatically, by virtue
of the Merger, be canceled without payment of any consideration therefor and
without any conversion thereof.
(f) At the Effective Time, each share of common stock, $.01
par value per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder hereof, be converted into one share of common stock, $.01 par
value per share, of the Surviving Corporation.
SECTION 2.2 DELIVERY OF MERGER CONSIDERATION.
(a) Promptly after the Effective Time, Parent, on behalf of
the Surviving Corporation, shall deliver certificates to American Stock Transfer
& Trust Company (the "INDEMNIFICATION ESCROW AGENT") and the holders of Company
Shares representing the shares of Parent Common Stock and the cash (in
immediately available funds) to which holders of Company Shares shall be
entitled pursuant to Sections 2.1 and 2.4 hereof.
(b) At the Closing or as soon as practicable thereafter, each
holder of record (other than Parent or Merger Sub or any other subsidiary of
Parent) of a certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding Company Shares (individually a
"CERTIFICATE" and collectively the "CERTIFICATES") shall deliver to the Exchange
Agent (as defined below) such shareholder's Certificates. The holder of such
Certificate(s) shall be entitled to receive in exchange therefor a certificate
representing all of the shares of Parent Common Stock (excluding those shares
being placed in escrow as described below) and all the cash, if any, that such
holder is entitled to receive pursuant to Sections 2.1 and 2.4 hereof. Stefania
Nappi shall act as the agent for the Company Shareholders for purposes of
mailing and receiving transmittal letters in the form attached as Exhibit J
hereto and distributing the Merger Consideration to the Company Shareholders
(the "EXCHANGE AGENT").
Of the shares otherwise issuable to the Company Shareholders,
an aggregate number of shares equal to 10% of the Consideration Shares (the
"INDEMNIFICATION ESCROW SHARES") rounded up to the nearest whole share shall be
deposited by Parent with the Indemnification Escrow Agent in accordance with the
terms and provisions of the Escrow Agreement to be executed as of the Closing
between Parent, Merger Sub, the Company, the Indemnification Representative and
the Indemnification Escrow Agent (the "ESCROW AGREEMENT") in the form attached
hereto as Exhibit B hereto. The delivery of the Indemnification Escrow Shares by
Parent to the Indemnification Escrow Agent shall be made on behalf of the
Company Shareholders in accordance with the provisions hereof and the Escrow
Agreement, with the same force and effect as if such shares had been delivered
by Parent directly to such holders and subsequently delivered by such holders to
the Indemnification Escrow Agent. The shares so deposited shall be evidenced by
a separate certificate in the name of the Escrow Agent on behalf of the Company
Shareholders and shall be subject to the restrictions on transfer and assignment
provided in the Escrow Agreement. On the Closing Date, Parent shall deliver to
the Escrow Agent a certificate (issued in the name of the Escrow Agent or its
nominee) representing the Indemnification Escrow Shares for the purpose of
securing the
<PAGE> 8
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indemnification obligations of the Company Shareholders set forth
in this Agreement. The Indemnification Escrow Shares shall be held by the Escrow
Agent under the Escrow Agreement pursuant to the terms thereof. The Escrow
Shares shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party, and shall be held and disbursed solely for the purposes and in accordance
with the terms of the Escrow Agreement. The principal terms of the
indemnification obligations of the Company Shareholders under the Escrow
Agreement are set forth on Exhibit B.
Stefania Nappi has been selected as the Indemnification Representative
and, solely for purposes of accepting such appointment executes a counterpart
signature page to this Agreement. In the event of her inability or unwillingness
prior to the execution of the Escrow Agreement to act as Indemnification
Representative, a substitute Indemnification Representative will be selected by
the holders of a majority of the Company Shares. In the event of the inability
or unwillingness of the then current Indemnification Representative to act as
Indemnification Representative after the Closing, a substitute Indemnification
Representative will be selected by the holders of a majority of the shares of
Parent Common Stock issued as Merger Consideration. Such Indemnification
Representative is authorized by this Agreement, as a specific term of the Merger
provided for herein, to act as Indemnification Representative of the Company
Shareholders in accordance with the provisions hereof, with the powers and
authority provided for in the Escrow Agreement. Without limiting the generality
of the foregoing, each of the Company Shareholders hereby authorizes the
Indemnification Representative (i) to take all action necessary in connection
with the defense and/or settlement of any Claims for which the Company
Shareholders may be required to indemnify Parent pursuant to this Agreement and
(ii) to give and receive all notices required to be given and take all action
required or permitted to be taken under the Escrow Agreement. All decisions and
actions by the Indemnification Representative, including the defense or
settlement of any Claims for which the Company Shareholders may be required to
indemnify Parent pursuant to this Agreement, shall be binding upon all of the
Company Shareholders, and no Company Shareholder shall have the right to object,
dissent, protest or otherwise contest the same. By their execution of this
Agreement, the Company Shareholders agree that:
(i) Parent shall be able to rely conclusively on the instructions and
decisions of the Indemnification Representative as to the settlement of any
Claims for indemnification by Parent pursuant to this Agreement and the Escrow
Agreement or any other actions required to be taken by the Indemnification
Representative hereunder or thereunder;
(ii) all actions, decisions and instructions of the Indemnification
Representative shall be conclusive and binding upon all of the Company
Shareholders and no Company Shareholder, nor Parent or Merger Sub, shall have
any cause of action against the Indemnification Representative for any action
taken, decision made or instruction given by the Indemnification Representative
under this Agreement or the Escrow Agreement, except for fraud or willful breach
of this Agreement or the Escrow Agreement by the Indemnification Representative;
(iii) the provisions of this Section 2.2(b) are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Company Shareholder may have in
connection with the transactions contemplated by this Agreement;
(iv) the provisions of this Section 2.2(b) shall be binding upon the
heirs, legal representatives, successors and assigns of each Company
Shareholder, and any references in this Agreement to a Company Shareholder or
the Company Shareholders shall mean and include the successors to the Company
Shareholders' rights hereunder, whether pursuant to testamentary disposition,
the laws of descent and distribution or otherwise; and
(v) all fees and expenses and all debts, obligations and other
liabilities incurred by the Indemnification Representative in connection with
this Agreement and the Escrow Agreement (including, without limitation, any
obligation of the Indemnification Representative to indemnify the Escrow Agent
pursuant to the Escrow Agreement) shall be paid by the Company Shareholders in
proportion to their respective pro rata share of the Escrow Shares (as defined
in the Escrow Agreement).
<PAGE> 9
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The adoption of this Agreement and the approval of the Merger by the
Company Shareholders and receipt of any Merger Consideration by any Company
Shareholder shall also constitute approval by such Company Shareholder of the
terms and provisions of the Escrow Agreement, including the indemnification
provided for therein, their confirmation of the appointment of American Stock
Transfer & Trust Company to act as Indemnification Escrow Agent, and their
approval of the terms and provisions therein relating to the Indemnification
Representative, including the provisions herein and relating to the appointment
of replacements, and their confirmation of the appointment of Stefania Nappi to
act as the initial Indemnification Representative.
(c) 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 will be a condition of the issuance thereof
that such transfer be in compliance with any applicable state and federal
securities laws and 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.
(d) Until surrendered, each Certificate shall, after the Effective
Time, represent only the right to receive shares of Parent Common Stock and the
right to receive cash into which the Company Shares formerly represented thereby
shall have been converted pursuant to Section 2.1 hereof. Any dividends or other
distribution declared after the Effective Time with respect to Parent Common
Stock shall be paid to the holder of any Certificate when the holder thereof
surrenders such Certificate. At and after the Effective Time, the holders of
Certificates shall cease to have any rights as shareholders of the Company,
except for the right to surrender certificates pursuant to Section 2.2(b). After
the Closing there shall be no transfers on the stock transfer books of the
Company (the stock transfer books of which shall be closed).
SECTION 2.3 DISSENTING COMPANY SHARES. Company Shares for which the
Company's Shareholders' Consent has not been executed and delivered and with
respect to which (a) a demand for payment and appraisal shall have been properly
made in accordance with the DCL ("DISSENTING COMPANY SHARES") or (b) the right
to make a demand for payment and appraisal still exists shall not be converted
into the right to receive the Merger Consideration at or after the Effective
Time unless and until the holder of such Company Shares withdraws his or her
demand or becomes ineligible pursuant to the provisions of the DCL for such
payment and appraisal. If a holder of Dissenting Company Shares shall withdraw
his or her demand for such payment and appraisal or shall become ineligible for
such payment and appraisal, then, as of the Effective Time or the occurrence of
such event of withdrawal or ineligibility, whichever last occurs, such holder's
Dissenting Company Shares shall cease to be Dissenting Company Shares and shall
be converted into the right to receive, and shall be exchangeable for, the
Merger Consideration into which such Dissenting Company Shares would have been
converted pursuant to Section 2.1 hereof.
SECTION 2.4 NO FRACTIONAL SHARES. No certificates or scrip for
fractional shares of Parent Common Stock will be issued, no Parent stock split
or dividend shall be paid in respect of any fractional share interest, and no
such fractional shares interest shall entitle the owner thereof to vote or to
any rights of or as a stockholder of Parent. In lieu of such fractional shares,
any holder of Company Shares who would otherwise be entitled to a fraction of a
share of Parent Common Stock at the Effective Time (after aggregating all
fractional shares of Parent Common Stock to be received by such holder) will be
paid the cash value of such fraction (rounded down to the nearest cent), which
shall be equal to the fraction multiplied by $36.397, which represents the
sixty-day trading average of the closing sale price per share of Parent Common
Stock on the Nasdaq National Market ending on the second day before the
execution of this Agreement.
SECTION 2.5 ADJUSTMENTS. If, between the date hereof and the Effective
Time, the outstanding shares of Parent Common Stock shall be changed into a
different number of shares or a different class by reason of any reorganization,
reclassification, recapitalization, split-up, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, the number of shares of Parent Common Stock to be
<PAGE> 10
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issued and delivered in the Merger for each outstanding Company Share as
provided in this Agreement shall be correspondingly adjusted.
SECTION 2.6 STOCK OPTIONS. At or prior to the Effective Time, Parent
and the Company shall take all action necessary to cause the assumption by
Parent as of the Effective Time of the options, warrants or other rights to
purchase Company Common Stock outstanding, whether vested or unvested, as of the
Effective Time (the "OUTSTANDING OPTIONS"). Each of the Outstanding Options
shall be converted without any action on the part of the holder thereof into an
option to purchase shares of Parent Common Stock as of the Effective Time. The
number of shares of Parent Common Stock that the holder of an assumed
Outstanding Option shall be entitled to receive upon the exercise of such option
shall be a number of shares (rounded down to the nearest whole number)
determined by multiplying the number of shares of Company Common Stock subject
to such option, determined immediately before the Effective Time, by the
Conversion Ratio. The option price of each share of Parent Common Stock subject
to an assumed Outstanding Option shall be the amount (rounded up to the nearest
whole cent) obtained by dividing the exercise price per share of Company Common
Stock at which such option is exercisable immediately before the Effective Time
by the Conversion Ratio applicable to the Company Shares. The assumption and
substitution of Outstanding Options as provided herein shall not give the
holders of such options additional benefits which they did not have immediately
prior to the Effective Time or relieve the holders of any obligations or
restrictions applicable to their options or the shares obtainable upon exercise
of the options. Parent shall (i) reserve out of its authorized but unissued
shares of Common Stock sufficient shares to provide for the exercise of the
Outstanding Options and (ii) use all commercially reasonable efforts to register
under the Securities Act, as promptly as practicable after the Effective Time
and in no event later than seven (7) days after the Effective Time, those shares
of Parent Common Stock to be issued upon the exercise of the Outstanding Options
for a period up to and ending on the first date by which all Outstanding Options
have been fully exercised, which registration shall initially be effective under
a registration statement on Form S-8 or such other form as may be permitted
under the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule of Parent dated as of
the date hereof and delivered herewith to the Company (the "PARENT DISCLOSURE
SCHEDULE") (it being agreed that with respect to any matter that is clearly
disclosed in any Section of Parent Disclosure Schedule in such a way as to make
its relevance to the information called for by another Section readily apparent,
such matter shall be deemed to have been included in Parent Disclosure Schedule
in response to such other Section, notwithstanding the omission of any
appropriate cross-reference thereto) Parent and Merger Sub represent and warrant
to the Company as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite corporate
power to own and operate its properties and to carry on its business as it is
now being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have, individually or in the aggregate, a Material Adverse Effect on the
business, assets, condition (financial or otherwise) or result of operations of
Parent and its subsidiaries, taken as a whole.
As used in this Agreement, the term "Material Adverse Effect" means a
material adverse effect on the business, financial condition, properties,
results of operation or prospects of the Parent or Company, as applicable,
provided, however, that neither of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Material Adverse
Effect: (a) any change arising out of conditions affecting the economy or
industry of the Company in general which does not affect the Parent or Company,
as applicable, in a materially disproportionate manner relative to other
participants in the economy or such industry, respectively, or (b) with respect
to the Company, employee attrition, or delays or cancellations of projects (or
contracts) involving
<PAGE> 11
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the Company and any third party (including any delay or pause in negotiations
with such third party) which is attributable to the announcement of the
execution of this Agreement and the transactions contemplated hereby. A Material
Adverse Effect will be deemed to exist if the "effect" results in or could
reasonably be expected to result in a liability or reduction in value, with
respect to the Company's assets an amount in excess of $25,000, and with respect
to the Parent's assets an amount in excess of $875,000.
SECTION 3.2 CAPITALIZATION. The authorized capital stock of Parent
consists of 15,000,000 shares of preferred stock, $.01 par value per share, of
which no shares are issued or outstanding or held in Parent's treasury, and
50,000,000 shares of Parent Common Stock, of which, as of September 30, 1999,
(a) 15,602,407 were validly issued and outstanding, fully paid and
nonassessable, (b) 2,997,059 were reserved for issuance pursuant to options
granted under Parent's stock option and stock purchase plans for its employees
and directors, and (c) 750,000 were reserved for issuance pursuant to
outstanding warrants. Except as set forth above, there are no options, warrants,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any shares of Parent Common Stock.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has the requisite corporate power and authority to enter into this
Agreement, the Escrow Agreement and the Registration Rights Agreement (as
defined in Section 6.2(d)) and to carry out its obligations hereunder. The
execution and delivery of this Agreement, the Escrow Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the respective
Boards of Directors of Parent and Merger Sub and the sole shareholder of Merger
Sub and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement, the Escrow Agreement and the Registration
Rights Agreement and the transactions contemplated hereby and thereby. This
Agreement, the Escrow Agreement and the Registration Rights Agreement have been
duly and validly executed and delivered by each of Parent and Merger Sub and,
assuming this Agreement, the Escrow Agreement and the Registration Rights
Agreement constitute valid and binding obligations of each Party hereto and
thereto other than Parent and Merger Sub, this Agreement, the Escrow Agreement
and the Registration Rights Agreement each constitutes a valid and binding
agreement of each of Parent and Merger Sub enforceable against each of Parent
and Merger Sub in accordance with their respective terms, except as the
enforceability hereof or thereof may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement or similar laws affecting the rights of
creditors generally, judicial limitations upon the specific performance of
certain types of obligations and public policy.
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the Escrow Agreement by
each of the Parent and Merger Sub and the consummation of the Merger do not and
will not conflict with or violate any provision of the charter or by-laws of the
Parent or Merger Sub, respectively. Neither Parent nor Merger Sub is subject to
or obligated under any contract provision or any license, franchise or permit,
or any order, writ, injunction, decree, statute, rule or regulation which would
be breached or violated or in respect of which a right of acceleration would be
created by its executing and carrying out this Agreement other than any such
breach, violation or right which would not have, individually or in the
aggregate, a Material Adverse Effect on the business, assets, condition
(financial or otherwise) or result of operations of Parent and its subsidiaries
taken as a whole, or the transactions contemplated by this Agreement.
SECTION 3.5 REPORTS AND FINANCIAL STATEMENTS. Parent has previously
furnished to the Company true and correct copies of its (i) Annual Report on
Form 10-K for the period ended June 30, 1999, (ii) all other reports or
registration statements filed by it with the Securities and Exchange Commission
(the "COMMISSION") under the Exchange Act since May 5, 1999 and (iv) Parent
hereby agrees to furnish to the Company true and correct copies of all reports
or registration statements filed by it with the Commission after the date hereof
prior to the Closing all in the form so filed (collectively, the "REPORTS"). As
of their respective dates, the Reports complied or will comply in all material
respects with the then applicable published rules and regulations of the
Commission with respect thereto at the date of their issuance and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the audited consolidated financial statements and unaudited interim financial
statements, if any, included in Parent's Reports has been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and
<PAGE> 12
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fairly presents, in all material respects, the financial position and the
results of operations and changes in financial position of Parent as at its date
and for the periods indicated therein, provided that any unaudited interim
financial statements lack footnotes and other presentation items required by
generally accepted accounting principles and are subject to normal year-end
adjustments and any other adjustments described therein, which adjustments will
not be material in amount or effect.
SECTION 3.6 VALIDITY OF PARENT COMMON STOCK. The shares of Parent
Common Stock to be issued in the Merger will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and free of all preemptive rights.
SECTION 3.7 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except
for (a) the requirements of state securities (or "BLUE SKY") laws, (b) the
filing and recording of appropriate documents as provided by the laws of the
State of Delaware, including the Certificate of Merger, (c) the filing of
appropriate documents with the Nasdaq National Market and (d) the filing of a
Form D with the Commission, if applicable, no consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Parent or Merger Sub in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 3.8 LITIGATION. Except as set forth on Parent Disclosure
Schedule or in the Reports, there is no action, suit, claim, investigation or
proceeding (or any basis therefor) pending against or threatened against Parent
or Merger Sub or their properties and assets before any court or arbitrator or
any governmental body, agency, official or authority.
SECTION 3.9 UNDISCLOSED LIABILITIES. Except as disclosed in the Reports
or in Parent Disclosure Schedule, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles to
be recognized or disclosed on a consolidated balance sheet of Parent and its
subsidiaries or in the notes thereto, except (i) liabilities reflected in the
consolidated balance sheet of Parent as of June 30, 1999 and (ii) liabilities
incurred since June 30, 1999, in the ordinary course of business and consistent
with past practice.
SECTION 3.10 INTELLECTUAL PROPERTY. The "PARENT INTELLECTUAL PROPERTY"
consists of all material trade secrets, copyrights, patents, trademarks, service
marks, trade dress, all registrations and applications with respect thereto and
all material licenses or rights under the same, that are owned or used by
Parent. Except as set forth in the Reports or Parent Disclosure Schedule, (a) no
claim has been asserted or, to the knowledge of Parent, threatened by any person
against Parent with respect to the ownership or use of any Parent Intellectual
Property by Parent (including infringement claims) nor has Parent asserted any
similar claim against any person and, to the knowledge of Parent, there exists
no set of circumstances which would likely give rise to any such claim; and (b)
Parent is not in breach or violation of any agreement under which it holds or
uses any Parent Intellectual Property which breach or material violation would
have a Material Adverse Effect on the business, prospects, results of operations
or financial condition of Parent.
SECTION 3.11 AGREEMENT FROM CERTAIN AFFILIATES OF PARENT. The "PARENT
INTELLECTUAL PROPERTY" Prior to the execution of this Agreement, Parent shall
have provided the Company a list of those persons or entities who are affiliates
of the Parent. The Parent shall also have provided the Company such information
and documents as the Company shall have reasonably requested for purposes of
reviewing such list and shall notify the Company in writing regarding any
changes in the identity of its affiliates prior to the Closing Date. In order to
help ensure that the Merger will be accounted for as a "pooling of interests"
and that the issuance of and any resale of the Consideration Shares will comply
with the Securities Act, the Parent is delivering to the Company simultaneously
herewith, a Parent Affiliate Agreement, in the form attached hereto as Exhibit
H, executed by each of its affiliates.
SECTION 3.12 POOLING. To the knowledge of Parent, neither Parent nor
any of its affiliates has through the date of this Agreement taken or agreed to
take any action that would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests" in
conformity with generally accepted accounting principles ("GAAP").
<PAGE> 13
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
Except as set forth in the disclosure schedule of the Company dated as
of the date hereof and delivered herewith to Parent (the "COMPANY DISCLOSURE
SCHEDULE") (it being agreed that with respect to any matter that is clearly
disclosed in any Section of the Company Disclosure Schedule in such a way as to
make its relevance to the information called for by another Section readily
apparent, such matter shall be deemed to have been included in the Company
Disclosure Schedule in response to such other Section, notwithstanding the
omission of any appropriate cross-reference thereto), the Company and the
Company Shareholders represent and warrant to Parent and Merger Sub as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and all material
governmental licenses, authorizations, consents and approvals required for the
ownership and operation of its properties and the carrying on of its business as
it is now being conducted and as it is now proposed to be conducted through the
Closing. The Company is duly qualified as a foreign corporation to do business,
and is in good standing, in the jurisdictions identified in Section 4.1 of the
Company Disclosure Schedule, which are all the jurisdictions in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
will not, individually or in the aggregate, have a Material Adverse Effect on
the business, assets, condition (financial or otherwise) or result of operations
of the Company.
SECTION 4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists 32,000,000
shares of Company Common Stock, of which 16,441,810 shares are issued and
outstanding, and no shares of preferred stock of the Company.
(b) The issued and outstanding capital stock of the Company,
which are and as of the Closing will be held of record and beneficially by the
shareholders of the Company, is as set forth on the Company Disclosure Schedule.
All of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable, are
not subject to any right of rescission and have been offered, issued, sold and
delivered by the Company in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws. In addition, the Company Disclosure Schedule sets forth
(i) Outstanding Options and warrants, if any, indicating (A) the holder thereof,
(B) the number of shares of Company Common Stock subject to each Outstanding
Option and warrant, (C) the exercise price, date of grant, vesting schedule and
expiration date for each Outstanding Option or warrant, and (D) any terms
regarding the acceleration of vesting, and (ii) all stock option plans and other
stock or equity-related plans of the Company. All Company Common Stock that may
be issued upon exercise of Outstanding Options or warrants will be (upon
issuance in accordance with their terms), duly authorized and validly issued and
are fully paid and nonassessable, with no personal liability attaching to the
ownership thereof. Except as set forth on the Company Disclosure Schedule, there
are no options, warrants, conversion privileges or preemptive or other rights or
agreements outstanding to purchase or otherwise acquire any shares of capital
stock of the Company from the Company. Except as set forth in the Company
Disclosure Schedule, there are, to the Company's knowledge, no options,
warrants, conversion privileges or preemptive or other rights or agreements as
to which the Company is not a party involving the purchase or other acquisition
of any capital stock in the Company, and there is no liability for dividends
accrued but unpaid. Except as set forth on the Company Disclosure Schedule,
there are no voting agreements, rights of first refusal or other restrictions
(other than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of the Company's capital stock. To the
knowledge of the Company, each shareholder of the Company holds of record and
owns beneficially the number of shares of
<PAGE> 14
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common stock set forth opposite his, her or its name in the Company Disclosure
Schedule, free and clear of any restrictions on transfer, taxes, security
interests, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands, except for transfer restrictions arising under applicable
securities laws. To the knowledge of the Company, no person other than the
shareholders and holders of options to purchase shares of the Company's capital
stock listed in the Company Disclosure Schedule holds any interest in any of the
capital stock of the Company. True and correct copies of the stock records of
the Company, showing all issuances and transfers of shares of capital stock of
the Company since inception, have been provided to Parent.
(c) Except as set forth in the Company Disclosure Schedule, there are
no outstanding rights of first refusal, preemptive rights, options, warrants,
conversion rights or other agreements, either directly or indirectly, for the
purchase or acquisition from the Company or any shareholder of the Company of
any shares of the Company's capital stock.
(d) Except as set forth on the Company Disclosure Schedule, the Company
is not a party or subject to any agreement or understanding, and to the
Company's knowledge, there is no agreement or understanding between any of the
shareholders of the Company that affects or relates to the voting or giving of
written consents with respect to any securities of the Company. Except as set
forth on the Company Disclosure Schedule, no shareholder of the Company or any
affiliate thereof is indebted to the Company, and the Company is not indebted to
any shareholder of the Company or any affiliate thereof. Except as set forth in
the Company's Disclosure Schedule, the Company is not under any contractual or
other obligation to register any of its presently outstanding securities or any
of its securities which may hereafter be issued.
SECTION 4.3 SUBSIDIARIES. The Company has never owned, nor does it
currently own, directly or indirectly, any capital stock or other equity
securities of any corporation or have direct or indirect equity or ownership
interest in any association, partnership, joint venture or other entity.
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Company's Board of Directors and, other than the adoption
of this Agreement by the Company Shareholders pursuant to the DCL, no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding obligations of each of Parent, Merger Sub and
each of the Company Shareholders that is a party hereto and thereto, and
assuming its adoption by the Company Shareholders, this Agreement constitutes
the valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as the enforceability hereof may be subject
to or limited by bankruptcy, insolvency, reorganization, arrangement or similar
laws affecting the rights of creditors generally, judicial limitations upon the
specific performance of certain types of obligations and public policy.
SECTION 4.5 NON-CONTRAVENTION. Assuming the receipt of all Required
Consents and Other Consents (each as defined in Section 4.6 below), neither the
execution, delivery or performance of this Agreement by the Company, nor the
consummation of the Merger or any other transaction described herein, does or
will, after the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the Certificate of Incorporation or the By-laws of the Company or any
applicable law or any federal, foreign, state or local court or administrative
order or process, or any contract, agreement or commitment to which the Company
is a party, or under which the Company is obligated, or by which the Company or
any of the rights, properties or assets of the Company are subject or bound;
(b) except as set forth in Section 4.5 of the Company Disclosure
Schedule, result in the creation of any mortgage, pledge, lien, claim, charge,
encumbrance or assessment upon, or otherwise adversely affect, any of the
rights, properties or assets of the Company;
<PAGE> 15
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(c) except as set forth in Section 4.5 of the Company Disclosure
Schedule, terminate, amend or modify, or give any party the right to terminate,
amend, modify, abandon or refuse to perform or comply with, any contract,
agreement or commitment to which the Company is a party, or under which the
Company is obligated, or by which the Company or any of the rights, properties
or assets of the Company are subject or bound; or
(d) except as set forth in Section 4.5 of the Company Disclosure
Schedule, accelerate, postpone or modify, or give any party the right to
accelerate, postpone or modify, the time within which, or the terms and
conditions under which, any liabilities, duties or obligations are to be
satisfied or performed, or any rights or benefits are to be received, under any
contract, agreement or commitment to which the Company is a party, or under
which the Company may be obligated, or by which the Company or any of the
rights, properties or assets of the Company are subject or bound.
SECTION 4.6 REQUIRED AND OTHER CONSENTS.
(a) Section 4.6(a) of the Company Disclosure Schedule sets forth each
agreement, contract or other instrument binding upon the Company or any Permit
(as defined in Section 4.14 below) requiring a consent as a result of the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby (each such consent, a "REQUIRED CONSENT"),
except such consents as would not, individually or in the aggregate, a Material
Adverse Effect in the business, assets, condition (financial or otherwise) or
result of operations of the Company, if not received by the Closing Date.
(b) Section 4.6(b) of the Company Disclosure Schedule sets forth every
other consent (each such consent, an "OTHER CONSENT") under such agreements,
contracts or other instruments or such Permits that are required with respect to
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby and thereby.
SECTION 4.7 FINANCIAL STATEMENTS AND REPORTS. The unaudited
consolidated balance sheets of the Company as of December 31, 1997, December 31,
1998 and the related unaudited statements of operations, stockholders' equity
and cash flows for each of the years ended December 31, 1997 and December 31,
1998 (the "COMPANY ANNUAL UNAUDITED FINANCIAL STATEMENTS"), delivered to Parent
in accordance with Section 6.3(i), in each case, present fairly, in all material
respects, the financial position of the Company as of the dates thereof and
their results of operations and changes in financial position for the periods
then ended in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods then ended (except as may be
indicated therein on the notes thereto). The Company has also furnished Parent
with a true and complete copy of the unaudited statements of operations,
stockholder's equity and cash flows of the Company for the nine months ended
August 31, 1999 and the unaudited balance sheet of the Company (the "BALANCE
SHEET") as of August 31, 1999 (the "BALANCE SHEET DATE") (collectively, the
"COMPANY UNAUDITED INTERIM FINANCIAL STATEMENTS"). The Balance Sheet included in
the Company Unaudited Interim Financial Statements fairly present in all
material respects the financial position of the Company as of their dates and
the other statements included in the Company Unaudited Interim Financial
Statements fairly present in all material respects the results of operations,
shareholders' equity and changes in financial position, as the case may be, of
the Company for the period therein set forth, in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved except as otherwise stated therein and provided that the Company
Unaudited Interim Financial Statements lack footnotes and other presentation
items required by generally accepted accounting principles and are subject to
normal year-end adjustments which adjustments are not material in amount in the
aggregate.
SECTION 4.8 TITLE TO PROPERTIES AND ASSETS. The Company has good and
valid title to all of the properties and assets, tangible or intangible, owned
by it, whether or not reflected in the Balance Sheet or subsequently acquired by
it, subject to no mortgages, pledges, liens, encumbrances or other charges of
any kind except for those mortgages, pledges, liens, encumbrances or charges
disclosed in Section 4.8 of the Company Disclosure Schedule. Except as
aforesaid, the assets and properties owned by the Company at the Effective Time
shall be free and clear of mortgages, pledges, liens, encumbrances or charges of
any kind. There is no asset used or required by the Company in the conduct of
its business as presently operated which is not either owned by it or licensed
or leased to it under a
<PAGE> 16
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license or lease listed in Section 4.13 of the Company Disclosure Schedule. All
of the fixtures, machinery, equipment, tools and other personal property owned,
leased or licensed by the Company are, and at the Effective Time will be,
sufficient to carry on the Company's business as presently conducted.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1,
1999, except as disclosed in Section 4.9 of the Company Disclosure Schedule or
reflected in the Company Unaudited Interim Financial Statements, there has not
been:
(a) any event, or to the knowledge of the Company, any fact, or
anticipated event which, individually or in the aggregate, may reasonably be
expected to give rise to any Material Adverse Effect in the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company;
(b) any change in any method of accounting or accounting practice of
the Company;
(c) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption, retirement or other acquisition by the Company of any
outstanding shares of capital stock or other securities of, or other equity or
ownership interests in, the Company;
(d) any change in the Certificate of Incorporation or By-laws of the
Company or any amendment of any term of any outstanding security of the Company;
(e) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money, other than in the ordinary course of business
and in an aggregate amount not exceeding $7,500 individually and $25,000 in the
aggregate;
(f) any creation or assumption by the Company of any lien on any asset;
(g) any making of any loan, advance or capital contributions to, or
investment in, any person;
(h) any sale, lease, pledge, transfer or other disposition of any
capital asset;
(i) any material transaction or commitment made, or any material
contract or agreement entered into, by the Company relating to its assets or
business (including the acquisition or disposition of any assets and consistent
with past practice) or any relinquishment by the Company of any contract or
other right other than in the ordinary course of business;
(j) any (A) grant of any severance or termination pay to any director,
officer or employee of the Company, (B) entering into of any employment,
severance, management, consulting, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company, (C) change in benefits payable under
existing severance or termination pay policies or employment, severance,
management, consulting or other similar agreements, (D) change in compensation,
bonus or other benefits payable to directors or officers or, other than in the
ordinary course of business and consistent with past practice, to employees of
the Company or (E) change in the payment or accrual policy with respect to any
of the foregoing;
(k) any labor dispute or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to any employees of the Company;
(l) any notes or accounts receivable or portions thereof written off by
the Company as uncollectible in an amount exceeding $7,500 individually and
$25,000 in the aggregate;
<PAGE> 17
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(m) any issuance or sale of any stock, bonds or other securities of
which the Company is the issuer other than pursuant to the exercise of employee
stock options, or the grant, issuance or change of any stock options, warrants,
or other rights to purchase securities of the Company;
(n) any discharge or satisfaction of any lien or encumbrance or payment
or satisfaction of any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) other than current
liabilities shown on the Balance Sheet and current liabilities incurred since
the Balance Sheet Date in the ordinary course of business and consistent with
past practice;
(o) any cancellation of any debts or claims or waiver of any rights
which in an aggregate amount exceed $7,500 individually and $25,000 in the
aggregate;
(p) any sale, assignment or transfer of any Company Intellectual
Property (as defined in Section 4.15), including licenses therefor other than in
the ordinary course of business and consistent with past practice;
(q) any capital expenditures, or commitment to make any capital
expenditures, for additions to property, plant or equipment in an individual
amount exceeding $7,500 individually and $25,000 in the aggregate;
(r) payment of any amounts to, or liability incurred to or in respect
of, or sale of any properties or assets (real, personal or mixed, tangible or
intangible) to, or any transaction or any agreement or arrangement with, any
corporation or business in which the Company or any of its corporate officers or
directors, or any "affiliate" or "associate" (as such terms are defined in the
rules and regulations promulgated under the Securities Act of 1933, as amended
(the "SECURITIES ACT") of any such person, has any direct or indirect ownership
interests; or
(s) any agreement undertaking or commitment to do any of the foregoing.
SECTION 4.10 DISCLOSURE OF LIABILITIES. On the Balance Sheet Date, the
Company had no liability of any nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting principles to be reflected
on the Balance Sheet dated the Balance Sheet Date or otherwise disclosed that
was not fully disclosed, reflected or reserved against in such Balance Sheet.
Except for the Secured Promissory Note dated September 29, 1999 payable to
Parent (the "Secured Note") and the Collateral Security Agreement dated
September 29, 1999 by and between Parent and the Company (the "Security
Agreement") and liabilities which have been incurred since August 31, 1999 in
the ordinary and regular course of business, none of which individually or in
the aggregate has resulted in, is causing, or will cause a Material Adverse
Effect on the business, assets, condition (financial or otherwise) or result of
operations of the Company, and except for liabilities incurred by the Company in
connection with the preparation and execution of this Agreement and the
consummation of the transactions contemplated herein since the Balance Sheet
Date, the Company has not incurred any liability of any nature (whether accrued,
absolute, contingent or otherwise) which would be required by generally accepted
accounting principles to be reflected in a balance sheet dated the date hereof.
SECTION 4.11 ACCOUNTS, NOTES AND RECEIVABLES. All of the accounts,
notes and other receivables which are reflected in the Balance Sheet were
acquired in the ordinary and regular course of business; and, except to the
extent reserved against in the Balance Sheet, all of the accounts, notes and
other receivables which are reflected therein have been collected in full, or
are reasonably believed by the Company to be good and collectible, in the
ordinary and regular course of business; and all of the accounts, notes and
other receivables which have been acquired by the Company since the Balance
Sheet Date were acquired in the ordinary and regular course of business and have
been collected in full, or are reasonably believed by the Company to be good and
collectible, subject to an appropriate reserve determined in a manner consistent
with past practices of the Company, in the ordinary and regular course of
business. Except as set forth on the Company Disclosure Schedule, no accounts,
notes or other receivables are contingent upon the performance by the Company of
any obligation or contract. Except as disclosed in Section 4.11 of the Company
Disclosure Schedule, no person has any lien, charge, pledge, security interest
or
<PAGE> 18
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other encumbrance on any of such receivables and no agreement for deduction or
discount has been made with respect thereto.
SECTION 4.12 LITIGATION. Except as set forth in Section 4.12 of the
Company Disclosure Schedule, there is no action, suit, claim, investigation or
proceeding (or, to the Company's knowledge, any basis therefor) pending against
or, to the Company's knowledge, threatened against the Company or its properties
and assets before any court or arbitrator or any governmental body, agency,
official or authority.
SECTION 4.13 AGREEMENTS.
(a) Section 4.13 of the Company Disclosure Schedule sets forth a list
of each agreement, contract or commitment (including any oral agreements,
contract or commitments) of the following types under which the Company is
obligated:
(i) any agreements of guarantee or indemnification;
(ii) any contract for personal services or employment which is not
terminable at will by the Company without penalty or obligation to make payments
related to such termination;
(iii) any agreement or commitment containing a covenant limiting or
purporting to limit the freedom of the Company to compete with any person in any
geographic area or engage in any line of business;
(iv) any lease to which the Company is a party as lessor or lessee;
(v) any joint venture contract or similar arrangement or any other
similar agreement which involves a sharing of profits or future payments to
other persons;
(vi) except for trade indebtedness incurred in the ordinary course of
business, any loan or credit agreements providing for the extension of credit to
the Company or any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or other debt obligation or instrument
which individually is in the amount of $7,500 or more;
(vii) any distributor, dealer, franchise, manufacturer's
representative, sales agency or other similar contract or commitment;
(viii) any license agreement, either as licensor or licensee or any
other similar contract or commitment;
(ix) any contract or agreement for the future sale, license or
sublicense by the Company of materials, products, services or supplies;
(x) any contract, purchase order or agreement for the future purchase
by the Company of any materials, equipment, services or supplies, which provides
for payments which cannot be terminated by the Company without penalty upon less
than thirty (30) days' notice;
(xi) any contract or commitment for the sale by the Company of any
materials, products, services or supplies;
(xii) any agreement or arrangement for the assignment, sale or other
transfer by the Company of any contract or lease (or right to payment
thereunder);
<PAGE> 19
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(xiii) any contract or commitment for the acquisition, construction or
sale of fixed assets;
(xiv) any agreement pertaining to the Company's maintenance or support
of its products, services or supplies;
(xv) any agreement or arrangement for the sale of any of the assets,
properties or rights of the Company or for the grant of any preferential rights
to purchase any of its assets, properties or rights or which requires the
consent of any third party to the transfer and assignment of any of its assets,
properties or rights; or
(xvi) any contract or agreement, not elsewhere specifically disclosed
pursuant to this Agreement, involving the payment or receipt by the Company of
more than $7,500 individually and $25,000 in the aggregate in the aggregate.
(b) Since the Balance Sheet Date, the Company has not amended, modified
or terminated the terms of the contracts or agreements referred to in Section
4.13(a) hereof unless such amendment, modification or termination was in the
ordinary course of business and the Company has provided Parent with written
notification of such.
SECTION 4.14 LICENSES AND PERMITS. Section 4.14 of the Company
Disclosure Schedule correctly describes each material license, franchise, permit
or other similar governmental authorization affecting, or relating in any way
to, the business of the Company, together with the name of the government agency
or entity issuing such license or permit (the "PERMITS"). Such Permits are valid
and in full force and effect and, assuming the related Required Consents and
Other Consents have been obtained prior to the Closing Date, will not be
terminated or impaired or become terminable as a result of the transactions
contemplated hereby. Upon consummation of the transactions contemplated hereby,
the Surviving Corporation will, assuming the related Required Consents and Other
Consents have been obtained prior to the Closing Date, have all of the right,
title and interest in all the Permits.
SECTION 4.15 INTELLECTUAL PROPERTY.
(a) The "COMPANY INTELLECTUAL PROPERTY" consists of all material trade
secrets, copyrights, patents, trademarks, service marks, trade dress, all
registrations and applications with respect thereto and all licenses or rights
under the same, that are owned or used by the Company, including without
limitation, any of the foregoing embodied or contained in any of the following:
net lists; domain names and URLs and textual information contained in web sites;
schematics; manufacturing processes; customer lists and supplier lists; know-how
and show-how; computer software programs, source code and object code; complete
system build software; development and test tools, documentation,
specifications, programmer and user manuals used by the Company to install,
operate, maintain, correct, test, repair enhance, extend, modify, prepare
derivative works based upon, design, develop, reproduce and package software;
all license and other rights in any third-party product, intellectual property,
proprietary or personal rights, documentation, or tangible or intangible
property; all documents, record and electronic files relating to the design, end
user documentation, manufacturing, quality control, sales, marketing, or
customer support; and all products of the Company currently being licensed or
sold or that are currently being developed, including all hardware products and
tools, software products and tools, and services that are currently licensed,
offered or under development by the Company (the "COMPANY PRODUCTS").
As used in this Agreement "SOFTWARE" means any and all current and
prior and currently under development versions and releases, and predecessors of
the software and computer programs and applications of the Company to the extent
related to the business as currently being conducted or as currently required or
as reasonably can be anticipated to be conducted in the future, including all
such software and computer programs in machine readable source code forms and in
machine executable object code forms and all related specifications (including
all logic architectures, algorithms and logic flows and all physical,
functional, operating and design parameters), any data used by or related to
software, work in progress relating to corrections, modifications, revisions,
upgrades,
<PAGE> 20
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translations or enhancements, all Company and third party development and test
tools used to develop or test the software, third party application program
interfaces to the software written by them and all methods of implementation and
packaging, together with all associated know-how and show-how and all related
Documentation. As used in this Agreement, "DOCUMENTATION" means all
documentation, specifications, manuals and other materials relating to the
software, including programmer and user manuals which are used by the Company to
install, operate, maintain, correct, test, repair, enhance, extend, modify,
prepare derivative works based upon, design, develop, reproduce and package such
software.
(b) The Company Disclosure Schedule lists: (i) all patents, copyright
registrations, mask works, trademarks, service marks, trade dress, any renewal
rights for any of the foregoing, and any applications and registrations for any
of the foregoing, which are included in the Company Intellectual Property and
owned by or on behalf of the Company; (ii) all Company Products; and (iii) all
licenses, sublicenses and other agreements to which the Company is a party and
pursuant to which the Company or any other person is authorized to use the
Company Intellectual Property or exercise any other right with regard thereto.
The Company has delivered to Parent true and complete copies of the agreements
described in (iii) hereof.
(c) The Company Intellectual Property consists solely of items and
rights which are either: (i) owned by the Company; (ii) in the public domain; or
(iii) rightfully used and authorized for use by the Company and its successors
pursuant to a valid license. All Company Intellectual Property which consists of
licenses or other rights to third party intellectual property is set forth in
the Company Disclosure Schedule. The Company has all rights in the Company
Intellectual Property necessary to commercially exploit the same in connection
with the Company's current, former, and planned or scheduled (whether for
release or development) activities in all geographic locations and fields of use
in which the Company currently operates or is scheduled to operate, and to
sublicense any or all such rights to third parties, including the right to grant
further sublicenses. All software created by the Company is as described in the
Documentation and performs in all material respects in accordance with the
specifications included in the Documentation. The Company has taken all
reasonable measures to protect the proprietary nature of each item of Company
Intellectual Property. No other person or entity has any rights to any of the
Company Intellectual Property (except pursuant to agreements or licenses
specified in the Company Disclosure Schedule), and no other person or entity is
infringing, violating or misappropriating any of the Company Intellectual
Property. The Company owns or has the right to use all Intellectual Property
necessary (i) to use, market and distribute the products, marketed, sold or
licensed, and to provide the services provided, by the Company to other parties,
or (ii) to operate the Company's internal systems that are material to the
business or operations of the Company, including, without limitation, computer
hardware systems, software applications and embedded systems (the "INTERNAL
SYSTEMS"). Each item of Company Intellectual Property will be owned or available
for use by the Surviving Corporation immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to the
Closing, except for any changes that do not, either individually or on the
aggregate, have a Material Adverse Effect. Except as set forth in Section 4.15
of the Company Disclosure Schedules, the Company's software, to the Company's
knowledge, and the Internal Systems are free from significant defects or
programming errors and conform in all material respects to the written
documentation and specifications therefor.
(d) The Company is not, nor as a result of the execution or delivery of
this Agreement and all other agreements contemplated hereby, or performance of
the Company's obligations hereunder, will the Company be, in violation of any
license, sublicense or other agreement to which the Company is a party. The
Company Disclosure Schedule lists all contracts or agreements under which the
Company is obligated to provide any consideration (whether financial or
otherwise) to any third party, or under which any third party otherwise would be
entitled to any consideration, with respect to any exercise of rights by the
Company or Parent in the Company Intellectual Property. The Company Disclosure
Schedule identifies each item of Company Intellectual Property that is owned by
a party other than the Company, and the license or agreement pursuant to which
the Company uses it (excluding off-the-shelf software programs licensed by the
Company pursuant to "shrink wrap" or "click wrap" licenses, such exclusion only
extending to programs used by the Company solely for non-revenue generating
administrative functions).
<PAGE> 21
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(e) Except as set forth in Section 4.15 of the Company Disclosure
Schedules, the use, reproduction, modification, distribution, licensing,
sublicensing, sale or any other exercise of rights by the Company with respect
to any of the Company Products does not infringe any copyright, trade secret,
trademark, service mark, trade name, trade dress or mask work, or any patent,
moral right or other intellectual property right, right of privacy, or right in
personal data of any person. No claims (i) challenging the validity,
effectiveness or ownership by the Company of any of the Company Intellectual
Property, or (ii) to the effect that the use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale or any other exercise
of rights by the Company with respect to any of the Company Products infringes
or will infringe on any intellectual property or other proprietary or personal
right of any person, have been asserted to the Company or, to the knowledge of
the Company, are threatened by any person, nor to the knowledge of the Company
are there any valid grounds for any bona fide claim of any such kind. All
granted or issued patents and mask works and all registered trademarks listed on
the Company Disclosure Schedule and all registered copyrights held by the
Company are valid, enforceable and subsisting. To the knowledge of the Company,
there are no pending or unissued patent rights which infringe upon or impair the
Company Intellectual Property. To the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, employee or former employee.
(f) The Company has not disclosed the source code for any of the
software owned by the Company or other confidential information constituting,
embodied in or pertaining to the software to any person or entity, except
pursuant to the agreements listed in Section 4.15(f) of the Company Disclosure
Schedule, and the Company has taken reasonable measures to prevent disclosure of
such source code. No parties other than the Company possess any current or
contingent rights to any source code that is part of the Company Intellectual
Property.
(g) Except as set forth in Section 4.15 of the Company Disclosure
Schedules, all of the copyrightable materials (including software) incorporated
in or bundled with the Company's products have been created by employees of the
Company within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to the Company. No
portion of such copyrightable materials was jointly developed with any third
party. The Company Disclosure Schedule lists all parties who have created any
portion of, or otherwise have any rights in or to, the Company Intellectual
Property, other than employees of the Company who have no rights in or to any
Company Intellectual Property. Except as set forth in Section 4.15 of the
Company Disclosure Schedules, the Company has secured from all parties who have
created any portion of, or otherwise have any rights in or to, the Company
Intellectual Property valid and enforceable written assignments of any such work
or other rights to Company and has provided true and complete copies of such
assignments to Parent.
(h) For purposes of this Agreement, "YEAR 2000 COMPLIANT" means that
the applicable system or item: (i) will accurately receive, record, store,
provide, recognize and process all date and time data from, during, into and
between the twentieth and twenty-first centuries, the years 1999 and 2000 and
all leap years; (ii) will accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and (iii)
will not malfunction, cease to function or provide invalid or incorrect results
as a result of (x) the change of years from 1999 to 2000, (y) date data,
including date data which represents or references different centuries,
different dates during 1999 and 2000, or more than one century or (z) the
occurrence of any particular date; in each case, without human intervention,
other than original data entry. "YEAR 2000 COMPLIANT" refers to the ability of
(i) the Company Products; (ii) the Company's Internal Systems and (iii) the
computer and data processing systems of the Company's suppliers and other third
parties on whose products and services the Company relies. The Company
Disclosure Schedule describes the Company's plan for achieving Year 2000
Compliance, the current status of such effort, the costs expended by the Company
in 1998 towards year 2000 Compliance, and the anticipated future expenditures
related to Year 2000 Compliance. Except as set forth in Section 4.15 of the
Company Disclosure Schedule, all of the Company Products currently being
marketed, distributed or licensed by the Company or which were marketed,
distributed or licensed by the Company since January 1, 1997 are Year 2000
Compliant. The Company is not aware of any failure to be Year 2000 Compliant of
any third-party system that is material to the business or operations of the
Company, including
<PAGE> 22
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without limitation any system belonging to any of the Company's suppliers,
service providers or customers. The Company has taken and is taking all
reasonably necessary and appropriate actions to achieve Years 2000 Compliance,
and the annual cost of such reasonably anticipated actions and expenditures to
achieve Year 2000 Compliance is not expected to be material. The costs of
becoming Year 2000 Compliant are not expected to have a Material Adverse Effect
on the results or operations or liquidity of the Company.
(i) The Company Disclosure Schedule identifies each license or other
agreement (or type of license or other agreement) pursuant to which the Company
has licensed, distributed or otherwise granted any rights to any third party
with respect to, any Company Intellectual Property. The Company Disclosure
Schedule includes a true and complete list of support and maintenance agreements
relating to Company Intellectual Property including the identity of the parties
entitled to receive such service or maintenance, and the term of such
agreements.
(j) Except as set forth in Section 4.15 of the Company Disclosure
Schedule, the Company has obtained written agreements from all employees and
third parties with whom Company has shared confidential proprietary information
(i) of the Company, or (ii) received from others which the Company is obligated
to treat as confidential, which agreements require such employees and third
parties to keep such information confidential. The Company has delivered or
given access to all copies of such written agreements, as executed, to Parent.
None of the present or former employees, officers or directors of the Company
owns directly or indirectly, in whole or in part, any Company Intellectual
Property or application therefor.
(k) To the knowledge of the Company none of the Internal Systems, or
the use thereof, infringes or violates, or constitutes a misappropriation of,
any Intellectual Property rights of any person or entity. Section 4.15 of the
Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by the Company alleging any such infringement, violation or
misappropriation; and the Company has provided to Parent complete and accurate
copies of all written documentation in the possession of the Company relating to
any such complaint, claim, notice or threat. The Company has provided to Parent
complete and accurate copies of all written documentation in the Company's
possession relating to claims or disputes known to the Company concerning any
Company Intellectual Property.
SECTION 4.16 EMPLOYEES.
(a) Section 4.16 of the Company Disclosure Schedule identifies a list
of (a) the names, titles, annual salaries and all other compensation of all
employees of the Company and (b) the wage rates for non-salaried employees of
the Company (by classification) delivered to Parent. Neither the Company nor its
officers or directors have any knowledge that any key employee of the Company
intends to resign or retire as a result of the transactions contemplated by this
Agreement or otherwise within 6 months after the Closing Date.
(b) Except as set forth in Section 4.16 of the Company Disclosure
Schedule, each current and former officer, employee and consultant of the
Company having access to confidential or proprietary information of the Company
has executed and delivered to the Company an agreement regarding the protection
of such confidential or proprietary information and the assignment of inventions
to the Company in the form attached as Exhibits F-1, F-2, F-3 of F-4 hereto,
as applicable; copies of the currently used forms of all such agreements have
been delivered to Parent. The Company is not and never has been engaged in any
dispute or litigation with an employee or former employee regarding matters
pertaining to intellectual property or assignment of inventions.
(c) The Company (i) has never been and is not now subject to a union
organizing effort, (ii) is not subject to any collective bargaining agreement
with respect to any of its employees, (iii) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (iv) has no material current labor dispute. The
Company has good labor relations, and has no knowledge of any facts indicating
that the consummation of the transactions provided for herein will have a
Material Adverse Effect on its labor relations.
<PAGE> 23
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(d) Hours worked by and payments made to employees of the
Company have not been in violation of the Fair Labor Standards Act or any other
applicable federal, foreign, state or local laws dealing with such matters.
(e) All payments due from the Company on account of employee
health and welfare insurance in respect of years and periods (and portions
thereof) ended on or prior to the Closing Date were or will be paid prior to the
Closing Date or accrued as a liability on the Company's Balance Sheet and
previously disclosed to Parent.
(f) All severance and vacation payments which are or were due
under the terms of any agreement, oral or written, in respect of years and
periods (and portions thereof) ended on or prior to the Closing Date, were or
will be paid prior to the Closing Date or accrued as a liability on the
Company's Balance Sheet and previously disclosed to Parent.
SECTION 4.17 ENFORCEABILITY OF CONTRACTS, ETC.
(a) No person, firm, corporation or entity who is a party to
any contract, agreement, commitment or plan to which the Company is a party
involving potential liability or obligation in excess of $10,000 (excluding
warranty claims arising in the ordinary course of business and consistent with
past practice, which are not expected by the Company to be material in the
aggregate) has a valid defense, on account of non-performance or malfeasance by
the Company, which would make any such contracts, agreement, commitment or plan
not valid and binding upon or enforceable against such parties in accordance
with their terms, except to the extent such enforceability may be subject to or
limited by bankruptcy, insolvency, reorganization, arrangement or similar laws
affecting the rights of creditors generally and usual equity principles.
(b) Neither the Company, nor, to the knowledge of the Company,
any other person, firm, corporation or entity, is in breach or violation of, or
default under, any contract, agreement, arrangement, commitment or plan to which
the Company is a party, and no event or action has occurred, is pending, or, to
the knowledge of the Company, is threatened, which, after the giving of notice,
or the lapse of time, or otherwise, would constitute a breach or a default by
the Company or, to the knowledge of the Company, any other person, firm,
corporation or entity, under any contract, agreement, arrangement, commitment or
plan to which the Company is a party except for such breaches, default or
violations which would not have a Material Adverse Effect on the Company. The
Company is not in breach or violation of, or default under, its Certificate of
Incorporation or By-laws, and no event or action has occurred, is pending, or,
to the knowledge of Company, is threatened, which, after the giving of notice,
or the lapse of time, or otherwise, would constitute a breach or a default by
the Company under its Certificate of Incorporation or By-laws.
SECTION 4.18 TAXES.
(a) The term "TAXES" as used herein means all federal, state,
local, foreign net income, alternative or add-on minimum tax, estimated, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term "TAX" means any one of the foregoing Taxes.
The term "TAX RETURNS" as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term "TAX RETURN" means any one of the foregoing Tax Returns.
"TAX AUTHORITY" means any governmental authority responsible for the imposition
of any Tax. "CODE" as used herein means the Internal Revenue Code of 1986, as
amended.
(b) The Company has timely filed all Tax Returns required to
be filed and has paid all Taxes owed (whether or not shown as due on such
returns), including, without limitation, all Taxes which the Company is
obligated to withhold for amounts paid or owing to employees, creditors and
third parties. All Tax Returns filed by
<PAGE> 24
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the Company were complete and correct in all material respects. Except as set
forth on the Company Disclosure Schedule, none of the Tax Returns filed by the
Company or Taxes payable by the Company have been the subject of an audit,
action, suit, proceeding, claim, examination, deficiency or assessment by any
governmental authority, and no such audit, action, suit, proceeding, claim,
examination, deficiency or assessment is currently pending or, to the knowledge
of the Company, threatened. Except as set forth on the Company Disclosure
Schedule, the Company is not currently the beneficiary of any extension of time
within which to file any Tax Return, and the Company has not waived any statute
of limitation with respect to any Tax or agreed to any extension of time with
respect to a Tax assessment or deficiency. All material elections with respect
to Taxes with respect to the Company, as of the date hereof, are set forth in
the Company Audited Financial Statements or in the Company Disclosure Schedule.
None of the Tax Returns filed by the Company contains a disclosure statement
under former Section 6661 of the Code or Section 6662 of the Code (or any
similar provision of state, local or foreign Tax law).
(c) Except as set forth in Section 4.18 of the Company
Disclosure Schedule, the Company is not a party to any agreement, contract,
arrangement or plan that would result, separately or in the aggregate, in the
payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the Code.
The Company has not agreed to make any adjustment under Section 481(a) of the
Code (or any corresponding provision of state, local or foreign Tax law) by
reason of a change in accounting method or otherwise, and will not be required
to make such an adjustment as a result of the transactions contemplated by this
Agreement. The Company is not, and has not been, a U.S. real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. The Company has never
received a written claim by a Tax Authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to Tax in that
jurisdiction. The Company has not participated in an international boycott as
defined in Section 999 of the Code. The Company does not have, and has not had,
a permanent establishment in any foreign country, as defined in any applicable
Tax treaty or convention between the United States and such foreign country.
None of the shares of outstanding capital stock of the Company are subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code,
except for shares with respect to which a valid election under Section 83(b) has
been filed. The Company has never filed a consent pursuant to Section 341(f) of
the Code, relating to collapsible corporations.
(d) The Company is not a party to any Tax sharing agreement or
similar arrangement. The Company has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company), and the Company does not have any liability for the
Taxes of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any corresponding provision of state, local or foreign Tax law), as
a transferee or successor, by contract, or otherwise.
(e) There are no liens for Taxes upon any of the assets, other
than for ad valorem Taxes not yet due and payable. The unpaid Taxes of the
Company did not, as of August 30, 1999, exceed by any material amount the
reserve for actual Taxes (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) as shown
on the Company Unaudited Balance Sheet dated August 30, 1999, and will not
exceed by any material amount such reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company in filing their Tax Returns. The Company has not incurred any liability
for Taxes from August 30, 1999 through the Closing Date other than in the
ordinary course of business consistent with past practice. The Company is not
obligated to file any Tax Return in any jurisdiction (whether foreign or
domestic) other than those jurisdictions in which it currently files Tax
Returns.
SECTION 4.19 INSURANCE. Section 4.19 of the Company Disclosure Schedule
sets forth a list of, and true and complete copies have previously been made
available to Parent and Merger Sub of, all insurance policies and fidelity bonds
covering the assets, business, operations and employees 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 payable under all such policies and bonds have
been paid and the Company is otherwise in full compliance with the material
terms and conditions of all such policies and bonds. Except as otherwise set
forth in Section 4.19 of the Company Disclosure Schedule, such
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policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since January 8,
1997 and remain in full force and effect.
SECTION 4.20 BOOKS AND RECORDS.
(a) The books, records and accounts of the Company (i) are
accurate and complete in all material respects and have been maintained in
accordance with good business practices on a basis consistent with prior years,
(ii) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of the Company and (iii) accurately
and fairly reflect the basis for the Company Unaudited Financial Statements.
(b) The Company has implemented and maintained a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (A) to
permit preparation of financial statements in conformity with generally accepted
accounting principles consistently applied and (B) to maintain accountability
for assets; and (iii) the amount recorded for assets on the books and records of
the Company is compared with the existing assets at reasonable intervals in
connection with the preparation of the annual unaudited financial statements of
the Company and appropriate action is taken with respect to any differences.
SECTION 4.21 COMPLIANCE WITH GOVERNMENTAL REGULATIONS. The Company is
not in violation of any federal, foreign, state or local law, statute,
ordinance, rule, regulation or court or administrative order or process relating
to the operation, conduct or ownership of the property, business or affairs of
the Company except for violations that, individually or in the aggregate would
not have a Material Adverse Effect on the Company.
SECTION 4.22 ENVIRONMENTAL COMPLIANCE [INTENTIONALLY LEFT BLANK]
SECTION 4.23 WARRANTIES. No product or service manufactured, sold,
leased, licensed or delivered by the Company is subject to any guaranty,
warranty, right of return, right of credit or other indemnity other than (i) the
applicable terms and conditions of sale, license or lease of the Company, which
are set forth in license agreements disclosed in Section 4.13 of the Company
Disclosure Schedule and (ii) manufacturers' warranties for which the Company has
any liability. Section 4.23 of the Disclosure Schedule sets forth the aggregate
expenses incurred by the Company in fulfilling their obligations under their
guaranty, warranty, right of return and indemnity provisions during each of the
fiscal years and the interim period covered by the Financial Statements; and the
Company does not know of any reason why such expenses should significantly
increase as a percentage of revenue in the future.
SECTION 4.24 REAL ESTATE.
(a) Section 4.24 of the Company Disclosure Schedule contains a
schedule setting forth and describing all real estate which is owned or leased
by the Company, or in which the Company has any other right, title or interest.
True and complete copies of each lease have been provided or made available to
Parent and such leases constitute the entire understanding relating to the
Company's use and occupancy of the leased premises. The leases are presently in
full force and effect without further amendment or modification. The Company is
not in default in any material respect in the performance of obligations under
any lease, and the Company does not know of any facts which with the giving of
notice or the passage of time, or both, would constitute a default by the
Company or any other party thereunder.
(b) To the knowledge of the Company, the improvements located
on the real estate described in Section 4.24 of the Company Disclosure Schedule
are not the subject of any official complaint or notice of violation of any
applicable zoning ordinance or building code and there is no use or occupancy
restriction or condemnation proceeding pending, or threatened against the
Company.
SECTION 4.25 BANK ACCOUNTS. Section 4.25 of the Company Disclosure
Schedule contains a schedule setting forth and describing (i) all bank accounts
owned or maintained by the Company and all authorized
<PAGE> 26
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signatories with respect thereto; and (ii) safety deposit boxes maintained by
the Company and all persons having access with respect thereto.
SECTION 4.26 EMPLOYEE BENEFIT PLANS. Except as set forth in Section
4.26 of the Company Disclosure Schedule, neither the Company nor any person that
together with the Company would be treated as a single employer (an "ERISA
AFFILIATE") under Section 414 of the Internal Revenue Code of 1986, as amended
(the "CODE") has established or maintains or is obligated to contribute to (a)
any bonus, severance, stock option, or other type of incentive compensation
plan, program, agreement, policy, commitment, contract or arrangement (written
or oral), (b) any pension, profit-sharing, retirement or other plan, program or
arrangement, or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans (individually,
a "PLAN" and collectively, the "PLANS") have been operated and administered in
all material respects in accordance with their terms, as applicable, with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. No act or failure to act by the
Company has resulted in, nor do the Company have knowledge of a non-exempt
"PROHIBITED TRANSACTION" (as defined in ERISA) with respect to the Plans.
Neither the Company nor any ERISA Affiliate maintains or has ever maintained or
contributed to any Plan subject to Title IV of ERISA. With respect to the
employees and former employees of the Company, there are no employee
post-retirement medical or health plans in effect, except as required by Section
4980B of the Code.
SECTION 4.27 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except
for (a) the requirements of state securities laws and (b) the filing and
recording of appropriate documents, including the Certificate of Merger, as
provided by the laws of the State of Delaware, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by the Company in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 4.28 CONFLICTS OF INTEREST. Except as set forth in Section 4.28
of the Company Disclosure Schedule, to the knowledge of the Company and the
Company Shareholders, none of the directors, officers, employees or shareholders
of the Company (a) has any material direct or indirect interest in any entity
which does business with the Company; (b) has any direct or indirect interest in
any property, asset or right which is used by the Company in the conduct of its
business; or (c) has any contractual relationship with the Company other than
such relationships which occur from being an officer, employee, director or
securityholder of the Company.
SECTION 4.29 ACCURACY OF REPRESENTATIONS. The representations made
herein, subject to the Company Disclosure Schedule, and all certificates,
documents and instruments furnished by the Company (or any of its directors,
officers, employees or shareholders) in connection with this Agreement or the
Merger including the Company Disclosure Schedule or any other transaction
contemplated by this Agreement, and represented as being so furnished, are true
and correct, and, when taken as a whole, do not contain any untrue statement of
a material fact or knowingly omit to state any material fact necessary in order
to make the statements included herein or therein, in light of the circumstances
under which they were made, not misleading.
SECTION 4.30 AGREEMENT FROM CERTAIN AFFILIATES OF THE COMPANY. Prior to
the execution of this Agreement, the Company shall have provided to Parent a
list of those persons or entities who are affiliates of the Company. The Company
shall also have provided Parent such information and documents as the Parent
shall have reasonably requested for purposes of reviewing such list and shall
notify the other party in writing regarding any change in the identity of its
affiliates prior to the Closing Date. In order to help ensure that the Merger
will be accounted for as a "pooling of interest", that the issuance of and any
resale of the Consideration Shares will comply with the Securities Act and that
the Merger will be treated as a tax-free reorganization, the Company is
delivering to Parent simultaneously herewith, a Company Affiliate Agreement, in
the form attached hereto as Exhibit I, executed by its affiliates. Parent shall
be entitled to place appropriate legends on the certificates evidencing any
Consideration Shares to be issued to affiliates of the Company, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, setting forth restrictions on transfer consistent with the terms
of the Company Affiliate Agreement.
<PAGE> 27
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ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY SHAREHOLDERS
Each Company Shareholder executing and delivering this Agreement
severally represents and warrants to Parent and Merger Sub as follows:
(a) Subject to applicable community property laws, such
Company Shareholder is the lawful owner of the Company Shares to be exchanged
for shares of Parent Common Stock pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Company Shares, free of all
restrictions on transfer, liens, encumbrances, security interests and claims
whatsoever.
(b) Such Company Shareholder has, and on the Closing Date will
have, full legal right, power and authority to enter into this Agreement and to
sell and deliver the Company Shares in the manner provided herein, and this
Agreement, the Escrow Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by such Company Shareholder and assuming
this Agreement, the Registration Rights Agreement and the Escrow Agreement
constitute valid and binding obligations of each party hereto and thereto other
than such Company Shareholder, this Agreement, the Escrow Agreement and the
Registration Rights Agreement are valid and binding agreements of such Company
Shareholder enforceable in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, arrangement or similar
laws affecting the rights of creditors generally, judicial limitations upon
equitable remedies including the specific performance of certain types of
obligations and public policy.
(c) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement and the Escrow Agreement by such Company
Shareholder, compliance by such Company Shareholder with all the provisions
hereof and thereof and the consummation of the transactions contemplated hereby
or thereby will not require any consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body,
or any agreement, indenture or other instrument to which such Company
Shareholder is a party or by which such Company Shareholder or property of such
Company Shareholder is bound, or violate or conflict with any laws,
administrative regulation or ruling or court decree applicable to such Company
Shareholder or property of such Company Shareholder.
(d) THAT SUCH COMPANY SHAREHOLDER UNDERSTANDS THAT SUCH
COMPANY SHAREHOLDER'S INVESTMENT IN THE PARENT COMMON STOCK INVOLVES RISK.
(e) THAT SUCH COMPANY SHAREHOLDER HAS CONSULTED SUCH COMPANY
SHAREHOLDER'S ATTORNEY, ACCOUNTANT OR INVESTMENT ADVISOR WITH RESPECT TO THE
INVESTMENT CONTEMPLATED HEREBY AND ITS SUITABILITY FOR HIM OR HER. ANY SPECIFIC
ACKNOWLEDGMENT SET FORTH BELOW WITH RESPECT TO ANY STATEMENT OR INFORMATION
FURNISHED TO SUCH COMPANY SHAREHOLDER SHALL NOT BE DEEMED TO LIMIT THE
GENERALITY OF THIS REPRESENTATION AND WARRANTY.
(f) The Company has made available to such Company
Shareholder, during the course of this transaction and prior to the acquisition
of the Parent Common Stock, the opportunity to ask questions of and receive
complete and correct answers from representatives of the Company concerning the
terms and conditions of the Parent Common Stock and to obtain any additional
information relating to the financial condition and business of the Company.
(g) Such Company Shareholder understands that he or she must
bear the economic risk of this investment until such time as the Parent Common
Stock is registered; that the Parent Common Stock being acquired by such Company
Shareholder is not currently registered under the Securities Act, and,
therefore, cannot be resold unless they are subsequently registered under the
Securities Act or unless an exemption from such registration is available; that
such Company Shareholder is purchasing the Parent Common Stock for investment
for
<PAGE> 28
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such Company Shareholder's account and not with any present view toward resale
or other distribution thereof; that such Company Shareholder agrees not to
resell or otherwise dispose of all or any part of the Parent Common Stock,
except as permitted by law, including, without limitation, any and all
applicable provisions of this Agreement and the Registration Rights Agreement
and any regulations under the Securities Act and applicable state securities
laws; that except as provided the Registration Rights Agreement, the Parent is
under no obligation to register the Parent Common Stock under the Securities Act
or any state securities law or to supply the information which may be necessary
to enable such Company Shareholder to sell the Parent Common Stock; and that
Rule 144 under the Securities Act is not now available as a basis for exemption
from registration of any Parent Common Stock hereunder.
(h) Such Company Shareholder has adequate means of providing
for his current needs and personal contingencies and has no need for liquidity
in connection with this investment in the Parent Common Stock.
(i) Such Company Shareholder's overall commitment to
investments which are not readily marketable is not disproportionate to such
Company Shareholder's net worth and such Company Shareholder's investment in the
Parent Common Stock will not cause such overall commitment to become excessive.
The acquisition of the Parent Common Stock by such Company Shareholder is
consistent with his general investment objectives.
(j) Such Company Shareholder received an offer concerning the
Parent Common Stock and first learned of this investment in the state or other
jurisdiction listed in the residence address on the signature page hereto, and
intend that the state securities laws of that state or other jurisdiction alone
govern this transaction.
(k) Such Company Shareholder acknowledges and warrants that,
prior to the execution of this Agreement, he has had the opportunity to ask
questions and receive answers from the Parent and Company concerning the terms
and conditions of the transactions contemplated by this Agreement and the
issuance of the Parent Common Stock, and concerning any of the documents
identified above, and to obtain such additional further information from the
Parent and Company as such Company Shareholder has deemed necessary to verify
the accuracy of the information contained in the documents identified above or
any other information furnished to such Company Shareholder.
(l) Such Company Shareholder understands that the
representations, warranties and covenants set forth herein will be relied upon
by the Company, other stockholders of Company, Parent, and their respective
counsel and accounting firms.
ARTICLE V
COVENANTS
The following covenants shall apply to the period of time from the date
hereof until the Effective Time unless otherwise specifically provided. All
references to the Company in Article V shall refer to the Company.
SECTION 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to its terms, the Company will conduct
its operations only in the ordinary and usual course of business and consistent
with past practice and will use its best efforts 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 and
others having business dealings with it to the end that its goodwill and
on-going business shall not be impaired at the Effective Time. During such
period the Company shall promptly report to Parent any occurrence or omission
which shall have caused any representation or warranty of the Company hereunder
to become untrue as of the time of such occurrence or omission, and shall confer
on a regular and frequent basis with representatives of Parent to report
operational matters of a material nature and to report the general status of the
ongoing operations of the business of the Company. Without limiting the
generality of the
<PAGE> 29
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foregoing, and except as contemplated by this Agreement and the Company
Disclosure Schedule, the Company will not, prior to the Effective Time, without
the prior written consent of Parent in each instance:
(a) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (i) any shares of capital stock of any class of the
Company (including Company Shares), or securities convertible into any such
shares, or any rights, warrants or options to acquire any such shares or
convertible securities, or (ii) any other securities in respect of, in lieu of
or in substitution for outstanding Company Shares;
(b) purchase or redeem or otherwise acquire, or propose to
purchase or redeem or otherwise acquire, any outstanding shares of capital stock
of any class (including Company Shares), or securities convertible into any such
shares, or any rights, warrants or options to acquire any such shares or
convertible securities;
(c) declare or pay any dividend or distribution on any shares
of its capital stock other than as approved in writing by Parent;
(d) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into a letter of intent (whether or
not binding), an agreement in principle or an agreement with respect to any
merger, consolidation or business combination (other than the Merger), any
acquisition of assets or securities, any disposition of assets or securities, or
any change in the Company's capitalization, or an entry into a material contract
other than in the ordinary course of business or any amendment or modification
of any material contract rights;
(e) except as may be contemplated herein, take any action
which would make any representation or warranty in this Agreement untrue or
incorrect, as if made as of such time;
(f) enter into any agreement, contract or commitment (other
than in the ordinary course of business, agreements, contracts or commitments
which were under negotiation on the date hereof and which are disclosed on the
Company Disclosure Schedule, the Secured Note and the Security Agreement) which,
if entered into prior to the date hereof, would be required to be listed in
Section 4.13 of the Company Disclosure Schedule and which involves a payment,
obligation or commitment in excess of $10,000;
(g) enter into any contract, agreement, license or commitment
which would be breached or violated or in respect of which a right of
acceleration would be created by the Company's execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(h) (i) increase or agree to increase the compensation payable
or to become payable to its officers or employees, (ii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any employee, (iii) enter into any collective bargaining agreement, (iv)
establish, adopt, enter into or amend in any material respect any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
(i) 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, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes; or
(j) agree in writing or otherwise to take any of the foregoing
actions.
SECTION 5.2 ACCESS AND INFORMATION; CONFIDENTIALITY.
(a) The Company shall afford to Parent and to Parent's
accountants, counsel and other representatives access throughout the period
prior to the Effective Time to its senior management, properties, books,
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contracts, commitments and records (including but not limited to tax returns)
and all other information concerning its business, properties and personnel as
Parent may reasonably request.
(b) Parent shall afford to the Company and to its counsel and
to the Company Shareholders access throughout the period prior to the Effective
Time to its senior management, and all other information concerning Parent as
the Company or a Company Shareholder may reasonably request. The Company
Shareholders shall also be afforded the opportunity to ask questions and to
receive accurate and complete answers from Parent concerning the terms and
conditions of the Merger and the issuance of shares of Parent Common Stock
pursuant thereto.
(c) The Company and its affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, (i) all confidential documents and information concerning
Parent and its affiliates furnished to the Company or its affiliates or
representatives in connection with the transactions contemplated by this
Agreement, and (ii) (after the Closing Date) all confidential documents and
information concerning the Company, except to the extent that such information
can be shown to have been (A) previously known on a nonconfidential basis by the
Company, (B) in the public domain through no fault of the Company or (C) later
lawfully acquired by the Company from sources other than the Parent (with
respect to information described in clause (ii) above) or Parent; provided that
the Company may disclose such information to its affiliates, stockholders,
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement so
long as such persons are informed by the Company of the confidential nature of
such information and are directed by the Company to treat such information
confidentially. The obligation of the Company to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to such
information as it would take to preserve the confidentiality of its own similar
information.
(d) Prior to the Closing Date and after any termination of
this Agreement, Parent and its affiliates will hold, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company furnished to Parent or its affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by Parent, (ii) in the public domain through no fault of Parent or (iii)
later lawfully acquired by Parent from sources other than the Company; provided
that Parent may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such persons are informed
by Parent of the confidential nature of such information and are directed by
Parent to treat such information confidentially. The obligation of Parent to
hold any such information in confidence shall be satisfied if it exercises the
same care with respect to such information as they would take to preserve the
confidentiality of its own similar information.
(e) If this Agreement is terminated in accordance with Section
8.1 hereof, Parent shall, and shall cause its accountants, counsel and other
representatives to immediately destroy or deliver to the Company all documents
and other material, and all copies thereof, obtained by Parent or on its behalf
from the Company in connection with this Agreement, whether so obtained before
or after the execution hereof, and will not disclose any such information or
documents to any third parties or make any use of such. If this Agreement is
terminated in accordance with Section 8.1 hereof, the Company shall, and shall
cause its accountants, counsel and other representatives to, immediately destroy
or deliver to Parent all documents and other material, and all copies thereof,
obtained by the Company or on its behalf from Parent in connection with this
Agreement, whether so obtained before or after the execution hereof, and will
not disclose any such information or documents to any third parties or make any
use of such.
SECTION 5.3 REASONABLE EFFORTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
expeditiously and practicably to
<PAGE> 31
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consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary actions or
non-actions, waivers, consents and approvals from governmental or regulatory
bodies and to effect all necessary registrations and filings.
SECTION 5.4 NO SOLICITATION. Unless and until the earlier of the
Effective Time and the termination of this Agreement pursuant to Section 8.1
hereof, the Company agrees that it will not directly or indirectly (or authorize
its agents, investment bankers, officers, directors, employees, affiliates or
representatives or any of their respective family members to) solicit,
entertain, negotiate or discuss with any person or entity (other than Parent)
the sale or licensing of the Company's products (other than transactions
consistent with the Company's ordinary course of business) or the sale or
transfer of the Company or the Company's business, whether by asset sale, stock
sale, merger or any other form of business combination, joint venture or
strategic alliance or enter into any agreement or understanding with respect
thereto. If the Company (or any of its agents, investment bankers, officers,
directors, employees, affiliates or representatives or any of their respective
family members) shall receive any bona fide offer or proposal concerning the
above, such offer or proposal shall be promptly delivered to Parent.
SECTION 5.5 PUBLIC ANNOUNCEMENTS. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
SECTION 5.6 INSURANCE. The Company will use its best efforts to
maintain in force at the Effective Time policies of insurance of the same
character and coverage as those described in Section 4.19 of the Company
Disclosure Schedule and the Company will promptly notify Parent in writing of
any changes in such insurance coverage occurring prior to the Effective Time.
SECTION 5.7 POOLING. Parent, the Merger Sub, the Company and each of
the Company Shareholders shall use all reasonable efforts, shall cooperate fully
and shall take all actions as are reasonably necessary to allow the Merger and
other transactions contemplated by this Agreement to be accounted for as a
"pooling of interests" in accordance with United States generally accepted
accounting principles.
SECTION 5.8 SHAREHOLDER APPROVAL. The Company shall use its best
efforts to obtain the approval of the Merger, this Agreement and the
transactions contemplated herein by the Company Shareholders.
SECTION 5.9 REQUIRED NOTIFICATIONS. The Company shall, within a
reasonable time after the Closing, notify the parties to those contracts listed
in Section 4.6(a) of the Company Disclosure Schedule and identified as requiring
notification upon a merger or a change in control affecting the Company.
SECTION 5.10 SECTION 16 MATTERS. Assuming that the Company delivers to
Parent the Section 16 Information (as defined below) in a timely fashion, the
Board of Directors of Parent, or a committee of two or more Non-Employee
Directors thereof (as such item is defined for purposes of Rule 16b-3 under the
Exchange Act), shall adopt resolutions prior to the consummation of the Merger,
providing that the receipt by the Company Insiders (as defined below) of Parent
Common Stock in exchange for the Company Shares, and of options for Parent
Common Stock upon conversion of the Outstanding Options, in each case pursuant
to the transaction contemplated hereby and to the extent such securities are
listed in the Section 16 Information, are intended to be exempt from liability
pursuant to Section 16(b) under the Exchange Act. Such resolutions shall comply
with the approval conditions of Rule 16b-3 under the Exchange Act for purposes
of such Section 16(b) exemption, including, but not limited to, specifying the
name of the Company Insiders, the number of securities to be acquired or
disposes of for each such person, the material terms of any derivative
securities, and that the approval is intended make the receipt of such
securities exempt pursuant to Rule 16b-3(d). "Section 16 Information" shall mean
information accurate in all respects regarding the Company Insiders, the number
of Company Shares held by each such Company Insider and expected to be exchanged
for Parent Common Stock in the Merger, and the number and description of the
Outstanding Options held by each such Company Insider and expected to converted
into options on Parent Common Stock in connection with the merger. "Company
Insiders" shall mean those officers and directors of the Company
<PAGE> 32
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who will be subject to the reporting requirement of Section 16(b) of the
Exchange Act with respect to Parent and who are listed in the Section 16
Information.
SECTION 5.11 CHANGES TO CERTIFICATE OF INCORPORATION OR BY-LAWS. Parent
shall not, for a period of three years after the Effective Time, take any action
to alter or impair any exculpatory or indemnification provisions now existing in
the Certificate of Incorporation or By-laws of the Company for the benefit of
any individual who served as a director or officer of the Company at any time
prior to the Effective Time, except for any changes which do not affect the
application of such provisions to acts or omissions of such individuals prior to
the Effective Time.
SECTION 5.12 TAX MATTERS. Parent intends to cause the Company to
continue its historic business or use a significant portion of its business
assets following the Merger (determined in accordance with the principles set
forth in Treasury Regulation Section 1.368-1(d)(4)).
From and after the Effective Time, Parent agrees that it will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present and
former director and officer of the Company (the "Indemnified Executives")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under Delaware law (and the Parent and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under Delaware law, provided that the Indemnified Executive to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Indemnified Executive is not entitled to
indemnification).
ARTICLE VI
CONDITIONS
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
at its option to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) this Agreement and the transactions contemplated hereby
shall have been approved and adopted by at least 95% in interest of the
shareholders of the Company;
(b) all statutory requirements for the valid consummation by
the Company, Parent and Merger Sub of the transactions contemplated by this
Agreement shall have been fulfilled; and all authorizations, waivers, consents,
approvals and actions of all federal and state governmental agencies and
authorities or other regulatory bodies required to be obtained in order to
permit consummation by the Company, the Company Shareholders, Parent and Merger
Sub of the transactions contemplated by this Agreement shall have been obtained,
without the imposition of a Burdensome Condition ("BURDENSOME CONDITION" shall
mean the imposition of a material restriction on Parent's ability to operate the
Company following the Effective Time or requiring Parent to dispose of assets of
the Company or Parent following the Effective Time), unless any of Parent, the
Company Shareholders, or the Company voluntarily agrees to satisfactorily
resolve the Burdensome Condition;
(c) no court of competent jurisdiction shall have issued any
order, decree or injunction restraining or preventing the consummation of the
Merger or otherwise materially adversely affecting the transactions contemplated
by this Agreement;
(d) no investigation, action, suit or proceeding by any
governmental or regulatory commission, agency, body or authority, and no action,
suit or proceeding by any other person, firm, corporation or entity, shall be
pending on the Closing Date which challenges, or might reasonably be expected to
result in a challenge to, this Agreement or the Merger or any other transaction
contemplated hereby, or which claims, or might
<PAGE> 33
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reasonably be expected to give rise to a claim for, damages in a material amount
as a result of the consummation of the Merger or any other transaction
contemplated hereby;
(e) the Company, the Indemnification Representation, Merger
Sub, and Parent shall have executed and delivered the Escrow Agreement in
substantially the form of Exhibit B;
(f) the Certificate of Merger shall have been filed with the
Secretary of State of the State of Delaware.
SECTION 6.2 CONDITIONS TO OBLIGATION OF THE COMPANY AND THE COMPANY
SHAREHOLDERS TO EFFECT THE MERGER. The obligation of the Company and the Company
Shareholders to effect the Merger shall be subject at the option of the Company
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Parent and Merger Sub shall have performed in all material
respects their agreements contained in this Agreement required to be performed
on or prior to the Effective Time; and the representations and warranties of
Parent and Merger Sub set forth in Article III hereof shall be true, correct and
complete as of the Effective Time as if made as of such time, except as
contemplated or permitted by this Agreement; and at the Closing the Company
shall have received certificates executed by the Presidents or Chief Executive
Officer of Parent and Merger Sub to the foregoing effects;
(b) no action, suit, claim, investigation or proceeding shall
be pending or threatened against Parent or its properties and assets which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on the business, assets, condition (financial or otherwise) or result of
operations of Parent and its subsidiaries taken as a whole.
(c) at the Closing, there shall be delivered to the Company
the opinion of Testa, Hurwitz & Thibeault, LLP, counsel for Parent and Merger
Sub, dated the Closing Date, in form and substance satisfactory to the Company
and its counsel and substantially as set forth in Exhibit C.
(d) Parent shall have executed Registration Rights Agreement
(the "REGISTRATION RIGHTS AGREEMENT") in substantially the form of Exhibit D;
(e) all corporate and other proceedings to be taken by Parent
and Merger Sub in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to the
Company and its counsel, and the Company and its counsel shall have received all
such counterpart originals or certified or other copies of such documents as
they reasonably may request;
(f) at the Closing, the Company and its counsel shall have
received copies of the following documents:
(i) (A) the Certificate of Incorporation of Parent and
Merger Sub, respectively, certified as of a recent date by the Secretary of
State of the State of Delaware, and (B) a certificate of each said Secretary
dated as of a recent date as to the due incorporation and good standing of each
of Parent and Merger Sub, and listing all documents of each on file with said
Secretary.
(ii) a certificate of the Secretary or Assistant
Secretary of each of Parent and Merger Sub dated the Closing Date and
certifying: (A) that attached thereto is a true and complete copy of the By-laws
of Parent and Merger Sub, as the case may be, as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the shareholders of Parent and
Merger Sub, as the case may be, authorizing the execution, delivery and
performance of this Agreement and the Merger, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection with
the transactions contemplated by this Agreement; (C) that the Certificate of
Incorporation of Parent and Merger Sub, as the case may be, have not been
amended since the date of the last amendment referred to in the certificate
delivered pursuant to clause (i)(B) above; and (D) to the incumbency and
specimen signature of each officer of
<PAGE> 34
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Parent or Merger Sub, as the case may be, executing this Agreement, Registration
Rights Agreement and Escrow Agreement, and any certificate or instrument
furnished pursuant hereto and thereto, and a certification by another officer of
Parent or Merger Sub, as the case may be, as to the incumbency and signature of
the officer signing the certificate referred to in this clause.
(g) no change in the business, assets, condition (financial or
otherwise) or results of operations of Parent and its subsidiaries taken as a
whole shall have occurred which individually or in the aggregate has resulted
in, or will cause a Material Adverse Effect; and
(h) the Company shall have the right to waive in writing any
of the foregoing conditions precedent.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB TO
EFFECT THE MERGER. The obligations of Parent and Merger Sub to effect the Merger
shall be subject at the option of Parent and Merger Sub to the fulfillment at or
prior to the Effective Time of the following conditions:
(a) the Company shall have performed in all material respects
its agreements contained in this Agreement required to be performed on or prior
to the Effective Time and the representations and warranties of the Company and
the Company Shareholders set forth in Article IV and IV-A hereof shall be true,
correct and complete as of the Effective Time as if made as of such time other
than representations or warranties that speak as of a particular date, which
shall continue to be true, correct and complete as of such date, and except as
contemplated or permitted by this Agreement; and at the Closing Parent and
Merger Sub shall have received a certificate executed by the President of the
Company to the foregoing effects with respect to the agreements, representations
and warranties of the Company;
(b) no action, suit, claim, investigation or proceeding shall
be pending or threatened against the Company or its properties and assets which,
if adversely determined, could reasonably be expected to have a Material Adverse
Effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company;
(c) At the Closing, there shall be delivered to Parent and
Merger Sub the opinion of Foley, Hoag & Eliot LLP, counsel for the Company and
the Company Shareholders, dated the Closing Date, in form and substance
satisfactory to Parent and Merger Sub and their counsel and substantially as set
forth in Exhibit E;
(d) Parent shall have received a letter from Pricewaterhouse
Coopers LLP, auditors for Parent, in a form reasonably satisfactory to Parent,
regarding its concurrence with the conclusion of Parent that both parties to the
merger are poolable entities and that Parent may treat the Merger as a "pooling
of interests" for accounting purposes under Accounting Principles Board Opinion
No. 16 and the applicable rules and regulations of the Commission.
(e) the Company shall have received all Required Consents and
all consents, authorizations or approvals from the governmental agencies, as
well as all consents and waivers required under the Company's Certificate of
Incorporation in each case in form and substance satisfactory to Parent and
Merger Sub and their counsel, and no such consent, authorization or approval
shall have been withdrawn;
(f) all corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to Parent
and Merger Sub and their counsel, and Parent and Merger Sub and their counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they reasonably may request;
(g) At or prior to the Closing, Parent shall have received
copies of the following documents:
(i) (A) the Certificate of Incorporation of the Company,
certified as of a recent date by the Secretary of State of the State of Delaware
and (B) a certificate of said Secretary dated as of a recent date as
<PAGE> 35
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to the due incorporation and good standing of the Company, and listing all
documents of the Company on file with said Secretary.
(ii) A certificate of the Secretary of the Company dated
the Closing Date and certifying: (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the shareholders of the Company
authorizing the execution, delivery and performance of this Agreement, and that
all such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement; (C)
that the Certificate of Incorporation of the Company has not been amended since
the date of the last amendment referred to in the certificate delivered pursuant
to clause (i)(B) above; and (D) as to the incumbency and specimen signature of
each officer of the Company executing this Agreement, and any certificate or
instrument furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing the
certificate referred to in this clause (ii).
(iii) Such additional supporting documents and other
information with respect to the operations and affairs of the Company as Parent
and Merger Sub or their counsel reasonably may request.
(h) Parent shall be satisfied, in its sole discretion after
consultation with its counsel, that the approval of the Merger, this Agreement
and all associated transactions by the Company Shareholders and the issuance of
Parent Common Stock hereunder shall have been conducted in compliance with the
Securities Act;
(i) The Company shall have furnished Parent with a true and
complete copy of the Company Annual Unaudited Financial Statements and the
Company Unaudited Interim Financial Statements.
(j) The Company shall have delivered to Parent a properly
executed statement satisfying the requirements of Treasury Regulation Sections
1.897-2(h) and 1.1445-2(c)(3) in a form reasonably acceptable to Parent;
(k) No change in the business, assets, condition (financial or
otherwise) or results of operations of the Company shall have occurred since the
date of this Agreement which individually or in the aggregate has resulted in,
or will cause a Material Adverse Effect.
(l) Holders of Outstanding Company Shares representing at
least ninety-five percent (95%) of the voting power of Company Shares entitled
to approve the Merger and the form of this Agreement shall have executed and
delivered the Company's Shareholders' Consent in favor of the transactions
contemplated herein.
(m) Each founder, Stefania Nappi, each officer and key
employee, and marketing technology employee of the Company shall have executed
an Employee Non-Disclosure, Invention and Covenant Not to Compete Agreement in
substantially the form of Exhibits F-1, F-2, F-3 and F-4, respectively.
(n) No employee or other option holder of the Company shall
have exercised any option to purchase shares of the Company's capital stock
after the date hereof and prior to the Closing.
(o) Parent and Merger Sub shall have the right in their sole
discretion to waive in writing any of the foregoing conditions precedent.
(p) Each Company Shareholder shall have executed a counterpart
signature page to this Agreement for purposes of Article IV, Article IV-A and
Article VII.
<PAGE> 36
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION
SECTION 7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants of the Company, Company Shareholders,
Parent and Merger Sub contained herein or in any schedule, document, written
statement, certificate or other instrument referred to herein or in the Escrow
Agreement shall survive the execution and delivery of this Agreement and the
Escrow Agreement, any investigation by or on behalf of the Company, the Company
Shareholders, Parent or Merger Sub, as the case may be, and the completion of
the transactions contemplated hereby and shall terminate on the first
anniversary of the Closing or, if sooner, the date of publication of audited
financial statements of Parent for the fiscal year ending June 30, 2000 (the
"INDEMNIFICATION TERMINATION DATE"). Nothing contained herein shall be deemed to
limit the rights or remedies of Parent with respect to a breach of the
representations of Company contained in Section 4.15(a) - (g) and (j) regarding
Company Intellectual Property (the "Intellectual Property Representations") and
the representations of the Company Shareholders contained in Article IV-A
hereof; provided, however, (i) the aggregate liability of any Company
Shareholder in connection with the foregoing representations other than the
Intellectual Property Representations shall not exceed the value of the
Indemnification Escrow Shares deposited to the escrow fund on behalf of such
Company Shareholder pursuant to this Agreement and the Escrow Agreement and (ii)
the aggregate liability of any Company Shareholder in connection with the
Intellectual Property Representations shall be limited in value to one-half of
the Consideration Shares issued to such Company Shareholder, valued at the
Merger Price, payable in Consideration Shares and/or cash; and provided,
further, in each case that Minor Claims (as defined in Exhibit G of this
Agreement) and the Company Threshold (as defined in Exhibit G of this Agreement)
limitations shall apply with respect to claims for indemnification based on the
foregoing representations.
ARTICLE VIII
TERMINATION; AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) By mutual written consent of Parent, Merger Sub and
Company;
(b) By Parent or Merger Sub, if there has been a material
breach of this Agreement on the part of the Company or any of the Company
Shareholders with respect to any of their covenants, representations or
warranties contained herein and such breach has not been cured by the earlier of
the time scheduled for the Closing under Section 1.6 hereof or within 10
business days after written notice thereof from Parent or Merger Sub;
(c) By Company, or a Company Shareholder if there has been a
material breach of this Agreement on the part of Parent or Merger Sub with
respect to any of their covenants, representations or warranties contained
herein and such breach has not been cured by the earlier of the time scheduled
for the Closing under Section 1.6 hereof or within 10 business days after
written notice thereof from Company; or
(d) By Parent, Merger Sub or by Company if, at or before the
Closing, any conditions set forth herein for the benefit of Parent, Merger Sub
or Company, as the case may be, (i) shall not have been timely met or (ii) shall
have become impossible to satisfy; or
(e) By Parent, Merger Sub or by Company if: (i) the Closing of
the transactions contemplated by this Agreement shall not have occurred on or
before October 15, 1999 or such later date as may have been agreed upon in
writing by the parties hereto; provided, that the right to terminate this
Agreement under this clause (i) shall not be available to any party if such
party's breach of any representation, warranty or agreement contained in this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such date; (ii) there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of
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the Merger; (iii) 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 agency or entity which would make consummation of the
Merger illegal; or (iv) 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 agency or entity, which would (A) prohibit Parent's
or the Company's ownership or operation of all or a material portion of the
business of the Company, or compel Parent or the Company to dispose of or hold
separate all or a material portion of the business or assets of the Company or
Parent as a result of the Merger or (B) render Parent, Merger Sub or the Company
unable to consummate the Merger.
The party desiring to terminate this Agreement shall give written
notice of such termination to the other parties.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of either Parent, Merger Sub or the
Company and the Company's Shareholders, except (i) the provisions of Section
5.2(c) hereof shall survive indefinitely; (ii) in the event this Agreement is
terminated pursuant to Section 8.1(b), the reasonable, documented expenses
incurred by Parent on behalf of Parent shall be paid by the Company; and (iii)
in the event this Agreement is terminated pursuant to Section 8.1(c), the
reasonable, documented expenses incurred by the Company on behalf of the Company
shall be paid by Parent. All payments pursuant to this section shall be made
within 30 days of a written claim.
SECTION 8.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of the Company, a majority of the Company
Shareholders, Parent and Merger Sub; provided, however, that any amendment of
Section 2.2(b)(ii) and (v) hereof shall require the consent of the
Indemnification Representative.
SECTION 8.4 WAIVER. At any time prior to the Effective Time, the
Company and Parent may (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of the party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 BROKERS. Neither the Company nor the Company Shareholders
have retained any investment banker, broker, finder or other intermediary to act
on behalf of such party and who may be entitled to a fee or commission from
Parent or the Company, or any affiliate thereof, in connection with, or upon
consummation of, the transactions contemplated by this Agreement.
SECTION 9.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given if delivered in
person, by overnight courier, electronic facsimile transmission (and shall be
deemed to have been duly given on the date of delivery if so given), or by first
class mail (postage prepaid) (and shall be deemed to have been duly given the
second business day after the date of the postmark if so given) to the
respective parties as follows at their addresses set forth in the preamble to
this Agreement or any schedule attached hereto, or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of changes of address shall only be effective upon receipt.
<PAGE> 38
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SECTION 9.3 SUBSIDIARIES. When a reference is made in this Agreement to
subsidiaries of Parent, the word "SUBSIDIARIES" means any corporation or other
entity of which voting securities possessing voting power sufficient to elect a
majority of the Board of Directors or similar body are, at the time which any
determination is being made, beneficially owned by Parent or Company, as the
case may be.
SECTION 9.4 HEADINGS. The descriptive headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision hereof.
SECTION 9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including
Parent and Company Disclosure Schedules, the Escrow Agreement and the
Registration Rights Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and thereof and supersede all other
prior agreements and understandings, both written and oral, among the parties or
any of them with respect to the subject matter hereof and thereof. This
Agreement shall not be assigned by operation of law or otherwise.
SECTION 9.6 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement; provided, however, that the provisions in Article II concerning the
issuance of shares of Parent Common Stock in the Merger and the assumption of
Outstanding Options and in Section 5.11 concerning the indemnification of
directors and officers of the Company are intended for the benefit of the
individuals referenced therein and may be enforced by them.
SECTION 9.7 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect, provided that enforcement of such other provisions in the absence of
the invalid or unenforceable provisions does not deprive either the Company, the
Company Shareholders or Parent of the benefit of the bargain.
SECTION 9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and same Agreement.
SECTION 9.9 EXPENSES. Except as provided in Section 8.2, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by Parent if such costs and expenses were incurred on
behalf of Parent, its shareholders or Merger Sub, and by the Company
Shareholders if such costs and expenses were incurred on behalf of the Company
or the Company Shareholders. All fees and expenses of PricewaterhouseCoopers
L.L.P. and any filing fees in connection with any required filings shall be
deemed to be incurred on behalf of Parent. If the Merger is consummated, Parent
shall pay the reasonable, documented expenses incurred by the Company for
accountants and attorneys incurred on behalf of the Company and in connection
with the Merger up to a maximum amount not to exceed $60,000. If such expenses
exceed $60,000, Parent may withdraw from the escrow account a sufficient number
of Escrow Shares (valued at the Merger Price) equal to any amounts in excess of
$60,000. Except as provided in Section 8.2, in the event the Merger is not
consummated, all costs and expenses incurred by the Company shall be paid by the
Company and the Company Shareholders.
SECTION 9.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Company
Shareholders and the Indemnification Representative have caused this Agreement
to be signed by their respective officers thereunto duly authorized, and their
respective seals to be affixed hereto, as of the date first written above.
SILKNET SOFTWARE, INC.
By: /s/ Patrick J. Scannell, Jr.
------------------------------------------
Title: VP/CFO
------------------------------------------
INSITE ACQUISITION CORP.
By: /s/ Patrick J. Scannell, Jr.
------------------------------------------
Title: Vice President
------------------------------------------
INSITE MARKETING TECHNOLOGY, INC.
By: /s/ Stefania Nappi
------------------------------------------
Title: President, CEO
------------------------------------------
/s/ Stefania Nappi
------------------------------------------
Name: Stefania Nappi
as Indemnification Representative
Company Shareholders:
/s/ John D.C. Little
------------------------------------------
JOHN D.C. LITTLE
37 Conant Road
Lincoln, MA 01773
/s/ Glen L. Urban
------------------------------------------
GLEN L. URBAN
20 Pinebrook Road
Carlisle, MA 01741
JEFFREY STAMEN
6 Conant Road
Weston, MA 02493
By: /s/ Glen Urban
------------------------------------------
Glen Urban, under Power of Attorney dated
September 29, 1999
<PAGE> 40
-36-
------------------------------------------
RON L. CHESLEY
4800 Hwy A1A
#216
Vero Beach, FL 32963
MARC S. GILMAN
1015 Chestnut Street
Manchester, NH 03104
/s/ Stefania Nappi
------------------------------------------
By: Stefania Nappi, under Power of Attorney,
dated September 30, 1999
THOMAS J. GOLIASH
1560 Gulf Boulevard
Penthouse #3
Clearwater, FL 33767
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
MORTON E. GOULDER
97 Ridge Road
PO Box 419
Hollis, NH 03049
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
DAVID J. JODOIN
10 Chelsari Lane
Hampstead, NH 03841
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
JAMES M. KENDALL
676 Reef Road
Vero Beach, FL 32963
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
<PAGE> 41
-37-
GEORGE G. SCHWENK
177 Merriam Hill Road
Mason, NH 03048
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
MAURICE SEGALL
1501 Beacon Street
Apt. 1804
Brookline, MA 02446
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
ROBERT F. SPROULL
239 Kenrick Street
Newton, MA 02458-2731
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
FRANCIS H. ZENIE
166 Old Farm Lane
Attleboro, MA 02703
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
JON D. GRUBER
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
J. WYATT GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
------------------------------------------
<PAGE> 42
-38-
Stefania Nappi, under Power of Attorney
dated September 30, 1999
LINDSAY D. GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
J. PATTERSON MCBAINE
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
ERIC B. SWERGOLD
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 30, 1999
JOHN N. LITTLE
158 Woodland Street
Sherborn, MA 01770
By: /s/ John D.C. Little
------------------------------------------
John D.C. Little, under Power of Attorney
dated September 30, 1999
SARAH A. LITTLE
14 Montvale Road
Wellesley, MA 02481
By: /s/ John D.C. Little
------------------------------------------
John D.C. Little, under Power of Attorney
dated September 30, 1999
<PAGE> 43
-39-
THOMAS LITTLE
80 Plymouth Road
Newton, MA 02461
By: /s/ John D.C. Little
------------------------------------------
John D.C. Little, under Power of Attorney
dated September 30, 1999
RUEL D. LITTLE
57 Monsen Road
Concord, MA 01742
By: /s/ John D.C. Little
------------------------------------------
John D.C. Little, under Power of Attorney
dated September 28, 1999
ATLANTIC MANAGEMENT ASSOCIATES
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
TRUST INVESTMENTS
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
BELCOM LTD.
By: /s/ Glen Urban
------------------------------------------
Glen Urban, under Power of Attorney
dated September 29, 1999
DRANE ASSOCIATES L.P.
By: /s/ Glen Urban
------------------------------------------
Glen Urban, under Power of Attorney
dated September 30, 1999
THE ANTHONY M. HELIES REVOCABLE TRUST
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi, under Power of Attorney
dated September 29, 1999
<PAGE> 44
-40-
HARRIS AND HARRIS GROUP, INC.
By: /s/ Mel P. Melshelmer
------------------------------------------
Name: Mel P. Melshelmer
Title: President
<PAGE> 45
Exhibit A
CERTIFICATE OF MERGER
OF
InSite Acquisition Corp.,
a Delaware corporation
WITH AND INTO
InSite Marketing Technology, Inc.,
a Delaware corporation
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware, the undersigned corporation, which is organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY THAT:
FIRST: The name and state of incorporation of each of the constituent
corporations are as follows: InSite Marketing Technology, Inc., a Delaware
corporation ("InSite"), and InSite Acquisition Corp., a Delaware corporation
("Merger Sub").
SECOND: An Agreement and Plan of Merger and Reorganization by and
among Silknet Software, Inc., a Delaware corporation, Merger Sub, InSite,
Stefania Nappi, as Indemnification Representative and certain stockholders of
InSite, dated as of October 5, 1999 (the "Merger Agreement") has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the requirements of Section 251 of the General
Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation is INSITE MARKETING
TECHNOLOGY, INC.
FOURTH: The certificate of incorporation of InSite shall be the
certificate of incorporation of the surviving corporation.
FIFTH: The effective date of the merger shall be the date on which this
Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
SIXTH: The executed Merger Agreement is on file at the principal place
of business of the surviving corporation at 85 River Street, Suite 8, Waltham,
Massachusetts 02453.
SEVENTH: A copy of the Merger Agreement will be furnished by the
surviving corporation, on request and without cost, to any stockholder of either
constituent corporation.
IN WITNESS WHEREOF, INSITE MARKETING TECHNOLOGY, INC., a Delaware
corporation, has caused its corporate seal to be affixed and this certificate to
be signed by Stefania Nappi, its President, this day of October, 1999.
InSite Marketing Technology, Inc.,
a Delaware corporation
By: /s/ Stefania Nappi
------------------------------------------
Stefania Nappi
President
<PAGE> 46
Exhibit B
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of October
5, 1999, by and among Silknet Software, Inc., a Delaware corporation (referred
to herein as "Silknet" or the "Indemnified Party"), American Stock Transfer &
Trust Company, as escrow agent (the "Escrow Agent"), and Stefania Nappi (the
"Indemnification Representative") and the shareholders (the "InSite
Shareholders") of InSite Marketing Technology, Inc., a Delaware corporation
("InSite"). Capitalized terms not defined herein shall have the meaning assigned
to them in the Agreement and Plan of Merger and Reorganization dated as of
October 5, 1999 (the "Merger Agreement").
RECITALS
WHEREAS, Silknet, InSite Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Silknet ("Merger Sub"), InSite and certain InSite
Shareholders have entered the Merger Agreement, pursuant to which Merger Sub
will merge with and into InSite (the "Merger"), with InSite surviving the
Merger.
WHEREAS, Section 2.2 of the Merger Agreement provides that at the
Closing 49,713 shares of common stock, par value $.01 per share, of Silknet
(including any dividend or equitable adjustment thereon in the event of a stock
split, stock dividend, stock recombination, recapitalization or like event, the
"Escrow Shares") shall be deposited by Silknet in escrow (such deposit and any
future deposits pursuant to Section 4 herein constituting the "Escrow Fund") and
shall be held as collateral for the indemnification obligations of the InSite
Shareholders under Exhibit G of the Merger Agreement (which Exhibit G is
attached hereto as Appendix A);
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Merger
Agreement; and
WHEREAS, the parties to this Agreement desire to establish the terms
and conditions pursuant to which the Escrow Shares will be deposited into, held
in, and disbursed from, the Escrow Fund.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. ESCROW; INDEMNIFICATION AND VALUE OF ESCROW SHARES.
(a) ESCROW FUND. The Escrow Agent agrees to accept delivery of such
Escrow Shares and to hold such Escrow Shares delivered to it in escrow subject
to the terms and conditions of this Agreement. Silknet and the Indemnification
Representative agree that the Escrow Agent will hold the Escrow Shares subject
to the terms and conditions set forth herein and as set forth in Exhibit G of
the Merger Agreement (collectively, the "Escrow Provisions") until the Escrow
Agent is required to release such Escrow Shares pursuant to the terms of this
Agreement.
(b) INDEMNIFICATION. The Escrow Agent is hereby notified that the
InSite Shareholders have agreed pursuant to the Merger Agreement to indemnify
Silknet in respect of, and hold it harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) ("Damages") incurred or suffered by InSite, as the surviving
corporation of the Merger or Silknet or any affiliate thereof resulting from,
relating to or constituting:
(i) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of InSite contained in the Merger Agreement or
the Company Disclosure Schedule (as defined in the Merger Agreement);
<PAGE> 47
(ii) any failure of any InSite Shareholder to have good, valid and
marketable title to the issued and outstanding shares of InSite common stock,
$.001 par value per share (the "InSite Common Stock") issued in the name of such
InSite Shareholder, free and clear of all liens, encumbrances or other security
interests; or
(iii) any claim by a stockholder or former stockholder of InSite, or
any other person or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of InSite; (ii) any rights of a
stockholder (other than the right to receive the Consideration Shares pursuant
to the Merger Agreement or appraisal rights under the applicable provisions of
the Delaware General Corporation Law), including any option, preemptive rights
or rights to notice or to vote; (iii) any rights under the Certificate of
Incorporation or By-laws of InSite; or (iv) any claim that his, her or its
shares were wrongfully repurchased by InSite.
(c) VALUE OF ESCROW SHARES. For purposes of this Agreement and
Exhibit G of the Merger Agreement, the Escrow Shares shall be valued at $36.397
per share, subject to appropriate equitable adjustment in the event of a stock
split, stock dividend, stock recombination, recapitalization or like event (the
"Escrow Per Share Value"). Silknet agrees to notify the Escrow Agent in writing
as to any such adjustment in the Escrow Per Share Value.
(d) DETERMINATION OF NUMBER OF ESCROW SHARES. Anytime the Escrow
Agent is obligated to release Escrow Shares to Silknet under the terms of this
Agreement, the number of Escrow Shares to be released to Silknet shall be equal
to the amount of the Claim (as defined in Section 2(b)(i) hereof), or other cost
or expense reimbursement to be satisfied pursuant to Section 6 hereof, divided
by the Escrow Per Share Value. If the calculation herein results in a fractional
number of Escrow Shares, such number of Escrow Shares shall be rounded, up or
down, as the case may be, to the nearest whole number of Escrow Shares.
2. RELEASE FROM ESCROW.
(a) DELIVERY OF ESCROW SHARES. On the Effective Date, Silknet will
deliver the Escrow Shares to the Escrow Agent for deposit into the Escrow Fund.
(b) RELEASE TO THE INDEMNIFICATION REPRESENTATIVE.
(i) so long as any portion of the Escrow Fund remains held
pursuant to this Agreement, the Escrow Agent shall deliver to Silknet
that portion of the Escrow Fund equal in value to the amount of claims
for Damages (a "Claim") by Silknet if any, which have been settled or
finally determined between Silknet and the Indemnification
Representative in accordance with Section 6 below;
<PAGE> 48
-42-
(ii) All representations and warranties contained in the
Merger Agreement or the Company Disclosure Schedule shall (a) survive
the Closing and any investigation at any time made by or on behalf of
Silknet and (b) shall expire on the earlier of (i) one day prior to the
first anniversary of the Closing Date, or (ii) the issuance of the
first independent audit report concerning the financial statements of
Silknet containing thirty (30) days of combined post-merger operations
of Silknet and the Company (the "Release Date). If Silknet delivers to
the Indemnification Representative, before expiration of a
representation or warranty, either a Notice of Claim (as defined in
Section 5(a) hereof) based upon a breach of such representation or
warranty, or a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, Silknet
reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes
of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim
Notice has been given is definitively withdrawn or resolved in favor of
the Silknet, the Silknet shall promptly so notify the Indemnification
Representative; and if the Silknet has delivered a copy of the Expected
Claim Notice to the Escrow Agent and Escrow Shares have been retained
in escrow after the Release Date with respect to such Expected Claim
Notice, the Indemnification Representative and the Silknet shall
promptly deliver to the Escrow Agent a written notice executed by both
parties instructing the Escrow Agent to distribute such retained Escrow
Shares to the InSite Shareholders.
(iii) within thirty (30) days following the Release Date, the
Escrow Agent shall deliver to the Indemnification Representative any
remaining portion of the Escrow Fund held pursuant to this Agreement
minus (i) an amount equal in value to the amount of Claims of Silknet
under Section 1(b) and Section 5, if any, that have been settled or
finally determined between Silknet and the Indemnification
Representative on or before the Release Date but have not, as of that
date, been delivered to Silknet hereunder and (ii) an amount equal in
value to the amount of any unresolved Claim by Silknet, if any, set
forth in Silknet's Notice of Claim pursuant to Section 5 below given on
or prior to the Release Date. Such retained portion of the Escrow Fund
shall be retained only until the claim for indemnification pursuant to
which such portion is being retained is settled or finally determined
between Silknet and the Indemnification Representative in accordance
with Section 6 below.
(c) RELEASE OF ESCROW FUND. The Escrow Fund will be held by the
Escrow Agent in accordance with the terms of this Agreement until required to be
released pursuant to this Agreement. Silknet will take such action as may be
necessary to cause released Escrow Shares to be in the name of the InSite
Shareholders.
(d) NO ENCUMBRANCE. Neither the Escrow Fund nor any Escrow Shares,
nor any beneficial interest therein, may be pledged, sold, assigned or
transferred, including by operation of law, by the Indemnification
Representative or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of the Indemnification
Representative (other than pursuant to this Escrow Agreement).
3. VOTING RIGHTS. In the event of a meeting or written action of
stockholders of Silknet during the term of this Agreement, the Escrow Agent
shall send to InSite Shareholders copies of any notices, proxies and proxy
material received by it in connection with such meeting. Silknet hereby
undertakes to independently furnish copies of all such notices, proxies and
proxy materials directly to the InSite Shareholders and to cooperate with the
Escrow Agent to facilitate the exercise by the InSite Shareholders of voting
rights in the Escrow Shares. Upon request of an InSite Shareholder, the Escrow
Agent shall execute and deliver a proxy authorizing such InSite Shareholder to
vote the whole number of such InSite Shareholder's Escrow Shares.
<PAGE> 49
4. DIVIDENDS AND DISTRIBUTIONS. All dividends and other distributions
or rights paid on or granted with respect to the Escrow Shares shall be added to
the Escrow Fund and shall be held hereunder upon the same terms as the Escrow
Shares. Any cash in the Escrow Fund shall be held by the Escrow Agent uninvested
in a non-interest bearing account.
5. NOTICE OF CLAIM.
(a) Each notice of a Claim by Silknet (the "Notice of Claim")
shall be delivered in writing at the same time to the Indemnification
Representative and the Escrow Agent, and shall contain the following
information:
(i) Silknet's good faith estimate of the reasonably
foreseeable amount of the claimed Damages; (the "Claimed Amount")
(ii) a brief description of the facts, circumstances or events
giving rise to the claimed Damages based on Silknet's good faith belief
thereof; and
(iii) the specific bases upon which indemnification may be
sought.
(b) The Escrow Agent will not release any portion of the Escrow
Fund to Silknet pursuant to a Notice of Claim until such Notice of Claim has
been resolved or is uncontested in accordance with this Agreement.
6. RESOLUTION OF NOTICE OF CLAIM AND RELEASE OF ESCROW FUND. Any Notice
of Claim received by the Indemnification Representative and the Escrow Agent
pursuant to Section 5 above will be resolved as follows:
(a) Silknet shall give written notification to the Indemnification
Representative of the commencement of any suit or proceeding relating to a third
party claim for which indemnification may be sought. Such notification shall be
given within 20 business days after receipt by the Indemnified Party of notice
of such suit or proceeding, and shall describe in reasonable detail (to the
extent known by the Indemnified Party) the facts constituting the basis for such
suit or proceeding and the amount of the claimed damages; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or liability caused by or arising
out of such failure. Within 20 days after delivery of such notification, the
Indemnification Representative may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party; provided that (i) the
Indemnification Representative may only assume control of such defense if (A) it
acknowledges in writing to the Indemnified Party that any damages, fines, costs
or other liabilities that may be assessed against the Indemnified Party in
connection with such suit or proceeding constitute Damages for which the
Indemnified Party shall be indemnified pursuant to the Merger Agreement, and (B)
the ad damnum is less than or equal to the amount of Damages for which the
InSite Shareholders are liable under the Merger Agreement and the
indemnification provisions contained herein, and (ii) the Indemnification
Representative may not assume control of the defense of a suit or proceeding
involving criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnification Representative does not so assume
control of such defense, the Indemnified Party shall control such defense.
The party not controlling such defense (the "Non-controlling Party")
may participate therein at its own expense; provided that if the Indemnification
Representative assumes control of such defense and the Indemnified Party
reasonably concludes that the InSite Shareholders and the Indemnified Party have
conflicting interests or different defenses available with respect to such suit
or proceeding, the reasonable fees and expenses of counsel to the Indemnified
Party shall be considered "Damages" for purposes of this Agreement. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense
<PAGE> 50
of such suit or proceeding. Neither the Indemnification Representative nor the
InSite Shareholders shall agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed. The Indemnified Party shall not agree to any settlement of, or the
entry of any judgment arising from, any such suit or proceeding without the
prior written consent of the Indemnification Representative, which shall not be
unreasonably withheld or delayed.
(b) Within 20 days after delivery of a Notice of Claim, the
Indemnification Representative shall deliver to the Indemnified Party a written
response (the "Response") in which the Indemnification Representative shall: (i)
agree that the Indemnified Party is entitled to receive all of the Claimed
Amount, in which case the Indemnification Representative and the Indemnified
Party shall deliver to the Escrow Agent, within three days following the
delivery of the Response, a written notice executed by both parties instructing
the Escrow Agent to distribute to Silknet such number of Escrow Shares as have
an aggregate Escrow Value Per Share equal to the Claimed Amount), (ii) agree
that the Indemnified Party is entitled to receive part, but not all, of the
Claimed Amount (the "Agreed Amount") in which case the Indemnification
Representative and the Indemnified Party shall deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
executed by both parties instructing the Escrow Agent to distribute to Silknet
such number of Escrow Shares as have an aggregate Escrow Value Per Share equal
to the Agreed Amount) or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnification Representative in the
Response disputes the liability of the InSite Shareholders for all or part of
the Claimed Amount, the Indemnification Representative and the Indemnified Party
shall follow the procedures set forth in Section 6(d) below for the resolution
of such dispute (a "Dispute").
(c) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnification Representative and the Indemnified Party
shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnification Representative and the
Indemnified Party shall discuss in good faith the submission of the Dispute to a
mutually acceptable alternative dispute resolution procedure (which may be
non-binding or binding upon the parties, as they agree in advance) (the "ADR
Procedure"). In the event the Indemnification Representative and the Indemnified
Party agree upon an ADR Procedure, such parties shall, in consultation with the
chosen dispute resolution service (the "ADR Service"), promptly agree upon a
format and timetable for the ADR Procedure, agree upon the rules applicable to
the ADR Procedure, and promptly undertake the ADR Procedure. The provisions of
this Section (c) shall not obligate the Indemnification Representative and the
Indemnified Party to pursue an ADR Procedure or prevent either such party from
pursuing the Dispute in a court of competent jurisdiction; provided that, if the
Indemnification Representative and the Indemnified Party agree to pursue an ADR
Procedure, neither the Indemnification Representative nor the Indemnified Party
may commence litigation or seek other remedies with respect to the Dispute prior
to the completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnification Representative and the Indemnified Party shall be considered a
compromise negotiation for purposes of federal and state rules of evidence, and
all statements, offers, opinions and disclosures (whether written or oral) made
in the course of the ADR Procedure by or on behalf of the Indemnification
Representative, the Indemnified Party or the ADR Service shall be treated as
confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Indemnification
Representative and the Indemnified Party shall be shared equally by the
Indemnification Representative (and shared among the InSite Shareholders as
provided in the Merger Agreement) and the Indemnified Party. The Indemnification
Representative and the Indemnified Party shall deliver to the Escrow Agent,
promptly following the resolution of the Dispute (whether by mutual agreement,
pursuant to an ADR Procedure, as a result of a judicial decision or otherwise),
a written notice executed by both parties instructing the Escrow Agent as to
what (if any) portion of the Escrow Shares shall be distributed to Silknet
and/or the InSite Shareholders (which notice shall be consistent with the terms
of the resolution of the Dispute).
(d) Notwithstanding the other provisions of this Agreement, if a third
party asserts (other than by means of a lawsuit) that an Indemnified Party is
liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to the Merger Agreement, and such Indemnified Party
reasonably determines that it has a valid business reason to
<PAGE> 51
fulfill such obligation, then (i) such Indemnified Party shall be entitled to
satisfy such obligation, without prior notice to or consent from the
Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim
for indemnification in accordance with the provisions of this Section 6, and
(iii) such Indemnified Party shall be reimbursed, in accordance with the
provisions of this Section, for any such Damages for which it is entitled to
indemnification pursuant to the Merger Agreement (subject to the right of the
Indemnifying Party to dispute the Indemnified Party's entitlement to
indemnification, or the amount for which it is entitled to indemnification),
under the terms of the Merger Agreement). If the indemnified party exercised its
rights pursuant to this Section 6, it shall advise the Indemnifying Party prior
to exercising such right and in good faith seek to solicit the views of the
Indemnifying Party with respect to any such matters. The payment or satisfaction
of any obligation pursuant to this Section shall not itself evidence the
existence or amount of damages.
(e) For purposes of this Section 6, any references to the Indemnifying
Party (except provisions relating to an obligation to make or a right to receive
any payments provided for in this Section) shall be deemed to refer to the
Indemnification Representative. The Indemnification Representative shall have
full power and authority on behalf of each InSite Shareholder to take any and
all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the InSite Shareholders under this
Agreement. The Indemnification Representative shall have no liability to any
InSite Shareholder for any action taken or omitted on behalf of the InSite
Shareholders pursuant to this Agreement.
(f) In the event that the Indemnification Representative does not
contest a Notice of Claim (or contests only a portion of the claim) in writing
to the Escrow Agent and Silknet within twenty (20) days after such Notice of
Claim is deemed delivered pursuant to Section 13 below, the Escrow Agent will
(i) promptly release to Silknet in accordance with Silknet's written
instructions that portion of the Escrow Fund equal in value to the amount
specified in the Notice of Claim (that is not contested) and (ii) notify the
Indemnification Representative of such transfer in writing.
(g) If a lawsuit is commenced as to any matter relating to this
Agreement or the Escrow Shares, all of the parties to this Agreement shall waive
any right to trial by jury.
(h) Silknet need not exhaust any other remedies that may be available
to it but may proceed directly in accordance with the provisions of this
Agreement. Silknet may make claims against the Escrow Fund and in satisfaction
thereof may recover all or a portion of the Escrow Fund, in accordance with and
subject to the terms of this Agreement, without making any other claims directly
against the Indemnification Representative and without rescinding or attempting
to rescind the transactions consummated pursuant to the Merger Agreement. The
assertion of any single claim for indemnification hereunder will not bar Silknet
from asserting other claims hereunder. Notwithstanding the foregoing, if Silknet
elects to make a claim against the Escrow Fund for any breach or default by
InSite under the Merger Agreement arising out of an action against a person not
a party to the Merger Agreement (a "Third Person Claim"), then the
Indemnification Representative shall be subrogated to the rights of Silknet with
respect to such Third Person Claim, and Silknet shall assign all of its rights
in connection with such Third Person Claim necessary for the Indemnification
Representative to assert such claim against such third party.
(i) Whether or not there is a Notice of Claim being disputed pursuant
to Section 6(b) (ii) or (iii) hereof, the Escrow Agent shall release to Silknet,
upon receipt of a Statement of Cost of Investigation (as defined below) that
portion of the Escrow Fund necessary to reimburse Silknet for all costs of
investigation (including reasonable attorneys' fees, costs and expenses)
actually incurred in connection with a Third Person Claim. Such fees, costs and
expenses shall be specified in reasonable detail in a written statement or
statements delivered to the Escrow Agent and the Indemnification Representative
and each such statement shall cover one calendar month (each a "Statement of
Cost of Investigation").
(j) The Escrow Agent is authorized and directed to deliver any Escrow
Funds due the Indemnification Representative under this Agreement in accordance
with Section 2(b) after (i) delivery to Silknet of that portion of the Escrow
Fund equal in value to the aggregate amount of any payments to the Escrow
Agent's or Silknet attorneys' and accountants' and other fees and expenses
incurred on behalf of the Indemnification Representative as contemplated by this
Agreement under Section 9, and (ii) withholding that portion of the Escrow
<PAGE> 52
Fund equal in value to the amount of any costs and expenses payable by Silknet
relating to potential disputes or Damages arising with respect to
indemnification or other obligations of the Indemnification Representative under
this Agreement. Such delivery of all or a portion of the Escrow Fund to the
Indemnification Representative shall be as set forth in writing by the
Indemnification Representative and Silknet.
(k) As to compliance with any of the foregoing restrictions and
limitations, the Escrow Agent shall have no responsibility to independently
calculate or otherwise determine such matters but may rely conclusively on the
other parties hereto in their related requests and instructions.
7. LIMITATIONS ON CLAIMS AND DAMAGES.
(a) Notwithstanding anything to the contrary herein, (i) the InSite
Shareholders shall not be liable under the Merger Agreement unless and until the
Damages arising out of any Claim arising out of the same event or series of
events or events of a similar nature exceed, with respect to InSite, $5,000 (a
"Minor Claim") (it being agreed that such claims are immaterial in nature and
accordingly not subject to indemnification hereunder) and unless and until the
aggregate Damages for which the InSite Shareholders would otherwise be liable
exceed, with respect to InSite, $100,000 (the "Company Threshold") (at which
point the InSite Shareholders shall become liable for the aggregate Damages in
excess of, with respect to InSite, $100,000). For purposes solely of this
Section 7, all representations and warranties of InSite in Article IV of the
Merger Agreement shall be construed as if the term "material" and any reference
to "Company Material Adverse Effect" (and variations thereof) were omitted from
such representations and warranties. Nothing contained herein or the Merger
Agreement shall be deemed to limit the rights or remedies of Silknet with
respect to a breach of the representations of InSite contained in Section
4.15(a) - (g) and (j) of the Merger Agreement regarding Company Intellectual
Property (the "Intellectual Property Representations") and the representations
of the InSite Shareholders contained in Article IV-A of the Merger Agreement;
provided, however, (i) the aggregate liability of any InSite Shareholder in
connection with the foregoing representations other than the Intellectual
Property Representations shall not exceed the value of the Escrow Shares held on
behalf of such InSite Shareholder and (ii) the aggregate liability of any InSite
Shareholder in connection with the Intellectual Property Representations shall
be limited in value to one-half of the Consideration Shares issued to such
InSite Shareholder, valued at the Escrow Per Share Value, payable in
Consideration Shares and/or cash; and provided, further, in each case that Minor
Claims and the Company Threshold shall apply with respect to claims for
indemnification based on the foregoing representations.
Pursuant to Section 9.9 of the Merger Agreement, Silknet shall pay the
reasonable, documented expenses incurred by InSite for accountants and attorneys
incurred on behalf of InSite in connection with the Merger up to a maximum
amount not to exceed $60,000. If such expenses exceed $60,000, Silknet may
withdraw from the Escrow Fund a sufficient number of Escrow Shares (valued at
the Escrow Per Share Value) equal to any amount incurred by Silknet in excess of
$60,000. The Company Threshold and Minor Claims shall not apply to these
expenses incurred by InSite (or paid by Silknet) in excess of $60,000.
(b) Except with respect to a breach of the Intellectual Property
Representations, a breach of a representations or warranties set forth in
Article IV-A of the Merger Agreement or claims based on fraud, this Agreement
shall be the exclusive means for Silknet to collect any Damages for which it is
entitled to indemnification.
(c) Except with respect to a breach of an Intellectual Property
Representation, a breach of a representation or warrant set forth in Article
IV-A of the Merger Agreement or claims based on fraud, after the Closing, the
rights of Silknet under this Agreement shall be the exclusive remedy of Silknet
with respect to claims resulting from or relating to any misrepresentation,
breach of warranty or failure to perform any covenant or agreement contained in
the Merger Agreement. This Agreement is intended to secure the indemnification
obligations of the InSite Shareholders under the Merger Agreement.
(d) No InSite Shareholder shall have any right of contribution against
InSite or the Surviving Corporation with respect to any breach by InSite of any
of its representations, warranties, covenants or agreements. The liability of
the InSite Shareholders shall be several and not joint and no such stockholder
shall have any liability
<PAGE> 53
which exceeds such stockholder's pro rata portion of the Escrow Shares, except
with respect to (i) any claims based on fraud of an InSite Shareholder or (ii) a
breach of Article IV-A of the Merger Agreement by an InSite Shareholder (a
"Breaching Indemnifying Shareholder") in which case, that portion of the Escrow
Shares held for the benefit of such Breaching Indemnifying Shareholder shall be
available to Silknet in connection with a claim based on (i) or (ii) hereof.
8. LIMITATION OF THE ESCROW AGENT'S LIABILITY.
(a) The parties acknowledge and agree that the Escrow Agent shall not
be responsible for any of the agreements referred to herein but shall only be
obligated for the performance of such duties as are specifically set forth
herein. The Escrow Agent (and its directors, officers and employees) will incur
no liability with respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other document
believed by it to be genuine and to have been signed by the proper person (and
shall have no responsibility to determine the authenticity or accuracy thereof),
nor for any other action or inaction, except its own willful misconduct, bad
faith or gross negligence. In no event shall the Escrow Agent be liable for
indirect, special, punitive or consequential damages. The Escrow Agent will not
be responsible for the validity or sufficiency of this Agreement, including the
amount of Escrow Shares. In all questions arising under this Agreement, the
Escrow Agent may rely on the advice of counsel (which may be in-house counsel),
and for anything done, omitted or suffered in good faith by the Escrow Agent
based on such advice, the Escrow Agent will not be liable to anyone. The Escrow
Agent will not be required to take any action under this Agreement involving any
expense unless the payment of such expense is made or provided for in a manner
satisfactory to it.
(b) In the event conflicting demands are made or notices are served
upon the Escrow Agent with respect to the Escrow Fund or should a third party
make a claim on such Escrow Fund, the Escrow Agent will have the absolute right,
at the Escrow Agent's election, to do any of the following: (i) resign so a
successor can be appointed pursuant to Section 10, (ii) file a suit in
interpleader and obtain an order from a court of competent jurisdiction
requiring the parties to interplead and litigate in such court their several
claims and rights among themselves; or (iii) retain all or any of the Escrow
Fund in its possession, without liability to anyone, until such dispute shall
have been settled as contemplated in Section 6. In no event shall the Escrow
Agent be obligated to take any legal or other action hereunder which might in
its judgment involve any expense or liability of the Escrow Agent unless it
shall have been furnished with acceptable indemnification. In the event an
interpleader suit is brought, the Escrow Agent will thereby be fully released
and discharged from all further obligations imposed upon it under this
Agreement, and the non-prevailing party in such dispute will pay the Escrow
Agent all costs, expenses and reasonable attorneys' fees expended or incurred by
the Escrow Agent pursuant to the exercise of the Escrow Agent's rights under
this Section 8 (such costs, fees and expenses will be treated as extraordinary
fees and expenses for the purposes of Section 9). The resignation of the Escrow
Agent under this section shall not affect the right of the Escrow Agent to be
paid any amount due to the Escrow Agent hereunder.
(c) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
subescrow agent employed by the Escrow Agent than any such book-entry depository
or subescrow agent has to the Escrow Agent, except to the extent that such
action or omission of any book-entry depository or subescrow agent was caused by
the Escrow Agent's own gross negligence, bad faith or willful misconduct.
9. ESCROW AGENT EXPENSES.
(a) All fees and expenses including attorney's fees of the Escrow Agent
incurred in entering into this Agreement and in the ordinary course of
performing its responsibilities (in accordance with the attached fee schedule
which may be subject to change annually) hereunder will be paid by Silknet upon
receipt of a written invoice by the Escrow Agent. Any extraordinary fees and
expenses including attorney's fees, including without limitation any fees or
expenses incurred by the Escrow Agent in connection with a dispute over the
distribution of the Escrow Fund or the validity of a Claim or Claims by Silknet
will be paid by the non-prevailing party in such dispute, provided, however, if
neither party has clearly prevailed, the arbitrator or judge may apportion such
fees and expenses between Silknet and the Indemnification Representative. The
Indemnification Representative's
<PAGE> 54
liability for the extraordinary fees and expenses of the Escrow Agent may be
paid by Silknet and recovered as a claim hereunder out of the Escrow Fund. If
Silknet has paid the Indemnification Representative's portion of such fees and
expenses as permitted under this Section 9 then the Escrow Agent will, upon
written demand by Silknet, transfer to Silknet a portion of the Escrow Fund
equal in value to such portion of fees and expenses.
In the event the Escrow Shares remaining in the Escrow Fund are not
sufficient to pay the extraordinary fees and expenses of the Escrow Agent, as
described in the prior paragraph, or in the event the Escrow Agent incurs any
liability by reason of its acceptance or administration of this Escrow
Agreement, Silknet and the Indemnification Representative, jointly and
severally, agree to indemnify the Escrow Agent, its officers, directors and
employees, against any such liability or for its extraordinary fees and expenses
or costs and expenses, including, without limitation, counsel fees and expenses,
as the case may be. Such joint and several liability shall not diminish the
right of either Silknet or the Indemnification Representative to pursue the
other for payment of such fees and expenses, which shall be shared equally
between Silknet and the Indemnification Representative. Notwithstanding the
foregoing, no indemnity need be paid in the event of the Escrow Agent's gross
negligence, bad faith or willful misconduct.
(b) Silknet and the Indemnification Representative, jointly and
severally, agree to assume any and all obligations imposed now or hereafter by
any applicable tax law with respect to the holding and payment of the Escrow
Fund under this Agreement, and to indemnify and hold the Escrow Agent harmless
from and against any taxes, additions of late payment, interest, penalties and
other expenses, that may be assessed against the Escrow Agent on any such
payment or other activities under this Agreement. Silknet and the
Indemnification Representative undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting in connection with its acting as Escrow Agent under this
Agreement. Silknet and the Indemnification Representative, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless from any
liability on account of taxes, assessments or other governmental charges,
including without limitation the withholding or deduction or the failure to
withhold or deduct same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to which the
Escrow Agent may be or become subject in connection with or which arises out of
this Agreement, including costs and expenses (including reasonable legal fees),
interest and penalties. The provisions of Sections 9(a) and (b) shall survive
the termination of this Agreement.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity as such, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
written notice of resignation to the Indemnification Representative and Silknet,
specifying by not less than thirty (30) days prior written notice of such date
when such resignation will take effect. Silknet will designate a successor
Escrow Agent prior to the expiration of such thirty (30) day period by giving
written notice to the Escrow Agent and the Indemnification Representative.
Silknet may appoint a successor Escrow Agent without the consent of the
Indemnification Representative so long as such successor is a bank or trust
company with assets of at least One Hundred Million Dollars ($100,000,000), and
may appoint any other successor Escrow Agent with the consent of the
Indemnification Representative, which consent will not be unreasonably withheld,
conditioned or delayed. The Escrow Agent will promptly transfer the Escrow Fund
to such designated successor. In the event no successor Escrow Agent is
appointed as described in this Section 10, the Escrow Agent may apply to a court
of competent jurisdiction for the appointment of a successor Escrow Agent.
11. LIMITATION OF RESPONSIBILITY; NOTICES. The Escrow Agent's duties
are limited to those set forth in this Escrow Agreement, and no additional
duties or obligations shall be implied; and the Escrow Agent may rely upon the
written notices delivered to the Escrow Agent hereunder.
12. [INTENTIONALLY LEFT BLANK]
13. NOTICES. Any notice provided for or permitted under this Agreement
will be treated as having been received (a) when delivered personally, (b) when
sent by confirmed telecopy, (c) one (1) day following when sent by commercial
overnight courier with written verification of receipt, or (d) three (3)
business days following when mailed postage prepaid by first class mail, postage
prepaid, to the party to be notified, at the address set forth
<PAGE> 55
below, or at such other place of which the other party has been notified in
accordance with the provisions of this Section 13.
Escrow Agent: American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Karen Lazar
Facsimile: (718) 921-8310
Indemnification Representative: Stefania Nappi
InSite Marketing Technology, Inc.
85 River Street
Suite 8
Waltham, MA 02453
Facsimile: (781) 894-4674
With copy to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum
Facsimile: (617) 832-7000
Silknet: Silknet Software, Inc.
50 Phillippe Cote Street
Manchester, NY 03101
Attention: Patrick J. Scannell, Jr.
With copy to: Testa Hurwitz, & Thibeault, LLP
Oliver Street Tower
125 High Street
Boston, MA 02110
Attention: John Hession
Facsimile: (617) 248-7100
14. GENERAL.
(a) GOVERNING LAW. It is the intention of the parties hereto that the
internal laws of the State of Delaware shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties to this Agreement.
(b) BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained in this Agreement shall be binding upon,
and inure to the benefit of, the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties to this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears on such counterpart and all of which together shall constitute
one and the same instrument. This Agreement shall become binding when one or
more counterparts of this Agreement, individually or taken together, shall bear
the signatures of all of the parties reflected in this Agreement as signatories.
(d) ENTIRE AGREEMENT. Except as set forth in the Merger Agreement, this
Agreement, the documents referenced in this Agreement and the exhibits to such
documents, constitute the entire understanding and agreement
<PAGE> 56
of the parties to this Agreement with respect to the subject matter of this
Agreement and of such documents and exhibits and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect to this Agreement,
provided that with respect to the Escrow Agent, this Agreement (without
reference to any other agreements) sets forth the entire understanding of the
parties. Notwithstanding anything to the contrary in the previous sentence,
Silknet and the Indemnification Representative agree that, in the event that any
term(s) or provision(s) of this Agreement conflict(s) with a term or provision
of the Merger Agreement, the term(s) and condition(s) of the Merger Agreement
will control (except with respect to the responsibilities of the Escrow Agent).
The express terms of this Agreement control and supersede any course of
performance or usage of the trade inconsistent with any of the terms of this
Agreement.
(e) WAIVERS. No waiver by any party to this Agreement of any condition
or of any breach of any provision of this Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained in this Agreement.
(f) AMENDMENT. This Agreement may be amended with the written consent
of Silknet, the Escrow Agent and the Indemnification Representative. In
addition, if the Escrow Agent does not agree to an amendment agreed upon by
Silknet and the Indemnification Representative, Silknet will appoint a successor
Escrow Agent in accordance with Section 10.
(g) ARBITRATION. Except as set forth in Section 6 regarding Claims for
Damages, Silknet and the Indemnification Representative agree that any
controversy or claim arising out of, or relating to, the breach of this
Agreement will be settled by arbitration by, and in accordance with the
applicable Commercial Arbitration Rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The arbitrator(s) will have the right to assess,
against a party or among the parties, as the arbitrator(s) deem reasonable, (i)
administrative fees of the American Arbitration Association, and (ii)
compensation, if any, to the arbitrator(s). Arbitration hearings will be held in
the county where the principal office of the Escrow Agent is located.
(h) CONSENT TO JURISDICTION AND SERVICE. Silknet and the
Indemnification Representative hereby absolutely and irrevocably consent and
submit to the jurisdiction of the courts in the Commonwealth of Massachusetts
and of any Federal court located in said Commonwealth in connection with any
actions of proceeding brought against Silknet and the Indemnification
Representative by the Escrow Agent arising out of or relating to this Escrow
Agreement. In any such action or proceeding, Silknet and the Indemnification
Representative hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and hereby absolutely and
irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Silknet and the Indemnification
Representative, as the case may be, at their respective addresses in accordance
with Section 13 hereof.
(i) FORCE MAJEURE. Neither Silknet nor the Indemnification
Representative nor Escrow Agent shall be responsible for delays or failures in
performance under this Agreement resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
(j) REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
<PAGE> 57
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year first above written.
SILKNET SOFTWARE, INC.:
By:
--------------------------------
Name: James C. Wood
Title:President & Chief Executive Officer
ESCROW AGENT:
AMERICAN STOCK TRANSFER & TRUST COMPANY
-------------------------------------
By:
Title:
INDEMNIFICATION REPRESENTATIVE
-------------------------------------
Stefania Nappi
<PAGE> 58
APPENDIX A
EXHIBIT G TO THE MERGER AGREEMENT
<PAGE> 59
Exhibit C
FORM OF OPINION TO BE ISSUED BY TESTA, HURWITZ & THIBEAULT, LLP
(i) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, respectively, with corporate power to own its property and to conduct
its business as now conducted.
(ii) The execution and delivery of this Agreement, the
Registration Rights Agreement and the Escrow Agreement by Parent and Merger Sub,
and the performance of their obligations hereunder and thereunder will not
result in the violation of any order or decree known to such counsel of any
court binding upon Parent or Merger Sub or their respective property, or
conflict with or constitute a default under the certificate of incorporation or
by-laws of Parent or the articles or organization or by-laws of Merger Sub.
(iii) Each of this Agreement, the Escrow Agreement and
the Registration Rights Agreement has been duly authorized, executed and
delivered by Parent and Merger Sub, as applicable, and is binding upon and
enforceable against Parent and Merger Sub, as applicable, in accordance with its
terms, except as the enforceability hereof or thereof may be subject to or
limited by bankruptcy, insolvency, reorganization, arrangement or similar laws
affecting the rights of creditors generally, judicial limitations upon the
specific performance of certain types of obligations and public policy.
(iv) All authorizations, consents and approvals of all
governmental agencies and authorities of the United States, the State of
Delaware and the Commonwealth of Massachusetts required in order to permit
consummation by Parent and Merger Sub of the transactions contemplated by this
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
obtained (it being understood that such counsel need not express an opinion with
respect to antitrust and trade regulation laws or state "blue sky" laws).
(v) The Shares of Parent Common Stock deliverable
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and nonassessable, and to such counsel's knowledge are not subject to any
preemptive rights or rights of first refusal either arising pursuant to any
agreement or instrument to which Parent is a party or which are otherwise
binding upon Parent; and
(vi) Based upon the representations of the Company and
the Company Shareholders, the issuance and delivery of the shares of Parent
Common Stock to the Company Shareholders pursuant to this Agreement do not
require registration under the Securities Act.
(vii) Upon the filing of the Certificate of Merger, the
Merger will be effective under the laws of Delaware.
<PAGE> 60
Exhibit D
REGISTRATION RIGHTS AGREEMENT
October 5, 1999
To each of the several Stockholders
named in Schedule I hereto
Gentlemen:
An Agreement and Plan of Merger and Reorganization dated as of October
5, 1999 has been entered into by Silknet Software, Inc., a Delaware corporation
(the "Company"), InSite Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of the Company, InSite Marketing Technology, Inc., a Delaware
corporation ("InSite"), and those shareholders of InSite named on the signature
pages thereto (the "Merger Agreement"). As a condition to the closing of the
transactions contemplated by the Merger Agreement, the Company has agreed to
enter into this Registration Rights Agreement with each of you (collectively,
the "InSite Stockholders") and the Company hereby covenants and agrees with each
of you as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of
the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean the shares of Common Stock of
the Company issued in exchange for the acquisition of the outstanding shares of
capital stock of InSite pursuant to the terms of the Merger Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the person who is then the record owner of
Registrable Securities which have not been sold to the public.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Section 4 or Section 5 hereof, including, without
limitation, all registration and filing fees, printing expenses, transfer taxes,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders and
other securityholders, and the expense of any special audits incident to or
required by any such registration.
"Registrable Securities" shall mean (i) all of the Conversion
Shares issued in connection with the Merger Agreement and (ii) any Common Stock
issued in respect of the shares described in clause (i) upon any stock split,
stock dividend, recapitalization or other similar event.
"Restricted Stock" shall mean the Conversion Shares, excluding
Conversion Shares which have been (i) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
<PAGE> 61
disposed of in accordance with the registration statement covering them or (ii)
publicly sold pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933 , as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
2. Restrictive Legend. Each certificate representing Conversion
Shares shall, except as otherwise provided in this Section 2 or in Section 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault,
LLP shall be satisfactory) the securities represented thereby may be publicly
sold without registration under the Securities Act and any applicable state
securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
any Conversion Shares (other than under the circumstances described in Sections
4 or 5), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel satisfactory to the Company (it being agreed that Testa,
Hurwitz & Thibeault, LLP shall be satisfactory) to the effect that the proposed
transfer may be effected without registration under the Securities Act and any
applicable state securities laws, whereupon the holder of such stock shall be
entitled to transfer such stock in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
transfer to one or more partners or members of the transferor (in the case of a
transferor that is a partnership or a limited liability company, respectively)
or to an affiliated corporation (in the case of a transferor that is a
corporation). Each certificate for Conversion Shares transferred as above
provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section.
4. Registration on Form S-3.
(a) The Company shall use its reasonable best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act, in accordance with the provisions of
the Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in this Agreement, the Holders of Registrable Securities shall have
the right to request one (1) registration on Form S-3 (such request shall be in
writing and shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders), provided that in no event shall the Company be required to
register shares with an aggregate market value (measured at the time of the
receipt by the Company of such request) of less than $5,000,000. Upon the
receipt of a request under this Section 4, the Company shall:
<PAGE> 62
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use all reasonable efforts to
effect such registration as may be so requested and as would permit or
facilitate the sale and distribution of such portion of such Registrable
Securities as are specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within thirty days after receipt of such
written notice from the Company. If the underwriter managing the offering
advises the Holders who have requested inclusion of their Registrable Securities
in such registration that marketing considerations require a limitation on the
number of shares offered, such limitation shall be imposed pro rata among such
Holders who requested inclusion of Registrable Securities in such registration
according to the number of Registrable Securities each such Holder requested to
be included in such registration. Neither the Company nor any other shareholder
may include shares in a registration effected under this Section 4 without the
consent of the Holders holding a majority of the Registrable Securities sought
to be included in such registration if the inclusion of shares by the Company or
the other shareholders would limit the number of Registrable Securities sought
to be included by the Holders or reduce the offering price thereof. No
registration initiated by Holders hereunder shall count as a registration under
this Section 4 unless and until it shall have been declared effective.
(b) The Company shall select the underwriter for an
offering made pursuant to this Section 4.
5. "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) Promptly give to each Holder of Registrable
Securities written notice thereof (which shall include the number of shares the
Company or other security holder proposes to register and, if known, the name of
the proposed underwriter); and
(ii) Use its reasonable best efforts to include in such
registration all the Registrable Securities specified in a written request or
requests, made by any Holder within twenty (20) days after the date of delivery
of the written notice from the Company described in clause (i) above. If the
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant to any registration
statement, then the maximum amount that the underwriter considers saleable shall
be apportioned: First, to the Company to the extent of the shares to be
registered for its own account, if any, second, among the selling shareholders
exercising their demand registration rights to the extent such shareholders
requested securities to be included in the registration statement, and then pro
rata among the selling Holders and all other selling shareholders according to
the number of shares each Holder and shareholder requested to be included in the
registration statement.
(b) The Company shall select the underwriter for an
offering made pursuant to this Section 5.
(c) In addition to the rights granted under Section 4 and
Section 5(a) of this Agreement, the Company hereby agrees that it shall make
commercially reasonable efforts (subject to market conditions) to file with the
Commission a registration statement on Form S-1 within four (4) months of the
closing date under the Merger Agreement, including shares of Common Stock to be
sold on behalf of the Company and/or any holder of registration rights who
notifies the Company of its intention to participate in accordance with the
registration rights provisions contained in (i) Article VI of the Company's
Series C Preferred Stock Purchase Agreement dated as of May 11, 1998, (ii)
Article VI of the Company's Series D Preferred Stock Purchase Agreement dated as
of
<PAGE> 63
February 26, 1999 and (iii) this Agreement, if the reasonably anticipated
aggregate price to the public of the shares of Common Stock to be included in
such registration would exceed $10,000,000 in gross proceeds to the Company
and/or selling securityholders; provided, however, that if the offering is
anticipated to result in gross proceeds of less than $10,000,000 but greater
than $5,000,000, then the holders of Registrable Securities shall be limited to
selling in such offering no more than 30% of their Registrable Securities. In
any case, any such offering must result in gross proceeds of at least $5,000,000
to the Company and/or selling securityholders. As soon practicable following
filing of the registration statement described in the immediately preceding
sentence with the Commission, the Company shall use all commercially reasonable
efforts to cause such registration statement to become effective.
6. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 4 or Section 5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.
7. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder of Registrable Securities included in such registration advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will do the following for the benefit of
such Holders:
(a) Keep such registration effective for a period of one
hundred twenty days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs, and amend or supplement such registration statement and the
prospectus contained therein from time to time to the extent necessary to comply
with the Act and applicable state securities laws;
(b) Use its reasonable best efforts to register or
qualify the Registrable Securities covered by such registration under the
applicable securities or "blue sky" laws of such jurisdictions as the selling
shareholders may reasonably request; provided, that the Company shall not be
obligated to qualify to do business in any jurisdiction where it is not then so
qualified or otherwise required to be so qualified or to take any action which
would subject it to the service of process in suits other than those arising out
of such registration;
(c) Furnish such number of prospectuses, prospectus
supplements or amendments and other documents incident thereto as a Holder from
time to time may reasonably request;
(d) In connection with any underwritten offering pursuant
to a registration statement filed pursuant to Section 5(c) hereof, the Company
will enter into any underwriting agreement reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by all of the Holders
included in such registration;
(e) To the extent then permitted under applicable
professional guidelines and standards, obtain (i) an opinion, dated the
effective date of the registration statement, of counsel representing the
Company for the purposes of such registration in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of the
Registrable Securities and (ii) a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters in a public issuance of securities,
addressed to the underwriters, if any, and the Holders requesting registration
of the Registrable Securities, and provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders whose
expenses are being paid pursuant to Section 6 hereof to inspect and copy such
corporate documents as such counsel may reasonably request.
8. Indemnification.
(a) The Company will, and hereby does, indemnify each
Holder, each of its officers, directors and partners, and each person
controlling such Holder within the meaning of the Securities Act, with
<PAGE> 64
respect to which registration, qualification or compliance has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls such underwriter within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or the Exchange Act or
securities act of any state or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, whether or not resulting in any liability, provided
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
it are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its directors
and officers, each other Holder and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of the Securities Act and the
rules and regulations thereunder, each other such Holder and each of their
officers, directors and partners, and each person controlling such Holder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such Holder's directors, officers, partners, persons, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, whether or not resulting in liability, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds received by such Holder upon sale of his securities.
(c) Each party entitled to indemnification under this
Section 8 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, but the failure of any Indemnifying Party to give such notice shall not
relieve the Indemnifying Party of its obligations under this Section 8 (except
and to the extent the Indemnifying Party has been prejudiced as a consequence
thereof). The Indemnifying Party will be entitled to participate in, and to the
extent that it may elect by written notice delivered to the Indemnified Party
promptly after receiving the aforesaid notice from such Indemnified Party, at
its expense to assume, the defense of any such claim or any litigation resulting
therefrom, with counsel reasonably satisfactory to such Indemnified Party,
provided that the Indemnified Party may participate in such defense at its
expense, notwithstanding the assumption of such defense by the Indemnifying
Party, and provided, further, that if the defendants in any such action shall
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it and/or other Indemnified Parties which are different
from or additional to those available to the Indemnifying Party, the Indemnified
Party or Parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party or Parties and the reasonable fees and expenses
of such counsel shall be paid by the Indemnifying Party. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which includes an admission of fault on the part of an Indemnified
Party or which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified
<PAGE> 65
Party of a release from all liability in respect to such claim or litigation.
Each Indemnified Party shall (i) furnish such information regarding itself or
the claim in question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom and (ii) shall reasonably assist the Indemnifying
Party in any such defense, provided that the Indemnified Party shall be entitled
to be reimbursed by the Indemnifying Party for its out-of-pocket expenses paid
in connection with such assistance.
(d) No Holder shall be required to participate in a
registration pursuant to which it would be required to execute an underwriting
agreement in connection with a registration effected under Section 5 which
imposes indemnification or contribution obligations on such Holder more onerous
than those imposed hereunder; provided, however, that the Company shall not be
deemed to breach the provisions of Section 5 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
9. Information by Holder. Each Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement or otherwise required by applicable state or federal securities
laws.
10. Exception to Registration. The Company shall not be required
to effect a registration under this Agreement if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of Registrable Securities, such Holders may
sell without registration under the Securities Act the Registrable Securities
for which they requested registration under the provisions of the Securities Act
and in the manner and in the quantity in which the Registrable Securities were
proposed to be sold, or (ii) the Company shall have obtained from the Commission
a "no-action" letter to that effect; provided that this Section 10 shall not
apply to sales made under Rule 144(k) or any successor rule promulgated by the
Commission until after the effective date of the Company's initial registration
of shares under the Securities Act. Notwithstanding the foregoing, in no event
shall the provisions of this Section 10 be construed to preclude a Holder of
Registrable Securities from exercising rights under Section 5 for a period of
two (2) years after the effective date of the Company's initial registration of
shares under the Securities Act.
11. Delay of Registration. For a period not to exceed 90 days, the
Company shall not be obligated to prepare and file, or prevented from delaying
or abandoning, a registration statement filed pursuant to this Agreement at any
time when the Company, in its good faith judgment with advice of counsel,
reasonably believes:
(a) that the filing thereof at the time requested, or the
offering of Registrable Shares pursuant thereto, would materially and adversely
affect (i) a pending or scheduled public offering of the Company's securities,
(ii) an acquisition, merger, recapitalization, consolidation, reorganization or
similar transaction by or of the Company, (iii) pre-existing and continuing
negotiations, discussions or pending proposals with respect to any of the
foregoing transactions, or (d) the financial condition of the Company in view of
the disclosure of any pending or threatened litigation, claim, assessment or
governmental investigation which may be required thereby; and
(b) that the failure to disclose any material information
with respect to the foregoing would cause a violation of the Securities Act or
the Exchange Act.
12. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to:
(a) make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after 90 days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
<PAGE> 66
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements; and
(c) furnish to each holder of Restricted Stock forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after 90 days following
the effective date of the first registration statement filed by the Company for
an offering of its securities to the general public), and of the Securities Act
and Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
13. Listing Application. If shares of any class of stock of the
Company shall be listed on a national securities exchange, the Company shall, at
its expense, include in its listing application all of the Conversion Shares
owned by any InSite Stockholder.
14. Damages. The Company recognizes and agrees that the holder of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure, any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance based on there
being an adequate remedy at law.
15. Changes in Common Stock. If, and as often as, there is any
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
16. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the certificate of incorporation or the by-laws of
the Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
17. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
on the holders of Restricted Stock shall only inure to the benefit of a
transferee of Restricted Stock if (i) there is transferred to such transferee at
least 20% of the total shares of Restricted Stock originally issued pursuant to
the Merger Agreement to the direct or indirect transferor of such transferee or
(ii) such transferee is a partner, shareholder or affiliate of a party hereto.
<PAGE> 67
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
if to the Company or any other party hereto, at the address of
such party set forth in the Merger Agreement;
if to any subsequent holder of Restricted Stock, to it at
such address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Restricted Stock) or to
the holders of Restricted Stock (in the case of the Company) in accordance with
the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the outstanding shares of Restricted
Stock.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The obligations of the Company to register shares of
Restricted Stock under Sections 4 or 5 shall terminate on the fifteenth (15th)
anniversary of the date of this Agreement.
(g) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
SILKNET SOFTWARE, INC.
By:_______________________________
Name: James C. Wood
Title: President, Chief Executive
Officer and Chairman of the Board
<PAGE> 68
AGREED TO AND ACCEPTED as of the date first above written.
INSITE STOCKHOLDERS:
- ------------------------------
JOHN D.C. LITTLE
37 Conant Road
Lincoln, MA 01773
- ------------------------------
GLEN L. URBAN
20 Pinebrook Road
Carlisle, MA 01741
JEFFREY STAMEN
6 Conant Road
Weston, MA 02493
By: ___________________________
Glen Urban, under Power of Attorney dated , 1999
- ------------------------------
RON L. CHESLEY
4800 Hwy A1A
#216
Vero Beach, FL 32963
- ------------------------------
MARC S. GILMAN
1015 Chestnut Street
Manchester, NH 03104
THOMAS J. GOLIASH
1560 Gulf Boulevard
Penthouse #3
Clearwater, FL 33767
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
MORTON E. GOULDER
97 Ridge Road
PO Box 419
Hollis, NH 03049
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
<PAGE> 69
DAVID J. JODOIN
10 Chelsari Lane
Hampstead, NH 03841
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
JAMES M. KENDALL
676 Reef Road
Vero Beach, FL 32963
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
GEORGE G. SCHWENK
177 Merriam Hill Road
Mason, NH 03048
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
MAURICE SEGALL
1501 Beacon Street
Apt. 1804
Brookline, MA 02446
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
ROBERT F. SPROULL
239 Kenrick Street
Newton, MA 02458-2731
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
FRANCIS H. ZENIE
166 Old Farm Lane
Attleboro, MA 02703
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
<PAGE> 70
JON D. GRUBER
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
J. WYATT GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
LINDSAY D. GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
J. PATTERSON MCBAINE
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
ERIC B. SWERGOLD
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
JOHN N. LITTLE
158 Woodland Street
Sherborn, MA 01770
By: ___________________________
John D.C. Little, under Power of Attorney dated , 1999
<PAGE> 71
SARAH A. LITTLE
14 Montvale Road
Wellesley, MA 02481
By: ___________________________
John D.C. Little, under Power of Attorney dated , 1999
THOMAS LITTLE
80 Plymouth Road
Newton, MA 02461
By: ___________________________
John D.C. Little, under Power of Attorney dated , 1999
RUEL D. LITTLE
57 Monsen Road
Concord, MA 01742
By: ___________________________
John D.C. Little, under Power of Attorney dated , 1999
ATLANTIC MANAGEMENT ASSOCIATES
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
TRUST INVESTMENTS
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
BELCOM LTD.
By: ___________________________
Glen Urban, under Power of Attorney dated , 1999
DRANE ASSOCIATES L.P.
By: ___________________________
Glen Urban, under Power of Attorney dated , 1999
THE ANTHONY M. HELIES REVOCABLE TRUST
By: ___________________________
Stefania Nappi, under Power of Attorney dated , 1999
<PAGE> 72
HARRIS AND HARRIS GROUP, INC.
By:___________________________
Name:
Title:
<PAGE> 73
Exhibit E
FORM OF OPINION TO BE ISSUED BY FOLEY, HOAG & ELIOT LLP
(i) The Company is a corporation validly existing and in
good standing under the laws of the jurisdiction of its incorporation with
corporate power to own its property and to conduct its business as now
conducted. The Company is qualified to do business and is in good standing as a
foreign corporation in the Commonwealth of Massachusetts.
(ii) The authorized, issued and outstanding capital stock
of the Company on the Closing Date is as set forth in the Company Disclosure
Schedule. Immediately prior to the Closing, except as set forth in the Company
Disclosure Schedule, to the knowledge of such counsel, no subscription, warrant,
option, convertible security, or other right (contingent or other) to purchase
or acquire equity securities of the Company will be authorized or outstanding
and there will be no commitment by the Company to issue shares, subscriptions,
warrants, options, convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. Except as set forth in the Company Disclosure Schedule or as provided for
in the Certificate of Incorporation of the Company, to the knowledge of such
counsel, the Company has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its equity securities or any interest therein or to
pay any dividend or make any other distribution in respect thereof.
(iii) The issued and outstanding shares of capital stock
of the Company have been duly and validly issued and are fully paid and
nonassessable; all of the outstanding shares of capital stock of the Company did
not require registration under the Securities Act or any state securities law
(assuming the accuracy of representations made by purchasers of such stock).
(iv) To such counsel's knowledge, there is no litigation,
action, suit, investigation, or proceeding pending, or threatened, against or
affecting the Company except as set forth in the Company Disclosure Schedule.
(v) The execution of this Agreement by the Company, and the
performance of its obligations hereunder and thereunder, will not result in the
violation of any order or decree known to such counsel of any court binding upon
the Company or its property, or conflict with or constitute a default under, the
Certificate of Incorporation or by-laws of the Company or under any note, debt
instrument, security agreement or mortgage, or any other material agreement or
commitment by which the Company is bound, to such counsel's knowledge or result
in the creation or imposition of any lien or encumbrance in favor of any third
person upon any of the property of the Company.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company, and is binding upon and enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, arrangement
or similar laws affecting the rights of creditors generally, judicial
limitations upon the specific performance of certain types of obligations and
public policy.
(vii) All authorizations, consents and approvals of all
governmental agencies and authorities required in order to permit consummation
by the Company of the transactions contemplated by this Agreement have been
obtained.
(viii) Upon the filing of the Certificate of Merger at the
Effective Time, the Merger shall be effective under the laws of the State of
Delaware.
<PAGE> 74
EXHIBIT F-1
SILKNET SOFTWARE, INC.
NONCOMPETITION, NONDISCLOSURE AGREEMENT
(FOR FOUNDERS OF INSITE MARKETING TECHNOLOGY, INC.)
The undersigned, _______________________________________, a Founder and
Investor in InSite Marketing Technology, Inc. (the "COMPANY") in consideration
for and as a condition of its merger with SILKNET SOFTWARE, Inc. (the
"SILKNET"), hereby agrees with as follows:
1. NONCOMPETITION COVENANT. For a period of three (3) years
following the closing of the merger of Silknet and the Company (the "MERGER"),
the Founder agrees that he will not, whether alone or as a partner, officer,
director, consultant, agent, employee or stockholder of any company or other
commercial enterprise, engage in any business or other commercial activity which
is directly competitive with the products and services being designed, marketed,
distributed or developed by the Company. For purpose of this Agreement, the
Company's products and services are software programs and the support of such
programs that assist in selling products on the internet or through other
electronic channels by making product recommendations based on a consumer's
stated preferences. The foregoing restriction shall not prohibit Founder from
owning securities of any publicly-traded company that is engaged in the same
business as the Company as long as Founder does not own at any time more than
three percent (3%) of such class of equity securities of such company.
2. NONSOLICITATION. For a period of three (3) years after the
Merger, the Founder will not directly or indirectly either for himself or for
any other commercial enterprise, solicit, divert or take away or attempt to
solicit, divert or take away, any of the Company's or Silknet's customers,
business or prospective customers on behalf of any enterprise or organization
which is competitive to the business of the Company or Silknet. For purposes of
this Agreement, "prospective customers" shall include those customers being
solicited by the Company or Silknet at any time during this three-year period.
For a period of three (3) years after the Merger, the Founder will not solicit
or discuss with any employee of the Company the employment of such Company
employee by any commercial enterprise, other than for the benefit of Silknet,
nor recruit, attempt to recruit, directly hire, or directly attempt to hire any
such Company employee.
3. NONDISCLOSURE OBLIGATION. As consideration for the merger of
Silknet and the Company, the Founder hereby assigns to the Company and Silknet
any right, title or interest which the Founder may have or claim with respect to
the intellectual property not in the public domain, proprietary information,
inventions, or software programs previously used or licensed in the business of
the Company. The Founder will not at any time, whether during or after the
merger, for any reason whatsoever (other than to promote and advance the
business of the Company) for a period of five (5) years, reveal to any person or
entity (both commercial and non-commercial) any of the trade secrets or
confidential business information concerning the Company, including its research
and development activities; product designs, prototypes and technical
specifications; marketing plans and strategies; or other nonpublic financial
information of the Company so far as they have come or may come to the Founder's
knowledge. This restriction shall not apply to: (i) information that may be
disclosed generally or is in the public domain through no fault of the Founder;
(ii) information received from a third party outside the Company that was
disclosed without a breach of any confidentiality obligation; (iii) information
approved for release by written authorization of Silknet; or (iv) information
that may be required by law or an order of any court, agency or proceeding to be
disclosed. The Founder shall keep secret all matters of such nature entrusted to
him and shall not use or disclose any such information for the benefit of any
third party in any manner which may injure or cause loss to Silknet, whether
directly or indirectly.
4. REMEDIES UPON BREACH. The Founder agrees that any breach of
this Agreement by the Founder could cause irreparable damage to Silknet. The
Silknet shall have, in addition to any and all remedies of law, the right to an
injunction or other equitable relief to prevent any violation of the Founder's
obligations hereunder.
<PAGE> 75
5. MISCELLANEOUS. Any waiver by Silknet of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach hereof. If one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject matter so as to be unenforceable at law, such provision(s)
shall be construed and reformed by the appropriate judicial body by limiting and
reducing it (or them), so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear. All covenants and agreements
hereunder shall inure to the benefit of and be enforceable by the successors of
Silknet. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the Commonwealth of Massachusetts. The Founder recognizes
and agrees that the enforcement of this Agreement is necessary to ensure the
preservation, protection and continuity of the confidential business
information, trade secrets and goodwill of the Company as it inures to Silknet.
The Founder agrees that, due to the proprietary nature of the Company's
business, the restrictions set forth in Sections 1, 2 and 3 of this Agreement
are reasonable as to duration and scope.
6. ACADEMIC ACTIVITIES. Nothing in this Agreement shall restrict
the normal activities and obligations of the undersigned Founder with respect to
research, teaching, executive education, administration, and other duties as a
professor at MIT; provided, however, that the Founder will not disclose any
proprietary, confidential, or trade secret information of the Company obtained
prior to the Merger date.
IN WITNESS WHEREOF, the undersigned Founder and Silknet have executed
this Agreement as of this ____ day of ________________________, 1999.
SILKNET SOFTWARE, INC. FOUNDER:
BY: ___________________________ ___________________________
Signature
TITLE: _________________________
<PAGE> 76
EXHIBIT F-2
SILKNET SOFTWARE, INC.
NON-SOLICITATION, NON-DISCLOSURE AND ASSIGNMENT OF INVENTIONS AGREEMENT
(FOR OFFICERS AND KEY EMPLOYEES)
The undersigned, STEFANIA NAPPI, in consideration for and as a
condition of my employment as an employee (the "EMPLOYEE") of SILKNET SOFTWARE,
INC. or any of its subsidiaries the "COMPANY"), hereby agrees with the Company
as follows:
1. NONSOLICITATION. During the period of employment by the
Company and for a period of one (1) year after termination of such employment
(for any reason), the Employee will not directly or indirectly either for
himself or for any other commercial enterprise, solicit, divert or take away or
attempt to solicit, divert or take away, any of the Company's customers,
business or prospective customers in existence at the time of termination of
such employment. For purposes of this Agreement, "prospective customers" shall
include those customers being solicited by the Company at the time of the
Employee's termination. During such employment with the Company and for a period
of one (1) year thereafter, the Employee WILL NOT SOLICIT, ENTICE, ATTEMPT TO
RECRUIT OR HIRE, OR HIRE any employee of the Company for the employment of such
Company employee by any commercial enterprise, other than for the benefit of the
Company. Notwithstanding any other provision contained in this Section, the
following activities shall be permitted under this Agreement: the Employee shall
be permitted to hire (i) any Company employee who has terminated employment with
the Company at the time the offer for hire was made by the Employee, or has
otherwise provided notice of termination to the Company; (ii) any current or
former Company employee where the person is offered employment by the Employee's
organization following a response by that employee to a general advertisement
regarding employment opportunities which was made in any newspaper, trade
journal or other magazine or periodical, or through a employment recruitment
agency, and where no direct solicitation was previously made by the Employee
directly of that Company employee prior to the employee's response to such
advertisement or recruiting agency or where the Employee's organization had no
prior contact with that Company employee prior to the employee's response to the
advertisement.
2. NONDISCLOSURE OBLIGATION. The Employee will not at any time,
whether during or after the termination of employment, for any reason whatsoever
(other than to promote and advance the business of the Company), reveal to any
person or entity (both commercial and non-commercial) any of the trade secrets
or confidential business information concerning the Company: including its
research and development activities; product designs, prototypes and technical
specifications; show-how and know-how; marketing plans and strategies; pricing
and costing policies; customer and supplier lists and accounts; or nonpublic
financial information of the Company so far as they have come or may come to the
Employee's knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company. This restriction shall not
apply to: (i) information that may be disclosed generally or is in the public
domain through no fault of the Employee; (ii) information received from a third
party outside the Company that was disclosed without a breach of any
confidentiality obligation; (iii) information approved for release by written
authorization of the Company; or (iv) information that may be required by law or
an order of any court, agency or proceeding to be disclosed. The Employee shall
keep secret all matters of such nature entrusted to him and shall not use or
disclose any such information for the benefit of any third party in any manner
which may injure or cause loss to the Company, whether directly or indirectly.
3. ASSIGNMENT OF INVENTIONS. The Employee expressly understands
and agrees that any and all right or interest he obtains in any designs, trade
secrets, technical specifications and technical data, know-how and show-how,
customer and vendor lists, marketing plans, pricing policies, inventions,
concepts, ideas, expressions, discoveries, improvements and patent or patent
rights which are authored, conceived, devised, developed, reduced to practice,
or otherwise obtained by him during the term of this Agreement which relate to
his employment with the Company are expressly regarded as "works for hire" (the
"INVENTIONS"). The Employee hereby assigns to the Company the sole and exclusive
right to such Inventions. The Employee agrees that he will promptly disclose to
<PAGE> 77
the Company any and all such Inventions, and that, upon request of the Company,
the Employee will execute and deliver any and all documents or instruments and
take any other action which the Company shall deem necessary to assign to and
vest completely in the Company, to perfect trademark, copyright and patent
protection with respect to, or to otherwise protect the Company's trade secrets
and proprietary interest in such Inventions. The obligations of the Employee
under this Section shall continue beyond the termination of the Employee's
employment with respect to such Inventions conceived of, reduced to practice, or
developed by the Employee during the term of this Agreement. The Company agrees
to pay any and all copyright, trademark and patent fees and expenses or other
costs incurred by the Employee for any assistance rendered to the Company
pursuant to this Section.
The assignment of Inventions is not intended to apply to any invention
that (i) was developed entirely on the Employee's own time and effort; (ii) used
no equipment, supplies, facility, trade secrets or confidential information of
the Company in its development; and (iii) does not relate to the business of the
Company at the time OF THE DEVELOPMENT, or to the Company's actual or reasonably
anticipated research and development activities at the time OF THE DEVELOPMENT.
4. NONCOMPETITION COVENANT. For a period ending with the later of
eighteen (18) months following the closing of the merger of Silknet and the
Company (the "MERGER") or twelve (12) months following termination of employment
by Silknet, the undersigned agrees that she will not, whether alone or as a
partner, officer, director, consultant, agent, employee or stockholder of any
company or other commercial enterprise, engage in any business or other
commercial activity which is directly competitive with the products and services
being designed, marketed, distributed or developed by the Company. For purpose
of this Agreement, the Company's products and services are software programs and
the support of such programs that assist in selling products on the Internet or
through other electronic channels by making product recommendations based on a
consumer's stated preferences. The foregoing restriction shall not prohibit the
undersigned from owning securities of any publicly-traded company that is
engaged in the same business as the Company as long as the undersigned does not
own at any time more than three percent (3%) of such class of equity securities
of such company.
5. ABSENCE OF CONFLICTING AGREEMENTS. The Employee understands
the Company does not desire to acquire from him any trade secrets, know-how or
confidential business information that he may have acquired from others. The
Employee represents that he is not bound by any agreement or any other existing
or previous business relationship which conflicts with or prevents the full
performance of the Employee's duties and obligations to the Company during the
course of employment.
6. REMEDIES UPON BREACH. The Employee agrees that any breach of
this Agreement by the Employee could cause irreparable damage to the Company.
The Company shall have, in addition to any and all remedies of law, the right to
an injunction or other equitable relief to prevent any violation of the
Employee's obligations hereunder.
7. MISCELLANEOUS. Any waiver by the Company of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach hereof. If one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject matter so as to be unenforceable at law, such provision(s)
shall be construed and reformed by the appropriate judicial body by limiting and
reducing it (or them), so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear. The obligations of the Employee
under this Agreement shall survive the termination of the Employee's
relationship with the Company regardless of the manner of such termination. All
covenants and agreements hereunder shall inure to the benefit of and be
enforceable by the successors of the Company. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
Hampshire. The Employee understands that this Agreement does not create an
obligation on the part of the Company to continue the Employee's employment with
the Company. The Employee is employed as an employee "at will."
The Employee recognizes and agrees that the enforcement of this
Agreement is necessary to ensure the preservation, protection and continuity of
the confidential business information, trade secrets and goodwill of the
<PAGE> 78
Company. The Employee agrees that, due to the proprietary nature of the
Company's business, the restrictions set forth in Sections 1, 2, 3 and 4 of this
Agreement are reasonable as to duration and scope.
IN WITNESS WHEREOF, the undersigned Employee and the Company have
executed this Agreement as of this ____ day of
_________________________________, 1999.
SILKNET SOFTWARE, INC. EMPLOYEE:
BY: ___________________________ ___________________________
TITLE: _________________________
<PAGE> 79
EXHIBIT F-3
SILKNET SOFTWARE, INC.
NON-SOLICITATION, NON-DISCLOSURE AND ASSIGNMENT OF INVENTIONS AGREEMENT
(FOR OFFICERS AND KEY EMPLOYEES)
The undersigned, _________________ in consideration for and as a
condition of my employment as an employee (the "EMPLOYEE") of SILKNET SOFTWARE,
INC. or any of its subsidiaries the "COMPANY"), hereby agrees with the Company
as follows:
1. NONSOLICITATION. During the period of employment by the
Company and for a period of one (1) year after termination of such employment
(for any reason), the Employee will not directly or indirectly either for
himself or for any other commercial enterprise, solicit, divert or take away or
attempt to solicit, divert or take away, any of the Company's customers,
business or prospective customers in existence at the time of termination of
such employment. For purposes of this Agreement, "prospective customers" shall
include those customers being solicited by the Company at the time of the
Employee's termination. During such employment with the Company and for a period
of one (1) year thereafter, the Employee will not solicit, entice, attempt to
recruit or hire, or hire any employee of the Company for the employment of such
Company employee by any commercial enterprise, other than for the benefit of the
Company. Notwithstanding any other provision contained in this Section, the
following activities shall be permitted under this Agreement: the Employee shall
be permitted to hire (i) any Company employee who has terminated employment with
the Company at the time the offer for hire was made by the Employee, or has
otherwise provided notice of termination to the Company; (ii) any current or
former Company employee where the person is offered employment by the Employee's
organization following a response by that employee to a general advertisement
regarding employment opportunities which was made in any newspaper, trade
journal or other magazine or periodical, or through a employment recruitment
agency, and where no direct solicitation was previously made by the Employee
directly of that Company employee prior to the employee's response to such
advertisement or recruiting agency or where the Employee's organization had no
prior contact with that Company employee prior to the employee's response to the
advertisement.
2. NONDISCLOSURE OBLIGATION. The Employee will not at any
time, whether during or after the termination of employment, for any reason
whatsoever (other than to promote and advance the business of the Company),
reveal to any person or entity (both commercial and non-commercial) any of the
trade secrets or confidential business information concerning the Company:
including its research and development activities; product designs, prototypes
and technical specifications; show-how and know-how; marketing plans and
strategies; pricing and costing policies; customer and supplier lists and
accounts; or nonpublic financial information of the Company so far as they have
come or may come to the Employee's knowledge, except as may be required in the
ordinary course of performing his duties as an employee of the Company. This
restriction shall not apply to: (i) information that may be disclosed generally
or is in the public domain through no fault of the Employee; (ii) information
received from a third party outside the Company that was disclosed without a
breach of any confidentiality obligation; (iii) information approved for release
by written authorization of the Company; or (iv) information that may be
required by law or an order of any court, agency or proceeding to be disclosed.
The Employee shall keep secret all matters of such nature entrusted to him and
shall not use or disclose any such information for the benefit of any third
party in any manner which may injure or cause loss to the Company, whether
directly or indirectly.
3. ASSIGNMENT OF INVENTIONS. The Employee expressly
understands and agrees that any and all right or interest he obtains in any
designs, trade secrets, technical specifications and technical data, know-how
and show-how, customer and vendor lists, marketing plans, pricing policies,
inventions, concepts, ideas, expressions, discoveries, improvements and patent
or patent rights which are authored, conceived, devised, developed, reduced to
practice, or otherwise obtained by him during the term of this Agreement which
relate to his employment with the Company are expressly regarded as "works for
hire" (the "INVENTIONS"). The Employee hereby assigns to the Company the sole
and exclusive right to such Inventions. The Employee agrees that he will
promptly disclose to
<PAGE> 80
the Company any and all such Inventions, and that, upon request of the Company,
the Employee will execute and deliver any and all documents or instruments and
take any other action which the Company shall deem necessary to assign to and
vest completely in the Company, to perfect trademark, copyright and patent
protection with respect to, or to otherwise protect the Company's trade secrets
and proprietary interest in such Inventions. The obligations of the Employee
under this Section shall continue beyond the termination of the Employee's
employment with respect to such Inventions conceived of, reduced to practice, or
developed by the Employee during the term of this Agreement. The Company agrees
to pay any and all copyright, trademark and patent fees and expenses or other
costs incurred by the Employee for any assistance rendered to the Company
pursuant to this Section.
The assignment of Inventions is not intended to apply to any invention
that (i) was developed entirely on the Employee's own time and effort; (ii) used
no equipment, supplies, facility, trade secrets or confidential information of
the Company in its development; and (iii) does not relate to the business of the
Company at the time OF THE DEVELOPMENT, or to the Company's actual or reasonably
anticipated research and development activities at the time OF THE DEVELOPMENT.
4. ABSENCE OF CONFLICTING AGREEMENTS. The Employee understands
the Company does not desire to acquire from him any trade secrets, know-how or
confidential business information that he may have acquired from others. The
Employee represents that he is not bound by any agreement or any other existing
or previous business relationship which conflicts with or prevents the full
performance of the Employee's duties and obligations to the Company during the
course of employment.
5. REMEDIES UPON BREACH. The Employee agrees that any breach of
this Agreement by the Employee could cause irreparable damage to the Company.
The Company shall have, in addition to any and all remedies of law, the right to
an injunction or other equitable relief to prevent any violation of the
Employee's obligations hereunder.
6. MISCELLANEOUS. Any waiver by the Company of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach hereof. If one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject matter so as to be unenforceable at law, such provision(s)
shall be construed and reformed by the appropriate judicial body by limiting and
reducing it (or them), so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear. The obligations of the Employee
under this Agreement shall survive the termination of the Employee's
relationship with the Company regardless of the manner of such termination. All
covenants and agreements hereunder shall inure to the benefit of and be
enforceable by the successors of the Company. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
Hampshire. The Employee understands that this Agreement does not create an
obligation on the part of the Company to continue the Employee's employment with
the Company. The Employee is employed as an employee "at will."
The Employee recognizes and agrees that the enforcement of this
Agreement is necessary to ensure the preservation, protection and continuity of
the confidential business information, trade secrets and goodwill of the
Company. The Employee agrees that, due to the proprietary nature of the
Company's business, the restrictions set forth in Sections 1, 2, 3 and 4 of this
Agreement are reasonable as to duration and scope.
IN WITNESS WHEREOF, the undersigned Employee and the Company have
executed this Agreement as of this ____ day of
_________________________________, 1999.
SILKNET SOFTWARE, INC. EMPLOYEE:
BY: ___________________________ ___________________________
TITLE: _________________________
<PAGE> 81
EXHIBIT F-4
INSITE MARKETING TECHNOLOGY, INC.
INVENTION AND NON-DISCLOSURE AGREEMENT
(FOR ALL INSITE MARKETING TECHNOLOGY EMPLOYEES)
The undersigned employee (the "EMPLOYEE") of InSite Marketing
Technology (the "Company") hereby agrees as follows:
1. NONDISCLOSURE OBLIGATION. The Employee will not at any time,
whether during or after the termination of employment, for any reason whatsoever
(other than to promote and advance the business of the Company), reveal to any
person or entity (both commercial and non-commercial) any of the trade secrets
or confidential business information concerning the Company. This restriction
shall not apply to: (i) information that may be disclosed generally or is in the
public domain through no fault of the Employee; (ii) information received from a
third party outside the Company that was disclosed without a breach of any
confidentiality obligation; (iii) information approved for release by written
authorization of the Company; or (iv) information that may be required by law or
an order of any court, agency or proceeding to be disclosed. The Employee shall
keep secret all matters of such nature entrusted to him and shall not use or
disclose any such information for the benefit of any third party in any manner
which may injure or cause loss to the Company, whether directly or indirectly.
2. ASSIGNMENT OF INVENTIONS. The Employee expressly understands
and agrees that any and all right or interest he has obtained prior to the date
hereof, or which he obtains in any designs, trade secrets, technical
specifications and technical data, know-how and show-how, customer and vendor
lists, marketing plans, pricing policies, inventions, concepts, ideas,
expressions, discoveries, improvements and patent or patent rights which are
authored, conceived, devised, developed, reduced to practice, or otherwise
obtained by him during the term of this Agreement which relate to his employment
with the Company, including services rendered to the Company prior to the date
of this Agreement, are expressly regarded as "works for hire" (the
"INVENTIONS"). The Employee hereby assigns to the Company the sole and exclusive
right to such Inventions. The Employee agrees that he will promptly disclose to
the Company any and all such Inventions, and that, upon request of the Company,
the Employee will execute and deliver any and all documents or instruments and
take any other action which the Company shall deem necessary to assign to and
vest completely in the Company, to perfect trademark, copyright and patent
protection with respect to, or to otherwise protect the Company's trade secrets
and proprietary interest in such Inventions. The obligations of the Employee
under this Section shall continue beyond the termination of the Employee's
employment with respect to such Inventions conceived of, reduced to practice, or
developed by the Employee during the term of this Agreement. The Company agrees
to pay any and all copyright, trademark and patent fees and expenses or other
costs incurred by the Employee for any assistance rendered to the Company
pursuant to this Section.
The assignment of Inventions is not intended to apply to any invention
that (i) was developed entirely on the Employee's own time and effort; (ii) used
no equipment, supplies, facility, trade secrets or confidential information of
the Company in its development; and (iii) does not relate to the business of the
Company or to the Company's actual or reasonably anticipated research and
development activities.
3. MISCELLANEOUS. The Company shall have, in addition to any and
all remedies of law, the right to an injunction or other equitable relief to
prevent any violation of the Employee's obligations hereunder. All covenants
hereunder shall inure to the benefit of and be enforceable by the successors of
the Company, including any direct successor to the capital stock or assets of
the Company by way or merger or other business combination, including Silknet
Software, Inc.. The second paragraph of Section 2 shall apply only to the
research and development activities of the Company at the time of any
termination of employment (or any direct successor to the business of the
Company, such as Silknet software, Inc.). This Agreement shall be governed by,
and construed in
<PAGE> 82
accordance with, the internal laws of the Commonwealth of Massachusetts. The
Employee understands that this Agreement does not create an employment
obligation on the part of the Company.
IN WITNESS WHEREOF, the undersigned Employee and the Company have
executed this Agreement as of this ____ day of _________________________, 1999.
INSITE MARKETING TECHNOLOGY, INC. EMPLOYEE:
BY: ___________________________ ___________________________
TITLE: __________________________ ___________________________
<PAGE> 83
Exhibit G
INDEMNIFICATION PROVISIONS
1. INDEMNIFICATION BY THE COMPANY SHAREHOLDERS. The Company
Shareholders receiving the Merger Shares pursuant to the Merger Agreement (the
"INDEMNIFYING STOCKHOLDERS") shall indemnify Parent in respect of, and hold it
harmless against, any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and expenses (including without
limitation amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation) ("DAMAGES") incurred or
suffered by the Surviving Corporation or Parent or any affiliate thereof
resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company contained in the Merger
Agreement or the Company Disclosure Schedule;
(b) any failure of any Company Shareholder to have good, valid
and marketable title to the issued and outstanding Company Shares issued in the
name of such Company Shareholder, free and clear of all liens, encumbrances or
other security interests; or
(c) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder (other than the right to receive the Consideration
Shares pursuant to the Merger Agreement or appraisal rights under the applicable
provisions of the Delaware General Corporation Law), including any option,
preemptive rights or rights to notice or to vote; (iii) any rights under the
Certificate of Incorporation or By-laws of the Company; or (iv) any claim that
his, her or its shares were wrongfully repurchased by the Company.
2. INDEMNIFICATION BY PARENT. Parent shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of Parent or the Merger Sub
contained in the Merger Agreement.
3. INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to indemnification
under the Merger Agreement (an "INDEMNIFIED PARTY") shall give written
notification to the party from whom indemnification is sought (an "INDEMNIFYING
PARTY") of the commencement of any suit or proceeding relating to a third party
claim for which indemnification may be sought. Such notification shall be given
within 20 business days after receipt by the Indemnified Party of notice of such
suit or proceeding, and shall describe in reasonable detail (to the extent known
by the Indemnified Party) the facts constituting the basis for such suit or
proceeding and the amount of the claimed damages; provided, however, that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party of any liability or obligation hereunder
except to the extent of any damage or liability caused by or arising out of such
failure. Within 20 days after delivery of such notification, the Indemnifying
Party may, upon written notice thereof to the Indemnified Party, assume control
of the defense of such suit or proceeding with counsel reasonably satisfactory
to the Indemnified Party; provided that (i) the Indemnifying Party may only
assume control of such defense if (A) it acknowledges in writing to the
Indemnified Party that any damages, fines, costs or other liabilities that may
be assessed against the Indemnified Party in connection with such suit or
proceeding constitute Damages for which the Indemnified Party shall be
indemnified pursuant to the Merger Agreement, and (B) the ad damnum is less than
or equal to the amount of Damages for which the Indemnifying Party is liable
under the Merger Agreement and the indemnification provisions contained herein,
and (ii) the Indemnifying Party may not assume control of the defense of a suit
or proceeding involving criminal liability or in
<PAGE> 84
which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not so assume control of such defense, the Indemnified
Party shall control such defense.
The party not controlling such defense (the "NON-CONTROLLING PARTY")
may participate therein at its own expense; provided that if the Indemnifying
Party assumes control of such defense and the Indemnified Party reasonably
concludes that the Indemnifying Party and the Indemnified Party have conflicting
interests or different defenses available with respect to such suit or
proceeding, the reasonable fees and expenses of counsel to the Indemnified Party
shall be considered "Damages" for purposes of this Agreement. The party
controlling such defense (the "CONTROLLING PARTY") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed. The Indemnified Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Exhibit G, an
Indemnified Party shall give written notification (a "CLAIM NOTICE") to the
Indemnifying Party which contains (i) a description and the amount (the "CLAIMED
AMOUNT") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Exhibit G for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages. If the
Indemnified Party is Parent, the Indemnifying Party shall deliver a copy of the
Claim Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the "RESPONSE")
in which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer; provided that if the
Indemnified Party is Parent, the Indemnifying Party and the Indemnified Party
shall deliver to the Escrow Agent, within three days following the delivery of
the Response, a written notice executed by both parties instructing the Escrow
Agent to distribute to Parent such number of Escrow Shares as have an aggregate
Value (as defined below) equal to the Claimed Amount), (ii) agree that the
Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "AGREED AMOUNT") (in which case the Response shall be accompanied by
a payment by the Indemnifying Party to the Indemnified Party of the Agreed
Amount, by check or by wire transfer; provided that if the Indemnified Party is
Parent, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent to
distribute to Parent such number of Escrow Shares as have an aggregate Value
equal to the Agreed Amount) or (iii) dispute that the Indemnified Party is
entitled to receive any of the Claimed Amount. If the Indemnifying Party in the
Response disputes its liability for all or part of the Claimed Amount, the
Indemnifying Party and the Indemnified Party shall follow the procedures set
forth in Section (d) below for the resolution of such dispute (a "DISPUTE"). For
purposes of this Exhibit G, the "Value" of any Escrow Shares delivered in
satisfaction of an indemnity claim shall be the average of the last reported
sale prices per share of Parent Common Stock on the Nasdaq National Market over
the SIXTY-DAY consecutive trading days ending on the second day before the
execution of this Agreement (subject to equitable adjustment in the event of any
stock split, stock dividend, reverse stock split or similar event affecting
Parent Common Stock since the beginning of such five-day period), multiplied by
the number of such Escrow Shares.
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 60-day period, the Indemnifying Party and the Indemnified Party shall
discuss in good faith
<PAGE> 85
the submission of the Dispute to a mutually acceptable alternative dispute
resolution procedure (which may be non-binding or binding upon the parties, as
they agree in advance) (the "ADR PROCEDURE"). In the event the Indemnifying
Party and the Indemnified Party agree upon an ADR Procedure, such parties shall,
in consultation with the chosen dispute resolution service (the "ADR SERVICE"),
promptly agree upon a format and timetable for the ADR Procedure, agree upon the
rules applicable to the ADR Procedure, and promptly undertake the ADR Procedure.
The provisions of this Section (c) shall not obligate the Indemnifying Party and
the Indemnified Party to pursue an ADR Procedure or prevent either such party
from pursuing the Dispute in a court of competent jurisdiction; provided that,
if the Indemnifying Party and the Indemnified Party agree to pursue an ADR
Procedure, neither the Indemnifying Party nor the Indemnified Party may commence
litigation or seek other remedies with respect to the Dispute prior to the
completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnifying Party and the Indemnified Party shall be considered a compromise
negotiation for purposes of federal and state rules of evidence, and all
statements, offers, opinions and disclosures (whether written or oral) made in
the course of the ADR Procedure by or on behalf of the Indemnifying Party, the
Indemnified Party or the ADR Service shall be treated as confidential and, where
appropriate, as privileged work product. Such statements, offers, opinions and
disclosures shall not be discoverable or admissible for any purposes in any
litigation or other proceeding relating to the Dispute (provided that this
sentence shall not be construed to exclude from discovery or admission any
matter that is otherwise discoverable or admissible). The fees and expenses of
any ADR Service used by the Indemnifying Party and the Indemnified Party shall
be shared equally by the Indemnifying Party and the Indemnified Party. If the
Indemnified Party is Parent, the Indemnifying Party and the Indemnified Party
shall deliver to the Escrow Agent, promptly following the resolution of the
Dispute (whether by mutual agreement, pursuant to an ADR Procedure, as a result
of a judicial decision or otherwise), a written notice executed by both parties
instructing the Escrow Agent as to what (if any) portion of the Escrow Shares
shall be distributed to Parent and/or the Indemnifying Stockholders (which
notice shall be consistent with the terms of the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Exhibit G, if a third
party asserts (other than by means of a lawsuit) that an Indemnified Party is
liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article, and (iii) such Indemnified Party
shall be reimbursed, in accordance with the provisions of this Article, for any
such Damages for which it is entitled to indemnification pursuant to this
Article (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article). If the
indemnified party exercised its rights pursuant to this Section (f), it shall
advise the Indemnifying Party prior to exercising such right and in good faith
seek to solicit the views of the Indemnifying Party with respect to any such
matters. Notwithstanding anything in Section 1 above, the payment or
satisfaction of any obligation pursuant to this Section 3(f) shall not itself
evidence the existence or amount of damages.
(f) For purposes of this Section 3 and the last two sentences of
Section 4, (i) if the Indemnifying Stockholders comprise the Indemnifying Party,
any references to the Indemnifying Party (except provisions relating to an
obligation to make or a right to receive any payments provided for in Section 3
or Section 4) shall be deemed to refer to the Indemnification Representative,
and (ii) if the Indemnifying Stockholders comprise the Indemnified Party, any
references to the Indemnified Party (except provisions relating to an obligation
to make or a right to receive any payments provided for in Section 3 or Section
4) shall be deemed to refer to the Indemnification Representative. The
Indemnification Representative shall have full power and authority on behalf of
each Indemnifying Stockholder to take any and all actions on behalf of, execute
any and all instruments on behalf of, and execute or waive any and all rights
of, the Indemnifying Stockholders under this Article. The Indemnification
Representative shall have no liability to any Indemnifying Stockholder for any
action taken or omitted on behalf of the Indemnifying Stockholders pursuant to
this Article.
4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and covenants of the Company, Company Shareholders, Parent and Merger
Sub contained in the Merger Agreement or in any schedule, document, written
statement, certificate or other instrument referred to the Merger Agreement or
in the
<PAGE> 86
Escrow Agreement shall survive the execution and delivery of the Merger
Agreement and the Escrow Agreement, any investigation by or on behalf of the
Company, the Company Shareholders, Parent or Merger Sub, as the case may be, and
the completion of the transactions contemplated the Merger Agreement and shall
terminate on the first anniversary of the Closing or, if sooner, the date of
publication of audited financial statements of Parent for the fiscal year ending
June 30, 2000. Nothing contained in the Merger Agreement shall be deemed to
limit the rights or remedies of Parent with respect to a breach of the
representations of contained in Section 4.15(a) - (g) and (j) of the Merger
Agreement regarding Company Intellectual Property and the representations of the
Company Shareholders contained in Article IV-A of the Merger Agreement.
If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result of a
legal proceeding instituted by or written claim made by a third party, the
Indemnified Party reasonably expects to incur Damages as a result of a breach of
such representation or warranty (an "EXPECTED CLAIM NOTICE"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and Escrow Shares have been retained in escrow after the Release
Date (as defined in the Escrow Agreement) with respect to such Expected Claim
Notice, the Indemnifying Party and the Indemnified Party shall promptly deliver
to the Escrow Agent a written notice executed by both parties instructing the
Escrow Agent to distribute such retained Escrow Shares to the Indemnifying
Stockholders in accordance with the terms of the Escrow Agreement.
5. LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, (i) the aggregate
liability of Parent for Damages under this Section 5 of Exhibit G shall not
exceed cash in an amount equal to the fair market value of the Indemnification
Escrow Shares), and (ii) neither the Indemnifying Stockholders nor Parent shall
be liable under this Exhibit G unless and until the Damages arising out of any
claim arising out of the same event or series of events or events of a similar
nature exceed, with respect to the Company, $5,000 and with respect to Parent,
$175,000 (a "Minor Claim") (it being agreed that such claims are immaterial in
nature and accordingly not subject to indemnification hereunder) and unless and
until the aggregate Damages for which the Indemnifying Stockholders or Parent
would otherwise be liable exceed, with respect to the Company, $100,000 (the
"Company Threshold") and with respect to the Parent, $3,500,000 (at which point
the Indemnifying Stockholders and Parent shall become liable for the aggregate
Damages in excess of, with respect to the Company, $100,000 and with respect to
Parent, $3,500,000). For purposes solely of this Article, all representations
and warranties of the Company in Article IV of the Merger Agreement and all
representations and warranties of Parent and the Merger Subsidiary in Article
III shall be construed as if the term "material" and any reference to Material
Adverse Effect (and variations thereof) were omitted from such representations
and warranties. Nothing contained herein or the Merger Agreement shall be deemed
to limit the rights or remedies of the Parent with respect to a breach of the
representations of the Company contained in Section 4.15(a) - (g) and (j) of the
Merger Agreement regarding Company Intellectual Property and the representations
of the Indemnifying Stockholders contained in Article IV-A of the Merger
Agreement; provided, however,(i) the liability of any Indemnifying Stockholder
in connection with the foregoing representations other than the Intellectual
Property Representations shall not exceed the value of the Indemnification
Escrow Shares deposited to the escrow fund on behalf of such Company Shareholder
pursuant to the Merger Agreement and the Escrow Agreement and (ii) the aggregate
liability of any Company Shareholder in connection with the Intellectual
Property Representations shall be limited in value to one-half of the
Consideration Shares issued to such Company Shareholder, valued at the Merger
Price, payable in Consideration Shares and/or cash; and provided, further, in
each case that Minor Claims and the Company Threshold limitations shall apply
with respect to claims for indemnification based on the foregoing
representations; provided, further, however, that Minor Claims and the Company
Threshold limitations shall not to apply to expenses in excess of $60,000
withdrawn from the escrow account pursuant to Section 9.9 of the Merger
Agreement.
<PAGE> 87
(b) Except with respect to a breach of the Intellectual Property
Representation, a breach of a representations or warranties set forth in Article
IV-A of the Merger Agreement or claims based on fraud, the Escrow Agreement
shall be the exclusive means for Parent to collect any Damages for which it is
entitled to indemnification under this Exhibit G.
(c) Except with respect to a breach of an Intellectual Property
Representation, a breach of a representation or warrant set forth in Article
IV-A of the Merger Agreement or claims based on fraud, after the Closing, the
rights of the Parent under the Escrow Agreement shall be the exclusive remedy of
the Parent with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in the Merger Agreement. The Escrow Agreement is intended to
secure the indemnification obligations of the Indemnifying Stockholders under
the Merger Agreement. Except with respect to claims based on fraud, after the
Closing, the rights of the Indemnifying Stockholders under Exhibit G and the
Merger Agreement shall be as set forth in Section 5(a) of this Exhibit G.
(d) No Indemnifying Stockholder shall have any right of contribution
against the Company or the Surviving Corporation with respect to any breach by
the Company of any of its representations, warranties, covenants or agreements.
The liability of the Indemnifying Stockholders shall be several and not joint
and no such stockholder shall have any liability which exceeds such
stockholder's pro rata portion of the Escrow Shares, except with respect to (i)
any claims based on fraud of an Indemnifying Stockholder or (ii) a breach of
Article IV-A of the Merger Agreement by an Indemnifying Stockholder (a
"Breaching Indemnifying Stockholder") in which case, that portion of the Escrow
Shares held for the benefit of such Breaching Indemnifying Stockholder shall be
available to the Parent in connection with a claim based on (i) or (ii) hereof.
6. DEFINITIONS. Any term used in this Exhibit G not defined herein
shall have the meaning assigned to it in the Merger Agreement.
<PAGE> 88
EXHIBIT H
SILKNET AFFILIATE AGREEMENT
October 5, 1999
Silknet Software, Inc.
50 Phillippe Cote Street
Manchester, NH 03101
InSite Marketing Technology, Inc.
85 River Street
Suite 8
Waltham, Massachusetts 02453
Ladies and Gentlemen:
An Agreement and Plan of Merger and Reorganization dated as of October
5, 1999 (the "Merger Agreement") has been entered into by and among Silknet
Software, Inc. (the "Buyer"), InSite Acquisition Corp. (the "Transitory
Subsidiary") and InSite Marketing Technology, Inc. (the "Company"). The Merger
Agreement provides for the merger of the Transitory Subsidiary with and into the
Company. In accordance with the Merger Agreement, the shares of each class of
capital stock of the Company (collectively, the "Company Stock") shall be
converted into shares of common stock, $.01 par value per share, of the Buyer
(the "Buyer Common Stock"), as described in the Merger Agreement.
The undersigned may be deemed to be an "affiliate" of the Buyer within
the meaning of the rules relating to pooling of interests accounting. In
consideration of the mutual agreements set forth in the Merger Agreement and
hereinafter in this agreement, the undersigned represents and agrees as follows:
1. Pooling Requirements. The undersigned has not, within the 30
days prior to the Effective Time (as defined in the Merger Agreement), sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of, or
reduced the undersigned's interest in or risk relating to, any shares of Buyer
Common Stock or Company Stock owned by the undersigned. In addition, the
undersigned will not sell, transfer, pledge, hypothecate or otherwise dispose
of, or reduce the undersigned's interest in or risk relating to, any shares of
capital stock of the Buyer, until after such time as the Buyer has published
(within the meaning of Accounting Series Release No. 135, as amended, of the
Securities and Exchange Commission) financial results covering at least 30 days
of combined operations of the Buyer and the Company.
2. Miscellaneous.
(a) This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(b) This agreement shall be binding on the undersigned's
successors and assigns, including his heirs, executors and administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for the Buyer.
Very truly yours,
<PAGE> 89
---------------------------------------
Signature
---------------------------------------
Print Name
Accepted:
SILKNET SOFTWARE, INC.
- ---------------------------
(signature)
- ---------------------------
(print name and title)
- ---------------------------
(date)
INSITE MARKETING TECHNOLOGY, INC.
- ---------------------------
(signature)
- ---------------------------
(print name and title)
- ---------------------------
(date)
<PAGE> 90
Exhibit I
INSITE AFFILIATE AGREEMENT
COMPANY AFFILIATE AGREEMENT
October 5, 1999
Silknet Software, Inc.
50 Phillippe Cote Street
Manchester, NH 03101
InSite Marketing Technology, Inc.
85 River Street
Suite 8
Waltham, Massachusetts 02453
Ladies and Gentlemen:
An Agreement and Plan of Merger and Reorganization dated as of October
5, 1999 (the "Merger Agreement") has been entered into by and among Silknet
Software, Inc. (the "Buyer"), InSite Acquisition Corp. (the "Transitory
Subsidiary") and InSite Marketing Technology, Inc. (the "Company"). The Merger
Agreement provides for the merger of the Transitory Subsidiary with and into the
Company (the "Merger"). In accordance with the Merger Agreement, the shares of
each class of capital stock of the Company (collectively, the "Company Stock")
owned by the undersigned at the Effective Time (as defined in the Merger
Agreement) shall be converted into shares of common stock, $.01 par value per
share, of the Buyer (the "Buyer Common Stock"), as described in the Merger
Agreement.
The undersigned may be deemed to be an "affiliate" of the Company
within the meaning of the rules promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules relating to pooling of interests
accounting. In consideration of the mutual agreements set forth in the Merger
Agreement and hereinafter in this agreement, the undersigned represents and
agrees as follows:
1. Pooling Requirements. The undersigned has not, within the 30
days prior to the Effective Time, sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of, or reduced the undersigned's interest in
or risk relating to, any shares of Buyer Common Stock or Company Stock owned by
the undersigned. In addition, the undersigned will not sell, transfer, pledge,
hypothecate or otherwise dispose of, or reduce the undersigned's interest in or
risk relating to, any shares of Buyer Common Stock issued to the undersigned
pursuant to the Merger, or any other shares of capital stock of the Buyer, until
after such time as the Buyer has published (within the meaning of Accounting
Series Release No. 135, as amended, of the Securities and Exchange Commission)
financial results covering at least 30 days of combined operations of the Buyer
and the Company.
2. Tax Matters. The undersigned has, and as of the Effective Time
will have, no plan or intent (a "Plan"), and is not aware of any Plan on the
part of other Company stockholders, to engage in a sale, transfer, pledge,
hypothecation or any other transaction that results in a direct or indirect
transfer of the risk of ownership: (i) to the Buyer, or any person related to
the Buyer, of (A) any shares of Company Common Stock for consideration other
than shares of Buyer Common Stock (or any cash received in lieu of fractional
shares of Company Stock), or (B) any shares of Buyer Common Stock to be received
in the Merger (taking into account not only the shares of Buyer Common Stock to
be received at the Effective Time but also the shares of Buyer Common Stock to
be held pursuant to the Escrow Agreement described in the Agreement); or (ii) to
the Company, or any person related to the Company, of any shares of Company
Stock. For purposes of this Section 2, the determination of whether a person is
related to the Buyer and/or the Company shall be made in accordance with
Treasury Regulation Section 1.368-1(e)(3). If any of the undersigned's
representations in this Section 2 cease to be true at any time prior to the
<PAGE> 91
Effective Time, then the undersigned will deliver to each of the Buyer and the
Company, prior to the Effective Time, a written statement to that effect, signed
by the undersigned.
3. Miscellaneous.
(a) This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(b) This agreement shall be binding on the undersigned's
successors and assigns, including his heirs, executors and administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for the Company.
Very truly yours,
-------------------------------
Signature
-------------------------------
Print Name
<PAGE> 92
Accepted:
SILKNET SOFTWARE, INC.
- ---------------------------
(signature)
- ---------------------------
(print name and title)
- ---------------------------
(date)
INSITE MARKETING TECHNOLOGY, INC.
- ---------------------------
(signature)
- ---------------------------
(print name and title)
- ---------------------------
(date)
<PAGE> 93
EXHIBIT J
LETTER OF TRANSMITTAL
FOR THE SURRENDER OF STOCK
CERTIFICATES REPRESENTING
SHARES OF THE CAPITAL STOCK OF
INSITE MARKETING TECHNOLOGY, INC.
INSTRUCTIONS
This Letter of Transmittal, which includes the "Description of
Certificates Submitted" on page 2 and the two enclosed Internal Revenue Service
Forms W-9 (the "Forms W-9"), should be filled out completely, signed and
submitted together with the undersigned's certificate(s) ("Certificates")
representing shares (the "Shares") of InSite Marketing Technology, Inc.
("InSite") common stock, $.001 par value per share ("InSite Common Stock") to:
INSITE MARKETING TECHNOLOGY, INC.
85 RIVER STREET
SUITE 8
WALTHAM, MA 02453
ATTN: STEFANIA NAPPI
TELEPHONE NUMBER: (781) 894-2400
The method of delivery of this Letter of Transmittal, the Forms W-9 and
Certificate(s) to InSite Marketing Technology, Inc. is at the undersigned's own
risk, but if sent by mail, overnight or certified mail is suggested. THE LETTER
OF TRANSMITTAL, FORMS W-9 AND CERTIFICATE(S) SHOULD BE RETURNED TO STEFANIA
NAPPI AS SOON AS POSSIBLE.
If any Certificate(s) of the undersigned has been mutilated, lost,
stolen or destroyed, contact Stefania Nappi immediately for further
instructions.
You must correctly complete, sign and return the enclosed Forms W-9
because, under U.S. federal income tax law, you must report and certify your
correct taxpayer identification number and further certify that you are not
subject to backup withholding on a Form W-9.
THE EXCHANGE OF INSITE STOCK
This Letter of Transmittal is being delivered to you in connection with
the acquisition of InSite by Silknet Software, Inc., a Delaware corporation
("Silknet"), pursuant to the terms of the Agreement and Plan of Merger and
Reorganization dated as of October 5, 1999 (the "Merger Agreement"), by and
among Silknet, InSite Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Silknet (the "Transitory Sub"), and InSite. Under the
terms of the Merger Agreement, the Transitory Sub will be merged (the "Merger")
with and into InSite, making InSite a subsidiary of Silknet by virtue of the
acquisition.
After receipt of the properly executed Letter of Transmittal, two
properly executed Forms W-9 and the Certificate(s) representing your shares, you
will be entitled to receive 90% of the shares of the Silknet Common Stock into
which your shares of InSite Stock will be converted. The remaining 10% of
Silknet Common Stock into which your shares of InSite Common Stock will be
converted will be placed in escrow. Silknet will not issue any fractional shares
of Silknet Common Stock in the Merger. Instead, if you would otherwise have been
entitled to receive a fraction of a share of Silknet Common Stock, you will
receive cash (without interest) in an amount equal to the product of such
fractional part of Silknet Common Stock multiplied by the sixty-day average of
the closing sale price per share of Silknet Common Stock on the Nasdaq National
Market ending on the second business day immediately preceding the execution of
the Merger Agreement (or $36.397 per share).
REPRESENTATIONS AND WARRANTIES
<PAGE> 94
The undersigned hereby represents and warrants that: (i) the
undersigned is the exclusive record and beneficial owner of the shares of InSite
Common Stock (the "Shares") represented by the enclosed Certificate(s) and is
entitled to all rights evidenced thereby; (ii) has full power and authority to
submit, sell, assign and transfer the Shares evidenced by the Certificate(s)
described below; (iii) the Shares are free and clear of all liens, restrictions
and encumbrances and not subject to any adverse claim. The undersigned will,
upon request, execute any additional documents necessary or desirable to
complete the transfer of the Shares evidenced by the Certificate(s).
All authority herein conferred shall survive the death or incapacity of
the undersigned, and all obligations of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
DESCRIPTION OF CERTIFICATES SUBMITTED
In connection with the Merger, the undersigned encloses herewith and
surrenders the Certificate(s) described below representing the Shares. The
undersigned hereby authorizes and instructs Silknet to prepare in the name(s)
indicated on the signature page attached hereto a certificate representing the
appropriate number of whole shares of Silknet Common Stock according to the
terms of the Merger Agreement, to be issued in exchange for the Shares evidenced
by the enclosed Certificate(s). IF YOU DO NOT RETURN YOUR CERTIFICATE(S)
REPRESENTING THE INSITE COMMON STOCK YOU WILL NOT RECEIVE CERTIFICATE(S) FOR
SHARES OF SILKNET COMMON STOCK IN THE MERGER.
Number of Shares
Exact Name and Address Common Stock represented by
of Registered Holder(s) Certificate No. Certificate
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
---------------------------- ----------------------- ----------------
IMPORTANT: YOUR STOCK CERTIFICATE(S), ALONG WITH THIS LETTER OF TRANSMITTAL,
PROPERLY COMPLETED, AND TWO FORMS W-9, PROPERLY COMPLETED, ARE TO BE MAILED OR
DELIVERED TO STEFANIA NAPPI AT THE ADDRESS SET FORTH IN THE INSTRUCTIONS.
<PAGE> 95
SIGNATURES*
Date:_________________________ By:_________________________________________
Signature of Stockholder or Agent
Print Name:______________________________
______________________________
Daytime Telephone Number
(including Area Code)
Date:_________________________ By:_________________________________________
Signature of Stockholder or Agent
(in case of Certificate(s) owned by
two or more joint holders)
Print Name:______________________________
______________________________
Daytime Telephone Number
(including Area Code)
* THE SIGNATURE (OR SIGNATURES, IN THE CASE OF CERTIFICATE(S) OWNED BY TWO OR
MORE JOINT HOLDERS) ON THIS LETTER OF TRANSMITTAL SHOULD CORRESPOND EXACTLY WITH
THE NAME(S) OF THE REGISTERED HOLDER(S) AS WRITTEN ON THE FACE OF THE
CERTIFICATE(S).
The Certificate(s) need not be endorsed or accompanied by any
instrument of assignment or transfer other than this Letter of Transmittal, if
registered in the name of the person(s) signing this Letter of Transmittal.
If this Letter of Transmittal is signed or if the endorsement on any
Certificate is executed by a trustee, executor, administrator, guardian, officer
of a corporation, partner of a partnership, attorney-in-fact, or in any other
representative or fiduciary capacity, the person signing this Letter of
Transmittal or executing the endorsement must give such person's full title in
such capacity and appropriate evidence of authority to act in such capacity must
be forwarded with any Certificate(s).
<PAGE> 1
EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of October
5, 1999, by and among Silknet Software, Inc., a Delaware corporation (referred
to herein as "Silknet" or the "Indemnified Party"), American Stock Transfer &
Trust Company, as escrow agent (the "Escrow Agent"), and Stefania Nappi (the
"Indemnification Representative") and the shareholders (the "InSite
Shareholders") of InSite Marketing Technology, Inc., a Delaware corporation
("InSite"). Capitalized terms not defined herein shall have the meaning assigned
to them in the Agreement and Plan of Merger and Reorganization dated as of
October 5, 1999 (the "Merger Agreement").
RECITALS
WHEREAS, Silknet, InSite Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Silknet ("Merger Sub"), InSite and certain InSite
Shareholders have entered the Merger Agreement, pursuant to which Merger Sub
will merge with and into InSite (the "Merger"), with InSite surviving the
Merger.
WHEREAS, Section 2.2 of the Merger Agreement provides that at the
Closing 49,713 shares of common stock, par value $.01 per share, of Silknet
(including any dividend or equitable adjustment thereon in the event of a stock
split, stock dividend, stock recombination, recapitalization or like event, the
"Escrow Shares") shall be deposited by Silknet in escrow (such deposit and any
future deposits pursuant to Section 4 herein constituting the "Escrow Fund") and
shall be held as collateral for the indemnification obligations of the InSite
Shareholders under Exhibit G of the Merger Agreement (which Exhibit G is
attached hereto as Appendix A);
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Merger
Agreement; and
WHEREAS, the parties to this Agreement desire to establish the terms
and conditions pursuant to which the Escrow Shares will be deposited into, held
in, and disbursed from, the Escrow Fund.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. ESCROW; INDEMNIFICATION AND VALUE OF ESCROW SHARES.
(a) ESCROW FUND. The Escrow Agent agrees to accept delivery of such
Escrow Shares and to hold such Escrow Shares delivered to it in escrow subject
to the terms and conditions of this Agreement. Silknet and the Indemnification
Representative agree that the Escrow Agent will hold the Escrow Shares subject
to the terms and conditions set forth herein and as set forth in Exhibit G of
the Merger Agreement (collectively, the "Escrow Provisions") until the Escrow
Agent is required to release such Escrow Shares pursuant to the terms of this
Agreement.
(b) INDEMNIFICATION. The Escrow Agent is hereby notified that the
InSite Shareholders have agreed pursuant to the Merger Agreement to indemnify
Silknet in respect of, and hold it harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) ("Damages") incurred or suffered by InSite, as the surviving
corporation of the Merger or Silknet or any affiliate thereof resulting from,
relating to or constituting:
(i) any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of InSite contained in the Merger Agreement or the Company
Disclosure Schedule (as defined in the Merger Agreement);
<PAGE> 2
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(ii) any failure of any InSite Shareholder to have good, valid and
marketable title to the issued and outstanding shares of InSite common stock,
$.001 par value per share (the "InSite Common Stock") issued in the name of such
InSite Shareholder, free and clear of all liens, encumbrances or other security
interests; or
(iii) any claim by a stockholder or former stockholder of InSite, or
any other person or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of InSite; (ii) any rights of a
stockholder (other than the right to receive the Consideration Shares pursuant
to the Merger Agreement or appraisal rights under the applicable provisions of
the Delaware General Corporation Law), including any option, preemptive rights
or rights to notice or to vote; (iii) any rights under the Certificate of
Incorporation or By-laws of InSite; or (iv) any claim that his, her or its
shares were wrongfully repurchased by InSite.
(c) VALUE OF ESCROW SHARES. For purposes of this Agreement and Exhibit
G of the Merger Agreement, the Escrow Shares shall be valued at $36.397 per
share, subject to appropriate equitable adjustment in the event of a stock
split, stock dividend, stock recombination, recapitalization or like event (the
"Escrow Per Share Value"). Silknet agrees to notify the Escrow Agent in writing
as to any such adjustment in the Escrow Per Share Value.
(d) DETERMINATION OF NUMBER OF ESCROW SHARES. Anytime the Escrow Agent
is obligated to release Escrow Shares to Silknet under the terms of this
Agreement, the number of Escrow Shares to be released to Silknet shall be equal
to the amount of the Claim (as defined in Section 2(b)(i) hereof), or other cost
or expense reimbursement to be satisfied pursuant to Section 6 hereof, divided
by the Escrow Per Share Value. If the calculation herein results in a fractional
number of Escrow Shares, such number of Escrow Shares shall be rounded, up or
down, as the case may be, to the nearest whole number of Escrow Shares.
2. RELEASE FROM ESCROW.
(a) DELIVERY OF ESCROW SHARES. On the Effective Date, Silknet will
deliver the Escrow Shares to the Escrow Agent for deposit into the Escrow Fund.
(b) RELEASE TO THE INDEMNIFICATION REPRESENTATIVE.
(i) so long as any portion of the Escrow Fund remains held
pursuant to this Agreement, the Escrow Agent shall deliver to Silknet
that portion of the Escrow Fund equal in value to the amount of claims
for Damages (a "Claim") by Silknet if any, which have been settled or
finally determined between Silknet and the Indemnification
Representative in accordance with Section 6 below;
(ii) All representations and warranties contained in the
Merger Agreement or the Company Disclosure Schedule shall (a) survive
the Closing and any investigation at any time made by or on behalf of
Silknet and (b) shall expire on the earlier of (i) one day prior to the
first anniversary of the Closing Date, or (ii) the issuance of the
first independent audit report concerning the financial statements of
Silknet containing thirty (30) days of combined post-merger operations
of Silknet and the Company (the "Release Date). If Silknet delivers to
the Indemnification Representative, before expiration of a
representation or warranty, either a Notice of Claim (as defined in
Section 5(a) hereof) based upon a breach of such representation or
warranty, or a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, Silknet
reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes
of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim
Notice has been given is definitively withdrawn or resolved in favor of
the Silknet, the Silknet shall promptly so notify the Indemnification
Representative; and if the Silknet has delivered a copy of the Expected
Claim Notice to the Escrow Agent and Escrow Shares have been retained
in escrow after the Release Date with respect to such Expected Claim
Notice, the Indemnification Representative and the Silknet shall
promptly deliver to the Escrow Agent a written notice executed by both
parties instructing the Escrow Agent to distribute such retained Escrow
Shares to the InSite Shareholders.
<PAGE> 3
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(iii) within thirty (30) days following the Release Date, the
Escrow Agent shall deliver to the Indemnification Representative any
remaining portion of the Escrow Fund held pursuant to this Agreement
minus (i) an amount equal in value to the amount of Claims of Silknet
under Section 1(b) and Section 5, if any, that have been settled or
finally determined between Silknet and the Indemnification
Representative on or before the Release Date but have not, as of that
date, been delivered to Silknet hereunder and (ii) an amount equal in
value to the amount of any unresolved Claim by Silknet, if any, set
forth in Silknet's Notice of Claim pursuant to Section 5 below given on
or prior to the Release Date. Such retained portion of the Escrow Fund
shall be retained only until the claim for indemnification pursuant to
which such portion is being retained is settled or finally determined
between Silknet and the Indemnification Representative in accordance
with Section 6 below.
(c) RELEASE OF ESCROW FUND. The Escrow Fund will be held by the Escrow
Agent in accordance with the terms of this Agreement until required to be
released pursuant to this Agreement. Silknet will take such action as may be
necessary to cause released Escrow Shares to be in the name of the InSite
Shareholders.
(d) NO ENCUMBRANCE. Neither the Escrow Fund nor any Escrow Shares, nor
any beneficial interest therein, may be pledged, sold, assigned or transferred,
including by operation of law, by the Indemnification Representative or be taken
or reached by any legal or equitable process in satisfaction of any debt or
other liability of the Indemnification Representative (other than pursuant to
this Escrow Agreement).
3. VOTING RIGHTS. In the event of a meeting or written action of
stockholders of Silknet during the term of this Agreement, the Escrow Agent
shall send to InSite Shareholders copies of any notices, proxies and proxy
material received by it in connection with such meeting. Silknet hereby
undertakes to independently furnish copies of all such notices, proxies and
proxy materials directly to the InSite Shareholders and to cooperate with the
Escrow Agent to facilitate the exercise by the InSite Shareholders of voting
rights in the Escrow Shares. Upon request of an InSite Shareholder, the Escrow
Agent shall execute and deliver a proxy authorizing such InSite Shareholder to
vote the whole number of such InSite Shareholder's Escrow Shares.
4. DIVIDENDS AND DISTRIBUTIONS. All dividends and other distributions
or rights paid on or granted with respect to the Escrow Shares shall be added to
the Escrow Fund and shall be held hereunder upon the same terms as the Escrow
Shares. Any cash in the Escrow Fund shall be held by the Escrow Agent uninvested
in a non-interest bearing account.
5. NOTICE OF CLAIM.
(a) Each notice of a Claim by Silknet (the "Notice of Claim") shall be
delivered in writing at the same time to the Indemnification Representative and
the Escrow Agent, and shall contain the following information:
(i) Silknet's good faith estimate of the reasonably
foreseeable amount of the claimed Damages; (the "Claimed Amount")
(ii) a brief description of the facts, circumstances or events
giving rise to the claimed Damages based on Silknet's good faith belief
thereof; and
(iii) the specific bases upon which indemnification may be
sought.
(b) The Escrow Agent will not release any portion of the Escrow Fund to
Silknet pursuant to a Notice of Claim until such Notice of Claim has been
resolved or is uncontested in accordance with this Agreement.
6. RESOLUTION OF NOTICE OF CLAIM AND RELEASE OF ESCROW FUND. Any Notice
of Claim received by the Indemnification Representative and the Escrow Agent
pursuant to Section 5 above will be resolved as follows:
<PAGE> 4
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(a) Silknet shall give written notification to the Indemnification
Representative of the commencement of any suit or proceeding relating to a third
party claim for which indemnification may be sought. Such notification shall be
given within 20 business days after receipt by the Indemnified Party of notice
of such suit or proceeding, and shall describe in reasonable detail (to the
extent known by the Indemnified Party) the facts constituting the basis for such
suit or proceeding and the amount of the claimed damages; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or liability caused by or arising
out of such failure. Within 20 days after delivery of such notification, the
Indemnification Representative may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party; provided that (i) the
Indemnification Representative may only assume control of such defense if (A) it
acknowledges in writing to the Indemnified Party that any damages, fines, costs
or other liabilities that may be assessed against the Indemnified Party in
connection with such suit or proceeding constitute Damages for which the
Indemnified Party shall be indemnified pursuant to the Merger Agreement, and (B)
the ad damnum is less than or equal to the amount of Damages for which the
InSite Shareholders are liable under the Merger Agreement and the
indemnification provisions contained herein, and (ii) the Indemnification
Representative may not assume control of the defense of a suit or proceeding
involving criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnification Representative does not so assume
control of such defense, the Indemnified Party shall control such defense.
The party not controlling such defense (the "Non-controlling Party")
may participate therein at its own expense; provided that if the Indemnification
Representative assumes control of such defense and the Indemnified Party
reasonably concludes that the InSite Shareholders and the Indemnified Party have
conflicting interests or different defenses available with respect to such suit
or proceeding, the reasonable fees and expenses of counsel to the Indemnified
Party shall be considered "Damages" for purposes of this Agreement. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. Neither the Indemnification Representative nor the InSite
Shareholders shall agree to any settlement of, or the entry of any judgment
arising from, any such suit or proceeding without the prior written consent of
the Indemnified Party, which shall not be unreasonably withheld or delayed. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnification Representative, which shall not be unreasonably
withheld or delayed.
(b) Within 20 days after delivery of a Notice of Claim, the
Indemnification Representative shall deliver to the Indemnified Party a written
response (the "Response") in which the Indemnification Representative shall: (i)
agree that the Indemnified Party is entitled to receive all of the Claimed
Amount, in which case the Indemnification Representative and the Indemnified
Party shall deliver to the Escrow Agent, within three days following the
delivery of the Response, a written notice executed by both parties instructing
the Escrow Agent to distribute to Silknet such number of Escrow Shares as have
an aggregate Escrow Value Per Share equal to the Claimed Amount), (ii) agree
that the Indemnified Party is entitled to receive part, but not all, of the
Claimed Amount (the "Agreed Amount") in which case the Indemnification
Representative and the Indemnified Party shall deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
executed by both parties instructing the Escrow Agent to distribute to Silknet
such number of Escrow Shares as have an aggregate Escrow Value Per Share equal
to the Agreed Amount) or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnification Representative in the
Response disputes the liability of the InSite Shareholders for all or part of
the Claimed Amount, the Indemnification Representative and the Indemnified Party
shall follow the procedures set forth in Section 6(d) below for the resolution
of such dispute (a "Dispute").
(c) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnification Representative and the Indemnified Party
shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnification Representative and the
Indemnified Party
<PAGE> 5
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shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnification Representative and the Indemnified Party agree
upon an ADR Procedure, such parties shall, in consultation with the chosen
dispute resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section (c) shall not obligate the Indemnification Representative and the
Indemnified Party to pursue an ADR Procedure or prevent either such party from
pursuing the Dispute in a court of competent jurisdiction; provided that, if the
Indemnification Representative and the Indemnified Party agree to pursue an ADR
Procedure, neither the Indemnification Representative nor the Indemnified Party
may commence litigation or seek other remedies with respect to the Dispute prior
to the completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnification Representative and the Indemnified Party shall be considered a
compromise negotiation for purposes of federal and state rules of evidence, and
all statements, offers, opinions and disclosures (whether written or oral) made
in the course of the ADR Procedure by or on behalf of the Indemnification
Representative, the Indemnified Party or the ADR Service shall be treated as
confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Indemnification
Representative and the Indemnified Party shall be shared equally by the
Indemnification Representative (and shared among the InSite Shareholders as
provided in the Merger Agreement) and the Indemnified Party. The Indemnification
Representative and the Indemnified Party shall deliver to the Escrow Agent,
promptly following the resolution of the Dispute (whether by mutual agreement,
pursuant to an ADR Procedure, as a result of a judicial decision or otherwise),
a written notice executed by both parties instructing the Escrow Agent as to
what (if any) portion of the Escrow Shares shall be distributed to Silknet
and/or the InSite Shareholders (which notice shall be consistent with the terms
of the resolution of the Dispute).
(d) Notwithstanding the other provisions of this Agreement, if a third
party asserts (other than by means of a lawsuit) that an Indemnified Party is
liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to the Merger Agreement, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Section 6, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Section,
for any such Damages for which it is entitled to indemnification pursuant to the
Merger Agreement (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification), under the terms of the Merger Agreement). If
the indemnified party exercised its rights pursuant to this Section 6, it shall
advise the Indemnifying Party prior to exercising such right and in good faith
seek to solicit the views of the Indemnifying Party with respect to any such
matters. The payment or satisfaction of any obligation pursuant to this Section
shall not itself evidence the existence or amount of damages.
(e) For purposes of this Section 6, any references to the Indemnifying
Party (except provisions relating to an obligation to make or a right to receive
any payments provided for in this Section) shall be deemed to refer to the
Indemnification Representative. The Indemnification Representative shall have
full power and authority on behalf of each InSite Shareholder to take any and
all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the InSite Shareholders under this
Agreement. The Indemnification Representative shall have no liability to any
InSite Shareholder for any action taken or omitted on behalf of the InSite
Shareholders pursuant to this Agreement.
(f) In the event that the Indemnification Representative does not
contest a Notice of Claim (or contests only a portion of the claim) in writing
to the Escrow Agent and Silknet within twenty (20) days after such Notice of
Claim is deemed delivered pursuant to Section 13 below, the Escrow Agent will
(i) promptly release to Silknet in accordance with Silknet's written
instructions that portion of the Escrow Fund equal in value to the
<PAGE> 6
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amount specified in the Notice of Claim (that is not contested) and (ii) notify
the Indemnification Representative of such transfer in writing.
(g) If a lawsuit is commenced as to any matter relating to this
Agreement or the Escrow Shares, all of the parties to this Agreement shall waive
any right to trial by jury.
(h) Silknet need not exhaust any other remedies that may be available
to it but may proceed directly in accordance with the provisions of this
Agreement. Silknet may make claims against the Escrow Fund and in satisfaction
thereof may recover all or a portion of the Escrow Fund, in accordance with and
subject to the terms of this Agreement, without making any other claims directly
against the Indemnification Representative and without rescinding or attempting
to rescind the transactions consummated pursuant to the Merger Agreement. The
assertion of any single claim for indemnification hereunder will not bar Silknet
from asserting other claims hereunder. Notwithstanding the foregoing, if Silknet
elects to make a claim against the Escrow Fund for any breach or default by
InSite under the Merger Agreement arising out of an action against a person not
a party to the Merger Agreement (a "Third Person Claim"), then the
Indemnification Representative shall be subrogated to the rights of Silknet with
respect to such Third Person Claim, and Silknet shall assign all of its rights
in connection with such Third Person Claim necessary for the Indemnification
Representative to assert such claim against such third party.
(i) Whether or not there is a Notice of Claim being disputed pursuant
to Section 6(b) (ii) or (iii) hereof, the Escrow Agent shall release to Silknet,
upon receipt of a Statement of Cost of Investigation (as defined below) that
portion of the Escrow Fund necessary to reimburse Silknet for all costs of
investigation (including reasonable attorneys' fees, costs and expenses)
actually incurred in connection with a Third Person Claim. Such fees, costs and
expenses shall be specified in reasonable detail in a written statement or
statements delivered to the Escrow Agent and the Indemnification Representative
and each such statement shall cover one calendar month (each a "Statement of
Cost of Investigation").
(j) The Escrow Agent is authorized and directed to deliver any Escrow
Funds due the Indemnification Representative under this Agreement in accordance
with Section 2(b) after (i) delivery to Silknet of that portion of the Escrow
Fund equal in value to the aggregate amount of any payments to the Escrow
Agent's or Silknet attorneys' and accountants' and other fees and expenses
incurred on behalf of the Indemnification Representative as contemplated by this
Agreement under Section 9, and (ii) withholding that portion of the Escrow Fund
equal in value to the amount of any costs and expenses payable by Silknet
relating to potential disputes or Damages arising with respect to
indemnification or other obligations of the Indemnification Representative under
this Agreement. Such delivery of all or a portion of the Escrow Fund to the
Indemnification Representative shall be as set forth in writing by the
Indemnification Representative and Silknet.
(k) As to compliance with any of the foregoing restrictions and
limitations, the Escrow Agent shall have no responsibility to independently
calculate or otherwise determine such matters but may rely conclusively on the
other parties hereto in their related requests and instructions.
7. LIMITATIONS ON CLAIMS AND DAMAGES.
(a) Notwithstanding anything to the contrary herein, (i) the InSite
Shareholders shall not be liable under the Merger Agreement unless and until the
Damages arising out of any Claim arising out of the same event or series of
events or events of a similar nature exceed, with respect to InSite, $5,000 (a
"Minor Claim") (it being agreed that such claims are immaterial in nature and
accordingly not subject to indemnification hereunder) and unless and until the
aggregate Damages for which the InSite Shareholders would otherwise be liable
exceed, with respect to InSite, $100,000 (the "Company Threshold") (at which
point the InSite Shareholders shall become liable for the aggregate Damages in
excess of, with respect to InSite, $100,000). For purposes solely of this
Section 7, all representations and warranties of InSite in Article IV of the
Merger Agreement shall be construed as if the term "material" and any reference
to "Company Material Adverse Effect" (and variations thereof) were omitted from
such representations and warranties. Nothing contained herein or the Merger
Agreement shall be deemed to limit the rights or remedies of Silknet with
respect to a breach of the representations of InSite contained in Section
4.15(a) - (g) and (j) of the Merger Agreement regarding Company Intellectual
Property (the "Intellectual Property
<PAGE> 7
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Representations") and the representations of the InSite Shareholders contained
in Article IV-A of the Merger Agreement; provided, however, (i) the aggregate
liability of any InSite Shareholder in connection with the foregoing
representations other than the Intellectual Property Representations shall not
exceed the value of the Escrow Shares held on behalf of such InSite Shareholder
and (ii) the aggregate liability of any InSite Shareholder in connection with
the Intellectual Property Representations shall be limited in value to one-half
of the Consideration Shares issued to such InSite Shareholder, valued at the
Escrow Per Share Value, payable in Consideration Shares and/or cash; and
provided, further, in each case that Minor Claims and the Company Threshold
shall apply with respect to Claims for indemnification based on the foregoing
representations.
Pursuant to Section 9.9 of the Merger Agreement, Silknet shall pay the
reasonable, documented expenses incurred by InSite for accountants and attorneys
incurred on behalf of InSite in connection with the Merger up to a maximum
amount not to exceed $60,000. If such expenses exceed $60,000, Silknet may
withdraw from the Escrow Fund a sufficient number of Escrow Shares (valued at
the Escrow Per Share Value) equal to any amount incurred by Silknet in excess of
$60,000. The Company Threshold and Minor Claims shall not apply to these
expenses incurred by InSite (or paid by Silknet) in excess of $60,000.
(b) Except with respect to a breach of the Intellectual Property
Representations, a breach of a representations or warranties set forth in
Article IV-A of the Merger Agreement or claims based on fraud, this Agreement
shall be the exclusive means for Silknet to collect any Damages for which it is
entitled to indemnification.
(c) Except with respect to a breach of an Intellectual Property
Representation, a breach of a representation or warrant set forth in Article
IV-A of the Merger Agreement or claims based on fraud, after the Closing, the
rights of Silknet under this Agreement shall be the exclusive remedy of Silknet
with respect to claims resulting from or relating to any misrepresentation,
breach of warranty or failure to perform any covenant or agreement contained in
the Merger Agreement. This Agreement is intended to secure the indemnification
obligations of the InSite Shareholders under the Merger Agreement.
(d) No InSite Shareholder shall have any right of contribution against
InSite or the Surviving Corporation with respect to any breach by InSite of any
of its representations, warranties, covenants or agreements. The liability of
the InSite Shareholders shall be several and not joint and no such stockholder
shall have any liability which exceeds such stockholder's pro rata portion of
the Escrow Shares, except with respect to (i) any claims based on fraud of an
InSite Shareholder or (ii) a breach of Article IV-A of the Merger Agreement by
an InSite Shareholder (a "Breaching Indemnifying Shareholder") in which case,
that portion of the Escrow Shares held for the benefit of such Breaching
Indemnifying Shareholder shall be available to Silknet in connection with a
claim based on (i) or (ii) hereof.
8. LIMITATION OF THE ESCROW AGENT'S LIABILITY.
(a) The parties acknowledge and agree that the Escrow Agent shall not
be responsible for any of the agreements referred to herein but shall only be
obligated for the performance of such duties as are specifically set forth
herein. The Escrow Agent (and its directors, officers and employees) will incur
no liability with respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other document
believed by it to be genuine and to have been signed by the proper person (and
shall have no responsibility to determine the authenticity or accuracy thereof),
nor for any other action or inaction, except its own willful misconduct, bad
faith or gross negligence. In no event shall the Escrow Agent be liable for
indirect, special, punitive or consequential damages. The Escrow Agent will not
be responsible for the validity or sufficiency of this Agreement, including the
amount of Escrow Shares. In all questions arising under this Agreement, the
Escrow Agent may rely on the advice of counsel (which may be in-house counsel),
and for anything done, omitted or suffered in good faith by the Escrow Agent
based on such advice, the Escrow Agent will not be liable to anyone. The Escrow
Agent will not be required to take any action under this Agreement involving any
expense unless the payment of such expense is made or provided for in a manner
satisfactory to it.
<PAGE> 8
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(b) In the event conflicting demands are made or notices are served
upon the Escrow Agent with respect to the Escrow Fund or should a third party
make a claim on such Escrow Fund, the Escrow Agent will have the absolute right,
at the Escrow Agent's election, to do any of the following: (i) resign so a
successor can be appointed pursuant to Section 10, (ii) file a suit in
interpleader and obtain an order from a court of competent jurisdiction
requiring the parties to interplead and litigate in such court their several
claims and rights among themselves; or (iii) retain all or any of the Escrow
Fund in its possession, without liability to anyone, until such dispute shall
have been settled as contemplated in Section 6. In no event shall the Escrow
Agent be obligated to take any legal or other action hereunder which might in
its judgment involve any expense or liability of the Escrow Agent unless it
shall have been furnished with acceptable indemnification. In the event an
interpleader suit is brought, the Escrow Agent will thereby be fully released
and discharged from all further obligations imposed upon it under this
Agreement, and the non-prevailing party in such dispute will pay the Escrow
Agent all costs, expenses and reasonable attorneys' fees expended or incurred by
the Escrow Agent pursuant to the exercise of the Escrow Agent's rights under
this Section 8 (such costs, fees and expenses will be treated as extraordinary
fees and expenses for the purposes of Section 9). The resignation of the Escrow
Agent under this section shall not affect the right of the Escrow Agent to be
paid any amount due to the Escrow Agent hereunder.
(c) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
subescrow agent employed by the Escrow Agent than any such book-entry depository
or subescrow agent has to the Escrow Agent, except to the extent that such
action or omission of any book-entry depository or subescrow agent was caused by
the Escrow Agent's own gross negligence, bad faith or willful misconduct.
9. ESCROW AGENT EXPENSES.
(a) All fees and expenses including attorney's fees of the Escrow Agent
incurred in entering into this Agreement and in the ordinary course of
performing its responsibilities (in accordance with the attached fee schedule
which may be subject to change annually) hereunder will be paid by Silknet upon
receipt of a written invoice by the Escrow Agent. Any extraordinary fees and
expenses including attorney's fees, including without limitation any fees or
expenses incurred by the Escrow Agent in connection with a dispute over the
distribution of the Escrow Fund or the validity of a Claim or Claims by Silknet
will be paid by the non-prevailing party in such dispute, provided, however, if
neither party has clearly prevailed, the arbitrator or judge may apportion such
fees and expenses between Silknet and the Indemnification Representative. The
Indemnification Representative's liability for the extraordinary fees and
expenses of the Escrow Agent may be paid by Silknet and recovered as a claim
hereunder out of the Escrow Fund. If Silknet has paid the Indemnification
Representative's portion of such fees and expenses as permitted under this
Section 9 then the Escrow Agent will, upon written demand by Silknet, transfer
to Silknet a portion of the Escrow Fund equal in value to such portion of fees
and expenses.
In the event the Escrow Shares remaining in the Escrow Fund are not
sufficient to pay the extraordinary fees and expenses of the Escrow Agent, as
described in the prior paragraph, or in the event the Escrow Agent incurs any
liability by reason of its acceptance or administration of this Escrow
Agreement, Silknet and the Indemnification Representative, jointly and
severally, agree to indemnify the Escrow Agent, its officers, directors and
employees, against any such liability or for its extraordinary fees and expenses
or costs and expenses, including, without limitation, counsel fees and expenses,
as the case may be. Such joint and several liability shall not diminish the
right of either Silknet or the Indemnification Representative to pursue the
other for payment of such fees and expenses, which shall be shared equally
between Silknet and the Indemnification Representative. Notwithstanding the
foregoing, no indemnity need be paid in the event of the Escrow Agent's gross
negligence, bad faith or willful misconduct.
(b) Silknet and the Indemnification Representative, jointly and
severally, agree to assume any and all obligations imposed now or hereafter by
any applicable tax law with respect to the holding and payment of the Escrow
Fund under this Agreement, and to indemnify and hold the Escrow Agent harmless
from and against any taxes, additions of late payment, interest, penalties and
other expenses, that may be assessed against the Escrow Agent on any such
payment or other activities under this Agreement. Silknet and the
Indemnification Representative undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility
<PAGE> 9
-9-
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Agreement. Silknet and the Indemnification
Representative, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including without limitation the withholding or deduction
or the failure to withhold or deduct same, and any liability for failure to
obtain proper certifications or to properly report to governmental authorities,
to which the Escrow Agent may be or become subject in connection with or which
arises out of this Agreement, including costs and expenses (including reasonable
legal fees), interest and penalties. The provisions of Sections 9(a) and (b)
shall survive the termination of this Agreement.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity as such, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
written notice of resignation to the Indemnification Representative and Silknet,
specifying by not less than thirty (30) days prior written notice of such date
when such resignation will take effect. Silknet will designate a successor
Escrow Agent prior to the expiration of such thirty (30) day period by giving
written notice to the Escrow Agent and the Indemnification Representative.
Silknet may appoint a successor Escrow Agent without the consent of the
Indemnification Representative so long as such successor is a bank or trust
company with assets of at least One Hundred Million Dollars ($100,000,000), and
may appoint any other successor Escrow Agent with the consent of the
Indemnification Representative, which consent will not be unreasonably withheld,
conditioned or delayed. The Escrow Agent will promptly transfer the Escrow Fund
to such designated successor. In the event no successor Escrow Agent is
appointed as described in this Section 10, the Escrow Agent may apply to a court
of competent jurisdiction for the appointment of a successor Escrow Agent.
11. LIMITATION OF RESPONSIBILITY; NOTICES. The Escrow Agent's duties
are limited to those set forth in this Escrow Agreement, and no additional
duties or obligations shall be implied; and the Escrow Agent may rely upon the
written notices delivered to the Escrow Agent hereunder.
12. [INTENTIONALLY LEFT BLANK]
13. NOTICES. Any notice provided for or permitted under this Agreement
will be treated as having been received (a) when delivered personally, (b) when
sent by confirmed telecopy, (c) one (1) day following when sent by commercial
overnight courier with written verification of receipt, or (d) three (3)
business days following when mailed postage prepaid by first class mail, postage
prepaid, to the party to be notified, at the address set forth below, or at such
other place of which the other party has been notified in accordance with the
provisions of this Section 13.
<TABLE>
<S> <C>
Escrow Agent: American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Karen Lazar
Facsimile: (718) 921-8310
Indemnification Representative: Stefania Nappi
InSite Marketing Technology, Inc.
85 River Street
Suite 8
Waltham, MA 02453
Facsimile: (781) 894-4674
With copy to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum
Facsimile: (617) 832-7000
</TABLE>
<PAGE> 10
-10-
<TABLE>
<S> <C>
Silknet: Silknet Software, Inc.
50 Phillippe Cote Street
Manchester, NY 03101
Attention: Patrick J. Scannell, Jr.
With copy to: Testa Hurwitz, & Thibeault, LLP
Oliver Street Tower
125 High Street
Boston, MA 02110
Attention: John Hession
Facsimile: (617) 248-7100
</TABLE>
14. GENERAL.
(a) GOVERNING LAW. It is the intention of the parties hereto that the
internal laws of the State of Delaware shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties to this Agreement.
(b) BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained in this Agreement shall be binding upon,
and inure to the benefit of, the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties to this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears on such counterpart and all of which together shall constitute
one and the same instrument. This Agreement shall become binding when one or
more counterparts of this Agreement, individually or taken together, shall bear
the signatures of all of the parties reflected in this Agreement as signatories.
(d) ENTIRE AGREEMENT. Except as set forth in the Merger Agreement, this
Agreement, the documents referenced in this Agreement and the exhibits to such
documents, constitute the entire understanding and agreement of the parties to
this Agreement with respect to the subject matter of this Agreement and of such
documents and exhibits and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to this Agreement, provided that with respect
to the Escrow Agent, this Agreement (without reference to any other agreements)
sets forth the entire understanding of the parties. Notwithstanding anything to
the contrary in the previous sentence, Silknet and the Indemnification
Representative agree that, in the event that any term(s) or provision(s) of this
Agreement conflict(s) with a term or provision of the Merger Agreement, the
term(s) and condition(s) of the Merger Agreement will control (except with
respect to the responsibilities of the Escrow Agent). The express terms of this
Agreement control and supersede any course of performance or usage of the trade
inconsistent with any of the terms of this Agreement.
(e) WAIVERS. No waiver by any party to this Agreement of any condition
or of any breach of any provision of this Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained in this Agreement.
(f) AMENDMENT. This Agreement may be amended with the written consent
of Silknet, the Escrow Agent and the Indemnification Representative. In
addition, if the Escrow Agent does not agree to an amendment agreed upon by
Silknet and the Indemnification Representative, Silknet will appoint a successor
Escrow Agent in accordance with Section 10.
(g) ARBITRATION. Except as set forth in Section 6 regarding Claims for
Damages, Silknet and the Indemnification Representative agree that any
controversy or claim arising out of, or relating to, the breach of this
<PAGE> 11
-11-
Agreement will be settled by arbitration by, and in accordance with the
applicable Commercial Arbitration Rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The arbitrator(s) will have the right to assess,
against a party or among the parties, as the arbitrator(s) deem reasonable, (i)
administrative fees of the American Arbitration Association, and (ii)
compensation, if any, to the arbitrator(s). Arbitration hearings will be held in
the county where the principal office of the Escrow Agent is located.
(h) CONSENT TO JURISDICTION AND SERVICE. Silknet and the
Indemnification Representative hereby absolutely and irrevocably consent and
submit to the jurisdiction of the courts in the Commonwealth of Massachusetts
and of any Federal court located in said Commonwealth in connection with any
actions of proceeding brought against Silknet and the Indemnification
Representative by the Escrow Agent arising out of or relating to this Escrow
Agreement. In any such action or proceeding, Silknet and the Indemnification
Representative hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and hereby absolutely and
irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Silknet and the Indemnification
Representative, as the case may be, at their respective addresses in accordance
with Section 13 hereof.
(i) FORCE MAJEURE. Neither Silknet nor the Indemnification
Representative nor Escrow Agent shall be responsible for delays or failures in
performance under this Agreement resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
(j) REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
<PAGE> 12
-12-
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year first above written.
SILKNET SOFTWARE, INC.:
By: /s/ James C. Wood
--------------------------------------------
Name: James C. Wood
Title: President & Chief Executive Officer
ESCROW AGENT:
AMERICAN STOCK TRANSFER & TRUST COMPANY
/s/ Herbert J. Lemmer
-------------------------------------------------
By: Herbert J. Lemmer
Title: Vice President
INDEMNIFICATION REPRESENTATIVE
/s/ Stefania Nappi
-------------------------------------------------
Stefania Nappi
<PAGE> 13
APPENDIX A
EXHIBIT G TO THE MERGER AGREEMENT
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
October 5, 1999
To each of the several Stockholders
named in Schedule I hereto
Gentlemen:
An Agreement and Plan of Merger and Reorganization dated as of October
5, 1999 has been entered into by Silknet Software, Inc., a Delaware corporation
(the "Company"), InSite Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of the Company, InSite Marketing Technology, Inc., a Delaware
corporation ("InSite"), and those shareholders of InSite named on the signature
pages thereto (the "Merger Agreement"). As a condition to the closing of the
transactions contemplated by the Merger Agreement, the Company has agreed to
enter into this Registration Rights Agreement with each of you (collectively,
the "InSite Stockholders") and the Company hereby covenants and agrees with each
of you as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean the Common Stock, $.01 par value, of
the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean the shares of Common Stock of
the Company issued in exchange for the acquisition of the outstanding shares of
capital stock of InSite pursuant to the terms of the Merger Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the person who is then the record owner of
Registrable Securities which have not been sold to the public.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Section 4 or Section 5 hereof, including, without
limitation, all registration and filing fees, printing expenses, transfer taxes,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders and
other securityholders, and the expense of any special audits incident to or
required by any such registration.
"Registrable Securities" shall mean (i) all of the Conversion
Shares issued in connection with the Merger Agreement and (ii) any Common Stock
issued in respect of the shares described in clause (i) upon any stock split,
stock dividend, recapitalization or other similar event.
"Restricted Stock" shall mean the Conversion Shares, excluding
Conversion Shares which have been (i) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
<PAGE> 2
- 2 -
disposed of in accordance with the registration statement covering them or (ii)
publicly sold pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933 , as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
2. Restrictive Legend. Each certificate representing Conversion
Shares shall, except as otherwise provided in this Section 2 or in Section 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault,
LLP shall be satisfactory) the securities represented thereby may be publicly
sold without registration under the Securities Act and any applicable state
securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
any Conversion Shares (other than under the circumstances described in Sections
4 or 5), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel satisfactory to the Company (it being agreed that Testa,
Hurwitz & Thibeault, LLP shall be satisfactory) to the effect that the proposed
transfer may be effected without registration under the Securities Act and any
applicable state securities laws, whereupon the holder of such stock shall be
entitled to transfer such stock in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
transfer to one or more partners or members of the transferor (in the case of a
transferor that is a partnership or a limited liability company, respectively)
or to an affiliated corporation (in the case of a transferor that is a
corporation). Each certificate for Conversion Shares transferred as above
provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section.
4. Registration on Form S-3.
(a) The Company shall use its reasonable best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act, in accordance with the provisions of
the Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in this Agreement, the Holders of Registrable Securities shall have
the right to request one (1) registration on Form S-3 (such request shall be in
writing and shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders), provided that in no event shall the Company be required to
register shares with an aggregate market value (measured at the time of the
receipt by the Company of such request) of less than $5,000,000. Upon the
receipt of a request under this Section 4, the Company shall:
<PAGE> 3
- 3 -
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use all reasonable efforts to
effect such registration as may be so requested and as would permit or
facilitate the sale and distribution of such portion of such
Registrable Securities as are specified in such request, together with
such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given
within thirty days after receipt of such written notice from the
Company. If the underwriter managing the offering advises the Holders
who have requested inclusion of their Registrable Securities in such
registration that marketing considerations require a limitation on the
number of shares offered, such limitation shall be imposed pro rata
among such Holders who requested inclusion of Registrable Securities in
such registration according to the number of Registrable Securities
each such Holder requested to be included in such registration. Neither
the Company nor any other shareholder may include shares in a
registration effected under this Section 4 without the consent of the
Holders holding a majority of the Registrable Securities sought to be
included in such registration if the inclusion of shares by the Company
or the other shareholders would limit the number of Registrable
Securities sought to be included by the Holders or reduce the offering
price thereof. No registration initiated by Holders hereunder shall
count as a registration under this Section 4 unless and until it shall
have been declared effective.
(b) The Company shall select the underwriter for an offering
made pursuant to this Section 4.
5. "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) Promptly give to each Holder of Registrable Securities
written notice thereof (which shall include the number of shares the
Company or other security holder proposes to register and, if known,
the name of the proposed underwriter); and
(ii) Use its reasonable best efforts to include in such
registration all the Registrable Securities specified in a written
request or requests, made by any Holder within twenty (20) days after
the date of delivery of the written notice from the Company described
in clause (i) above. If the underwriter advises the Company that
marketing considerations require a limitation on the number of shares
offered pursuant to any registration statement, then the maximum amount
that the underwriter considers saleable shall be apportioned: First, to
the Company to the extent of the shares to be registered for its own
account, if any, second, among the selling shareholders exercising
their demand registration rights to the extent such shareholders
requested securities to be included in the registration statement, and
then pro rata among the selling Holders and all other selling
shareholders according to the number of shares each Holder and
shareholder requested to be included in the registration statement.
(b) The Company shall select the underwriter for an offering
made pursuant to this Section 5.
(c) In addition to the rights granted under Section 4 and
Section 5(a) of this Agreement, the Company hereby agrees that it shall make
commercially reasonable efforts (subject to market conditions) to file with the
Commission a registration statement on Form S-1 within four (4) months of the
closing date under the Merger Agreement, including shares of Common Stock to be
sold on behalf of the Company and/or any holder of registration rights who
notifies the Company of its intention to participate in accordance with the
registration rights provisions contained in (i) Article VI of the Company's
Series C Preferred Stock Purchase Agreement dated as of May 11, 1998, (ii)
Article VI of the Company's Series D Preferred Stock Purchase Agreement dated as
of
<PAGE> 4
- 4 -
February 26, 1999 and (iii) this Agreement, if the reasonably anticipated
aggregate price to the public of the shares of Common Stock to be included in
such registration would exceed $10,000,000 in gross proceeds to the Company
and/or selling securityholders; provided, however, that if the offering is
anticipated to result in gross proceeds of less than $10,000,000 but greater
than $5,000,000, then the holders of Registrable Securities shall be limited to
selling in such offering no more than 30% of their Registrable Securities. In
any case, any such offering must result in gross proceeds of at least $5,000,000
to the Company and/or selling securityholders. As soon practicable following
filing of the registration statement described in the immediately preceding
sentence with the Commission, the Company shall use all commercially reasonable
efforts to cause such registration statement to become effective.
6. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 4 or Section 5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.
7. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder of Registrable Securities included in such registration advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will do the following for the benefit of
such Holders:
(a) Keep such registration effective for a period of one
hundred twenty days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs, and amend or supplement such registration statement and the
prospectus contained therein from time to time to the extent necessary to comply
with the Act and applicable state securities laws;
(b) Use its reasonable best efforts to register or qualify the
Registrable Securities covered by such registration under the applicable
securities or "blue sky" laws of such jurisdictions as the selling shareholders
may reasonably request; provided, that the Company shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to the service of process in suits other than those arising out of such
registration;
(c) Furnish such number of prospectuses, prospectus
supplements or amendments and other documents incident thereto as a Holder from
time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5(c) hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by all of the Holders
included in such registration;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain (i) an opinion, dated the effective date of the
registration statement, of counsel representing the Company for the purposes of
such registration in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of the Registrable Securities and (ii) a
comfort letter from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters in a public issuance of securities, addressed to the underwriters, if
any, and the Holders requesting registration of the Registrable Securities, and
provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders whose
expenses are being paid pursuant to Section 6 hereof to inspect and copy such
corporate documents as such counsel may reasonably request.
8. Indemnification.
(a) The Company will, and hereby does, indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder within the meaning of the Securities Act, with
<PAGE> 5
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respect to which registration, qualification or compliance has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls such underwriter within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or the Exchange Act or
securities act of any state or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, whether or not resulting in any liability, provided
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each other Holder and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of the Securities Act and the
rules and regulations thereunder, each other such Holder and each of their
officers, directors and partners, and each person controlling such Holder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such Holder's directors, officers, partners, persons, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, whether or not resulting in liability, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds received by such Holder upon sale of his securities.
(c) Each party entitled to indemnification under this Section
8 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnifying Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 8 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the reasonable fees and expenses of such
counsel shall be paid by the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which includes an admission of fault on the part of an Indemnified Party or
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified
<PAGE> 6
- 6 -
Party of a release from all liability in respect to such claim or litigation.
Each Indemnified Party shall (i) furnish such information regarding itself or
the claim in question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom and (ii) shall reasonably assist the Indemnifying
Party in any such defense, provided that the Indemnified Party shall be entitled
to be reimbursed by the Indemnifying Party for its out-of-pocket expenses paid
in connection with such assistance.
(d) No Holder shall be required to participate in a
registration pursuant to which it would be required to execute an underwriting
agreement in connection with a registration effected under Section 5 which
imposes indemnification or contribution obligations on such Holder more onerous
than those imposed hereunder; provided, however, that the Company shall not be
deemed to breach the provisions of Section 5 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
9. Information by Holder. Each Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement or otherwise required by applicable state or federal securities
laws.
10. Exception to Registration. The Company shall not be required
to effect a registration under this Agreement if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of Registrable Securities, such Holders may
sell without registration under the Securities Act the Registrable Securities
for which they requested registration under the provisions of the Securities Act
and in the manner and in the quantity in which the Registrable Securities were
proposed to be sold, or (ii) the Company shall have obtained from the Commission
a "no-action" letter to that effect; provided that this Section 10 shall not
apply to sales made under Rule 144(k) or any successor rule promulgated by the
Commission until after the effective date of the Company's initial registration
of shares under the Securities Act. Notwithstanding the foregoing, in no event
shall the provisions of this Section 10 be construed to preclude a Holder of
Registrable Securities from exercising rights under Section 5 for a period of
two (2) years after the effective date of the Company's initial registration of
shares under the Securities Act.
11. Delay of Registration. For a period not to exceed 90 days, the
Company shall not be obligated to prepare and file, or prevented from delaying
or abandoning, a registration statement filed pursuant to this Agreement at any
time when the Company, in its good faith judgment with advice of counsel,
reasonably believes:
(a) that the filing thereof at the time requested, or the
offering of Registrable Shares pursuant thereto, would materially and adversely
affect (i) a pending or scheduled public offering of the Company's securities,
(ii) an acquisition, merger, recapitalization, consolidation, reorganization or
similar transaction by or of the Company, (iii) pre-existing and continuing
negotiations, discussions or pending proposals with respect to any of the
foregoing transactions, or (d) the financial condition of the Company in view of
the disclosure of any pending or threatened litigation, claim, assessment or
governmental investigation which may be required thereby; and
(b) that the failure to disclose any material information with
respect to the foregoing would cause a violation of the Securities Act or the
Exchange Act.
12. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
from and after 90 days following the effective date of the first registration
under the Securities Act filed by the Company for an offering of its securities
to the general public;
<PAGE> 7
- 7 -
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after 90 days following
the effective date of the first registration statement filed by the Company for
an offering of its securities to the general public), and of the Securities Act
and Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
13. Listing Application. If shares of any class of stock of the
Company shall be listed on a national securities exchange, the Company shall, at
its expense, include in its listing application all of the Conversion Shares
owned by any InSite Stockholder.
14. Damages. The Company recognizes and agrees that the holder of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure, any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance based on there
being an adequate remedy at law.
15. Changes in Common Stock. If, and as often as, there is any
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
16. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the certificate of incorporation or the by-laws of the Company or
any provision of any indenture, agreement or other instrument to which it or any
or its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
17. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Restricted Stock), whether so expressed or
not, provided, however, that registration rights conferred herein on the holders
of Restricted Stock shall only inure to the benefit of a transferee of
Restricted Stock if (i) there is transferred to such transferee at least 20% of
the total shares of Restricted Stock originally issued pursuant to the Merger
Agreement to the direct or indirect transferor of such transferee or (ii) such
transferee is a partner, shareholder or affiliate of a party hereto.
<PAGE> 8
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(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
if to the Company or any other party hereto, at the address of
such party set forth in the Merger Agreement;
if to any subsequent holder of Restricted Stock, to it at such
address as may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Restricted Stock) or to
the holders of Restricted Stock (in the case of the Company) in accordance with
the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the outstanding shares of Restricted
Stock.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The obligations of the Company to register shares of
Restricted Stock under Sections 4 or 5 shall terminate on the fifteenth (15th)
anniversary of the date of this Agreement.
(g) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
SILKNET SOFTWARE, INC.
By: /s/ James C. Wood
---------------------------------------
Name: James C. Wood
Title: President, Chief Executive Officer
and Chairman of the Board
<PAGE> 9
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AGREED TO AND ACCEPTED as of the date first above written.
INSITE STOCKHOLDERS:
/s/ John D.C. Little
- ---------------------------
JOHN D.C. LITTLE
37 Conant Road
Lincoln, MA 01773
/s/ Glen L. Urban
- ---------------------------
GLEN L. URBAN
20 Pinebrook Road
Carlisle, MA 01741
JEFFREY STAMEN
6 Conant Road
Weston, MA 02493
By: /s/ Glen L. Urban
---------------------------
Glen L. Urban, under Power of Attorney dated September 29, 1999
______________________________
RON L. CHESLEY
4800 Hwy A1A
#216
Vero Beach, FL 32963
MARC S. GILMAN
1015 Chestnut Street
Manchester, NH 03104
By: /s/ Stefania Nappi
---------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
THOMAS J. GOLIASH
1560 Gulf Boulevard
Penthouse #3
Clearwater, FL 33767
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
MORTON E. GOULDER
97 Ridge Road
PO Box 419
Hollis, NH 03049
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
<PAGE> 10
- 10 -
DAVID J. JODOIN
10 Chelsari Lane
Hampstead, NH 03841
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
JAMES M. KENDALL
676 Reef Road
Vero Beach, FL 32963
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
GEORGE G. SCHWENK
177 Merriam Hill Road
Mason, NH 03048
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
MAURICE SEGALL
1501 Beacon Street
Apt. 1804
Brookline, MA 02446
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
ROBERT F. SPROULL
239 Kenrick Street
Newton, MA 02458-2731
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
FRANCIS H. ZENIE
166 Old Farm Lane
Attleboro, MA 02703
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
<PAGE> 11
- 11 -
JON D. GRUBER
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
J. WYATT GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
LINDSAY D. GRUBER
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
J. PATTERSON MCBAINE
Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
ERIC B. SWERGOLD
c/o Gruber & McBaine
50 Osgood Place - PH
San Francisco, CA 94133
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 30, 1999
JOHN N. LITTLE
158 Woodland Street
Sherborn, MA 01770
By: /s/ John D.C. Little
----------------------------------------
John D.C. Little, under Power of Attorney dated September 29, 1999
<PAGE> 12
- 12 -
SARAH A. LITTLE
14 Montvale Road
Wellesley, MA 02481
By: /s/ John D.C. Little
----------------------------------------
John D.C. Little, under Power of Attorney dated September 30, 1999
THOMAS LITTLE
80 Plymouth Road
Newton, MA 02461
By: /s/ John D.C. Little
----------------------------------------
John D.C. Little, under Power of Attorney dated September 29, 1999
RUEL D. LITTLE
57 Monsen Road
Concord, MA 01742
By: /s/ John D.C. Little
----------------------------------------
John D.C. Little, under Power of Attorney dated September 28, 1999
ATLANTIC MANAGEMENT ASSOCIATES
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
TRUST INVESTMENTS
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
BELCOM LTD.
By: /s/ Glen L. Urban
----------------------------------------
Glen L. Urban, under Power of Attorney dated September 29, 1999
DRANE ASSOCIATES L.P.
By: /s/ Glen L. Urban
----------------------------------------
Glen L. Urban, under Power of Attorney dated September 30, 1999
THE ANTHONY M. HELIES REVOCABLE TRUST
By: /s/ Stefania Nappi
----------------------------------------
Stefania Nappi, under Power of Attorney dated September 29, 1999
<PAGE> 13
- 13 -
HARRIS AND HARRIS GROUP, INC.
By: /s/ Mel P. Melshelmer
----------------------------------------
Name: Mel P. Melshelmer
Title: President
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts:
<TABLE>
<S> <C> <C>
Patrick J. Scannell, Jr. David Fowler Tedd Rodman or Beth Andrix
Chief Financial Officer Vice President of Marketing Schwartz Communications
Silknet Software, Inc. Silknet Software, Inc. (781) 684-0770
(603) 625-0070 (603) 625-0070 [email protected]
[email protected] [email protected]
</TABLE>
SILKNET SOFTWARE ACQUIRES INSITE MARKETING TECHNOLOGY
Agreement Adds eSales and eMarketing Technology and Applications to Silknet's
Customer-centric eBusiness Suite
MANCHESTER, N.H. -- OCTOBER 5, 1999 -- Silknet Software, Inc. (NASDAQ: SILK),
today announced it has acquired privately-held InSite Marketing Technology, Inc.
of Waltham, Mass. Under the terms of the agreement, Silknet will acquire all of
the outstanding common stock and options of InSite in exchange for approximately
592,000 shares of Silknet common stock. The transaction is intended to be
accounted for as a pooling-of-interests transaction. Based on the closing price
of Silknet's common stock for a recent 60-day trading period, the transaction is
valued at approximately $21.5 million.
The acquisition will enable Silknet to expand and enhance the company's existing
e-business product line and service offerings to include InSite's e-marketing
and e-sales applications. Silknet will now be positioned to deliver a completely
integrated set of customer-facing e-business applications that enable companies
to provide Internet-based one-to-one customer assistance and personalization
across the entire spectrum of customer interaction, including service, commerce,
sales and marketing.
InSite will become a wholly-owned subsidiary of Silknet. Stefania Nappi, InSite
president and CEO, will be president of the new subsidiary. In addition, Silknet
announced that InSite Chairman of the Board and co-founder Dr. Glen L. Urban,
world-renowned marketing expert and the former Dean of MIT's Sloan School of
Management, will be joining Silknet's Board of Directors.
"This acquisition will allow us to meet growing marketplace demand for a
complete and integrated suite of customer-facing e-business applications," said
James (Jay) Wood, president and CEO of Silknet. "To fully deliver on the promise
of e-commerce, both brick and mortar companies as well as dot.com businesses are
demanding that every area of customer interaction be fully leveraged. This
acquisition allows us to offer capabilities
<PAGE> 2
-2-
-- more --
that are critical to customer acquisition and retention in the Web economy. We
believe that InSite brings experienced and talented people as well as
world-class technology to Silknet and our e-business solutions. The combination
of InSite's expertise in Web-based sales and marketing and our leadership in
e-service and e-commerce offers terrific synergies."
"I am excited about the benefits that this combination delivers to both our own
customers as well as Silknet's," said Nappi. "As e-commerce becomes ubiquitous,
on-line buyers are becoming increasingly intolerant of companies that can't
cater to their unique needs across the entire customer experience--from learning
about products, to buying, to getting service. Now companies will be able to
deploy integrated, native Internet technologies across the complete spectrum of
the customer relationship. All of us at InSite Marketing Technology look forward
to working with the Silknet team."
COMPANIES WILL DELIVER INTEGRATED PRODUCT OFFERING
The addition of InSite's customer-centric, Web-based marketing and sales
software applications, branded as Trust-Based Marketing(TM) (TBM), enhances
Silknet's suite of e-business solutions. Silknet is now positioned to offer its
customers an integrated line of Web-based e-commerce, customer service, sales
and marketing software that will optimize e-business initiatives by focusing on
the customer experience.
Silknet's e-business solutions allow companies to manage the entire customer
relationship, from initial point of customer interest, to shopping and buying,
to support and service, to personalized promotion, to follow-on purchases.
Silknet's solutions also cover customer self service, e-assisted sales and
service, e-agent assisted sales and service, all integrated across Web, email,
phone or in-store interactions. The result is a customer-centric e-business
solution that focuses on building compelling and enjoyable customer
relationships and experiences.
InSite provides a novel class of e-sales applications that identify the buying
style of the customer and the selling style of the company and dynamically
integrates them to help the customer through the buying process. The underlying
technology uses psychographic and demographic analysis to recognize not only
what the customer would like to buy but also how the customer would like to buy.
It then matches the customer with a virtual assistant that can consult with the
customer on buying the right product. In addition, the InSite software is able
to "recognize" the attitudes and preferences of the customer with more accuracy
than traditional methods, such as collaborative filtering.
InSite's Trusted Advisor(TM) acts as a company's virtual sales force, seamlessly
augmenting an existing Web site. Using Trusted Advisor, customers become engaged
in interactive experiences that demonstrate the customer's expertise, and the
software leads the customer to a purchase decision that matches his/her goals,
thus increasing customer trust in the company and in the sales outcome.
<PAGE> 3
-3-
-- more --
ABOUT INSITE MARKETING TECHNOLOGY, INC.
InSite Marketing Technology is headquartered in Waltham, Mass. and was founded
in 1997 by Dr. Glen L. Urban, prominent marketing expert and former Dean of
MIT's Sloan School of Management. InSite Marketing Technology provides companies
with software that helps to close sales on the Internet by earning each
customer's trust. Companies who use InSite's software put the expertise and
skill of their very best salespeople directly in front of the customer.
ABOUT SILKNET SOFTWARE
Silknet Software (NASDAQ:SILK) provides the industry's leading customer-centric
e-business applications and systems for Global 2000 and dot.com companies such
as Office Depot, Microsoft, Priceline.com, Beyond.com, Sprint, Utility.com,
Inacom, KPMG and Bell Canada. Built from the ground up with Web technologies and
standards, Silknet's software allows companies to build strong customer
relationships through personalized marketing, sales, electronic commerce and
customer support services. Silknet's approach integrates all customer
interactions and data whether across the Web, by phone, through e-mail or in
person, providing the company's agents, partners and the customers with a single
view of their relationship. Silknet is headquartered in Manchester, N.H., with
offices across North America and in Europe. Additional information can be
obtained on the World Wide Web at http://www.silknet.com or by calling Silknet
at (603) 625-0070.
###
SILKNET eSERVICE AND SILKNET eBUSINESS SYSTEM ARE TRADEMARKS OF SILKNET
SOFTWARE. ALL OTHER TRADEMARKS ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS.
This release contains forward-looking statements that are made pursuant to the
"Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995. The forward-looking statements contained in this release are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from Silknet's expectations. If the InSite acquisition is completed,
there can be no assurance that the combined companies can successfully integrate
the acquired businesses, personnel, products or technologies. Silknet's
integration of the InSite business may cause a diversion of management time and
reallocation of resources. There can be no assurance that the InSite
personalization technology can be successfully integrated with Silknet's product
offerings and distribution infrastructure, or that further product research and
development, and additional development expenses, will be required to fully
integrate InSite's products with those of Silknet. There can be no assurances
that revenues will exceed operating expenses, or that sales of the InSite
product will be successful, that Silknet can be successful in reducing expenses
to achieve profitability, or that customers will continue to support the
company's new product initiatives following the integration. Investors are
cautioned that all forward-looking statements involve risks related to the
market acceptance of and demand for the combined company's products, new product
development, impact of competitors, and dependence on third-party distribution
channels.
Additional factors that could cause actual future results to differ materially
from current expectations include the following: fluctuations in customer
demand; the Company's ability to manage its growth; the risk of new product
introductions and customer acceptance of new products; the rapid technological
change which characterizes the Company's markets; the risks associated with
competition; the risks associated with international sales as the Company
expands its markets; and the ability of the Company to compete successfully in
the future, as well as other risks identified in the Company's Securities and
Exchange Commission filings, including but not limited to those appearing under
the caption "Risk Factors" in the Company's recently filed Annual Report on Form
10-K.
