<PAGE> 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZIMBA
I-2 MERGER CORPORATION
AND
INFORMATICA CORPORATION
AUGUST 29, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE MERGER.............................................................1
1.1 The Merger...................................................................1
1.2 Effective Time of the Merger.................................................1
ARTICLE 2 THE SURVIVING CORPORATION..............................................1
2.1 Articles of Incorporation....................................................1
2.2 Bylaws.......................................................................2
2.3 Directors and Officers of Surviving Corporation..............................2
ARTICLE 3 CONVERSION OF SECURITIES...............................................2
3.1 Conversion of Shares.........................................................2
3.2 Options and Warrants.........................................................2
3.3 Restricted Shares............................................................2
3.4 Exchange of Certificates.....................................................2
3.5 Escrow.......................................................................3
3.6 Dividends; Transfer Taxes; Lost Certificates; No Fractional Shares...........3
3.7 Closing of Company Transfer Books............................................4
3.8 Closing......................................................................4
3.9 Supplementary Action.........................................................4
3.10 Dissenting Shares............................................................4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................5
4.1 Due Organization; Good Standing; Authority; Binding Nature of Agreements.....5
4.2 Articles of Incorporation and Bylaws; Records................................6
4.3 Capitalization; Ownership of Stock...........................................6
4.4 Financial Statements.........................................................7
4.5 Absence of Changes...........................................................8
4.6 Title to Assets; Equipment; Real Property, Leases...........................10
4.7 Receivables; Major Customers................................................10
4.8 Accounts Payable; Major Suppliers...........................................11
4.9 Proprietary Assets..........................................................11
4.10 Contracts...................................................................12
4.11 Compliance With Legal Requirements..........................................15
4.12 Governmental Authorizations.................................................15
4.13 Tax Matters.................................................................15
4.14 Employee and Labor Matters..................................................16
4.15 Benefit Plans; ERISA........................................................18
4.16 Environmental Matters.......................................................19
4.17 Sale of Products; Performance of Services...................................20
4.18 Insurance...................................................................20
4.19 Related Party Transactions..................................................21
4.20 Proceedings; Orders.........................................................21
4.21 Non-Contravention; Consents.................................................22
4.22 Brokers.....................................................................23
4.23 Full Disclosure.............................................................23
4.24 Powers of Attorney..........................................................23
4.25 Voting Arrangements.........................................................24
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND MERGER SUB........................................................24
5.1 Due Organization; Good Standing; Authority; Binding Nature of Agreements....24
5.2 Capitalization; Ownership of Stock..........................................24
5.3 Brokers.....................................................................24
5.4 Non-Contravention; Consents.................................................24
5.5 SEC Reports.................................................................25
ARTICLE 6 ADDITIONAL AGREEMENTS.................................................26
6.1 Stock Options and Warrants..................................................26
6.2 Certain Employee Benefit Matters............................................26
6.3 Expenses....................................................................27
6.4 Additional Agreements.......................................................27
6.5 Bridge Financing............................................................27
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER..............................28
7.1 Conditions to Each Party's Obligation to Effect the Merger..................28
7.2 Additional Conditions to Acquiror's and Merger Sub's Obligation to
Consummate the Merger.......................................................28
7.3 Additional Conditions to the Company's Obligation to Consummate the Merger..29
ARTICLE 8 ESCROW AND INDEMNIFICATION............................................30
8.1 Indemnification.............................................................30
8.2 Escrow Fund.................................................................30
8.3 Damage Threshold............................................................31
8.4 Escrow Periods..............................................................31
8.5 Claims......................................................................31
8.6 Valuation...................................................................32
8.7 Objections to Claims........................................................32
8.8 Resolution of Conflicts.....................................................32
8.9 Shareholders' Agent.........................................................33
8.10 Actions of the Shareholders' Agent..........................................34
8.11 Claims......................................................................34
ARTICLE 9 MISCELLANEOUS PROVISIONS..............................................34
9.1 Survival of Representations and Covenants...................................34
9.2 Transfer Taxes..............................................................34
9.3 Notices.....................................................................34
9.4 Time of the Essence.........................................................35
9.5 Headings....................................................................35
9.6 Counterparts................................................................35
9.7 Governing Law...............................................................35
9.8 Waiver......................................................................35
9.9 Amendments..................................................................36
9.10 Severability................................................................36
9.11 Parties in Interest.........................................................36
9.12 Entire Agreement............................................................36
9.13 Construction................................................................36
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
PAGE
----
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
A. Certain Definitions
B. Form of Escrow Agreement
C. Proprietary Information and Inventions Agreement
D. Opinion from Company Counsel
E. Opinion from Acquiror's Counsel
SCHEDULES
---------
I. Disclosure Schedules
<PAGE> 5
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 29, 2000, by and
among Informatica Corporation, a Delaware corporation ("Acquiror"), I-2 Merger
Corporation, a Delaware corporation ("Merger Sub"), and Zimba, a California
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Exhibit A.
WHEREAS, the Boards of Directors of Acquiror, Merger Sub and the Company
each have determined that the acquisition of the Company by Acquiror is in the
best interests of their respective companies and shareholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have agreed to effect the merger provided
for herein upon the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the merger
contemplated herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time Merger Sub shall be merged with and into the Company, the
Company shall be the surviving corporation (the "Surviving Corporation") and the
separate existence of Merger Sub shall thereupon cease (the "Merger"). Without
limiting the generality of the foregoing, at the Effective Time all property,
rights, powers, privileges and franchises of Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
Immediately following the Effective Time, the Surviving Corporation shall be a
wholly-owned subsidiary of Acquiror.
1.2 Effective Time of the Merger. The Merger shall become effective when
a properly executed agreement of merger (the "Agreement of Merger"), in such
form as may be agreed by the parties hereto and as required by the relevant
provisions of the California General Corporation Law (the "CGCL"), is duly filed
with the Secretary of State of the State California and the Secretary of State
of Delaware, which filing shall be made as soon as practicable after the closing
of the Transactions hereof upon satisfaction or waiver of the conditions set
forth in Article 7. When used in this Agreement, the term "Effective Time" shall
mean the date and time at which such Agreement of Merger has been accepted for
filing by the Secretary of State of the State of California or at such later
time as is provided in the Agreement of Merger.
ARTICLE 2
THE SURVIVING CORPORATION
2.1 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation attached as Exhibit A to the Agreement of Merger shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by the CGCL and such Articles of Incorporation.
1
<PAGE> 6
2.2 Bylaws. The Bylaws of the Company, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
2.3 Directors and Officers of Surviving Corporation. The directors of the
Company shall resign effective as of the Effective Time. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial and only
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
ARTICLE 3
CONVERSION OF SECURITIES
3.1 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, and subject to Section 3.4 and
Section 3.10, (i) each share of common stock, no par value per share (the
"Company Common Stock"), (ii) each share of Series A Preferred Stock, no par
value per share (the "Series A Preferred Stock"), and (iii) each share of Series
B Preferred Stock, no par value per share (the "Series B Preferred Stock") of
the Company (collectively, the Common Stock, Series A Preferred Stock, and the
Series B Preferred Stock are referred to herein as the "Company Stock") that is
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive, upon surrender of the certificate formerly
representing such share of Company Stock (the "Certificate"), that number of
shares of the Common Stock of Acquiror, $0.001 par value per share ("Acquiror
Stock") as equals the Exchange Ratio for such class or series, plus, as to the
Series B Preferred Stock, shares of Acquiror Stock equal to the Series B
Preference Amount (as set forth in Section 2(a) of Article III of the Articles
of Incorporation of the Company).
(b) For purposes of calculating the Exchange Ratio, each share of
Company Stock that is held in the treasury of the Company or by any subsidiary
of the Company immediately prior to the Effective Time shall not be so converted
but shall be canceled and retired, and no consideration shall be delivered in
exchange therefor.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of the common stock, $0.001
value per share, of Merger Sub that is issued and outstanding immediately prior
to the Effective Time shall be converted into and continue as one share of the
common stock of the Surviving Corporation.
3.2 Options and Warrants. All outstanding stock options to purchase
Company Stock, whether vested or unvested ("Company Stock Options"), warrants
and convertible securities to purchase Company Stock shall be assumed by
Acquiror in accordance with Section 6.1.
3.3 Restricted Shares. Shares of Company Stock which are subject to
repurchase by the Company in the event the holder thereof ceases to be employed
by the Company shall be converted into Acquiror Stock on the same basis as
provided in Section 3.1 above and shall be registered in such holder's name, but
shall be held by the Company or Acquiror pursuant to the existing agreements in
effect on the date of this Agreement.
3.4 Exchange of Certificates.
2
<PAGE> 7
(a) Within thirty (30) days after the Effective Time, Acquiror
shall make available, and each holder of shares of Company Stock will be
entitled to receive upon surrender to American Stock Transfer, acting as
exchange agent (the "Exchange Agent"), of one or more Certificates, certificates
representing the number of whole shares of Acquiror Stock into which such shares
of Company Stock are converted in the Merger, pursuant to this Section 3.1. The
shares of Acquiror Stock into which the shares of the Company Stock shall be
converted in the Merger shall be deemed to have been issued at the Effective
Time.
(b) Within thirty (30) days after the Effective Time, the Exchange
Agent shall mail to each holder of record of Company Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Acquiror may reasonably specify that are not
inconsistent with the terms of this Agreement) and (ii) instructions for use in
effecting the surrender of one or more Certificates, in exchange for
certificates representing shares of Acquiror Stock. Upon surrender of such
Certificate or Certificates, as the case may be, or cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, the holder of
such Certificate, or Certificates, as the case may be, shall be entitled to
receive in exchange therefor (A) a certificate representing that number of whole
shares of Acquiror Stock less the number of shares of Acquiror Stock to be
deposited into the Escrow Fund pursuant to Section 3.5; (B) any dividends or
other distributions to which such holder is entitled pursuant to Section 3.6;
and (C) a check representing the amount of cash which such holder has the right
to receive in respect of the Certificate, or Certificates, as the case may be,
so surrendered pursuant to Section 3.7 for fractional shares as provided in
Section 3.6(e). Until so surrendered, each outstanding Certificate that, prior
to the Effective Time, represented shares of Company Stock will be deemed from
and after the Effective Time, for all corporate purposes, to evidence ownership
of the number of full shares of Acquiror Stock into which such shares of Company
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 3.6(e).
3.5 Escrow. As security for the Company's and the Shareholders'
indemnification obligations set forth herein, Acquiror will deliver to the
Escrow Agent under an Escrow Agreement dated as of the date hereof by and among
Acquiror, the Shareholders' Agent and the Escrow Agent, the form of which is
attached as Exhibit B (the "Escrow Agreement"), a certificate or certificates
representing ten percent (10%) of the aggregate number of shares of Acquiror
Stock to be issued pursuant to Section 3.1 in respect of Company Stock (the
"Escrow Fund"). Such shares shall be beneficially owned by such holders and such
shares shall be held in escrow on behalf of the Shareholders, on a pro rata
basis, in accordance with each such Shareholder's percentage ownership ("Pro
Rata Portion") of Company Stock immediately prior to the Merger. Such shares
("Escrow Shares") shall be held as security for the Shareholders'
indemnification obligations under Article 8.
3.6 Dividends; Transfer Taxes; Lost Certificates; No Fractional Shares.
(a) No dividends that are declared on shares of Acquiror Stock
after the Effective Time (if any) will be paid to Persons entitled to receive
certificates representing shares of Acquiror Stock until such Persons surrender
their Certificates. Upon such surrender, there shall be paid to the Person in
whose name the certificates representing such shares of Acquiror Stock shall be
issued any dividends which shall have become payable with respect to such shares
of Acquiror Stock between the Effective Time and the time of such surrender. In
no event shall the Person entitled to receive such dividends be entitled to
receive interest on such dividends.
(b) If any certificates for any shares of Acquiror Stock are to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Person requesting such exchange shall (i) pay to the Exchange Agent
3
<PAGE> 8
any transfer or other taxes required by reason of the issuance of certificates
for such shares of Acquiror Stock in a name other than that of the registered
holder of the Certificate surrendered or (ii) establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
(c) In the event any certificate shall have been lost, stolen or
destroyed, upon making of an affidavit of that fact by the Person claiming such
certificate to be lost, stolen or destroyed, Acquiror shall issue the Acquiror
Stock as set forth in Section 3.1. The Board of Directors of Acquiror may, in
its reasonable discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate to give Acquiror
a bond in such sum as it may direct as indemnity against any claim that may be
made against Acquiror with respect to such lost, stolen or destroyed
certificate.
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
shares of Company Stock for any shares of Acquiror Stock or dividends thereon or
the cash payments otherwise due hereunder delivered to a public official
pursuant to applicable escheat laws following the passage of time specified
therein.
(e) Notwithstanding anything herein to the contrary, no fractional
shares of Acquiror Stock shall be issued pursuant to the Merger. In lieu of the
issuance of any such fractional share of Acquiror Stock, cash adjustments will
be paid in respect of any fractional share of Acquiror Stock that would
otherwise be issuable. The amount of such adjustment shall be the product of (i)
such fraction of a share of Acquiror Stock multiplied by (ii) the Closing Date
Moving Average.
3.7 Closing of Company Transfer Books. Except in accordance with Section
3.6(b), the stock transfer books of the Company shall be closed and no transfer
of shares of Company Stock shall thereafter be made at the Effective Time. If
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for certificates representing shares of Acquiror Stock or cash in
accordance with the terms hereof. The holders of shares of Company Stock to be
exchanged for shares of Acquiror Stock pursuant to this Agreement shall cease to
have any rights as shareholders of the Company, except for the right to
surrender such Certificates in exchange for shares of Acquiror Stock as provided
hereunder or such dissenters' rights as are provided under applicable law.
3.8 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morrison & Foerster
LLP, 755 Page Mill Road, Palo Alto, California 94304, concurrently with the
execution of this Agreement.
3.9 Supplementary Action. If, at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of the Company, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
Company in the name of and on behalf of the Company to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving Corporation, and otherwise to carry out
the purposes and provisions of this Agreement.
3.10 Dissenting Shares.
(a) Notwithstanding any provisions of this Agreement to the
contrary, any shares of Company Stock held by a holder who has exercised such
holder's dissenters' rights in accordance with the CGCL and who, as of the
Effective Time, has not effectively withdrawn or lost such dissenter's rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive the consideration
4
<PAGE> 9
described in Section 3.1, but the holder of the Dissenting Shares shall only be
entitled to such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of subsection (a) above, if any
holder of shares of Company Stock who demands dissenters' rights with respect to
such shares shall effectively withdraw or lose (through the failure to perfect
or otherwise) such holder's dissenters' rights under the CGCL, then, as of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represents only the right to receive the
consideration described in Section 3.1, subject in any event to Section 3.5.
(c) The Company shall give Acquiror (i) prompt written notice of
any written demands for payment with respect to any shares of Company Stock
pursuant to dissenters' rights, and any withdrawals of such demands or losses of
such rights, and any other instruments served pursuant to the CGCL, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for dissenters' rights. The Company shall not, except with the prior
written consent of Acquiror, voluntarily make any payment with respect to
demands for dissenters' rights or offer to settle or settle any such demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the disclosure schedule delivered by
the Company to Acquiror at or prior to the execution of this Agreement, a copy
of which is attached hereto as Schedule I and is made a part hereof (the
"Disclosure Schedule"), the parts of which are numbered to correspond to the
Section numbers of this Agreement, the Company hereby represents and warrants to
Acquiror and Merger Sub as follows:
4.1 Due Organization; Good Standing; Authority; Binding Nature of
Agreements.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, and has all
necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; (iii)
to perform its obligations under all Company Contracts; and (iv) to enter into
and perform all of its obligations under the Transactional Agreements.
(b) The Company has never conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or name other than the name set forth in its Articles
of Incorporation, as amended.
(c) The Company is duly qualified and in good standing as a
foreign corporation in each of the jurisdictions in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, and in which any failure to qualify would have a Material Adverse
Effect on the Company. For purposes of this Agreement, the term "Material
Adverse Effect" when used in connection with an Entity means any change, event,
violation, inaccuracy, circumstance or effect that is materially adverse (i) to
the business, assets (including intangible assets), capitalization, operations,
financial condition or results of operations of such Entity taken as a whole
with its subsidiaries; (ii) such Entities' ability to consummate the
transactions contemplated by this Agreement or perform its obligations under
this Agreement; or (iii) the Acquiror's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Surviving Corporation, except to the extent that any such change, event,
violation, inaccuracy, circumstance or effect results from
5
<PAGE> 10
(A) changes in general economic conditions or changes affecting the industry
generally in which such Entity operates that do not affect such Entity in a
disproportionate manner or (B) the Company entering into this Agreement.
(d) Neither the Company nor any of the Shareholders has ever
approved, or commenced any proceeding or made any election contemplating, the
dissolution or liquidation of the Company or the winding up or cessation of the
Company's business or affairs.
(e) The Company has no subsidiaries, and the Company has never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest of any nature in, any Entity.
(f) The execution, delivery and performance of the Transactional
Agreements to which the Company is a party have been duly authorized by all
necessary action on the part of Company, its officers, its Board of Directors,
and its Shareholders.
(g) Each of the Transactional Agreements to which the Company is a
party constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms and conditions.
4.2 Articles of Incorporation and Bylaws; Records.
(a) The Company has delivered to Acquiror accurate and complete
copies of: (i) the Company's articles of incorporation and Bylaws, including all
amendments thereto; (ii) the stock records of the Company; and (iii) the minutes
and other records of the meetings and other proceedings (including any actions
taken by written consent or otherwise without a meeting) of the shareholders of
the Company and the Board of Directors of the Company. There have been no
meetings or other proceedings of the shareholders of the Company or the Board of
Directors of the Company that are not reflected in such minutes or other
records.
(b) There has not been any violation of any of the provisions of
the Company's Articles of Incorporation or Bylaws or of any resolution adopted
by the Company's shareholders or the Company's Board of Directors, and to the
Knowledge of the Company, no event has occurred, and no condition or
circumstance exists, that likely would (with or without notice or lapse of time)
constitute or result directly or indirectly in such a violation.
(c) The books of account, stock records, minute books and other
records of the Company are accurate, up to date and complete, and have been
maintained in accordance with sound and prudent business practices. All of the
records of the Company are in the actual possession and direct or indirect
control of the Company.
4.3 Capitalization; Ownership of Stock. As of the date of this Agreement
and as of the Closing:
(a) The authorized capital stock of the Company consists of forty
million (40,000,000) shares of Common Stock, no par value per share, and twenty
million (20,000,000) shares of Preferred Stock, no par value per share, of which
four million three hundred and seventy five thousand (4,375,000) shares are
designated as "Series A Preferred Stock," twelve million (12,000,000) shares are
designated as "Series B Preferred Stock," and three million six hundred twenty
five thousand (3,625,000) shares are undesignated. As of the date of this
Agreement, the outstanding capital of the Company consists of (i) thirteen
million nine hundred fifteen thousand three hundred seventy five (13,915,375)
6
<PAGE> 11
shares of Common Stock, (ii) four million three hundred seventy four thousand
nine hundred ninety six (4,374,996) shares of Series A Preferred Stock, (iii)
six million five thousand three hundred ninety one (6,005,391) shares of Series
B Preferred Stock, (iv) options to purchase four million eight hundred eighty
two thousand one hundred twenty five (4,882,125) shares of Common Stock, (v)
warrants to purchase two hundred seventy eight thousand six hundred forty nine
(278,649) shares of Common Stock, and (vi) warrants to purchase twelve thousand
eight hundred fifty seven (12,857) shares of Series B Preferred Stock. All of
such Common Stock, Preferred Stock, warrants and options are owned of record by
the shareholders, warrantholders and optionholders, respectively, free and clear
of any Encumbrances. Section 4.3 of the Disclosure Schedule includes a list of
(A) all issued and outstanding shares of Company Stock as of the date hereof,
including the name of the record holder of each share of such Company Stock, and
(B) all Company Stock Options as of the date hereof, including the name of each
holder of Company Stock Options, the date of grant, the number of shares of
Company Stock subject to such options, the vesting commencement date and the
vesting schedule.
(b) All of the shares of Company Stock currently outstanding (i)
have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, and (iii) have been issued in full compliance with all applicable
securities laws and other applicable Legal Requirements. The Company has
delivered to Acquiror accurate and complete copies of the stock certificates
evidencing the currently outstanding shares of Common Stock.
(c) There is no (i) outstanding preemptive right, subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) Contract under which the Company is or may become obligated
to sell or otherwise issue any shares of its capital stock or any other
securities; or (iv) to the Company's Knowledge, condition or circumstance that
likely would directly or indirectly give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of the
Company.
(d) The Company has neither repurchased, redeemed or otherwise
reacquired, and has not agreed, committed or offered (in writing or otherwise)
to reacquire, any shares of capital stock or other securities. Any securities
reacquired by the Company were (or will have been) reacquired in full compliance
with the applicable provisions of all applicable Legal Requirements.
4.4 Financial Statements.
(a) The Company has delivered to Acquiror the following financial
statements and notes (collectively, the "Financial Statements"):
(i) the unaudited balance sheet of the Company as of
December 31, 1999, and the related unaudited statements of operations of the
Company as of December 31, 1999; and
(ii) the unaudited balance sheets of the Company as of July
31, 2000 (the "Unaudited Interim Balance Sheet") and related unaudited
statements of operations, for the month then ended.
(b) The Financial Statements are accurate and complete in all
material respects. The Financial Statements are in accordance with the books and
records of the Company, have been prepared on a consistent basis, and present
fairly the financial position of the Company as of the respective dates thereof
and the results of operations, subject, in the case of the unaudited financial
statements, to normal
7
<PAGE> 12
recurring year-end adjustments, the effect of which will not be material, and
the absence of notes and statements of cash flows and changes in shareholders'
equity.
(c) At the date of the Unaudited Interim Balance Sheet, (i) the
Company had no Liabilities of any nature (matured or unmatured, fixed or
contingent) required by GAAP consistently applied to be provided for in such
Unaudited Interim Balance Sheet which were not provided for, (ii) the Company
had no material Liabilities of any nature (matured or unmatured, fixed or
contingent) which were not required by GAAP to be provided for in the Unaudited
Interim Balance Sheet and (iii) all reserves established by the Company and set
forth in the Unaudited Interim Balance Sheet were adequate for the purposes for
which they were established.
(d) As of the date of this Agreement, the Company has no
Liabilities in excess of $20,000 individually or in the aggregate, except for
(i) Liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; and (ii) accounts payable and Liabilities (of the type
required to be reflected as current liabilities in the "liabilities" column of a
balance sheet prepared in accordance with GAAP) incurred and accrued by the
Company in the Ordinary Course of Business since the date of the Unaudited
Interim Balance Sheet; and (iii) those incurred in connection with the execution
of this Agreement.
4.5 Absence of Changes. Since July 31, 2000:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations, financial
performance, results of operations or prospects, and no event has occurred that
would have a Material Adverse Effect on the Company's business, condition,
assets, liabilities, operations, financial performance, results of operations or
prospects;
(b) there has not been any material loss, damage or destruction
to, or any interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
(c) the Company has not (i) declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold or otherwise issued any shares of
capital stock or any other securities;
(e) the Company has not amended its Articles of Incorporation or
Bylaws and has not effected or been a party to any recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) the Company has not purchased or otherwise acquired any asset
from any other Person, except for assets acquired by the Company in the Ordinary
Course of Business;
(g) the Company has not leased or licensed any asset from any
other Person except for assets leased or licensed in the Ordinary Course of
Business;
(h) the Company has not made any individual capital expenditure,
or series of related capital expenditures, measured by invoice amount, in excess
of $50,000;
8
<PAGE> 13
(i) the Company has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company from its inventory in the Ordinary Course of Business;
(j) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness, except in the Ordinary Course of Business;
(k) the Company has not pledged or hypothecated any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except in the Ordinary Course of Business;
(l) the Company has not made any loan or advance to any other
Person, including without limitation, any shareholder of the Company;
(m) neither the Company nor any Employee Leasing Organization (i)
established or adopted any Employee Benefit Plan or (ii) paid any bonus or made
any profit sharing or similar payment to, or increased the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees other than reasonable
compensation payments and increases for non-officer employees consistent with
the Company's review and compensation policies in force prior to the date of
this Agreement;
(n) the Company has not entered into, and neither the Company nor
any of the assets owned or used by the Company has become bound by, any
Contract, except in the Ordinary Course of Business;
(o) no material Contract by which the Company or any of the assets
owned or used by the Company is or was bound, or under which the Company has or
had any rights or interest, has been amended or terminated, except in the
Ordinary Course of Business;
(p) except any equipment lines of credit not exceeding the
aggregate amount of $150,000 (a complete list of which is set forth in Section
4.5(q) of the Disclosure Schedule), there has been no borrowing or agreement to
borrow by the Company or change in the contingent obligations of the Company by
way of guaranty, endorsement, indemnity, warranty or otherwise or grant of a
mortgage or security interest in any property of the Company, and the Company
has not incurred, assumed or otherwise become subject to any Liabilities, other
than accounts payable (of the type required to be reflected as current
liabilities on a balance sheet prepared in accordance with GAAP) in the Ordinary
Course of Business;
(q) the Company has not discharged any Encumbrance or discharged
or paid any indebtedness or other Liability, except any that (i) are reflected
as current liabilities in the Unaudited Interim Balance Sheet or have been
incurred by the Company since the date thereof in the Ordinary Course of
Business, and (ii) have been discharged or paid in the Ordinary Course of
Business;
(r) the Company has not forgiven any debt or otherwise released or
waived any right or claim;
(s) the Company has not changed any of its methods of accounting
or accounting practices in any material respect;
9
<PAGE> 14
(t) the Company has not entered into any transaction or taken any
other action outside the Ordinary Course of Business; and
(u) the Company has not agreed or committed (in writing or
otherwise) to take any of the actions referred to in clauses (c) through (t)
above.
4.6 Title to Assets; Equipment; Real Property, Leases.
(a) The Company owns, and has good, valid and marketable title to,
all assets it purports to own, including (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets acquired by the Company since
the date of the Unaudited Interim Balance Sheet; and (iii) all other assets
reflected in the Company's books and records as being owned by the Company; all
except any assets sold or otherwise disposed of since the date of the Unaudited
Interim Balance Sheet in the Ordinary Course of Business. All of said assets are
owned by the Company free and clear of any Encumbrances, except liens for
current taxes and assessments not delinquent.
(b) The Company does not own any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Section 4.6(d) of the Disclosure Schedule (the "Leased Premises").
The Company has delivered to Acquiror complete copies of all such leases.
(c) Section 4.6(c) of the Disclosure Schedule identifies all
Personal property assets that are being leased or licensed to the Company.
(d) All leases pursuant to which the Company leases real or
Personal property are valid and effective in all material respects and
accordance with their respective terms and, to the Company's Knowledge, there
exists no material default thereunder or occurrence or condition which could
result in a material default thereunder or termination thereof.
(e) The Company owns, or has a valid leasehold interest in or
license to, all material assets necessary for the conduct of its business as
presently conducted.
4.7 Receivables; Major Customers.
(a) Section 4.7(a) of the Disclosure Schedule provides a
materially accurate and complete breakdown and aging of all accounts and notes
receivable and a list of all other receivables of the Company as of July 31,
2000.
(b) Section 4.7(b) of the Disclosure Schedule accurately
identifies in all material respects, and provides a materially accurate and
complete list of the revenues received from, each customer or other Person that
accounted for more than $25,000 of the gross revenues of the Company during
fiscal year 1999 and the seven months ended July 31, 2000. The Company has not
received any notice or other communication (in writing or otherwise), or
received any other information, indicating that any customer or other Person
identified in Section 4.7(b) of the Disclosure Schedule may cease dealing with
the Company or may otherwise substantially reduce the volume of business
transacted by such Person with the Company below historical levels.
(c) All existing accounts receivable of the Company (including
those accounts receivable reflected on the Unaudited Interim Balance Sheet that
have not yet been collected and those accounts receivable that have arisen since
such date and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from bona fide transactions entered into in the
Ordinary
10
<PAGE> 15
Course of Business; and (ii) are current and in the aggregate, the Company to
its Knowledge, has no reason to expect they will not be collected in full
(without any counterclaim or setoff), net of reserves, on or before the later of
ninety (90) days from the date of invoice or sixty (60) days from the date
hereof.
(d) The Company has provided to Acquiror a copy of the Company's
standard form of customer contract for each product or service it offers to
customers, and all of the Company's customer relationships are governed by such
standard contracts. The Company has no oral contracts or agreements to deliver
products or provide services.
4.8 Accounts Payable; Major Suppliers.
(a) Section 4.8 of the Disclosure Schedule (i) provides a
materially accurate and complete breakdown and aging of the Company's accounts
payable as of July 31, 2000; (ii) provides a materially accurate and complete
breakdown of all customer deposits and other deposits held by the Company as of
July 31, 2000; and (iii) provides a materially accurate and complete breakdown
of the Company's long term debt as of the date of this Agreement.
(b) Section 4.8 of the Disclosure Schedule accurately identifies
in all material respects, and provides a materially accurate and complete
breakdown of, the amounts paid to each supplier or other Person, that received
more than $20,000 from the Company in the fiscal year ended December 31, 1999 or
the period from January 1, 2000 to July 31, 2000, other than amounts paid to
employees or consultants and described in Section 4.14(a) or (b) of the
Disclosure Schedule. Each such supplier or other Person has executed and
delivered to the Company a valid and binding invoice or other agreement with the
Company relating to the services or supplies to which such amounts relate.
4.9 Proprietary Assets.
(a) Schedule 4.9(a) of the Disclosure Schedule sets forth each of
the following Proprietary Assets owned by or licensed to the Company or
otherwise used in connection with the Company's business except for "off the
shelf" or other software widely available through regular commercial
distribution channels: all United States and foreign (i) patent and patent
applications; (ii) registered trademarks and trademark applications; (iii)
registered copyrights and applications for copyright registration; (iv) mask
work registrations and applications to register mask works; and (v) any other
such Proprietary Asset of the Company that is the subject of an application to,
or certificate or registration issued by, any state, government or other public
legal authority.
(b) All material designs, drawings, specifications, schematics,
designs, source code, object code, scripts, documentation, flow charts,
diagrams, data lists, databases, compilations and information incorporating,
embodying or reflecting any of the Proprietary Assets of the Company at any
stage of their development were written, developed and created solely and
exclusively by employees of the Company without the assistance of any third
party or Entity or were created by third parties who assigned ownership of their
rights to the Company by means of valid and enforceable confidentiality and
invention assignment agreements, copies of which have been made available to
Acquiror. The Company has taken all reasonable measures and precautions
necessary to protect the confidentiality and value of each Proprietary Asset
that is owned by or licensed to the Company or that is otherwise used in
connection with the Company's business.
(c) The Company has not granted any third party any right to
manufacture, reproduce, license, use, distribute, market or exploit any of its
Proprietary Assets or any adaptations, translations, or derivative works based
on the Proprietary Assets of the Company or any portion thereof.
11
<PAGE> 16
No Proprietary Asset is a "derivative work" of any original work currently owned
by a third party as the term "derivative work" is defined in the United States
Copyright Act, Title 17, U.S.C. Section 101.
(d) All current and former employees and consultants of the
Company (including Girish Pancha and Adam Wilson) have executed a Proprietary
Information and Inventions Agreement substantially in the form attached as
Exhibit B. Such agreements constitute valid and binding obligations of the
Company and such Person, enforceable in accordance with their respective terms.
To the Knowledge of the Company, no such employee or consultant is in violation
thereof. The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any Company employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information identified in Schedule 4.9(d) of the
Disclosure Schedule, which have been assigned to the Company.
(e) To the Company's Knowledge, none of the Proprietary Assets
owned or used by the Company violate or infringe or, if used in the Company's
business as currently proposed to be conducted, would violate or infringe, any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. To the Company's Knowledge, the
Company is not infringing and has not at any time infringed or received any
written notice or other communication (in writing or otherwise) of any actual,
alleged, possible or potential infringement of any Proprietary Asset owned or
used by any other Person. To the Company's Knowledge, no Person is infringing,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Proprietary Asset owned or used by Company. The Company has
not entered into any agreement to indemnify any other Person against any charge
of infringement, misappropriation or other conflict with respect to any
Proprietary Asset.
(f) There are no royalties, honoraria, fees or other payments
payable by the Company to any Person by reason of the ownership, use, license,
sale or disposition of any Proprietary Asset of the Company.
(g) The Proprietary Assets identified or described in Section 4.9
of the Disclosure Schedule constitute all of the Proprietary Assets necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted and the Company owns, or has the right to use, and
to license others to use all such Proprietary Assets. Such ownership or right to
use, and to license others to use, are free and clear of, and without liability
under, all claims and right of third parties (other than the licensor).
(h) All proprietary software developed by the Company and
currently sold under license, licensed or otherwise used by the Company in its
business operates in substantial conformity with its product specifications and
reviewer's guide, provided by the Company, and does not contain any timer,
clock, counter, or other limiting design, instruction or routine, that would
(when used by such user without substantial unauthorized modification by such
user), without the user's knowledge and consent, erase data or programming code
or cause such software to become inoperable or otherwise incapable of being used
in substantial conformity with its product specifications and reviewer's guide.
4.10 Contracts.
(a) Section 4.10 of the Disclosure Schedule lists each of the
following Company Contracts:
(i) any Company Contract or series of related Company
Contracts requiring in the aggregate payments after the date hereof by or to the
Company of more than $35,000;
12
<PAGE> 17
(ii) any Company Contract with or for the benefit of any
current or former officer, director, shareholder, employee or consultant of the
Company;
(iii) any Company Contract with any labor union or
association representing any employee of the Company;
(iv) any material Company Contract for the purchase or sale
of materials, supplies, equipment, merchandise or services that contain an
escalation, renegotiation or redetermination clause or that obligate the Company
to purchase all or substantially all of its requirements of a particular product
from a supplier, or for periodic minimum purchases of a particular product from
a supplier;
(v) any Company Contract for sale of any of the assets or
properties of the Company other than in the Ordinary Course of Business or for
the grant to any Person of any options, rights of first refusal, or preferential
or similar rights to purchase any such assets or properties;
(vi) any agreement of surety, guarantee or indemnification,
other than agreements in the Ordinary Course of Business with respect to
obligations in an aggregate amount not in excess of $25,000;
(vii) any Company Contract containing covenants of the
Company not to compete in any line of business, in any geographic area or with
any Person or covenants of any other Person not to compete with the Company or
in any line of business of the Company;
(viii) any Company Contract granting or restricting the
right of the Company to use any Proprietary Assets;
(ix) any material Company Contract with customers or
suppliers for the sharing of fees, the rebating of charges or other similar
arrangements;
(x) any Company Contract with any holder of securities of
the Company as such (including, without limitation, any Company Contract
containing an obligation to register any of such securities under any federal or
state securities laws);
(xi) any Company Contract obligating the Company to deliver
services or product enhancements or containing a "most favored nation" pricing
clause;
(xii) any Company Contract relating to the acquisition by
the Company of any operating business or the capital stock of any other Person;
(xiii) any Company Contract requiring the payment to any
Person of a brokerage or sales commission or a finder's or referral fee (other
than arrangements to pay commission or fees to employees in the Ordinary Course
of Business);
(xiv) any Company Contract or note relating to or
evidencing outstanding indebtedness for borrowed money;
(xv) any lease, sublease or other Company Contract under
which the Company is lessor or lessee of any real property or equipment or other
tangible property with respect to obligations in excess of $25,000; and
13
<PAGE> 18
(xvi) any other material Company Contract whether or not
made in the Ordinary Course of Business.
Except as identified in Section 4.10 of the Disclosure Schedule, all such
Company Contracts are in writing. The Company has delivered to Acquiror accurate
and complete copies of all written Company Contracts identified, or required to
be identified, in Section 4.10 of the Disclosure Schedule, including all
amendments thereto.
(b) Each Company Contract is valid and in full force and effect,
and is enforceable by the Company in accordance with its material terms, except
as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity.
(c) Neither the Company nor, to the Company's actual knowledge,
any party to a Company Contract is in default under any Company Contract. To the
Knowledge of the Company, no event has occurred, and no circumstance or
condition exists, that would (with or without notice or lapse of time) (i)
result in a violation or breach of any of the provisions of any Company
Contract, (ii) give any Person the right to declare a default or exercise any
remedy or hinder any Company Contract, (iii) give any Person the right to
accelerate the maturity or performance of any Company Contract, or (iv) give any
Person the right to cancel, terminate or modify any Company Contract. The
Company has not waived any of its rights under any Company Contract, except in
the Ordinary Course of Business.
(d) Intentionally omitted.
(e) (i) The Company has never guaranteed or otherwise agreed to
cause, insure or become liable for, and has never pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of any
other Person except in the Ordinary Course of Business; and (ii) the Company has
never been a party to or bound by (A) any joint venture agreement, partnership
agreement, profit sharing agreement, cost sharing agreement, loss sharing
agreement or similar Contract, or (B) any Contract that creates or grants to any
Person, or provides for the creation or grant of, any stock appreciation right,
phantom stock right or similar right or interest.
(f) To the Knowledge of the Company, the performance of the
Company Contracts will not result in any violation of or failure to comply with
any Legal Requirement.
(g) Schedule 4.10(g) of the Disclosure Schedule identifies and
provides an accurate and brief description of each proposed Contract as to which
any bid, offer, written proposal, term sheet or similar document has been
submitted or received by the Company and which is currently pending that would
commit the Company to deliver goods or provide services with a value in excess
of $25,000 and is outstanding.
(h) No party to any Company Contract has notified the Company or
made a claim to the effect that the Company has failed to perform an obligation
thereunder. In addition, to the Knowledge of the Company, there is no plan,
intention or indication of any contracting party to any Company Contract to
cause the termination, cancellation or modification of such Contract or to
reduce or otherwise change its activity thereunder so as to have a Material
Adverse Effect on the benefits derived or expected to be derived therefrom by
the Company.
14
<PAGE> 19
4.11 Compliance With Legal Requirements.
(a) The Company is in material compliance with each Legal
Requirement that is applicable to it or to the conduct of its business or the
ownership or use of any of its assets and any failure to comply would not have a
Material Adverse Effect on the Company's business.
(b) The Company has not received at any time any written notice or
other communication (in writing or otherwise) from any Governmental Body, or any
other Person, regarding (i) any actual, alleged, possible or potential violation
of, or failure to comply with, any Legal Requirement, or (ii) any actual,
alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature.
4.12 Governmental Authorizations.
(a) Section 4.12(a) of the Disclosure Schedule identifies each
Governmental Authorization that is held by the Company. The Company has
delivered to Acquiror accurate and complete copies of all of the Governmental
Authorizations identified, or required to be identified, in Section 4.12(a) of
the Disclosure Schedule, including all renewals thereof and all amendments
thereto. Each Governmental Authorization identified or required to be identified
in Section 4.12(a) of the Disclosure Schedule is valid and in full force and
effect.
(b) The Governmental Authorizations identified in Section 4.12(a)
of the Disclosure Schedule constitute all of the Governmental Authorizations
necessary (i) to enable the Company to conduct its business in the manner in
which its business is currently being conducted and (ii) to permit the Company
to own and use its assets in the manner in which they are currently owned and
used.
4.13 Tax Matters.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Company (whether pursuant to any Tax
Return or otherwise) has been duly paid in full on a timely basis. Any Tax
required to have been withheld or collected by the Company has been duly
withheld and collected, and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) Section 4.13(b) of the Disclosure Schedule accurately
identifies all Tax Returns required to be filed by or on behalf of the Company
with any Governmental Body with respect to any taxable period ending on or
before the date hereof ("Company Returns"). All Company Returns (i) have been or
will be filed when due, and (ii) have been, or will be when filed, accurately
and completely prepared in material compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the date hereof, and all amounts otherwise payable in connection with the
Company Returns on or before the date hereof, have been paid. The Company has
delivered to Acquiror accurate and complete copies of Company Returns filed by
the Company since 1997.
(c) The Company's liability for unpaid Taxes for all periods
ending on or before the date of the Financial Statements does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred taxes) reported in the Financial Statements.
The Company has established in the Ordinary Course of Business reserves for the
payment of all Taxes for the period from the date of the Financial Statements
through the date hereof and has disclosed the dollar amount of such reserves to
the Acquiror.
15
<PAGE> 20
(d) Section 4.13(d) of the Disclosure Schedule accurately
identifies each examination or audit of any Company Return that has been
conducted by any Governmental Body. The Company has delivered to Acquiror
accurate and complete copies of all audit reports and similar documents relating
to Company Returns. No extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from the Company.
(e) No claim or other Proceeding is pending or to the Company's
Knowledge has been threatened against or with respect to Company in respect of
any Tax. There are no unsatisfied Liabilities for Taxes (including liabilities
for interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by the Company.
The Company has not entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code. The Company has not been, and will not
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing. The Company is
in compliance with the terms and conditions of any applicable Tax exemptions,
Tax agreements or Tax orders of any Governmental Body to which it may be subject
or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse affect on such compliance.
(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, individually or collectively, could
give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.
(g) Except for those options set forth on Section 4.13(g) of the
Disclosure Schedules, to the Company's Knowledge, all stock options that the
Company has granted, were at the time of such grant, and are, as of the date of
this Agreement, treated as incentive stock options under Section 421 of the Code
and meet the requirements of Section 422 of the Code.
(h) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(i) The Company is not liable for Taxes incurred by any
individual, trust, corporation, partnership or other Entity other than Company,
either as a transferee or pursuant to Treasury Regulations Section 1.1502-6, or
pursuant to any other provision of federal, state or local law or regulation.
The Company is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
(j) The Company is not a party to any joint venture, partnership
or other arrangement or contract which could be treated as a partnership for
United States federal income tax purposes.
4.14 Employee and Labor Matters.
(a) Section 4.14(a) of the Disclosure Schedule accurately sets
forth, with respect to each employee of the Company (including any employee of
the Company who is on a leave of absence or on layoff status and any Leased
Employee) (i) the name of such employee and the date as of which such employee
was originally hired by the Company (or assigned to work at the Company by an
Employee Leasing Organization); (ii) such employee's title; (iii) such
employee's annualized compensation as of the
16
<PAGE> 21
date of this Agreement; (iv) each Current Benefit Plan in which such employee
participates or is eligible to participate; and (v) any Governmental
Authorization that is held by such employee and that is used in connection with
the Company's business.
(b) Schedule 4.14(b) of the Disclosure Schedule contains a list of
individuals who are currently performing services for the Company and are
classified by the Company as "consultants" or "independent contractors," and the
respective compensation of each such "consultant" or "independent contractor."
(c) There is no former employee of the Company or former Leased
Employee who is receiving or is scheduled to receive (or whose spouse or other
dependent is receiving or is scheduled to receive) any benefits (whether from
the Company or otherwise) relating to such former employee's employment with the
Company.
(d) The Company is not a party to or bound by any employment
agreement other than for at-will employment or any union contract, collective
bargaining agreement or similar Contract, other than one or more contracts with
Employee Leasing Organizations, each of which is listed in Section 4.10 of the
Disclosure Schedule.
(e) The employment of each of the Company's employees is
terminable by the Company at will. The contract with each Employee Leasing
Organization is terminable with not more than thirty (30) days' notice. The
Company has delivered to Acquiror or made available accurate and complete copies
of all employee manuals and handbooks, disclosure materials, policy statements,
employment agreements and other materials relating to the employment of the
current employees of the Company.
(f) To the Knowledge of the Company (i) no employee of the Company
or Leased Employee intends to terminate his or her employment with the Company
and the Company does not have a present intention to terminate the employment of
any employee or Leased Employee; (ii) no employee of the Company or Leased
Employee has received since July 31, 2000, nor is any employee or Leased
Employee currently considering, an offer to join a business that likely would be
competitive with the Company's business; and (iii) no employee of the Company or
Leased Employee is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other Contract (with any Person) that likely would
have material adverse effect on (A) the performance by such employee of any of
his or her duties or responsibilities as an employee or Leased Employee of the
Company, or (B) the Company's business or operations.
(g) To the Company's Knowledge, the Company is not engaged, and
has never been engaged, in any unfair labor practice of any nature. There has
never been any slowdown, work stoppage, labor dispute or union organizing
activity, or any similar activity or dispute, affecting the Company or any of
its employees or Leased Employees. There is not now pending, and to the
Knowledge of the Company no Person has threatened to commence, any such
slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute, nor has any event occurred, nor does any condition
or circumstance exist, that likely would directly or indirectly give rise to or
provide a basis for the commencement of any such slowdown, work stoppage, labor
dispute or union organizing activity or any similar activity or dispute.
(h) To the Company's Knowledge, each employee of the Company and
each Leased Employee is in compliance with all applicable visa and work permit
requirements. No visa or work permit held by an employee of the Company or
Leased Employee will expire during the six (6) month period beginning at the
date of this Agreement.
17
<PAGE> 22
4.15 Benefit Plans; ERISA.
(a) Section 4.15 of the Disclosure Schedule lists (i) all Employee
Benefit Plans, (ii) all employment agreements, including, but not limited to,
any individual benefit arrangement, policy or practice with respect to any
current or former employee or director of the Company, any ERISA Affiliate or
any Employee Leasing Organization, and (iii) all other employee benefit, bonus
or other incentive compensation, stock option, stock purchase, stock
appreciation, severance pay, lay-off or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which the
Company, any ERISA Affiliate or any Employee Leasing Organization maintains,
contributes to or has any obligation to or liability for (collectively, the
"Plans").
(b) None of the Plans is a Defined Benefit Plan or a Defined
Contribution Plan, and neither the Company nor any ERISA Affiliate has ever
sponsored, maintained or contributed to, or ever been obligated to contribute
to, a Defined Benefit Plan or a Defined Contribution Plan.
(c) None of the Plans is a Multiemployer Plan, and neither the
Company nor any ERISA Affiliate has ever contributed to, or ever been obligated
to contribute to, a Multiemployer Plan.
(d) Neither the Company nor, to the Company's Knowledge, any
Employee Leasing Organization maintains or contributes to any welfare benefit
plan that provides health benefits to an employee after the employee's
termination of employment or retirement except as required under Section 4980B
of the Code and Sections 601 through 608 of ERISA (or other comparable state
law).
(e) Each Plan that is an Employee Benefit Plan maintained by the
Company or any ERISA Affiliate, and to the Company's Knowledge, each Plan that
is an Employee Benefit Plan of any Employee Leasing Organization, complies by
its terms and in operation, in all material respects, with the requirements
provided by any and all statutes, orders or governmental rules or regulations
currently in effect and applicable to the Plan, including but not limited to
ERISA and the Code.
(f) All reports, forms and other documents required to be filed
with any Governmental Body with respect to any Plan maintained by the Company
(including without limitation, summary plan descriptions, Forms 5500 and summary
annual reports), have been timely filed and are accurate, unless any failure to
have made a timely and accurate filing would not have a Material Adverse Effect
on the Company. To the Company's Knowledge, all reports, forms and other
documents required to be filed with any Governmental Body with respect to any
Plan maintained by any Employee Leasing Organization (including without
limitation, summary plan descriptions, Forms 5500 and summary annual reports),
have been timely filed and are accurate, unless any failure to have made a
timely and accurate filing would not have a material adverse effect on the
Company.
(g) All contributions for all periods ending prior to the Closing
(including periods from the first day of the current plan year to the Closing)
have been made by the Company or the Employee Leasing Organization, as the case
may be, in accordance with past practice and the recommended contribution in any
applicable actuarial report.
(h) To the Company's Knowledge, all insurance premiums due and
owing have been paid in full, subject only to normal retrospective adjustments
in the ordinary course, with regard to the Plans maintained by any Employee
Leasing Organization, for plan years ending on or before the Closing.
18
<PAGE> 23
(i) With respect to each Plan maintained by the Company, and to
the Company's Knowledge, maintained by any Employee Leasing Organization:
(i) no prohibited transactions (as defined in Section 406
or 407 of ERISA or Section 4975 of the Code) have occurred for which an
exemption is not available;
(ii) no action or claims (other than routine claims for
benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending,
threatened or imminent against or with respect to the Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary (as defined
in Section 3(21) of ERISA) of the Plan;
(iii) the Company has no Knowledge of any facts which could
give rise to any such action or claim; and
(iv) it provides that it may be amended or terminated at
any time, except for benefits protected under applicable law without material
liability.
(j) To the Company's Knowledge, none of the Company, any ERISA
Affiliate or any Employee Leasing Organization has any liability or to the
Company's Knowledge is threatened with any liability (whether joint or several)
(i) for any excise tax imposed by Section 4971, 4975, 4976, 4977 or 4979 of the
Code, or (ii) to a fine under Section 502 of ERISA.
(k) All of the Plans listed in the Disclosure Schedule maintained
by the Company, and to the Company's Knowledge, maintained by any Employee
Leasing Organization, to the extent applicable, are in material compliance with
the continuation of group health coverage provisions contained in Section 4980B
of the Code and Sections 601 through 608 of ERISA.
(l) Complete copies of all documents creating or evidencing any
Plan listed, or required to be listed, in the Disclosure Schedule of which the
Company has Knowledge have been delivered or made available to Acquiror.
(m) All expenses and liabilities relating to all of the Plans
described in the Disclosure Schedule have been, and will, on the Closing, be
fully accrued on the Company's books and records and disclosed in accordance
with generally accepted accounting principles and in Plan financial statements.
(n) All contributions or payments required to be made by the
Company under the terms of a service agreement between the Company and any
Employee Leasing Organization for all periods ending prior the Closing
(including periods from the first day of the current plan year to the Closing)
have been made prior to the Closing by the Company in accordance with past
practice or such service agreement between the Company and such Employee Leasing
Organization. To the Company's Knowledge, all contributions for all periods
ending prior to the Closing (including periods from the first day of the current
plan year to the Closing) have been made by the Employee Leasing Organization in
accordance with past practice and the recommended contribution in any applicable
actuarial report.
4.16 Environmental Matters. The Company has been at all times in
compliance in all material respects with all Environmental Laws. The Company has
now and at all times has had all the necessary permits required under
Environmental Laws for the operation of its business, and is not and has not
been in violation of any of the terms and conditions of any such permits. The
Company has not received any notice or other communication (in writing or
otherwise) that alleges that the Company is not in compliance with any
Environmental Law. The Company has not generated, manufactured, produced,
19
<PAGE> 24
transported, imported, used, treated, refined, processed, handled, stored,
discharged, released, or disposed of any Hazardous Materials (whether lawfully
or unlawfully) at any of the Leased Premises occupied or controlled by the
Company on or at any time prior to the date hereof (other than common household
and office products in de minimis quantities). To the Knowledge of the Company:
(a) there are not and have not been any releases or threatened releases of any
Hazardous Materials by the Company in any quantity (other than common household
and office products in de minimis quantities) at, on, or from the Leased
Premises, and (b) there are no circumstances that may prevent or interfere with
the Company's compliance with any Environmental Law.
4.17 Sale of Products; Performance of Services. The Company has not made
any express warranties or guarantees relating to its products that are in effect
as of the date hereof. No customer or other Person has ever asserted or
threatened to assert any material claim against the Company (a) under or based
upon any warranty provided by or on behalf of the Company, or (b) under or based
upon any other warranty relating to any product sold by the Company or any
services performed by the Company. To the Knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that likely would (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for the assertion of any such claim. During the seven (7) month period
ended on July 31, 2000, the Company has received no customer complaints pursuant
to which the Company gave a credit or accepted a product return for a refund in
either case in excess of $20,000.
4.18 Insurance.
(a) Section 4.18 of the Disclosure Schedule accurately sets forth,
with respect to each insurance policy maintained by or at the expense of, or for
the direct or indirect benefit of, the Company:
(i) the name of the insurance carrier that issued such
policy and the policy number of such policy;
(ii) whether such policy is a "claims made" or an
"occurrence" policy;
(iii) a brief description of the coverage provided by such
policy and the material terms and provisions of such policy (including all
applicable coverage limits, deductible amounts and co-insurance arrangements);
(iv) the annual premium payable with respect to such
policy, and the cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims
that have been asserted in the past, with respect to such policy.
Section 4.18 also identifies (1) each pending application for insurance that has
been submitted by or on behalf of the Company and (2) each self-insurance or
risk-sharing arrangement affecting the Company or any of its assets, if any. The
Company has delivered to Acquiror accurate and complete copies of all of the
insurance policies identified, or required to be identified, in Section 4.18 of
the Disclosure Schedule (including all renewals thereof and endorsements
thereto) and binders relating thereto indicating that such policies are in full
force and effect as of the date hereof, and all of the pending applications
identified in Section 4.18 of the Disclosure Schedule.
(b) Each of the policies identified in Section 4.18 of the
Disclosure Schedule is valid, enforceable and in full force and effect, and has
been issued by an insurance carrier that, to the
20
<PAGE> 25
Knowledge of the Company, is solvent, financially sound and reputable. All of
the information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete in all material respects, and all premiums and other amounts owing with
respect to said policies have been paid in full on a timely basis.
(c) There is no pending claim under or based upon any of the
policies identified in Section 4.18 of the Disclosure Schedule, and to the
Company's Knowledge, no event has occurred, and no condition or circumstance
exists, that likely would (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any such claim.
(d) The Company has not received:
(i) any notice or other communication (in writing or
otherwise) regarding the actual or possible cancellation or invalidation of any
of the policies identified in Section 4.18 of the Disclosure Schedule or
regarding any actual or possible adjustment in the amount of the premiums
payable with respect to any of said policies prior to their normal expiration
dates;
(ii) any notice or other communication (in writing or
otherwise) regarding any actual or possible refusal of coverage under, or any
actual or possible rejection of any claim under, any of the policies identified
in Section 4.18 of the Disclosure Schedule; or
(iii) any indication that the issuer of any of the policies
identified in Section 4.18 of the Disclosure Schedule may be unwilling or unable
to perform any of its obligations thereunder.
4.19 Related Party Transactions.
(a) No Related Party has, and no Related Party has at any time
since January 1, 1999, had, any direct or indirect interest of any nature in any
material asset used in the business of the Company;
(b) no Related Party is, or has at any time since January 1, 1999,
has been, indebted to the Company;
(c) since January 1, 1999, no Related Party has entered into, or
has had any direct or indirect financial interest in, any Contract, or
transaction involving the Company and no such Contract or transaction is
necessary to operate the business of the Company as it is currently conducted;
(d) to the Company's Knowledge, no Related Party has any material
claim or right against the Company; and
(e) to the Knowledge of the Company, no event has occurred, and no
condition or circumstance exists, that would (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any claim or
right in favor of any Related Party against the Company.
4.20 Proceedings; Orders.
(a) There is no pending Proceeding, and to the Knowledge of the
Company, no Person has threatened to commence any Proceeding (i) that involves
the Company or that otherwise relates to or likely would affect the Company's
business or any of the assets owned or used by the Company (whether or not the
Company is named as a party thereto); or (ii) that challenges, or that may
21
<PAGE> 26
have the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Transactions. To the Knowledge of the Company, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
likely would directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) No Proceeding has ever been commenced by or against the
Company, and no Proceeding otherwise involving or relating to the Company has
been pending or threatened at any time.
(c) The Company has delivered to Acquiror accurate and complete
copies of any pleadings, correspondence and other written materials to which the
Company has access that relate to the Proceedings identified in Section 4.20 of
the Disclosure Schedule, if any.
(d) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject.
(e) To the Knowledge of the Company, no officer or employee of the
Company is subject to any Order that prohibits such officer or employee from
engaging in or continuing any conduct, activity or practice relating to the
Company's business.
(f) There is no Order issued in connecting with a Proceeding
commenced by or against the Company that (i) likely would have an adverse effect
on the Company's business, condition, assets, liabilities, operations, financial
performance, net income or prospects (or on any aspect or portion thereof) or on
the ability of the Company to comply with or perform any covenant or obligation
under this Agreement or any of the other Transactional Agreements, or (ii) may
have the effect of preventing, delaying, making legal or otherwise interfering
with any of the Transactions.
4.21 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement or the other Transactional Agreements, nor the consummation or
performance of any of the Transactions, will directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Company's Articles of Incorporation or Bylaws, or (ii)
any resolution adopted by the Company's shareholders, the Company's Board of
Directors or any committee of the Company's Board of Directors, if any;
(b) to the Knowledge of the Company, contravene, conflict with or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(c) cause the Company to become subject to, or to become liable
for the payment of, any material Tax;
(d) cause any of the assets owned or used by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(e) to the Knowledge of the Company, contravene, conflict with or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by the Company or any of its
employees or that otherwise relates to the Company's business or to any of the
assets owned or used by the Company;
22
<PAGE> 27
(f) contravene, conflict with or result in a violation or breach
of, or result in a default under, any material provision of any of the Company
Contracts;
(g) give any Person the right to (i) declare a default or exercise
any remedy under any Company Contract, (ii) accelerate the maturity or
performance of any Company Contract, or (iii) cancel, terminate or modify any
Company Contract;
(h) give any Person the right to any payment by the Company or
give rise to any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, severance payments or other
contingent obligations of any nature whatsoever of the Company in favor of any
Person, in any such case as a result of the change in control of the Company or
otherwise resulting from the Transactions; or
(i) result in the imposition or creation of any Encumbrance upon
or with respect to any asset owned or used by the Company.
Except as set forth in Section 4.21 of the Disclosure Schedule, the Company will
not be required to make any filing with or give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement and the other Transactional Agreements or the consummation or
performance of any of the Transactions. As of the date hereof, all such filings,
notices and Consents, set forth, or required to be set froth, in Section 4.21 of
the Disclosure Schedules, have been duly made, given or obtained and are in full
force and effect, other than those which by their nature are required to be
made, given or obtained after the execution of this Agreement, all of which
shall be made, given or obtained within the time required therefor.
4.22 Brokers. The Company has not agreed or become obligated to pay, or
taken any action that likely would result in any Person claiming to be entitled
to receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
4.23 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto), nor any of the Transactional Agreements, contains any untrue statement
of material fact or omits to state any fact necessary to make any of the
representations, warranties or statements contained herein or therein on behalf
of the Company or any of the Shareholders not misleading. To the extent any
representation or warranty permits omission of items otherwise required to be
discussed because they are not material or do not or would not have a Material
Adverse Effect on the Company, such omissions in the aggregate will not and do
not have a Material Adverse Effect on the Company.
(b) As of the date of this Agreement, the Company has provided
Acquiror and Acquiror's Representatives with full and complete access to all of
the Company's records and other documents and data requested by them.
(c) All of the information set forth in the Disclosure Schedule,
and all other written information regarding the Company and its business,
condition, assets, liabilities, operation, financial performance, net income and
prospects that has been furnished to Acquiror or any of its Representatives by
or on behalf of Company or any of the Company's Representatives, is accurate and
complete in all material respects.
4.24 Powers of Attorney. The Company has not given a power of attorney to
any Person.
23
<PAGE> 28
4.25 Voting Arrangements. The Company is not a party to any, nor to the
Company's Knowledge are there any, outstanding shareholder agreements, voting
trusts, proxies or other arrangements or understandings relating to the voting
of any shares of the capital stock of the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to the Company as follows:
5.1 Due Organization; Good Standing; Authority; Binding Nature of
Agreements.
(a) Acquiror is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has all necessary
corporate power and authority to enter into and perform its obligations under
the Transactional Agreements to which it is a party. The Acquiror is duly
qualified and in good standing as a foreign corporation in each of the
jurisdictions in which the nature of its business or the ownership or leasing of
its properties requires such qualification and any failure to qualify would have
a Material Adverse Effect. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all necessary corporate power and authority to enter into and perform its
obligations under the Transactional Agreements to which it is a party. Acquiror
has delivered a true and correct copy of the Certificate of Incorporation and
Bylaws or other charter documents, as applicable, of Acquiror and Merger Sub,
each as amended to date, to the Company. Neither the Acquiror or Merger Sub is
in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent organizational documents.
(b) The execution, delivery and performance of each of the
Transactional Agreements to which it is a party have been duly authorized by all
necessary action on the part of each of Acquiror and Merger Sub and their
respective Boards of Directors and the sole shareholder of Merger Sub.
(c) Each of the Transactional Agreements to which it is a party
constitutes the legal, valid and binding obligation of Acquiror and Merger Sub,
enforceable against Acquiror and Merger Sub in accordance with its terms.
5.2 Capitalization; Ownership of Stock. As of August 18, 2000, the
authorized capital stock of the Acquiror consists of two hundred million
(200,000,000) shares of Common Stock, $0.001 par value per share, and two
million (2,000,000) shares of Preferred Stock, $0.001 par value per share. As of
the date of this Agreement, the outstanding capital of the Acquiror consists of
(a) thirty four million seven hundred forty six thousand ninety (34,746,090)
shares of Common Stock, (b) zero (0) shares of Preferred Stock, and (c) options
to purchase seven million five hundred thirty three thousand four hundred twenty
(7,533,420) shares of Common Stock. The Shares of Acquiror Stock to be issued
pursuant to the Merger will be duly authorized, validly issued, fully paid and
non-assessable.
5.3 Brokers. The Acquiror has not agreed or become obligated to pay, or
taken any action that likely would result in any Person claiming to be entitled
to receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
5.4 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement or the Transactional Agreements to which Acquiror or Merger Sub,
as the case may be, is a party, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice or lapse
of time) contravene, conflict with or result in a violation of (i) any of the
provisions of Acquiror's or Merger Sub's respective certificate of incorporation
or Bylaws, or (ii) any resolution
24
<PAGE> 29
adopted by Acquiror's or Merger Sub's shareholders, Acquiror's or Merger Sub's
Board of Directors or any committee of Acquiror's or Merger Sub's Board of
Directors. With the exception of the filing of the Agreement of Merger in the
State of California and any necessary filings pursuant to federal and state
securities laws or the rules of other regulatory bodies, Acquiror and Merger Sub
will not be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Transactions.
5.5 SEC Reports. Acquiror has filed all reports required to be filed by
it with the SEC pursuant to the Securities Act and the Exchange Act. Acquiror
has made available to the Company or its counsel through EDGAR a true and
complete copy of each statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and other filings filed with the SEC by Acquiror
since January 1, 1998, and, prior to the Effective Time, Acquiror will have made
available to the Company or its counsel through EDGAR true and complete copies
of any additional documents filed with the SEC by Acquiror prior to the
Effective Time (collectively, the "Acquiror SEC Documents"). In addition,
Acquiror has made available to the Company all exhibits to the Acquiror SEC
Documents filed prior to the date hereof which are (i) reasonably requested by
the Company and (ii) are not available in complete form through EDGAR
("Requested Confidential Exhibits") and will promptly make available to the
Company all Requested Confidential Exhibits to any additional Acquiror SEC
Documents filed prior to the Effective Time. All documents required to be filed
as exhibits to the Acquiror SEC Documents have been so filed, and all material
contracts so filed as exhibits are in full force and effect except those which
have expired in accordance with their terms, and neither Acquiror nor any of its
subsidiaries is in default thereunder. As of their respective filing dates, the
Acquiror SEC Documents complied in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document prior to the date
hereof. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements"),
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Acquiror Financial Statements fairly present the
consolidated financial condition and operating results of Acquiror and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no material change in Acquiror accounting policies except as
described in the notes to the Acquiror Financial Statements.
5.6 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
25
<PAGE> 30
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Stock Options and Warrants.
(a) As of the Effective Time, any Company Stock Options or
warrants exercisable for Company Stock and Preferred Stock, which are
outstanding as of the date hereof and have not expired as of the Effective Time,
shall be assumed by Acquiror and converted into options or warrants, as the case
may be, such that each Company Stock Option shall be converted into an option to
purchase such shares of Acquiror Stock as the holder thereof would have received
in the Merger had such option been exercised prior to the Effective Time, at an
aggregate purchase price equal to the aggregate purchase price applicable prior
to such conversion; provided, however, that in the case of any Company Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code, the conversion formula shall be adjusted, if
necessary, to comply with Section 424(a) of the Code to the effect that the
number of shares shall be rounded down to the nearest whole share and the
exercise price shall be rounded up to the nearest cent. Except as provided
above, the converted stock options or warrants, as the case may be, shall be
subject to the same terms and conditions (including, without limitation,
expiration date, vesting and exercise provisions) as were applicable to the
Company Stock Options or warrants, as the case may be, immediately prior to the
Effective Time.
(b) No such option or warrant shall be converted into a stock
option or warrant to purchase a partial share of Acquiror Stock.
(c) The consummation of the Merger shall not be treated as a
termination of employment for purposes of such stock options or warrants.
(d) It is intended that Company Stock Options assumed by Acquiror
shall qualify following the Effective Time as incentive stock options as defined
in Section 422 of the Internal Revenue Code, to the extent Company Stock Options
qualified as incentive stock options immediately prior to the Effective Time and
the provisions of this Section 6.1 shall be applied consistent with such intent.
(e) Acquiror shall reserve a number of shares of Acquiror Stock
sufficient to cover the issuance of Acquiror Stock pursuant to the exercise of
Company Stock Options or warrants assumed pursuant to this Section 6.1.
6.2 Certain Employee Benefit Matters. Employees of the Company and Leased
Employees who become employees of the Surviving Corporation or Acquiror shall
receive employee benefits (including stock options and compensation) which in
the aggregate are no less favorable to such employees than those provided from
time to time by Acquiror to similarly situated employees. The Acquiror shall
provide or cause to be provided that under each employee benefit plan, policy,
program or arrangement where service is relevant to a determination of an
employee's eligibility to participate, vesting, or level or amount of benefits,
employees of the Company and Leased Employees who become employees of the
Surviving Corporation or Acquiror shall be credited with their periods of
service with the Company or the Employee Leasing Organization while such
employee was a Leased Employee assigned to the Company prior to the Closing. The
Acquiror shall make available, or cause to be made available, to employees of
Company and Leased Employees who become employees of the Surviving Corporation
or Acquiror, medical, dental, disability and other welfare benefits plans and
programs, and 401(k) plan participation without regard to any preexisting
condition limitation, actively-at-work requirement or similar limitation, except
to the extent an analogous restriction applied to the employee under the
analogous plan and had not been satisfied as of the Closing. In determining an
employee's share of the cost of coverage under any plan or program of the
Acquiror for the year in which the Closing
26
<PAGE> 31
falls, the Acquiror shall make its commercially reasonable best efforts to
credit the employee with any pre-Closing co-pays and deductibles made by or on
behalf of such employee under each comparable plan maintained by the Company (or
by the Employee Leasing Organization) prior to the Effective Time, for such
year. The Acquiror shall be responsible for providing continuation health
coverage to the extent required by Section 601 et seq. of ERISA or Section 4980B
of the Code (commonly referred to as COBRA) to those employees of the Company
and Leased Employees who do not become employees of the Surviving Corporation or
the Acquiror, either by making such coverage available through the Acquiror's
benefit plans or by bearing the cost of having such coverage provided through
the applicable Employee Leasing Organization.
6.3 Expenses. All costs and expenses incurred in connection with the
Transactional Agreements and the transactions contemplated hereby and thereby
("Transaction Fees") shall be paid by the party incurring such expenses,
provided that the amount by which the aggregate legal, accounting and investment
banking fees, if any, incurred by the Company exceeds Two Hundred Thousand
Dollars ($200,000) shall be assumed and paid by the Shareholders.
6.4 Additional Agreements. In case at any time after the Effective Time
any reasonable further action is necessary to consummate this Agreement and the
Transactional Agreements and the transaction contemplated hereby and thereby,
the proper officers and/or directors of Acquiror and the Company (or of the
Surviving Corporation on behalf of the Company) shall take all such action.
6.5 Bridge Financing. In the event that the Closing does not occur by
August 31, 2000, the Acquiror shall provide bridge financing to the Company in
the principal amount of $700,000 and bearing interest at a per annum rate of 8%
(the "Bridge Loan"). The Bridge Loan shall be repaid by the Company upon the
earlier of (i) December 31, 2000, (ii) the closing of the sale by the Company of
shares of its preferred stock to investors in one or more transactions for
aggregate cash proceeds to the Company of not less than $5,000,000, or (iii) the
liquidation, dissolution, sale, lease, assignment, transfer, conveyance, or
disposal of all or substantially all of the assets of the Company, or the
acquisition of the Company by another Entity by means of consolidation,
corporate reorganizations or merger, or other transaction or series of related
transactions in which more than 50% of the outstanding voting power of the
Company is sold, transferred or otherwise disposed of. The Company hereby agrees
to execute a promissory note in favor of the Acquiror reasonably requested by
the Acquiror to evidence the terms of the Bridge Loan. Notwithstanding the
foregoing, the Acquiror will not be obligated to provide the Bridge Loan to the
Company if Closing has not occurred by August 31, 2000 as a result of the
Company's failure to act in good faith as determined in good faith by the
Acquiror.
6.6 Tax Consequences. From the date of this Agreement until the end of
the Escrow Period, Acquiror shall not take any action that, to the Acquiror's
Knowledge, would be expected to be a material cause of the Merger failing to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
6.7 Filing of Form S-8. Acquiror agrees to file within one (1) year
following Closing, if available for use by Acquiror, a registration statement on
Form S-8 for the shares of Acquiror Stock issuable with respect to assumed
Company Stock Options and intends to maintain the effectiveness of such
registration statement thereafter for so long as any of such options remain
outstanding.
27
<PAGE> 32
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to consummate the Merger and to take the
other actions required to be taken by it at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by both the Company and Acquiror, in whole or in
part):
(a) All necessary approvals under federal and state securities
laws and other authorizations relating to the issuance of the Acquiror Stock to
be issued to Company shareholders in connection with the Merger shall have been
received.
(b) This Agreement, the Merger and the other actions contemplated
hereby shall have been approved by the requisite vote of the shareholders of the
Company under applicable law.
(c) A duly authorized officer of the Company and the Acquiror
shall have executed and delivered a certificate setting forth the Exchange Ratio
and a description of the calculation thereof, including without limitation, the
closing price on the NASDAQ National Market of the Acquiror Common Stock for the
twenty (20) consecutive trading days ending three (3) business days prior to
Closing and the liquidation preference of the Series B Preferred Stock.
7.2 Additional Conditions to Acquiror's and Merger Sub's Obligation to
Consummate the Merger. Acquiror's and Merger Sub's obligations to consummate the
Merger and to take the other actions required to be taken by Acquiror and Merger
Sub at the Closing is subject to the satisfaction of each of the following
conditions (any of which may be waived by Acquiror, in whole or in part):
(a) Acquiror's Board of Directors shall have ratified or approved
the execution of this Agreement and the other Transactional Agreements by
Acquiror and shall have approved the consummation of the Transactions.
(b) In addition to the documents required to be received under
this Section 7.2, Acquiror shall also have received the following documents:
(i) the opinion letter from Gray Cary Ware & Freidenrich,
counsel to the Company, dated the date hereof, in the form attached as Exhibit
D;
(ii) a certificate, duly executed by the Company,
certifying that (A) each of the representations and warranties made by the
Company in this Agreement and in the other Transactional Agreements is accurate
as of the date hereof , (B) each of the covenants and obligations that the
Company is required to have complied with or performed pursuant to this
Agreement or any of the other Transactional Agreements at or prior to the
Closing has been duly complied with and performed in all respects, and (C) each
of the conditions set forth in Section 7.2 has been satisfied in all respects;
(iii) all Material Consents shall have been obtained by the
Company;
(iv) all authorizations, consents, or approvals of, or
notifications to any third party (excluding Material Consents), required by the
Company Contracts in connection with the consummation of the Merger or any of
the transactions contemplated hereby shall have occurred or been obtained;
28
<PAGE> 33
(v) executed copies of investor representation letters from
each Shareholder, in the form previously provided to the Company; and
(vi) copies of resolutions of the Company, certified by the
Secretary of the Company, authorizing the execution, delivery and performance of
the Transactional Agreements and the Transactions, and copies of resolutions of
the meeting of shareholders of the Company (or written consent in lieu thereof),
certified by the Secretary of the Company, authorizing the execution, delivery
and performance of the Transactional Agreements and the Transactions.
(c) Joseph Villa shall have delivered an assignment of proprietary
information and inventions agreement and a release to the Company, in the forms
acceptable to the Acquiror in its sole discretion.
(d) Each Person (other than Acquiror and Merger Sub) shall have
executed and delivered all Transactional Agreements to which it is a party.
(e) The holders of no more than one percent (1%) of the
outstanding shares of Company Stock shall have demanded and not lost or
withdrawn, or shall be eligible to demand, dissenters' rights.
7.3 Additional Conditions to the Company's Obligation to Consummate the
Merger. The Company's obligation to consummate the Merger and to take the other
actions required to be taken by the Company at the Closing shall be subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Company, in whole or in part):
(a) The Company shall have received the following documents:
(i) the opinion letter from Morrison & Foerster LLP,
counsel to Acquiror and Merger Sub, dated the date hereof, in the form attached
as Exhibit E;
(ii) a certificate, duly executed by Acquiror, certifying
that (A) each of the representations and warranties made by Acquiror in this
Agreement and in the other Transactional Agreements is accurate in all respects
as of the date hereof, (B) each of the covenants and obligations that Acquiror
is required to have complied with or performed pursuant to this Agreement or any
of the other Transactional Agreements at or prior to the Closing has been duly
complied with and performed in all respects, and (C) each of the conditions set
forth in Section 7.3 has been satisfied in all respects.
(b) Subject to the terms and conditions of this Agreement, each of
Acquiror and Merger Sub shall have executed and delivered all Transactional
Agreements to which it is a party.
(c) Subject to Section 6.3, all legal costs and expenses incurred
in connection with the Transactional Agreements and the transactions
contemplated thereby shall be paid to GCWF at the Closing.
(d) All shares of Series A Preferred Stock shall have been
converted to shares of Common Stock.
29
<PAGE> 34
ARTICLE 8
ESCROW AND INDEMNIFICATION
8.1 Indemnification.
(a) By the Company and Shareholders. From and after the Effective
Time and subject to the limitations contained in Sections 8.2 and 8.3, the
Shareholders will, severally and pro rata, in accordance with their Pro Rata
Portion, indemnify and hold Acquiror harmless against any loss, expense,
liability or other damage, including reasonable attorneys' fees, to the extent
of the amount of such loss, expense, liability or other damage (collectively,
"Damages") that Acquiror has incurred by reason of the breach by the Company of
any representation, warranty, covenant or agreement of the Company contained in
this Agreement that occurs or becomes known to Acquiror during the Escrow
Period. The Escrow Fund and claims against the Escrow Fund shall be Acquiror's
sole and exclusive remedy for any such breach of representation, warranty,
covenant or agreement of the Company contained in this Agreement by the Company,
provided, however, that, in addition to the Shareholders' Pro Rata Portion of
the Escrow Fund, each Shareholder, severally and not jointly, shall be fully
liable to the Acquiror for any Damage relating to (i) such Shareholder's willful
misconduct or fraud in connection with the representations and warranties set
forth herein without limitation, or (ii) the breach of a representation or
warranty set forth in Section 4.3(a) or 4.3(c) hereof; provided, further, that
such Shareholder's liability under this Section 8.1(a) for a breach of a
representation or warranty set forth in Section 4.3(a) or 4.3(c) shall be
limited to such Shareholder's pro rata portion of the aggregate number of shares
of Acquiror Stock to be issued pursuant to Section 3.1 in respect of the Company
Stock (the "Shareholder's Shares"). Any claim for Damages by Acquiror for a
breach of a representation or warranty set forth in Section 4.3(a) or 4.3(c)
shall be settled first with such Shareholder's pro rata portion of the Escrow
Shares, and, second, to the extent liability for Damages remain, with the
Shareholder's Shares less such Shareholder's pro rata portion of the Escrow
Shares; provided, however, that if such Shareholder has transferred any of such
Shareholder's Shares, the Shareholder shall settle such remaining liability with
the cash value of such transferred shares (determined by multiplying the
Acquiror Share Value by the number of Shareholder's Shares so transferred);
provided, further, that the aggregate liability of the Shareholders for a breach
of a representation or warranty set forth in Sections 4.3(a) or 4.3(c) shall not
exceed the shares of Acquiror Stock issued pursuant to Section 3.1.
(b) By Acquiror. From and after the Effective Time and subject to
the limitations contained in Section 8.2 and 8.3, Acquiror will indemnify and
hold the Shareholders harmless against any Damage that the Shareholders have
incurred by reason of the breach by Acquiror or Merger Sub of any
representation, warranty, covenant or agreement of Acquiror or Merger Sub
contained in this Agreement that occurs or becomes known to the Shareholders
during the Escrow Period, provided, however, that such indemnification
obligation of the Acquiror and the Merger Sub contained in this Section 8.1(b)
shall not exceed, in the aggregate, $500,000 (the "Limitation"); provided,
further, that, in addition to the Limitation, the Acquiror shall be fully liable
to the Shareholders for the Acquiror's willful misconduct or fraud in connection
with the representations and warranties set forth herein without limitation.
8.2 Escrow Fund. As security for the indemnity in Section 8.1(a), the
Escrow Shares shall be deposited with the Escrow Agent as soon as practicable
after of the Closing, such deposit to be governed by the terms set forth in this
Article 8 and in the Escrow Agreement. Notwithstanding the foregoing, the
indemnification obligations of each of the Shareholders pursuant to this Article
8 shall be limited to the amount and assets present in the Escrow Fund and the
sole recourse of Acquiror and the Merger Sub shall be to make claims against the
Escrow Fund in accordance with the terms of the Escrow Agreement or to make
claims for the reduction of the Escrow Fund, as the case may be (except for
cases involving breach of the representation and warranties set forth in Section
4.3(a) or 4.3(c), or willful misconduct or fraud as set forth above in Section
8.1(a)).
30
<PAGE> 35
8.3 Damage Threshold.
(a) Acquiror's Damages. Notwithstanding the foregoing, the
Shareholders shall have no liability under Section 8.1 and Acquiror may not
receive any shares from the Escrow Fund unless and until an Officer's
Certificate or Certificates for an aggregate amount of Damages in excess of
$50,000 has been delivered to the Shareholders' Agent and to the Escrow Agent;
provided, however, that after an Officer's Certificate or Certificates for an
aggregate of $50,000 in Damages has been delivered, Acquiror shall be entitled
to receive Escrow Shares equal in value to the full amount of Damages identified
in such Officer's Certificate or Certificates in excess of such $50,000, and
provided further, notwithstanding such $50,000 threshold, that the full amount
by which the Company's Transaction Fee exceeds $200,000 may, at Acquiror's
option, be deducted from the Escrow Fund.
(b) Shareholders' Damages. Notwithstanding the foregoing, Acquiror
shall have no liability under Section 8.1 until a Shareholders' Agent
Certificate or Certificates for an aggregate amount of Damages in excess of
$50,000 has been delivered to the Acquiror; provided, however, that after a
Shareholders' Agent Certificate or Certificates for an aggregate of $50,000 in
Damages has been delivered, the Acquiror shall, subject to the Limitation
provided in Section 8.1(b) and the provisions of Sections 8.5 and 8.6, deliver
to the Shareholders' Agent not less than thirty (30) days thereafter, cash equal
to the amount of Damages.
8.4 Escrow Periods. The Escrow Fund shall commence on the date hereof and
terminate (a) as to items reasonably expected to be encountered in the audit
process, on the earlier to occur of (i) the first anniversary of the date of the
Closing and (ii) the date of issuance of the first independent audit report on
Acquiror's financial statements after the Closing, which financial statements
include the financial results of Company, or (b) as to all other items, on the
first anniversary of the Closing (the "Escrow Period"), provided, however, that
the number of Escrow Shares, which, in the reasonable judgment of Acquiror,
subject to the objection of the Shareholders' Agent and the subsequent
resolution of the matter in the manner provided in Section 8.8, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent and the Shareholders' Agent prior to
termination of the Escrow Period with respect to Damages incurred or litigation
pending prior to expiration of the Escrow Period, shall remain in the Escrow
Fund until such claims have been finally resolved, or, if earlier, until
released pursuant to the terms hereof.
8.5 Claims.
(a) Claims by Acquiror. Upon receipt by the Escrow Agent on or
before the last day of the Escrow Period of a certificate signed by any
appropriately authorized officer of Acquiror (an "Officer's Certificate"):
(i) Stating the aggregate amount of Acquiror's Damages or
an estimate thereof, in each case to the extent known or determinable at such
time, and
(ii) Specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid or properly accrued or arose, and the nature of the misrepresentation,
breach or claim to which such item is related, and
(iii) The Escrow Agent shall, subject to the provisions of
Sections 8.3, 8.7 and 8.8 hereof, deliver to Acquiror out of the Escrow Fund, as
promptly as practicable, Escrow Shares having a value equal to such Damages all
in accordance with the Escrow Agreement and Section 8.6 below. Amounts paid or
distributed from the Escrow Fund shall be paid or distributed pro rata among the
Holders (as defined in the Escrow Agreement) based upon their respective
percentage interests therein at
31
<PAGE> 36
the time. Notwithstanding anything herein to the contrary, no Escrow Shares
shall be distributed to Acquiror until the first anniversary of the Closing (the
"Release Date"), but in no event later than three (3) business days after such
Release Date; provided, however, that any portion of the Escrow Fund subject to
an objection submitted pursuant to Section 8.7, shall not be released until
resolution of such objection pursuant to Section 8.8.
(b) Claims by Shareholders. Upon receipt by the Acquiror on or
before the last day of the Escrow Period of a certificate signed by the
Shareholders' Agent (a "Shareholders' Agent Certificate"):
(i) Stating the aggregate amount of the Shareholders'
Damages or an estimate thereof, in each case to the extent known or determinable
at such time, and
(ii) Specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid or properly accrued or arose, and the nature of the misrepresentation,
breach or claim to which such item is related, the amount of such Damages,
subject to the Limitation, shall be paid by the Acquiror in cash pro rata to the
Shareholders.
8.6 Valuation. For the purpose of compensating Acquiror for its
respective Damages pursuant to this Agreement, the value per share of the Escrow
Shares shall be the Acquiror Share Value. In determining the amount of any
indemnity, there shall be taken into account any tax benefit, insurance proceeds
or other similar recovery or offset realized, directly or indirectly.
8.7 Objections to Claims.
(a) At the time of delivery of any Officer's Certificate to the
Escrow Agent, a duplicate copy of such Officer's Certificate shall be delivered
to the Shareholders' Agent and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery of Escrow Shares pursuant to
Section 8.5 unless the Escrow Agent shall have received written authorization
from the Shareholders' Agent to make such delivery. After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of the Escrow
Shares in the Escrow Fund in accordance with Section 8.5, provided that no such
delivery may be made if the Shareholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent and to Acquiror prior to the
expiration of such thirty (30) day period.
(b) Within thirty (30) days following delivery of the
Shareholders' Agent Certificate to the Acquiror for any Damages incurred by the
Shareholders, the Acquiror shall, subject to the Limitation, pay cash to the
Shareholders' Agent in the amount of the Damages set forth in the Shareholders'
Agent Certificate, provided that no such payment shall be made if Acquiror shall
object in a written statement to the claim made in the Shareholders' Agent
Certificate, and such statement shall have been delivered to the Shareholders'
Agent prior to the expiration of such thirty (30) day period.
8.8 Resolution of Conflicts.
(a) In case the Shareholders' Agent or Acquiror, as applicable,
shall so object in writing to any claim or claims made in any Acquiror's
Officer's Certificate or Shareholders' Agent Certificate, the non-objecting
party shall have twenty-one (21) days to respond in a written statement to the
objection. If after such twenty-one (21) day period there remains a dispute as
to any claims, the Shareholders' Agent and Acquiror shall attempt in good faith
for twenty-one (21) days to agree upon the rights of the respective parties with
respect to each of such claims. If the Shareholders' Agent and Acquiror should
so agree, a memorandum setting forth such agreement shall be prepared and signed
by
32
<PAGE> 37
both parties and, in the event that such memorandum was prepared as a result of
an objection to the Acquiror's Officer's Certificate, shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the Escrow Shares from the Escrow Fund in accordance with
the terms of the memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three (3) arbitrators. Within fifteen (15)
days after such written notice is sent, Acquiror (on the one hand) and the
Shareholders' Agent (on the other hand) shall each select one arbitrator, and
the two arbitrators so selected shall promptly select a third arbitrator. The
decision of the arbitrators as to the validity and amount of any claim in such
Officer's Certificate or Shareholders' Agent Certificate shall be binding and
conclusive upon the parties to this Agreement, and notwithstanding anything in
Sections 8.1 through 8.5, in the event that such decision was delivered as a
result of an objection to the Acquiror's Officer's Certificate, the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance with such decision.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa Clara County, California under the commercial rules then in effect of the
American Arbitration Association.
8.9 Shareholders' Agent.
(a) Girish Pancha shall be constituted and appointed as agent (the
"Shareholders' Agent") for and on behalf of the Shareholders to give and receive
notices and communications, to authorize delivery to Acquiror of the Escrow
Shares or other property from the Escrow Fund in satisfaction of claims by
Acquiror, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the Shareholders' Agent for
the accomplishment of the foregoing. Such agency may be changed by the holders
of a majority in interest of the Escrow Shares from time to time upon not less
than ten (10) days' prior written notice to Acquiror. No bond shall be required
of the Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for services. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Shareholders.
(b) The Shareholders' Agent shall not be liable for any act done
or omitted hereunder as Shareholders' Agent while acting in good faith and in
the exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall severally and pro rata, in accordance with their Pro Rata
Portion, indemnify the Shareholders' Agent and hold him harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Shareholders' Agent and arising out of or in connection with the
acceptance or administration of his duties under this Agreement or the Escrow
Agreement, provided, that the Shareholders' Agent shall be reimbursed for
counsel fees and other out-of-pocket expenses incurred by such Shareholder Agent
in connection with the administration of his duties under this Agreement or the
Escrow Agreement or the Escrow Agreement from the proceeds of the sale of Escrow
Shares by the Shareholder Agent. For such purpose, the Shareholder Agent shall
be authorized to direct the Escrow Agent to deliver or cause to be delivered to
the Shareholder Agent such number of Escrow Shares the sale of which by the
Shareholder Agent in ordinary open-market brokers transactions is sufficient to
cover such out-of-pocket costs.
33
<PAGE> 38
(c) The Shareholders' Agent shall have reasonable access to
information about Company and Acquiror and the reasonable assistance of
Company's and Acquiror's officers and employees for purposes of performing its
duties and exercising its rights under this Article 8, provided that the
Shareholders' Agent shall treat confidentially and not disclose any nonpublic
information from or about Company or Acquiror to anyone (except on a need to
know basis to individuals who agree to treat such information confidentially).
8.10 Actions of the Shareholders' Agent. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all of the
Shareholders for whom shares of Acquiror Stock otherwise issuable to them are
deposited in the Escrow Fund and shall be final, binding and conclusive upon
each such Shareholder, and the Escrow Agent and Acquiror may rely upon any
decision, act, consent or instruction of the Shareholders' Agent as being the
decision, act, consent or instruction of each and every such Shareholder. The
Escrow Agent and Acquiror are hereby relieved from any liability to any Person
for any acts done by them in accordance with such decision, act, consent or
instruction of the Shareholders' Agent.
8.11 Claims. In the event Acquiror becomes aware of a third-party claim
which Acquiror believes may result in a demand against the Escrow Fund, Acquiror
shall notify the Shareholders' Agent of such claim, and the Shareholders' Agent
and the Shareholders for whom shares of Acquiror Stock otherwise issuable to
them are deposited in the Escrow Fund shall be entitled, at their expense, to
participate in any defense of such claim. Acquiror shall have the right to
settle any such claim; provided, however, that Acquiror may not effect the
settlement of any such claim without the consent of the Shareholders' Agent,
which consent shall not be unreasonably withheld. In the event that the
Shareholders' Agent has consented to any such settlement, the Shareholders'
Agent shall have no power or authority to object to the amount of any claim by
Acquiror against the Escrow Fund for indemnity with respect to such settlement,
unless such claim is in an amount in excess of any amount consented to by the
Shareholders' Agent.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Survival of Representations and Covenants. All representations,
warranties, covenants and agreements of the Company contained in this Agreement
shall survive the Closing and any investigation at any time made by or on behalf
of Acquiror until the end of the Escrow Period. If shares or other assets are
retained in the Escrow Fund beyond expiration of the period specified in the
Escrow Agreement, then because and to the extent of a timely claim being
asserted against the Escrow Fund (notwithstanding the expiration of such time
period) the representation, warranty, covenant or agreement applicable to such
claim shall survive until, but only for purposes of, the resolution of the claim
to which such retained shares or other assets relate.
9.2 Transfer Taxes. Each Shareholder shall be individually responsible
for his, her or its respective sales, use and transfer taxes, including but not
limited to any value added, stock transfer, gross receipts, stamp duty and real,
Personal or intangible property transfer taxes, due and payable by such
Shareholder under applicable law by reason of the consummation of the
Transactions, including but not limited to any interest or penalties in respect
thereof.
9.3 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by telecopier) to the
address or telecopier number set forth beneath the name of such party below (or
to such other address or telecopier number as such party shall have specified in
a written notice given to the other parties hereto):
34
<PAGE> 39
if to the Company:
Zimba
2201 Broadway, Suite 243
Oakland, CA 94612
Attention: Girish Pancha
Telefax: (510) 663-8004
with a copy to:
Gray Cary Ware & Freidenrich
139 Townsend Street, Suite 400
San Francisco, CA 94301-1922
Attention: Pamela Burke, Esq.
Telefax: (415) 836-9220
if to Acquiror or Merger Sub:
Informatica Corporation
3350 West Bayshore Road
Palo Alto, CA 94303
Attention: Diaz Nesamoney
Telefax: (650) 687-0039
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Attention: Cori M. Allen, Esq.
Telefax: 650-494-0792
9.4 Time of the Essence. Time is of the essence in the performance of
each of the terms hereof with respect to the obligations and rights of each
party hereto.
9.5 Headings. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
9.6 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
9.7 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
9.8 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or
35
<PAGE> 40
remedy; and no single or partial exercise or waiver of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.9 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Acquiror, Merger Sub and the Company.
9.10 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.11 Parties in Interest. Except for the provisions of Article 8 hereof
applicable to the Shareholders, none of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns (if any).
9.12 Entire Agreement. The Transactional Agreements (including Schedules
and Exhibits thereto) set forth the entire understanding of the parties relating
to the subject matter thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter thereof.
9.13 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections," "Exhibits" and "Schedules" are intended to refer to
Sections of this Agreement and Exhibits and Schedules to this Agreement.
36
<PAGE> 41
IN WITNESS WHEREOF, each of Acquiror, Merger Sub and the Company has
caused this Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
ZIMBA
By:
------------------------------------------
Girish Pancha, its President
I-2 MERGER CORPORATION
By:
------------------------------------------
Diaz Nesamoney, its President
INFORMATICA CORPORATION
By:
------------------------------------------
Diaz Nesamoney, its President
37
<PAGE> 42
INDEX OF SCHEDULES AND EXHIBITS
A. Certain Definitions
B. Proprietary Information and Inventions Agreement
C. Opinion from Company Counsel
D. Opinion from Acquiror's Counsel
38
<PAGE> 43
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIROR. "Acquiror" shall have the meaning specified in the first
paragraph of the Agreement.
ACQUIROR SHARE VALUE. "Acquiror Share Value" means the average of the
closing prices of the shares of Acquiror Common Stock on the NASDAQ National
Market for the twenty (20) consecutive trading days ending three (3) business
days prior to a breach of representation or warranty giving rise to a claim for
Damages by the Acquiror.
ACQUIROR STOCK. "Acquiror Stock" shall mean Common Stock of the Acquiror,
$0.001 par value per share.
AFFILIATE. "Affiliate" shall have the meaning specified in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger to
which this Exhibit A is attached (including the Disclosure Schedule and all
Exhibits thereto), as it may be amended from time to time.
AGREEMENT OF MERGER. "Agreement of Merger" shall have the meaning
specified in Section 1.2 of the Agreement.
BEST EFFORTS. "Best Efforts" shall mean the efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible. An obligation to use "Best
Efforts" under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement, the other Transactional
Agreements and the Transactions.
CERTIFICATE. "Certificate" shall have the meaning specified in Section
3.1(a) of the Agreement.
CGCL. "CGCL" shall have the meaning specified in Section 1.2 of the
Agreement.
CLOSING. "Closing" shall have the meaning specified in Section 3.9 of the
Agreement.
CLOSING DATE MOVING AVERAGE. "Closing Date Moving Average" means the
average of the closing prices of the shares of Acquiror Common Stock on the
NASDAQ National Market for the twenty (20) consecutive trading days ending three
(3) business days prior to Closing.
CODE. "Code" shall have the meaning specified in the Recitals of the
Agreement.
COMMON STOCK EXCHANGE RATIO. "Common Stock Exchange Ratio" shall have the
meaning specified in Section 3.1 of the Agreement.
COMPANY. The "Company" shall mean Zimba, a California corporation.
A-1
<PAGE> 44
COMPANY CONTRACT. "Company Contract" shall mean any Contract:
(a) to which Company is a party;
(b) by which the Company or any of its assets is or may become bound or
under which the Company has, or may become subject to, any obligation; or
(c) under which the Company has or may acquire any right or interest.
COMPANY RETURNS. "Company Returns" shall have the meaning specified in
Section 4.14(b) of the Agreement.
COMPANY STOCK. "Company Stock" shall mean all of the Company Common Stock
and Preferred Stock.
COMPANY COMMON STOCK. "Company Common Stock" shall have the meaning
specified in Section 3.1(a).
COMPANY STOCK OPTIONS. "Company Stock Options" shall have the meaning
specified in Section 3.2.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean, with respect to any Person, any written
or oral agreement, contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation, warranty, deed, assignment, power of
attorney, certificate, purchase order, work order, insurance policy, benefit
plan, commitment, covenant, assurance, obligation, promise or undertaking of any
nature to which such Person is a party or by which its properties or assets
maybe bound or affected or under which it or its business, properties or assets
receive benefits.
CURRENT BENEFIT PLAN. "Current Benefit Plan" shall mean any Employee
Benefit Plan that is currently in effect and:
(a) that was established or adopted by the Company or any ERISA Affiliate
or is maintained or sponsored by the Company;
(b) in which the Company participates;
(c) with respect to which the Company or any ERISA Affiliate is or may be
required or permitted to make any contribution;
(d) with respect to which the Company or any ERISA Affiliate is or may
become subject to any Liability; or
(e) maintained or sponsored or contributed by an Employee Leasing
Organization and in which a Leased Employee is a participant.
DAMAGES. "Damages" shall have the meaning specified in Section 8.1.
A-2
<PAGE> 45
DEFINED BENEFIT PLAN. "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
DEFINED CONTRIBUTION PLAN. "Defined Contribution Plan" shall mean a plan
described in Section 3(34) of ERISA.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall have the meaning
specified in Article 4 of the Agreement.
DISSENTING SHARES. "Dissenting Shares" shall have the meaning specified
in Section 3.11 of the Agreement.
EFFECTIVE TIME. "Effective Time" shall have the meaning specified in
Section 1.2 of the Agreement.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
EMPLOYEE LEASING ORGANIZATION. "Employee Leasing Organization" shall mean
an organization from which the Company leases one or more employees, or has one
or more co-employees with the Company, and when used with reference to employees
or Current Benefit Plans refers only to those employees who are leased to the
Company and the Employee Benefit Plans that cover them, and not to other
personnel of the Employee Leasing Organization or Employee Benefit Plans that
cover them.
EMPLOYMENT AGREEMENTS. "Employment Agreements" shall mean the employment
agreements between Acquiror and each of Girish Pancha, A. Adam Wilson, Helen
Dwight and Suresh Sankaran entered into concurrently herewith.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, licensee,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset.
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
Entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
ERISA AFFILIATE. "ERISA Affiliate" shall mean any Person that is, was or
would be treated as a single employer with the Company under Section 414 of the
Code.
A-3
<PAGE> 46
ESCROW AGENT. "Escrow Agent" shall mean U.S. Bank Trust National
Association, and its successors and assigns.
ESCROW AGREEMENT. "Escrow Agreement" shall have the meaning specified in
Section 3.5 of the Agreement.
ESCROW FUND. "Escrow Fund" shall have the meaning specified in Section
3.5 of the Agreement.
ESCROW SHARES. "Escrow Shares" shall have the meaning specified in
Section 3.5 of the Agreement.
ESCROW PERIOD. "Escrow Period" shall have the meaning specified in
Section 8.4 of the Agreement.
EXCHANGE AGENT. "Exchange Agent" shall have the meaning specified in
Section 3.4 of the Agreement.
EXCHANGE RATIO. "Exchange Ratio" shall be equal to the quotient obtained
by dividing (i) the Ratable Distribution Amount by (ii) the total number of
Fully Diluted Shares as of the Effective Time by (iii) the Closing Date Moving
Average. If the foregoing calculation of the Exchange Ratio results in an
Exchange Ratio greater than the quotient obtained by dividing 0.70 by the
Closing Date Moving Average, then the Exchange Ratio shall be calculated
separately for the holders of the Common Stock and the holders of the Series B
Preferred Stock as follows:
(a) the Exchange Ratio for holders of Series B Preferred
Stock shall be the quotient obtained by dividing 0.70 by the
Closing Date Moving Average (the "Series B Exchange Ratio"); and
(b) the Exchange Ratio for holders of Common Stock shall be
the quotient obtained by dividing (i) the Ratable Distribution
Amount less an amount equal to the outstanding number of shares of
Series B Preferred Stock multiplied by the Series B Exchange Ratio
multiplied by the Closing Date Moving Average by (ii) the
Fully-Dilluted Shares less an amount equal to the outstanding
number of shares of Series B Preferred Stock by (iii) the Closing
Date Moving Average.
FINANCIAL STATEMENTS. "Financial Statements" shall have the meaning
specified in Section 4.4(a) of the Agreement.
FULLY-DILUTED SHARES. "Fully Diluted Shares" shall be equal to the total
number of outstanding shares of Company Common Stock, immediately prior to the
Closing Date, calculated on a fully diluted, fully converted basis as though all
convertible debt and equity securities and options (whether vested or unvested)
and warrants had been converted or exercised, less any Dissenting Shares.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration,
A-4
<PAGE> 47
qualification or authorization that is issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or
(b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi governmental authority of any nature (including
any governmental division, subdivision, department, agency, bureau, branch,
office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multinational organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, Judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
HAZARDOUS MATERIAL. "Hazardous Material" shall mean any substance,
chemical, waste or other material which is listed, defined or otherwise
identified as hazardous, toxic or dangerous under any Environmental Law; as well
as any petroleum, petroleum product or by-product, crude oil, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas useable for fuel,
and "source," "special nuclear," and "by-product" material as defined in the
Atomic Energy Act of 1954, 42 U.S.C. Sections 2011 et seq.
KNOWLEDGE. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. A corporation shall be deemed to have "Knowledge" of a
particular fact or matter only if a director, officer or key employee of such
corporation, after due inquiry, has or had Knowledge of such fact or matter.
LEASED EMPLOYEE. "Leased Employee" shall mean a person who is a
co-employee of both the Company and an Employee Leasing Organization, or is not
an employee of the Company, but is assigned to work at the Company by an
Employee Leasing Organization with whom the Company has contracted, including,
without limitation any employee leased to, or a co-employee of, the Company
pursuant to that certain General Service Agreement by and between the Company
and TriNet Employer Group, Inc., dated as of the September 15, 1998.
LEASED PREMISES. "Leased Premises" shall have the meaning specified in
Section 4.6(b) of the Agreement.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is or has been issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Body.
A-5
<PAGE> 48
LIABILITY. "Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
MATERIAL ADVERSE EFFECT. "Material Adverse Effect" shall have the meaning
specified in Section 4.1(c) of the Agreement.
MATERIAL CONSENT. "Material Consent" shall mean the Consent of any Person
with respect to the (i) execution and delivery of this Agreement and the
Transactional Agreements and the consummation of the transactions contemplated
hereby and thereby, or (ii) transferability to, or assumption by, the Acquiror
of any Company Contract as contemplated by this Agreement, the failure of which
to obtain prior to Closing would have a Material Adverse Effect on (A) the
Company, its assets, operations, or business, (B) any Company Contract, or (C)
the consummation of the transactions contemplated hereby or by the Transactional
Agreements.
MERGER. "Merger" shall have the meaning specified in Section 1.1 of the
Agreement.
MERGER SUB. "Merger Sub" shall have the meaning specified in the first
paragraph of the Agreement.
MULTIEMPLOYER PLAN. "Multiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
OFFICER'S CERTIFICATE. "Officer's Certificate" shall have the meaning
specified in Section 8.5(a) of the Agreement.
ORDER. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, pronouncement,
determination, decision, opinion, verdict, sentence, subpoena, writ or award
that is issued, made, entered, rendered or otherwise put into effect by or under
the authority of any court, administrative agency or other Governmental Body or
any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is entered into in
connection with any Proceeding.
ORDINARY COURSE OF BUSINESS. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, consistent with the Company's
past practices and taken in the ordinary course of the Company's normal day to
day operations;
(b) such action is not required to be authorized by the Company's
shareholders; and
(c) such action is similar in nature and magnitude to actions customarily
taken in the ordinary course of the normal day to day operations of other
Entities that are employed in businesses substantially similar to Company's
business.
A-6
<PAGE> 49
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PREFERRED STOCK. "Preferred Stock" shall mean all of the issued and
outstanding shares of Series A and Series B Preferred Stock of the Company.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right.
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. "Proprietary
Information and Inventions Agreement" shall mean an agreement between the
Company and its employees and consultants, substantially in the form of Exhibit
B.
PRO RATA PORTION. "Pro Rata Portion" shall have the meaning specified in
Section 3.5 of the Agreement.
PURCHASE PRICE. "Purchase Price" shall mean the product of the Closing
Date Moving Average multiplied by the quotient obtained by dividing (i)
$24,000,000 plus the aggregate proceeds the Company would have received if all
options and warrants outstanding at the Effective Time had been exercised less
(A) the amount of long-term debt of the Company as reflected on the Unaudited
Interim Balance Sheet (but excluding any equipment leases up to an aggregate
maximum of $150,000), (B) any amounts paid to Dissenting Shareholders pursuant
to Section 3.10 by (ii) $81.625.
RATABLE DISTRIBUTION AMOUNT. "Ratable Distribution Amount" shall mean the
Purchase Price less the Series B Preference Amount.
RELATED PARTY. Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is, or who has at any time been, an officer of
the Company;
(b) each member of the immediate family (which shall mean the spouse or
any lineal descendants of such individual) of each of the individuals referred
to in clause "(a)" above;
(c) any Entity (other than the Company) in which any one of the Persons
referred to in clauses "(a)" or "(b)" above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.
REPRESENTATIVES. "Representatives" of a specified party shall mean
officers, directors, employees, attorneys, accountants, advisors and
representatives of such party, including, without limitation, in the case of
Company, all subsidiaries of Company and all such Persons with respect to such
subsidiaries. The Related Parties shall be deemed to be "Representatives" of
Company.
A-7
<PAGE> 50
SEC. "SEC" shall mean the Securities and Exchange Commission.
SERIES A PREFERRED STOCK. "Series A Preferred Stock" shall have the
meaning specified in Section 3.1 of the Agreement.
SERIES B PREFERRED STOCK. "Series B Preferred Stock" shall have the
meaning specified in Section 3.1 of the Agreement.
SERIES B PREFERENCE AMOUNT. "Series B Preference Amount" shall mean the
aggregate amount of the liquidation preference to which the holders of Series B
Preferred Stock are entitled pursuant to Section 2(a) of Article III of the
Articles of Incorporation of the Company.
SHAREHOLDER. "Shareholder" shall mean a shareholder of the Company
immediately prior to the Effective Time.
SHAREHOLDERS' AGENT. "Shareholders' Agent" shall have the meaning
specified in Section 8.9 of the Agreement.
SHAREHOLDERS' AGENT CERTIFICATE. "Shareholders' Agent Certificate" shall
have the meaning specified in Section 8.5(b) of the Agreement.
SHAREHOLDER'S SHARES. "Shareholder's Shares" shall have the meaning
specified in Section 8.1(b) of the Agreement.
SURVIVING CORPORATION. "Surviving Corporation" shall have the meaning
specified in Section 1.1 of the Agreement.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax sharing agreement or similar Contract.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Escrow Agreement;
(c) the Employment Agreements; and
(d) the Agreement of Merger.
A-8
<PAGE> 51
TRANSACTION FEES. "Transaction Fees" shall have the meaning specified in
Section 6.3 of the Agreement.
TRANSACTIONS. "Transactions" shall mean (a) the execution and delivery of
the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including, without
limitation, the Merger, and the performance by Company, Acquiror, the
Shareholders, and the other parties to the Transactional Agreements of their
respective obligations under the Transactional Agreements.
UNAUDITED INTERIM BALANCE SHEET. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 4.4(a)(ii) of the Agreement.
A-9
