<PAGE> 1
WALL DATA INCORPORATED
INFORMATION STATEMENT
DECEMBER 8, 1999
<PAGE> 2
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER AND OTHER RELATED INFORMATION
THE MERGER
Wall Data Incorporated, a Washington corporation (the "Company"),
NetManage, Inc. ("Parent"), a Delaware corporation and NetManage Acquisition
Corporation, a Washington corporation ("Purchaser"), which is a wholly-owned
subsidiary of Parent, have entered into an Agreement and Plan of Merger, dated
as of October 20, 1999 (the "Merger Agreement"), whereby the Company will become
a wholly-owned subsidiary of Parent, as of the Effective Time of the Merger (the
"Merger").
The Company had sought and evaluated several potential buyers, and
Parent was selected. Both companies engaged in negotiations regarding the
Merger, which have resulted in the Merger Agreement, attached hereto as APPENDIX
I.
The Board of Directors of the Company approved the Merger Agreement on
October 20, 1999. In considering whether to approve the Merger Agreement, the
Board considered a number of factors, including the fairness of purchase price.
After taking into consideration these factors, the Board determined that the
Merger was in the best interest of the shareholders of the Company and
recommended that the Company's shareholders vote to adopt and approve the Merger
Agreement and approve the Merger.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed by Purchaser and Parent with the Securities and Exchange
Commission in connection with the Offer. Such summary is qualified in its
entirety by reference to the Merger Agreement. Capitalized terms not otherwise
defined in the following description of the Merger Agreement have the respective
meanings ascribed to them in the Merger Agreement.
THE OFFER
In accordance with the Merger Agreement, Purchaser completed the Offer
on November 24, 1999. As a result, Purchaser owns 89.2% of the outstanding
shares of the Company's common stock, and consequently will be able to approve
the merger.
COMPANY COVENANTS
Pursuant to the Merger Agreement, the Company has covenanted and agreed,
between the date of the Merger Agreement and continuing until the earlier of the
termination of the Merger Agreement pursuant to its terms and the Effective
Time, unless Parent shall otherwise consent in writing, to carry on the
businesses of the Company and its subsidiaries (the "Subsidiaries" and,
individually, a "Subsidiary") diligently and in accordance with good commercial
practice and in the usual, regular and ordinary course, in substantially the
same manner as heretofore conducted and in compliance with all applicable laws
and regulations, to pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, to pay or perform other material obligations
when due, and use its commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensers, licensees,
and others with which it has business dealings. In addition, the Company will
promptly notify Parent of any material event involving its business or
operations. The Merger Agreement provides that, except as permitted by the terms
of the Merger Agreement, neither the Company nor any Subsidiary will do any of
the following, without the prior written consent of Parent: (i) waive any stock
repurchase rights, accelerate, amend or change the period of exercisability of
options or restricted stock, or reprice options granted under any employee,
consultant or director stock plans or authorize cash payments in exchange for
any options granted under any of such plans; (ii) grant any severance or
termination pay to any officer or employee except payments in amounts consistent
with policies and past practices or pursuant to written agreements outstanding,
or policies existing, on the date of the Merger Agreement and as previously
disclosed in writing to the other, or adopt any new severance plan; (iii)
transfer or license to any person or entity or otherwise extend, amend or modify
in any material respect any rights to the Company's intellectual property or
other proprietary rights, or enter into grants to future patent rights, other
than in the ordinary
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course of business, consistent with past practice; (iv) buy any Intellectual
Property of a third party or enter into any license agreement with respect to
the Intellectual Property of any third party for an acquisition or license, the
price for which exceeds $50,000 individually (or in the aggregate for a single
third party) other than "shrink wrap," "click wrap," and similar widely
available commercial end-user licenses; (v) declare or pay any dividends on or
make any other distributions (whether in cash, stock or property) in respect of
any capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock; (vi) repurchase or otherwise acquire,
directly or indirectly, any shares of capital stock except pursuant to rights of
repurchase of any such shares under any employee, consultant or director stock
plan existing on the date of the Merger Agreement (which repurchase rights the
Company shall be obligated to exercise if the repurchase price is less than the
Merger Consideration); (vii) issue, deliver, sell, authorize or propose the
issuance, delivery or sale of, any shares of capital stock or any securities
convertible into shares of capital stock, or subscriptions, rights, warrants or
options to acquire any shares of capital stock or any securities convertible
into shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible securities,
other than the issuance of Shares, pursuant to the exercise of stock options
therefor outstanding as of the date of the Merger Agreement, and Shares issuable
pursuant to the Option Plans; (viii) cause, permit or propose any amendments to
any charter document or Bylaw (or similar governing instruments of any
subsidiaries), (ix) acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company, or enter into
any joint ventures, strategic partnerships or alliances; (x) sell, lease;
license, encumber or otherwise dispose of any properties or assets which are
material, individually or in the aggregate, to the business of the Company,
except in the ordinary course of business consistent with past practice; (xi)
incur any indebtedness for borrowed money (other than ordinary course trade
payables or pursuant to existing credit facilities in the ordinary course of
business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities, or guarantee any
debt securities of others; (xii) adopt or amend any employee benefit or employee
stock purchase or employee option plan (other than is necessary to comply with
law), or enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its officers or employees other than in the ordinary course of business,
consistent with past practice, or change in any material respect any management
policies or procedures; (xiii) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business; (xiv) make any grant of exclusive rights to any third party; (xv)
except in the ordinary course of business, modify, amend or terminate any
material contract or agreement involving payments of $50,000 or more to which
the Company or any subsidiary thereof is a party or waive, release or assign any
material rights or claims thereunder, (xvi) materially revalue any of its assets
or, except as required by GAAP, make any change in accounting methods,
principles or practices; (xvii) make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes in an amount in excess of $50,000 in the
aggregate; (xviii) commence any litigation or settle any litigation for an
amount in excess of the greater of $100,000 in the aggregate or the amount
reserved in respect thereof in the Company Balance Sheet; or (xix) agree in
writing or otherwise to take any of the actions described in (i) through (xviii)
above.
BOARD OF DIRECTORS
The Merger Agreement provides that, promptly upon the purchase by
Purchaser of Shares satisfying the Minimum Condition, Parent shall be entitled
to designate a majority of the members of the Company's Board of Directors,
subject to compliance with Section 14(f) of the Exchange Act. The Merger
Agreement also provides that the Company has agreed to cause Parent's designees
to be elected as directors of the Company, including increasing the size of the
Board of Directors to the extent permitted by its Restated Articles of
Incorporation and/or secure the resignations of such number of directors as is
necessary to cause Parent's designees to be elected as directors of the Company.
The Merger Agreement provides that following the election or appointment
of Purchaser's designees in accordance with the immediately preceding paragraph,
any amendment or termination of the Merger Agreement by the Company or any
extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or Purchaser or waiver of any of the
Company's rights thereunder, will require the concurrence of a majority of those
directors of the Company then in office who were not designated by Parent.
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SHAREHOLDER MEETING
In accordance with the Merger Agreement, the Company agreed to call a
special meeting of shareholders of the Company to approve the Merger. As a
result of the Tender Offer, Purchaser owns 89.2% of the outstanding shares of
the Company's Common Stock and therefore it will be able to approve the Merger.
FAILURES TO COMPLY
Pursuant to the Merger Agreement, the Company shall give prompt notice
in writing to Parent, and Parent and Purchaser shall give prompt notice in
writing to the Company, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time from the date of the Merger Agreement through the
Effective Time and (ii) any failure of the Company, Parent or Purchaser, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy in all material respects any covenant, condition or agreement to
be complied with or satisfied by it under the Merger Agreement; provided,
however, no such notification shall affect the representations or warranties of
the parties or the conditions to the obligations of the parties thereunder. The
Merger Agreement provides that the Company shall give prompt notice in writing
to Parent of (i) any act, omission to act, event or occurrence which, with the
passage of time or otherwise, would likely have a Material Adverse Effect on the
Company and (ii) any material contingent liability of the Company or any of its
subsidiaries for which such party reasonably believes it will, with the passage
of time or otherwise, become liable; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties thereunder.
ACTIONS BY THE COMPANY
Pursuant to the Merger Agreement, subject to the terms and conditions
therein, the Company shall, and shall cause its Subsidiaries to, cooperate with
Parent and Purchaser and take all such actions as may be reasonably requested by
Parent and Purchaser to accomplish the Merger.
OPTION PLANS; PURCHASE PLAN; SAVINGS PLAN
The Merger Agreement provides that, the Company agrees to take all
necessary actions to ensure that all outstanding compensatory options to
purchase common stock of the Company terminate and become without further force
and effect immediately prior to the Effective Time. The Company agrees to take
all necessary actions to ensure that all offering periods outstanding under the
Company's Restated Employee Stock Purchase Plan (the "ESPP") terminate
immediately prior to the Effective Time, and to ensure that the ESPP terminates
immediately prior to the Effective Time. The Company and its ERISA Affiliates,
as applicable, each agrees to terminate its Retirement Savings Plan immediately
prior to Effective Time, unless the Parent, in its sole and absolute discretion,
agrees to sponsor and maintain such plans by providing the Company with written
notice of such election at least three (3) days before the Effective Time.
Unless the Parent provides such notice to the Company, the Parent shall receive
from the Company evidence that the Company's and each ERISA Affiliate's (as
applicable) 401 (k) plan has been terminated pursuant to resolutions of each
such entity's Board of Directors (the form and substance of which resolutions
shall be subject to review and approval of the Parent), effective as of the day
immediately preceding the Effective Time.
INDEMNIFICATION; LITIGATION
Pursuant to the Merger Agreement, from and after the Effective Time,
Parent will cause the Surviving Corporation to fulfill and honor in all respects
the obligations of the Company pursuant to any indemnification agreements
between the Company and its directors and officers as of the Effective Time (the
"Indemnified Parties"). The Restated Articles of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Restated Articles of Incorporation and Bylaws of the
Company as in effect on the date hereof, which provisions will not be amended,
repealed or otherwise modified for a period of three years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of the Company, unless such modification is
required by law. For a period of three years after the Effective Time, Parent
will cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of the Company;
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provided, however, that in no event will Parent or the Surviving Corporation be
required to expend in excess of 150% of the annual premium currently paid by the
Company for such coverage (or such coverage as is available for such 150% of
such annual premium).
The Merger Agreement provides that the Company shall give Parent the
opportunity to participate m me defense or settlement of any shareholder
litigation against the Company and its directors relating to any of the
transactions contemplated by the Merger Agreement until the purchase of the
Shares pursuant to the Offer, and thereafter, shall give Parent the opportunity
to direct the defense of such litigation and, if Parent so chooses to direct
such litigation, Parent shall give the Company and its directors an opportunity
to participate in such litigation; provided, however, that no settlement of such
litigation shall be agreed to without Parent's consent; and provided further
that no settlement requiring a payment by a director shall be agreed to without
such director's consent.
EMPLOYMENT AGREEMENTS
In accordance with the Merger Agreement, the Company entered into
employment agreements with each of Kevin B. Vitale, Richard P. Fox, Craig E.
Shank and Kerry D. Palmer.
TERMINATION; FEES AND EXPENSES
The Merger Agreement provides that it may be terminated and the
transactions contemplated thereby may be abandoned at any time prior to the
Effective Time, whether before or after approval by the shareholders of the
Company by mutual written agreement of the Boards of Directors of Parent and the
Company.
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
The following information is being furnished to holders of the common
stock, no par value (the "Common Stock"), of the Company, in connection with the
possible designation by Parent, of at least a majority of the board of directors
of the Company pursuant to the terms of the Merger Agreement, by and among the
Company, Parent and Purchaser.
Pursuant to the Merger Agreement, the Purchaser commenced a tender offer
(the "Offer") to purchase all of the outstanding shares of the Common Stock.
Upon completion of, and in accordance with, the Offer, on November 24, 1999, the
Purchaser acquired 9,104,225 shares of Common Stock, representing 89.2% of the
outstanding Common Stock. The Merger Agreement provides that promptly following
the acquisition by the Purchaser pursuant to the Offer of not less than
fifty-one percent (51%) of the shares of Common Stock outstanding on a fully
diluted basis, Parent shall be entitled to designate a majority of the members
of the Company's Board of Directors. In addition, pursuant to the terms of the
Merger Agreement, the Company has agreed to, upon the request of Parent,
increase the size of its Board of Directors and/or secure resignations to enable
Parent's designees to be elected to the Board of Directors.
The information contained herein concerning the Purchaser has been
furnished to the Company by Parent, and the Company assumes no responsibility
for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of December 2, 1999 there were issued and outstanding 10,203,324
shares of Common Stock, each of which entitles the holder to one vote.
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BOARD OF DIRECTORS,
ACQUISITION DESIGNEES AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
Certain information concerning directors of the Company as of December
2, 1999 is set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
<S> <C> <C>
Robert J. Frankenberg.......... 52 Chairman of the Board of Directors Wall Data; President and
Chief Executive Officer of Encanto Networks, Inc.
Jeffrey A. Heimbuck............ 53 Former President and Chief Executive Officer of Inmac
Corporation
Henry N. Lewis................. 60 Managing Director and Principal of Computer Ventures Group
Limited
David F. Millet................ 55 Managing Director of Gemini Investments
Steve Sarich, Jr............... 78 President of 321 Investment Co. and President of C.S.S.
Management Co.
Bettie A. Steiger.............. 65 President and Founder of Steiger Associates
Kevin B. Vitale................ 42 President and Chief Executive Officer
Richard P. Fox................. 52 Vice President Finance, Chief Financial Officer and Treasurer
</TABLE>
Robert J. Frankenberg has been Chairman of the Board since August 1997
and a Director of the Company since December 1996. Since June 1997, Mr.
Frankenberg has been President and Chief Executive Officer of Encanto Networks,
Inc., a company that develops and markets Internet products. Mr. Frankenberg was
Chief Executive Officer and President of Novell, Inc. from April 1994 to August
1996, and Chairman of the Board of Novell, Inc. from August 1994 to August 1996.
From February 1991 to April 1994 he was Vice President, General Manager of
Hewlett-Packard Company's ("H-P") Personal Information Products Group. Prior to
February 1991 he led H-P's Information Networks Group and Information Systems
Group. Mr. Frankenberg currently serves on the Board of Directors of Caere
Corporation, Daw Technologies, Inc., Electroglas, Inc., National Semiconductor
Corporation and Secure Computing Corporation. Mr. Frankenberg also serves on the
advisory board of the Sundance Film Festival and the Board of Trustees of
Westminster College.
Jeffrey A. Heimbuck has been a Director of the Company since December
1996. From July 1992 through July 1996, Mr. Heimbuck was President and Chief
Executive Officer of Inmac Corporation. Prior to Inmac Corporation, he was
President of Quantum Commercial Products, a division of Quantum Corporation,
manufacturer of Winchester disk drives.
Henry N. Lewis has been a Director of the Company since January 1993.
Since 1976, Mr. Lewis has been a Managing Director and a principal in Computer
Ventures Group Limited, a London-based investment company investing primarily in
the computer industry. Mr. Lewis is also a director of Action Computer Supplies
Limited, Action Computer Supplies Holdings, p.1.c. and CVG Investments Limited.
David F. Millet has been a Director of the Company since October 1992.
Since 1997, he has served as Managing Director of Gemini Investors, a private
investment firm, and since 1988, he has also served as President of Chatham
Venture Corporation, an investment advisory company. He is also President and a
director of Thomas Emery & Sons, LLC, a private investment company, and Chairman
of Holographix, Inc., a manufacturer of holographic optical components and
systems. Mr. Millet is also a director of View Tech, Inc., National
Telemanagement Corporation and Mohawk Metal Products.
Steve Sarich, Jr. has been a Director of the Company since June 1991. He
has been President of 321 Investment Co., a venture capital company, since 1980
and President of C.S.S. Management Co., a management company, since 1986. Mr.
Sarich is also a director of Cyclopss Corporation and Flo Scan Instrument
Company.
Bettie A. Steiger has been a Director of the Company since May 1995. She
is President and Founder of Steiger Associates, a consulting firm which
specializes in business management and strategic marketing. From June 1988, Ms.
Steiger served in various capacities at Xerox Corporation ("Xerox"). She served
as a Principal for Xerox's Market and Technology Innovation Group ("MTI")
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from June 1992 until July 1998. MTI sponsors new business initiatives for Xerox
based on emerging technologies invented at Xerox. From December 1990 to June
1992, Ms. Steiger was Worldwide Marketing Resident at Xerox's Palo Alto Research
Center. Formerly, Ms. Steiger was Vice President, Videotex, of the Gartner Group
and the Executive Director of the Association for Information and Image
Management. She is a founding member of Source Telecomputing Corporation ("The
Source"). Ms. Steiger is also a director of Alumnae Resources, ISIM, Inc.,
PubWeb.com, Inc., and B-Linked, Inc.
Kevin B. Vitale has been President and Chief Executive Officer since
August 1999 and a Director since July 1997. He served as Chief Operating Officer
of the Company since July 1997, as Executive Vice President of the Company from
April 1996 to July 1997 and Vice President, Operations and Services from July
1993 to April 1996. Prior to joining the Company, Mr. Vitale was Vice President,
Corporate Quality and Customer Service of NetFRAME Systems Incorporated from
July 1989 to July 1993. Mr. Vitale also serves as a director and the chairman of
the Long Range Planning Committee for the Washington Software Association. He is
also a founding member of the Technical Support Alliance Network ("TSANet"),
where he served as a board member and Treasurer for the past four years.
Mr. Fox has been a Director since September 1999 and Vice President
Finance, Chief Financial Officer and Treasurer of the Company since April 1998.
Immediately prior to joining the Company, Mr. Fox was Senior Vice President of
PACCAR Inc. from March 1997 to January 1998. Prior to that, he was with Ernst &
Young LLP, becoming a partner in 1979. His last position was managing partner of
the firm's Seattle office. Mr. Fox serves on the Board of Trustees of the
Seattle Repertory Theatre and the Seattle Repertory Theatre Foundation.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
The Merger Agreement provides that promptly upon the purchase by the
Purchaser pursuant to the Offer of such number of Shares which satisfies the
Minimum Condition (as defined in the Merger Agreement), Parent shall be entitled
to designate a majority of the number of members of the Board. The Company will,
upon request of Parent, promptly increase the size of the Board and/or secure
the resignations of such number of its incumbent directors as is necessary to
enable the nominees designated by Parent to be elected to the Board.
To date, Parent has not provided the Company with the names of persons
it intends to nominate.
BOARD COMMITTEES AND MEETINGS
During the last fiscal year, there were six meetings of the Board of
Directors. All Directors attended at least 75% of the meetings of the Board of
Directors and of the committees of which they were members.
The Board of Directors has established an Acquisition Committee, an
Audit Committee, a Compensation Committee and a Nominating Committee. Each of
these committees is responsible to the full Board of Directors. The functions
performed by these committees are summarized below.
Acquisition Committee. The Acquisition Committee formulates the
Company's acquisition strategy for review and approval by the Board of
Directors. The members of this committee are Mr. Frankenberg, Mr. Fox and Mr.
Vitale. The Acquisition Committee met once in the last fiscal year.
Audit Committee. The Audit Committee reviews the scope and results of
the annual independent audit of the Company's books and records and reviews the
Company's finance and accounting policies. The members of this committee are Mr.
Lewis, Mr. Heimbuck and Mr. Millet. The Audit Committee met four times in the
last fiscal year.
Compensation Committee. The Compensation Committee administers certain
of the Company's incentive compensation plans and establishes certain policies
relating to such plans and other compensation and benefit matters. This
committee also establishes salaries, incentives and other forms of compensation
for executive officers. The members of this committee are Ms. Steiger, Mr.
Frankenberg, Mr. Millet and Mr. Sarich. The Compensation Committee met six times
in the last fiscal year.
Nominating Committee. The Nominating Committee makes recommendations to
the Board of Directors regarding the size and composition of the Board of
Directors and nominees for Director. The members of this committee are Mr. Lewis
and Ms. Steiger.
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The Nominating Committee met once in the last fiscal year. The Nominating
Committee does not consider nominees recommended by security holders.
DIRECTORS' COMPENSATION
Directors who are employees of the Company do not receive any fee for
their services as Directors. Directors who are not employees of the Company are
paid a $10,000 annual retainer plus $1,000 per meeting and $500 per telephonic
meeting of the Board of Directors and are reimbursed for their expenses incurred
in attending meetings. Non-employee Directors who are members of a committee of
the Board are paid $1,000 per committee meeting and $500 per telephonic meeting
and are reimbursed for their expenses incurred in attending committee meetings.
In addition, Mr. Frankenberg receives an annual cash retainer of $50,000 per
year for his services as Chairman of the Board.
Non-employee Directors are compensated for service on the Boards of
Directors of subsidiaries of the Company. They are paid an annual retainer of
$10,000 and $1,000 per day for attending subsidiary Board or committee meetings
that are not held on the same day as a Company Board or Committee meeting at
which the Director is in attendance. The Company compensates Directors for
services rendered at the request of the Company other than at or in preparation
for Board of Directors meetings or Committee meetings at the rate of $1,000 per
diem. In the fiscal year ending April 30, 1999, no payments were made for such
services.
Non-employee Directors also receive stock option grants under the
Company's 1993 Stock Option Plan for Non-Employee Directors (the "Directors
Plan"). Each new non-employee Director upon election or appointment to the Board
of Directors receives an initial option to purchase 10,000 shares of Common
Stock at an exercise price equal to the fair market value per share of Common
Stock on the grant date. In addition, each non-employee Director automatically
receives an annual grant of options to purchase 2,500 shares of Common Stock at
each annual meeting of shareholders at which he or she is reelected or continues
as a Director at an exercise price per share equal to the fair market value per
share of Common Stock on the grant date. Options granted to non-employee
Directors upon their initial appointment or election will become fully vested
and exercisable four years from the date of grant, with 25% of the total option
becoming fully vested and exercisable on the first anniversary date of the grant
and 2.0833% becoming fully vested and exercisable each month thereafter. The
annual options granted as of each annual meeting of shareholders (including the
1999 Annual Meeting) will vest and become exercisable upon the date of the next
annual meeting of shareholders. Options granted under the Directors Plan
generally expire five years from the grant date.
In addition, in consideration of Mr. Frankenberg's assumption of the
position of Chairman of the Board, Mr. Frankenberg received a one-time option
under the Directors Plan to purchase 30,000 shares of Common Stock at an
exercise price equal to the fair market value per share of Common Stock on
October 28, 1997, the grant date. This option vests over three years, one-third
at each anniversary date, so long as Mr. Frankenberg continues serving as
Chairman of the Board. This option terminates six years from the date of grant,
except that early termination shall be based on Mr. Frankenberg's service as the
Company's outside Chairman of the Board rather than on his service as a
director.
EXECUTIVE OFFICERS
Certain information concerning executive officers of the Company as of
December 2, 1999 is set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
<S> <C> <C>
Kevin B. Vitale............ 42 President and Chief Executive Officer
Richard P. Fox............. 52 Vice President Finance, Chief Financial Officer and Treasurer
Craig E. Shank............. 40 Vice President, General Counsel and Secretary
Roger C. Fairchild......... 51 Vice President, Worldwide Sales and Service
Kerry D. Palmer............ 47 Corporate Controller and Assistant Secretary
</TABLE>
Mr. Vitale has been President and Chief Executive Officer of the Company
since August 1999 and a director since July 1997. He served as Chief Operating
Officer of the Company since July 1997, as Executive Vice President of the
Company from April 1996 to July 1997 and Vice President, Operations and Services
from July 1993 to April 1996. Prior to joining the Company, Mr. Vitale was Vice
President, Corporate Quality and Customer Service of NetFRAME Systems
Incorporated from July 1989 to July 1993. Mr. Vitale also serves as a director
and the chairman of the Long Range Planning Committee for the Washington
Software Association.
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<PAGE> 9
He is also a founding member of the Technical Support Alliance Network, where he
served as a board member and Treasurer for the past five years.
Mr. Fox has been a director since September 1999 and Vice President
Finance, Chief Financial Officer and Treasurer of the Company since April 1998.
Immediately prior to joining the Company, Mr. Fox was Senior Vice President of
PACCAR Inc. from March 1997 to January 1998. Prior to that, he was with Ernst &
Young LLP, becoming a partner in 1979. His last position was managing partner of
the firm's Seattle office. Mr. Fox serves on the Board of Trustees of the
Seattle Repertory Theatre Foundation.
Mr. Shank joined the Company as General Counsel in March 1998 and was
elected Vice President, General Counsel and Secretary of the Company in May
1998. Prior to joining the Company, he was a lawyer with the Perkins Coie LLP
law firm from November 1986 to May 1998, becoming a partner in January 1993.
Mr. Fairchild has been Vice President, Worldwide Sales and Service since
September 1999. Prior to that, he held positions of Vice President, Customer
Service and Vice President, Internet Business Development since joining the
Company in October 1997. From September 1994 through September 1997, Mr.
Fairchild was Vice President, Sales and Marketing at Muzak Limited Partnership.
Mr. Palmer joined the Company in December 1988 and has served as
Corporate Controller and Assistant Secretary since October 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 2,
1999, known to the Company regarding the beneficial ownership of Common Stock by
(i) each person known to the Company to be the beneficial owner of more than 5%
of the outstanding Common Stock; (ii) each director of the Company; (iii) each
of the Company's executive officers who earned in excess of $100,000 from the
Company during fiscal 1998 (together, the "Named Officers"); and (iv) all
directors and executive officers as a group. The business address of each of the
following persons is 11332 N.E. 122nd Way, Kirkland, Washington 98034. The
following table does not reflect the effect of accelerated vesting as a result
of the Offer.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING(1)
- ------------------------------------ ---------- --------------
<S> <C> <C>
NetManage Acquisition Corporation(2)............... 9,104,225 89.2%
Robert J. Frankenberg(3)........................... 36,249 *
Jeffrey A. Heimbuck(4)............................. 11,249 *
Henry N. Lewis(5).................................. 7,291 *
David F. Millet(6)................................. 7,291 *
Steve Sarich, Jr.(7)............................... 7,291 *
Bettie A. Steiger(8)............................... 14,041 *
Kevin B. Vitale(9)................................. 131,166 1.3%
Richard P. Fox(10)................................. 54,997 *
Craig E. Shank(11)................................. 18,933 *
All directors and officers as a group (11
persons)(12)..................................... 322,049 3.1%
</TABLE>
- ----------
* Less than 1%.
(1) Percentage ownership is based upon 10,203,324 shares of Common Stock
outstanding as of December 2, 1999.
(2) Based on publicly available information as of December 2, 1999.
(3) Includes options for 36,249 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
(4) Represents options for 11,249 shares of Common Stock that are
exercisable within 60 days of December 2, 1999.
(5) Represents options for 7,291 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
9
<PAGE> 10
(6) Represents 7,291 shares of Common Stock that are exercisable within 60
days of December 2, 1999.
(7) Represents options for 7,291 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
(8) Includes options for 11,041 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
(9) Includes options for 128,166 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
(10) Includes options for 32,810 shares of Common Stock that are exercisable
within 60 days of December 2, 1999, and 2,187 shares of Common Stock
purchased pursuant to the Company's Employee Stock Purchase Plan.
(11) Includes options for 18,333 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
(12) Includes options for 288,449 shares of Common Stock that are exercisable
within 60 days of December 2, 1999.
10
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation received by the Named
Officers for the following periods: (1) the fiscal year ended April 30, 1999
("Fiscal 1999"), (2) the four-month period from January 1, 1998 transitioning
the Company's fiscal year from a calendar year to a fiscal year ending April 30
(the "1998 Four-Month Period"), (3) the fiscal year ended December 31, 1997
("Fiscal 1997") and (4) the fiscal year ended December 31, 1996 ("Fiscal 1996").
This information includes the dollar values of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any, whether
paid or deferred. The Company does not grant stock appreciation rights and has
no long-term compensation benefits other than stock options.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
1998 FOUR-MONTH PERIOD AND ------------
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
- --------------------------- ---- ---------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Kevin B. Vitale..................... 1999 $280,417 $ 101 74,000 $1,112
President and Chief Executive 4 mos 70,000 -0- -0- 602
Officer 1997 203,750 37,976 65,000 306
1996 175,000 55,000 30,000 198
John R. Wall........................ 1999 333,333 101 117,000 1,112
President and Chief Executive 4 mos 75,000 -0- -0- 602
Officer(3)
1997 218,750 40,689 80,000 306
1996 193,750 55,000 52,500(4) 198
Richard P. Fox...................... 1999 200,000 101 10,000 1,671
Vice President Finance, 4 mos 43,747 -0- -0- 64
Chief Financial Officer and
Treasurer(5)
Barry Horn.......................... 1999 154,799 81,947 -0- 1,694
Vice President Worldwide Sales(6) 4 mos 58,333 -0- 10,000 950
1997 43,750 32,108 40,000 216
Craig E. Shank...................... 1999 185,000 101 -0- 234
Vice President, General Counsel 4 mos 54,110 -0- 40,000 602
and Secretary(7)
</TABLE>
- ----------
(1) In 1999, for all officers except Mr. Horn, such amounts represent
payments under the Company's Holiday Bonus Program, in which all of the
Company's employees participate; with respect to Mr. Horn, $81,896
represents sales incentive bonuses and $101 represents a holiday bonus.
With respect to prior periods, such bonus amounts represent payments
under the Company's Management Incentive Plan.
(2) For all officers, amounts represent group term life premiums paid by the
Company during Fiscal 1999, the 1998 Four-Month Period, Fiscal 1997 and
Fiscal 1996, a $500 travel benefit for each of the officers' spouses
during the 1998 Four-Month Period and a $777 travel benefit for each of
the officers' spouses, with the exception of Mr. Shank's spouse, during
Fiscal 1999.
(3) Mr. Wall resigned his position as President and Chief Executive and
resigned from the board of directors in August, 1999.
(4) Options granted in 1996 include the repricing of options granted in 1994
that were canceled in connection with an exchange of options with
exercise prices in excess of the then fair market value for new options
with exercise prices equal to the then fair market value.
(5) Mr. Fox's employment with the Company commenced April 8, 1998.
(6) Mr. Horn's employment with the Company commenced on October 3, 1997 and
terminated on February 26, 1999.
(7) Mr. Shank's employment with the Company commenced March 30, 1998.
11
<PAGE> 12
STOCK OPTION GRANTS DURING FISCAL 1999
The following table sets forth information concerning the grant of stock
options during Fiscal 1999 to the named executive officers.
OPTION GRANTS DURING FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL FAIR AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS MARKET STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE VALUE ON FOR OPTION TERM(4)(5)
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL 1999 ($/SH) GRANT DATE 5%($) 10%($)
- ---- ---------- ------------ --------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Wall.............. 75,000(1) 9.1% $13.69 -- -- $ 645,718 $1,636,375
42,000(2) 5.1 13.69 -- -- 1,097,488 2,088,145
Kevin B. Vitale........... 50,000(1) 6.0 13.69 -- -- 430,478 1,090,917
24,000(2) 2.9 13.69 -- -- 786,418 1,446,857
Richard P. Fox............ 10,000(3) 1.2 13.69 -- -- 86,096 218,183
Barry Horn................ -- -- -- -- -- -- --
Craig E. Shank............ -- -- -- -- -- -- --
</TABLE>
- ----------
(1) Option becomes fully vested and exercisable four years from December 16,
1998, with 25% of the total option becoming fully vested and exercisable
on December 16, 1999 and 2.0833% becoming fully vested and exercisable
each month thereafter so long as employment with the Company continues.
Upon the occurrence of certain business combination transactions, the
exercisability of the options is accelerated.
(2) Option becomes fully vested and exercisable four years from May 20,
1998, with 25% of the total option becoming fully vested and exercisable
on May 20, 1999 and 2.0833% becoming fully vested and exercisable each
month thereafter so long as employment with the Company continues. Upon
the occurrence of certain business combination transactions, the
exercisability of the options is accelerated.
(3) Option becomes fully vested and exercisable four years from April 8,
1998, with 25% of the total option becoming fully vested and exercisable
on April 8, 1999 and 2.0833% becoming fully vested and exercisable each
month thereafter so long as employment with the Company continues. Upon
the occurrence of certain business combination transactions, the
exercisability of the options is accelerated.
(4) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by applicable regulations of the SEC and
are therefore not intended to forecast possible future appreciation, if
any, of the Common Stock price. Assumes all options are exercised at the
end of their respective 10-year terms. Actual gains, if any, on stock
option exercises depend on the future performance of the Common Stock
and overall stock market conditions, as well as the option holders'
continued employment through the vesting period. The amounts reflected
in this table may not be achieved.
(5) The increase in the market value of the holdings of all of the Company's
shareholders over a 10-year period, based on 10,151,162 shares of Common
Stock outstanding as of April 30, 1999, at assumed annual rates of
appreciation of 5% and 10% from a base price of $15.625 per share (the
closing market price as of April 30, 1999), would be $99,750,176 and
$252, 786, 530, respectively.
12
<PAGE> 13
OPTION EXERCISES DURING FISCAL 1999
The following table sets forth information concerning the exercise of
stock options during Fiscal 1999 by the named executive officers, and their
options outstanding at the end of Fiscal 1999.
AGGREGATED OPTION EXERCISES DURING FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ------------------------------ --------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Wall 225,000 $3,076,875 62,499 227,834 $ 48,590 $397,364
Kevin B. Vitale -0- -0- 68,276 168,976 48,025 285,498
Richard P. Fox -0- -0- 18,750 56,250 11,953 35,859
Barry Horn -0- -0- 13,332 36,668 -0- 4,375
Craig E. Shank -0- -0- 10,833 29,167 4,739 12,761
</TABLE>
- ----------
(1) Amounts equal the closing price of the Common Stock on April 30, 1999
($15.625 per share), less the option exercise price, multiplied by the
number of shares exercisable or unexercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which is comprised of four non-employee Directors. The
Compensation Committee works with management to develop compensation plans for
the Company and is responsible for determining the compensation of each
executive officer and reporting such compensation to the Board of Directors.
The Company's executive compensation program is designed to align
executive compensation with the Company's business objectives and the
executive's individual performance, and to enable the Company to attract, retain
and reward executive officers who contribute, and are expected to continue to
contribute, to the Company's long-term success. In establishing executive
compensation, the Compensation Committee is guided by the following principles:
(i) the total compensation for executive officers should be sufficiently
competitive with the compensation paid by other high-growth companies in the
software industry for officers in comparable positions so that the Company can
attract and retain qualified executives and (ii) individual compensation should
include components that reflect the financial performance of the Company and the
performance of the individual.
The compensation of the Company's executive officers consists of a
combination of base salary, bonuses and equity-based compensation. In general,
the Company's compensation program favors bonuses based on operating profit and
individual merit as opposed to salary increases. The Compensation Committee
believes that executive compensation should be designed to motivate executives
to increase shareholder value, and further believes that executive officers can
best increase shareholder value through the Company's operating profit by
conceiving, developing and positioning the best products in the Company's chosen
markets. The Compensation Committee has also focused on maintaining total
compensation packages that are adequate to retain executives for the Company.
Compensation payments in excess of $1 million to the Chief Executive
Officer or the other four most highly compensated executive officers are subject
to a limitation on deductibility for the Company under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Certain performance-
based compensation is not subject to the limitation on deductibility. The
Compensation Committee does not expect cash compensation in fiscal 1999 to its
Chief Executive Officer or any other executive officer to be in excess of $1
million. The Company's 1993 Plan is designed to qualify for the
performance-based exception to the $1 million limitation on deductibility of
compensation payments.
Base Salary. The Compensation Committee sets the base salary for
executive officers by reviewing the salaries for comparable positions in
high-growth companies in the Company's industry, the historical compensation
levels of the Company's executives and the executive's individual performance in
the preceding year (based on the factors discussed under "Merit Bonus Program"
below).
13
<PAGE> 14
The Compensation Committee utilizes salary surveys for reference purposes, but
its salary determinations are not subject to specific criteria. For 1995 and
1996, base salary for Mr. Wall also reflected the Company's obligations under
his employment agreement. See "Employment Contracts, Termination of Employment
and Change of Control Arrangements." In fiscal 1999, the base salaries of the
executive officers as a group were increased, based in part on the individual
contributions of the executives and in part on the need to retain key
executives, at an average rate of approximately 16.6%.
Merit Bonus Program. Each year the Compensation Committee adopts a
management incentive plan that reflects the Compensation Committee's belief that
a portion of each executive officer's and other manager-level participant's
compensation should be tied to the achievement by the Company of its profit
goals and by each executive officer of his or her individual performance goals.
The 1999 Executive Incentive Plan (the "1999 Incentive Plan"), set operating
profit goals and a merit bonus pool. In addition, the 1999 Incentive Plan
provided for both an increase and a decrease in the merit bonus pool as a
function of the Company's actual operating profit. Under the 1997 Incentive
Plan, executive officers are entitled to receive a bonus of between 40% and 50%
of base salary if the Company achieved its profit goals for Fiscal 1999 and the
individual executive met or exceeded his or her performance expectations. Based
on the Company's performance during Fiscal 1999, the bonus pool was not funded
and the executive officers did not receive a bonus.
Stock-Based Compensation. Awards of stock options under the Company's
stock option plans are designed to more closely tie the long-term interests of
the Company's executives with those of its shareholders and to assist in the
retention of executives. The Compensation Committee selects the executive
officers, if any, to receive stock options and determines the number of shares
subject to each option. The Compensation Committee's determination of the size
of option grants is generally intended to reflect an executive's position with
the Company and his or her contributions to the Company. Options generally have
a four-year vesting period to encourage key employees to continue in the
Company's employ. The Compensation Committee reviews the outstanding unvested
options of the key executives from time to time and may grant additional options
to encourage the retention of key executives. In fiscal 1999, a total of 201,000
options were granted to the executive officers.
Chief Executive Officer Compensation. The compensation for Mr. Wall, the
Company's former Chief Executive Officer, was determined based on the same
policies and criteria as the compensation for the other executive officers. The
Compensation Committee reviewed Mr. Wall's base salary and increased it to
$325,000 from its 1998 level of $219,000. The Compensation Committee continued
to utilize the 1999 Incentive Plan to tie Mr. Wall's compensation to shareholder
value by encouraging him to meet and exceed the goals set forth in the Company's
operating profit plan. The Compensation Committee also granted to Mr. Wall
options to purchase 117,000 shares in fiscal 1999.
The Compensation Committee
Bettie A. Steiger
Robert J. Frankenberg
David F. Millet
Steve Sarich, Jr.
14
<PAGE> 15
STOCK PRICE PERFORMANCE
The graph set forth below compares the cumulative total return on the
Common Stock with the cumulative total returns of the NASDAQ Total U.S. Index
and the NASDAQ Computer and Data Processing Index, resulting from an initial
assumed investment of $100 in each and assuming the reinvestment of any
dividends, for the period beginning on the date of the Company's initial public
offering on March 15, 1993 and ending on April 30, 1999. Stock price performance
shown in the Performance Graph for the Common Stock is historical and not
necessarily indicative of future price performance.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
WALL DATA, NASDAQ TOTAL U.S. INDEX AND
NASDAQ COMPUTER AND DATA PROCESSING INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ COMPUTER AND NASDAQ
DATA PROCESSING INDEX TOTAL U.S. INDEX WALL DATA
--------------------- ---------------- ---------
<S> <C> <C> <C>
3/15/93 100.00 100.00 100.00
12/31/93 100.00 112.00 176.00
12/31/94 122.00 109.00 175.00
12/31/95 185.00 155.00 73.00
12/31/96 229.00 190.00 66.00
12/31/97 281.00 233.00 60.00
4/30/98 374.00 277.00 68.00
4/30/99 571.00 376.00 69.00
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
In January 1999, the Company entered into Employment and Change of
Control Agreements with each of Messrs. Wall, Vitale, Fox and Shank (the
"Executives"). Each agreement provides that the Executive will be employed by
the Company for a term of two years, with an automatic renewal for successive
one-year terms unless cancelled upon twelve months' notice. Termination without
cause or for good reason entitles the Executives to receive (1) two times base
salary for Messrs. Wall and Vitale and one times base salary for Messrs. Fox and
Shank, (2) a percentage of base salary equal to the Executive Incentive Plan
percentage for the prior fiscal year and (3) COBRA premiums for eighteen months.
In the event of termination due to change of control, the Executives will
receive the benefits above, except that the salary multiple for Messrs. Wall and
Vitale is two and one-half and for Messrs. Fox and Shank is one and one-half.
Upon a merger (other than a merger of the Company in which the holders
of Common Stock immediately prior to the merger have the same proportionate
ownership of common stock in the surviving corporation immediately after the
merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company)
15
<PAGE> 16
or liquidation of the Company, as a result of which the Company's shareholders
receive cash, stock or other property in exchange for or in connection with
their shares of Common Stock, options granted under the 1983 and the 1993
Amended and Restated Stock Option Plans will terminate (with certain
exceptions), but the optionee will have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise his or her option in whole or in part
whether or not the vesting requirements set forth in the option agreement have
been satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 14, 1999, the Company loaned $860,000 to John R. Wall, the
Company's former CEO, which loan is to be repaid by Mr. Wall in accordance with
the terms of a promissory note by Mr. Wall in favor of the Company (the "Note").
The Note accrues interest at a rate of 5.28% per year. The accrued interest is
due on April 15, 2000, April 15, 2001 and April 15, 2002, and the principal
amount of the Note and any unpaid interest is due on April 15, 2003. The Note
will become due and immediately payable upon any disposition by Mr. Wall of his
shares of the Company's Common Stock. As of August 18, 1999, the entire
principal amount remained outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's securities, to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, Directors and greater-than-10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, the Company believes that, during the year ended December
31, 1998, its executive officers, Directors and greater-than-10% shareholders
complied with all Section 16(a) filing requirements.
DISSENTERS' RIGHTS
Under Washington law, the Company's shareholders have the right to
dissent from the merger and receive payment in cash for the fair value of their
shares of the Company's common stock in lieu of the merger consideration of
$9.00 net per share in cash without interest thereon for each share of the
Company's common stock owned. To preserve their rights , the Company's
shareholders who wish to exercise their statutory dissenters' rights must:
- deliver to the Company before the shareholders' meeting written
notice of their intent to demand payment for the fair value of
their shares of the Company's common stock if the merger is
effected; and
- not vote their shares in favor of adoption and approval of the
merger agreement and approval of the merger.
MERELY VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER WILL NOT
PRESERVE YOUR DISSENTERS' RIGHTS. CHAPTER 23B.13 OF THE WASHINGTON BUSINESS
CORPORATION ACT IS REPRINTED IN ITS ENTIRELY IN APPENDIX II TO THIS DOCUMENT.
THE FOLLOWING DISCUSSION IS A SUMMARY OF THE MATERIAL TERMS OF THE LAW RELATING
TO DISSENTERS' RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX
II. THE SHAREHOLDERS OF THE COMPANY SHOULD REVIEW THIS DISCUSSION AND APPENDIX
II CAREFULLY IF THEY WISH TO EXERCISE STATUTORY DISSENTERS' RIGHTS OR PRESERVE
THEIR RIGHT TO DISSENT. FAILURE TO COMPLY WITH THE PROCEDURES DESCRIBED IN THIS
DISCUSSION AND IN THE STATUTE WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
A shareholder of the Company who wishes to exercise dissenters' rights
generally must dissent with respect to all of the shares he or she owns or over
which he or she has power to direct the vote. However, if a record shareholder
is a nominee for several beneficial shareholders, some of whom wish to dissent
and some of whom do not, then the record shareholder may dissent with respect to
all the shares beneficially owned by any one person by notifying the Company in
writing of the name and address of each person on whose behalf the record
shareholder asserts dissenters' rights. A beneficial shareholder may assert
dissenters' rights directly by submitting to the Company the record
shareholder's written consent to the dissent and by dissenting with respect to
all the shares of which the shareholder is the beneficial shareholder or over
which the shareholder has power to direct the vote.
16
<PAGE> 17
A shareholder who does not deliver to the Company prior to the vote
being taken at the Company's shareholders' meeting a written notice of the
shareholder's intent to demand payment for the fair value of the shares will
lose the ability to exercise dissenters' rights. Notice must be sent to Wall
Data Incorporated, 11332 N.E. 122nd Way, Kirkland, Washington 98034, Attention:
Chief Executive Officer. In addition, a shareholder electing to exercise
dissenters' rights must not vote in favor of adoption and approval of the merger
agreement and approval of the merger.
If the merger closes, the Company will, within 10 days after the
effective time, deliver a written notice to all shareholders who properly
exercised their dissenters' rights. This notice will, among other things:
- state where the payment demand must be sent and where and when
certificates must be deposited;
- supply a form for demanding payment, which requires shareholders
to certify that they acquired beneficial ownership of the shares
before the date on which the merger was first announced;
- set a date by which the Company must receive the payment demand,
which date must be between 30 and 60 days after the Company
delivers the notice to dissenting shareholders; and
- include another copy of Chapter 23B.13 of the WBCA.
A shareholder wishing to exercise dissenters' rights must file the
payment demand, certify as to whether beneficial ownership of the shares was
acquired before the merger was announced, and deliver share certificates, in the
manner and by the time set forth in the notice. Failure to do so will cause the
loss of dissenters' rights.
Within 30 days after the later of the effective time of the merger and
the date the payment demand is received by the Company, the Company will pay
each dissenter with properly perfected dissenters' rights the Company's estimate
of the fair value of the shareholder's shares, plus accrued interest from the
effective time. The Company is required to provide, along with this payment:
- financial information relating to the Company, including a
balance sheet, income statement and statement of changes in
shareholders' equity for or as of a fiscal year ending not more
than 16 months before the date of payment and its latest
available interim financial statements, if any;
- an explanation of how the Company estimated the fair market
value of the shares;
- an explanation of how the accrued interest was calculated, a
statement of a dissenter's right to demand further payment if he
or she is dissatisfied with the tendered payment; and
- another copy of Chapter 23B.13 of the Washington Business
Corporation Act.
With respect to any dissenter who did not beneficially own the Company
shares prior to the first public announcement of the merger, the Company may
send an offer to make payment to the dissenter, conditioned upon the dissenter's
agreement to accept the payment in full satisfaction of the dissenters' rights.
A dissenter dissatisfied with the Company's estimate of the fair value
may, within 30 days of payment or offer for payment by the Company, notify the
Company in writing of the shareholder's estimate of the fair value of his or her
shares and the amount of interest due, and demand payment of his or her estimate
of the fair value of his or her shares. If the Company does not accept the
dissenter's estimate and the parties do not otherwise settle on a fair value,
Washington law requires that, within 60 days of the dissenter's demand for
further payment, the Company start a proceeding in King County Superior Court
and petition the court to determine the fair value of the shares and accrued
interest, naming all the Company's dissenting shareholders whose demand remain
unsettled as parties to the proceeding. The court may appoint one or more
persons as appraisers to receive evidence and recommend the fair value of the
shares of the Company. The dissenters will be entitled to the same discovery
rights as parties in other civil actions. Each dissenter made a party to the
proceeding will be entitled to judgment for the amount, if any, by which the
court finds that the fair value of his or her shares, plus accrued interest,
exceeds the amount, if any, previously paid to the dissenter by the Company. If
the Company fails to institute a court action within the specified time period,
it must pay the amount specified in the dissenter's demand.
Court costs and appraiser's fees will be assessed against the Company,
except that the court may assess these costs against some or all of the
dissenters to the extent that it finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment.
17
<PAGE> 18
A shareholder entitled to dissent and obtain payment for his or her
shares of the common stock of the Company under Washington law may not challenge
the merger unless the Company fails to comply with the procedural requirements
imposed by Washington law, the Company's articles of incorporation or the
Company's bylaws or is fraudulent with respect to the shareholders of the
Company.
A shareholder's right to dissent will terminate if:
- the merger is terminated;
- a court with proper jurisdiction enjoins or sets aside the
merger; or
- the shareholder withdraws demand for payment with the written
consent of the Company.
The Company's shareholders who dissent from the merger will generally
recognize taxable gain or loss for federal income tax purposes. In view of the
complexity of Chapter 23B.13 of the WBCA and potential tax implications, the
Company's shareholders who may wish to dissent from the merger and pursue
dissenters' rights should consult their tax and legal advisors.
18
<PAGE> 19
APPENDIX I
================================================================================
PROJECT PANAMA
AGREEMENT AND PLAN OF MERGER
By and Among
NETMANAGE, INC.
NETMANAGE ACQUISITION CORPORATION
and
WALL DATA INCORPORATED
Dated as of October 20, 1999
================================================================================
<PAGE> 20
APPENDIX I
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE TENDER OFFER.................................................................... 1
1.1 The Offer...................................................................... 1
1.2 Company Action................................................................. 3
1.3 Directors...................................................................... 4
ARTICLE II THE MERGER......................................................................... 4
2.1 The Merger..................................................................... 4
2.2 Effective Time................................................................. 5
2.3 Effects of the Merger.......................................................... 5
2.4 Restated Articles of Incorporation............................................. 5
2.5 Bylaws......................................................................... 5
2.6 Directors...................................................................... 5
2.7 Officers....................................................................... 5
2.8 Conversion of Shares........................................................... 5
2.9 Dissenting Shares.............................................................. 6
2.10 Payment For Shares............................................................. 6
2.11 No Further Rights or Transfers................................................. 7
2.12 Supplementary Action........................................................... 8
2.13 Closing........................................................................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... 8
3.1 Organization of the Company.................................................... 8
3.2 Company Capital Structure...................................................... 9
3.3 Obligations With Respect to Capital Stock...................................... 10
3.4 Authority...................................................................... 10
3.5 SEC Filings; the Company Financial Statements.................................. 11
3.6 Absence of Certain Changes or Events........................................... 12
3.7 Taxes.......................................................................... 12
3.8 Title to Properties; Absence of Liens and Encumbrances......................... 14
3.9 Intellectual Property.......................................................... 14
3.10 Compliance; Permits; Restrictions.............................................. 17
3.11 Litigation..................................................................... 17
3.12 Brokers' and Finders' Fees..................................................... 18
3.13 Employee Benefit Plans......................................................... 18
3.14 Employees; Labor Matters....................................................... 18
3.15 Environmental Matters.......................................................... 19
3.16 Year 2000 Compliance........................................................... 19
3.17 Agreements, Contracts and Commitments.......................................... 20
3.18 Change of Control Payments..................................................... 21
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3.19 Board Approval................................................................. 21
3.20 Fairness Opinion............................................................... 21
3.21 Chapter 23B.19 of the Washington Business Corporation Act Not Applicable....... 21
3.22 Offer Documents; Proxy Statement............................................... 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER............................. 22
4.1 Organization and Qualification................................................. 22
4.2 Corporate Power, Authorization and Enforceability.............................. 22
4.3 No Conflict; Required Filings and Consents..................................... 22
4.4 Schedule 14D-1................................................................. 23
4.5 Available Funds................................................................ 23
ARTICLE V COVENANTS........................................................................... 24
5.1 Conduct of Business by the Company............................................. 24
5.2 Access to Information; Confidentiality......................................... 26
5.3 Proxy Material; Shareholders' Meeting.......................................... 27
5.4 No Solicitation; Break-up Fee.................................................. 28
5.5 Public Announcements........................................................... 29
5.6 Notification of Certain Matters................................................ 30
5.7 Actions by Company............................................................. 30
5.8 Officers' and Directors' Indemnification....................................... 30
5.9 Employment Agreements.......................................................... 31
5.10 Additional Agreements.......................................................... 31
5.11 Other Actions by the Company................................................... 31
5.12 Company Options................................................................ 31
5.13 Restated Employee Stock Purchase Plan.......................................... 31
5.14 Retirement Savings Plan Termination............................................ 32
5.14 The Effective Time............................................................. 32
5.15 Stockholder Litigation......................................................... 32
ARTICLE VI CONDITIONS OF MERGER............................................................... 32
6.1 Conditions to the Obligations of Each Party to Effect the Merger............... 32
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................. 33
7.1 Termination.................................................................... 33
7.2 Procedure and Effect of Termination............................................ 34
7.3 Fees and Expenses.............................................................. 34
7.4 Amendment...................................................................... 35
7.5 Waiver......................................................................... 35
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ARTICLE VIII MISCELLANEOUS.................................................................... 36
8.1 Severability................................................................... 36
8.2 Notices........................................................................ 36
8.3 Entire Agreement; No Third Party Beneficiaries; No Assignment.................. 37
8.4 Interpretation; Knowledge...................................................... 37
8.5 Counterparts................................................................... 38
8.6 Other Remedies; Specific Performance........................................... 38
8.7 Governing Law.................................................................. 38
8.8 Rules of Construction.......................................................... 38
8.9 WAIVER OF JURY TRIAL........................................................... 38
EXHIBIT A Employment Agreements
EXHIBIT B Required Third Party Consents
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered
into as of this 20th day of October, 1999, by and among NetManage, Inc., a
Delaware corporation ("PARENT"), NetManage Acquisition Corporation, a Washington
corporation and a wholly-owned subsidiary of Parent ("Purchaser"), and Wall Data
Incorporated, a Washington corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of Parent, Purchaser and the Company
have each unanimously approved the terms and conditions of a merger of Purchaser
with and into the Company (the "MERGER") upon the terms and subject to the
conditions set forth herein.
B. Pursuant to the Merger, Purchaser will acquire each issued and
outstanding share of Common Stock of the Company at a price of $9.00 net per
Share to the seller in cash and without interest thereon (the "OFFER PRICE"). In
order to accomplish the Merger, Purchaser shall first commence a tender offer
(the "OFFER") by Purchaser under Section 14(d)(1) of the Securities and Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), to purchase all outstanding shares
of the Common Stock, no par value, of the Company (shares of the Common Stock
are referred to herein as the "SHARES").
C. The Board of Directors of the Company has unanimously resolved
to recommend the acceptance of the Offer and approval of the Merger to the
holders of Shares and determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to the holders of such Shares and that
the Offer and the Merger are in the best interests of the holders of such
Shares.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree
as follows:
ARTICLE I
THE TENDER OFFER
1.1. THE OFFER.
(a) Provided that this Agreement shall not have been
terminated pursuant to Section 7.1 and none of the events set forth in clause
(iii) of Annex I shall have occurred or be existing, Purchaser shall, and Parent
shall cause Purchaser to, within five business days after the public
announcement of the execution of this Agreement commence the Offer (within the
meaning of Rule 14d-2 under the Exchange Act) at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and
to accept for payment and pay for any of the Shares tendered shall be subject to
the conditions set forth on
<PAGE> 24
Annex I, including that a minimum of not less than fifty-one percent (51%) of
the Shares outstanding on a fully-diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested and unvested stock
options, and conversion of convertible securities or other rights to purchase or
acquire Shares) being validly tendered and not withdrawn prior to the expiration
of the Offer (the "MINIMUM CONDITION"). The per Share amount shall be net to the
seller in cash, upon the terms and subject to the conditions of the Offer and
subject to reduction for any applicable federal back-up or other applicable
withholding or stock transfer taxes. The Offer shall remain open until 12:00
Midnight, New York City time, on November 24, 1999 (twenty (20) business days
following the commencement of the Offer). As used in this Agreement, the
"EXPIRATION DATE" means 12:00 Midnight, New York City time, on November 24,
1999, unless Purchaser extends the Offer as permitted by this Agreement, in
which case the "Expiration Date" means the latest time and date to which the
Offer is extended.
(c) Purchaser expressly reserves the right in its sole
discretion to waive any conditions to the Offer (other than the condition set
forth in clause (ii) or (iii)(E) of Annex I), to increase the price per Share
payable in the Offer, to extend the duration of the Offer, or to make any other
changes in the terms and conditions of the Offer; provided, however, that no
such change may be made which decreases the price per Share payable in the
Offer, reduces the maximum number of Shares to be purchased in the Offer,
imposes conditions to the Offer in addition to those set forth in Annex I or
amends any other material terms of the Offer in a manner materially adverse to
the Company's shareholders, and provided, further, that the Offer may not,
without the Company's prior written consent, be extended beyond December 8, 1999
except as necessary to provide time to satisfy the conditions set forth in Annex
I, and except that Purchaser may extend the Offer for up to 10 additional
business days, if as of such date, there shall not have been tendered at least
ninety percent (90%) of the outstanding Shares so that the Merger could be
effected without a meeting of the Company's shareholders in accordance with
applicable provisions of the Washington Business Corporation Act (the "WBCA").
(d) The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement and
the conditions set forth in Annex I. Concurrently with the commencement of the
Offer, Parent and Purchaser shall file with the Securities and Exchange
Commission (the "SEC") a tender offer statement on Schedule 14D-1 reflecting the
Offer (together with all exhibits, amendments and supplements thereto, the
"SCHEDULE 14D-1"). The Company and its counsel shall be given an opportunity to
review the Offer to Purchase and the Schedule 14D-1. Parent and Purchaser agree
to provide the Company and its counsel with any comments which Parent, Purchaser
or their counsel may receive from the SEC or the staff of the SEC with respect
to such documents promptly after receipt thereof. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Purchaser will
purchase by accepting for payment and will pay for Shares validly tendered and
not properly withdrawn, as promptly as practicable after the Expiration Date.
The Schedule 14D-1 will contain or will incorporate by reference the Offer to
Purchase (or portions thereof) and forms of the related letter of transmittal
and summary advertisements (which Schedule 14D-1, Offer to Purchase and other
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "OFFER
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<PAGE> 25
DOCUMENTS"). Parent, Purchaser and the Company agree promptly to correct any
information provided by any of them for use in the Offer Documents that shall
have become false or misleading, and Parent and Purchaser further agree to take
all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and the other Offer Documents as so corrected to be disseminated to the
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Offer Documents will, on the date filed, comply in
all material respects with all provisions of applicable federal securities laws.
1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that (i) its Board of Directors has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (B) approved and adopted this Agreement
and the transactions contemplated hereby and (C) resolved to recommend that the
shareholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby and thereby (provided,
however, that subject to the provisions of Section 5.4 such recommendation may
be withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 5.4)) and (ii) Bear, Stearns & Co. Inc. ("BANKER") has
rendered to the Board of Directors of the Company its written opinion (which
opinion is permitted to be included in writing in the Schedule 14D-9 (as defined
in Section 1.2(b)), to the effect that the consideration to be received by the
holders of Shares pursuant to each of the Offer and the Merger is fair to the
holders of Shares from a financial point of view. The Company hereby consents to
the inclusion in the Offer Documents of the recommendation of the Company's
Board of Directors described in the first sentence of this Section 1.2(a), and
has obtained the consent of Banker to the inclusion in the Schedule 14D-9 of a
copy of the written opinion referred to in clause (ii) above.
(b) The Company shall file with the SEC, concurrently with
the filing by Parent and Purchaser of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 under the Exchange Act
relating to the Offer (together with all exhibits, amendments and supplements
thereto as well as the Information Statement required pursuant to Section 14(f)
under the Exchange Act, collectively the "SCHEDULE 14D-9"), which shall contain
the recommendation of the Company's Board of Directors described in Section
1.2(a), and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. The Schedule 14D-9, and each amendment
thereto, will, on the date filed, comply in all material respects with the
provisions of applicable federal securities laws. The Company, Parent and
Purchaser agree promptly to correct any information provided by any of them for
use in the Schedule 14D-9 that shall have become false or misleading, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and the Schedule 14D-9 as so corrected
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given the opportunity to review and shall be reasonably satisfied with the
Schedule 14D-9 in the form in which such document is originally filed with the
SEC, and all amendments and supplements thereto, prior to the time at which such
documents and all documents related thereto are filed with the SEC. The Company
shall
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<PAGE> 26
provide Purchaser and its counsel with any comments the Company or its counsel
may receive from the SEC with respect to the Schedule 14D-9 promptly after
receipt of such comments.
(c) The Company has been advised by all of its directors and
executive officers, as of the date of this Agreement, each intends to tender all
outstanding Shares beneficially owned by such person to Purchaser pursuant to
the Offer unless to do so would subject such person to liability under Section
16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with
mailing labels containing the names and addresses of all record holders of
Shares and security position listings of Shares held in stock depositories, each
of a recent date, and shall promptly furnish Purchaser with such additional
information, including updated lists of shareholders, mailing labels and
security position listings, and such other assistance as Parent, Purchaser or
their agents may reasonably request in connection with communicating the Offer
and any amendments or supplements thereto to the Company's shareholders. Subject
to the requirements of applicable laws and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Purchaser shall hold in confidence the
information contained in any of such labels and lists.
1.3 DIRECTORS. Promptly upon the acquisition by Purchaser pursuant
to the Offer of such number of Shares which satisfies the Minimum Condition and
from time to time thereafter, Parent shall be entitled to designate a majority
of the members of the Company's Board of Directors, subject to compliance with
Section 14(f) of the Exchange Act. The Company shall, upon request by Parent,
promptly increase the size of the Board of Directors to the extent permitted by
its Restated Articles of Incorporation and/or secure the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board of Directors and shall cause Parent's designees to be so elected.
The Company shall take, at its expense, all action necessary to effect any such
election, including mailing to its shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in form
and substance reasonably satisfactory to Parent and its counsel. Following the
election or appointment of Parent's designees pursuant to this Section 1.3 and
prior to the Effective Time, any amendment or termination of this Agreement,
extension for the performance or waiver of the obligations or other acts of
Parent or Purchaser or waiver of the Company's rights hereunder, shall require
the concurrence of a majority of the Company's directors (or the concurrence of
the director, if there is only one remaining) then in office who are directors
on the date hereof, or are directors (other than directors designated by Parent
in accordance with this Section 1.3) designated by such persons to fill any
vacancy (the "CONTINUING DIRECTORS").
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions hereof
and in accordance with the WBCA, Purchaser shall be merged with and into the
Company as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI of this
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<PAGE> 27
Agreement. Following the Merger, the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and the separate corporate existence
of Purchaser shall cease. At the election of Parent or Purchaser, any direct or
indirect wholly-owned subsidiary of Parent incorporated under the laws of
Washington may be substituted for Purchaser as a constituent corporation in the
Merger. As used herein, the term "PURCHASER" shall, upon such substitution,
refer to any such substituted corporation.
2.2 EFFECTIVE TIME. The Merger shall be consummated by and shall be
effective at the time there has been filed as provided by Section 2.13 with the
Secretary of State of the State of Washington the articles of merger in such
form as is required by, and executed in accordance with, the relevant provisions
of the WBCA, and such other documents as may be required by the provisions of
the WBCA. The time of such filing is referred to as the "EFFECTIVE TIME."
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in applicable sections of the WBCA. As of the Effective Time, the Company
shall be a wholly-owned subsidiary of Parent.
2.4 RESTATED ARTICLES OF INCORPORATION. The Restated Articles of
Incorporation of the Surviving Corporation shall be amended to contain the
substantive provisions of the Articles of Incorporation of the Purchaser as in
effect at the Effective Time.
2.5 BYLAWS. The Bylaws of Purchaser, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation, until
thereafter duly amended in accordance with applicable law.
2.6 DIRECTORS. The directors of Purchaser immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation and
will hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the Restated
Articles of Incorporation and Bylaws of the Surviving Corporation, as such
instruments may be amended from time to time, either before or after the
Effective Time, or as otherwise provided by law.
2.7 OFFICERS. The officers of the Purchaser immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation. Such
officers of the Surviving Corporation will hold office from the Effective Time
until their respective successors are duly elected or appointed and qualified in
the manner provided in the Restated Articles of Incorporation and Bylaws of the
Surviving Corporation, as such instruments may be amended from time to time,
either before or after the Effective Time, or as otherwise provided by law.
2.8 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Purchaser, the Company or the holders
of the Shares:
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<PAGE> 28
(i) Each Share issued and outstanding immediately
prior to the Effective Time (other than Shares held, directly or indirectly, by
Parent, Purchaser, the Company or any of their majority-owned subsidiaries, and
any Dissenting Shares (as defined in Section 2.9)) shall automatically be
canceled and extinguished and be converted into the right to receive $9.00, or
such higher amount per Share as is paid pursuant to the Offer (the "MERGER
CONSIDERATION"), in cash, without interest thereon.
(ii) Each Share issued and outstanding immediately
prior to the Effective Time which is owned or held, directly or indirectly, by
Parent, Purchaser, the Company or any of their majority-owned subsidiaries shall
be canceled and extinguished and cease to exist, without any conversion thereof,
and no payment shall be made with respect thereto.
(iii) Each holder (other than holders referred to in
Section 2.8(a)(ii)) of a certificate representing any Shares shall after the
Effective Time cease to have any rights with respect to such Shares, except
either to receive the Merger Consideration upon surrender of such certificate,
or to exercise such holder's appraisal rights as provided in Section 2.9 and the
WBCA.
(iv) Each share of Common Stock of Purchaser issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and thereafter represent one validly issued, fully paid and nonassessable
share of Common Stock of the Surviving Corporation.
2.9 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, Shares which are outstanding immediately prior to the Effective
Time and which are held by a holder who dissents from the Merger in the manner
provided under the WBCA and becomes entitled to obtain payment for the fair
value of such Shares pursuant to the applicable provisions of the WBCA
("DISSENTING SHARES") shall not be converted into a right to receive the Merger
Consideration pursuant to Section 2.8, but the holders of Dissenting Shares
shall instead be entitled to receive such consideration as shall be determined
pursuant to the WBCA; provided, however, that Section 2.8 shall apply to Shares
held by a dissenting shareholder who subsequently withdraws his or her demand
for payment in the manner provided under the WBCA, fails to comply fully with
the requirements of applicable provisions of the WBCA, or otherwise fails to
establish the fair value of such holder's Shares under the WBCA, in which event
such Shares shall be deemed to be converted into the right to receive the Merger
Consideration pursuant to Section 2.8. The Company shall give Parent and
Purchaser prompt notice of any written objection to the Merger and demand for
payment of the fair value of Shares. Prior to the Effective Time, the Company
shall not, except with the prior written consent of Purchaser, make any payment
with respect to, or settle or offer to settle, any such demand for payment of
the fair value of Shares. Each holder of Dissenting Shares shall have only such
rights and remedies as are granted to such holder under the WBCA.
2.10 PAYMENT FOR SHARES.
(a) Prior to the Effective Time, Purchaser shall select and
appoint a bank to act as agent for the holders of Shares (the "PAYING AGENT") to
receive and disburse the Merger Consideration to which holders of Shares shall
become entitled pursuant to Section 2.8. At the
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Effective Time, Purchaser or Parent shall provide the Paying Agent with
sufficient cash to allow the Merger Consideration to be paid by the Paying Agent
for each Share then entitled to receive the Merger Consideration.
(b) As soon as practicable after the Effective Time,
Purchaser or Parent shall cause the Paying Agent to mail to each record holder a
certificate or certificates representing Shares which as of the Effective Time
represents the right to receive the Merger Consideration (the "CERTIFICATES"), a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be requested, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration and such Certificate shall forthwith be canceled. No interest
shall be paid or accrued on the Merger Consideration upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section, each Certificate shall be deemed for all purposes to evidence only the
right to receive the Merger Consideration (without interest thereon), and shall,
subject to Section 2.9, have no other right.
(c) If the Merger Consideration (or any portion thereof) is
to be delivered to a person other than the person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment that the Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment or delivery shall pay any transfer or other taxes payable by reason of
the foregoing or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Paying Agent nor any party hereto shall be liable to a holder of
Shares for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
(d) Promptly following the date that is six months after the
Effective Date, the Paying Agent shall return to the Surviving Corporation all
Merger Consideration and other cash, property and instruments in its possession
relating to the transactions described in this Agreement, and the Paying Agent's
duties shall terminate. Thereafter, each holder of a Certificate formerly
representing a Share may surrender such Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Merger Consideration (without interest thereon).
Notwithstanding the foregoing, the Surviving Corporation shall be entitled to
receive from time to time all interest or other amounts earned with respect to
any cash deposited with the Paying Agent as such amounts accrue or become
available.
2.11 NO FURTHER RIGHTS OR TRANSFERS. At and after the Effective Time
the holders of Certificates to be exchanged for the Merger Consideration
pursuant to this Agreement shall cease to have any rights as to shareholders of
the Company except for the right to surrender such holder's Certificates in
exchange for payment of the Merger Consideration, and after the Effective Time
there shall be no transfers on the stock transfer books of the Surviving
Corporation of the Shares which
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were outstanding immediately prior to the Effective Time. Any Certificates
formerly representing Shares presented to the Surviving Corporation or Paying
Agent shall be canceled and exchanged for the Merger Consideration, as provided
in this Article II, subject to applicable law in the case of Dissenting Shares.
2.12 SUPPLEMENTARY ACTION. If at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or
Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
2.13 CLOSING. Upon the terms and subject to the conditions of this
Agreement, as soon as practicable after all the conditions to the obligations of
the parties hereto to effect the Merger under Article VI of this Agreement shall
have been satisfied or waived, the Company and Purchaser shall (i) file with the
Delaware Secretary of State a certificate or agreement of merger or a
certificate of ownership and merger in such form as may be required by, and
executed in accordance with, the relevant provisions of the WBCA and (ii) take
all such other and further actions as may be required by law to make the Merger
effective. Contemporaneous with the filing referred to in this Section, a
closing (the "CLOSING") will be held at the offices of Wilson Sonsini Goodrich &
Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304 or at such other
location as the parties may establish for the purpose of confirming all the
foregoing. The date and the time of such Closing are referred to as the "CLOSING
DATE."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which for purposes of this Article III shall include the
Company and each of its subsidiaries unless the context otherwise requires)
represents and warrants to Parent and Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent and Purchaser dated as of the date hereof and certified by a
duly authorized officer of the Company (the "COMPANY SCHEDULES"), as follows:
3.1 ORGANIZATION OF THE COMPANY.
(a) The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; has the corporate power and authority
to own, lease and operate its assets and property and to carry on its business
as now being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing
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necessary, except where the failure to be so qualified would not have a Material
Adverse Effect (as defined below) on the Company.
(b) The Company has delivered to Parent a true and complete
list of all of the Company's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary, the jurisdictions in which such subsidiary is
qualified or licensed, and the Company's and any other person's equity interest
therein. All shares of subsidiaries owned of record by persons other than the
Company are owned beneficially (or the substantive equivalent) by the Company.
(c) The Company has delivered or made available to Parent a
true and correct copy of the Restated Articles of Incorporation and Bylaws of
the Company and similar governing instruments of each of its subsidiaries, each
as amended to date, and each such instrument is in full force and effect.
Neither the Company nor any of its subsidiaries is in violation of any of the
provisions of its Restated Articles of Incorporation or Bylaws or equivalent
governing instruments.
(d) When used in connection with the Company, the term
"MATERIAL ADVERSE EFFECT" means, for purposes of this Agreement, any change,
event or effect that is materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of Company and
its subsidiaries taken as a whole.
3.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 45,000,000 shares of Common Stock, no par value, of which
there are 10,189,969 shares were issued and outstanding as of September 30,
1999, and 5,000,000 shares of Preferred Stock, no par value, of which no shares
are issued or outstanding. No shares of capital stock have been issued since
September 30, 1999 except pursuant to option exercises. All outstanding shares
of the Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Restated Articles of Incorporation or Bylaws of the Company or any agreement or
document to which the Company is a party or by which it is bound. As of the date
of this Agreement, the Company had reserved an aggregate of 5,226,789 shares of
the Company Common Stock, net of exercises, for issuance to employees,
consultants and non-employee directors pursuant to the Amended and Restated 1983
Stock Option Plan, Restated 1993 Stock Option Plan and Restated 1993 Stock
Option Plan for Non-Employee Directors and 1994 Non-Officer Stock Option Plan
("the Option Plans"). (Stock options granted by the Company pursuant to the
Option Plans or otherwise are referred to in this Agreement as "Company
Options.") As of September 30, 1999, there were Company Options outstanding to
purchase an aggregate of 2,477,892 shares of Common Stock, issued to employees,
consultants and non-employee directors pursuant to the Option Plans. No Company
Options have been granted since September 30, 1999. All shares of the Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. The
Company Schedules list for each person who held restricted stock or options, the
name of the holder of such shares or option, the exercise price of such option,
the number of shares which will have vested at such date, the vesting schedule
for such shares or option and whether the lapsing of the Company's repurchase
rights or
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exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicate the extent of acceleration, if any.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth
in Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of the Company, or any securities exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities the Company owns, directly or indirectly
through one or more subsidiaries, there are no equity securities, partnership
interests or similar ownership interests of any class of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section
3.2, there are no options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement. There are no registration rights and, to the
knowledge of the Company, as of the date of this Agreement, there are no voting
trusts, proxies or other agreements or understandings with respect to any equity
security of any class of the Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
3.4 AUTHORITY.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval and adoption of this Agreement and the approval of the Merger by
the Company's shareholders and the filing and recordation of the Restated
Articles of Merger pursuant to the WBCA. A vote of the holders of fifty-one
percent (51%) of the outstanding Shares is required for the Company's
shareholders to approve and adopt this Agreement and approve the Merger. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and, if applicable,
Purchaser, constitutes valid and binding obligations of the Company, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Restated Articles of Incorporation or Bylaws of the Company or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by the Company's shareholders, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable
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to the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected. The Company Schedules list
all consents, waivers and approvals under any of the Company's or any of its
subsidiaries' material agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Delaware Secretary of State, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country, and (iii)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not be material to the Company, Parent or
Purchaser or have a material adverse effect on the ability of the parties to
consummate the Offer or the Merger.
3.5 SEC FILINGS; THE COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed in a timely manner all forms,
reports and documents required to be filed with the SEC since January 1, 1997,
and has made available to Parent all such forms, reports and documents. All such
required forms, reports and documents (including those that the Company may file
subsequent to the date hereof) are referred to herein as the "COMPANY SEC
REPORTS." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such the Company SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIALS"),
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including any of the Company SEC Reports filed after the date hereof until the
Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q, 8-K or any successor form under the
Exchange Act) and (z) fairly presented the consolidated financial position of
the Company and its subsidiaries as at the respective dates thereof and the
consolidated results of the Company's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments. The balance sheet of the Company contained in the Company SEC
Reports as of July 31, 1999 is hereinafter referred to as the "COMPANY BALANCE
SHEET." Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet neither the Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) provided for in the Company Balance Sheet, or (ii) incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practices and immaterial in the aggregate and liabilities
incurred in connection with this Agreement.
(c) The Company has heretofore furnished to Parent a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Company Balance Sheet there has not been: (i) any Material Adverse Effect, (ii)
any material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (iii) any
material revaluation by the Company of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
3.7 TAXES.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
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(b) Tax Returns and Audits.
The Company and each of its subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed by the
Company and each of its subsidiaries, except such Returns which are not material
to the Company, and have timely paid all Taxes shown to be due on such Returns.
Such Returns are true and correct and have been completed in accordance with
applicable law.
Except as is not material to the Company, the Company
and each of its subsidiaries as of the Effective Time will have withheld with
respect to its employees all federal and state income taxes, the Federal
Insurance Contribution Act ("FICA"), the Federal Unemployment Tax Act ("FUTA")
and other Taxes required to be withheld and have timely paid to the proper
government authorities all amounts required to be withheld and paid.
Except as is not material to the Company, neither the
Company nor any of its subsidiaries has been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company or any of its subsidiaries, nor has the Company or any of its
subsidiaries executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
Except as is not material to the Company, no audit or
other examination of any Return of the Company or any of its subsidiaries is
presently in progress, nor has the Company or any of its subsidiaries been
notified of any request for such an audit or other examination.
Except as is not material to the Company, no adjustment
relating to any Returns filed by the Company or any of its subsidiaries has been
proposed formally or informally by any Tax authority to the Company or any of
its subsidiaries or any representative thereof.
Except as is not material to the Company, neither the
Company nor any of its subsidiaries has any liability for unpaid Taxes which has
not been accrued for or reserved on the Company Balance Sheet, whether asserted
or unasserted, contingent or otherwise.
There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company.
Neither the Company nor any of its subsidiaries (i) has
ever been a member of an affiliated group filing a consolidated federal income
Tax Return (other than a consolidated group the common parent of which is the
Company), (ii) is a party to any Tax sharing or Tax allocation
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agreement, arrangement or understanding, (iii) is liable for the Taxes of any
other person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise, and (iv) is a party to any joint venture, partnership or
other arrangement that could be treated as a partnership for income Tax
purposes.
Neither the Company nor any of its subsidiaries is and
has never been at any time, a "United States Real Property Holding Corporation"
within the meaning of Section 897(c)(2) of the Code.
3.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company Schedules list the real property owned by
the Company. The Company Schedules list all real property leases to which the
Company is a party and each amendment thereto. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim in an amount
greater than $100,000.
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS"), except as reflected in
the Company Financials or in the Company Schedules and except for liens for
taxes not yet due and payable and such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
3.9 INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the
following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i)
all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv)
all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos,
common law trademarks and service marks, trademark and service
mark registrations and applications therefor throughout the
world; (vi) all databases and data collections and all rights
therein throughout the world; and (vii) any similar or
equivalent rights to any of the foregoing anywhere in the world.
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"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property
that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded
by any state, government or other public legal authority.
(a) The Company has made available to Parent, a list of the
Registered Intellectual Property owned by, or filed in the name of, the Company
(the "COMPANY REGISTERED INTELLECTUAL PROPERTY").
(b) The Company has made available to Parent, a list of all
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office ("PTO") or equivalent authority anywhere in the
world) related to any Company Intellectual Property.
(c) No Company Intellectual Property or product or service
of the Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by the Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(d) Each item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
in connection with such Registered Intellectual Property have been made and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) Except as set forth in Schedule 3.9: (i) the Company
owns and has good and exclusive title to each item of Company Intellectual
Property, including all Company Registered Intellectual Property listed on
Schedule 3.9, free and clear of any lien or encumbrance; and (ii) the Company is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of the Company, including the sale of
any products or the provision of any services by the Company.
(f) The Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which the Company otherwise
purports to own.
(g) To the extent that any work, invention, or material has
been developed or created by a third party for the Company, the Company has a
written agreement with such third party with respect thereto and the Company
thereby has obtained ownership of, and is the exclusive owner
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of, all Intellectual Property in such work, material or invention by operation
of law or by valid assignment.
(h) Except as set forth in Schedule 3.9, the Company has not
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is material Company Intellectual Property, to any
third party.
(i) Schedule 3.9 lists all material contracts, licenses and
agreements to which the Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party; or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to the Company, with a cost or royalty value in excess of $50,000.
Schedule 3.9 lists any material agreements pursuant to which the Company has
licensed any Company Intellectual Property or products to any third party that
differs in any material respect from its standard form.
(j) The contracts, licenses and agreements listed on
Schedule 3.9 are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements. The Company is in compliance with, and has not breached
any term any of such contracts, licenses and agreements and, to the knowledge of
the Company, all other parties to such contracts, licenses and agreements are in
compliance with, and have not breached any term of, such contracts, licenses and
agreements. Following the Closing Date, Purchaser will be permitted to exercise
all of the Company's rights under the contracts, licenses and agreements listed
on Schedule 3.9 to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
(k) Schedule 3.9 lists all contracts, licenses and
agreements between the Company and any third party wherein or whereby the
Company has agreed to, or assumed, any obligation or duty to warrant, indemnify,
hold harmless or otherwise assume or incur any obligation or liability with
respect to the infringement or misappropriation by the Company or such third
party of the Intellectual Property of any third party.
(l) The operation of the business of the Company as such
business currently is conducted, or is reasonably is contemplated to be
conducted, including the Company's design, development, manufacture, marketing
and sale of the products or services of the Company (including with respect to
products currently under development) has not, does not and will not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction.
(m) The Company has not received notice from any third party
that the operation of the business of the Company or any act, product or service
of the Company, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction. To the knowledge of the Company, there is no current
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claim asserted against any customer of the Company which alleges that the
customer's use or distribution of the Company's products violates any
Intellectual Property of any third party.
(n) Except as set forth in Schedule 3.9, to the knowledge of
the Company, no Person has or is infringing or misappropriating any Company
Intellectual Property.
(o) The Company has taken all steps that are reasonably
required to protect the Company's rights in the Company's confidential
information and trade secrets or any trade secrets or confidential information
of third parties provided to the Company, and, without limiting the foregoing,
the Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in
the Company's standard form and all current and former employees and contractors
of the Company have executed such an agreement.
3.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Neither the Company nor any of its subsidiaries is, in
any material respect, in conflict with, or in default or violation of (i) any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective properties is bound or affected, or (ii) any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other material instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties is bound or affected.
To the knowledge of the Company, no investigation or review by any Governmental
Entity is pending or threatened against the Company or any of its subsidiaries,
nor has any Governmental Entity indicated an intention to conduct the same.
There is no material agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company or any of its subsidiaries, any acquisition of material
property by the Company or any of its subsidiaries or the conduct of business by
the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals from governmental
authorities that are material to the operation of the business of the Company
(collectively, the "COMPANY PERMITS"). The Company and its subsidiaries are in
compliance in all material respects with the terms of the Company Permits.
3.11 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which the Company or any of its
subsidiaries has received any notice of assertion nor, to the knowledge of the
Company, is there a threatened action, suit, proceeding, claim, arbitration or
investigation against the Company or any of its subsidiaries which reasonably
would be likely to be material to the Company. To the knowledge of the Company,
no Governmental Entity has at any time challenged or questioned in writing the
legal right of the Company to manufacture, offer or sell any of its products in
the present manner or style thereof.
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3.12 BROKERS' AND FINDERS' FEES. Except for fees payable to Banker
pursuant to an engagement letter dated December 18, 1999, as amended a copy of
which has been provided to Parent, the Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.13 EMPLOYEE BENEFIT PLANS.
(i) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "EMPLOYEE
BENEFIT PLAN" as defined in Section 3(3) of ERISA) maintained or contributed to
by the Company or any trade or business which is under common control with the
Company within the meaning of Section 414 of the Code (the "COMPANY EMPLOYEE
PLANS"), the Company has made available to Parent a true and complete copy of,
to the extent applicable, (i) such Company Employee Plan, (ii) the most recent
annual report (Form 5500), (iii) each trust agreement related to such Company
Employee Plan, (iv) the most recent summary plan description for each Company
Employee Plan for which such a description is required, (v) the most recent
actuarial report relating to any Company Employee Plan subject to Title IV of
ERISA and (vi) the most recent IRS determination letter issued with respect to
any Company Employee Plan.
(ii) Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code is the subject of a favorable
determination from the IRS covering the provisions of the Tax Reform Act of 1986
and, to the knowledge of the Company, nothing has occurred since the date of
such letter that could reasonably be expected to affect the qualified status of
such plan so as to result in a Material Adverse Effect on the Company other than
changes in applicable law for which the remedial amendment period has not
expired. Each Company Employee Plan has been operated in all material respects
in accordance with its terms and the requirements of applicable law. Neither the
Company nor, to the knowledge of the Company, any ERISA Affiliate of the Company
has incurred or expects to incur any material liability under Title IV of ERISA
in connection with any Company Employee Plan.
3.14 EMPLOYEES; LABOR MATTERS. To the Company's knowledge, no
employee of the Company (i) is in violation of any term of any employment
contract, patent disclosure agreement, non-competition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or to the use of
trade secrets or proprietary information of others and (ii) has given notice to
the Company, nor is the Company otherwise aware, that any employee intends to
terminate his or her employment with the Company except for terminations of a
nature and number that are consistent with the Company's prior experience. To
the Company's knowledge, there are no activities or proceedings of any labor
union to organize any employees of the Company or any of its subsidiaries and
there are no strikes, or material slowdowns, work stoppages or lockouts, or
threats thereof by or with respect to any employees of the Company or any of its
subsidiaries. The Company and its subsidiaries are and have been in compliance
in all material respects with all applicable laws regarding employment
practices, terms and conditions of
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employment, and wages and hours (including, without limitation, OSHA, ERISA,
WARN or any similar state or local law).
3.15 ENVIRONMENTAL MATTERS.
(i) Hazardous Material. No underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies, are present
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company or any of its subsidiaries has
at any time owned, operated, occupied or leased.
(ii) Hazardous Materials Activities. Neither the Company nor
any of its subsidiaries has transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has the
Company or any of its subsidiaries disposed of, transported, sold, used,
released, exposed its employees or others to or manufactured any product
containing a Hazardous Material (collectively "HAZARDOUS MATERIALS ACTIVITIES")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(iii) Permits. The Company and its subsidiaries currently hold
all environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(iv) Environmental Liabilities. No material action,
proceeding, revocation proceeding, amendment procedure, writ, injunction or
claim is pending, or to the Company's knowledge, threatened concerning any
Company Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of the Company or any of its subsidiaries. The Company is not aware of
any fact or circumstance which could involve the Company or any of its
subsidiaries in any material environmental litigation or impose upon the Company
any material environmental liability.
3.16 YEAR 2000 COMPLIANCE. All of the current versions of the
Company's products (including products currently under development) will record,
store, process, calculate and present calendar dates falling on and after (and
if applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information
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dependent on or relating to such dates (collectively, "Year 2000 Compliant").
The Company's material internal computer and technology products and systems are
Year 2000 Compliant, except for upgrades or replacements which may be made
without disruption to the Company's operations and for which the cost to the
Company is estimated to be less than $300,000 in aggregate.
3.17 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
the Company Schedules, neither the Company nor any of its subsidiaries is a
party to or is bound by:
(i) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will;
(ii) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation right plan, stock purchase plan or
restricted stock purchase agreement, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(iii) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between the Company or any of its subsidiaries and any of its officers or
directors;
(iv) any agreement, contract or commitment currently in force
containing any covenant limiting the freedom of the Company or any of its
subsidiaries to engage in any line of business or compete with any person or
granting any exclusive distribution rights;
(v) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(vi) any material joint marketing or development agreement;
or
(vii) any agreement, contract or commitment currently in force
to provide source code to any party for any product or technology that is
material to the Company and its subsidiaries taken as a whole.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any
agreement, contract or commitment to which the Company or any of its
subsidiaries is a party of the type described above or any other material
agreement, contract or
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commitment (any such agreement, contract or commitment, as well as any
agreement, contract or commitment that is an exhibit to any Company SEC Report,
a "COMPANY CONTRACT") in such a manner as would permit any other party to cancel
or terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
3.18 CHANGE OF CONTROL PAYMENTS. The Company Schedules set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers and directors of the
Company as a result of or in connection with the Offer and/or the Merger, and
the nature and amount of any such obligation.
3.19 BOARD APPROVAL. The Board of Directors of the Company has, as of
the date of this Agreement (A) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
are fair to and in the best interests of the holders of the Shares, (B) approved
and adopted this Agreement and the transactions contemplated hereby and (C)
resolved to recommend that the shareholders of the Company accept the Offer and
approve and adopt this Agreement and the transactions contemplated hereby and
thereby.
3.20 FAIRNESS OPINION. The Company's Board of Directors has received
a written opinion from Banker to the effect that the consideration to be
received by the holders of Shares pursuant to each of the Offer and the Merger
is fair to the holders of Shares from a financial point of view, and the Company
has delivered to Parent a copy of such opinion.
3.21 CHAPTER 23B.19 OF THE WASHINGTON BUSINESS CORPORATION ACT NOT
APPLICABLE. The Board of Directors of Company has taken all actions so that (a)
the restrictions contained in Chapter 23B.19 of the WBCA will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement, (b)
approval of shareholders holding fifty-one percent (51%) of the outstanding
shares will be sufficient under the WBCA to approve the Merger, and (c) the
execution, delivery and performance of this Agreement and the consummation of
the Merger will not cause any change, effect or result under the Company Rights
Plan which is adverse to the interests of Parent. Without limiting the
generality of the foregoing, if necessary to accomplish the foregoing, the
Company Rights Plan has been (or will be within five business days of the date
hereof) amended to (i) render the Company Rights Plan inapplicable to the Merger
and the other transactions contemplated by this Agreement, (ii) ensure that (x)
neither Parent nor Purchaser is an Acquiring Person (as defined in the Company
Rights Plan) pursuant to the Company Rights Plan by virtue of the Offer or the
consummation of the Merger or the other transactions contemplated hereby and
thereby and (y) a Distribution Date or Shares Acquisition Date (as such terms
are defined in the Company Rights Plan) does not occur by reason of the
execution of this Agreement, the consummation of the Merger, or the consummation
of the transactions contemplated hereby or thereby, and such amendment may not
be further amended by Company without the prior consent of Parent in its sole
discretion.
3.22 OFFER DOCUMENTS; PROXY STATEMENT. Neither the Schedule 14D-9,
nor any of the information supplied by the Company for inclusion in the Offer
Documents, shall, at the respective times that the Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are
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filed with the SEC or are first published, sent or given to shareholders, as the
case may be, contain any untrue statement of a material fact or omit to state
any 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. Neither the proxy statement to be sent to the shareholders
of the Company in connection with the meeting of the Company's shareholders to
consider the Merger (the "Company Shareholders' Meeting") or the information
statement to be sent to such shareholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, is referred to as the
"Proxy Statement"), shall, at the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to shareholders, at the time of
the Company Shareholders' Meeting and at the Effective Time, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Shareholders' Meeting which has
become false or misleading. The Schedule 14D-9 and the Proxy Statement will
comply in all material respects as to form and substance with the requirements
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
any information supplied to the Company by Parent or Purchaser which is
contained in the foregoing document.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to
the Company that:
4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Purchaser is
a corporation duly organized validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
4.2 CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of
Parent and Purchaser has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate all the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Purchaser, the performance by each of Parent and Purchaser of
their respective obligations hereunder and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of Parent and Purchaser and no
other corporate action on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of appropriate merger documents as
required by the WBCA). This Agreement has been duly executed and delivered by
each of Parent and Purchaser and is a legal, valid and binding obligation of
each of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
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(a) Assuming satisfaction of all applicable requirements
referred to in Section 4.3 (b) below, the execution and delivery of this
Agreement by Parent and Purchaser, the compliance by Parent and Purchaser with
the provisions hereof and the consummation by Parent and Purchaser of the
transactions contemplated hereby will not conflict with or violate (i) any
statute, law, ordinance, rule, regulation, order, writ, judgment, award,
injunction, decree or ruling applicable to Parent or Purchaser or any of their
properties, other than such conflicts or violations which individually or in the
aggregate do not and will not have a material adverse effect on the business,
properties, assets, results of operations or financial condition of Parent and
Purchaser, taken as a whole, or (ii) conflict with or violate the Restated
Articles of Incorporation or Bylaws of Parent or Purchaser.
(b) Other than in connection with or in compliance with the
provisions of the WBCA, the Exchange Act, the "takeover" or "blue sky" laws of
various states and the HSR Act, (i) neither Parent nor Purchaser is required to
submit any notice, report, registration, declaration or other filing with any
Governmental Entity in connection with the execution or delivery of this
Agreement by Parent and Purchaser or the performance by Parent and Purchaser of
their obligations hereunder or the consummation by Parent and Purchaser of the
transactions contemplated by this Agreement and (ii) no waiver, consent,
approval, order or authorization of any Governmental Entity is required to be
obtained by Parent or Purchaser in connection with the execution or delivery of
this Agreement by Parent and Purchaser or the performance by Parent and
Purchaser of their obligations hereunder or the consummation by Parent and
Purchaser of the transactions contemplated by this Agreement. None of the
information supplied by Parent or Purchaser for inclusion in the Proxy Statement
shall, at the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Company
Shareholders' Meeting, contain any untrue statement of a material fact required
to be stated therein or necessary in order to make the statements made therein
in light of the circumstances under which they were made, not misleading.
4.4 SCHEDULE 14D-1. Neither the Schedule 14D-1 nor the Offer
Documents, nor any of the information supplied by Parent and Purchaser for
inclusion in the Schedule 14D-9, shall at the respective times the Schedule
14D-1 or the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to shareholders or upon the
expiration of the Offer, as the case may be, contain any untrue statement of a
material fact or omit to state any 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 (except for information
supplied by the Company for inclusion in the Schedule 14D-1 and the Offer
Documents, as to which Parent and Purchaser make no representation). None of the
information supplied by Parent or Purchaser for inclusion in the Proxy Statement
shall, at the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to shareholders, at the time of the Company
Shareholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact required to be stated therein or necessary in order to make the
statements made therein in light of the circumstances under which they were
made, not misleading.
4.5 AVAILABLE FUNDS. Parent has or has available to it, and will
make available to Purchaser, all funds necessary to satisfy all of Parent's and
Purchaser's obligations under this
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Agreement and in connection with the transaction contemplated hereby, including,
without limitation, the obligation to purchase all outstanding Shares pursuant
to the Offer and the Merger and to pay all related fees and expenses in
connection with the Offer and the Merger.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms and the Effective Time, the Company (which
for the purposes of this Article V shall include the Company and each of its
subsidiaries) agrees, except to the extent that Parent shall otherwise consent
in writing, to carry on its business diligently and in accordance with good
commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, to pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, to pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, the Company will promptly notify Parent of any material
event involving its business or operations.
In addition, except as permitted by the terms of this Agreement (other
than as provided in Article 5.1 of the Company Schedules), without the prior
written consent of Parent, the Company shall not do any of the following, and
shall not permit any of its subsidiaries to do any of the following:
(i) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(ii) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(iii) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company's
intellectual property or other proprietary rights, or enter into grants to
future patent rights, other than in the ordinary course of business, consistent
with past practice;
(iv) Buy any Intellectual Property of a third party or enter
into any license agreement with respect to the Intellectual Property of any
third party for an acquisition or license,
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the price for which exceeds $50,000 individually (or in the aggregate for a
single third party), other than "shrink wrap," "click wrap," and similar widely
available commercial end-user licenses;
(v) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock.
(vi) Repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof (which repurchase rights the Company shall be obligated to exercise
if the repurchase price is less than the Merger Consideration).
(vii) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of Shares, pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement, (ii) Shares issuable pursuant to
the Option Plans;
(viii) Cause, permit or propose any amendments to any charter
document or Bylaw (or similar governing instruments of any subsidiaries);
(ix) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company, or enter into
any joint ventures, strategic partnerships or alliances;
(x) Sell, lease, license, encumber or otherwise dispose of
any properties or assets which are material, individually or in the aggregate,
to the business of the Company, except in the ordinary course of business
consistent with past practice;
(xi) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire debt securities, or
guarantee any debt securities of others;
(xii) Adopt or amend any employee benefit or employee stock
purchase or employee option plan (other than is necessary to comply with law),
or enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its officers or employees other than in the ordinary course of business,
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consistent with past practice, or change in any material respect any management
policies or procedures;
(xiii) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than in the ordinary course of business;
(xiv) Make any grant of exclusive rights to any third party;
or
(xv) Except in the ordinary course of business, modify, amend
or terminate any material contract or agreement involving payments of $50,000 or
more to which the Company or any Subsidiary thereof is a party or waive, release
or assign any material rights or claims thereunder;
(xvi) Materially revalue any of its assets or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
(xvii) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes in an amount in excess of $50,000 in the
aggregate;
(xviii) Commence any litigation or settle any litigation for an
amount in excess of the greater of $100,000 in the aggregate or the amount
reserved in respect thereof in the Company Balance Sheet, as set forth in
Section 5.1 of the Company Schedules;
(xix) Agree in writing or otherwise to take any of the actions
described in (i) through (xviii) above.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and
conditions of that certain letter dated April 29, 1999 between Parent and the
Company (the "CONFIDENTIALITY AGREEMENT"), from the date of this Agreement to
the Effective Time, the Company shall, and shall cause its subsidiaries,
officers, directors, employees and agents to, afford the officers, employees and
agents of Parent, Purchaser and their affiliates and the attorneys, accountants,
banks, other financial institutions and investment banks working with Parent or
Purchaser, and their respective officers, employees and agents, reasonable
access at all reasonable times to its officers, employees, agents, properties,
books, records and contracts, and shall furnish Parent, Purchaser and their
affiliates and the attorneys, banks, other financial institutions and investment
banks working with Parent or Purchaser, all financial, operating and other data
and information as they reasonably request.
(b) Subject to the requirements of law, Parent and Purchaser
shall, and shall use their reasonable efforts to cause their officers, employees
and agents, and the attorneys, banks, other financial institutions and
investment banks who obtain such information to, hold all information
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obtained pursuant to this Agreement or the Confidentiality Agreement in
accordance with the terms and conditions of the Confidentiality Agreement.
(c) No investigation pursuant to this Section 5.2 shall
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto.
5.3 PROXY MATERIAL; SHAREHOLDERS' MEETING.
(a) The Company and each of Parent and Purchaser shall
prepare and file, or shall cause to be prepared and filed, with the SEC those
documents, schedules and amendments and supplements thereto required to be filed
with respect to the transactions contemplated by this Agreement. The Company,
acting through its Board of Directors, shall, if necessary, cause the Company
Shareholders' Meeting to be duly called (including establishing the record date,
if requested, to be a date immediately after the date the Purchaser first
purchases any Shares pursuant to the Offer) and shall give notice of, convene
and hold the Company Shareholders' Meeting as soon as practicable, and at such
time and place designated by Parent or Purchaser, for the purpose of approving
the Merger, this Agreement and any other actions contemplated hereby which
require the approval of the Company's shareholders. The Company shall recommend
to its shareholders approval of the Merger and take all reasonable actions
necessary to solicit such approval. The Company shall use its best efforts to
obtain and furnish the information required to be included by it in the Proxy
Statement and, after consultation with Parent and Purchaser, shall respond
promptly to any comments of the SEC relating to any preliminary proxy statement
regarding the Merger and the other transactions contemplated by this Agreement
and to cause the Proxy Statement to be mailed to its shareholders, all at the
earliest practicable time. Whenever any event occurs which should be set forth
in an amendment or supplement to the Proxy Statement or any other filing
required to be made with the SEC with respect to the Proxy Statement or the
Company Shareholders' Meeting, each party shall promptly inform the other of
such occurrence and cooperate in filing with the SEC and/or mailing to the
Company's shareholders such amendment or supplement. The Proxy Statement and all
amendments and supplements thereto shall comply with applicable law and be in
form and substance satisfactory to each of Parent and Purchaser and the Company.
The Company, acting through its Board of Directors, shall include in the Proxy
Statement the recommendation of its Board of Directors that shareholders of the
Company vote in favor of the approval and adoption of this Agreement and the
Merger and shall disclose that each of the Company's directors and executive
officers and Banker and its affiliates intend to tender all outstanding shares
beneficially owned by such persons to Purchaser pursuant to the offer unless to
do so would subject such person to liability under Section 16(b) of the Exchange
Act. The Company shall use its best efforts to solicit from shareholders of the
Company proxies in favor of such approval and adoption and shall take all other
actions necessary or, in the reasonable judgment of Parent and Purchaser,
advisable to secure the vote or consent of the Company's shareholders required
by the WBCA to effect the Merger.
(b) Notwithstanding the foregoing, in the event that
Purchaser shall acquire at least ninety percent (90%) of the outstanding Shares,
the parties hereto agree, at the request of Purchaser, subject to Article VI, to
take all necessary and appropriate action to cause the Merger to
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become effective as soon as reasonably practicable after such acquisition,
without a meeting and without a vote of the Company's shareholders, in
accordance with the WBCA.
5.4 NO SOLICITATION; BREAK-UP FEE.
(a) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, the Company and its subsidiaries shall not, and will instruct their
respective directors, officers, employees, representatives, investment bankers,
agents and affiliates not to, directly or indirectly, (i) solicit or encourage
submission of, any proposals or offers by any person, entity or group (other
than Parent and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. For the purposes of this Agreement, an "ACQUISITION PROPOSAL"
with respect to an entity means any proposal or offer relating to (i) any
merger, consolidation, sale of substantial assets or similar transactions
involving the entity or any subsidiaries of the entity (other than sales of
assets or inventory in the ordinary course of business or as permitted under the
terms of this Agreement), (ii) sale of outstanding shares of capital stock of
the entity (including without limitation by way of a tender offer or an exchange
offer), (iii) the acquisition by any person of beneficial ownership or a right
to acquire beneficial ownership of, or the formation of any "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of the
entity (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto); or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company will (i) notify Parent as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify Parent of the terms and
conditions of any such Acquisition Proposal. In addition, subject to the other
provisions of this Section 5.4(a), from and after the date of this Agreement
until the earlier of the Effective Time and termination of this Agreement
pursuant to its terms, the Company and its subsidiaries will not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than
Parent).
(b) Notwithstanding the provisions of paragraph (a) above,
prior to consummation of the Offer, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the
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requirements of paragraph (c), below, furnish information to any person, entity
or group after such person, entity or group has delivered to the Company in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of the Company in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Offer and the Merger to the shareholders of
the Company from a financial point of view and for which financing, to the
extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors of the Company (based upon the advice of
independent financial advisors), is reasonably capable of being financed by such
person, entity or group and which is likely to be consummated (a "SUPERIOR
PROPOSAL"). In the event the Company receives a Superior Proposal, nothing
contained in this Agreement (but subject to the terms hereof) will prevent the
Board of Directors of the Company from recommending such Superior Proposal to
the Company's shareholders, provided that (i) the Board determines in good
faith, after consultation with outside legal counsel, that such action is
required by its fiduciary duties under applicable law; (ii) the Company shall
not recommend to its shareholders a Superior Proposal until at least 48 hours
after Parent's receipt of a copy of such Superior Proposal (or a description of
its terms and conditions, if not in writing), and (iii) the Company shall not
recommend to its shareholders a Superior Proposal unless the Company shall have
terminated this Agreement and paid the Break-up Fee pursuant to Section
7.1(d)(ii).
(c) Notwithstanding anything to the contrary herein, the
Company will not provide any non-public information to a third party unless: (x)
the Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (y)
such non-public information has been previously delivered to Parent.
(d) Nothing contained in this Section 5.4 shall prohibit the
Company from at any time taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Company Board, after consultation with outside counsel, failure so to
disclose would constitute a breach of its fiduciary duties to the Company's
shareholders under applicable law; provided, however, that neither the Company
nor its Board of Directors nor any committee thereof shall, except as permitted
by Section 5.4(b), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Merger or this Agreement or approve or recommend,
or propose to approve or recommend, an Acquisition Proposal. The taking of a
position by the Company pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act
in respect of an Acquisition Proposal shall not be deemed a withdrawal, a
modification or a proposal to withdraw or modify its position with respect to
the Acquisition for purposes hereof.
5.5 PUBLIC ANNOUNCEMENTS. Parent and Purchaser on the one hand and
the Company on the other hand will consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger or the other transactions contemplated hereby, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law. This Section 5.5 shall supersede
any conflicting provisions in the Confidentiality Agreement.
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5.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice (which notice shall
state that it is delivered pursuant to Section 5.6(a) of this Agreement) in
writing to Parent, and Parent and Purchaser shall give prompt notice in writing
to the Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement through the Effective Time and (ii)
any failure of the Company, Parent or Purchaser, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy in all
material respects any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, no such notification
shall affect the representations or warranties of the parties or the conditions
to the obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which
notice shall state that it is delivered pursuant to Section 5.6(b) of this
Agreement) to Parent of (i) any act, omission to act, event or occurrence which,
with the passage of time or otherwise, would likely have a Material Adverse
Effect on the Company and (ii) any material contingent liability of the Company
or any of its subsidiaries for which such party reasonably believes it will,
with the passage of time or otherwise, become liable; provided, however, that no
such notification shall affect the representations or warranties of the parties
or the conditions to the obligations of the parties hereunder.
5.7 ACTIONS BY COMPANY. Subject to the terms and conditions hereof,
the Company shall, and shall cause its Subsidiaries to, cooperate with Parent
and Purchaser and take all such actions as may be reasonably requested by Parent
and Purchaser to accomplish the Merger.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of the Effective Time (the "Indemnified Parties").
The Restated Articles of Incorporation and Bylaws of the Surviving Corporation
will contain provisions with respect to exculpation and indemnification that are
at least as favorable to the Indemnified Parties as those contained in the
Restated Articles of Incorporation and Bylaws of the Company as in effect on the
date hereof, which provisions will not be amended, repealed or otherwise
modified for a period of three years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or agents of
the Company, unless such modification is required by law.
(b) For a period of three years after the Effective Time,
Parent will cause the Surviving Corporation to use its commercially reasonable
efforts to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable
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to the current directors and officers of the Company; provided, however, that in
no event will Parent or the Surviving Corporation be required to expend in
excess of 150% of the annual premium currently paid by the Company for such
coverage (or such coverage as is available for such 150% of such annual
premium).
5.9 EMPLOYMENT AGREEMENTS. Prior to commencement of the Offer, the
Company shall offer to enter into employment agreements (the "EMPLOYMENT
AGREEMENTS") with the persons set forth in Exhibit A, which Employment
Agreements shall be substantially in the form of Exhibit A hereto or such other
terms as may be accepted in writing by Parent.
5.10 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of the
parties to this Agreement agrees to use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement (including consummation of the
Offer and the Merger) and to cooperate with each other in connection with the
foregoing.
(b) Subject to the terms and conditions hereof, each of the
parties to this Agreement agrees to use (i) all reasonable efforts to obtain all
necessary waivers, consents and approvals from other parties to loan agreements,
leases, licenses and other contracts, and (ii) all reasonable efforts to obtain
all necessary consents, approvals and authorizations as required to be obtained
under any federal, state or foreign law or regulations, including, but not
limited to, those required under the HSR Act, to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, to effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by Governmental Entities, and to
fulfill all conditions to this Agreement.
5.11 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium,"
"control share acquisition," "shareholder protection" or other form of
anti-takeover statute, regulation or charter provision or contract is or shall
become applicable to the Offer or the Merger or the transactions contemplated
hereby, the Company and the Board of Directors of the Company shall grant such
approvals and take such actions as are necessary under such laws and provisions
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute, regulation, provision or contract on the
transactions contemplated hereby.
5.12 COMPANY OPTIONS. The Company agrees to take all necessary
actions to ensure that all outstanding compensatory options to purchase common
stock of the Company terminate and become without further force and effect
immediately prior to the Effective Time.
5.13 RESTATED EMPLOYEE STOCK PURCHASE PLAN. The Company agrees to
take all necessary actions to ensure that all offering periods outstanding under
the Company's Restated
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Employee Stock Purchase Plan (the "ESPP") terminate immediately prior to the
Effective Time, and to ensure that the ESPP terminates immediately prior to the
Effective Time.
5.14 RETIREMENT SAVINGS PLAN TERMINATION. The Company and its ERISA
Affiliates, as applicable, each agrees to terminate its Retirement Savings Plan
immediately prior to Effective Time, unless the Parent, in its sole and absolute
discretion, agrees to sponsor and maintain such plans by providing the Company
with written notice of such election at least three (3) days before the
Effective Time. Unless the Parent provides such notice to the Company, the
Parent shall receive from the Company evidence that the Company's and each ERISA
Affiliate's (as applicable) 401(k) plan has been terminated pursuant to
resolutions of each such entity's Board of Directors (the form and substance of
which resolutions shall be subject to review and approval of the Parent),
effective as of the day immediately preceding the Effective Time.
5.15 STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of Company Common
Stock pursuant to the Offer, and thereafter, shall give Parent the opportunity
to direct the defense of such litigation and, if Parent so chooses to direct
such litigation, Parent shall give the Company and its directors an opportunity
to participate in such litigation; provided, however, that no settlement of such
litigation shall be agreed to without Parent's consent; and provided further
that no settlement requiring a payment by a director shall be agreed to without
such director's consent.
ARTICLE VI
CONDITIONS OF MERGER
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) If required by the WBCA, this Agreement and the Merger
shall have been approved and adopted by the requisite vote of the shareholders
of the Company.
(b) Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) Shares shall have been purchased pursuant to the Offer.
(d) No temporary restraining order, preliminary or permanent
injunction, judgment or other order, decree or ruling nor any statute, rule,
regulation or order shall be in effect which would (i) make the acquisition or
holding by Parent or its affiliates of Shares or shares of Common Stock of the
Surviving Corporation illegal or otherwise prevent the consummation of the
Merger, (ii) prohibit Parent's or Purchaser's ownership or operation of, or
compel Parent or Purchaser to dispose of or hold separate, all or a material
portion of the business or assets of
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Purchaser, the Company or any Significant Subsidiary thereof, (iii) compel
Parent, Purchaser or the Company to dispose of or hold separate all or a
material portion of the business or assets of Parent or any of its Subsidiaries
or the Company or any of its Significant Subsidiaries, (iv) impose material
limitations on the ability of Parent or Purchaser or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or (v) impose any material condition to the Offer, this Agreement
or the Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated, at any time prior
to the Effective Time, whether before or after approval by the shareholders of
the Company:
(a) by mutual written agreement of the Boards of Directors
of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall be terminated or expire
without any Shares having been purchased pursuant to the Offer; provided,
however, that a party shall not be entitled to terminate this Agreement pursuant
to this Section 7.1(b)(i) if it is in material breach of its representations and
warranties, covenants or other obligations under this Agreement; or
(ii) if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) by Parent:
(i) if the Board of Directors of the Company or any
committee thereof shall have approved, or recommended that shareholders of the
Company accept or approve, an Acquisition Proposal by a third party, or shall
have resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval of, or
recommendation that the shareholders of the Company accept or approve (as the
case may be), the Offer, this Agreement and the Merger, or shall have resolved
to do any of the foregoing;
(iii) if the Company shall have failed to include in
the Schedule 14D-9 the recommendation of the Board of Directors of the Company
that the shareholders of the Company accept the Offer;
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<PAGE> 56
(iv) prior to the purchase of Shares pursuant to the
Offer, in the event that the conditions to the Offer set forth in clause (i) or
(ii) of Annex I shall not be satisfied or if any of the events set forth in
clause (iii) thereof shall have occurred; or
(v) if the Company is in material breach of any of
its covenants or obligations under this Agreement, or if there shall have been
or be any material inaccuracy in the representations and warranties of the
Company contained in this Agreement, either as of the date of this Agreement or
subsequently;
(d) by the Company:
(i) if the Offer shall not have been commenced in
accordance with Section 1.1, or Parent or Purchaser shall have failed to
purchase validly tendered Shares in violation of the terms of the Offer within
ten business days after the expiration of the Offer; provided, however, that the
Company shall not be entitled to terminate this Agreement pursuant to this
Section 7.1(d)(i) if it is in material breach of its representations and
warranties, covenants or other obligations under this Agreement;
(ii) if the Board of Directors of the Company has
resolved to, and in fact does, recommend to the Company's Shareholders that they
accept a Superior Proposal, provided that all the provisions of Section 5.4 have
been fully complied with, and provided further that the Company shall have paid
to Parent the entire Break-up Fee as provided in Section 7.3 (b); or
(iii) prior to the purchase of Shares pursuant to the
Offer, if Parent or Purchaser is in material breach of any of its covenants or
obligations under this Agreement, or any representation or warranty of Parent or
Purchaser contained in this Agreement shall have been incorrect, in any material
respect, when made or shall have since ceased to be true and correct in any
material respect.
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement by the Company or Parent or both of them pursuant
to Section 7.1, the terminating party shall provide written notice of such
termination to the other party and this Agreement shall forthwith become void
and there shall be no liability on the part of Parent, Purchaser or the Company,
except as set forth in this Section 7.2 and in Sections 5.2(b) and 7.3. The
foregoing shall not relieve any party for liability for damages actually
incurred as a result of any breach of this Agreement. Sections 5.2(b), 7.2, 7.3
and Article VIII shall survive the termination of this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement and
whether or not the transactions contemplated by the Offer and this Agreement are
consummated, all costs and expenses incurred in connection with the transactions
contemplated by the Offer and this Agreement shall be paid by the party
incurring such expenses.
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(b) The Company shall pay to Parent, in same day funds, upon
demand, a fee of U.S. $5,000,000 (the "BREAK-UP FEE"), if any of the following
shall occur:
(i) if the Board of Directors of the Company or any
committee thereof shall have approved, or recommended that shareholders of the
Company accept or approve, an Acquisition Proposal by a third party, or shall
have resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval of, or
recommendation that the shareholders of the Company accept or approve (as the
case may be), the Offer, this Agreement and the Merger, or shall have resolved
to do any of the foregoing; or
(iii) if the Company shall have failed to include in
the Schedule 14D-9 the recommendation of the Board of Directors of the Company
that the shareholders of the Company accept the Offer.
(c) The Break-up Fee shall not be deemed to be liquidated
damages, and the right to the payment of the Break-up Fee shall be in addition
to (and not a maximum payment in respect of) any other damages or remedies at
law or in equity to which Parent or Purchaser may be entitled as a result of the
Company's violation or breach of any term or provision of this Agreement.
7.4 AMENDMENT. This Agreement may be amended by each of the parties
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that (i) such amendment
shall be in writing signed by all of the parties, (ii) any such waiver,
amendment or supplement by the Company shall be effective as against the Company
only if approved by a majority of the Continuing Directors and (iii) after
adoption of this Agreement and the Merger by the shareholders of the Company, no
amendment may be made without the further approval of the shareholders of the
Company which reduces the Merger Consideration or changes the form thereof or
changes any other terms and conditions of this Agreement if the changes, alone
or in the aggregate, would materially adversely affect the shareholders of the
Company.
7.5 WAIVER. At any time prior to the Effective Time, whether before
or after the Company's Shareholders Meeting, any party hereto, by action taken
by its Board of Directors, may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto or (ii) subject to the
provisions of Section 7.4, waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party by a duly
authorized officer of such party. Notwithstanding the above, any waiver given
shall not apply to any subsequent failure of compliance with agreements of the
other party or conditions to its own obligations.
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ARTICLE VIII
MISCELLANEOUS
8.1 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given,
or made as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting
next-day delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by similar notice, except that notices
of changes of address shall be effective upon receipt):
(a) If to Parent or Purchaser:
NetManage, Inc.
10725 N. DeAnza Blvd.
Cupertino, CA 95014
Attention: Gary Anderson, Chief Financial Officer
Telecopier No.: (408) 342-7880
With copies to:
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael J. Danaher
Telecopier No.: (415) 493-6811
and to:
NetManage Acquisition Corporation
10725 N. DeAnza Blvd.
Cupertino, CA 95014
Attention: Gary Anderson, Chief Financial Officer
Telecopier No.: (408) 342-7880
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(b) If to the Company:
Wall Data Incorporated
11332 N.E. 122nd Way
Kirkland, WA 98034
Attention: Richard P. Fox, Chief Financial Officer
Telecopier No.: (425) 814-4372
With copies to:
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, WA 98101-3099
Attention: Andrew Bor
Telecopier No.: (206) 583-8500
8.3 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO ASSIGNMENT.
This Agreement, Annex I, the documents delivered pursuant hereto or in
connection herewith and the Confidentiality Agreement (i) constitute the entire
agreement and supersede all other prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (ii) are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder (except as expressly set forth
in Section 5.9 with respect to present officers and directors of the Company),
and (iii) may not be assigned, except that Parent or Purchaser may assign their
rights hereunder in whole or in part to one or more direct or indirect
subsidiaries or affiliates of Parent which, in written instruments reasonably
satisfactory to the Company, shall agree to make all representations and
warranties of Purchaser set forth herein and shall agree to assume all of such
party's obligations hereunder and be bound by all of the terms and conditions of
this Agreement; provided, however, that no such assignment shall relieve the
assignor of its obligations hereunder.
8.4 INTERPRETATION; KNOWLEDGE.
(i) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "KNOWLEDGE"
means, with respect to any matter in question, that any of the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer or Controller (or
principal accounting officer if different from the foregoing) of the parties, as
the case may be, have knowledge of such matter.
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8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof; provided that issues involving the corporate governance of any of the
parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the Northern District of
California, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, other than issues involving the
corporate governance of any of the parties hereto, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
8.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NETMANAGE, INC.
By: /s/ ZVI ALON
-------------------------------------
Zvi Alon, Chief Executive Officer
NETMANAGE ACQUISITION CORPORATION
By: /s/ ZVI ALON
-------------------------------------
Zvi Alon, Chief Executive Officer
WALL DATA INCORPORATED
By: /s/ KEVIN B. VITALE
-------------------------------------
Kevin B. Vitale, President and
Chief Executive Officer
*****SIGNATURE PAGE -- AGREEMENT AND PLAN OF MERGER*****
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ANNEX I
CONDITIONS OF THE OFFER
The term "AGREEMENT" as used in this Annex I shall mean the Agreement
and Plan of Merger to which this Annex I is attached, and all capitalized terms
used in this Annex I and not defined in this Annex I shall have the respective
meanings set forth in the Agreement.
Notwithstanding any other provision of the Offer, and in addition to
(and not in limitation of) Purchaser's rights to extend and amend the Offer at
any time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of, and
payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or not any
Shares have theretofore been accepted for payment or paid for pursuant to the
Offer), any Shares tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of Shares pursuant to the Offer shall
not have expired or been terminated;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Agreement, any
of the following events shall be determined by Parent or Purchaser to
have occurred:
(A) there shall have been any action taken or
threatened, or any statute, rule, regulation, judgment, temporary restraining
order, preliminary or permanent injunction or other order, decree or ruling
proposed, sought, promulgated, enacted, entered, enforced or deemed applicable
to the Offer or the Merger by any Governmental Entity or arbitration panel that
could reasonably be expected to, directly or indirectly, (1) make the acceptance
for payment or the payment for, or the purchase of some or all of the Shares
pursuant to the Offer illegal or otherwise delay, restrict or prohibit
consummation of the Offer or the Merger or the consummation of any transaction
contemplated by the Merger Agreement, (2) result in a delay in or restrict the
ability of Purchaser, or render Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares, (3) require the divestiture by Parent,
Purchaser, the Company or any of their respective Subsidiaries or affiliates of
all or any portion of the business, assets or property of any of them or any
Shares or impose any material limitation on the ability of any of them to
conduct their business and own such assets, properties or Shares, (4) impose any
material limitation on the ability of Parent, Purchaser or their affiliates to
acquire or hold or to exercise effectively all rights of ownership of the
Shares, including the right to vote any Shares purchased by any of them on all
matters properly presented to the shareholders of the Company, including,
without limitation, the adoption and approval of the Agreement and the Merger,
(5) result in a material diminution in the benefits expected to be derived by
Parent or Purchaser as a result of the transactions contemplated by the Offer or
the Agreement (other than legislation or rule-making affecting the industry as a
whole), or (6) impose any material condition to the Offer, the Agreement or the
Merger unacceptable to Parent or Purchaser; or
<PAGE> 63
(B) the Company shall have failed to obtain all of
the consents of third parties set forth in Exhibit B by the Expiration Date; or
(C) the Company shall have breached, or failed to
comply with, in any material respect, any of its covenants or obligations under
the Agreement or if there shall have been or be any material inaccuracy in the
representations and warranties of the Company contained in the Agreement, either
as of the date of this Agreement or subsequently; or
(D) the Board of Directors of the Company or any
committee thereof shall have (1) withdrawn or modified (including without
limitation, by amendment of the Company's Schedule 14D-9) in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, the Merger or
the Agreement, (2) approved or recommended any Acquisition Proposal by a third
party other than the Offer and the Merger, (3) publicly resolved to do any of
the foregoing, or (4) upon a request to reaffirm the Company's approval or
recommendation of the Offer, the Agreement or the Merger, the Board of Directors
of the Company shall fail to do so within two business days after such request
is made; or
(E) the Agreement shall have been terminated in
accordance with its terms; or
(F) there shall have occurred any Material Adverse
Effect on the Company, or any event, fact or change which could reasonably be
expected to result in a Material Adverse Effect on the Company; or
(G) any of the Employment Agreements shall not have
been executed and delivered or any Employment Agreement is not in full force and
effect.
The foregoing conditions are for the sole benefit of Parent, Purchaser
and their affiliates and may be asserted by Parent or Purchaser regardless of
the circumstances giving rise to such condition. All the foregoing conditions
may be waived by Parent or Purchaser in whole or in part at any time and from
time to time in the sole discretion of Parent or Purchaser. The failure by
Parent or Purchaser at any time to exercise its rights with respect to the
foregoing conditions shall not be deemed a waiver of any such condition, and
each condition shall be deemed an ongoing condition with respect to which Parent
or Purchaser may assert its rights at any time and from time to time.
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EXHIBIT A
NETMANAGE, INC.
RICHARD P. FOX EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made between and among
NetManage, Inc., Wall Data Incorporated and Richard P. Fox ("Employee"),
effective as of October 20, 1999, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") entered into by and among NetManage, Inc. (together
with its subsidiaries and affiliates, "NetManage"), Bogota, Inc. and Wall Data
Incorporated ("Wall Data").
WHEREAS, Employee has previously entered into an employment agreement
and a change of control agreement, both dated January 21, 1999, with Wall Data
(respectively, the "Employment Agreement" and the "Change of Control
Agreement"); and
WHEREAS, Employee has previously entered into stock option agreements
with Wall Data (the "Stock Option Agreements"); and
WHEREAS, the parties hereto desire to amend the Employment Agreement,
Change of Control Agreement and Stock Option Agreements in exchange for the
consideration set forth herein;
NOW, THEREFORE, the parties hereto agree that the Employment Agreement,
Change of Control Agreement and Stock Option Agreements are hereby amended as
follows:
1. Stock Option Cancellation & Waiver of Severance Benefits and
Payments in Exchange for New Benefits and Payments.
8.10 Stock Option Cancellation. In exchange for the consideration
specified in Section 1(c) of this Agreement, Employee agrees that his unvested
Stock Options which otherwise would have accelerated their vesting (the
"Accelerated Options"), will not have their vesting accelerated either by the
consummation of the tender offer contemplated by the Merger Agreement (the
"Tender Offer") or by the merger contemplated by the Merger Agreement (the
"Merger") and shall be cancelled and become without further force and effect
upon the date on which they otherwise would have had their vesting accelerate.
8.11 Waiver of Severance Benefits and Payments. Employee agrees that
in exchange for the consideration specified in Section 1(c) of this Agreement,
subject to the consummation of the Tender Offer, he shall no longer be entitled
to receive any retention or severance benefits or payments pursuant to Section 8
of the Change of Control Agreement, pursuant to Section 7 of the Employment
Agreement or pursuant to any other plans, policies or arrangements of Wall Data,
whether written or oral, formal or informal.
<PAGE> 65
8.12 New Benefits and Payments. Subject to Section 8.8 of the Change
of Control Agreement, and, with respect to payments and benefits not already
made or provided, subject to Employee entering into a standard form of mutual
release of claims upon the termination of his employment, Employee shall be
entitled to the following benefits and payments:
(a) Retention Payment. In the event Employee remains
employed by NetManage for the period commencing on the "Effective Time," (as
such term is defined in the Merger Agreement) and ending six months later (the
"Retention Period"), Employee shall be entitled to receive twelve substantially
equal semi-monthly payments equal, in the aggregate, to the sum of $360,000 (the
"Change of Control Agreement Payment"), plus an amount equal to $9 minus the
exercise price times the number of shares subject to Employee's Accelerated
Options, (the "Accelerated Stock Option Payment") less applicable withholding
(the sum of the Change of Control Agreement Payment and the Accelerated Stock
Option Payment, less applicable withholding, is referred to herein as the
"Retention Payment"). Notwithstanding the foregoing, the balance of any unpaid
Retention Payment shall be paid within five days of the date of Employee's
termination, in a lump-sum, in the event that, prior to the end of the Retention
Period, Employee (i) has his employment terminated by NetManage other than for
"Cause" (as defined herein), (ii) terminates his employment with NetManage for
"Good Reason" (as defined herein), or (iii) dies or terminates employment with
NetManage due to his "Total Disability" (as such term is defined in Section 7.2
of the Change of Control Agreement).
For the purposes of this Agreement, "Cause" shall have the meaning set
forth in Section 8.6 of the Change of Control Agreement; provided, however, that
Section 8.6(d) of the Change of Control Agreement shall be amended to include a
material violation by Employee of any provision of this Agreement, subject to
the notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
For the purposes of this Agreement, "Good Reason" shall have the meaning
set forth in Section 8.7 of the Change of Control Agreement; provided, however,
(A) that "Good Reason" shall not include a reduction in title, position,
authority, duties or responsibilities solely by virtue of the consummation of
the transactions contemplated by the Merger Agreement (for example, if the
Company becomes a division of NetManage and the Chief Financial Officer of Wall
Data remains the Chief Financial Officer of the division and does not serve on
the Board of Directors of NetManage, this shall not constitute "Good Reason"),
and (B) Section 8.7(e) shall be amended to include a material violation by the
Company of any provision of this Agreement, and that any such violation or a
material violation of the Change of Control Agreement shall be subject to the
notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
(b) Accrued Obligations. Upon Employee's termination of
employment for any reason, Employee shall be entitled to receive the "Accrued
Obligations" as such term is defined in Section 8.1 of the Change of Control
Agreement.
(c) COBRA. In the event Employee (A) remains employed by
NetManage through the Retention Period, or (B) prior to the end of the Retention
Period Employee is terminated other than for Cause, voluntarily resigns for Good
Reason, terminates employment due to becoming
-2-
<PAGE> 66
Totally Disabled or dies, then Employee and his family members shall be entitled
to receive the COBRA benefits set forth in Section 8.1(b) of the Change of
Control Agreement, commencing upon the date of Employee's termination of
employment.
(d) Bonus. Employee agrees that, on and after the Effective
Time, he shall not be entitled to any further payments pursuant to the Wall Data
Executive Incentive Plan, but instead shall be eligible for a quarterly bonus
pursuant to the NetManage bonus plan, with a target bonus level comparable to
those of similar senior officers of NetManage.
2. Other Change of Control and Employment Agreement Provisions. To
the extent not amended hereby, the Employment Agreement and Change of Control
Agreement remain in full force and effect, including with respect to Section 8.8
of the Change of Control Agreement.
3. Entire Agreement. This Amendment, taken together with the
Employment Agreement and Change of Control Agreement (to the extent not amended
hereby), represents the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings between the parties
with respect to the Executive's employment (the "Agreement"). The Agreement may
be amended at any time only by mutual written agreement of the parties hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement.
NETMANAGE, INC.
By:
-------------------------------------
Title:
----------------------------------
WALL DATA INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
EMPLOYEE:
----------------------------------------
Richard P. Fox
-3-
<PAGE> 67
EXHIBIT A
NETMANAGE, INC.
KERRY D. PALMER EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made between and among
NetManage, Inc., Wall Data Incorporated and Kerry D. Palmer ("Employee"),
effective as of October 20, 1999, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") entered into by and among NetManage, Inc. (together
with its subsidiaries and affiliates, "NetManage"), Bogota, Inc. and Wall Data
Incorporated ("Wall Data").
WHEREAS, Employee has previously entered into an employment agreement
and a change of control agreement, both dated January 21, 1999, with Wall Data
(respectively, the "Employment Agreement" and the "Change of Control
Agreement"); and
WHEREAS, Employee has previously entered into stock option agreements
with Wall Data (the "Stock Option Agreements"); and
WHEREAS, the parties hereto desire to amend the Employment Agreement,
Change of Control Agreement and Stock Option Agreements in exchange for the
consideration set forth herein;
NOW, THEREFORE, the parties hereto agree that the Employment Agreement,
Change of Control Agreement and Stock Option Agreements are hereby amended as
follows:
2. Stock Option Cancellation & Waiver of Severance Benefits and
Payments in Exchange for New Benefits and Payments.
8.13 Stock Option Cancellation. In exchange for the consideration
specified in Section 1(c) of this Agreement, Employee agrees that his unvested
Stock Options which otherwise would have accelerated their vesting (the
"Accelerated Options"), will not have their vesting accelerated either by the
consummation of the tender offer contemplated by the Merger Agreement (the
"Tender Offer") or by the merger contemplated by the Merger Agreement (the
"Merger") and shall be cancelled and become without further force and effect
upon the date on which they otherwise would have had their vesting accelerate.
8.14 Waiver of Severance Benefits and Payments. Employee agrees that
in exchange for the consideration specified in Section 1(c) of this Agreement,
subject to the consummation of the Tender Offer, he shall no longer be entitled
to receive any retention or severance benefits or payments pursuant to Section 8
of the Change of Control Agreement, pursuant to Section 7 of the Employment
Agreement or pursuant to any other plans, policies or arrangements of Wall Data,
whether written or oral, formal or informal.
<PAGE> 68
8.15 New Benefits and Payments. Subject to Section 8.8 of the Change
of Control Agreement, and, with respect to payments and benefits not already
made or provided, subject to Employee entering into a standard form of mutual
release of claims upon the termination of his employment, Employee shall be
entitled to the following benefits and payments:
(a) Retention Payment. In the event Employee remains
employed by NetManage for the period commencing on the "Effective Time," (as
such term is defined in the Merger Agreement) and ending six months later (the
"Retention Period"), Employee shall be entitled to receive twelve substantially
equal semi-monthly payments equal, in the aggregate, to the sum of $192,750 (the
"Change of Control Agreement Payment"), plus an amount equal to $9 minus the
exercise price times the number of shares subject to Employee's Accelerated
Options, (the "Accelerated Stock Option Payment") less applicable withholding
(the sum of the Change of Control Agreement Payment and the Accelerated Stock
Option Payment, less applicable withholding, is referred to herein as the
"Retention Payment"). Notwithstanding the foregoing, the balance of any unpaid
Retention Payment shall be paid within five days of the date of Employee's
termination, in a lump-sum, in the event that, prior to the end of the Retention
Period, Employee (i) has his employment terminated by NetManage other than for
"Cause" (as defined herein), (ii) terminates his employment with NetManage for
"Good Reason" (as defined herein), or (iii) dies or terminates employment with
NetManage due to his "Total Disability" (as such term is defined in Section 7.2
of the Change of Control Agreement).
For the purposes of this Agreement, "Cause" shall have the meaning set
forth in Section 8.6 of the Change of Control Agreement; provided, however, that
Section 8.6(d) of the Change of Control Agreement shall be amended to include a
material violation by Employee of any provision of this Agreement, subject to
the notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
For the purposes of this Agreement, "Good Reason" shall have the meaning
set forth in Section 8.7 of the Change of Control Agreement; provided, however,
(A) that "Good Reason" shall not include a reduction in title, position,
authority, duties or responsibilities solely by virtue of the consummation of
the transactions contemplated by the Merger Agreement (for example, if the
Company becomes a division of NetManage and the Controller of Wall Data remains
the Controller of the division, this shall not constitute "Good Reason"), and
(B) Section 8.7(e) shall be amended to include a material violation by the
Company of any provision of this Agreement, and that any such violation or a
material violation of the Change of Control Agreement shall be subject to the
notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
(b) Accrued Obligations. Upon Employee's termination of
employment for any reason, Employee shall be entitled to receive the "Accrued
Obligations" as such term is defined in Section 8.1 of the Change of Control
Agreement.
(c) COBRA. In the event Employee (A) remains employed by
NetManage through the Retention Period, or (B) prior to the end of the Retention
Period Employee is terminated other than for Cause, voluntarily resigns for Good
Reason, terminates employment due to becoming Totally Disabled or dies, then
Employee and his family members shall be entitled to receive the
-2-
<PAGE> 69
COBRA benefits set forth in Section 8.1(b) of the Change of Control Agreement,
commencing upon the date of Employee's termination of employment.
(d) Bonus. Employee agrees that, on and after the Effective
Time, he shall not be entitled to any further payments pursuant to the Wall Data
Executive Incentive Plan, but instead shall be eligible for a quarterly bonus
pursuant to the NetManage bonus plan, with a target bonus level comparable to
those of similar senior officers of NetManage.
2. Other Change of Control and Employment Agreement Provisions. To
the extent not amended hereby, the Employment Agreement and Change of Control
Agreement remain in full force and effect, including with respect to Section 8.8
of the Change of Control Agreement.
3. Entire Agreement. This Amendment, taken together with the
Employment Agreement and Change of Control Agreement (to the extent not amended
hereby), represents the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings between the parties
with respect to the Executive's employment (the "Agreement"). The Agreement may
be amended at any time only by mutual written agreement of the parties hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement.
NETMANAGE, INC.
By:
-------------------------------------
Title:
----------------------------------
WALL DATA INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
EMPLOYEE:
----------------------------------------
Kerry D. Palmer
-3-
<PAGE> 70
EXHIBIT A
NETMANAGE, INC.
CRAIG E. SHANK EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made between and among
NetManage, Inc., Wall Data Incorporated and Craig E. Shank ("Employee"),
effective as of October 20, 1999, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") entered into by and among NetManage, Inc. (together
with its subsidiaries and affiliates, "NetManage"), Bogota, Inc. and Wall Data
Incorporated ("Wall Data").
WHEREAS, Employee has previously entered into an employment agreement
and a change of control agreement, both dated January 21, 1999, with Wall Data
(respectively, the "Employment Agreement" and the "Change of Control
Agreement"); and
WHEREAS, Employee has previously entered into stock option agreements
with Wall Data (the "Stock Option Agreements"); and
WHEREAS, the parties hereto desire to amend the Employment Agreement,
Change of Control Agreement and Stock Option Agreements in exchange for the
consideration set forth herein;
NOW, THEREFORE, the parties hereto agree that the Employment Agreement,
Change of Control Agreement and Stock Option Agreements are hereby amended as
follows:
3. Stock Option Cancellation & Waiver of Severance Benefits and
Payments in Exchange for New Benefits and Payments.
8.16 Stock Option Cancellation. In exchange for the consideration
specified in Section 1(c) of this Agreement, Employee agrees that his unvested
Stock Options which otherwise would have accelerated their vesting (the
"Accelerated Options"), will not have their vesting accelerated either by the
consummation of the tender offer contemplated by the Merger Agreement (the
"Tender Offer") or by the merger contemplated by the Merger Agreement (the
"Merger") and shall be cancelled and become without further force and effect
upon the date on which they otherwise would have had their vesting accelerate.
8.17 Waiver of Severance Benefits and Payments. Employee agrees that
in exchange for the consideration specified in Section 1(c) of this Agreement,
subject to the consummation of the Tender Offer, he shall no longer be entitled
to receive any retention or severance benefits or payments pursuant to Section 8
of the Change of Control Agreement, pursuant to Section 7 of the Employment
Agreement or pursuant to any other plans, policies or arrangements of Wall Data,
whether written or oral, formal or informal.
<PAGE> 71
8.18 New Benefits and Payments. Subject to Section 8.8 of the Change
of Control Agreement, and, with respect to payments and benefits not already
made or provided, subject to Employee entering into a standard form of mutual
release of claims upon the termination of his employment, Employee shall be
entitled to the following benefits and payments:
(a) Retention Payment. In the event Employee remains
employed by NetManage for the period commencing on the "Effective Time," (as
such term is defined in the Merger Agreement) and ending six months later (the
"Retention Period"), Employee shall be entitled to receive twelve substantially
equal semi-monthly payments equal, in the aggregate, to the sum of $330,000 (the
"Change of Control Agreement Payment"), plus an amount equal to $9 minus the
exercise price times the number of shares subject to Employee's Accelerated
Options, (the "Accelerated Stock Option Payment") less applicable withholding
(the sum of the Change of Control Agreement Payment and the Accelerated Stock
Option Payment, less applicable withholding, is referred to herein as the
"Retention Payment"). Notwithstanding the foregoing, the balance of any unpaid
Retention Payment shall be paid within five days of the date of Employee's
termination, in a lump-sum, in the event that, prior to the end of the Retention
Period, Employee (i) has his employment terminated by NetManage other than for
"Cause" (as defined herein), (ii) terminates his employment with NetManage for
"Good Reason" (as defined herein), or (iii) dies or terminates employment with
NetManage due to his "Total Disability" (as such term is defined in Section 7.2
of the Change of Control Agreement).
For the purposes of this Agreement, "Cause" shall have the meaning set
forth in Section 8.6 of the Change of Control Agreement; provided, however, that
Section 8.6(d) of the Change of Control Agreement shall be amended to include a
material violation by Employee of any provision of this Agreement, subject to
the notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
For the purposes of this Agreement, "Good Reason" shall have the meaning
set forth in Section 8.7 of the Change of Control Agreement; provided, however,
(A) that "Good Reason" shall not include a reduction in title, position,
authority, duties or responsibilities solely by virtue of the consummation of
the transactions contemplated by the Merger Agreement (for example, if the
Company becomes a division of NetManage and the Vice-President and General
Counsel of Wall Data remains the Vice-President and General Counsel of the
division, this shall not constitute "Good Reason"), and (B) Section 8.7(e) shall
be amended to include a material violation by the Company of any provision of
this Agreement, and that any such violation or a material violation of the
Change of Control Agreement shall be subject to the notice and opportunity to
cure requirements of Section 10 of the Change of Control Agreement.
(b) Accrued Obligations. Upon Employee's termination of
employment for any reason, Employee shall be entitled to receive the "Accrued
Obligations" as such term is defined in Section 8.1 of the Change of Control
Agreement.
(c) COBRA. In the event Employee (A) remains employed by
NetManage through the Retention Period, or (B) prior to the end of the Retention
Period Employee is terminated other than for Cause, voluntarily resigns for Good
Reason, terminates employment due to becoming
<PAGE> 72
Totally Disabled or dies, then Employee and his family members shall be entitled
to receive the COBRA benefits set forth in Section 8.1(b) of the Change of
Control Agreement, commencing upon the date of Employee's termination of
employment.
(d) Bonus. Employee agrees that, on and after the Effective
Time, he shall not be entitled to any further payments pursuant to the Wall Data
Executive Incentive Plan, but instead shall be eligible for a quarterly bonus
pursuant to the NetManage bonus plan, with a target bonus level comparable to
those of similar senior officers of NetManage.
2. Other Change of Control and Employment Agreement Provisions. To
the extent not amended hereby, the Employment Agreement and Change of Control
Agreement remain in full force and effect, including with respect to Section 8.8
of the Change of Control Agreement.
3. Entire Agreement. This Amendment, taken together with the
Employment Agreement and Change of Control Agreement (to the extent not amended
hereby), represents the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings between the parties
with respect to the Executive's employment (the "Agreement"). The Agreement may
be amended at any time only by mutual written agreement of the parties hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement.
NETMANAGE, INC.
By:
-------------------------------------
Title:
----------------------------------
WALL DATA INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
EMPLOYEE:
----------------------------------------
Craig E. Shank
-3-
<PAGE> 73
EXHIBIT A
NETMANAGE, INC.
KEVIN B. VITALE EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made between and among
NetManage, Inc., Wall Data Incorporated and Kevin B. Vitale ("Employee"),
effective as of October 20, 1999, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") entered into by and among NetManage, Inc. (together
with its subsidiaries and affiliates, "NetManage"), Bogota, Inc. and Wall Data
Incorporated ("Wall Data").
WHEREAS, Employee has previously entered into an employment agreement
and a change of control agreement, both dated January 21, 1999, with Wall Data
(respectively, the "Employment Agreement" and the "Change of Control
Agreement"); and
WHEREAS, Employee has previously entered into stock option agreements
with Wall Data (the "Stock Option Agreements"); and
WHEREAS, the parties hereto desire to amend the Employment Agreement,
Change of Control Agreement and Stock Option Agreements in exchange for the
consideration set forth herein;
NOW, THEREFORE, the parties hereto agree that the Employment Agreement,
Change of Control Agreement and Stock Option Agreements are hereby amended as
follows:
4. Stock Option Cancellation & Waiver of Severance Benefits and
Payments in Exchange for New Benefits and Payments.
8.19 Stock Option Cancellation. In exchange for the consideration
specified in Section 1(c) of this Agreement, Employee agrees that his unvested
Stock Options which otherwise would have accelerated their vesting (the
"Accelerated Options"), will not have their vesting accelerated either by the
consummation of the tender offer contemplated by the Merger Agreement (the
"Tender Offer") or by the merger contemplated by the Merger Agreement (the
"Merger") and shall be cancelled and become without further force and effect
upon the date on which they otherwise would have had their vesting accelerate.
8.20 Waiver of Severance Benefits and Payments. Employee agrees that
in exchange for the consideration specified in Section 1(c) of this Agreement,
subject to the consummation of the Tender Offer, he shall no longer be entitled
to receive any retention or severance benefits or payments pursuant to Section 8
of the Change of Control Agreement, pursuant to Section 7 of the Employment
Agreement or pursuant to any other plans, policies or arrangements of Wall Data,
whether written or oral, formal or informal.
<PAGE> 74
8.21 New Benefits and Payments. Subject to Section 8.8 of the Change
of Control Agreement, and, with respect to payments and benefits not already
made or provided, subject to Employee entering into a standard form of mutual
release of claims upon the termination of his employment, Employee shall be
entitled to the following benefits and payments:
(a) Retention Payment. In the event Employee remains
employed by NetManage for the period commencing on the "Effective Time," (as
such term is defined in the Merger Agreement) and ending six months later (the
"Retention Period"), Employee shall be entitled to receive twelve substantially
equal semi-monthly payments equal, in the aggregate, to the sum of $812,500 (the
"Change of Control Agreement Payment"), plus an amount equal to $9 minus the
exercise price times the number of shares subject to Employee's Accelerated
Options, (the "Accelerated Stock Option Payment") less applicable withholding
(the sum of the Change of Control Agreement Payment and the Accelerated Stock
Option Payment, less applicable withholding, is referred to herein as the
"Retention Payment"). Notwithstanding the foregoing, the balance of any unpaid
Retention Payment shall be paid within five days of the date of Employee's
termination, in a lump-sum, in the event that, prior to the end of the Retention
Period, Employee (i) has his employment terminated by NetManage other than for
"Cause" (as defined herein), (ii) terminates his employment with NetManage for
"Good Reason" (as defined herein), or (iii) dies or terminates employment with
NetManage due to his "Total Disability" (as such term is defined in Section 7.2
of the Change of Control Agreement).
For the purposes of this Agreement, "Cause" shall have the meaning set
forth in Section 8.6 of the Change of Control Agreement; provided, however, that
Section 8.6(d) of the Change of Control Agreement shall be amended to include a
material violation by Employee of any provision of this Agreement, subject to
the notice and opportunity to cure requirements of Section 10 of the Change of
Control Agreement.
For the purposes of this Agreement, "Good Reason" shall have the meaning
set forth in Section 8.7 of the Change of Control Agreement; provided, however,
(A) that "Good Reason" shall not include a reduction in title, position,
authority, duties or responsibilities solely by virtue of the consummation of
the transactions contemplated by the Merger Agreement (for example, if the
Company becomes a division of NetManage and the Chief Executive Officer and
President of Wall Data remains the Chief Executive Officer and President of the
division and does not serve on the Board of Directors of NetManage, this shall
not constitute "Good Reason"), and (B) Section 8.7(e) shall be amended to
include a material violation by the Company of any provision of this Agreement,
and that any such violation or a material violation of the Change of Control
Agreement shall be subject to the notice and opportunity to cure requirements of
Section 10 of the Change of Control Agreement.
(b) Accrued Obligations. Upon Employee's termination of
employment for any reason, Employee shall be entitled to receive the "Accrued
Obligations" as such term is defined in Section 8.1 of the Change of Control
Agreement.
(c) COBRA. In the event Employee (A) remains employed by
NetManage through the Retention Period, or (B) prior to the end of the Retention
Period Employee is terminated other
-2-
<PAGE> 75
than for Cause, voluntarily resigns for Good Reason, terminates employment due
to becoming Totally Disabled or dies, then Employee and his family members shall
be entitled to receive the COBRA benefits set forth in Section 8.1(b) of the
Change of Control Agreement, commencing upon the date of Employee's termination
of employment.
(d) Bonus. Employee agrees that, on and after the Effective
Time, he shall not be entitled to any further payments pursuant to the Wall Data
Executive Incentive Plan, but instead shall be eligible for a quarterly bonus
pursuant to the NetManage bonus plan, with a target bonus level comparable to
those of similar senior officers of NetManage.
2. Other Change of Control and Employment Agreement Provisions. To
the extent not amended hereby, the Employment Agreement and Change of Control
Agreement remain in full force and effect, including with respect to Section 8.8
of the Change of Control Agreement.
3. Entire Agreement. This Amendment, taken together with the
Employment Agreement and Change of Control Agreement (to the extent not amended
hereby), represents the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings between the parties
with respect to the Executive's employment (the "Agreement"). The Agreement may
be amended at any time only by mutual written agreement of the parties hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement.
NETMANAGE, INC.
By:
-------------------------------------
Title:
----------------------------------
WALL DATA INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
EMPLOYEE:
----------------------------------------
Kevin B. Vitale
-3-
<PAGE> 76
APPENDIX II
CHAPTER 23B.13 OF THE WASHINGTON BUSINESS
CORPORATION ACT
(DISSENTERS' RIGHTS)
23B.13.010 DEFINITIONS
As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020 RIGHT TO DISSENT
(1) A shareholder is entitled to dissent from, and obtain payment of
the fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party (i) if shareholder approval is required for the merger by
RCW 23B.11.030,
II-1
<PAGE> 77
23B.11.080, or the articles of incorporation and the shareholder is entitled to
vote on the merger, or (ii) if the corporation is a subsidiary that is merged
with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that
materially reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the
fair value of the shareholder's shares shall terminate upon the occurrence of
any one of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets
aside the corporate action; or
(c) The shareholder's demand for payment is withdrawn with
the written consent of the corporation.
II-2
<PAGE> 78
23B.13.030 DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(1) A record shareholder may assert dissenters' rights as to fewer
than all shares registered in the shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter's other shares were registered in the names
of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all
shares of which such shareholder is the beneficial shareholder or over which
such shareholder has power to direct the vote.
23B.13.200 NOTICE OF DISSENTERS' RIGHTS
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW
23B.13.020 is taken without a vote of shareholders, the corporation, within ten
days after effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights must (a) deliver to the corporation
before the vote is taken written notice of the shareholder's intent to demand
payment for the shareholder's shares if the proposed action is effected, and (b)
not vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to payment for the shareholder's
shares under this chapter.
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23B.13.220 DISSENTERS' NOTICE
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of the
shares before that date;
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230 DUTY TO DEMAND PAYMENT
(1) A shareholder sent a dissenters' notice described in RCW
23B.13.220 must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to be set forth in
the dissenters' notice pursuant to RCW 23B.13.220(2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the
shareholder's share certificates under subsection (1) of this section retains
all other rights of a shareholder until the proposed corporate action is
effected.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter.
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23B.13.240 SHARE RESTRICTIONS
(1) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the proposed
corporate action is effected or the restriction is released under RCW
23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250 PAYMENT
(1) Except as provided in RCW 23B.13.270, within thirty days of the
later of the effective date of the proposed corporate action, or the date the
payment demand is received, the corporation shall pay each dissenter who
complied with RCW 23B.13.230 the amount the corporation estimates to be the fair
value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date of payment, an
income statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment
under RCW 23B.13.280; and
(e) A copy of this chapter.
23B.13.260 FAILURE TO TAKE ACTION
(1) If the corporation does not effect the proposed action within
sixty days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release any transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure.
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23B.13.270 AFTER-ACQUIRED SHARES
(1) A corporation may elect to withhold payment required by RCW
23B.13.250 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280.
23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(1) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and amount
of interest due, and demand payment of the dissenter's estimate, less any
payment under RCW 23B.13.250, or reject the corporation's offer under RCW
23B.13.270 and demand payment of the dissenter's estimate of the fair value of
the dissenter's shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW
23B.13.250 within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
23B. 13.300 COURT ACTION
(1) If a demand for payment under RCW 23B.13.280 remains unsettled,
the corporation shall commence a proceeding within sixty days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued
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interest. If the corporation does not commence the proceeding within the
sixty-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
(2) The corporation shall commence the proceeding in the superior
court of the county where a corporation's principal office, or, if none in this
state, its registered office, is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled, parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(6) Each dissenter made a party to the proceeding is entitled to
judgment (a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or (b) for the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation elected to withhold
payment under RCW 23B.13.270.
23B.13.310 COURT COSTS AND COUNSEL FEES
(1) The court in a proceeding commenced under RCW 23B.13.300 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess the costs against all
or some of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment under RCW 23B.13.280.
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(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially comply with
the requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid out
of the amounts awarded the dissenters who were benefited.
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[WALL DATA LETTERHEAD]
WALL DATA INCORPORATED
11332 N.E. 122ND WAY
KIRKLAND, WASHINGTON 98034
December 8, 1999
Dear Shareholder:
We cordially invite you to attend a special meeting of our shareholders
at the Company's headquarters, located at 11332 N.E. 122nd Way, Kirkland,
Washington on Wednesday, December 29, 1999 at 10:00 a.m., Pacific Standard Time.
At the meeting, the shareholders of the Company will be asked to
consider and vote upon a single proposal to adopt and approve a merger agreement
with NetManage, Inc. and its subsidiary, NetManage Acquisition Corporation, and
approve a merger that will cause the Company to become a wholly-owned subsidiary
of NetManage.
Approval of the merger requires the affirmative vote by the holders of
not less than fifty-one percent (51%) of the shares of the Company's common
stock outstanding as of the record date. Only shareholders of the Company on the
close of business on December 2, 1999 will be entitled to vote at the special
meeting. As a result of a tender offer completed on November 24, 1999, NetManage
Acquisition Corporation now owns approximately eighty-nine percent (89%) of the
outstanding shares of the Company's common stock, and intends to vote such
shares in favor of the merger, and will therefore be able to approve the merger.
THE COMPANY'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS
ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
SHAREHOLDERS. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ADOPTION AND APPROVAL
OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
Enclosed please find a notice of special meeting of shareholders and a
disclosure document relating to the merger. We encourage you to read them
carefully.
Sincerely,
Kevin B. Vitale
President and Chief Executive Officer
Kirkland, WA
December 8, 1999
<PAGE> 85
[WALL DATA LETTERHEAD]
WALL DATA INCORPORATED
11332 N.E. 122ND WAY
KIRKLAND, WASHINGTON 98034
--------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 29, 1999
--------------------
To Our Shareholders:
We will hold a special meeting of shareholders of Wall Data Incorporated
(the "Company") at 10:00 a.m. Pacific Standard Time, on Wednesday, December 29,
1999, at the Company's headquarters, located at 11332 N.E. 122nd Way, Kirkland,
Washington, for the following purpose:
To consider and vote upon a proposal to adopt and approve the merger
agreement among NetManage, Inc., NetManage Acquisition Corporation, a
wholly-owned subsidiary of NetManage, and the Company, and approve the
merger that will cause the Company to become a wholly-owned subsidiary
of NetManage. Under the merger agreement, shareholders of the Company
will receive the merger consideration of $9.00 net per share in cash and
without interest thereon for each share of the Company's common stock
owned.
We will conduct no other business at the meeting, except business which
may be properly brought before the special meeting and which is within the
purpose of the special meeting described above.
We cannot complete the merger unless the holders of not less than
fifty-one percent (51%) of the shares of the Company's common stock outstanding
as of the record date vote to adopt and approve the merger agreement. As a
result of a tender offer completed on November 24, 1999, NetManage Acquisition
Corporation now owns approximately eighty-nine percent (89%) of the outstanding
shares of the Company's common stock, and intends to vote such shares in favor
of the merger, and will therefore be able to approve the merger.
Holders of the Company's common stock may be entitled to assert
dissenters' rights with respect to the merger under Chapter 23B.13 of the
Washington Business Corporation Act.
We have fixed the close of business on December 2, 1999 as the record
date for the determination of our shareholders entitled to vote at this meeting
or any adjournment or postponement of it.
By Order of the Board of Directors
of Wall Data Incorporated
Craig E. Shank
Vice President, General Counsel
and Secretary
