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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1999
ACCRUE SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 000-26437 94-3238684
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation
or organization) Identification No.)
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48634 Milmont Drive
FREMONT, CALIFORNIA 94538-7353
(Address of principal executive offices) (Zip code)
(510) 580-4500
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1999, Accrue Software, Inc., a Delaware corporation
(the "Company"), acquired Marketwave Corporation, a Washington corporation
("Target"), by the statutory merger (the "Merger") of Marketwave Acquisition
Corp., a Washington corporation and a wholly-owned subsidiary of the Company
("Merger Sub"), with and into Target. The Merger was accomplished pursuant to an
Agreement and Plan of Merger and Reorganization, dated as of September 14, 1999,
among the Company, Merger Sub, Target and the shareholders of Target (the
"Merger Agreement") and a related Agreement of Merger (collectively, the "Merger
Agreements"). As a result of the Merger, the Company became the owner of 100% of
the issued and outstanding shares of Target's Common Stock and each outstanding
share of Target Common Stock was converted into 0.1858 shares of the Company's
Common Stock.
A total of approximately 3,446,414 shares of the Company's Common Stock
will be issued to former Target shareholders and optionholders in exchange for
the acquisition by the Company of all outstanding Target capital stock and all
unexpired and unexercised options to acquire Target capital stock. The shares
issued to Target shareholders were issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, constitute "restricted securities" within
the meaning of the Securities Act. Target options to purchase Target Common
Stock were assumed by the Company and remain outstanding as options to purchase
shares of the Company's Common Stock. The Company has granted certain
registration rights for the shares issued in connection with the Merger.
Under the terms of the Merger Agreement and a related Escrow Agreement
dated September 30, 1999, ten percent of the shares of the Company's Common
Stock issued in connection with the Merger will be held in escrow for the
purpose of indemnifying the Company, Merger Sub, and each of their respective
affiliates, officers, directors, employees, representatives and agents against
any damages that relate to or arise from a breach of any of Target's
representations and warranties contained in the Merger Agreement. Such escrow
will expire on the earlier of (i) the date of the issuance of the audit report
on the first financial statements of the Company containing combined operations
of Target and the Company and (ii) September 30, 2000.
In connection with the Merger, certain employees of Target entered into
noncompetition agreements with the Company, which agreements restrict the
ability of such persons to compete with Target or the Company during the period
commencing on the effective date of the Merger and ending on the later of (a)
two years after the effective date of the Merger and (b) one year after the date
of such person's termination of employment with the Company.
Effective upon the closing of the Merger, Steven Podradchik, an
executive officer of Target, was appointed as a member of the Company's Board of
Directors.
For accounting purposes, the Merger will be accounted for as a "pooling
of interests".
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The number of shares of the Company's Common Stock to be issued to the
shareholders of Target was determined by arm's-length negotiations among the
parties.
Target is a developer and licensor of e-business intelligence and Web
mining software products that allow Internet marketers and Web developers to
identify and analyze how their Internet/Intranet presence is being used by
visitors. The Company intends to continue to use the assets acquired to conduct
such business.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
It is currently impracticable for the Company to provide the
required financial statements. In accordance with Item 7(a)(4) of the
Instructions to Form 8-K, the Company will file such financial statements as
soon as they are available, and in no event later than 60 days from the date of
the 8-K filing.
(b) PRO FORMA FINANCIAL INFORMATION.]
It is currently impracticable for the Company to provide the
required financial statements. In accordance with Items 7(a)(4) and 7(b)(2) of
the Instructions to Form 8-K, the Company will file such financial statements as
soon as they are available, and in no event later than 60 days from the date of
the 8-K filing.
(c) Exhibits.
2.1 Form of Agreement and Plan of Merger and Reorganization dated
as of September 14, 1999, among the Company, Merger Sub,
Target and the shareholders of Target.
4.1 Form of Investor Rights Agreement, dated September 30, 1999,
among the Company and the shareholders of Target.
20.1 Press release dated September 15, 1999 announcing the
execution of the Agreement and Plan of Merger and
Reorganization.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ACCRUE SOFTWARE, INC.
Date: October 12, 1999 By: /s/ Gregory C. Walker
-------------------------------
Gregory C. Walker
Vice President of Finance and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1 Form of Agreement and Plan of Merger and Reorganization,
dated as of September 14, 1999, among the Company, Merger
Sub, Target and the shareholders of Target.
4.1 Form of Investor Rights Agreement, dated September 30, 1999,
among the Company and the shareholders of Target.
20.1 Press Release dated September 15, 1999 announcing the
execution of the Agreement and Plan of Merger and
Reorganization.
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EXECUTION COPY
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG:
ACCRUE SOFTWARE, INC.,
A DELAWARE CORPORATION;
MARKETWAVE ACQUISITION CORP.,
A WASHINGTON CORPORATION;
MARKETWAVE CORPORATION
A WASHINGTON CORPORATION;
AND
SHAREHOLDERS OF MARKETWAVE CORPORATION
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DATED AS OF SEPTEMBER 14, 1999
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B* - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit C* - Directors and officers of Surviving Corporation
Exhibit D* - Form of Escrow Agreement
Exhibit E-1* - Persons to execute Affiliate Agreements
Exhibit E-2* - Form of Affiliate Agreement
Exhibit F-1* - Persons to sign Noncompetition Agreements
Exhibit F-2* - Form of Noncompetition Agreement
Exhibit G* - Form of legal opinion of Venture Law Group
Exhibit H - Investor Rights Agreement
Exhibit I* - Form of Opinion of Orrick, Herrington & Sutcliffe LLP
SCHEDULES
* - Disclosure Schedule of Marketwave Corporation
[*The indicated exhibit or schedule has not been included in this filing but a
copy will be furnished supplementally to the Securities and Exchange Commission
upon request.]
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Section 1. Description of Transaction.....................................................1
1.1 Merger of Merger Sub into the Company.........................................1
1.2 Effect of the Merger..........................................................2
1.3 Closing; Effective Time.......................................................2
1.4 Articles of Incorporation and Bylaws; Directors and Officers..................2
1.5 Conversion of Shares..........................................................2
1.6 Employee Stock Options........................................................3
1.7 Closing of the Company's Transfer Books.......................................4
1.8 Exchange of Certificates......................................................4
1.9 Dissenting Shares.............................................................6
1.10 Holdback Shares...............................................................6
1.11 Tax Consequences..............................................................7
1.12 Accounting Treatment..........................................................7
1.13 Further Action................................................................7
Section 2. Representations and Warranties of the Company and the Company Executives.......7
2.1 Due Organization; No Subsidiaries; Etc........................................7
2.2 Articles of Incorporation and Bylaws; Records.................................8
2.3 Capitalization, Etc...........................................................8
2.4 Financial Statements.........................................................10
2.5 Absence of Changes...........................................................10
2.6 Title to Assets..............................................................12
2.7 Bank Accounts; Receivables...................................................12
2.8 Equipment; Leasehold.........................................................13
2.9 Proprietary Assets...........................................................13
2.10 Contracts....................................................................14
2.11 Liabilities..................................................................16
2.12 Compliance with Legal Requirements...........................................17
2.13 Governmental Authorizations..................................................17
2.14 Tax Matters..................................................................17
2.15 Employee and Labor Matters; Benefit Plans....................................18
2.16 Environmental Matters........................................................21
2.17 Insurance....................................................................21
2.18 Related Party Transactions...................................................22
2.19 Legal Proceedings; Orders....................................................22
2.20 Authority; Binding Nature of Agreement.......................................23
2.21 Non-Contravention; Consents..................................................23
2.22 Brokers......................................................................24
2.23 Pooling Matters..............................................................24
2.24 Financial Performance........................................................25
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(continued)
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2.25 Compliance with the Hart-Scott-Rodino Act....................................25
2.26 Full Disclosure..............................................................25
Section 3. Representations and warranties of the shareholders............................25
3.1 Title; Absence of Certain Agreements.........................................25
3.2 Authority....................................................................25
3.3 Investment Representations...................................................26
Section 4. Representations and Warranties of Parent and Merger Sub.......................27
4.1 Organization; Good Standing; Qualification and Power.........................27
4.2 Parent Capitalization........................................................28
4.3 No Conflict; Required Filings and Consents...................................28
4.4 SEC Filings; Financial Statements............................................29
4.5 Absence of Undisclosed Liabilities...........................................30
4.6 Absence of Certain Changes...................................................30
4.7 Litigation...................................................................30
4.8 Governmental Authorization...................................................30
4.9 Compliance With Laws.........................................................30
4.10 Accounting and Tax Matters; Pooling of Interests.............................31
4.11 Authority; Binding Nature of Agreement.......................................31
4.12 Valid Issuance...............................................................31
Section 5. Certain Covenants of the Company and the Shareholders.........................31
5.1 Access and Investigation.....................................................31
5.2 Operation of the Company's Business..........................................32
5.3 Notification; Updates to the Company Disclosure Schedule.....................33
5.4 Support of Merger by Shareholders............................................34
5.5 Approval of Merger; Waiver of Dissenter's Rights.............................34
5.6 Conversion of Company Preferred Stock........................................35
Section 6. Additional Covenants of the Parties...........................................35
6.1 Filings and Consents.........................................................35
6.2 Public Announcements.........................................................35
6.3 Pooling of Interests.........................................................35
6.4 Affiliate Agreements.........................................................35
6.5 Commercially Reasonable Efforts..............................................35
6.6 Noncompetition Agreements....................................................35
6.7 FIRPTA Matters...............................................................36
6.8 Advice of Changes............................................................36
6.9 Reorganization Treatment.....................................................36
6.10 Certain Employee Benefits Matters............................................36
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(continued)
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6.11 Section 16 Matters...........................................................36
Section 7. Conditions Precedent to Obligations of Parent and Merger Sub..................37
7.1 Accuracy of Representations..................................................37
7.2 Performance of Covenants.....................................................37
7.3 Shareholder Approval.........................................................37
7.4 Consents.....................................................................37
7.5 Agreements and Documents.....................................................37
7.6 Exemption from Applicable Securities Laws....................................39
7.7 No Restraints................................................................39
7.8 No Legal Proceedings.........................................................39
7.9 No Material Adverse Change...................................................39
7.10 Tax Opinion..................................................................39
Section 8. Conditions Precedent to Obligations of the Company............................40
8.1 Accuracy of Representations..................................................40
8.2 Performance of Covenants.....................................................40
8.3 Documents....................................................................40
8.4 Listing......................................................................40
8.5 No Restraints................................................................40
8.6 Board Seat...................................................................41
8.7 No Material Adverse Change...................................................41
8.8 Tax Opinion..................................................................41
Section 9. Termination...................................................................41
9.1 Termination..................................................................41
9.2 Effect of Termination........................................................42
Section 10. Indemnification, Etc.........................................................42
10.1 Survival of Representations, Etc.............................................42
10.2 Indemnification..............................................................43
10.3 Exclusive Remedy.............................................................43
10.4 No Contribution..............................................................44
10.5 Defense of Third Party Claims................................................44
Section 11. Miscellaneous Provisions.....................................................45
11.1 Restrictions on Transfer.....................................................45
11.2 Shareholders' Agent..........................................................47
11.3 Further Assurances...........................................................47
11.4 Fees and Expenses............................................................47
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(continued)
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11.5 Attorneys' Fees..............................................................48
11.6 Notices......................................................................48
11.7 Confidentiality..............................................................49
11.8 Time of the Essence..........................................................49
11.9 Headings.....................................................................49
11.10 Counterparts.................................................................49
11.11 Governing Law................................................................49
11.12 Successors and Assigns.......................................................49
11.13 Waiver of Jury Trial.........................................................50
11.14 Remedies Cumulative; Specific Performance....................................50
11.15 Waiver.......................................................................50
11.16 Amendments...................................................................50
11.17 Severability.................................................................50
11.18 Parties in Interest..........................................................50
11.19 Entire Agreement.............................................................50
11.20 Construction.................................................................51
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is
made and entered into as of September 14, 1999 by and among: ACCRUE SOFTWARE,
INC., a Delaware corporation ("PARENT"); MARKETWAVE ACQUISITION CORP., a
Washington corporation and a wholly owned subsidiary of Parent ("MERGER SUB");
MARKETWAVE CORPORATION, a Washington corporation (the "COMPANY"); and the
holders of all the outstanding capital stock of the Company (the
"SHAREHOLDERS"). Certain other capitalized terms used in this Agreement are
defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub with and into the Company in accordance with this Agreement and the
Washington Business Corporation Act (the "MERGER"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. The Shareholders own a total of (i) 8,398,845 shares of the Common
Stock (par value $.001 per share) of the Company ("COMPANY COMMON STOCK"), (ii)
2,352,950 shares of the Series A Preferred Stock (par value $.001 per share) of
the Company ("SERIES A PREFERRED STOCK"), and (iii) 4,558,822 shares of the
Series B Preferred Stock (par value $.001 per share) of the Company ("SERIES B
PREFERRED STOCK" and, together with the Company Common Stock and the Series A
Preferred Stock, the "COMPANY STOCK"), which shares are all of the issued and
outstanding shares of capital stock of the Company.
AGREEMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties to this Agreement agree as follows: SECTION 1.
DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation after the Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Washington Business
Corporation Act.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Orrick, Herrington & Sutcliffe LLP, 400 Capitol Mall, Suite 3000, Sacramento,
California 95814 at 10:00 a.m. on September 30, 1999, or at such other time and
date as Parent and the Company may agree. The
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date on which the Closing actually takes place is referred to in this Agreement
as the "Closing Date." Contemporaneously with or as promptly as practicable
after the Closing, a properly executed agreement of merger conforming to the
requirements of Chapter 23B.11 of the Washington Business Corporation Act shall
be filed with the Secretary of State of the State of Washington. The Merger
shall become effective at the time such agreement of merger is filed with the
Secretary of State of the State of Washington (the "EFFECTIVE TIME").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.8(c), at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub, the
Company or any Shareholder:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time (including the shares of Company Common Stock issued
upon conversion of all shares of the Company's Series A Preferred Stock and
Series B Preferred Stock) shall be converted into the right to receive the
"Applicable Fraction" (as defined in Section 1.5(b)) of a share of the common
stock (par value $.001 per share) of Parent ("PARENT COMMON STOCK"); and
(ii) each share of the common stock (par value $.001 per share)
of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) the "APPLICABLE FRACTION" shall be calculated by dividing
the Net Merger Shares (as defined below) by the aggregate number of outstanding
shares of Company Common Stock (after giving effect to the conversion of all
outstanding shares of the Company's Series A Preferred Stock and Series B
Preferred Stock into Common Stock) plus the aggregate number of shares
represented by Company Options (as defined in Section 1.6), in each case as of
the Effective Time;
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(ii) the term "TOTAL MERGER SHARES" shall mean 3,479,375 shares
of Parent Common Stock;
(iii) the term "NET MERGER SHARES" shall mean the Total Merger
Shares less the number of Expense Shares (as defined below); and
(iv) the term "EXPENSE SHARES" shall mean the number of shares
of Parent Common Stock calculated by dividing the amount of the Company Expenses
reflected on the Schedule of Expenses delivered pursuant to Section 7.5(j) (less
$300,000 of the Broadview Expenses (as defined in Section 2.22) and all
accounting and legal fees and expenses incurred by the Company in connection
with the transactions contemplated by this Agreement and reflected on the
Schedule of Expenses) by the Stipulated Value (as defined in Section 1.8(c)).
(c) The Applicable Fraction shall be adjusted to reflect fully the
effect of any stock split, stock dividend (including any dividend or
distribution of stock convertible into Parent Common Stock or Company Common
Stock), reorganization, recapitalization or other similar change with respect to
Parent Common Stock or Company Common Stock after the date hereof and prior to
the Effective Time.
(d) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company after giving effect to
any provisions providing for acceleration as a result of the Merger contained in
any applicable restricted stock agreement or other agreement with the Company,
then the shares of Parent Common Stock issued in exchange for such shares of
Company Common Stock will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock may accordingly be marked with appropriate
legends.
1.6 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
that is then outstanding under the Company's 1997 Stock Option Plan (the
"COMPANY OPTION PLAN"), whether vested or unvested (a "COMPANY OPTION"), shall
be assumed by Parent in accordance with the terms (as in effect as of the date
of this Agreement) of the Company Option Plan and the stock option agreement by
which such Company Option is evidenced. All rights with respect to Company
Common Stock under outstanding Company Options shall thereupon be converted into
rights with respect to Parent Common Stock. Accordingly, from and after the
Effective Time, (a) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (b) the number of shares of Parent
Common Stock subject to each such assumed Company Option shall be equal to the
number of shares of Company Common Stock that were subject to such Company
Option immediately prior to the Effective Time multiplied by the Applicable
Fraction, rounded down to the nearest whole number of shares of Parent Common
Stock (collectively, the "OPTION SHARES"), (c) the per share exercise price for
the Parent Common Stock issuable upon exercise of each such assumed Company
Option shall be determined by dividing the exercise price per share of Company
Common Stock subject to such Company Option, as in effect immediately prior to
the Effective Time, by the Applicable
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Fraction, and rounding the resulting exercise price up to the nearest whole
cent, and (d) all restrictions on the exercise of each such assumed Company
Option shall continue in full force and effect, and the term, exercisability,
vesting schedule and other provisions of such Company Option shall otherwise
remain unchanged; provided, however, that each such assumed Company Option
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time. The Company and Parent shall take all action that may be
necessary (under the Company Option Plan and otherwise) to effectuate the
provisions of this Section 1.6. It is the intention of the parties that the
Company Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
Company Options qualified as incentive stock options prior to the Effective
Time, and this Section 1.6 shall be interpreted consistent with such intent.
Following the Closing, Parent will send to each holder of an assumed Company
Option a written notice setting forth (i) the number of shares of Parent Common
Stock subject to such assumed Company Option, and (ii) the exercise price per
share of Parent Common Stock issuable upon exercise of such assumed Company
Option. No later than February 1, 2000, Parent shall file a registration
statement on Form S-8 for the shares of Parent Common Stock issuable with
respect to assumed Company Options that are eligible for inclusion on Form S-8
and shall maintain the effectiveness of such registration statement thereafter
for so long as any such options or other rights remain outstanding.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "COMPANY STOCK CERTIFICATE") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, Parent
will send to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify, and (ii) instructions for use in effecting the surrender of
Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to Parent for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably requested by Parent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock (and
cash in lieu of any fractional share of Parent Common Stock in accordance with
Section 1.8(c)) that such holder has the right to receive pursuant to the
provisions of this Section 1, and the Company Stock Certificate so surrendered
shall be canceled. Until
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surrendered as contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender a certificate representing shares of Parent
Common Stock (and cash in lieu of any fractional share of Parent Common Stock in
accordance with Section 1.8(c)) as contemplated by this Section 1. If any
Company Stock Certificate shall have been lost, stolen or destroyed, Parent may,
in its discretion and as a condition precedent to the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
closing price per share of Parent Common Stock on The Nasdaq Stock Market (as
reported in The Wall Street Journal, or, if not reported therein, any other
authoritative source) on the business day immediately prior to the Closing Date
(the "STIPULATED VALUE").
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto) or for
any cash amounts if, on or after the expiration of one (1) year after the
Effective Time, such shares are delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
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1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become held by a "dissenter" within the meaning of Chapter
23B.13 of the Washington Business Corporation Act shall not be converted into or
represent the right to receive Parent Common Stock in accordance with Section
1.5 (or cash in lieu of fractional shares in accordance with Section 1.8(c)),
and the holder or holders of such shares shall be entitled only to such rights
as may be granted to such holder or holders in Chapter 23B.13 of the Washington
Business Corporation Act; provided, however, that if the status of any such
holder as a "dissenter" shall not be perfected, or if such holder shall lose
his, her or its status as a "dissenter," then, as of the later of the Effective
Time or the time of the failure to perfect such status or the loss of such
status, such shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or certificates
representing such shares) Parent Common Stock in accordance with Section 1.5
(and cash in lieu of fractional shares in accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
23B.13 of the Washington Business Corporation Act and of any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the Washington Business Corporation Act, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such demand,
notice or instrument. The Company shall not make any payment (unless such
payment is pursuant to a court order in which event the Company shall give
Parent notice of any such court order or request therefor as soon as
practicable) or settlement offer prior to the Effective Time with respect to any
such demand unless Parent shall have consented in writing to such payment or
settlement offer.
1.10 HOLDBACK SHARES.
(a) Parent shall establish and maintain an escrow (the "ESCROW
ACCOUNT") comprised of ten percent (10%) of the Net Merger Shares less the
Option Shares (the "HOLDBACK SHARES"). Parent shall designate and appoint U.S.
Stock Transfer Corporation or such other third party escrow agent that is
mutually and reasonably acceptable to Parent and the Shareholders' Agent (as
hereinafter defined) in connection therewith (the "ESCROW AGENT") to serve in
accordance with the Escrow Agreement substantially in the form attached as
Exhibit D hereto (the "ESCROW AGREEMENT") to be entered into among Parent, the
Escrow Agent and the Shareholders' Agent at Closing. Such escrow of the Holdback
Shares shall be maintained for purposes of satisfying claims brought pursuant to
Section 10 and for the period of time set forth in such Section 10.1 (the
"HOLDBACK PERIOD").
(b) The right to receive the Holdback Shares upon expiration of the
Holdback Period (i) is an integral part of the consideration in the Merger, and
(ii) shall be transferable or assignable only upon submission of evidence of
such transfer or assignment reasonably satisfactory to Parent and the Escrow
Agent. The value of any shares of Parent Common Stock
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ultimately retained by Parent hereunder shall be treated for purposes of this
Agreement as a reduction of the consideration paid to the Shareholders in the
Merger.
1.11 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.12 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.13 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be reasonably necessary or desirable
to carry out the purposes of this Agreement or to vest the Surviving Corporation
or Parent with full right, title and possession of and to all rights and
property of Merger Sub and the Company, the officers and directors of the
Surviving Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY
EXECUTIVES
The Company and Steve Podradchik and Barry Allen (collectively, the
"COMPANY EXECUTIVES") jointly and severally represent and warrant, to and for
the benefit of the Indemnitees, that, except as set forth in the Company
Disclosure Schedule:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Washington and has all necessary corporate power
and authority to: (i) conduct its business in the manner in which its business
is currently being conducted; (ii) own and use its assets in the manner in which
its assets are currently owned and used; and (iii) perform its obligations under
all Company Contracts.
(b) The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the names "Marketwave" and
"Marketwave.com."
(c) The Company is not, and has not been required to be, qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Company Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and could not reasonably be
expected to result in a Company Material Adverse Effect. The Company is in good
standing as a foreign corporation in each of the jurisdictions identified in
Part 2.1(c) of the Company Disclosure Schedule.
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<PAGE> 14
(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors, and
(iii) the names and titles of the Company's officers.
(e) Except as set forth in Part 2.1(e) of the Company Disclosure
Schedule, the Company does not own any controlling interest in any Entity and
the Company has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any Entity. The
Company has not agreed and is not obligated to make any future investment in, or
capital contribution to, any Entity.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate, complete and up-to-date copies of: (a) the
Company's articles of incorporation and bylaws, including all amendments
thereto; (b) the stock records of the Company; and (c) 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, the board of directors of the Company and all committees of the board
of directors of the Company since the date of the Company's incorporation. There
have been no formal meetings or other proceedings of the shareholders of the
Company, the board of directors of the Company or any committee of the board of
directors of the Company that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of the
Company's articles of incorporation or bylaws, and the Company has not taken any
action that is inconsistent in any material respect with any resolution adopted
by the Company's shareholders, the Company's board of directors or any committee
of the Company's board of directors. The books of account, stock records, minute
books and other records of the Company are accurate, up-to-date and complete in
all material respects, and have been maintained in accordance with prudent
business practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
22,500,000 shares of Common Stock, of which 8,398,845 shares have been issued
and are outstanding as of the date of this Agreement; and (ii) 7,500,000 shares
of Preferred Stock, 2,500,000 of which have been designated "Series A Preferred
Stock," of which 2,352,950 shares have been issued and are outstanding as of the
date of this Agreement, and 5,000,000 of which have been designated "Series B
Preferred Stock," of which 4,558,822 shares have been issued and are outstanding
as of the date of this Agreement. Each outstanding share of Series A Preferred
Stock is convertible into approximately 1.08 shares of Company Common Stock and
each share of Series B Preferred Stock is convertible into one share of Company
Common Stock. All of the outstanding shares of Company Stock have been duly
authorized and validly issued, and are fully paid and non-assessable. Part 2.3
of the Company Disclosure Schedule (i) sets forth the name of each Shareholder
of the Company and the number and type of all shares of Company Common Stock,
Series A Preferred Stock and Series B Preferred Stock held by such Shareholder
and (ii) provides an accurate and complete description of the terms of each
repurchase option which is held by the Company and to which any of such shares
is subject.
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<PAGE> 15
(b) The Company has reserved 4,750,000 shares of Company Common
Stock for issuance under the Company Option Plan. As of the date of this
Agreement, of such reserved shares of Company Common Stock, options to purchase
3,045,958 shares have been granted and are outstanding, 1,067,595 shares have
been granted and exercised and 636,447 shares remain available for issuance to
officers, directors, employees and consultants pursuant to the Company Option
Plan. Part 2.3(b) of the Company Disclosure Schedule accurately sets forth, with
respect to each Company Option that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Company Option; (ii) the total
number of shares of Company Common Stock that are subject to such Company Option
and the number of shares of Company Common Stock with respect to which such
Company Option is immediately exercisable; (iii) the date on which such Company
Option was granted and the term of such Company Option; (iv) the vesting
schedule for such Company Option; (v) the exercise price per share of Company
Common Stock purchasable under such Company Option; and (vi) whether such
Company Option has been designated an "incentive stock option" as defined in
Section 422 of the Code. Each Company Option designated as an "incentive stock
option" as defined in Section 422 of the Code on the applicable books and
records of the Company qualified as an "incentive stock option" within the
meaning of Section 422 of the Code on the date of grant of such Company Option.
Except as set forth in Part 2.3(b) of the Company Disclosure Schedule, there is
no: (i) outstanding 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 knowledge of the Company,
condition or circumstance that may 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.
(c) All outstanding shares of Company Stock and all outstanding
Company Options have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
(d) Except as set forth in Part 2.3(d) of the Company Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the Washington Business Corporation Act and all other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
restricted stock purchase agreements and other applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and the notes, if any, thereto (collectively, the "COMPANY FINANCIAL
STATEMENTS"):
(i) The audited balance sheets of the Company as of December 31,
1997 and 1998, and the related audited income statements, statements of
shareholders' equity
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and statements of cash flows of the Company for the years then ended, together
with the notes thereto and the unqualified report and opinion of Deloitte &
Touche LLP relating thereto; and
(ii) the unaudited balance sheet of the Company as of August 31,
1999, (the "UNAUDITED INTERIM BALANCE SHEET"), and the related unaudited income
statement of the Company for the eight months then ended.
(b) The Company Financial Statements are accurate and complete in
all material respects and present fairly the financial position of the Company
as of the respective dates thereof and the results of operations and (in the
case of the financial statements referred to in Section 2.4(a)(i)) cash flows of
the Company for the periods covered thereby. The Company Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except that the
financial statements referred to in Section 2.4(a)(ii) do not contain footnotes
and are subject to normal and recurring year end audit adjustments, which will
not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since August 31, 1999:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the knowledge of the Company, no event has occurred that will
or could reasonably be expected to result in a Company Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets (whether
or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of its capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
its capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any shares of its capital stock or other security (except for Company Common
Stock issued upon the exercise of outstanding Company Options), (ii) any option
or right to acquire any shares of its capital stock or any other security
(except for Company Options described in Part 2.3(b) of the Company Disclosure
Schedule), or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(e) the Company has not amended or waived any of its rights under,
or modified the vesting provisions under, (i) any provision of the Company
Option Plan, (ii) any provision of any agreement evidencing any outstanding
Company Option, or (iii) any restricted stock purchase agreement;
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<PAGE> 17
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
August 31, 1999, exceeds $50,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices and Permitted Liens;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine advances for business expenses made to employees in the
ordinary course of business), or (ii) incurred or guaranteed any indebtedness
for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (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, employees or consultants, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
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<PAGE> 18
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good and valid title to, all assets
purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.7(b) and
2.9 of the Company Disclosure Schedule; and (iii) all other assets reflected in
the Company's books and records as being owned by the Company. Except as set
forth in Part 2.6(a) of the Company Disclosure Schedule, all of said assets are
owned by the Company free and clear of any liens or other Encumbrances, except
for Permitted Liens.
(b) Part 2.6(b) of the Company Disclosure Schedule identifies all
assets that are material to the business of the Company and that are being
leased or licensed to the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Company Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company as of August 31, 1999. Except as
set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Company (including the accounts receivable reflected
on the Unaudited Interim Balance Sheet that have not yet been collected and
those accounts receivable that have arisen since August 31, 1999 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 course of
business, and (ii) are current and, except to the extent of a reserve which the
Company has established specifically for doubtful accounts receivable (which
reserve is set forth on the Unaudited Interim Balance Sheet, is reasonable under
the circumstances and is consistent with the Company's past practice) will be
collected in full when due, without any counterclaim or set off.
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and
constitute all of the material items of
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equipment and other tangible assets reasonably necessary for the conduct of the
Company's business in the manner in which such business is currently being
conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Company Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Company Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company that
are material to the Company's business. Part 2.9(a)(iii) of the Company
Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company. Except as set forth in Part 2.9(a)(iv) of the Company
Disclosure Schedule, the Company has good and valid title to all of the Company
Proprietary Assets identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Company
Disclosure Schedule, free and clear of all liens and other Encumbrances other
than Permitted Liens, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Company Disclosure Schedule. Except as set
forth in Part 2.9(a)(v) of the Company Disclosure Schedule, the Company is not
obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the Company
Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken all reasonable steps to protect and
maintain the confidentiality and secrecy of all Company Proprietary Assets and
otherwise to maintain and protect the value of all Company Proprietary Assets.
Except as set forth in Part 2.9(b) of the Company Disclosure Schedule, the
Company has not (other than pursuant to license agreements identified in Part
2.10(a)(iii) of the Company Disclosure Schedule) disclosed or delivered to any
Person, or permitted the disclosure or delivery to any Person of, the source
code, or any portion or aspect of the source code, of any Company Proprietary
Asset.
(c) None of the Company Proprietary Assets infringe or conflict with
any Proprietary Asset owned or used by any other Person. The Company is not
infringing, misappropriating or making any unlawful use of, and the Company has
not at any time infringed, misappropriated or made any unlawful use of, or
received any written notice (including written notices in electronic form) of
any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
knowledge of the Company, no other Person is infringing, misappropriating or
making
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any unlawful use of, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Company Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of the Company;
and (ii) there has not been any written claim (including written claims in
electronic form) by any customer or other Person alleging that any Company
Proprietary Asset (including each version thereof that has ever been licensed or
otherwise made available by the Company to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Company,
and, to the knowledge of the Company, there is no basis for any such claim. The
Company has established adequate reserves on the Unaudited Interim Balance Sheet
to cover all costs associated with any obligations that the Company may have
with respect to the correction or repair of programming errors or other defects
in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business is being conducted and as presently proposed to be
conducted. Except as set forth in Part 2.9(e) of the Company Disclosure
Schedule, (i) the Company has not licensed any of the Company Proprietary Assets
to any Person on an exclusive basis, and (ii) the Company has not entered into
any covenant not to compete or Contract limiting its ability to exploit fully
any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Company Disclosure
Schedule, (i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
Proprietary Information and Inventions Agreement previously delivered to Parent,
and (ii) all current and former consultants and independent contractors to the
Company have executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Consultant Proprietary Information and
Inventions Agreement previously delivered to Parent.
(g) Each item of software and hardware that has been developed by or
for the Company is Year 2000 Compliant and, to the knowledge of the Company,
each other item of software and hardware that is owned or used by the Company is
Year 2000 Compliant.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Company Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor;
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(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);
(x) any Company Contract that was entered into outside the
ordinary course of business or was inconsistent with the Company's past
practices and is material to the Company;
(xi) any Company Contract that is material to the Company and
that has a term of more than 60 days and that may not be terminated by the
Company (without penalty) within 60 days after the delivery of a termination
notice by the Company;
(xii) any other Company Contract that is material to the
Company. For purposes of this Section 2.10, "material" shall mean any Company
Contract that contemplates or involves (A) the payment or delivery of cash or
other consideration in an amount or having a value in excess of $25,000 in the
aggregate, or (B) the performance of services having a value in excess of
$25,000 in the aggregate. Contracts in the respective categories described in
clauses "(i)" through "(xii)" above are referred to in this Agreement as
"Material Contracts."
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10(a) of the Company Disclosure
Schedule, including all
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amendments thereto. Part 2.10(a) of the Company Disclosure Schedule provides an
accurate description of the terms of each Material Contract that is not in
written form. Each Material Contract identified in Part 2.10(a) of the Company
Disclosure Schedule is valid and in full force and effect and is enforceable by
the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(c) Except as set forth in Part 2.10(c) of the Company Disclosure
Schedule:
(i) the Company has not violated or breached, in any material
respect, or committed any material default under, any Material Contract and, to
the knowledge of the Company, no other Person has violated or breached, in any
material respect, or committed any material default under, any Material
Contract;
(ii) to the knowledge of the Company, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a material
violation or breach of any of the provisions of any Material Contract, (B) give
any Person the right to declare a default or exercise any other material remedy
under any Material Contract, (C) give any Person the right to accelerate the
maturity or performance of any Material Contract, or (D) give any Person the
right to cancel, terminate or modify any Material Contract;
(iii) the Company has not received any written notice (including
written notices in electronic form) regarding any actual or possible violation
or breach of, or default under, any Material Contract; and
(iv) the Company has not waived any of its material rights under
any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(e) The Material Contracts identified in Part 2.10(a) of the Company
Disclosure Schedule collectively constitute all of the Contracts reasonably
necessary to enable the Company to conduct its business in the manner in which
its business is currently being conducted.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for
liabilities: (a) identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; (b) incurred by the Company since August 31, 1999 in the
ordinary course of business and consistent with the Company's past practices;
(c) under the Company Contracts identified in Part 2.10 of the Company
Disclosure Schedule, to the extent the
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nature of such liabilities can be specifically ascertained by reference to the
text of such Company Contracts; and (d) identified in Part 2.11 of the Company
Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times been, in compliance with all applicable Legal Requirements, except where
the failure to comply with such Legal Requirements has not had and could not
reasonably be expected to result in a Company Material Adverse Effect. Except as
set forth in Part 2.12 of the Company Disclosure Schedule, the Company has not
received any written notice (including written notices in electronic form) from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent accurate and complete copies of
all Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
the Company Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations reasonably necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted. The Company is, and at all times has been, in
compliance with the terms and requirements of the respective Governmental
Authorizations identified in Part 2.13 of the Company Disclosure Schedule,
except where the failure to comply with such Governmental Authorizations has not
had and could not reasonably be expected to result in a Company Material Adverse
Effect. The Company has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any Governmental Authorization, or (b)
any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company (taking into account extensions) with any Governmental Body prior to the
Closing Date (the "COMPANY RETURNS") (i) have been filed or will be filed, and
(ii) have been, or will be when filed, accurately and completely prepared in all
material respects in compliance with all applicable Legal Requirements. All
amounts shown on the Company Returns to be due on or before the Closing Date
have been or will be paid on or before the Closing Date. The Company has
delivered to Parent accurate and complete copies of all Company Returns which
have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The Company
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
August 31, 1999 through the Closing Date.
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(c) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, there have been no examinations or audits of any Company Return. The
Company has delivered to Parent accurate and complete copies of all audit
reports and similar documents (to which the Company has access) relating to the
Company Returns. Except as set forth in Part 2.14 of the Company Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Company Returns has been granted that is still in effect (by the Company or
any other Person), and no request for such extension or waiver from the Company
is pending.
(d) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, no claim or Legal Proceeding is pending or has been threatened against
or with respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes with respect to any notice of deficiency or similar
document received by the Company with respect to any Tax (other than liabilities
for Taxes asserted under any such notice of deficiency or similar document which
are being contested in good faith by the Company and with respect to which
adequate reserves for payment have been established). There are no liens for
Taxes upon any of the assets of the Company except liens for current Taxes not
yet due and payable. 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 the Company 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.
(e) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, 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, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, 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. The
Company is not liable for the Taxes of any other Person.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "PLANS") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("EMPLOYEE"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to the
knowledge of the Company, has not at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in Section 3(2)
of the Employee Retirement Income Security Act of
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1974, as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees (a "PENSION PLAN").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA) for the
benefit of Employees or former Employees which are described in Part 2.15(c) of
the Company Disclosure Schedule (the "WELFARE PLANS"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the knowledge of the
Company, has never been required to be, treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. The Company has never been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. To the knowledge of the
Company, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
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(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, to the
knowledge of the Company, the provisions of Section 4980B of the Code ("COBRA")
have been complied with in all material respects.
(i) To the knowledge of the Company, each of the Plans has been
operated and administered in all material respects in accordance with applicable
Legal Requirements, including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service or has time remaining in which to apply for such favorable determination
within the remedial amendment period under Section 401(b) of the Code and the
regulations thereunder, and the Company is not aware of any reason why any such
determination letter should be revoked or denied.
(k) Except as set forth in Part 2.15(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
the Company (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
(l) Part 2.15(l) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
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(m) Part 2.15(m) of the Company Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) To the knowledge of the Company, the Company is in compliance in
all material respects with all applicable Legal Requirements and Contracts
relating to employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company Disclosure
Schedule, to the knowledge of the Company, the Company has good labor relations
and (i) the consummation of the Merger or any of the other transactions
contemplated by this Agreement could not reasonably be expected to result in a
material adverse effect on the Company's labor relations, and (ii) none of the
Company's employees intends to terminate his or her employment with the Company
as a result of the Merger.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance with all
applicable Environmental Laws, which compliance includes the possession by the
Company of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof, except where the failure to comply with such Environmental Laws has not
had and could not reasonably be expected to result in a Company Material Adverse
Effect. The Company has not received any written notice (including written
notices in electronic form), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental Law and, to the knowledge of the Company, there are no
circumstances that may prevent or interfere with the Company's compliance with
any Environmental Law in the future. To the knowledge of the Company, no current
or prior owner of any property leased or controlled by the Company has received
any notice or other communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or the Company is not in compliance with any
Environmental Law. All Governmental Authorizations currently held by the Company
pursuant to Environmental Laws are identified in Part 2.16 of the Company
Disclosure Schedule. For purposes of this Section 2.16: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is regulated by any Environmental Law.
2.17 INSURANCE. Part 2.17 of the Company Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for the benefit of
the Company and identifies any material claims made thereunder, and the Company
has delivered to Parent
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accurate and complete copies of the insurance policies identified on Part 2.17
of the Company Disclosure Schedule. Each of the insurance policies identified in
Part 2.17 of the Company Disclosure Schedule is in full force and effect. The
Company has not received any notice or other communication regarding any actual
or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any claim under any insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any insurance policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18 of the
Company Disclosure Schedule, to the knowledge of the Company: (a) no Related
Party has, and no Related Party has at any time had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
the Company; (b) no Related Party is, or has at any time been, indebted to the
Company; (c) no Related Party has entered into, or has had any direct or
indirect financial interest in, any Material Contract, transaction or business
dealing involving the Company; (d) no Related Party is competing, or has at any
time competed, directly or indirectly, with the Company; and (e) no Related
Party has any claim or right against the Company (other than rights under
Company Options and rights to receive compensation for services performed as an
employee of the Company). For purposes of this Agreement each of the following
shall be deemed to be a "Related Party": (i) each of the Shareholders; (ii) each
individual who is an officer of the Company; (iii) each member of the immediate
family of each of the individuals referred to in clauses (i) and (ii) above; and
(iv) any trust or other Entity (other than the Company) in which any one of the
individuals referred to in clauses (i), (ii) and (iii) above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19(a) of the Company Disclosure
Schedule, there is no pending Legal Proceeding and, to the knowledge of the
Company, no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company or any
Person whose liability the Company has retained or assumed, either contractually
or by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of the Company, except as set forth in Part 2.19(a) of the Company
Disclosure Schedule, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) Except as set forth in Part 2.19(b) of the Company Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. To
the knowledge of
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the Company, no officer or other employee of the Company is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and, subject
only to the approval by the Company's shareholders of this Agreement, the Merger
and each Related Agreement to which the Company is a party, to perform its
obligations under this Agreement and each Related Agreement to which the Company
is a party and the transactions contemplated hereby and thereby; and the
execution, delivery and, subject only to the approval by the Company's
shareholders of this Agreement and the Merger, performance by the Company of
this Agreement has been duly authorized by all necessary action on the part of
the Company and its board of directors. This Agreement constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, and the Related Agreements to which the Company is a
party, when executed and delivered by the company, shall be legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Company Disclosure Schedule and subject to the approval of this Agreement
and the Merger by the Company's shareholders, neither (1) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to herein or therein, nor (2) the consummation of the Merger or any of
the other transactions contemplated by this Agreement, 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
currently effective resolution adopted by the Company's shareholders, the
Company's board of directors or any committee of the Company's board of
directors;
(b) 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 contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject, other than such contravention, conflict, violation or right
to exercise any remedy that could not be reasonably likely to result in a
Company Material Adverse Effect;
(c) give any Governmental Body or other Person the right to
challenge any of the transactions contemplated by this Agreement;
(d) 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 that
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otherwise relates to the Company's business or to any of the assets owned or
used by the Company, other than any such contravention, conflict, violation or
right to revoke, withdraw, suspend, cancel, terminate or modify any such
Governmental Authorization which could not reasonably be expected to result in a
Company Material Adverse Effect;
(e) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Material Contract, or give
any Person the right to (i) declare a default or exercise any remedy under any
such Material Contract, (ii) accelerate the maturity or performance of any such
Material Contract, or (iii) cancel, terminate or modify any such Material
Contract; or
(f) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens, pledges, hypothecations, charges, mortgage, and
security interests that will not, individually or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company).
Except as set forth in Part 2.21 of the Company Disclosure Schedule and except
for (i) the filing of the Agreement of Merger with the Washington Secretary of
State and appropriate documents in other states where the Company is qualified
to do business, and (ii) obtaining the approval by the Company's shareholders of
this Agreement and the Merger, the Company is not and 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 (x) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, or (y)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement.
2.22 BROKERS. The Company has not, nor have any of its directors,
officers, securityholders or employees, employed any broker or finder (other
than Broadview International LLC) or incurred any liability (other than to
Broadview International LLC) for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby. The Company has
previously furnished to Parent a complete and correct copy of all agreements
between the Company and Broadview International LLC pursuant to which such firm
would be entitled to any payment relating to the transactions contemplated by
this Agreement (collectively, the "BROADVIEW EXPENSES").
2.23 POOLING MATTERS. Neither the Company nor any of its Affiliates has,
to its knowledge and based upon consultation with its independent accountants,
taken or agreed to take any action that (without giving effect to any action
taken or agreed to be taken by Parent or any of its Affiliates) would affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests.
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2.24 FINANCIAL PERFORMANCE. During the period from July 1, 1999 to
September 10, 1999, the Company received binding customer orders arising from
bona fide transactions entered into in the ordinary course of business in an
aggregate amount of at least $1,298,000.
2.25 COMPLIANCE WITH THE HART-SCOTT-RODINO ACT. The Company's total
assets and annual net sales do not exceed $10,000,000 within the meaning of, and
calculated in accordance with, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, Section 7A(a)(3) of the Clayton Act, 15 U.S.C. Section 18A,
and the regulations promulgated thereunder.
2.26 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does
not, and the Officer's Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) In the event that information regarding the Merger is prepared
by the Company and distributed to its shareholders, such information will not
contain any statement that is inaccurate or misleading with respect to any
material fact.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders, severally (and not jointly), represents and
warrants to Parent and Merger Sub with respect to himself, herself or itself as
follows:
3.1 TITLE; ABSENCE OF CERTAIN AGREEMENTS. Such Shareholder is the lawful
and record and beneficial owner of, and has good and valid title to, the shares
of Company Stock set forth opposite the name of such Shareholder in Part 2.3(a)
of the Company Disclosure Schedule, with the full power and authority to vote
such shares and transfer and otherwise dispose of such shares, and any and all
rights and benefits incident to the ownership thereof free and clear of all
Encumbrances. Except as set forth in Part 3.1 of the Company Disclosure
Schedule, there are no agreements or understandings between such Shareholder and
the Company and/or any other Shareholder or any other person with respect to the
voting, sale or other disposition of Company Common Stock or any other matter
relating to Company Stock.
3.2 AUTHORITY. Such Shareholder has full and absolute power and
authority to enter into this Agreement and each Related Agreement to which such
Shareholder is a party and this Agreement and each Related Agreement to which
such Shareholder is a party have been duly executed and delivered by such
Shareholder, and are valid and binding obligations of such Shareholder,
enforceable against such Shareholder in accordance with their respective terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. Neither the execution, delivery
and performance of this Agreement or any Related
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Agreement to which such Shareholder is a party, nor the consummation of the
transactions contemplated hereby or thereby nor compliance by such Shareholder
with any of the provisions hereof or thereof will (i) (A) conflict with, (B)
result in any violations of, (C) cause a default under (with or without due
notice, lapse of time or both), (D) give rise to any right of termination,
amendment, cancellation or acceleration of any obligation contained in or the
loss of any material benefit under or (E) result in the creation of any
Encumbrance upon or against any assets, rights or property of the Company (or
against any Company Stock, Parent capital stock or common stock of the Surviving
Corporation), under any term, condition or provision of (x) any agreement or
instrument to which such Shareholder is a party, or by which such Shareholder or
any of his, her or its properties, assets or rights may be bound, or (y) any
law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Body applicable to such
Shareholder or any of his, her or its properties, assets or rights, which
conflict, breach, default or violation or other event would prevent the
consummation of the transactions contemplated by this Agreement or any Related
Agreement. No permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Body or other person is
required in connection with the execution, delivery and performance by such
Shareholder of this Agreement and each Related Agreement to which such
Shareholder is a party or the consummation by such Shareholder of the
transactions contemplated hereby or thereby.
3.3 INVESTMENT REPRESENTATIONS. Such Shareholder:
(a) is acquiring the Parent Common Stock being issued to such
Shareholder in connection with the Merger (the "MERGER SHARES") for investment
and for such Shareholder's own account and not as a nominee or agent for any
other person and with no present intention of distributing or reselling such
shares or any part thereof in any transactions that would be in violation of the
Securities Act or any state securities or "blue-sky" laws;
(b) understands (A) that the Parent Common Stock to be issued to
him, her or it have not been registered for sale under the Securities Act or any
state securities or "blue-sky" laws in reliance upon exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of the
investment intent of such Shareholder as expressed herein, (B) that such Merger
Shares must be held indefinitely and not sold until such shares are registered
under the Securities Act and any applicable state securities or "blue-sky" laws,
unless an exemption from such registration is available, (C) that, except as
provided in the Investor Rights Agreement (as defined in Section 7.5(n) below),
Parent is under no obligation to register such Merger Shares and (D) that the
certificates evidencing such Merger Shares will be imprinted with a legend in
the form set forth in Section 11.1 that prohibits the transfer of such shares,
except as provided in Section 11.1;
(c) has been furnished with, and has read and reviewed, the Parent's
SEC Documents;
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<PAGE> 33
(d) has had an opportunity to ask questions of and has received
satisfactory answers from the officers of Parent or persons acting on Parent's
behalf concerning Parent and the terms and conditions of an investment in Parent
Common Stock;
(e) is aware of Parent's business affairs and financial condition
and has acquired sufficient information about Parent to reach an informed and
knowledgeable decision to acquire the Merger Shares to be issued to such
Shareholder;
(f) can afford to suffer a complete loss of his, her or its
investment in such Merger Shares;
(g) is familiar with the provisions of Rule 144 promulgated under
the Securities Act which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
requirements, including, among other things: (A) the availability of certain
public information about the issuer, (B) the resale occurring not less than one
year after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and, in the case of an
affiliate, or of a non-affiliate who has held the securities less than two
years, the amount of securities being sold during any three month period not
exceeding the specified limitations stated therein, and (C) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a "market maker" (as such term is defined under the Exchange Act);
(h) understands that in the event all of the applicable requirements
of Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk;
(i) has such knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the merits and risks of
acquiring and holding the shares of Parent Common Stock to be issued in
connection with the Merger; and
(j) except as set forth in Part 3.3(j) of the Company Disclosure
Schedule, is an "accredited investor" within the meaning of Rule 501(a) under
the Securities Act.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Shareholders as follows:
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4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of Parent
and Merger Sub (i) is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation and (ii) has
all requisite corporate power and corporate authority to own, lease and operate
its properties and assets and to carry on its business as now being conducted,
to enter into this Agreement and each Related Agreement to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby or thereby. Parent has delivered to the Company
true and correct copies of Parent's Certificate of Incorporation and Bylaws and
Merger Sub's Articles of Incorporation and Bylaws, each as amended to date.
Neither Parent nor any of its subsidiaries is in violation of any material
provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents.
4.2 PARENT CAPITALIZATION. The authorized capital stock of Parent
consists of 75,000,000 shares of Common Stock, $.001 par value per share, of
which 21,874,844 shares were issued and outstanding as of the close of business
on August 31, 1999, and 5,000,000 shares of Preferred Stock, $.001 par value per
share, of which no shares were issued and outstanding as of the close of
business on August 31, 1999. As of the close of business on August 31, 1999,
Parent had reserved (a) 6,330,000 shares of Common Stock for issuance to
employees and independent contractors pursuant to Parent's 1996 Stock Option
Plan (the "PARENT EMPLOYEE STOCK OPTION PLAN"), of which, as of August 31, 1999,
4,073,942 shares had been issued pursuant to option exercises and 1,375,774
shares were subject to outstanding, unexercised options and (b) 250,000 shares
of Common Stock for issuance to directors pursuant to Parent's 1999 Directors'
Stock Option Plan (the "PARENT DIRECTORS STOCK OPTION PLAN"), of which, as of
August 31, 1999, no shares had been issued pursuant to option exercises and
50,000 shares were subject to outstanding, unexercised options. As of August 31,
1999, 20,000 shares of Common Stock were issuable pursuant to an outstanding
warrant. There are no other outstanding shares of capital stock or voting
securities of Parent other than shares of Parent Common Stock issued after the
date of this Agreement upon the exercise of options issued under the Parent
Employee Stock Option Plan or the Parent Directors Stock Option Plan. Other than
as contemplated under this Agreement, there are no other options, warrants,
calls, rights, commitments or agreements of any character to which Parent or
Merger Sub is a party or by which either of them is bound obligating Parent or
Merger Sub to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
Parent or Merger Sub or obligating Parent or Merger Sub to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Related
Agreements do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a benefit
under (i) any provision of the Certificate of Incorporation or Bylaws of Parent
or the Articles of Incorporation of Bylaws of Merger Sub, as amended, or (ii)
any material mortgage, indenture, lease, contract or other material agreement or
instrument, permit, concession,
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franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Merger Sub or their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body, is required by
or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of appropriate merger documents as required by Washington law, (ii)
the filing of a Form 8-K with the SEC and National Association of Securities
Dealers ("NASD") within 15 days after the Closing Date, (iii) any filings as may
be required under applicable state securities laws and the securities laws of
any foreign country and (iv) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the shares of
Parent Common Stock to be issued to the Shareholders in connection with the
Merger and upon exercise of the options under the Company Stock Option Plan
assumed by Parent, and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Parent Material Adverse Effect and would not prevent, materially alter or
materially delay any the transactions contemplated by this Agreement.
4.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
of each report, registration statement (on a form other than Form S-8 or 8-A)
and definitive proxy statement filed by Parent with the SEC between May 1, 1999
and the date of this Agreement, which are all the documents (other than
preliminary material) that Parent was required to file (or otherwise did file)
with the SEC in accordance with Section 6(a) of the Securities Act or Sections
13, 14 and 15(d) of the Exchange Act since May 1, 1999 (collectively, the
"PARENT'S SEC DOCUMENTS"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the Parent's SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder; and (ii) none of the Parent's SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The financial statements (including the notes thereto) contained
in the Parent's SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude; and (iii) fairly present in all
material respects the financial position of Parent as of the respective dates
thereof and the results of operations, shareholders' equity and cash flows of
Parent for the
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periods covered thereby. There has been no material change in Parent's
accounting policies except as described in the notes to the financial statements
included as part of Parent's final Prospectus dated July 30, 1999.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Parent has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet included in Parent's Quarterly Report on Form 10-Q heretofore
provided to the Company for the period ended June 30, 1999 (the "PARENT BALANCE
SHEET"), (ii) those incurred in the ordinary course of business and not required
to be set forth in the Parent Balance Sheet under United States generally
accepted accounting principles, and (iii) those incurred in the ordinary course
of business since the Parent Balance Sheet Date and consistent with past
practice.
4.6 ABSENCE OF CERTAIN CHANGES. Since June 30, 1999 (the "PARENT BALANCE
SHEET DATE"), Parent has conducted its business in the ordinary course in a
manner consistent with past practice and there has not occurred: (i) any change,
event or condition (whether or not covered by insurance) that has resulted in,
or might reasonably be expected to result in, a Parent Material Adverse Effect;
(ii) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Parent, or any direct or indirect
redemption, purchase or other acquisition by Parent of any of its shares of
capital stock; (iii) any material amendment or change to Parent's Certificate of
Incorporation or Bylaws; or (iv) any negotiation or agreement by Parent to do
any of the things described in the preceding clauses (i) through (iii) (other
than negotiations with the Company and its representatives regarding the
transactions contemplated by this Agreement).
4.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries or any of their respective properties
or any of their respective officers or directors (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected to have a
Parent Material Adverse Effect. There is no judgment, decree or order against
Parent or any of its subsidiaries or, to the knowledge of Parent or any of its
subsidiaries, any of their respective directors or officers (in their capacities
as such) that could reasonably be expected to prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Parent Material Adverse Effect.
4.8 GOVERNMENTAL AUTHORIZATION. Each of Parent and its subsidiaries has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Body that is
required for the operation of Parent's or any of its subsidiaries' business
("PARENT AUTHORIZATIONS"), and all of such Parent Authorizations are in full
force and effect, except where the failure to obtain or have any of such Parent
Authorizations could not reasonably be expected to have a Parent Material
Adverse Effect.
4.9 COMPLIANCE WITH LAWS. Each of Parent and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal,
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state, local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for such
violations or failures to comply as could not reasonably be expected to have a
Parent Material Adverse Effect.
4.10 ACCOUNTING AND TAX MATTERS; POOLING OF INTERESTS.
(a) Parent is not aware of any agreement, plan or other circumstance
that would prevent the Merger from constituting a reorganization under Section
368(a) of the Code.
(b) Neither Parent nor any of its subsidiaries nor, to the knowledge
of Parent, any of their respective directors, officers or stockholders has taken
any action which would interfere with Parent's ability to account for the Merger
as a "pooling-of-interests."
4.11 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the right, power and authority to perform their obligations under this Agreement
and the Related Agreements to which Parent or Merger Sub, as applicable, is a
party and the transactions contemplated hereby and thereby; and the execution,
delivery and performance by each of Parent and Merger Sub of this Agreement, the
Related Agreements to which it is a party and the transactions contemplated
hereby and thereby (including the contemplated issuance of Parent Common Stock
in the Merger in accordance with this Agreement) have been duly authorized by
all necessary corporate action on the part of Parent and Merger Sub, their
respective boards of directors and the shareholder of Merger Sub. No vote of
Parent's Shareholders is required to approve the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, and the Related
Agreements to which they are a party, when executed and delivered by Parent and
Merger Sub, as applicable, shall be legal, valid and binding obligations of
Parent and Merger Sub, as applicable, enforceable against them in accordance
with their respective terms, in each case subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
4.12 VALID ISSUANCE. The Merger Shares will, when issued in accordance
with the provisions of this Agreement and the Agreement of Merger, be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights and Encumbrances. Parent owns all the outstanding shares of capital stock
of Merger Sub and all of such shares are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights or Encumbrances.
SECTION 5. CERTAIN COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time or the earlier termination of this
Agreement pursuant to Section 9.1 (the "PRE-CLOSING PERIOD"), the Company shall,
and shall cause its Representatives to, (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and
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Parent's Representatives with copies of such existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request.
5.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period,
without the prior written consent of Parent:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use all commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and good will
with all suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with the Company;
(c) the Company shall use all commercially reasonable efforts to
keep in full force all insurance policies identified in Part 2.17 of the Company
Disclosure Schedule;
(d) the Company shall cause its officers to respond to reasonable
requests from Parent and Parent's Representatives for information concerning the
status of the Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company may repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(f) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (x) to grant stock options to employees in accordance with
its past practices, (y) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options, and (z) to issue shares of Company
Common Stock upon the conversion of shares of Series A Preferred Stock or Series
B Preferred Stock);
(g) the Company shall not amend or waive any of its rights under, or
modify the vesting provisions under, (i) any provision of the Company Option
Plan, (ii) any provision of any agreement evidencing any outstanding Company
Option, or (iii) any provision of any restricted stock purchase agreement;
(h) neither the Company nor any of the Shareholders shall amend or
permit the adoption of any amendment to the Company's articles of incorporation
or bylaws, or effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization,
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reclassification of shares, stock split, reverse stock split or similar
transaction (except that the Company may issue shares of Company Common Stock
upon the conversion of shares of Series A Preferred Stock or Series B Preferred
Stock);
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not amend or prematurely terminate, or waive
any material right or remedy under, any Material Contract;
(k) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person other than in the ordinary course of business
consistent with past practice, or (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person other than in the ordinary
course of business consistent with past practice;
(l) the Company shall not (i) lend money to any Person (except that
the Company may make routine advances for business expenses to employees in the
ordinary course of business, make loans to Robert Wyman in an aggregate amount
not to exceed $1,500 consistent with past practice and may, consistent with its
past practices, allow employees to acquire Company Common Stock in exchange for
promissory notes upon exercise of Company Options), or (ii) incur or guarantee
any indebtedness for borrowed money;
(m) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan (other than such amendments as may be required to comply with
applicable law and as to which Parent is notified in writing), (ii) pay any
bonus or make any profit-sharing payment, cash incentive payment or similar
payment to, or increase 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 in the ordinary course of business consistent
with past practice, or (iii) hire any new employee whose aggregate annual
compensation is expected to exceed $75,000;
(n) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(o) the Company shall not make any Tax election; provided that
Parent shall not unreasonably withhold its consent for any tax election the
Company may propose to make;
(p) the Company shall not commence or settle any material Legal
Proceeding; provided that Parent shall not unreasonably withhold its consent to
the commencement or settlement of any such legal proceeding; and
(q) the Company shall not agree or commit to take any of the actions
described in clauses (e) through (p) above.
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5.3 NOTIFICATION; UPDATES TO THE COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Shareholders in
this Agreement;
(ii) the discovery by the Company of any event, condition, fact
or circumstance that occurs, arises or exists after the date of this Agreement
and that would cause or constitute an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Shareholders in
this Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(iii) the discovery by the Company of any breach of any covenant
or obligation of the Company or, to the best knowledge of the Company, any of
the Shareholders; and
(iv) the discovery by the Company of any event, condition, fact
or circumstance that would make the satisfaction of any of the conditions set
forth in Section 7 or Section 8 on or prior to the Closing Date impossible or
unlikely (a notice under this Section 5.3(a)(iv) is hereinafter referred to as a
"NOTICE OF BREACH").
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.3(a) requires any change in the Company
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Company Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then the Company shall promptly deliver to Parent an
update to the Company Disclosure Schedule specifying such change. Except for
updates to the Company Disclosure Schedule that arise out of facts and
circumstances arising after the date hereof, which, as of the date hereof, could
not reasonably have been expected by the Company or the Company Executives to
arise and which updates could not reasonably be expected individually or in the
aggregate to result in a Company Material Adverse Effect (a "PERMITTED UPDATE"),
no such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the purpose of determining (i) the accuracy of any of the
representations and warranties made by the Company or any of the Shareholders in
this Agreement and (ii) whether any of the conditions set forth in Section 7 has
been satisfied.
SUPPORT OF MERGER BY SHAREHOLDERS. The Shareholders shall use all
reasonable efforts to cause the Company to duly observe and perform its
obligations under this Agreement.
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APPROVAL OF MERGER; WAIVER OF DISSENTER'S RIGHTS. By signing this
Agreement, each Shareholder hereby consents to, and votes all shares of Company
Stock that are owned, of record or beneficially by such Shareholder in favor of,
the Merger, this Agreement and the other transactions contemplated hereby and
thereby and each Shareholder hereby waives any dissenter's rights such
Shareholder may otherwise have pursuant to applicable law.
5.4 CONVERSION OF COMPANY PREFERRED STOCK. Each holder of the Company's
Series A Preferred Stock or Series B Preferred Stock agrees to convert such
shares into Company Common Stock prior to the Effective Time.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
6.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. Each party
shall (upon request) promptly deliver to the other party a copy of each such
filing made, each such notice given and each such Consent obtained by such party
during the Pre-Closing Period.
6.2 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, but subject to
applicable legal and regulatory obligations, neither Parent, the Company nor any
of the Shareholders shall, and Parent, the Company and the Shareholders shall
not permit any of their respective Representatives to, issue any press release
or make any public statement regarding this Agreement, the Merger or any of the
other transactions contemplated by this Agreement, without the prior written
consent of Parent, with respect to disclosures by the Company or any Shareholder
or their respective Representative, and the Company, with respect to disclosures
by Parent (which consents shall not be unreasonably withheld or delayed).
6.3 POOLING OF INTERESTS. No party to this Agreement shall take any
action that could reasonably be expected to have an adverse effect on the
ability of Parent to account for the Merger as a "pooling of interests."
6.4 AFFILIATE AGREEMENTS. Each Shareholder identified on Exhibit E-1
shall execute and deliver to Parent, and the Company shall use all commercially
reasonable efforts to cause each other Person identified on Exhibit E-1 (and any
other Person that could reasonably be deemed to be an "affiliate" of the Company
for purposes of the Securities Act), to execute and deliver to Parent, as
promptly as practicable after the execution of this Agreement, an Affiliate
Agreement in the form of Exhibit E-2.
6.5 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing Period, (a)
the Company and the Shareholders shall use all commercially reasonable efforts
to cause the conditions set forth in Section 7 to be satisfied on a timely
basis, and (b) Parent and Merger Sub
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shall use all commercially reasonable efforts to cause the conditions set forth
in Section 8 to be satisfied on a timely basis.
6.6 NONCOMPETITION AGREEMENTS. At or prior to the Closing, each of the
individuals identified on Exhibit F-1 shall execute and deliver to the Company
and Parent a Noncompetition Agreement in the form of Exhibit F-2.
6.7 FIRPTA MATTERS. At the Closing, the Company shall deliver to Parent
separate statements (in such form as may be reasonably requested by counsel to
Parent) signed under penalty of perjury by each of the Shareholders, certifying
as to such Shareholder's non-foreign status for purposes of U.S. income taxation
and setting forth such Shareholder's tax identification number and home or
principal address.
6.8 ADVICE OF CHANGES. Parent will promptly advise the Company in
writing of (a) any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Parent or Merger Sub contained in
this Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (ii) any Material Adverse
Change in Parent's business or financial condition, taken as a whole.
6.9 REORGANIZATION TREATMENT. Neither Parent, the Shareholders nor the
Company shall take any action (either before or after the Closing) that would
cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code. Parent shall, and shall use its reasonable best
efforts to cause the Surviving Corporation to, report to the extent required by
the Code or the regulations thereunder, the Merger for United States federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code.
6.10 CERTAIN EMPLOYEE BENEFITS MATTERS. Employees of the Company at the
Effective Time will be provided with welfare benefits by the Surviving
Corporation, Parent or one of its subsidiaries which welfare benefits shall be
substantially similar to such welfare benefits provided to similarly situated
employees of Parent immediately prior to the Closing. If any employee of the
Company becomes a participant in any employee benefit plan, program, policy or
arrangement of Parent or one of its subsidiaries, such employee shall, to the
extent permitted by such plan, program, policy or arrangement, be given credit
for all service with the Company prior to the Effective Time for purposes of
vesting eligibility but not for benefit accrual purposes. Parent shall pay, or
cause the Company to pay, severance payments in the following amounts, on such
terms as Parent shall request (including a general release agreement), to any
employees of the Company and/or Officers who are terminated in connection with
the Merger: (a) each such employee shall receive a severance payment equal to at
least two (2) months of his or her regular straight-time salary as of the
Effective Date, and (b) each such Officer shall receive a severance payment
equal to at least three (3) months of his or her regular straight-time salary as
of the Effective Date. For purposes of this Section 6.10, "Officer" shall mean
Steve Podradchik, Barry Allen, Bob Wyman, Mike McClure and Richard Bryan. Parent
agrees to provide continuation coverage of medical benefits (as described in
sections 601 through 609 of ERISA and section 4980B of the Code) to employees of
the Company who are terminated
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in connection with the Merger and who elect such coverage notwithstanding
whether such employees are entitled to elect continuation coverage under ERISA
or the Code.
6.11 SECTION 16 MATTERS. The Board of Directors of Parent shall, to the
extent permitted by applicable law, take or cause to be taken all actions
necessary to obtain approval in the form required by Rule 16b-3 of the Exchange
Act so that, with respect to persons who will or may become officers or
directors of Parent, the transactions relating to the Merger that may be
considered acquisitions under such Rule for such persons will be exempt from
Section 16(b) of the Exchange Act.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Shareholders in this Agreement shall have
been accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality qualifications contained or incorporated
directly or indirectly in such representations and warranties), and shall be
accurate in all material respects as of the Closing Date as if made at the
Closing Date (without giving effect to any update to the Company Disclosure
Schedule other than Permitted Updates, and without giving effect to any
materiality qualifications contained or incorporated, directly or indirectly, in
such representations and warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Shareholders are required to comply with or to perform at or
prior to the Closing Date shall have been complied with and performed in all
material respects.
7.3 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of at least eighty percent (80%) of
the shares of Company Common Stock, Series A Preferred Stock and Series B
Preferred Stock entitled to vote with respect thereto, each voting as a separate
class.
7.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.21 of the Company Disclosure Schedule and
those set forth in Section 4.3) shall have been obtained and shall be in full
force and effect.
7.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Affiliate Agreements substantially in the form of Exhibit E-2
(each, an "AFFILIATE AGREEMENT"), executed by the Persons identified on Exhibit
E-1;
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(b) Noncompetition Agreements substantially in the form of Exhibit
F-2 (each a "NONCOMPETITION AGREEMENT"), executed by the individuals identified
on Exhibit F-1;
(c) Proprietary information and inventions agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and former
employees of the Company and by all consultants and independent contractors and
former consultants and former independent contractors to the Company who have
not already signed such agreements (including the individuals identified in Part
2.9(f) of the Company Disclosure Schedule);
(d) the statements referred to in Section 6.7, executed by each of
the Shareholders;
(e) a legal opinion of Venture Law Group, counsel to the Company and
the Shareholders, dated as of the Closing Date, substantially in the form of
Exhibit G;
(f) a letter from PricewaterhouseCoopers LLC, dated as of the
Closing Date, confirming that Parent may account for the Merger as a "pooling of
interests" in accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16, and all published rules, regulations
and policies of the SEC;
(g) a letter from Deloitte & Touche LLP, dated as of the Closing
Date, confirming that no transaction entered into by the Company, and no other
fact or circumstance relating to the Company, will prevent Parent from
accounting for the Merger as a "pooling of interests" in accordance with
generally accepted principles, Accounting Principles Board Opinion No. 16 and
all published rules, regulations and policies of the SEC;
(h) a certificate executed by the President and Chief Executive
Officer of the Company that each of the representations and warranties set forth
in Section 2 is accurate in all material respects as of the Closing Date as if
made on the Closing Date and that the conditions set forth in Sections 7 have
been duly satisfied in all material respects (the "COMPANY OFFICER'S CLOSING
CERTIFICATE");
(i) a written opinion from Thomas Weisel Partners LLC, in a form
satisfactory to the Board of Directors of Parent, stating that the issuance of
the Merger Shares to the Shareholders is fair to Parent from a financial point
of view;
(j) A true, correct and complete schedule (the "SCHEDULES OF
EXPENSES") of all Company Expenses paid or incurred by or on behalf of the
Company or the Shareholders through the Closing Date, accompanied by a
certificate signed by the President and Chief Financial Officer of the Company
certifying the accuracy and completeness thereof, shall have been delivered by
the Company.
(k) written resignations of all officers and directors of the
Company, effective as of the Effective Time;
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(l) a counterpart signature page to this Agreement executed by the
Shareholders set forth on Schedule 7.5(l);
(m) the Escrow Agreement substantially in the form of Exhibit D (the
"ESCROW AGREEMENT") executed by the Shareholders' Agent;
(n) the Investor Rights Agreement substantially in the form of
Exhibit H (the "INVESTOR RIGHTS AGREEMENT") executed by the Shareholders;
(o) the consent of the holders of at least a majority of the
outstanding "Registrable Securities" (as such term is defined in Section 2.1(b)
of the Second Amended and Restated Investor Rights Agreement dated as of August
13, 1998 by and among Parent, Organic and the other shareholders of Parent
listed on the signature pages thereto (the "EXISTING REGISTRATION RIGHTS
AGREEMENT")) to the Parent's grant of registration rights to the Shareholders
pursuant to the Investor Rights Agreement, as required by Section 2.14 of the
Existing Registration Rights Agreement (the "CONSENT OF THE EXISTING
REGISTRATION RIGHTS HOLDERS"); and
(p) If requested by Parent, Steve Podradchik shall have executed an
amendment of that certain License Agreement, dated as of February 27, 1997,
between Steve Podradchik and the Company or shall have executed a new license
agreement, in each case, in form and substance reasonably satisfactory to Parent
to ensure that the Company has the absolute, royalty free and perpetual right to
use, sublicense, transfer and modify the software program Hit List and any and
all derivative works thereof and all modifications, enhancements and upgrades
thereto.
7.6 EXEMPTION FROM APPLICABLE SECURITIES LAWS. The issuance of shares of
Parent Common Stock and the other transactions contemplated by this Agreement in
the Merger shall be exempt from applicable state and federal securities laws.
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
7.9 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business, condition, assets, liabilities,
operations, financial performance or prospects since the date of this Agreement
(it being understood that none of the following shall be deemed, in and of
itself, to constitute a material adverse change in the business, condition,
assets, liabilities, operations, financial or prospects performance of the
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Company since the date of this Agreement: (a) a change that results from
conditions affecting the U.S. economy or the world economy, (b) a change that
results from conditions affecting the Internet or the e-commerce industry so
long as such conditions do not affect the Company in a disproportionate manner
as compared with companies of a similar size, (c) a change that results from the
announcement or pendency of the Merger or the transactions contemplated hereby
and (d) a change that results from the taking of any action required by this
Agreement).
7.10 TAX OPINION. Parent shall have received a written opinion of
Parent's legal counsel in form and substance reasonably satisfactory to it and
dated on or about the Closing Date to the effect that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code, and such
opinion shall not have been withdrawn. In rendering such opinion, counsel shall
be entitled to rely upon, among other things, reasonable assumptions as well as
customary representations of Parent and the Company.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Closing Date as if made at the Closing Date (without giving effect to
any materiality or similar qualifications contained in such representations and
warranties).
8.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing Date shall have been complied with and performed in all respects.
8.3 DOCUMENTS. The Company shall have received the following documents:
(a) the Escrow Agreement executed by Parent and the Escrow Agent;
(b) the Investor Rights Agreement executed by Parent;
(c) the Consent of the Existing Registration Rights Holders;
(d) a certificate executed by the President and Chief Executive
Officer of Parent that each of the representations and warranties set forth in
Section 4 is accurate in all material respects as of the Closing Date as if made
on the Closing Date and that the conditions set forth in Sections 8 have been
duly satisfied in all material respects (the "PARENT OFFICER'S CLOSING
CERTIFICATE"); and
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(e) a legal opinion of Orrick, Herrington & Sutcliffe LLP, counsel
to Parent and Merger Sub, dated as of the Closing Date, substantially in the
form of Exhibit I.
8.4 LISTING. The Merger Shares shall have been approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
8.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
8.6 BOARD SEAT. Parent shall have offered Steve Podradchik a position on
Parent's Board of Directors, such board position to be effective at the Closing
Date and to be subject to re-election at the discretion of Parent's
shareholders.
8.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in Parent's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement (it being
understood that none of the following shall be deemed, in and of itself, to
constitute a material adverse change in the business, condition, assets,
liabilities, operations or financial performance of Parent since the date of
this Agreement: (a) a change in the market price or trading volume of Parent's
Common Stock, (b) a failure by Parent to meet any securities analyst estimates
of Parent's financial results for any period (c) a change that results from
conditions affecting the U.S. economy or the world economy, (d) a change that
results from conditions affecting the Internet or the e-commerce industry so
long as such conditions do not affect Parent in a disproportionate manner as
compared with companies of a similar size, (e) a change that results from the
announcement or pendency of the Merger or the transactions contemplated hereby
and (f) a change that results from the taking of any action required by this
Agreement).
8.8 TAX OPINION. The Company shall have received a written opinion of
the Company's legal counsel in form and substance reasonably satisfactory to it
and dated on or about the Closing Date to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
and such opinion shall not have been withdrawn. In rendering such opinion,
counsel shall be entitled to rely upon, among other things, reasonable
assumptions as well as customary representations of Parent and the Company.
SECTION 9. TERMINATION
TERMINATION. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Merger Sub and the Company of
this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Merger Sub and the Company; or
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(b) Parent and Merger Sub if the conditions set forth in Section 7
hereof shall not have been satisfied by October 15, 1999, except if such
conditions have not been satisfied solely as a result of the action or inaction
of Parent or Merger Sub, or such earlier date upon which Parent receives a
Notice of Breach from the Company; or
(c) the Company if the conditions set forth in Section 8 hereof
shall not have been satisfied by October 15, 1999, except if such conditions
have not been satisfied solely as a result of the action or inaction of the
Company or the Shareholders; or
(d) Parent and Merger Sub or the Company if, without fault of the
terminating party, there shall be any applicable federal or state law that makes
consummation of the Merger illegal or otherwise prohibited or if any court of
competent jurisdiction or Governmental Body shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable.
Any termination pursuant to this Section 9.1 (other than a termination pursuant
to Section 9.1(a) hereof) shall be effected by written notice from the party or
parties so terminating to the other parties hereto.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect, except for this Section 9.2 and Section 11, each of which shall
survive the termination of this Agreement; provided, however, that the liability
of any party for any breach by such party of the representations, warranties,
covenants or agreements of such party set forth in this Agreement occurring
prior to the termination of this Agreement shall survive the termination of this
Agreement.
SECTION 10. INDEMNIFICATION, ETC.
10.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company and the
Company Executives set forth in Section 2 shall survive the Closing and shall
expire on the earlier of (i) the date of the issuance of the audit report on the
first financial statements of Parent containing combined operations of the
Company and Parent and (ii) the first anniversary of the Closing Date (the
"TERMINATION DATE"); provided, however, that if, at any time prior to the
Termination Date, any Indemnitee (acting in good faith) delivers to the
Shareholders' Agent a written notice alleging the existence of an inaccuracy in
or a breach of any of the representations and warranties made by the Company and
the Company Executives set forth in Section 2 (and setting forth in reasonable
detail the basis for such Indemnitee's belief that such an inaccuracy or breach
may exist) and asserting a claim for recovery under Section 10.2 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the Termination Date until such time as such claim is fully and finally
resolved. All representations and warranties made by Parent shall terminate and
expire as of the Closing Date, and any liability of Parent with respect to such
representations and warranties shall thereupon cease.
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(b) The representations, warranties, covenants and obligations of
Company and the Shareholders, and the rights and remedies that may be exercised
by the Indemnitees, shall not be limited or otherwise affected by or as a result
of any information furnished to, or any investigation made by or knowledge of,
any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Company Disclosure Schedule shall be deemed to be a
representation and warranty made by the Company and the Shareholders in this
Agreement.
10.2 INDEMNIFICATION.
(a) Indemnification by Company Indemnitors. From and after the
Closing Date (but subject to Section 10.1(a)), the Merger Shareholders (the
"INDEMNITORS"), jointly and severally, shall hold harmless and indemnify each of
the Indemnitees from and against, and the Holdback Shares shall be available to
compensate and reimburse each of the Indemnitees for, any Damages that are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject (regardless of whether
or not such Damages relate to any third-party claim) and that arise from or as a
result of, or are directly or indirectly connected with: (i) any breach of any
representation or warranty set forth in Section 2 (without giving effect to any
"Company Material Adverse Effect" or other materiality qualification or any
similar qualification contained or incorporated directly or indirectly in such
representation or warranty), or (ii) any Legal Proceeding relating to any breach
of the type referred to in clause (i) above (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Section 10).
(b) Deductible. The Indemnitors shall not be required to make any
indemnification payment pursuant to Section 10.2(a) for any inaccuracy in or
breach of any representation and warranty set forth in Section 2 until such time
as the total amount of all Damages (including the Damages arising from such
inaccuracy or breach and all other Damages arising from any other inaccuracies
in or breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees has or have otherwise become subject,
exceeds $500,000 in the aggregate. (If the total amount of such Damages exceeds
$500,000, then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for the entire amount of such Damages up to a maximum
of the full amount of the Holdback Shares.)
(c) Limitation Due to Post-Closing Actions. None of the Indemnitors
shall have any liability for Damages which arise solely as a result of (i)
actions taken by or on behalf of, or omissions of, Parent or the Surviving
Corporation after the Closing; (ii) changes in accounting methods or policies of
the Surviving Corporation after the Closing; or (iii) the passing of, or any
change in, after the Closing, any law or administrative practice of any
Governmental Body in any such case not actually in force as of the date of this
Agreement (even if retroactive in effect), including any increase in the tax
rates in effect on the date of this Agreement or the imposition of any Tax not
in effect on the date of this Agreement.
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10.3 EXCLUSIVE REMEDY. With the exception of claims based upon fraud,
from and after the Closing, recourse of the Indemnitees to the Holdback Shares
pursuant to this Agreement and the Escrow Agreement shall be the sole and
exclusive remedy of the Indemnitees for monetary damages for any inaccuracy in
or breach of any representation or, warranty contained in Section 2 of this
Agreement or any Legal Proceeding related thereto. Any distribution of Holdback
Shares to satisfy a claim hereunder shall be done so as to reduce the Escrow
Account. Any Holdback Shares remaining upon termination of the Escrow Account
shall be distributed to the Merger Shareholders in accordance with the Escrow
Agreement.
10.4 NO CONTRIBUTION. No Indemnitors shall have any right of
contribution, right of indemnity or other right or remedy against the Company in
connection with any indemnification obligation or any other liability to which
she, he or it may become subject under or in connection with this Agreement.
10.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Company, Parent or against any other Person) with respect to which any of the
Indemnitors may become obligated to hold harmless, indemnify, compensate or
reimburse any Indemnitee pursuant to this Section 10, Parent shall have the
right, at its election, to proceed with the defense of such claim or Legal
Proceeding on its own. If Parent so proceeds with the defense of any such claim
or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding by counsel reasonably satisfactory to the Shareholders' Agent
shall be borne and paid exclusively from the Holdback Shares;
(b) each Indemnitor shall make available to Parent any documents and
materials in his, her or its possession or control that reasonably may be
necessary to the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the written consent of the Shareholders' Agent
(as defined in Section 11.2); provided, however, that such consent shall not be
unreasonably withheld.
Parent shall give the Shareholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent or the Company; provided, however, that
any failure on the part of Parent to so notify the Shareholders' Agent shall not
limit any of the obligations of the Indemnitors under this Section 10 (except to
the extent such failure materially prejudices the defense of such Legal
Proceeding). Parent shall conduct the defense of such claim or Legal Proceeding
diligently and in good faith using all reasonable means and defenses available
to it or to the Company. The Shareholders' Agent shall have the right, if it so
notifies Parent with reasonable promptness after receipt of Parent's claim
notice, to assist at its own expense and with counsel of its choice in the
defense of such claim or Legal Proceeding by Parent (or in the case of a claim
or Legal Proceeding against the Company, by the Company). In such event, Parent
shall afford the Shareholders' Agent and its counsel a reasonable opportunity to
comment and the right to object (which right shall not be unreasonably
exercised) with respect to the conduct of the
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defense of such claim or Legal Proceeding. Parent shall keep the Shareholders'
Agent reasonably informed of the progress of any claim or Legal Proceeding and
its defense, and shall with reasonable promptness provide the Shareholders'
Agent with copies of all material notices, written communications and filings
(including court papers) made by or on behalf of any of the parties to the
underlying claim or Legal Proceeding. If Parent does not elect to proceed with
the defense of any such claim or Legal Proceeding, the Shareholders' Agent may
proceed with the defense of such claim or Legal Proceeding with counsel
reasonably satisfactory to Parent; provided, however, that the Shareholders'
Agent may not settle, adjust or compromise any such claim or Legal Proceeding
without the prior written consent of the Parent (which consent may not be
unreasonably withheld).
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 RESTRICTIONS ON TRANSFER
(a) The shares of Parent Common Stock to be issued to each
Shareholder at the Effective Time pursuant to Section 1 of this Agreement and
any shares of capital stock or other securities received with respect thereto
(collectively, the "RESTRICTED SECURITIES") shall not be sold, transferred,
assigned, pledged, encumbered or otherwise disposed of (each, a "TRANSFER")
except upon the conditions specified in this Section 11.1, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
Shareholder shall observe and comply with the Securities Act and the rules and
regulations promulgated by the SEC thereunder as now in effect or hereafter
enacted or promulgated, and as from time to time amended, in connection with any
Transfer of Restricted Securities beneficially owned by the Shareholder.
(b) Each certificate representing the Restricted Securities issued
to a Shareholder and each certificate for such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 11.1(c) and 11.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY" LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 11.1 OF THE
AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF SEPTEMBER 14, 1999
AMONG ACCRUE SOFTWARE, INC., MARKETWAVE ACQUISITION CORP. AND MARKETWAVE
CORPORATION AND THE OTHER SIGNATORIES THERETO AND NO TRANSFER OF THESE
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SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, PUBLIC
CO, INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE,
NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY
REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ACCRUE SOFTWARE, INC."
(c) Each Shareholder agrees, prior to any Transfer of Restricted
Securities, to give written notice to Parent of such Shareholder's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 11.1. Each such notice shall describe the manner and circumstances
of the proposed Transfer and shall be accompanied by the written opinion,
addressed to Parent, of counsel for the holder of such Restricted Securities,
stating that in the opinion of such counsel (which opinion and counsel shall be
reasonably satisfactory to Parent) such proposed transfer does not involve a
transaction requiring registration or qualification of such Restricted
Securities under the Securities Act or the securities or "blue-sky" laws of any
relevant state of the United States. The holder thereof shall thereupon, with
the written consent of Parent, be entitled to Transfer such Restricted
Securities in accordance with the terms of the notice delivered by it to Parent.
Each certificate or other instrument evidencing the securities issued upon the
Transfer of any such Restricted Securities (and each certificate or other
instrument evidencing any untransferred balance of such Restricted Securities)
shall bear the legend set forth in Section 11.1(b) unless (x) in such opinion of
counsel of Parent registration of any future Transfer is not required by the
applicable provisions of the Securities Act or (y) Parent shall have waived the
requirement of such legends. No Shareholder shall Transfer any Restricted
Securities until such opinion of counsel has been given (unless waived by Parent
or unless such opinion is not required in accordance with the provisions of this
Section 11.1(c)).
(d) Notwithstanding the foregoing provisions of this Section 11.1,
the restrictions imposed by this Section 11.1 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 11.1(c) and,
pursuant to Section 11.1(c), the securities so transferred are not required to
bear the legend set forth in Section 11.1(b) or (ii) the holder of such
Restricted Securities has met the requirements for Transfer of such Restricted
Securities pursuant to Rule 144. Whenever the restrictions imposed by this
Section 11.1 shall terminate, as herein provided, the holder of Restricted
Securities as to which such restrictions have terminated shall be entitled to
receive from Parent, without expense, a new certificate not bearing the
restrictive legend set forth in Section 11.1(b) and not containing any other
reference to the restrictions imposed by this Section 11.1.
(e) Each Shareholder understands and agrees that Parent, at its
discretion, may cause stop transfer orders to be placed with its transfer agent
with respect to certificates for
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Restricted Securities owned by such Shareholder but not as to certificates for
such shares of Parent Common Stock as to which the legend set forth in this
Section 11.1(b) is no longer required because one or more of the conditions set
forth in Section 11.2(d) shall have been satisfied.
(f) The provisions of this Section 11.1 shall be in addition to, and
shall not alter or otherwise limit, the provisions set forth in the Affiliate
Agreements.
11.2 SHAREHOLDERS' AGENT. The Company and the Shareholders hereby
irrevocably appoint Steve Podradchik as their agent and as the agent for the
Indemnitors for purposes of all matters relating to Section 1.9, Section 10 and
the Escrow Agreement (the "SHAREHOLDERS' AGENT"), and Steve Podradchik hereby
accepts his appointment as the Shareholders' Agent. Parent shall be entitled to
deal exclusively with the Shareholders' Agent on all matters relating to Section
1.9, Section 10 and the Escrow Agreement, and shall be entitled to rely
conclusively (without further evidence of any kind whatsoever) on any document
executed or purported to be executed on behalf of any Shareholder or Indemnitor
by the Shareholders' Agent, and on any other action taken or purported to be
taken on behalf of any Shareholder or Indemnitor by the Shareholders' Agent, as
fully binding upon such Shareholder or Indemnitor. If the Shareholders' Agent
shall die, become disabled or otherwise be unable to fulfill his
responsibilities as agent of the Shareholders and Indemnitors, then the
Shareholders shall, within ten days after such death or disability, appoint a
successor agent and, promptly thereafter, shall notify Parent of the identity of
such successor. Any such successor shall become the "Shareholders' Agent" in
accordance with this Section 11.2. If for any reason there is no Shareholders'
Agent at any time, all references herein to the Shareholders' Agent shall be
deemed to refer to the Shareholders. The Shareholders' Agent shall be reimbursed
out of the Holdback Shares for his reasonable out-of-pocket expenses incurred in
connection with serving as the Shareholders' Agent under this Agreement and the
Escrow Agreement. 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. The Shareholders on whose behalf Holdback
Shares were contributed to the Escrow Account shall severally indemnify
Shareholders' Agent and hold Shareholders' Agent harmless against any loss,
liability or expense incurred without gross negligence, bad faith or willful
misconduct on the part of Shareholders' Agent and arising out of or in
connection with the acceptance or administration of Shareholders' Agent's duties
hereunder and under the Escrow Agreement, including the reasonable fees and
expenses of any legal counsel retained by Shareholders' Agent.
11.3 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
11.4 FEES AND EXPENSES. As used in this Agreement, "TRANSACTION COSTS"
shall mean, with respect to any party, all actual, out-of-pocket expenses
incurred by such party to third parties in connection with this Agreement, the
Agreement of Merger, the Related Agreements, the Merger and all other
transactions provided for herein and therein but shall not in any event
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include general overhead; the time spent by employees of such party internally;
postage, telephone, telecopy, photocopy and delivery expenses of such party;
permit and filing fees; and other non-material expenses that are incidental to
the ordinary course of business. Each party hereto shall bear its own
Transaction Costs; provided, however, that in the event the Merger shall be
consummated, the Shareholders shall bear all Transaction Costs of the Company
(other than any severance payments paid by Parent in connection with the
Merger), whether or not such fees and expenses have been paid by the Company on
or before the Closing Date and whether or not such fees and expenses are
reflected in the Company Disclosure Schedule or the Schedule of Expenses (such
Transaction Costs of the Company being herein collectively referred to as the
"COMPANY EXPENSES"), other than $300,000 of the Broadview Expenses and all legal
and accounting fees incurred by the Company in connection with the transactions
contemplated by this Agreement.
11.5 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.6 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 facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent:
Accrue Software, Inc.
48634 Milmont Drive
Fremont, CA 94538-7353
Facsimile: 510-580-4509
Attn: Chief Executive Officer
with a copy (not constituting notice ) to:
Orrick, Herrington & Sutcliffe LLP
400 Capitol Mall, Suite 3000
Sacramento, CA 95814
Facsimile: (916) 329-4900
Attn: Iain Mickle, Esq.
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if to the Company:
Marketwave Corporation
201 Queen Anne Avenue North
Suite 401
Seattle, WA 98109
Facsimile: 206-281-5005
Attn: Chief Executive Officer
with a copy (not constituting notice ) to:
Venture Law Group
4750 Carillon Point
Kirkland, Washington 98033
Facsimile: (415) 739-8750
Attn: Craig Sherman, Esq.
if to any of the Shareholders:
Steven T. Podradchik
1615 N.E. 63rd Street
Seattle, WA 98115
11.7 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 6.3, on and at all times after the Closing Date, each
Shareholder shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in such
Shareholder's possession that relates to the business of the Company or Parent.
11.8 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.9 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.
11.10 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.
11.11 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).
11.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Shareholders (to the extent set
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<PAGE> 56
forth in Section 1.5); the holders of assumed Company Options (to the extent set
forth in Section 1.6); Parent; Merger Sub; the other Indemnitees (subject to
Section 10); and the respective successors and assigns (if any) of the
foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 10), in whole or
in part, to any other Person without obtaining the consent or approval of any
other party hereto or of any other Person.
WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any Action relating to this Agreement,
the Related Agreements, the Agreement of Merger or any transaction contemplated
hereby or thereby, and for any counterclaim with respect thereto.
11.13 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
11.14 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 remedy; and no
single or partial exercise 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.
11.15 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 all of the parties hereto.
11.16 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.
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<PAGE> 57
11.17 PARTIES IN INTEREST. Except for the provisions of Sections 1.6 and
10, 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).
11.18 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the letter agreement executed
on behalf of Parent and the Company on July 8, 1999 relating to nondisclosure
(the "NON-DISCLOSURE AGREEMENT") and the letter agreement executed on behalf of
Parent and the Company on August 26, 1999 relating to restrictions on third
party negotiations (the "NO-SHOP AGREEMENT") shall not be superseded by this
Agreement and shall remain in effect in accordance with their terms until the
earlier of (a) the Effective Time, or (b) the date on which such Non-Disclosure
Agreement and No-Shop Agreement, as applicable, are terminated in accordance
with their terms.
11.19 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" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
(e) Any references in this Agreement to the "knowledge" of the
Company, or to matters "known" to the Company, shall mean, with respect to a
given matter, the actual knowledge of the Company Executives, such knowledge
that could have been obtained by the Company Executives after due inquiry and a
reasonable investigation and any information contained in the files of the
Company. Any references in this Agreement to the "knowledge" of Parent, or the
matters "known" to Parent, shall mean, with respect to a given matter, the
actual knowledge of the executive officers of Parent listed on Schedule 11.20
(the "Parent Executives"), such knowledge that could have been obtained by the
Parent Executives after due inquiry and a reasonable investigation and a
reasonable investigation and any information contained in the files of Parent.
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<PAGE> 58
The parties hereto have caused this Agreement to be executed and
delivered as of September 14, 1999.
ACCRUE SOFTWARE, INC.,
a Delaware corporation
-------------------------------------
Richard Kreysar
President and Chief Executive Officer
MARKETWAVE ACQUISITION CORP.,
a Washington corporation
-------------------------------------
Richard Kreysar
President and Chief Executive Officer
MARKETWAVE CORPORATION,
a Washington corporation
-------------------------------------
Steve Podradchik
Chief Executive Officer
[Signature page to Agreement and Plan of Merger and Reorganization]
<PAGE> 59
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"ACQUISITION TRANSACTION" shall mean any transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;the issuance, disposition
or acquisition of (i) any capital stock or other equity security of the Company
(other than common stock issued to employees of the Company, upon exercise of
Company Options or otherwise, in routine transactions in accordance with the
Company's past practices), (ii) any option, call, warrant or right (whether or
not immediately exercisable) to acquire any capital stock or other equity
security of the Company (other than stock options granted to employees of the
Company in routine transactions in accordance with the Company's past
practices), or (iii) any security, instrument or obligation that is or may
become convertible into or exchangeable for any capital stock or other equity
security of the Company; or any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
"AGREEMENT" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Company
Disclosure Schedule), as it may be amended from time to time.
"COMPANY CONTRACT" shall mean any Contract: (a) to which the 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 PROPRIETARY ASSET" shall mean any Proprietary Asset owned by or
licensed to the Company or otherwise used by the Company.
"CONSENT" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"CONTRACT" shall mean any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature.
"COMPANY DISCLOSURE SCHEDULE" shall mean the schedule (dated as of the
date of the Agreement) delivered to Parent on behalf of the Company and the
Shareholders.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean a violation or other matter
that could reasonably be expected to result in a material adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance or prospects (it being understood that none of the following shall
be deemed, in and of itself, to constitute a material adverse effect on the
business, condition, assets, liabilities, operations or financial performance of
the Company: (a) a change that results from conditions affecting the U.S.
economy or the world economy, (b) a change that results from conditions
affecting the Internet or the e-commerce industry so long as such conditions do
not affect the Company in a disproportionate manner as compared with companies
of a similar size, (c) a change that results from the announcement or pendency
of the Merger or the transactions contemplated hereby and (d) a change that
results from the taking of any action required by this Agreement).
<PAGE> 60
"DAMAGES" shall include any loss, damage, injury, decline in value, lost
opportunity, liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest 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" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GOVERNMENTAL AUTHORIZATION" shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization 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" shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"INDEMNITEES" shall mean the following Persons: (a) Parent; (b) Parent's
current and future affiliates (including the Surviving Corporation); (c) the
respective Representatives of the Persons referred to in clauses "(a)" and "(b)"
above; and (d) the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above; provided, however, that the
Shareholders shall not be deemed to be "Indemnitees."
"LEGAL PROCEEDING" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Body or any arbitrator or arbitration panel.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
"PARENT MATERIAL ADVERSE EFFECT" shall mean a violation or other matter
that could reasonably be expected to result in a material adverse effect on
Parent's business, condition, assets, liabilities, operations, financial
performance or prospects (it being understood that none of the following shall
be deemed, in and of itself, to constitute a material adverse effect on the
business, condition, assets, liabilities, operations or financial performance of
Parent: (a) a change in the market price or trading volume of Parent's Common
Stock, (b) a failure by Parent to meet
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<PAGE> 61
any securities analyst estimates of Parent's financial results for any period
(c) a change that results from conditions affecting the U.S. economy or the
world economy, (d) a change that results from conditions affecting the Internet
or the e-commerce industry so long as such conditions do not affect Parent in a
disproportionate manner as compared with companies of a similar size, (e) a
change that results from the announcement or pendency of the Merger or the
transactions contemplated hereby and (f) a change that results from the taking
of any action required by this Agreement).
"PERMITTED LIENS" shall mean (i) taxes or other charges which are not
due and payable; and (ii) minor liens that have arisen in the ordinary course of
business and that do not individually, or in the aggregate, materially detract
from the value of the asset subject thereto or materially impair the operations
of the Company.
"PERSON" shall mean any individual, Entity or Governmental Body.
"PROPRIETARY ASSET" shall mean any: (a) patent, patent application,
trademark (whether registered or unregistered), 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, customer list, franchise, system, computer software, computer
program, invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.
"RELATED AGREEMENTS" shall mean the Agreement of Merger, the Escrow
Agreement, the Affiliate Agreements and the Investor Rights Agreement.
"REPRESENTATIVES" shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and representatives.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TAX" shall mean any tax (including any income tax, franchise tax,
capital gains 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, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
"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 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.
"YEAR 2000 COMPLIANT", for purposes of the Agreement, shall mean an item
of software or hardware shall be deemed to be "Year 2000 Compliant" only if
operating on a stand-alone basis without reference to dates supplied by third
party software or hardware: (i) the functions, calculations, and other computing
processes of such item of software or hardware (collectively, "PROCESSES")
perform in a consistent and correct manner without interruption regardless of
the date on which the Processes are actually performed and regardless of the
date input to the applicable computer system (before, on or after January 1,
2000 until December 31, 2099); (ii)
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<PAGE> 62
such item of software or hardware accepts, calculates, compares, sorts,
extracts, sequences and otherwise processes date inputs and date values, and
returns and displays date values, in a consistent and correct manner regardless
of the dates used (before, on or after January 1, 2000 until December 31, 2099);
(iii) such item of software or hardware accepts and can respond to year input,
if any, in a manner that resolves any ambiguities as to century in a defined,
predetermined and appropriate manner; (iv) such item of software or hardware
stores and displays date information in ways that are unambiguous as to the
determination of the century; and (v) if such item of software or hardware
determines leap years, it uses the following standard: (A) if dividing the year
by four yields an integer, it is a leap year, except for years ending in 00, but
(B) a year ending in 00 is a leap year if dividing it by 400 yields an integer.
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<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
ACCRUE SOFTWARE, INC.
INVESTOR RIGHTS AGREEMENT
SEPTEMBER 30, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
1. Amendment..........................................................................1
1.1 Procedure.....................................................................1
1.2 Rights of Holders.............................................................2
2. Registration Rights................................................................2
2.1 Definitions...................................................................2
2.2 Requested Registration........................................................3
2.3 Company Registration..........................................................4
2.4 Obligations of the Company....................................................4
2.5 Furnish Information...........................................................6
2.6 Expenses of Demand Registration...............................................6
2.7 Expenses of Company Registration..............................................6
2.8 Underwriting Requirements.....................................................6
2.9 No Delay of Registration......................................................7
2.10 Indemnification...............................................................7
2.11 Reports Under Securities Exchange Act of 1934.................................9
2.12 Form S-3 Registration........................................................10
2.13 Assignment of Registration Rights............................................11
2.14 Termination of Registration Rights...........................................12
3. Miscellaneous.....................................................................12
3.1 Assignment...................................................................12
3.2 Third Parties................................................................12
3.3 Governing Law................................................................12
3.4 Counterparts.................................................................12
3.5 Notices......................................................................12
3.6 Severability.................................................................13
3.7 Delays or Omissions..........................................................13
3.8 Consent and Waiver...........................................................13
3.9 Legal Representation.........................................................14
3.10 Assumed Option Holders.......................................................13
</TABLE>
<PAGE> 3
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is entered into as of
September 30, 1999, by and among Accrue Software, Inc., a Delaware corporation
(the "Company"), and the Marketwave Holders (as defined below).
RECITALS
A. The Company, Marketwave Corporation, a Washington corporation
("Marketwave"), and Marketwave Acquisition Corp., a Washington corporation and a
wholly owned subsidiary of the Company ("Merger Sub"), have entered into an
Agreement and Plan of Merger and Reorganization dated as of September 14, 1999
(the "Merger Agreement") providing for the merger of Merger Sub with and into
Marketwave (the "Merger") and the Merger Agreement contemplates that, upon
consummation of the Merger, (i) holders of shares of the capital stock of
Marketwave (collectively with all holders of Assumed Options that become a party
to this Agreement pursuant to Section 3.10, the "Marketwave Holders") will
receive shares of common stock of the Company ("Common Stock") in exchange for
their shares of capital stock of Marketwave and (ii) Marketwave will become a
wholly owned subsidiary of the Company;
B. The execution of this Agreement by the Company is a condition to the
obligation of Marketwave and the Marketwave Holders to consummate the
transactions contemplated by the Merger Agreement; and
C. The Company wishes to execute this Agreement and grant to the
Marketwave Holders the rights contained herein in order to fulfill such
condition.
THE PARTIES AGREE AS FOLLOWS:
1. Amendment.
1.1 Procedure. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
Notwithstanding the foregoing, any provision of this Agreement may be amended,
waived, discharged or terminated upon the written consent of the Company and the
holders of at least a majority of the outstanding Registrable Securities (as
defined below); provided, however, that no such amendment shall be effective
with respect to any Holder if such amendment materially adversely affects any of
the rights granted pursuant to this Agreement to such Holder (the "Uniquely
Affected Holder") in a manner different from the manner in which such amendment
affects all other Holders, unless such amendment is consented to in writing by
the Uniquely Affected Holder. If such Holder does not so consent, then the
amendment shall be effective as to all Holders other than the Uniquely Affected
Holder.
<PAGE> 4
1.2 Rights of Holders. Each Holder (as defined below) shall have the
absolute right to exercise or refrain from exercising any right or rights that
such Holder may have by reason of this Agreement, including, without limitation,
the right to consent to the waiver or modification of any obligation under this
Agreement, and such Holder shall not incur any liability to any other Holder of
any securities of the Company as a result of exercising or refraining from
exercising any such right or rights.
2. Registration Rights.
2.1 Definitions. As used in this Agreement:
(a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and the subsequent declaration or ordering of the effectiveness of such
registration statement.
(b) The term "Registrable Securities" means:
(i) The shares of Common Stock issued or issuable to the
Marketwave Holders pursuant to the terms of the Merger Agreement; provided,
however, that the Registrable Securities shall not include the Holdback Shares
(as defined in the Merger Agreement) until and unless such shares are released
from the Escrow Agreement (as defined in the Merger Agreement) and provided
further that the Registrable Securities shall not include shares of Common Stock
issued to Marketwave Holders upon the exercise of Assumed Options if such shares
are registered under a registration statement on Form S-8 (the shares of Common
Stock referred to in this clause (i) are collectively referred to hereafter as
the "Stock"); and
(ii) Any other shares of Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned; provided, however, that Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock or
other securities outstanding which are, and the number of shares of Common Stock
or other securities issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(d) The term "Holder" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 2.13
below, acquired such
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<PAGE> 5
Registrable Securities in a transaction or series of transactions not involving
any registered public offering.
(e) The term "Form S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the Securities and Exchange Commission (the "SEC")
which permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.
2.2 Requested Registration.
(a) If, at any time after December 1, 1999, the Company shall
receive a written request from any Holder that the Company file a registration
statement under the Securities Act covering the registration of that number of
shares of Registrable Securities whose anticipated aggregate offering price, net
of underwriting discounts and commissions, would equal at least $10,000,000,
then the Company shall, within ten (10) days of the receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of subsection 2.2(b), effect as soon as practicable, and in any
event within ninety (90) days of the receipt of such request, or, with respect
to any request received by the Company between December 1, 1999 and December 15,
1999, on or prior to February 1, 2000, the registration under the Securities Act
of all Registrable Securities which the Holders request to be registered within
twenty (20) days of the mailing of such notice by the Company in accordance with
Section 3.5.
(b) If the Holder or Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 2.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 2.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such
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<PAGE> 6
underwriting shall not be reduced unless all other securities proposed to be
sold by persons other than the Holders are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 2.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 2.2 a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
2.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
Common Stock or other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration
relating either to the sale of securities to participants in a Company stock
option, stock purchase or similar plan or to an SEC Rule 145 transaction, or a
registration on any form which does not include substantially similar
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within fifteen (15) days from receipt of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 2.8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective for one hundred twenty (120) days, or until the distribution
contemplated in the Registration Statement has been completed; provided,
however, that (i) such 120-day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the
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<PAGE> 7
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (i) and (ii) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such reasonable numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent public accountants of the Company, in form and substance as is
customarily given
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by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed.
2.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
2.6 Expenses of Demand Registration. All expenses other than stock
transfer taxes, the fees and disbursements of special counsel for individual
Holders, underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders (not to
exceed $15,000) shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 2.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 2.2.
2.7 Expenses of Company Registration. All expenses, other than stock
transfer taxes, the fees and disbursements of special counsel of individual
Holders, underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.3, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one special counsel for all of the
participating Holders (not to exceed $15,000) shall be paid by the Company.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters, adversely
affect the success of the offering by the Company. If the total amount of
securities,
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including Registrable Securities, requested by Holders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters reasonably believe would not adversely affect the success of
the offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters believe will not adversely affect the success of the offering (the
securities so included to be apportioned first to the Company, then pro rata
among the selling Holders and the selling holders participating in such
registration pursuant to the terms of the Second Amended and Restated
Registration Rights Agreement dated as of August 13, 1998 (the "Existing Rights
Agreement") among the Company and the parties listed on the signature pages
thereto according to the total amount of Registrable Securities (including
Registrable Securities as defined in the Existing Rights Agreement) entitled to
be included therein owned by each selling Holder and then to all other selling
stockholders, or in such other proportions as shall mutually be agreed to by
such selling stockholders); it being understood that with respect to any
offering, no exclusion may reduce the total number of Registrable Securities
plus Registrable Securities under the Existing Rights Agreement to less than
twenty-five percent (25%) of the total number of securities subject to the
registration. For purposes of the first parenthetical in the preceding sentence
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
2.9 No Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the 1934 Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the 1934 Act, any
state securities law or any rule or regulation
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<PAGE> 10
promulgated under the Securities Act, the 1934 Act or any state securities law;
and the Company will pay, as incurred, to each such Holder, underwriter or
controlling person, any legal or other expenses reasonably incurred by them in
connection with defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
2.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (such consent not to be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 2.10(b) in
connection with defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
2.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder (such consent not to be unreasonably withheld); provided further,
that in no event shall any indemnity under this Section 2.10(b) exceed the net
proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
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<PAGE> 11
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.10 (to the extent of such prejudicial
effect), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.10.
(d) No indemnifying party, in the defense of any claim arising
out of a Violation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation and, in the event the terms of such judgment or settlement
include any term other than the payment by the indemnifying party of money
damages, the indemnifying party shall not so consent or enter into such a
settlement without the consent of each indemnified party (which will not be
unreasonably withheld) whether or not the terms thereof include such a release.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act; and
(d) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied
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<PAGE> 12
with the reporting requirements of SEC Rule 144 (at any time after ninety (90)
days after the effective date of the first registration statement filed by the
Company), the Securities Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration.
2.12 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders (the "S-3 Initiating Holders") a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.12 (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than sixty (60) days after
receipt of the request of the Holder or Holders under this Section 2.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; (4) at any time during the twelve (12) month period
following the Company's July 30, 1999 initial public offering; (5) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders pursuant
to this Section 2.12; or (6) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
Notwithstanding any other provision of this Section 2.12, if the Company or an
underwriter advising the Company advises the S-3 Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
included in any registration on Form S-3, then the S-3 Initiating Holders shall
so advise all Holders of Registrable Securities which would otherwise be
included in such registration on
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<PAGE> 13
Form S-3 hereunder, and the number of shares of Registrable Securities that may
be included in the registration shall be allocated among all Holders thereof,
including the S-3 Initiating Holders, in proportion (as nearly as practicable)
to the amount of Registrable Securities of the Company owned by each Holder;
provided, however, that the number of shares of Registrable Securities to be
included in such registration shall not be reduced unless all other securities
proposed to be sold by persons other than the Holders are first entirely
excluded from the registration.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses other than stock transfer
taxes, the fees and disbursements of special counsel for individual Holders,
underwriting discounts and commissions incurred in connection with a
registration requested pursuant to Section 2.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
(not to exceed $15,000) and counsel for the Company, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to this Section 2.12
if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all Participating Holders shall bear such expenses); provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to this Section 2.12. Registrations effected pursuant to this Section
2.12 shall not be counted as demands for registration or registrations effected
pursuant to Section 2.2 or 2.3.
(d) The Company is obligated to effect only five (5) such
registrations on Form S-3 pursuant to this Section 2.12.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may only
be assigned by a Holder to a transferee who acquires at least 250,000 shares of
Registrable Securities (subject to appropriate adjustment for any stock split,
reverse stock split, stock dividend, recapitalization or similar transaction),
provided the Company is, prior to such transfer, furnished with written notice
of the name and address of such transferee; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. The foregoing 250,000 share requirement
shall not apply, however, to any transferee which is a partner, retired partner
or affiliated or constituent partnership of any Holder which is a partnership,
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) or which is a family member (including a spouse, ancestor,
lineal descendant or sibling) or a trust for the benefit of any individual
Holder, if all such transferees or assignees agree in writing to be bound by the
terms of this Agreement and appoint a single representative as their attorney in
fact for the purpose of receiving any notices and exercising their rights under
this Section 2.
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<PAGE> 14
2.14 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Agreement (a) after August 4, 2004 or
(b) at such time as such Holder may sell all of such Holder's Registrable
Securities in any single three (3) month period pursuant to Rule 144 (or such
successor rule as may be adopted).
3. Miscellaneous.
3.1 Assignment. Subject to the provisions of Section 2.13 hereof,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under this Agreement, except as expressly provided herein.
3.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5 Notices.
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows:
To the Company: Accrue Software, Inc.
48634 Milmont Drive
Fremont, CA 94538
Telephone: (408) 542-8900
Telecopy: (408) 541-1874
Attention: President
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<PAGE> 15
with a copy (not constituting notice) to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 854-4488
Telecopy: (650) 233-8386
Attention: John V. Bautista
To a Holder: At such Holder's address as set forth on the
signature page hereto.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, or by telex or
telecopy (facsimile) with confirmation of receipt, and shall be deemed to be
given or made when receipt is so confirmed.
(c) Any party may, by written notice (in accordance with this
Section 3.5) to the other, alter its address or respondent.
3.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
3.8 Consent and Waiver. In connection with the issuance and sale of
the shares of Common Stock by the Company to the shareholders of Marketwave
pursuant to the terms of the Merger Agreement, the Existing Rights Holders,
severally, hereby consent to amend the Prior Rights Agreement in the manner set
forth herein.
3.9 Legal Representation. The Company and the Holders acknowledge
that: (a) they have read this Agreement; (b) they have been represented in the
preparation, negotiation, and execution of this Agreement by legal counsel of
their own choice or have voluntarily
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<PAGE> 16
declined to seek such counsel; and (c) they understand the terms and
consequences of this Agreement and are fully aware of its legal and binding
effect.
3.10 Assumed Option Holders. Any holder of an Assumed Option that
exercises such option on or prior to the date of a request for registration of
Registrable Securities held by the Marketwave Holders (the "Request Date")
pursuant to Section 2.2 (the "Marketwave Demand Registration") may elect by
delivering a written notice to the Company within thirty (30) days after the
Request Date to become a party to this Agreement by execution of a counterpart
signature page hereto and to include shares of Common Stock issued upon exercise
of such Assumed Option in the Marketwave Demand Registration and,
notwithstanding anything to the contrary in Section 1 of this Agreement, each
Holder hereby consents to the inclusion of such holders of Assumed Options as
parties to this Agreement, provided, however, that, notwithstanding the
foregoing, the right of holders to include shares of Common Stock issued upon
exercise of Assumed Options in the Marketwave Demand Registration shall
terminate once such shares are registered by the Company pursuant to the filing
of a registration statement on Form S-8.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Investor
Rights Agreement as of the date first written above.
ACCRUE SOFTWARE, INC. MARKETWAVE HOLDERS:
By: Name:
------------------------------------- -------------------------------
Title: Title:
---------------------------------- ------------------------------
Address:
<PAGE> 1
EXHIBIT 20.1
FOR IMMEDIATE RELEASE
ACCRUE AND MARKETWAVE ANNOUNCE AGREEMENT TO MERGE, FURTHER STRENGTHENING
POSITION IN THE ENTERPRISE EBUSINESS ANALYSIS MARKET
MARKETWAVE ADDS SIGNIFICANTLY TO ACCRUE'S EMPLOYEE TALENT, TECHNOLOGY, CUSTOMER
BASE AND DISTRIBUTION CHANNELS
FREMONT, CALIF., -- SEPTEMBER 15, 1999 -- Accrue Software(TM), Inc., (NASDAQ:
ACRU), a leading provider of eBusiness analysis software and services, today
announced that it has signed a definitive agreement to merge with Marketwave
Corporation, a privately held company that develops the Hit List(R) family of
scalable solutions for analyzing Web traffic on Internet and intranet sites.
Upon closing of the transaction, Marketwave will become a wholly owned
subsidiary of Accrue Software. Specific terms of the agreement were not
released; however, Marketwave's outstanding stock will be exchanged for
approximately 3.5 million shares of Accrue common stock. The closing, which is
subject to certain customary closing conditions, is expected to occur on or
prior to September 30, 1999.
"We saw tremendous synergy between Marketwave's technology and expertise and our
own. By combining the two companies, Accrue will be a more powerful player in
the Web site eBusiness analysis market with critical mass of customers,
employees and revenue," said Richard Kreysar, president and CEO of Accrue. "The
merger provides five key benefits: broadest platform coverage, clear technology
leadership, outstanding people, an exceptional referencable customer list and
expanded worldwide sales channels."
"Accrue's Insight is the eBusiness analysis leader in the Solaris world, and
Marketwave's Hit List is the leader in the Windows NT world," said Steve
Podradchik, founder and CEO of Marketwave, who will take a seat on Accrue's
board of directors. "Combined, the two companies create a very strong unified
force in the market, being the leading vender of Web site analysis solutions."
The combined company will have more than 300 enterprise-class customers.
Marketwave brings Ask Jeeves, Broadcast.com, Buy.com, Citibank, Compaq, Dell,
Egghead.com, IBM, and Shopping.com. Coupled with Accrue's stellar customer list
of companies with significant Web initiatives that includes Oracle Corporation,
Preview Travel, Hearst New Media, Bank of America, ShopNow.com and
TheStreet.com, Accrue becomes the worldwide leader in number of customers for
enterprise eBusiness analysis applications.
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The merger also expands the platform and database options from which customers
can choose to include Microsoft Windows NT and Sun Solaris operating systems
with SQL Server, DB2, Informix/Redbrick or Oracle databases.
"With this merger, Accrue now offers the most platform and database choices for
enterprise eBusiness analysis, as well as one of the largest customer bases in
the industry," said Kreysar. "Our expanded engineering, sales and customer
service efforts will be focused on Accrue Insight, Hit List Live and Hit List
Enterprise, all of which are aimed at the high-end market of companies with
significant Web initiatives and visitor traffic."
ABOUT ACCRUE SOFTWARE
Accrue Software, Inc., is a leading provider of eBusiness data collection and
analysis software and services. Accrue's flagship product, Accrue Insight, is a
comprehensive and highly scalable application that enables eBusiness managers to
make marketing and merchandising decisions that increase the effectiveness of
their eBusiness in attracting new customers, increasing sales and maintaining
customer loyalty.
Accrue Software was founded in 1996 and is headquartered in Fremont, Calif. with
regional sales offices throughout the US, and an international office in London,
England. The company's fast-growing list of customers includes Apple Computer,
DHL Airways, DreamWorks SKG, Federal Express, Ford Motor Company, Miller
Freeman, Inc., Motorola, Preview Travel, San Jose Mercury News, Standard &
Poor's MMS, Sun Microsystems, TheStreet.com, and T. Rowe Price. Accrue has
strategic partnerships with Vignette Corporation, Art Technology Group, Inc.,
Oracle Corporation, IBM, and Organic Online Services. Accrue Software can be
reached at 1/888/4ACCRUE or 510/580-4500. For more information on the company,
visit www.accrue.com.
Accrue will expand its U.S. distribution channels to include Marketwave's
domestic VAR channels, as well as gain reseller channel partners worldwide.
Marketwave's Seattle location will become another Accrue facility, focusing on
the Hit List solutions for development, customer service and marketing while
Accrue Insight will continue to be supported and developed in California. This
provides excellent recruiting access in two of the top high technology areas in
the country, Seattle and Silicon Valley.
ABOUT MARKETWAVE CORPORATION
Marketwave was founded in 1996 by Seattle Internet entrepreneur and former
Microsoft manager Steve Podradchik to provide software that allows marketing and
business professionals to maximize their Internet marketing opportunities.
Marketwave's enterprise-class solutions are used by hundreds of companies
worldwide.
Marketwave's Hit List Live 4.0 is an enterprise-class Windows NT eBusiness
analysis program that uses a proprietary technology called DataLink(TM) to
integrate Web traffic with traditional business data such as accounting and
sales databases, allowing marketing and advertising
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managers to see real ROI data and track how changes in visitors' demographics
and psychographics affect browsing and purchasing behavior.
NOTE TO FINANCIAL ANALYSIS:
The briefing will be held at 5:15 am PST on September 15, 1999
Dial-in number: 800-288-9626 / follow the voice prompts The briefing will also
be available for playback at 11:00 am PST on September 15, 1999 through
September 29, 1999.
Dial-in number: US - 800-475-6701 / access code is 470853 International
320-365-3844 / access code is 470853
Except for the historical information contained herein, the matters discussed in
the news release are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
such forward-looking statements. Accordingly, you should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this press release. Potential risks and uncertainties include, without
limitation, the Company's limited operating history, history of losses,
fluctuations in operating results, competition in the eBusiness analysis market,
reliance on sales from a single product for its revenue, reliance on expanding
sales operations and distribution channels and potential difficulties associated
with the integration of the personnel, operations and products of Marketwave
with Accrue's personnel, operations and products. These and other risk factors
are described in detail in the Company's Registration Statement on Form S-1, and
in the Company's other filings with the Securities and Exchange Commission.
Accrue does not undertake any obligations to publicly update and forward-looking
statements to reflect events or circumstances after the date on which any such
statement is made or to reflect the occurrence of unanticipated events.
###
Accrue Software and Accrue Insight are trademarks of Accrue Software, Inc. All
other trademarks are the properties of their respective owners. All rights
reserved.
FOR MORE COMPANY & PRODUCT INFORMATION:
Accrue Software, Inc.
Alyce Menton
(510) 580-4541
[email protected]
Martell Communications
Colleen Martell
(408) 374-7420
[email protected]
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