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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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SPATIAL TECHNOLOGY INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction: $27,000,000
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(5) Total fee paid: $5,400
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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SPATIAL TECHNOLOGY INC.
2425 55TH STREET, SUITE 100
BOULDER, COLORADO 80301
To Our Stockholders:
You are cordially invited to attend this year's annual meeting
of stockholders of Spatial Technology Inc. The meeting will be held at our
principal executive offices, 2425 55th Street, Suite 100, Boulder, Colorado
80301 on _______, 2000 at 10:00 a.m., Colorado time.
We are seeking your vote at the annual meeting to (a) approve
the sale of our component software division to Dassault Systemes Corp., (b)
approve the sale and issuance of additional shares of our common stock to
Dassault, (c) amend our certificate of incorporation to change our name to
PlanetCAD Inc., (d) elect directors to serve for the ensuing year, (e) approve
our 2000 Stock Incentive Plan, and (f) ratify the selection of KPMG LLC as our
independent auditors for the fiscal year ending December 31, 2000. As previously
announced, we have entered into an agreement to sell our component software
division to Dassault. Additionally, Dassault has agreed to an investment in
PlanetCAD(TM) through the purchase of 555,556 shares of our common stock for a
cash price of $2.0 million. The terms of the proposed sale and the other
proposals to be acted upon at the annual meeting are described in detail in the
proxy statement, and the purchase agreement is attached as Appendix A for your
reference. We encourage you to read the full text of the proxy statement and the
purchase agreement because they contain important information concerning the
terms of the proposed sale. Please give this material your careful attention.
The sale of the component software division has been designed
to permit us to refocus the core of our business to offering Internet-based
services. Following the proposed sale, we will focus exclusively upon our
PlanetCAD(TM) division. We belieVe that the proposed sale will maximize the
potential for the component software division by combining it with the resources
of Dassault. We intend to change our name to PlanetCAD Inc. following completion
of the proposed sale.
The investment banking firm of Roth Capital Partners, Inc. has
rendered a written opinion to our board of directors that, as of August 28,
2000, the consideration to be received from the sale of the component software
division was fair to us and our stockholders, other than Dassault, from a
financial point of view. Our board of directors has unanimously approved the
purchase agreement, the sale of the component software division and the other
transactions contemplated by the purchase agreement and determined that they are
advisable and fair to you and in your best interests. Our board of directors
unanimously recommends that you vote "FOR" approval of the purchase agreement
and the sale of the component software division.
Whether or not you plan to attend the annual stockholder
meeting, please complete, sign and date the accompanying proxy and return it in
the enclosed, postage prepaid, return envelope. If you hold shares of Spatial
common stock and attend the meeting, you may vote your shares in person even if
you have previously returned your proxy card. Your prompt cooperation is greatly
appreciated.
Sincerely,
R. Bruce Morgan
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SPATIAL TECHNOLOGY INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON [INSERT DATE], 2000
TO THE STOCKHOLDERS OF SPATIAL TECHNOLOGY INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Spatial Technology Inc. will be held on [INSERT DATE] at 10:00 a.m. local time
at Spatial's principal executive offices located at 2425 55th Street, Suite 100,
Boulder, Colorado, 80301, for the following purposes, each of which is more
fully described in the proxy statement accompanying this notice:
1. To consider and vote on a proposal to approve the sale of Spatial's
component software division to Dassault Systemes Corp., pursuant to a
purchase agreement dated July 4, 2000 and amended on September 2, 2000,
among Dassault, Spatial and Spatial Components, LLC, a wholly owned
subsidiary of Spatial.
2. To consider and vote on a proposal to issue 555,556 shares of Spatial
common stock to Dassault, pursuant to a share purchase agreement to be
entered into between Spatial and Dassault, in exchange for a cash
payment by Dassault to Spatial of $2.0 million.
3. To consider and vote on a proposal to amend Article I of Spatial's
certificate of incorporation to change its name from Spatial Technology
Inc. to PlanetCAD Inc.
4. To elect directors to serve for the ensuing year and until their
successors are elected and qualified.
5. To consider and vote on a proposal to approve the 2000 Stock Incentive
Plan.
6. To ratify the selection of KPMG LLP as independent auditors of Spatial
for the fiscal year ending December 31, 2000.
7. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Our board of directors has fixed the close of business on [INSERT
RECORD DATE], as the record date for the determination of stockholders entitled
to notice of and to vote at the annual meeting of Spatial stockholders or at any
adjournment or postponement thereof.
By Order of the Board of Directors,
-----------------------------------
Todd S. Londa
Secretary
Boulder, Colorado
[INSERT DATE]
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED WITHIN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE
IT IS VOTED.
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TABLE OF CONTENTS
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Page
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INFORMATION CONCERNING SOLICITATION AND VOTING..........................................................1
GENERAL..............................................................................................1
RECORD DATE; OUTSTANDING SHARES; VOTING RIGHTS; QUORUM...............................................1
VOTING OF PROXIES....................................................................................2
REVOCABILITY OF PROXIES..............................................................................2
PROPOSAL 1 -- SALE OF COMPONENT SOFTWARE BUSINESS.......................................................2
QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE........................................................3
THE COMPANIES........................................................................................7
THE TRANSACTION.........................................................................................9
DESCRIPTION OF TRANSACTION...........................................................................9
REASONS FOR THE TRANSACTION; RECOMMENDATION OF THE BOARD.............................................9
HISTORY OF THE TRANSACTION...........................................................................9
USE OF PROCEEDS.....................................................................................11
BUSINESS OF PLANETCAD FOLLOWING THE TRANSACTION.....................................................11
Background.......................................................................................11
The Opportunity..................................................................................12
PlanetCAD Applications and Services..............................................................12
PlanetCAD Strategy...............................................................................13
PlanetCAD Business Model.........................................................................14
Usage of Public Internet Site by Second Tier and Third Tier Suppliers............................15
Co-Branding Relationships........................................................................16
PlanetCAD's Competitive Strength.................................................................17
CUSTOMERS...........................................................................................18
MANAGEMENT TEAM.....................................................................................18
SPECIAL CONSIDERATIONS..............................................................................20
New And Unproven Business Model..................................................................20
Risks Associated with the Internet...............................................................21
Limited Operating History........................................................................21
History Of Losses, Expectation of Losses for the Foreseeable Future..............................21
We Depend on Swift and Timely Introductions of New Products......................................21
PlanetCAD Is Vulnerable To System Failures.......................................................21
System Capacity Constraints......................................................................22
Unknown Software Defects.........................................................................22
Ability to Raise Additional Capital, Employee Retention and Attraction...........................22
Our Products May Contain Undetected Errors.......................................................22
Competition in Our Industry is Intense...........................................................22
We Are Dependent Upon Key Personnel and the Ability to Hire Additional Personnel.................23
We May Not be able to Effectively Manage Our Growth..............................................23
We May be Exposed to Risks of Intellectual Property and Proprietary Rights Infringement..........23
Protection Against Online Security Breaches......................................................24
Our Stock Price is Highly Volatile...............................................................24
Difficulties Doing Business In International Markets.............................................24
Use of the Internet..............................................................................25
Uncertainties And Potential Government Regulations Regarding the Internet........................25
Internet Related Taxes...........................................................................25
ACCOUNTING TREATMENT................................................................................25
FEDERAL INCOME TAX TREATMENT........................................................................25
REGULATORY APPROVALS................................................................................26
OPINION OF ROTH CAPITAL PARTNERS, INC...............................................................26
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THE PURCHASE AGREEMENT.................................................................................29
TERMS OF PURCHASE AND SALE..........................................................................29
Assets Sold to and Liabilities Assumed by Dassault...............................................29
Consideration....................................................................................30
Closing..........................................................................................30
Conditions to Closing............................................................................30
Representations and Warranties...................................................................31
Prohibition on Competition and Solicitation of Employees.........................................31
Covenants........................................................................................32
Component Software Business Employee Matters.....................................................33
No Solicitation of Transactions..................................................................33
Indemnification..................................................................................33
Escrow Agreement.................................................................................34
Termination......................................................................................34
Break-up Fee.....................................................................................35
CERTAIN ASSOCIATED INTELLECTUAL PROPERTY AGREEMENTS.................................................36
Software License, Maintenance and Support Agreements.............................................36
CERTAIN MATERIAL NEGOTIATIONS AND AGREEMENTS........................................................40
INTERESTS OF CERTAIN PERSONS IN THE SALE OF THE COMPONENT SOFTWARE DIVISION.........................40
NO APPRAISAL RIGHTS.................................................................................40
SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS..........................40
PROPOSAL 2 -- APPROVAL OF SALE AND ISSUANCE OF SPATIAL COMMON STOCK TO DASSAULT........................46
GENERAL.............................................................................................46
DESCRIPTION OF SHARE PURCHASE; TITLE AND AMOUNT OF SECURITIES ISSUED................................46
USE OF PROCEEDS.....................................................................................47
DESCRIPTION OF SECURITIES...........................................................................47
REASONS FOR TRANSACTION; EFFECT ON RIGHTS OF EXISTING STOCKHOLDERS..................................47
FINANCIAL AND OTHER INFORMATION.....................................................................47
PROPOSAL 3 -- APPROVAL OF THE AMENDMENT TO SPATIAL'S CERTIFICATE OF INCORPORATION CHANGING ITS NAME....48
PROPOSAL 4 -- ELECTION OF DIRECTORS....................................................................49
NOMINEES............................................................................................49
FORMER DIRECTOR.....................................................................................51
BOARD COMMITTEES AND MEETINGS.......................................................................51
Audit Committee..................................................................................51
Compensation Committee...........................................................................51
EXECUTIVE OFFICERS..................................................................................52
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.............................................52
COMPENSATION OF EXECUTIVE OFFICERS..................................................................53
COMPENSATION OF DIRECTORS...........................................................................55
EMPLOYMENT AGREEMENTS...............................................................................55
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................56
PROPOSAL 5 -- APPROVAL OF STOCK INCENTIVE PLAN.........................................................57
SUMMARY OF THE PLAN.................................................................................57
DESCRIPTION OF THE PLAN.............................................................................58
FEDERAL INCOME TAX CONSEQUENCES.....................................................................61
PROPOSAL 6 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS........................................63
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OTHER MATTERS..........................................................................................64
FORWARD-LOOKING STATEMENTS..........................................................................64
SOLICITATION........................................................................................64
STOCKHOLDER PROPOSALS...............................................................................64
INDEPENDENT AUDITORS................................................................................64
OTHER PROPOSALS.....................................................................................64
AVAILABLE INFORMATION...............................................................................65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................................................65
APPENDICES
Appendix A - Purchase Agreement and Amendment No. 1 to the Purchase Agreement
Appendix B - Fairness Opinion of Roth Capital Partners, Inc.
Appendix C - Form of Share Purchase Agreement
Appendix D - Written Charter of Audit Committee
Appendix E - 2000 Stock Incentive Plan
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SPATIAL TECHNOLOGY INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
[INSERT DATE]
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of
Spatial Technology Inc., a Delaware corporation, for use at the annual meeting
of stockholders to be held on [INSERT DATE] at 10:00 a.m. Colorado time, or at
any adjournment or postponement thereof, for the purposes set forth in this
proxy statement and in the accompanying notice of annual meeting. The annual
meeting will be held at our principal executive offices located at 2425 55th
Street, Suite 100, Boulder, Colorado 80301. This proxy statement and
accompanying form of proxy is dated [INSERT DATE] and is first being mailed to
our stockholders entitled to notice of and to vote at the annual meeting on or
about [INSERT DATE].
RECORD DATE; OUTSTANDING SHARES; VOTING RIGHTS; QUORUM
The close of business on [INSERT RECORD DATE] is the record date for
the determination of the Spatial stockholders of record entitled to notice of,
and to vote at, the annual meeting and any adjournments or postponements
thereof. Only holders of record of shares of Spatial common stock on that date
will be entitled to notice of and to vote at the annual meeting. Holders of
stock options and warrants, as such, are not entitled to notice of or vote at
the annual meeting.
At the close of business on [INSERT RECORD DATE], [INSERT VOTING SHARES
ISSUED AND OUTSTANDING] shares of common stock were outstanding. Each holder of
record of Spatial common stock on such date will be entitled to one vote for
each share held on all matters to be voted upon at the annual meeting or any
adjournments or postponements thereof.
The holders of a majority of the shares of Spatial common stock
entitled to vote, present in person or represented by proxy, constitute a quorum
for purposes of the annual meeting of stockholders. The vote required for each
of the proposals is set forth below.
o The affirmative vote of the holders of a majority of the
outstanding shares of Spatial common stock as of the record
date is required to:
o approve the sale of our component software division
to Dassault; and
o amend our certificate of incorporation to change our
name to "PlanetCAD Inc."
o The affirmative vote of the holders of a majority of the
shares of Spatial common stock present in person or
represented by proxy at the annual meeting and entitled to
vote is required to:
o approve the sale and issuance by us of additional
shares of our common stock to Dassault;
o approve our 2000 Stock Incentive Plan;
o ratify the selection of KPMG LLC as our independent
auditors for the fiscal year ending December 31,
2000; and
o take action with respect to any other matter as may
be properly brought before the annual meeting.
o A plurality of the votes of the shares present in person or
represented by proxy at the annual meeting and entitled to
vote is required for election of the directors.
<PAGE> 8
VOTING OF PROXIES
All shares of Spatial common stock that are represented at the annual
meeting by properly executed proxy cards received prior to or at the annual
meeting, and not duly and timely revoked, will be voted at the annual meeting
(or any adjournment or postponement thereof) in accordance with the instructions
indicated on the proxy cards. If no instructions are indicated, the proxies will
be voted FOR adoption of each of the proposals contained in this proxy statement
and FOR the election each of the nominees to the board of directors set forth in
this proxy statement.
Abstentions will be considered present and entitled to vote at the
annual meeting and, except with respect to the election of directors, will have
the effect of negative votes. Broker non-votes will be considered present for
purposes of the establishment of a quorum, but will have no effect on the
outcome of any of the proposals except the proposals to approve the sale of the
component software division and to approve the amendment to the certificate of
incorporation, in which cases broker non-votes will have the effect of negative
votes. With regard to election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
have no effect.
REVOCABILITY OF PROXIES
You may revoke your proxy given pursuant to this solicitation at any
time before it is voted at the annual meeting. It may be revoked by providing
Spatial's corporate secretary, at the address of Spatial's principal executive
offices provided above, a written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the meeting and voting
in person. Attendance at the meeting will not, by itself, revoke a proxy.
PROPOSAL 1
SALE OF COMPONENT SOFTWARE DIVISION
The board of directors of Spatial proposes, and unanimously recommends
that the stockholders of Spatial approve, the sale of Spatial's component
software division to Dassault upon the terms and subject to the conditions set
forth in the purchase agreement, dated July 4, 2000, as amended by Amendment No.
1 dated as of September 2, 2000, among Spatial, Dassault and a wholly owned,
newly formed subsidiary of Spatial called Spatial Components, LLC. A conformed
copy of the purchase agreement and of Amendment No. 1 thereto are included as
Appendix A to this proxy statement. The summaries of portions of the purchase
agreement set forth in this proxy statement are qualified in their entirety by
reference to the full text of the purchase agreement, and you are encouraged to
read it carefully and in its entirety before voting on proposal 1.
QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE
The following questions and answers briefly address some anticipated
questions about the sale of Spatial's component software division, briefly
describe the principal terms of the sale and are intended to provide sufficient
information to understand the essential features and significance of the sale.
What am I being asked o You are being asked to approve the sale of
to vote upon? Spatial's component software division to
Dassault Systemes Corp. in exchange for
approximately $25.0 million in cash. As a
result of the sale, Spatial's component
software division will become a wholly owned
subsidiary of Dassault. Spatial's component
software division includes the
three-dimensional ("3D") computer design and
modeling software components products,
trademarks relating to such products, the
name "Spatial" and the employees of Spatial
currently assigned to the component software
division. See "The Transaction - Description
of Transaction" on page 9 of this proxy
statement.
2
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What will Spatial's o After completing the sale of the component
business be after the software division to Dassault, Spatial will
sale of the component focus its efforts on building its Internet
software division? application service provider ("ASP")
business known as PlanetCAD(TM), which
provides Internet-based tools and
applications that maximize the value of the
engineering data in the Internet-based
manufacturing service supply chain. In an
effort to achieve more immediate name
recognition and to demonstrate its new
business focus, Spatial intends to change
its name to PlanetCAD Inc. upon closing the
component software division sale. See "The
Transaction - Business of PlanetCAD
Following the Transaction" on page 11 of
this proxy statement.
Why is Spatial o The component software division has seen
recommending the sale intense competition and narrowing profit
of the component margins in recent years. Spatial believes
software division? that its best opportunities for future
growth lie in its Internet ASP business
known as PlanetCAD. Spatial's small size has
made it difficult for Spatial to maintain
simultaneously the proper degree of
management attention to both PlanetCAD and
the component software division.
Furthermore, although Spatial's management
believes that its component software
division, including its principal product
ACIS(R) and related technologies, is
superior in its market, Spatial's management
also believes that the investments necessary
to further expand Spatial's market presence
are beyond its resources. The sale of the
component software division to Dassault,
will enable Spatial's management to direct
all of its focus and effort toward expanding
the PlanetCAD business. In addition, Spatial
believes that Dassault will be able to use
its greater resources to continue operating
the component software division, which will
benefit Spatial's existing component
software customers and present new
challenges and opportunities to the
employees of the component software division
who have made that business a success. See
"The Transaction - Reasons for the
Transaction; Recommendation of the Board" on
page 9 of this proxy statement. Furthermore,
Dassault Systemes, the parent of Dassault
Systemes Corp., has agreed at the closing of
the sale of the component software division
to enter into significant mutually
supportive relationships with PlanetCAD that
Spatial's management believes will be
beneficial to the development and success of
PlanetCAD.
3
<PAGE> 10
What will Spatial o At the closing, Spatial will receive:
receive for the
component software o $25.0 million in cash, plus
division? o the amount of the costs and
expenses paid by Spatial prior to
the closing for products and
services to be delivered or
rendered to the component software
division by third parties on or
after the closing, plus
o the amount of all accounts
receivable from third parties
arising from the conduct of the
component software division before
the closing and related to the
amounts referred to in next bullet
point, minus
o the amount of cash and receivables
received by Spatial on or before
the closing for work or obligations
relating to maintenance, support
and consulting services to be
performed on or after the closing
in connection with the component
software division. See "The
Purchase Agreement - Terms of
Purchase and Sale - Consideration"
on page 30 of this proxy statement.
o Prior to the closing and upon three business
days' notice to Dassault, Dassault is
required to loan to Spatial $2,000,000. The
loan is required to be repaid by Spatial to
Dassault on the earlier to occur of the
following:
o termination of the purchase
agreement prior to the closing and
o the consummation of the
transactions contemplated by the
purchase agreement, provided that,
in such event Spatial shall repay
the loan, by way of set-off against
the purchase price to be paid to
Spatial by Dassault at the closing
under the purchase agreement. See
"The Purchase Agreement - Terms of
Purchase and Sale - Consideration"
on page 30 of this proxy statement.
What will be the initial o In addition to the $25.0 million received
source of Spatial's for the sale of the component software
operating capital for the division, Dassault has agreed to purchase,
PlanetCAD business on or prior to the closing of that sale,
after the sale? 555,556 newly issued shares of Spatial's
common stock from Spatial for a total cash
purchase price of $2.0 million, or $3.60 per
share. See "The Purchase Agreement - Terms
of Purchase and Sale - Consideration" on
page 30 of this proxy statement.
How much cash will o Spatial anticipates net proceeds from this
Spatial receive net of transaction to be approximately $22.5
estimated transaction million, after deductions for expenses and
costs? taxes related to the transaction and
application of the purchase price formula,
in the manner described in the purchase
agreement, totaling approximately $4.5
million.
What will the o The stockholders of Spatial will not receive
stockholders of Spatial directly any consideration in connection
receive? with the proposed sale of the component
software division. Spatial plans to retain
the cash purchase price of the component
software division to fund the expansion and
development of PlanetCAD. See "The
Transaction - Use of Proceeds" on page 47 of
this proxy statement.
What will happen to the o They will be offered employment with
employees of Spatial Dassault in the acquired component software
who work in Spatial's division after the sale upon substantially
component software similar terms and conditions, and with
division? substantially similar benefits, as such
employees had with Spatial prior to the
transaction. See "The Transaction -
Component Software Division Employee
Matters" on page 33 of this proxy statement.
4
<PAGE> 11
What are the federal tax o Spatial: The sale of the component software
consequences of the division to Dassault will be treated as a
sale? sale of assets for cash under the Internal
Revenue Code of 1986, as amended, which will
result in the imposition of federal income
tax liability on Spatial. However, Spatial's
existing net operating loss carryforward of
approximately $16.2 million will be utilized
to reduce tax liabilities resulting from
this transaction. See "The Transaction -
Federal Income Tax Treatment" on page 25 of
this proxy statement.
o Stockholders: The sale should not create any
immediate federal income tax liabilities for
the stockholders of Spatial since the
stockholders will not receive any
consideration in connection with the sale of
the component software division. See "The
Transaction - Federal Income Tax Treatment"
on page 25 of this proxy statement.
What approvals are o Stockholder Approval: Once a quorum is
required for the sale? present for purposes of the annual meeting
of stockholders of Spatial, approval by the
majority of all of the votes entitled to be
cast for the sale is required to approve the
sale. See "The Transaction - Reasons for the
Transaction; Recommendation of the Board" on
page 9 of this proxy statement.
o Regulatory Approval: The consummation of the
sale of the component software division is
subject to:
o The expiration or termination of
the waiting period under the
Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
amended, which occurred on August
15, 2000.
o The absence of any action commenced
before any governmental authority
against any of the parties to the
transaction seeking to restrain or
materially and adversely alter the
terms of the sale. See "The
Transaction - Regulatory Approvals"
on page 26 of this proxy statement.
o Other: The consummation of the sale of the
component software division is also subject
to such other approvals and consents that
Dassault deems reasonably necessary or
desirable to complete the transaction.
What happens if I o If a majority of the outstanding shares of
choose not to vote in Spatial common stock as of the record date
favor of the sale? vote against the sale of the component
software division, then Spatial will not
consummate the sale.
Is Spatial obligated to o Subject to the fiduciary duty obligations of
complete the sale even the board to Spatial's stockholders, the
if Spatial's board purchase agreement prohibits Spatial,
receives a more directly or indirectly through its
attractive offer? directors, officers, agents or otherwise,
from soliciting, initiating, encouraging or
facilitating the submission of any third
party proposal that constitutes, or may
reasonably be expected to lead to, an
alternative acquisition proposal. See "The
Purchase Agreement - Terms of Purchase and
Sale - No Solicitation of Transactions" on
page 33 of this proxy statement.
o In the event that Spatial receives an
alternative acquisition proposal that
Spatial's board determines in good faith to
be more favorable to the stockholders of
Spatial, it may terminate the purchase
agreement, but only in order to proceed with
the alternative acquisition proposal. See
"The Purchase Agreement - Terms of Purchase
and Sale - Termination" on page 34 of this
proxy statement.
5
<PAGE> 12
In what instances can o The purchase agreement may be terminated by
Spatial or Dassault either Spatial or Dassault if:
terminate the purchase
agreement? o Spatial and Dassault mutually agree
to the termination.
o The sale of the component software
division is not completed on or
before November 20, 2000.
o Any governmental or court order or
judgment prevents the consummation
of the transaction.
o The stockholders of Spatial do not
approve the sale of the component
software division. See "The
Purchase Agreement - Terms of
Purchase and Sale - Termination" on
page 34 of this proxy statement.
o The purchase agreement may be terminated by
Spatial if:
o Dassault fails to comply in any
material respect with its covenants
and agreements contained in the
purchase agreement or breaches any
representation or warranty
contained in the purchase
agreement, subject to certain
rights of Dassault to cure such
failures or breaches.
o Spatial receives and accepts an
alternative acquisition proposal
from a third party that would
result in a transaction more
favorable to Spatial's
stockholders. See "The Purchase
Agreement - Terms of Purchase and
Sale - Termination" on page 34 of
this proxy statement.
o The purchase agreement may be terminated by
Dassault if:
o Spatial fails to comply in any
material respect with its covenants
and agreements contained in the
purchase agreement or breaches any
representation or warranty
contained in the purchase
agreement, subject to certain
rights of Spatial to cure such
failures or breaches.
o Spatial's board of directors
withdraws, modifies or changes its
recommendation of the purchase
agreement or recommends to the
stockholders an alternative
acquisition proposal. See "The
Purchase Agreement - Terms of
Purchase and Sale - Termination" on
page 34 of this proxy statement.
Are there any financial o Under certain circumstances, if the sale of
consequences to the component software division to Dassault
termination of the is not completed and Spatial subsequently
purchase agreement? sells its assets or merges with a third
party, Spatial would be obligated to pay to
Dassault a "break-up fee" of $400,000 plus
all of Dassault's actual out-of-pocket
expenses and fees of counsel incurred in
connection with the transaction. See "The
Purchase Agreement - Terms of Purchase and
Sale - Break-up Fee" on page 35 of this
proxy statement.
Is Spatial permitted to o In the purchase agreement, Spatial has
do business in the agreed not to compete in the computer-aided
component software design ("CAD") and manufacturing ("CAM") and
market after the product data management ("PDM") component
transaction? software market for a period of time after
the closing. See "The Purchase Agreement -
Terms of Purchase and Sale - Prohibition on
Competition and Solicitation of Employees"
on page 31 of this proxy statement.
What do I need to do o After carefully reading and considering the
now? information contained in this proxy
statement, please fill out and sign your
proxy card. Then, mail your completed,
signed and dated proxy card in the enclosed
return envelope as soon as possible so that
your shares can be voted at the annual
meeting.
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<PAGE> 13
If my shares are held in o Your broker will not be able to vote your
"street name" by my shares without instructions from you. You
broker, will my broker should follow the directions that will be
vote my shares for me? forwarded to you by your broker in order to
vote your shares.
How do I change my vote o At any time before the annual meeting, you
after I have mailed my may change your vote by sending a written
signed proxy card? notice stating that you would like to revoke
your proxy or by completing and submitting a
new, later dated proxy card to the corporate
secretary of Spatial. You can also attend
the annual meeting and vote in person.
When do you expect the o We expect to complete the sale in the fourth
sale to be completed? calendar quarter of 2000. We are working to
complete the sale as quickly as possible and
intend to do so shortly after the annual
meeting.
Who can help answer my o After reading this proxy statement, if you
questions? have additional questions about the sale you
should contact:
Spatial Technology Inc.
2425 55th Street, Suite 100
Boulder, Colorado 80301
Attention: R. Bruce Morgan
Telephone: 303.544.2900
THE COMPANIES
SPATIAL TECHNOLOGY INC.
2425 55th Street, Suite 100
Boulder, Colorado 80301
Website: www.spatial.com
Telephone: 303.544.2900
Spatial develops, markets and supports business-to-business
Internet-based tools, applications and services for professional design and
manufacturing engineers, and state-of-the-art component three-dimensional ("3D")
modeling software for companies involved in the manufacturing industry with
special focus on the computer-aided design ("CAD"), manufacturing ("CAM"),
engineering ("CAE") and architecture markets for 3D modeling software and
services. Spatial operates two divisions: the PlanetCAD division and the
component software division. The PlanetCAD division focuses on the development,
marketing, sales, support and integration of a business-to-business platform,
application services and supporting services. The component software division
focuses on the development, marketing and support of 3D component software
products for the original equipment manufacturer ("OEM") software market segment
and for the PlanetCAD division.
Through the component software division, Spatial develops 3D modeling
software and complementary products and provides consulting services to help
optimize engineering processes. The division's flagship product is the ACIS(R)
3D modeling software and related component technology. Spatial licenses its 3D
software products to OEMs for building commercially available 3D software
products and to large manufacturing companies for building in-house proprietary
3D applications. The ACIS 3D modeling software is also broadly licensed to
leading universities and research institutions worldwide and is the foundation
for many of Spatial's other products. Most licensees pay royalties based on a
percentage of net revenues received from applications incorporating the ACIS 3D
software, and Spatial also provides maintenance services for an annual fee.
There are over 570 ACIS licensees worldwide and over 215 ACIS-enabled
applications serving more than 1.5 million end-users.
The PlanetCAD(TM) division provides Internet-based tools and
applications that maximize the value of the engineering data in the
Internet-based manufacturing design and procurement supply chain. PlanetCAD's
powerful business-to-business platform, applications and services enable
efficient engineering information exchange for the more than ten million
professional manufacturing and design engineers worldwide and for information
technology and engineering professionals managing the manufacturing supply
chain. These engineers and managers benefit
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<PAGE> 14
from more efficient Internet-based manufacturing design and procurement
processes, lower cost of production, and faster delivery of products to market.
PlanetCAD intends to execute a business model combining Internet-based
"enterprise solutions" sold directly to large manufacturing enterprise
customers, and a public Internet portal and engineering application service for
the manufacturing industry. PlanetCAD is designing its Internet-based
applications service to eventually make available a broad set of Web-hosted
software applications, Internet-based commerce, content and community services
to manufacturing and design engineers worldwide.
Additional information regarding Spatial and its two divisions is
included in its Annual Report on Form 10-KSB for the year ended December 31,
1999 and its Quarterly Reports on Form 10-QSB for the quarters ended March 31
and June 30, 2000, which are incorporated herein by reference and included with
this proxy statement.
DASSAULT SYSTEMES
9 Quai Marcel Dassault
BP310
2150 Suresnes Cedex
France
Website: www.dsweb.com
Telephone: 33.1.40.99.40.99
Dassault Systemes, the parent of Dassault, is a leading developer of
product-life cycle applications which include, among others, software solutions
in the area of Computer-Aided Design, Manufacturing and Engineering
(CAD/CAM/CAE) and Product Data Management (PDM II).
Dassault Systemes offers its customers solutions designed to improve
company-wide design and manufacturing processes by using computer simulation of
products which tracks the entire product life cycle, from preliminary design to
maintenance in operation. The simulation of these different production stages
permits a customer to streamline its design and manufacturing processes by
making it possible to create several virtual prototypes. These virtual
prototypes assist a customer to improve its design and manufacturing processes
by many different methods, such as (a) shorten production lead times, (b) cut
costs, and (c) improve the quality of the finished products.
The solutions provided by Dassault Systemes are targeted to two market
segments:
o the industrial process market -- to address the production and
development needs of this market, Dassault Systemes has
developed its CATIA, DELMIA and ENOVIA product lines, and
o the mechanical component design market -- to address the
production and development needs of this market, Dassault
Systemes has developed its SolidWorks and SmarTeam product
lines.
Dassault Systemes' customer base includes more than 18,000 CATIA
customers, 17,000 SolidWorks customers, and over 155,000 CATIA workstation seats
and 53,000 SolidWorks seats.
Dassault Systemes delivers scaleable processes and design-centric
solutions on both Unix and Windows NT environments. In addition, Dassault
Systemes develops e-business infrastructure tools.
Dassault Systemes products are licensed by users in the automotive,
aerospace, fabrication and assembly, consumer goods, electrical and electronics,
plant design and shipbuilding industries. Dassault Systemes is present in the
United States, France, Germany, Italy, the United Kingdom, Sweden, Spain,
Israel, Canada, Argentina, Brazil, Mexico, India, Korea and Japan.
Dassault Systemes' total revenue for 1999 was 505 million euros. At
December 31, 1999, Dassault Systemes employed 2,675 people.
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<PAGE> 15
THE TRANSACTION
DESCRIPTION OF TRANSACTION
Spatial intends to sell its entire component software division to
Dassault in exchange for a cash payment of approximately $25.0 million, subject
to adjustment and on the terms and subject to the conditions set forth in the
purchase agreement. The full text of the purchase agreement, as amended by
Amendment No. 1 thereto, is attached to this proxy statement as Appendix A, and
a summary of the terms of the purchase agreement begins on page 29 under the
caption "The Purchase Agreement - Terms of Purchase and Sale." In order to
effect the sale, Spatial has formed Spatial Components, LLC, a newly organized
Delaware limited liability company, as its wholly owned subsidiary. Immediately
prior to the closing of the transactions contemplated by the purchase agreement,
Spatial will capitalize Spatial Components, LLC with all of the assets and
certain of the liabilities of the component software division. See "The Purchase
Agreement - Terms of the Purchase and Sale - Assets Sold to and Liabilities
Assumed by Dassault." Spatial will then sell all of the membership interests of
Spatial Components, LLC to Dassault. As a result of the transaction, Spatial's
component software division will become a wholly owned subsidiary of Dassault.
Spatial and Dassault Systemes, the parent of Dassault, will have a relationship
going forward through certain side IP agreements to be entered into at closing.
REASONS FOR THE TRANSACTION; RECOMMENDATION OF THE BOARD
Spatial believes that its future and capabilities lie in its
Internet-based applications service business known as PlanetCAD. Spatial's small
size has made it difficult for Spatial to maintain simultaneously the proper
degree of management attention to both PlanetCAD and the component software
division necessary for the continued success of both businesses. Furthermore,
the component software division has seen intense competition and Spatial has
suffered narrowing profit margins in recent years. Although Spatial believes
that its component software division, including ACIS and its related
technologies, is the superior product in its market, it also believes that the
investments necessary to compete successfully in the market and significantly
expand its market presence are beyond its resources. By selling the component
software division to Dassault, Spatial's management will be able to direct its
attention to expanding and developing PlanetCAD. Spatial's management believes
that Dassault will be positioned to utilize its greater resources to expand and
operate the component software division. Spatial's board of directors therefore
believes that the sale of the component software division will enhance the
growth and prospects of PlanetCAD and, at the same time, benefit Spatial's
existing customers and present new challenges and opportunities to the employees
of the component software division who have made that business a success.
In addition, Dassault has agreed to make a $2.0 million loan to
Spatial, which will be funded upon three business days' notice and repaid by
Spatial at the closing of the purchase agreement, or upon termination of the
purchase agreement, and to make an investment in PlanetCAD of $2.0 million in
exchange for the issuance by Spatial of 555,556 shares of its common stock.
Because of Dassault's name recognition in the market, Spatial believes that
Dassault's investment is a significant endorsement of PlanetCAD to its market.
Both the loan and the investment will provide Spatial with additional, needed
working capital to be used in developing and marketing PlanetCAD to its targeted
customers. See "Approval of Sale and Issuance of Spatial Common Stock to
Dassault - Use of Proceeds" on page 47 of this proxy statement.
The board believes that the sale of the component software division to
Dassault is fair to you and in your best interest and will provide increased
long-term stockholder value to you. See "Opinion of Roth Capital Partners, Inc."
beginning on page 26 of this proxy statement. The affirmative vote of the
holders of a majority of the outstanding shares of Spatial common stock as of
the record date is required to approve the sale of the component software
division to Dassault.
HISTORY OF THE TRANSACTION
Dassault Systemes approached the board of directors of Spatial in
October 1999 with a proposal to purchase Spatial for a per share price of $4.00.
This proposal was rejected as inadequate by the board at meetings in New York on
October 28 and 29, 1999. The board believed that the offer placed insufficient
value on the Internet activities of Spatial, subsequently organized as the
PlanetCAD division, which had become a major focus of Spatial
9
<PAGE> 16
in June of 1999 and in which Spatial had invested significant time and money.
Roth Capital Partners, Inc. was retained to assist the board in evaluating the
adequacy of the Dassault offer.
After the board's rejection of the proposal, Dassault Systemes
informally approached Mr. Richard Sowar, Spatial's Chairman of the board of
directors and Chief Technology Officer, in late November 1999 to inquire as to
whether or not he believed the board would consider a proposal for the sale of
Spatial's component software division, leaving Spatial to operate the PlanetCAD
activity as a dedicated business. The proposal was discussed by the members of
the board of directors in several conversations during late November and early
December 1999. On December 24, 1999, Mr. Bruce Morgan, Spatial's President and
Chief Executive Officer, received a call from Mr. Thibault de Tersant, Executive
Vice President and Chief Financial Officer of Dassault Systemes, to inform him
that Dassault Systemes wished to begin formal negotiations for the purchase of
the component software division.
The board authorized Mr. Morgan to begin exploratory talks on the
potential sale of the component software division in January 2000 though no
decision was made at that time as to whether or not Spatial would be prepared to
consummate any such transaction. In the course of initial discussions in January
and February, Dassault Systemes made it clear that it was willing to enter into
a broad strategic relationship with Spatial that would include Dassault
Systemes' purchase and commitment to the long term viability of the component
software division, which was experiencing significant financial stress due to an
ongoing change in the purchasing patterns of customers away from up-front
license fees and towards a back-end royalty and service payment model. The
strategic relationship would also include Dassault Systemes' provision of key
technologies to Spatial that are important to the success of PlanetCAD,
including a CATIA/ACIS model converter that Spatial believes is critical to the
success of its 3Dshare.com(TM) model interoperability service, and a joint
marketing and technology agreement that would make Dassault a significant
technology and distribution partner of PlanetCAD. Roth Capital Partners was
retained to assist Mr. Morgan in negotiations with Dassault Systemes, and the
board of directors was provided with regular updates on the status of the
negotiations.
During the course of the initial negotiations, Spatial negotiated a
round of venture financing for its PlanetCAD division. As this financing was
being finalized, Dassault Systemes agreed to participate in the funding round
and to invest $1 million to show serious intent in the long term success of
Spatial's PlanetCAD business. The financing closed on February 22, 2000.
In March 2000, the board of directors agreed to permit Mr. Morgan, with
the assistance of Roth Capital, to begin formal negotiations toward agreement on
a Letter of Intent providing an outline of the transaction for the sale of the
component software division. The parties agreed to a Letter of Intent on March
29, 2000. Following its review of the Letter of Intent, the board authorized Mr.
Morgan to begin negotiations towards a binding agreement based on the conditions
detailed in the Letter of Intent.
In April 2000, Spatial retained Hogan & Hartson L.L.P. to represent it
in the negotiation of the definitive agreements. These agreements included the
purchase agreement, a technology cross licensing agreement, a joint software
agreement, a co-branding agreement, a web services agreement, a server software
agreement and an intravision agreement. Intense negotiations occurred throughout
May and June, with regular updates provided to the board. On June 21, 2000 the
board authorized Roth Capital to contact potential third party bidders. The
board received a fairness opinion from Roth Capital on June 28, 2000, which Roth
Capital updated on August 28, 2000. On July 2, 2000, Mr. Morgan flew to Paris to
finalize the negotiations and documentation relating to the transaction, which
occurred on July 3 and 4, 2000. The definitive purchase agreement was executed
at the close of business on July 4, 2000. The transaction was announced to the
public on July 5, 2000.
Included in the purchase agreement was a provision that Spatial and
Roth Capital could continue to pursue negotiations with third parties contacted
prior to the agreement signature through July 24, 2000. Spatial did receive a
request for additional due diligence information from Structural Dynamics
Research Corporation ("SDRC"), and executives from Spatial visited SDRC's
corporate headquarters in Milford, Ohio on July 12, 2000. Subsequently, a team
of technical and financial experts from SDRC visited Spatial's premises in
Boulder, Colorado on July 17 and 18, 2000, to complete due diligence on the
proposed transaction.
On August 4, 2000, Mr. Morgan received a call from SDRC's
representatives requesting a meeting on August 9, 2000 in Denver, Colorado. At
that meeting, SDRC's representatives presented a proposal to Spatial's
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<PAGE> 17
management that was subsequently judged by Spatial's board of directors in a
telephonic meeting the same day to be superior to the offer from Dassault. SDRC
offered a purchase price of $26 million for the component software division
coupled with a $3 million investment in Spatial's common stock at a purchase
price of $4.00 per share. In addition, SDRC indicated that it was willing to
guarantee a total of $2 million of revenues for PlanetCAD from SDRC's Internet
customers. The SDRC offer was also subject to a break-up fee of $1.5 million and
provided for a more limited indemnification obligation for any breach by Spatial
of its obligations, representations or warranties. All other material terms of
the SDRC were identical to the terms set forth in the purchase agreement. As
required by the purchase agreement, Mr. Morgan provided on August 10, 2000 both
oral and written notice to Dassault regarding the determination by Spatial's
board of directors that the offer by SDRC constituted a superior proposal, as
defined in the purchase agreement. Pursuant to the terms of the purchase
agreement, Dassault had five days to respond to the SDRC proposal with any
modifications to the consideration provided for under the purchase agreement.
On August 10, 2000, Mr. Morgan also provided Dassault Systemes'
management, at their request, a list of seven ideas that would clarify for
investors and customers in PlanetCAD's target markets that Dassault Systemes was
committed to a long term, mutually beneficial relationship with PlanetCAD if the
purchase agreement were to be approved by Spatial's stockholders. Mr. Morgan
also spoke with representatives of Dassault Systemes on August 12, 2000 to
provide some additional details on possible revisions to Dassault Systemes'
offer. Mr. Morgan arranged a meeting between Mr. Bernard Charles, the President
of Dassault Systemes, and Mr. Gene Fischer, one of Spatial's directors, to take
place in San Jose, California on August 15, 2000. At that meeting, Mr. Charles
clarified for Mr. Fischer Dassault Systemes' desire to build strategic
relationships between Dassault Systemes and PlanetCAD's Internet-based
application services for the engineering marketplace upon completion of the sale
of the component software division to Dassault.
On August 15, 2000, Mr. Morgan received a revised offer from Dassault
that included an increased purchase price for the component software division to
$25 million and agreements to enter into additional agreements that would help
promote PlanetCAD's Internet-based applications services in the future. During a
telephonic meeting of Spatial's board of directors on August 17, 2000, the board
determined that the revised Dassault offer was superior to the offer received
from SDRC. In particular, the board determined that, in light of the
approximately $1 million of fees and expenses that would be due to Dassault
under the purchase agreement if Spatial completed a transaction with SDRC, the
$26 million purchase price offered by SDRC was functionally equivalent to the
$25 million offered by Dassault. Moreover, the board determined that given their
relative size and market positions, the future support and relationship with
Dassault and Dassault Systemes would be more beneficial to PlanetCAD than the
relationship proposed by SDRC. Mr. Morgan informed SDRC of the board's decision
on August 17, 2000.
USE OF PROCEEDS
Spatial anticipates net proceeds from this transaction to be
approximately $22.5 million, after deductions for expenses and taxes related to
the transaction and after giving effect to certain adjustments to the purchase
price provided for in the purchase agreement totaling approximately $4.5
million. Spatial plans to use the net proceeds of this transaction for general
corporate purposes, including sales and marketing, research and development,
capital expenditures and working capital. In addition, Spatial may use a portion
of the net proceeds to acquire complementary products, technologies or
businesses or to make strategic investments. Spatial currently has no agreements
with respect to any such acquisitions or investments. Pending any of these uses,
Spatial intends to invest the net proceeds in short-term, investment-grade,
interest-bearing securities.
BUSINESS OF PLANETCAD FOLLOWING THE TRANSACTION
BACKGROUND
Today's manufacturers are faced with significant challenges as they
strive to develop and maintain products throughout a product's lifecycle. To
meet competitive pressures and timely product delivery schedules, manufacturers
frequently outsource the design and manufacture of components and assemblies,
often using many different suppliers and vendors (the "manufacturing supply
chain"). Managing the supply chain is a challenging task and demands an
integrated approach to developing, procuring, producing, and delivering
products. It is
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essential that accurate and timely communication of product data is available
throughout the manufacturing supply chain.
Triggered by the rapid growth of electronic commerce of the World Wide
Web, Internet-based supply chains have rapidly become the new model for
manufacturers worldwide. Electronic manufacturing supply chains use the power of
the Internet and the simplicity of a Web browser to meet manufacturers' critical
needs.
As companies move to Internet-based electronic manufacturing supply
chains, the challenge is to find effective Internet infrastructure tools and
applications that add value to the product engineering and manufacturing
process. Several companies have already demonstrated the high value of
delivering Internet-based tools and applications for enhancing business
processes, including procurement operations. These companies have proven that
Internet-based tools and applications can deliver efficiencies and cost savings
in core business processes in the manufacturing sector. Spatial's management
believes that the Internet is an effective medium for system, process and
supplier integration.
To be effective, the Internet-based manufacturing design and
procurement supply chain must be able to communicate engineering model data
unambiguously, regardless of the format in which the data was originally
created. Further, the engineering data must be integrated with the
manufacturer's existing product development software, including product data
management (PDM) and enterprise resource planning (ERP) systems. To date,
Spatial's management believes that no supplier has provided a Internet-based
software application for the management and integration of engineering data in
the electronic manufacturing supply chain. PlanetCAD was created to provide
Internet-based management and integration resources for CAD models by
capitalizing on the engineering data interoperability expertise and proprietary
technology in model healing and translation developed by Spatial over the past
decade.
THE OPPORTUNITY
PlanetCAD was established as a division of Spatial in January 2000. It
has developed significant software expertise in engineering and 3D software
markets while becoming identified as a neutral supplier of engineering data
exchange and integration solutions. In addition, PlanetCAD has developed
customer relationships with many CAD/CAM/CAE application software providers and
been recognized as a "first mover" Internet-based tools and applications
supplier for manufacturers worldwide. Spatial's management believes that the
sale of the component software division will provide PlanetCAD with the
opportunity to build on PlanetCAD's initial successes and PlanetCAD's
significant, new relationship with Dassault Systemes to become the leading
provider of Internet-based tools and applications that maximize the value of
engineering data in the Internet-based manufacturing design and procurement
supply chain. The new relationship with Dassault Systemes is memorialized in a
number of agreements to be entered into as a part of the closing of the
transactions contemplated by the purchase agreement. The industrial market
segment, which includes manufacturers of automobiles and automotive components,
airframes, aircraft engines and parts, computers and peripherals, telephone
equipment, molds and dies, and machine tools, among others, is the target market
for PlanetCAD.
PLANETCAD APPLICATIONS AND SERVICES
PlanetCAD provides tools and applications that enhance the value of
engineering data in the Internet-based manufacturing design and procurement
supply chain. PlanetCAD enhances engineering data by addressing problems that
affect data interoperability. This includes, but is not limited to, CAD data
translation and 3D model healing to enable communication of engineering data
with varying formats and precision. PlanetCAD's business-to-business platform,
Internet-based software applications, and services enable efficient engineering
information exchange and integration for professional manufacturing and design
engineers worldwide. Engineers and managers can benefit from efficient
engineering data integration into Internet-based manufacturing design and
procurement processes, which can lower the cost of production and speed
introduction of products to market.
PlanetCAD's products include PlanetCAD Enterprise Solutions, PlanetCAD
e-Applications(TM) and PlanetCAD.com(R), along with professional services, that
help implement a transparent integration of engineering data with existing
manufacturing systems in corporate product design and production processes.
The PlanetCAD Enterprise Solutions are Internet-based software packages
that are installed within a corporate firewall. They help manage transactions
and interactive business processes by simplifying engineering
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data flows between design and manufacturing engineers and their suppliers. Key
features of the PlanetCAD Enterprise Solutions include:
o installation in the OEM manufacturer's or first tier
supplier's Intranet
o integration of engineering data flows into CAD, PDM, ERP, and
legacy systems for more efficient management of the
Internet-based manufacturing design and procurement supply
chain
o simplification of communication of engineering data with
varying formats and precision
o optimization of design and manufacturing business processes
PlanetCAD's products include data interoperability, data quality management,
visualization and collaboration, and process automation solutions. PlanetCAD
focuses on providing e-Applications to enhance business practice in the
following areas:
o data interoperability, including such applications such as CAD
data translation, 3D model healing, engineering data quality,
and engineering data distribution;
o visualization and collaboration, including 3D viewing, markup
and collaboration;
o process automation, including applications for data quality
certification, RFQ management, process planning and costing,
and engineering change order management
PlanetCAD is a pioneer in Internet delivery of engineering application
services, having launched 3Dshare.com in the fourth quarter of 1999 as the first
server-based, pay-per-use engineering service on the Internet. 3Dshare.com
provides automated, online 3D engineering model translation and repair.
PlanetCAD subsequently launched 3Dpublish.com, a service for providing
two-dimensional publishing output from three-dimensional models.
PlanetCAD plans to introduce its first third party application service,
quote-A-part.com, in the third quarter of 2000 in partnership with Tecnomatix
Technologies Ltd., a leading supplier of factory automation and process planning
software. Quote-A-part is an automated service for estimating the cost of
producing a physical part from a digital model.
PlanetCAD plans to introduce an important e-Application for secure
model distribution in the fourth quarter of 2000. In addition, PlanetCAD plans
to introduce 3Dquality.com, a keystone e-Application for CAD model quality
certification and management that will be based on the Design/QA product from
Prescient Technologies, a company acquired by PlanetCAD in July 2000. PlanetCAD
is targeting to have eight e-Applications available over the next year.
PlanetCAD plans to make its flagship Web site, PlanetCAD.com, the
premier Internet destination for manufacturing and design engineers.
PlanetCAD.com includes all PlanetCAD e-Applications, making them available to a
broad public user base. Manufacturers that utilize the PlanetCAD Enterprise
Solutions can also use PlanetCAD.com to access a broader supplier base and
provide incremental e-Application functionality to corporate users, while
suppliers can potentially access additional manufacturing customers. When
enterprise customers of the PlanetCAD Enterprise Solutions establish
relationships with new suppliers through PlanetCAD.com, both they and the new
suppliers will be using the same Internet-based software platform and tools for
engineering data interoperability, minimizing costly engineering data exchange
and integration issues.
PLANETCAD STRATEGY
PlanetCAD's management plans to capitalize on the market opportunity
by:
o Providing enterprise and Internet-based applications for
engineering data that give manufacturers a cost-effective
alternative to performing similar tasks with their own staff
or software
o Providing high-value e-Applications to optimize
customer/supplier business processes
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o Aggregating in-house and third party e-Applications and
content to deliver comprehensive solutions for the
Internet-based manufacturing design and procurement supply
chain over the Internet
o Leveraging partnerships for marketing, distribution and
technology
o Expanding internationally through distribution partners
overseas
PLANETCAD BUSINESS MODEL
PlanetCAD plans to focus on the following revenue sources:
1. Direct sale and implementation of PlanetCAD Enterprise
Solutions into major manufacturing companies and their Tier
One suppliers, generating revenue through:
o Subscription fees from corporate usage of PlanetCAD
Enterprise Solutions and add on e-Applications and
services
o ASP fees from hosting Enterprise Solutions at the
PlanetCAD site when requested by the customer
o Professional Service fees for implementation,
integration, customization, and training
o Subscription fees for access to selected
functionality of PlanetCAD.com
2. Usage of the public PlanetCAD.com by Second Tier and Third
Tier suppliers and enterprise customers will generate revenue
through:
o Subscription and pay-per-use fees from public usage
of e-Applications
o Commissions for business generated through usage of
process automation e-Applications by suppliers
o Subscription fees for access to selected content
o Advertising
o Co-branding partnerships that generate revenue
through private branded versions of PlanetCAD's
Internet-based software applications
3. Direct sale and implementation of PlanetCAD Enterprise
Solutions into large manufacturing companies
PlanetCAD's primary focus is to sell and install Enterprise Solutions
at large manufacturing companies worldwide. Revenue from the sale and
implementation of Enterprise Solutions will be generated from monthly leases on
a per processor basis. Monthly hosting fees will be charged when the Enterprise
Solution is provided on an application service provider basis by PlanetCAD.
Professional service fees will be charged for implementation, integration and
customization. Finally, subscription fees will be charged for access to selected
additional products and services from the PlanetCAD.com site.
Spatial has sold the first and second installations of PlanetCAD's
Enterprise Solutions to large Japanese automotive manufacturers. PlanetCAD plans
to license Enterprise Solutions through its direct sales force and through third
party resellers.
To accelerate sales of PlanetCAD's Enterprise Solutions, PlanetCAD
intends to build on the strengths of Prescient Technologies, a supplier of
manufacturing data quality products that Spatial acquired in July 2000.
Prescient provides expertise in enterprise product packaging, implementation
services, end user sales, and over one
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hundred major manufacturing customers. PlanetCAD's management believes that
Prescient's customers are ideal candidates for PlanetCAD's Enterprise Solutions.
PlanetCAD will also seek to use its relationship with Information
Services International-Dentsu Ltd. to capitalize on interest in PlanetCAD's
Enterprise Solutions in the Japanese market. At the closing, and as part of the
transactions contemplated by the purchase agreement, a reseller agreement for
PlanetCAD's Enterprise Solutions will be signed with Dassault Systemes, the
parent of Dassault, or one of its affiliates, which is the leading Engineering
Software supplier in the automotive and aerospace industries worldwide. In
addition, PlanetCAD is seeking to enter into arrangements with first-tier
hardware companies, to accelerate sales of Enterprise Solutions in connection
with sales of those companies' products.
Enterprise Solutions are sold on a per-application, per-processor
basis. The base package includes the PlanetCAD business-to-business Integration
Server and software applications for secure data distribution, data quality
management, and data translation and repair, running on a single processor.
Customers can purchase additional e-Applications at any time, on a
per-application basis or as specialized packages targeted at specific vertical
niches, such as mold making or tool and die manufacturing. As a customer reaches
computing limitations of a processor's ability to process jobs, the customer can
subscribe for additional processors to increase capacity. PlanetCAD has adopted
this subscription sales model in order to improve customer acceptance of
PlanetCAD Enterprise Solutions by providing customers with complete control of
application usage and capacity planning.
Subscription fees for e-Applications vary depending on the service
provided, but PlanetCAD's management believes that it has established prices
that are low enough to make cost justification straightforward.
PlanetCAD will generate incremental revenue by hosting, for an
additional fee, Enterprise Solutions on PlanetCAD hardware on an application
service provider basis. PlanetCAD will also establish virtual private networks
(VPN) for manufacturers and their suppliers for an incremental fee.
After the initial installation, it is expected that some enterprise
customers will purchase additional services for their PlanetCAD Enterprise
Solutions. PlanetCAD will provide implementation consulting, training and
support for PlanetCAD Enterprise Solutions, building on the expertise of the
Prescient implementation services team. These scalable services will help
PlanetCAD customers maximize the benefit of their Enterprise Solutions.
PlanetCAD will try to build alliances with system integrators and international
consulting companies to help satisfy the expected demand for implementation
services. PlanetCAD also plans to expand its Internet-based "customer care"
services to increase the availability of support tools and on-line help
around-the-clock.
USAGE OF PUBLIC INTERNET SITE BY SECOND TIER AND THIRD TIER SUPPLIERS
PlanetCAD provides PlanetCAD.com as a public Internet service so second
tier and third tier suppliers can benefit from the same e-Applications as
enterprise customers. PlanetCAD.com also provides an evaluation mechanism for
enterprise customers who wish to try new e-Applications before they license them
as Enterprise Solutions. PlanetCAD generates revenue from PlanetCAD.com through
usage of e-Applications on a pay-per-use and subscription basis by registered
users of the public site.
Subscription fees for e-Applications vary depending on the service
provided, but are to provide cost efficient services when compared to the cost
of performing similar functions through current business practices. For example,
3Dshare.com users are charged based on the size (in megabytes) of the models
they wish to have translated and/or healed. Currently, many manufacturing
companies solve difficult CAD data translation and healing problems by having an
employee manually repair an imperfect model using a seat of a CAD system. Often
the engineer does not have experience with the CAD system used to create the
original model, which forces many suppliers to purchase multiple CAD system
licenses and employ specialists in different CAD systems, just to be able to
read and write customer CAD data. 3Dshare.com pricing is approximately 10% of
the expected cost of this manual translation and repair process, and it's
pay-per-use or subscription-based pricing model virtually eliminates the cost of
owning multiple CAD systems and employing more CAD specialists than needed for
model interoperability tasks. Quote-A-part.com users will be charged under a
similar pricing strategy. PlanetCAD believes this pricing model will be
attractive to prospective users in small to mid-sized companies.
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It is expected that some customers will use e-Applications from the
public PlanetCAD.com site before purchasing them as Enterprise Solutions. Fees
for public usage of PlanetCAD e-Applications will be slightly higher than for
those e-Applications installed in a corporate Intranet.
PlanetCAD will provide Internet-based commerce solutions targeted at
process automation for custom manufacturing. PlanetCAD's management believes
that this is a significant market that is not currently served by other
Internet-based service providers. PlanetCAD's first Internet-based service,
Bits2Parts.com, was launched in a limited beta-test form in July 2000.
Bits2Parts.com allows manufacturers to automate the RFQ process with third party
service bureaus that generate physical prototypes of the manufacturers' digital
model data. The Bits2Parts.com target market includes custom manufacturing
market segments such as mold, die and machine tool manufacturing. The
Bits2Parts.com software engine integrates tightly with PlanetCAD e-Applications
such as 3Dshare.com to assure that a high quality model is delivered with the
RFQ to the supplier - a substantial technical differentiator and barrier to
entry for competitors. This tight integration provides additional benefits to
large manufacturing customers of PlanetCAD Enterprise Solutions, as they
integrate their front and back office business and Internet-based manufacturing
design and procurement processes.
The primary revenue streams for bits2parts.com will be subscription
fees charged to suppliers, and transaction fees generated when a buyer and
seller agree to do business on a project quoted through bits2parts. PlanetCAD
also plans to generate revenue from advertisements placed by manufacturing
sell-side suppliers and equipment suppliers who want to reach new customers in
this highly specialized custom manufacturing marketplace
The foundation of the bits2parts e-Application is configurable to
support other similar business process automation applications, such as project
bidding for marketing or sales. It is expected this feature will generate
incremental revenue from enterprise customers as they integrate and customize
the bits2parts platform to support these and other business functions. The
flexible nature of the bits2parts platform also provides PlanetCAD with
opportunities to leverage the technology to create new e-Applications at low
cost.
PlanetCAD.com will provide a targeted audience for advertisers seeking
to sell products and services to design and manufacturing engineers. PlanetCAD
expects this revenue stream will be small initially, but that it should become
more significant as page views increase. PlanetCAD expects page views to
increase as more large manufacturers form private Internet-based manufacturing
design and procurement supply chain networks with their community of suppliers,
and as smaller manufacturing suppliers leverage PlanetCAD.com as a vehicle to
broaden relationships with large manufacturers.
CO-BRANDING RELATIONSHIPS
PlanetCAD will provide co-branded versions of its e-Applications to
engineering software companies. In a co-branding agreement, a partner's end user
customer will be able to access PlanetCAD's e-Applications from the partner's
Web site. Co-branded e-Applications will be customized with the partner's
look-and-feel, while utilizing PlanetCAD's Web infrastructure and application
back-end. PlanetCAD will retain prominent branding for each e-Application
offered as a co-branded service.
When a customer visits PlanetCAD.com from a co-branded partner site,
PlanetCAD and the co-brand partner will share the revenue generated by the
customer based on the relative contribution of each party to the development,
marketing, and support of the service. PlanetCAD typically receives between
fifty and eighty percent of this revenue depending on the services provided.
PlanetCAD recently announced co-branding relationships with Dassault
Systemes and Autodesk, Inc., the sixth largest PC Software company in the world
and the leading supplier of mass market engineering software. These companies
will provide a co-branded 3Dshare.com service to their customers worldwide to
meet demand for online engineering data translation and quality services. The
co-branding agreement with Dassault Systemes, or one of its affiliates, will be
signed contemporaneously with closing as part of the transactions contemplated
by the purchase agreement. PlanetCAD plans to execute similar co-branding
relationships with additional partners in the coming year.
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PLANETCAD'S COMPETITIVE STRENGTH
PlanetCAD's management believes that its competitive strengths are
based on its proprietary business-to-business Integration Server and
e-Applications, its existing technology, distribution and marketing
partnerships, its ability to integrate engineering data flows in the
Internet-based manufacturing design and procurement process, and the dual nature
of PlanetCAD's business model combining Web-based Enterprise Solutions and a
public Internet vertical portal and engineering ASP for the manufacturing
industry. PlanetCAD is a first-mover for Web-based delivery, management and
integration of engineering data in the Internet-based manufacturing design and
procurement marketplace.
The following factors could help contribute to PlanetCAD's success:
UNIQUE COMBINATION OF PROPRIETARY TECHNOLOGY. PlanetCAD's Enterprise
Solutions and e-Applications are technologically difficult to develop, and
require highly specialized Web software along with significant mathematical and
engineering expertise. Products like 3Dshare.com and Prescient's Design/QA have
each taken more than a decade to develop. PlanetCAD has invested over fifteen
months of effort and over $2 million to develop its Integration Server, the core
software tool in PlanetCAD's Enterprise Solutions.
PlanetCAD's combination of technologies and industry expertise in
engineering data management enables it to integrate engineering data with
Internet-based manufacturing design and procurement processes to address
mission-critical problems such as time to market and production cost. PlanetCAD
provides a combination of e-Applications for data distribution, data quality
management, data translation and repair and RFQ management that enables the
delivery of the right engineering data to the right place at the right time in
the right format. This helps manufacturers and their suppliers integrate
engineering data flows, data quality and data formats as they optimize the
Internet-based manufacturing design and procurement process.
KEY TECHNOLOGY, MARKETING AND DISTRIBUTION PARTNERSHIPS. PlanetCAD is
building on Spatial's fourteen-year history of partnerships in manufacturing and
engineering software markets. PlanetCAD has already announced partnerships for
technology, distribution and marketing. These include:
o agreements with Tecnomatix Technologies Ltd., Freightliner and
Dassault for e-Applications;
o agreements with Dassault Systemes (which will be signed
contemporaneously at the closing as a part of the transactions
contemplated by the purchase agreement), Autodesk and Science
Applications International Corporation (SAIC) for
distribution; and
o agreements with Information Services International-Dentsu,
Ltd. (ISID) and SAIC for marketing in Japan and the automotive
industry, respectively. The agreements with Dassault Systemes
will be signed contemporaneously with closing, as part of the
transactions contemplated by the purchase agreement.
COMMON WEB INFRASTRUCTURE FOR THE CUSTOMER/SUPPLIER RELATIONSHIP.
PlanetCAD delivers its Web infrastructure to major manufacturers and first tier
suppliers as Enterprise Solutions, and to second tier and third tier suppliers
through PlanetCAD.com on the public Internet. Competitive advantage can be
derived by using the PlanetCAD engineering data integration and Internet-based
commerce infrastructure throughout the manufacturer/supplier relationship.
PlanetCAD delivers a low cost means for enterprise customers to broaden their
supplier base, to access relevant market information, and to evaluate new
engineering applications and services that are not licensed in their Enterprise
Solution. At the same time, PlanetCAD enables second tier and third tier
suppliers to find new customers that utilize the same B2B infrastructure and
e-Applications.
SYNERGISTIC TRAFFIC FLOWS FROM COMPLEMENTARY CONTENT AND
E-APPLICATIONS. Design and manufacturing engineers who visit PlanetCAD.com for
applications and services will be drawn to the site's commerce, content and
community offerings and vice-versa. For example, a customer may not have a daily
need for PlanetCAD.com's engineering services, but may visit the site regularly
for professional information and educational purposes, providing advertising and
Internet-based commerce revenue opportunities for PlanetCAD. PlanetCAD expects
that users of Enterprise Solutions will link to PlanetCAD.com on a pay per use
basis for access to e-Applications not licensed on their internal system.
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NEUTRALITY IN ENGINEERING MARKETS. Since its inception in 1986,
Spatial has enjoyed a reputation for being the largest supplier of 3D component
technology that is independent of any of the major CAD companies. This
reputation has enabled Spatial to maintain and grow relationships with CAD
software companies and their end user customers alike. PlanetCAD similarly
enjoys a neutral position in the market, and will try to develop partnerships
with all major suppliers of engineering application software.
ACQUISITION OF PRESCIENT TECHNOLOGIES. With the acquisition of
Prescient in July 2000, Spatial acquired over one hundred major manufacturing
customers in the automotive, aerospace and discrete manufacturing markets
worldwide. These companies are natural consumers of PlanetCAD Enterprise
Solutions. PlanetCAD's applications engineers will provide technical sales
support and implementation services. The engineering team will help to ensure
successful customer implementations, while turning implementation experiences
into new features.
Marketing resources will be used to support large account reference
selling, while developing and promoting key reference accounts and success
stories for future business leverage. Marketing expenses will be reduced by
establishing co-branding partnerships that should help draw design and
manufacturing engineers to PlanetCAD.com. Business development will acquire
technology for new back-end tools that will accelerate time to market by
facilitating integration of PlanetCAD e-Applications with in-house engineering
and PDM systems.
CUSTOMERS
PlanetCAD has generated interest from end-users as well as industry
press and analysts. 3Dshare.com has won awards including NASA Technical Brief's
Product of the Year in 1999, the Industry Week 1999 Technology and Innovation
Award, and Cadence magazine's Editor's Choice Award for 1999. 3Dshare.com had
over 8,000 registered users as of August 15, 2000. Many registered users are
engineers from some of the world's foremost manufacturing companies. Below is a
sample of some of the companies that have registered to use 3Dshare.com:
<TABLE>
<S> <C> <C> <C> <C>
Sony Nokia Toyota Sun Microsystems Qualcomm
Intel Kodak Schlumberger Caterpillar Nissan
Rockwell Siemens Lucent Motorola Honeywell
Boeing Freightliner Iomega Honda Cummins Engine
</TABLE>
3Dshare.com now has registered users in 100 countries around the world.
MANAGEMENT TEAM
Following completion of the sale of the component software division,
PlanetCAD's management team will be:
R. BRUCE MORGAN, PRESIDENT & CHIEF EXECUTIVE OFFICER
Mr. Morgan was named President and Chief Executive Officer of Spatial
Technology in October of 1998 after serving as Spatial's President and Chief
Operating Officer since July of 1997. Prior to joining Spatial, Mr. Morgan
served at ANSYS Inc. in senior marketing and business development positions. He
was responsible for developing and implementing a strategy that helped
re-establish ANSYS as a market leader in the computer-aided engineering (CAE)
industry, and played a key role in the company's successful initial public
offering in 1996.
From 1991 through 1995, Mr. Morgan was Vice President of Sales and
Marketing at Spatial. He developed and executed the OEM business strategy that
established Spatial's ACIS Geometric Modeler as the de facto standard for
geometry creation in the mechanical computer aided design (MCAD) industry. Prior
to his position at Spatial, Mr. Morgan held executive Sales and Marketing
management positions at Convergent Technologies and Burroughs Corporation
(Unisys).
Mr. Morgan holds a B.A. degree in Economics from Carleton University.
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DAVID A. PRAWEL, VICE PRESIDENT, STRATEGY & BUSINESS DEVELOPMENT
Mr. Prawel was recently appointed Vice President of Strategy & Business
Development responsible for PlanetCAD's overall corporate strategy and M&A
activities. He served as Spatial's Vice President of Business Development since
October of 1997. Mr. Prawel served previously in senior marketing and product
management positions at Spatial and several Boulder-based startup companies in
the computer graphics and CAD software industries through a career spanning over
18 years. Mr. Pawel has published and presented numerous articles in these
fields, including regular participation in annual industry round-up and
visionary articles.
Mr. Pawel holds B.A. and M.S. degrees in Natural Sciences, Biology and
Comparative Physiology from the University of Buffalo and Rutgers University,
and completed doctoral studies in Physiology at Rutgers University.
MICHAEL HANSEN, VICE PRESIDENT, SITE PRODUCTION & PRODUCT MANAGEMENT
Mr. Hansen was appointed Vice President of Site Production in January
2000, with responsibility for product planning, site execution, product quality
and continuous product improvement. He served previously at Spatial as Director
of Marketing, and has held positions in the product development, QA, sales and
sales support organizations since joining Spatial in 1993. His extensive
technical and marketing background make him uniquely qualified to oversee the
execution of PlanetCAD's product strategy. From 1990 through 1993, Mr. Hansen
worked at Graftek Corporation, a CAD/CAM, injection molding and analysis
software company, in a variety of technical and customer support positions. Mr.
Hansen holds a B.A. in Mechanical Engineering from the University of Colorado.
RONALD J. ZABILSKI, VICE PRESIDENT OF SALES
Mr. Zabilski joined PlanetCAD as Vice President of Sales following
Spatial's acquisition of Prescient Technologies Inc., Boston MA. Mr. Zabilski
was responsible for development of the sales territories outside North America
as Director of International Sales at Prescient. Mr. Zabilski had responsibility
for managing the indirect sales channel in Europe and Asia, as well as North
America. Mr. Zabilski has 15 years experience selling engineering and design
software applications and services into the Aerospace, Automotive and Discrete
Manufacturing Industries
Before becoming Director of International Sales for Prescient
Technologies, Mr. Zabliski was Director of Project Consulting and Director of
Customer Service. Prior to joining Prescient, he was responsible for Advanced
Construction Systems for Stone & Webster Engineering Corporation where he
directed the development of integrated 3D CAD with relational databases for
managing construction projects. He has had numerous papers published on these
subjects. Mr. Zabilski has a B.A. in Civil Engineering from Northeastern
University, and a MBA from Northeastern University.
JOHN RACINE, VP, PROFESSIONAL SERVICES
As Vice President of Professional Services, Mr. Racine has overall
responsibility for the implementation and support of infrastructure tools for
maximizing the value of engineering data in the Internet-based manufacturing
design and procurement supply chain. Mr. Racine's skill at building and managing
a field services organization will make an important contribution to PlanetCAD's
ability to provide turnkey installations of Enterprise Solutions.
Mr. Racine has over 13 years of experience in professional services
management in the software tools and consulting industry. His expertise includes
execution and management of global implementation services, development of help
desk and field service organizations, sales process and business case
development, strategic planning and the management of industry and customer
relationships. Previously, Mr. Racine was vice president of customer services at
Prescient Technologies, Inc, where he had overall responsibility for
customer-related services, including application engineering, consulting,
implementation services and help desk execution. While at Prescient, Mr. Racine
was instrumental in setting the product vision and strategic direction that
solidified Prescient's position in the digital data quality field. He also held
key positions with Stone & Webster Advanced Systems Development Services.
Mr. Racine holds a M.A. from Lehigh University.
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DOUGLAS HAKALA, VICE PRESIDENT, 3DSHARE DEVELOPMENT
Mr. Hakala joined PlanetCAD as Vice President of 3DShare after serving
as Vice President of ACIS Development (1997-1998) and Advanced Technology
(1999-2000) for Spatial. Mr. Hakala joined Spatial in 1989 as Director of ACIS
Software Development. His numerous senior development and management positions
in geometric modeling software over the last 20 years have made him a well-known
industry expert in the specialized field of advanced 3D solid modeling
development. Mr. Hakala holds a B.A. and a M.A. in Mathematics from the
University of Michigan and also completed doctoral studies in Computer Science
at the University of Michigan.
DAVID TAIT, DIRECTOR OF CUSTOM MANUFACTURING
Mr. Tait was appointed Director of Custom Manufacturing at Spatial's
PlanetCAD Division in March 2000. He is responsible for the development and
launch of PlanetCAD's Internet-based commerce services for custom manufacturing.
His first assignment is to commercialize bits2parts.com, a service focused on
streamlining the RFQ process for rapid prototyping between manufacturers and
service providers.
Mr. Tait's career spans more than 20 years in large manufacturing
organizations including a position as manager at General Motors Advanced Vehicle
Engineering Division, cofounder and President of LaserForm Inc., a start-up and
innovator in the Rapid Prototyping industry in 1989, co-founder and executive VP
of P2 Holdings Corp, and a Regional Manager for ARRK Product development. Mr.
Tait is an active figure in national organizations, notably an Advisory Board
Member to the Society of Manufacturing Engineers (SME) and is active in local
charities.
Mr. Tait holds a B.S. degree from Central Michigan University.
SPECIAL CONSIDERATIONS
The following is a summary of a number of factors that should be
considered by you before voting on the proposal to sell the component software
division to Dassault. You are encouraged to read the following summaries
carefully.
NEW AND UNPROVEN BUSINESS MODEL
Spatial's business model for PlanetCAD is new and unproven and may
never be successful. The success of the business plan depends on a number of
factors. These factors include:
o acceptance by consumers of 3D modeling application services as
a replacement or supplement to the traditional use of custom
developed or licensed software; and
o PlanetCAD's ability to implement new and additional services
useful to the engineering software market.
PlanetCAD will need to develop application services that stimulate and
satisfy customer demand while safeguarding copyright and other commercial rights
of the licensors of the application software made available on its Web site. If
PlanetCAD fails to achieve these objectives, its business may not be viable.
End-users may fail to adopt 3D modeling application services for a number of
reasons, including:
o lack of awareness of 3D modeling application services;
o limited access to 3D modeling application services;
o the look and feel of 3D modeling application services; or
o actual or perceived limitations in selection and availability
of 3D modeling application services.
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RISKS ASSOCIATED WITH THE INTERNET
As PlanetCAD is in the early stage of development, there are
significant uncertainties relating to our ability to successfully implement a
new business plan. The business and prospects must be considered in light of the
risks, expenses and difficulties encountered by companies in their early stages
of development, particularly companies in new and rapidly evolving markets such
as Internet services. The risks and uncertainties include, among other things,
the following:
o we may not be able to develop awareness and brand loyalty for
our products and services
o we may not be able to anticipate and adapt to the changing
market for Internet services and Internet-based commerce
o we may not be able to expand our sales and marketing efforts
o we may not be able to continue to upgrade and enhance our
technologies to accommodate expanded service offerings
o we may not successfully respond to competitive developments
o we may not be able to develop and renew strategic
relationships.
We may not be successful in accomplishing any or all of these
objectives, which could materially harm our business. In this case, the value of
your investment may decline.
LIMITED OPERATING HISTORY
Spatial began its PlanetCAD operations in June 1999 and launched its
first application service in October 1999. The PlanetCAD Division was formed in
January 2000. Its limited operating history makes it difficult to evaluate
PlanetCAD's business and prospects. Prospects must be considered in light of the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies
attempting to use technology to change long-established businesses and consumer
behavior. These risks and uncertainties are discussed throughout this section.
If PlanetCAD fails to address these risks and uncertainties, we may be unable to
grow the PlanetCAD business, increase its revenue or become profitable.
HISTORY OF LOSSES; EXPECTATION OF LOSSES FOR THE FORESEEABLE FUTURE
On a stand-alone basis, the PlanetCAD division has experienced
operating losses in each quarterly period since inception. As of June 30, 2000,
the PlanetCAD division had an accumulated deficit of $5.5 million. PlanetCAD
expects to continue to incur net losses for the foreseeable future because its
operating expenses associated with capital expenditures and marketing will
increase significantly during the next several years as we attempt to grow its
business. With increased expenses, PlanetCAD will need to generate significant
additional revenue to achieve profitability. As a result, PlanetCAD may never
become profitable. Even if PlanetCAD does achieve profitability in any period,
PlanetCAD may not be able to sustain or increase profitability on a quarterly or
annual basis.
WE DEPEND ON SWIFT AND TIMELY INTRODUCTIONS OF NEW PRODUCTS
PlanetCAD competes in an industry faced with evolving standards and
rapid technological developments. New products are introduced frequently and
customer requirements change with technology developments. PlanetCAD's success
will depend upon our ability to anticipate evolving standards, technological
developments and customer requirements and enhance existing products
accordingly. Delays in product development may adversely affect our business,
financial condition and operating results. Negative reviews of new products or
product versions could also materially adversely affect market acceptance.
PLANETCAD IS VULNERABLE TO SYSTEM FAILURES
Interruptions in its computer systems or Web site operations could
cause PlanetCAD's revenue to decline and impose substantial unforeseen costs on
its operations. If customers experience significant interruptions or slow
response times in its Web services, the attractiveness of 3D engineering data
management and integration services as
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a viable alternative to traditional licensed or custom developed software will
decrease. Unexpected events such as natural disasters, power losses and
vandalism could damage PlanetCAD's systems. Also, telecommunications failures,
computer viruses, electronic break-ins or other similar disruptive problems
could adversely affect the operation of its systems. PlanetCAD's insurance
policies may not adequately compensate Spatial for any losses that may result
from these types of system problems.
SYSTEM CAPACITY CONSTRAINTS
A substantial increase in the use of PlanetCAD's products and services
could strain the capacity of its systems, which could lead to slower response
time or system failures. These failures or slowdowns could frustrate customers
and harm its business. Although PlanetCAD has designed and tested its system to
handle several times the highest daily traffic volume PlanetCAD has experienced
to date, PlanetCAD cannot be certain that its systems will be able to meet
sporadic or sustained increases in its Web-site traffic. As a result, its
ability to scale up to its expected traffic levels while maintaining
satisfactory performance may be compromised. As traffic volume increases,
PlanetCAD will need to purchase additional servers and networking equipment to
maintain adequate data transmission speeds. The availability of these products
and related services may be limited or their cost may be significant.
UNKNOWN SOFTWARE DEFECTS
PlanetCAD's platform depends on complex computer software,
both internally developed and licensed from third parties. Complex software
often contains defects, particularly when first introduced or when new versions
are released. Although PlanetCAD conducts extensive testing, PlanetCAD may not
discover software defects that affect its new or current services or
enhancements until after they are deployed. If PlanetCAD experiences service
interruptions or markets products and services that contain errors or that do
not function properly, PlanetCAD may experience negative publicity, loss of or
delay in market acceptance, or claims against PlanetCAD by customers, any of
which could harm its business.
ABILITY TO RAISE ADDITIONAL CAPITAL
In addition to the proceeds of the sale of the component software
division and the investment by Dassault, PlanetCAD may need to raise additional
capital to fund operating losses, develop and enhance its services and products,
fund expansion, respond to competitive pressures or acquire complementary
products, businesses or technologies. PlanetCAD may not be able to raise
additional financing on favorable terms, if at all. If PlanetCAD raises
additional funds through the issuance of equity or convertible debt securities,
the percentage ownership of its stockholders will be reduced and the securities
issued may have rights, preferences or privileges senior to those of its common
stock. If PlanetCAD cannot raise adequate funds on acceptable terms, its ability
to fund growth, take advantage of business opportunities, develop or enhance
services or products or otherwise respond to competitive pressures will be
significantly limited.
OUR PRODUCTS MAY CONTAIN UNDETECTED ERRORS
PlanetCAD's products or services may contain undetected errors when
first introduced or as modifications are released. In the past, PlanetCAD has
discovered software errors in some new products and enhancements after their
introduction. We may find errors in current or future new products or releases
after commencement of commercial use. Any errors, whether discovered before or
after commercial introduction of the product or service, may result in delay,
which could materially adversely affect PlanetCAD's business, operating results
and financial condition. Although PlanetCAD and Spatial have not experienced
product liability claims by customers in the past as a result of product or
service errors, such claims might be brought against PlanetCAD in the future.
COMPETITION IN OUR INDUSTRY IS INTENSE
The markets for PlanetCAD's products and services are highly
competitive, rapidly changing and subject to constant technological innovation.
Participants in these markets face constant pressure to accelerate the release
of new products, enhance existing products, introduce new product features and
reduce prices. Many of PlanetCAD's competitors or potential competitors have
significantly greater financial, managerial, technical and marketing
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resources than PlanetCAD. Actions by competitors that could materially adversely
affect PlanetCAD's business, financial condition and results of operations
include:
o a reduction in product or service prices;
o increased promotion;
o accelerated introduction of, or the announcement of, new or
enhanced products, services or features;
o acquisitions of software applications or technologies from
third parties; or
o product or service giveaways or bundling.
In addition, PlanetCAD's present and future competitors may be able to
develop comparable or superior products or respond more quickly to new
technologies or evolving standards. Accordingly, PlanetCAD may be unable to
consistently compete effectively in its markets, competition might intensify or
future competition may develop, all of which could materially adversely affect
PlanetCAD's business, financial condition or results of operations.
WE ARE DEPENDENT UPON KEY PERSONNEL AND THE ABILITY TO HIRE ADDITIONAL
PERSONNEL
PlanetCAD's executive officers and key employees are vital assets.
PlanetCAD also depends on the ability to attract, retain and motivate high
quality personnel, especially management, skilled development personnel and
sales personnel. Competition for skilled development personnel with specialized
experience and training relevant to 3D modeling and Web-based software is
intense. There are a limited number of experienced people in the United States
with the skills and training PlanetCAD requires.
The loss of any of PlanetCAD's key employees could materially adversely
affect its business, financial condition or operating results. A failure to
recruit executive officers or key sales, management or development personnel
would similarly harm PlanetCAD's growth and competitiveness.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH
The anticipated growth in PlanetCAD's business may place substantial
demands on its managerial, operational and financial resources. PlanetCAD's
future success will depend upon its ability to:
o continue to enhance the PlanetCAD suite of products,
o respond to competitive developments,
o expand PlanetCAD's sales and marketing efforts, and
o attract, train, motivate and retain qualified management and
engineering personnel.
Although PlanetCAD believes its systems and controls are adequate for
its current level of operations, PlanetCAD may need to add additional personnel
and expand and upgrade its systems and controls to manage possible future
growth. The failure to do so could have a material adverse effect upon
PlanetCAD's business, financial condition and results of operations.
In the future, PlanetCAD may acquire additional complementary
companies, products or technologies. Managing acquired businesses entails
numerous operational and financial risks. These risks include difficulty in
assimilating acquired operations, diversion of management's attention and the
potential loss of key employees or customers of acquired operations. PlanetCAD
may not be able to achieve or effectively manage growth, and failure to do so
could materially adversely affect its operating results.
WE MAY BE EXPOSED TO RISKS OF INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS INFRINGEMENT
PlanetCAD's proprietary technologies are crucial to its success and
ability to compete. PlanetCAD relies on trade secret and copyright laws to
protect its proprietary technologies but its efforts may be inadequate to
protect these proprietary rights or to prevent others from claiming violations
of their proprietary rights. We have no patents with respect to the technology
used by PlanetCAD. Further, effective trade secret and copyright protection may
not be available in all foreign countries.
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PlanetCAD generally enters into confidentiality or license agreements
with employees and consultants. Additionally, PlanetCAD generally controls
access to and distribution of its software, documentation and other proprietary
information. Despite PlanetCAD's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. Policing unauthorized use of
our proprietary information is difficult.
The unauthorized misappropriation of PlanetCAD technology could have a
material adverse effect on our business, financial condition and results of
operations. If PlanetCAD resorts to legal proceedings to enforce its proprietary
rights, the proceedings could be burdensome and expensive and could involve a
high degree of risk.
PlanetCAD may also be subject to claims alleging infringement by
PlanetCAD of third party proprietary rights. Litigating such claims, whether
meritorious or not, could be costly. These claims might require PlanetCAD to
enter into royalty or license agreements, the terms of which may be unfavorable
to PlanetCAD. If PlanetCAD were found to have infringed upon the proprietary
rights of third parties, it could be required to pay damages, cease sales of the
infringing products and redesign or discontinue such products, any of which
could have a material adverse effect on its business, financial condition or
results of operations.
PROTECTION AGAINST ONLINE SECURITY BREACHES
A significant barrier to Internet-based commerce and communications is
the secure transmission of confidential, proprietary and copyrighted information
over public networks. PlanetCAD's security software and other security measures
may not prevent security breaches and unauthorized access to engineering data
management and integration services or copying of third-party software.
Substantial or ongoing security breaches of PlanetCAD's system or other
Internet-based systems could reduce customer confidence in PlanetCAD's Web site.
This could lead to reduced usage and lower revenue. A third party who is able to
circumvent PlanetCAD's security systems could steal proprietary information,
make and distribute unauthorized copies of proprietary software or cause
interruptions in PlanetCAD's operations. In response to a breach, PlanetCAD
would likely incur substantial remediation and prevention costs. If PlanetCAD
suffers significant or repeated breaches of security, its reputation would be
harmed, and PlanetCAD could be exposed to systems failures, data loss or
litigation, any of which could have a material adverse effect on PlanetCAD's
results of operations. Moreover, PlanetCAD's insurance policies may be
inadequate to reimburse it for losses caused by security breaches.
OUR STOCK PRICE IS HIGHLY VOLATILE
The market price of our common stock has been highly volatile and is
likely to continue to be volatile. Factors affecting our stock price may
include:
o fluctuations in our operating results;
o announcements of technological innovations or new software standards by
us or competitors;
o published reports of securities analysts;
o developments in patent or other proprietary rights;
o changes in our relationships with development partners; and o general
market conditions, especially regarding the general performance of
comparable technology stocks.
Many of these factors are beyond our control. These factors may
materially adversely affect the market price of our common stock, regardless of
our operating performance.
DIFFICULTIES DOING BUSINESS IN INTERNATIONAL MARKETS
PlanetCAD's ability to sell engineering data management and integration
and other Internet-based engineering services in international markets will
depend in part on several legal issues relating to the Internet and risks
inherent in doing business on an international level. Factors that may affect
PlanetCAD's international expansion efforts include:
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o its inability to obtain or resolve uncertainties concerning
territorial rights to software;
o copyright laws that are not uniform, or uniformly enforced, in
all countries;
o export restrictions;
o export controls relating to encryption technology;
o longer payment cycles;
o problems in collecting accounts receivable;
o political and economic instability; and
o potentially adverse tax consequences.
PlanetCAD has no control over many of these factors and the occurrence
of any of them could harm its international business efforts.
USE OF THE INTERNET
A number of factors may inhibit Internet usage, including inadequate
network infrastructure, security concerns, inconsistent quality of service and
lack of availability of cost-effective, high-speed service. If Internet usage
grows, the Internet infrastructure may not be able to support the demands placed
on it by this growth and its performance and reliability may decline. If
Internet outages or delays occur frequently in the future, Internet usage as
well as Internet-based commerce and the usage of its products and services could
grow more slowly or decline.
UNCERTAINTIES AND POTENTIAL GOVERNMENT REGULATIONS REGARDING THE
INTERNET
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws to the Internet, could decrease
the demand for PlanetCAD's products and services, increase its cost of doing
business or otherwise have a material adverse effect on its business, financial
condition and results of operations. New laws or new applications of old laws
could subject Spatial to content-based claims brought by Internet users.
INTERNET RELATED TAXES
The tax treatment of the Internet and Internet-based commerce is
currently unsettled, and any legislation that substantially impairs the growth
of Internet-based commerce could seriously harm its revenue and prospects.
PlanetCAD does not collect sales tax or other similar taxes in connection with
its sales. One or more states or the federal government may seek to impose sales
tax collection obligations on out-of-state companies that engage in or
facilitate on-line commerce, and a number of proposals have been made at the
state and local level that would impose additional taxes on Internet-based
commerce. The Internet Tax Freedom Act of 1998 placed a three-year moratorium on
selected types of federal, state and local taxation on Internet commerce. This
tax moratorium does not, however, prohibit states or the Internal Revenue
Service from collecting taxes on income, if any, or from collecting taxes that
are due under existing tax rules. A successful assertion by one or more states,
the federal government or any foreign country that PlanetCAD should pay taxes on
the sales of engineering data management and integration services over the
Internet could harm PlanetCAD's business. PlanetCAD cannot assure you that
future laws will not impose taxes or other regulations on Internet commerce, or
that the three-year moratorium will not be repealed or renewed, any of which
could substantially impair the growth of Internet-based commerce.
ACCOUNTING TREATMENT
The sale of the component software division will be accounted for as a
sale and Spatial will recognize gain or loss on the sale to the extent the
portion of the purchase price exceeds or is less than Spatial's basis in the
assets comprising the component software division.
FEDERAL INCOME TAX TREATMENT
As a result of the sale of the component software division, Spatial
will recognize taxable income. The aggregate amount of taxable income that
Spatial will recognize will equal the difference between the amount received
from Dassault and Spatial's basis in the assets sold. Because Spatial has
nominal basis in the assets sold, the amount of taxable income recognized from
the sale will approximate the consideration received. As of
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December 31, 1999, Spatial had a $16,176,000 operating loss carryforward that is
available to reduce the taxable income from the sale.
The proposed sale will not have any federal income tax consequences to
Spatial's stockholders because the stockholders will not receive any
consideration in connection with the sale of the component software division to
Dassault.
REGULATORY APPROVALS
To Spatial's knowledge, completion of the sale of the component
software division is not subject to any regulatory approvals or filings other
than the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the filing of this proxy statement
with the Securities and Exchange Commission. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act expired on August 15, 2000.
OPINION OF ROTH CAPITAL PARTNERS, INC.
Spatial Technology engaged Roth Capital Partners, Inc. ("RCP") to
render an opinion as to the fairness from a financial point of view to Spatial
Technology stockholders of the sale of assets of its component business division
to Dassault. RCP was selected by Spatial's board of directors based on RCP's
qualifications and expertise. RCP rendered the opinion on August 28, 2000 to
Spatial's board that based on the qualifications and limitations set forth in
the opinion, the merger is fair to the Spatial Technology stockholders from a
financial point of view. No limitations were placed on RCP by the Spatial
Technology board with respect to the investigation made or the procedures
followed in preparing and rendering its opinion.
The full text of the opinion of RCP is attached as Appendix B to this
proxy statement and is incorporated in this proxy statement by reference.
Spatial Technology stockholders are urged to read the opinion in its entirety
for the assumptions made, procedures followed, other matters considered and
limits of the review by RCP. The discussion of the opinion of RCP set forth in
this proxy statement is qualified in its entirety by references to the full text
of RCP's opinion. RCP's opinion was prepared for the Spatial Technology board of
directors and is directed only to the fairness, from a financial point of view,
to Spatial Technology stockholders of the sale of assets under the purchase
agreement and does not constitute a recommendation to any Spatial Technology
stockholder as to how to vote at the Spatial Technology stockholders' meeting.
In its review of the sale of assets, and in arriving at its opinion,
RCP, among other things, reviewed and analyzed: (1) Spatial's strategic
financing options in the context of the current state of the market for public
and private equity; (2) the historical and projected pro forma financial
statements of the component business division; (3) the recent public filings of
Spatial; (4) the purchase agreement executed between Spatial and Dassault; and
(5) the business contracts between Spatial and Dassault to be executed in
conjunction with the closing under the purchase agreement. In addition, it also
performed the following due diligence: (1) interviewed Spatial's senior
management with respect to the components business division and its prospects;
(2) reviewed certain publicly available information of companies which RCP
believes to be comparable to the component business division; (3) reviewed the
trading history of Spatial's common stock for the most recent several years and
in comparison to the trading history of other companies that we deemed relevant;
(4) compared the historical, present and projected financial performance and
valuation of Spatial in comparison with other companies that we deemed relevant;
(5) evaluated the discounted cash flow of Spatial based on projected financial
data furnished to us by Spatial; and (6) compared the valuation of the
components business division with the implied valuation of certain other
transactions that we deemed relevant.
RCP did not assume responsibility for independent verification of any
of the information concerning the component business division considered in
connection with its review of the sale of the assets and, for purposes of its
opinion, RCP assumed and relied upon the accuracy and completeness of all such
information. RCP assumed that there has been no material change in the component
business division assets, financial condition, results of operations, business
or prospects since the date of its last financial statements. RCP relied on
advice of counsel and independent accountants of Spatial as to all legal and
financial reporting matters with respect to the component business division, the
sale of assets and the purchase agreement. In connection with its opinion, RCP
did not
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prepare or obtain any independent evaluation or appraisal of any of the assets
or liabilities of the component business division, nor did it conduct a physical
inspection of its properties or facilities. With respect to the financial
forecasts and projections used in its analysis, RCP assumed that they reflected
the best currently available estimates and judgments of the expected future
financial performance. For the purposes of its opinion, RCP also assumed that
the component business division was not a party to any pending transactions,
including external financings, recapitalizations or merger discussions, other
than the sale of assets and those in the ordinary course of conducting its
business. RCP's opinion is necessarily based upon market, economic, financial
and other conditions as they existed and can be evaluated as of the date of the
opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of RCP analyses set forth below does not purport to be a complete description of
the presentation by RCP to the Spatial Technology board. In arriving at its
opinion, RCP did not attribute any particular weight to any analysis or factor
considered by it but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, RCP believes that its
analyses and the summary set forth below must be considered as a whole, and that
selecting portions of its analyses without considering all factors and analyses
could create an incomplete view of the processes underlying the analyses set
forth in RCP's presentation to the Spatial Technology board and RCP's opinion.
In performing the analyses, RCP made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Spatial Technology and
Dassault. The analyses performed by RCP and summarized below are not necessarily
indicative of actual values or actual future results that may be significantly
more or less favorable than suggested by those analyses. Additionally, analyses
relating to the values of the businesses do not purport to be appraisals or to
reflect the prices at which businesses actually may be acquired.
RCP addressed whether the value offered in the sale of assets is fair
from a financial point of view to Spatial shareholders. Our analysis used a
range of potential values upon closing, given current market conditions and
expectations. The following is a brief summary of selected financial analyses
performed by RCP in connection with providing its opinion to the Spatial
Technology board on August 28, 2000.
Discounted Cash Flow Analysis: RCP performed a discounted cash flow
analysis for the component business division using projected financial
performance for fiscal 2000 through fiscal 2010 derived from projections
prepared by Spatial Technology management. The analysis aggregated:
o The present value of the projected free cash flow through
2010; and
o The present value of a terminal value at the end of fiscal
year 2010.
A terminal value is the hypothetical value of selling the enterprise in
its entirety at some future date. The terminal value for the component business
division was determined by applying a multiple derived from the component
business division's weighted averaged cost of capital and growth into perpetuity
of four percent times the component business division estimated after tax
operating cash flow ("ATOCF") in fiscal 2010. The component business division
ATOCF stream and terminal value were discounted to present values using a range
of discount rates from 20% to 25%. The discount rate is related to the estimated
weighted average cost of capital to Spatial which is influenced by several
factors including the historical performance of equity markets, the relative
performance of the component business division's sector and the size of Spatial.
The discounted cash flow value was calculated for the enterprise value and then
further adjusted for component business division's cash and debt to reflect the
equity value. The discounted cash flow equity value for the component business
division ranged from $16.7 million to $22 million. The value range of the
component business division estimated by this method was within or below the
purchase price anticipated at closing and supported the financial fairness of
the sale of assets.
Analysis of Publicly Traded Comparable Companies: RCP compared selected
historical financial information of the component business division to
publicly-traded companies RCP deemed to be comparable to the component business
division. RCP examined five companies. These companies consisted of:
o 3Dfx Interactive,
o Corel Corp.,
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o 3 D Systems Corp.,
o Autodesk Inc., and
o Micrografx, Inc.
Each of which is a publicly-traded company in the software business
with a focus on 3D modeling. Comparing the value of the proposed purchase price
of the component business division, using several standard comparative measures,
reveals that the component business division measures are similar to those of
the median of the five companies. The ratios highlighted include (i) a projected
net income multiple using the companies' equity value which is the value of the
total shares outstanding times the recent share price, (ii) a revenue multiple
using the companies' enterprise value which is the equity value plus the
companies' debt outstanding less cash on the balance sheet, and (ii) projected
revenue, operating income and EBITDA multiples using the companies' enterprise
value. The multiples measured each company's equity value or enterprise value in
relation to each company's revenues, operating income and net income for the
twelve months period ended just prior to the date of the analysis. In the
enterprise value comparisons, RCP noted the median multiple of latest twelve
months revenue for the publicly-traded companies was 1.2, compared to the
component business division multiple of 1.7 for the proposed consideration of
$25.0 million. For projected revenue, RCP noted the median multiple of projected
2000 was 0.9, compared to the component business division multiple of 1.5. For
projected operating income, RCP noted the median multiple of projected 2000 was
16.0, compared to the component business division multiple of 16.8. For
projected EBITDA, RCP noted the median multiple of projected 2000 was 7.4,
compared to the component business division multiple of 12.2 for the proposed
consideration of $25.0 million. In the equity value comparison, RCP noted the
median multiple of projected 2000 net income was 14.6, compared to the component
business division multiple of 20.2 for the proposed consideration of $25.0
million. Differences in multiples between component business division and the
comparable companies may be attributed to the larger size of the comparables and
better predictability of the comparables' future earnings. As a whole, this
analysis suggests that the proposed consideration of $25.0 million is similar to
the median multiples of the comparable companies and are, therefore, fair, from
a financial point of view, to Spatial's shareholders.
Precedent Transaction Analysis: RCP compared the sale of assets with
selected merger and acquisition transactions in the software industry from 1995
to the date of the opinion with a transaction value of less than $30 million and
focused on 15 transactions. Only transactions representing the sale of greater
than fifty percent of the entity were included in the analysis. These
transactions involved the acquisition of:
o Easel Corp
o Intermetics Inc.
o Altai Inc.
o Technalysis Corp.
o New Image Industries Inc.
o CUSA Technologies Inc.
o Radius PLC
o Red Brick Systems Inc.
o COHR Inc.
o Division Group PLC
o Precision Systems Inc.
o Expert Software
o CommTouch Software Ltd.
o Analogy Inc.
o Telesoft Corp.
Comparing the value of the component business division proposed
purchase price with the acquisition values realized in the transactions listed,
using several standard comparative measures, reveals that the component business
division revenue multiple is above the median multiples of the 15 transactions.
The revenue and total assets multiples were the only meaningful measures for the
analysis, which use revenue and total assets as ratios to each company's
enterprise value which is the equity value plus the company's debt outstanding
less cash on the balance sheet. The multiples measured the equity value or
enterprise value in relation to each company's revenues and total assets for the
twelve-month period ended just prior to the date of the transaction. In the
enterprise value
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comparisons, RCP noted the median multiple of latest twelve months revenue for
the publicly-traded companies was 0.85 compared to the component business
division multiple of 1.49 at the proposed consideration of $25.0 million. For
total assets, RCP noted the median multiple for the comparable transactions of
1.28, compared to component business division's multiple of 1.95. This analysis
suggests that the proposed consideration of $25.0 million is above the median
multiple of the comparable companies and is, therefore, relatively favorable to
Spatial Technology.
The foregoing discussion of RCP's opinion is qualified in its entirety
by reference to the full text of such opinion which is attached as Appendix B to
this proxy statement.
RCP, as part of its investment banking services, is regularly engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, strategic transactions, negotiated underwritings, private
placements and valuations for corporate and other purposes.
Spatial Technology has agreed to pay RCP a fairness opinion fee of
$200,000 in connection with the delivery of its fairness opinion and a $75,000
transaction fee upon closing of the sale of the component software division, of
which $10,000 has been paid. Spatial Technology also has agreed to reimburse RCP
for its reasonable out-of-pocket expenses and to indemnify RCP, including
against liabilities under the federal securities laws or relating to or arising
out of RCP's engagement.
THE PURCHASE AGREEMENT
TERMS OF PURCHASE AND SALE
The following is a brief summary of the material provisions of the
purchase agreement, dated as of July 4, 2000, as amended on September 2, 2000,
relating to the sale of the component software division to Dassault. This
summary description of the purchase agreement describes the salient terms of the
agreement, but does not describe every term or detailed condition of the
purchase agreement. You are encouraged to review the purchase agreement in its
entirety, a copy of which is attached to this proxy statement as Appendix A and
is incorporated herein by reference.
ASSETS SOLD TO AND LIABILITIES ASSUMED BY DASSAULT
Pursuant to the terms of the purchase agreement, Spatial has agreed to
sell to Dassault all of the assets and rights of Spatial relating to its
component software division, including, without limitation:
o the component software division as a going concern;
o all permits, licenses and authorizations used in connection
with the component software division;
o all tangible personal property and vehicles of Spatial
relating to the component software division;
o the goodwill of Spatial, including the right to the name
"Spatial";
o all inventories and certain receivables related to the
component software division;
o the sales and promotional literature and customer lists of
Spatial;
o the component software and other intellectual property used or
related to the component software division; and
o the rights of Spatial, to the extent assignable, under
contracts and licenses related to the component software
division.
In addition to the acquisition of the assets as described above,
Dassault has also agreed to assume or perform, subsequent to the closing date of
the proposed sale, Spatial's obligations pursuant to certain contracts
enumerated in the purchase agreement that will be assigned by Spatial to
Dassault, as well as certain liabilities arising out of the transferred assets
after the closing. These assets and liabilities will be contributed to Spatial
Components LLC prior to the closing. At the closing of the transactions
contemplated by the purchase agreement, Spatial will sell the membership
interests in Spatial Components LLC to Dassault.
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All of the assets and liabilities of Spatial relating to Spatial's
Internet application service provider business known as PlanetCAD, and all of
the liabilities of the component software division not assumed by Dassault, will
be retained by Spatial.
CONSIDERATION
In consideration the sale of the component software division to
Dassault, Spatial will receive an amount in cash equal to $25.0 million, plus
(a) the aggregate amount of the costs and expenses that have been paid by
Spatial prior to the closing for products and services to be delivered or
rendered to the component software division by third parties on or after the
closing, plus (b) the aggregate amount of all accounts receivable, notes and
other amounts receivable from third parties arising from the conduct of the
component software division before the closing date and related to the amounts
referred to in clause (c), minus (c) the aggregate amount of cash and
receivables received by Spatial on or before the closing date for work or
obligations relating to maintenance, support and consulting services to be
performed on or after the closing in connection with the component software
division.
Dassault has also agreed in an amendment to the purchase agreement, a
copy of which is attached hereto as Appendix A, to loan $2.0 million of the
purchase price to Spatial in advance of the closing of the transaction, which
amount, including accrued and unpaid interest, will be repaid by Spatial as an
offset against the purchase price at the closing or, in the event that the
purchase agreement is terminated before the closing, upon such termination. If
the loan becomes payable due to termination of the purchase agreement, it will
be repaid, at Dassault's option, either in cash or in shares of common stock of
Spatial, on the basis of $3.60 per share. In addition, $1.0 million of the
purchase price for the component software division will be deposited into escrow
at the closing of the transaction to secure a portion of Spatial's potential
indemnification obligations under the purchase agreement.
At or prior to the closing of the sale of the component software
division, Dassault has agreed to make a $2.0 million investment in Spatial in
exchange for 555,556 shares, or $3.60 per share, of newly issued shares of
Spatial common stock. As part of the transactions contemplated by the purchase
agreement, Dassault Systemes or an affiliate of Dassault Systemes will enter
into, at or prior to the closing, several agreements with Spatial relating to
the software and other intellectual property used by the component software
division and PlanetCAD and to the Internet-based services to be provided by
PlanetCAD to Dassault Systemes and its customers.
CLOSING
The closing of the proposed sale of the component software division
will take place at 10:00 A.M. Colorado time on the second business day following
the satisfaction or waiver of all of the conditions to the obligations of the
parties described below or at another time or date mutually agreed upon by the
parties; provided, however, that both Spatial and Dassault have the right to
terminate the purchase agreement in the event that the closing has not occurred
on or before November 20, 2000.
CONDITIONS TO CLOSING
The obligations of each party to consummate the purchase and sale are
subject to the satisfaction or, if permissible, waiver, of certain conditions,
including (a) the approval of the purchase agreement by the stockholders of
Spatial in accordance with General Corporation Law of the State of Delaware and
Spatial's charter documents, (b) the waiting period (and any extension thereof)
applicable to the consummation of the purchase and sale under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, will have
expired or been terminated, (c) all consents required pursuant to any antitrust
or competition law will have been obtained, and (d) no action will have been
commenced by or before any governmental authority seeking to restrain or
materially and adversely alter the transactions contemplated by the purchase
agreement.
The obligations of Dassault are subject to the satisfaction or, if
permissible, waiver, of certain conditions, including (a) Spatial will have
performed in all material respects each of its covenants and agreements
contained in the purchase agreement, and the representations and warranties of
Spatial will still be true in all material respects, and Dassault will have
received a certificate signed on behalf of Spatial by one of its officers to
such effect, (b) there will have been no material adverse change with respect to
Spatial since the date of the purchase agreement, (c) the transfer of the assets
of the component software division to Spatial Components will have been
consummated,
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(d) Dassault will have received a copy of the resolutions of Spatial's board of
directors approving the transaction, (e) Dassault will have received
confirmation that no foreign, federal, state or local withholding tax is
required to be withheld in connection with the transaction, (f) Spatial and
Dassault shall have received all authorizations and approvals that Dassault
deems reasonably necessary or desirable to effectuate the acquisition, including
obtaining third party consents of parties to material agreements, (g) certain
key employees of Spatial will have accepted employment with Dassault, (h) no
more than ten employees of Spatial's component software division will have
declined employment with Dassault (subject to Spatial's right to hire
replacement employees), (i) the parties to the ancillary and intellectual
property agreements contemplated by the purchase agreement will have signed such
agreements, and (j) the expiration date of the Software Consulting Agreement
dated December 31, 1997, between Three-Space Ltd. and Spatial shall have been
extended until at least July 31, 2001.
The obligations of Spatial are subject to the satisfaction or waiver,
of certain conditions, including (a) Dassault will have performed in all
material respects each of its covenants and agreements contained in the purchase
agreement and the representations and warranties of Dassault will still be true
in all material respects on the closing date, (b) the parties to the ancillary
and intellectual property agreements contemplated by the purchase agreement will
have signed such agreements, (c) Dassault or an affiliate of Dassault will have
entered into the Joint Software License Agreement, and (d) Spatial shall have
used commercially reasonable efforts to enter into a modified license agreement
and to permit Dassault to enter into a substantially similar license software
agreement with Geometric Software Co., Ltd., regarding the licensing of certain
software from Geometric.
REPRESENTATIONS AND WARRANTIES
The purchase agreement contains various representations and warranties
by Spatial and Spatial Components that are customary for sellers in similar
transactions relating to, among other things: (a) organization, standing and
qualification; (b) authority to perform obligations under the purchase
agreement; (c) consents and approvals and compliance with charter documents and
laws; (d) SEC filings and accuracy of financial statements; (e) receivables and
prepaid royalties; (f) absence of certain changes or events; (g) permits and
compliance with applicable laws; (h) tax matters; (i) litigation; (j) material
agreements; (k) employee benefits matters; (l) no undisclosed material
liabilities; (m) labor matters and employees; (n) intellectual property and
software; (o) inventories; (p) sales and purchase order backlog; (q) brokers;
(r) environmental matters; (s) customers and suppliers; (t) insurance; (u)
tangible personal property and real property; (v) assets; and (w) subsidiaries
and membership interests in Spatial Components LLC.
The purchase agreement contains representations and warranties by
Dassault that are customary for purchasers in similar transactions relating to,
among other things: (a) organization and standing; (b) authority of Dassault to
perform its obligations under the purchase agreement; (c) consents and approvals
and compliance with charter documents and laws; (d) retention of membership
interests after the transaction, and (e) brokers.
PROHIBITION ON COMPETITION AND SOLICITATION OF EMPLOYEES
Under the terms of the purchase agreement, both Spatial and Dassault
have agreed to restrict its ability to solicit certain employees of the other.
For two years following the closing, Spatial will not hire any employee of
Dassault engaged in the component software division purchased from Spatial or
any affiliate of Dassault or induce any such employee to violate the terms of
any contract with Dassault or any affiliate of Dassault. For two years following
the closing, Dassault will not hire any employee of Spatial or any affiliate of
Spatial or induce any such employee to violate the terms of any contract with
Spatial or any affiliate of Spatial.
In addition, Spatial has agreed to restrict its ability to enter
certain businesses: (a) for five years from the closing of the transactions
contemplated by the purchase agreement, Spatial will not develop
computer-assisted design, computer-assisted modeling or product data management
component software, which we refer to as "CAD/CAM/PDM component software," for
resale as component software anywhere in the world, or, without the consent of
Dassault, own an interest in or manage or assist any company that develops
CAD/CAM/PDM component software for resale; (b) for one year from the closing,
Spatial will not distribute such software anywhere in the world or, without the
consent of Dassault, manage or assist any party that does; and (c) for three
years from the closing,
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Spatial will not distribute competing CAD/CAM/PDM solid model kernals or,
without the consent of Dassault, manage or assist any party that does.
COVENANTS
Spatial has agreed that, until the closing of the transactions
contemplated by the purchase agreement, it will conduct the component software
division in the ordinary course and continue its business policies in accordance
with past practices. As part of such undertakings, Spatial has agreed to use
commercially reasonable efforts to preserve its business organization intact,
keep available to Dassault the services of employees who devote substantial time
to the component software division, and preserve for the benefit of Dassault its
relationships with customers, suppliers and others having business relations
with the component software division. Spatial will also continue without
material modification all existing insurance policies and will not make, revoke
or change any tax election that would affect Spatial Components LLC.
Both Dassault and Spatial have agreed to use reasonable best efforts to
take all appropriate actions necessary to consummate the transactions
contemplated by the purchase agreement, including using reasonable best efforts
to obtain all necessary permits and consents from governmental authorities
including, without limitation, filing notifications under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and any similar filings required
by the laws of France or other non-United States government authority. However,
Dassault is not required to take any action that requires divestiture of any
assets of Dassault or Spatial's component software division. Dassault and
Spatial have each agreed to cooperate and use reasonable best efforts to contest
and resist any action that restricts or prevents the consummation of the
transaction. Spatial has agreed to use reasonable best efforts, and Dassault has
agreed to assist Spatial, to obtain certain consents from third parties in
connection with the transactions contemplated by the purchase agreement. If any
consents, approvals or authorizations are necessary to preserve the component
software division of Dassault, or any right under any lease, license, contract
or other agreement or arrangement to which Spatial is a party, and not obtained
prior to the closing of the transaction, Spatial has agreed to cooperate with
Dassault after the closing to obtain the requisite consents, approvals or
authorizations, or, if the consents, approvals or authorizations cannot be
obtained, use reasonable best efforts to provide Dassault with the benefits of
the affected lease, license, contract or other agreement or arrangement.
Prior to the closing, both Dassault and Spatial have agreed to inform
the other party of any fact or event which could result in a material breach of
any representation, warranty or covenant of the disclosing party or make any
representation or warranty untrue or incorrect in any material respect. Spatial
has also agreed to inform Dassault of any material development affecting the
assets, liabilities, business, financial condition, customer or supplier
relations or prospects of the component software division. Spatial has agreed
that following the closing it will cease to use the name "Spatial" and any logo,
mark or name associated with the component software division and will, within 45
days of the closing, remove such logos, marks and names from all items and
materials retained by Spatial. Spatial will change its name after the closing to
another corporate name that does not include the name "Spatial." Subject to the
approval of Spatial's stockholders, Spatial will change its corporate name to
PlanetCAD Inc.
Dassault has agreed to waive compliance by Spatial with any applicable
bulk sale and bulk transfer laws, and Spatial has agreed to indemnify Dassault
for any liabilities that may be asserted by third parties (including, without
limitation, any taxes) in connection with Spatial's failure to comply with any
such law. Spatial has agreed to make the necessary filings with all applicable
tax authorities to protect Dassault from liability as a transferee of the assets
of the component software division and to file necessary returns and pay taxes
due for all periods prior to the closing date. Dassault and Spatial have agreed
to each be liable for one half of the conveyance taxes arising out of the
transactions contemplated by the purchase agreement. Spatial will prepare, with
the review and consent of Dassault, all documents required to be filed in
connection with such taxes so as to permit any tax to be paid as soon as
practicable after the closing. After the closing, Dassault and Spatial have
agreed to provide each other with any information the other may request in
connection with the filing of any tax return or participation in any tax audit
or the making of any representation to any party desiring to purchase any part
of the component software division from Dassault.
Each of Dassault and Spatial has agreed that it will not issue any
press release or make any public statement with respect to the purchase
agreement or the transactions contemplated by the purchase agreement without the
prior
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consent of the other party, except as may be required by law or any listing
agreement with a securities exchange to which Dassault or Spatial is a party.
After the closing, Spatial has agreed not to disclose any trade secrets or
confidential information relating to the component software division unless
legally compelled to do so, and Dassault has agreed not to disclose any trade
secrets or confidential information relating to the PlanetCAD Internet service
business or any other assets retained by Spatial after the closing unless
legally compelled to do so.
Spatial has agreed to pay, within 30 days following the closing date,
$400,000 for Dassault's performance of services in connection with obligations
assumed as part of prepaid royalties liabilities transferred to Dassault.
For three years after the closing, subject to applicable law, Spatial
has agreed to notify Dassault in writing of any proposal to purchase the assets
retained by Spatial in the event Spatial's board of directors decides to sell
Spatial. In connection with such a notification, Spatial has also agreed to
provide to Dassault, on a confidential basis, due diligence materials
substantially equivalent to those provided to the potential purchaser.
COMPONENT SOFTWARE DIVISION EMPLOYEE MATTERS
Dassault has agreed to offer employment, as of the closing of the
transactions contemplated by the purchase agreement, to employees of Spatial who
are employed by Spatial's component software division at rates of compensation
no less than those they received from Spatial as of the closing date. To the
extent that service is relevant for eligibility and vesting under any Dassault
employee benefit plan, Dassault has agreed to credit each transferred employee
with the respective employee's length of service with Spatial. Dassault will
also waive any pre-existing conditions or limitations with respect to medical
and dental plans. Spatial has agreed to fully vest employees hired by Dassault
in any Spatial employee pension benefit plans and pay such employees for any
unused vacation days accrued as of the closing. Spatial will have the right to
offer certain key employees retention bonuses for payment after the closing, and
Dassault has agreed to pay such bonuses. Spatial has also agreed to amend its
stock option plans to allow for early vesting of component software division
employees who will be hired by Dassault if they continue to work for Dassault
for one year after the closing.
NO SOLICITATION OF TRANSACTIONS
Spatial has agreed that, until the earlier of the closing of the sale
of the component software division and the termination of the purchase
agreement, it will not, directly or indirectly, solicit, initiate or encourage
the submission of, any acquisition proposal, or, except as required by the
fiduciary duties of the board to Spatial's stockholders, participate in or
facilitate any discussions or negotiations regarding, any acquisition proposal
that constitutes, or may reasonably be expected to lead to, an alternative
acquisition proposal. Through July 24, 2000, Spatial was permitted to engage in
discussions or negotiations regarding the possible submission of an alternative
acquisition proposal from the companies contacted by Spatial prior to entering
into the purchase agreement with Dassault.
In the event that Spatial receives an alternative acquisition proposal
that is determined by the board to be more favorable, from a financial point of
view, to Spatial's stockholders than the transaction with Dassault, the board
may terminate the purchase agreement in order to proceed with the alternative
superior proposal, provided that Spatial will give Dassault five days prior
notice setting forth the person making such offer and the final terms of the
offer, and after giving effect to any concessions that may be offered by
Dassault. In certain circumstances, if Spatial terminates the purchase agreement
in favor of an alternative acquisition, it will be obligated to pay a "break-up
fee" to Dassault.
INDEMNIFICATION
The representations and warranties of the parties contained in the
purchase agreement or any document executed and delivered in connection with the
purchase agreement will survive for two years from the closing of the
transactions contemplated by the purchase agreement. In addition,
representations and warranties with respect to tax matters will survive for the
applicable statute of limitations, while the representations and warranties
concerning intellectual property will survive for five years from the closing
and proper organization, authority, lack of conflicts and broker's fees
representations will survive indefinitely.
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The purchase agreement obligates Spatial to indemnify Dassault for
liabilities, losses, damages, judgments and expenses resulting from:
o Spatial's breach of any surviving representation or warranty;
o Spatial's failure to fulfill any obligation under the purchase
agreement or certain agreements executed or delivered in
connection with the purchase agreement;
o any liability of Spatial that is not expressly assumed by
Dassault; and
o any claim made with respect to events occurring on or prior to
the closing by any employee hired by Dassault in connection
with the purchase of the component software division.
Spatial's liability to indemnify Dassault is limited to $5.0 million,
except that liability associated with any breach of Spatial's representations
and warranties regarding intellectual property is limited to (i) on or prior to
the second anniversary of the closing, to the purchase price paid by Dassault to
Spatial, and (ii) after the second anniversary of the closing but on or prior to
the fifth anniversary of the closing, $10 million. In addition, Dassault may not
recover any expense via indemnification unless Dassault's aggregate amount of
indemnifiable expenses exceeds $100,000, at which point Spatial will be liable
for the entire amount of Dassault's indemnifiable expenses. There is no
limitation on Spatial's liability in the case of fraud or any willful or
intentional misrepresentation. $1.0 million of the purchase price will be set
aside pursuant to an escrow agreement to secure the indemnification obligations
of Spatial. See "- Escrow Agreement" on page 34 of this proxy statement.
The purchase agreement obligates Dassault to indemnify Spatial for
expenses resulting from:
o Dassault's breach of any surviving representation or warranty;
and
o Dassault's failure to fulfill any obligation under the
purchase agreement or certain agreements executed or delivered
in connection with the purchase agreement.
Dassault's liability to indemnify Spatial is limited to $500,000. There
is no limitation on Dassault's liability in the case of fraud or any willful or
intentional misrepresentation.
Except for the right to petition a court for specific performance of an
obligation, indemnification is the exclusive remedy of Spatial and Dassault with
respect to the purchase agreement. Neither party has the right to seek any
special, incidental, punitive or consequential damages under the agreement or
other remedy at law or equity (other than specific performance). The purchase
agreement imposes specific conditions and procedures on a party seeking
indemnification, including, without limitation, notice requirements, defense of
claim procedures and settlement conditions.
ESCROW AGREEMENT
Spatial and Dassault have agreed in the purchase agreement to escrow
$1.0 million of the cash consideration to be received by Spatial from the sale
of the component software division to partially secure Spatial's potential
indemnification obligations. The escrow, or remaining portion of the escrow,
will be released to Spatial on the first anniversary of the closing of the sale.
State Street Bank and Trust Company, a trust company organized under the laws of
the Commonwealth of Massachusetts, has agreed to act as the escrow agent for the
escrowed funds.
TERMINATION
The purchase agreement may be terminated by either Spatial or Dassault
if:
o Spatial and Dassault mutually consent to such termination;
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o the purchase of the component software division is not
consummated by November 20, 2000;
o any final governmental order prevents the consummation of any
of the transactions contemplated by the purchase agreement; or
o the sale of the component software division and the other
transactions contemplated by the purchase agreement are not
approved by the stockholders of Spatial by the requisite vote.
The purchase agreement may be terminated by Dassault if:
o Spatial breaches any representation, warranty, covenant or
agreement, or if any representation or warranty of Spatial
becomes untrue, and in either case such breach or failure
prevents the fulfillment of a condition of Dassault's
obligations to consummate the purchase of Spatial's component
software division, unless such breach or failure is curable
through the exercise of reasonable best efforts and as long as
Spatial continues to exercise such efforts, Dassault may not
terminate the agreement; or
o the board of directors of Spatial modifies or changes its
recommendation of the purchase agreement or recommends to the
stockholders of Spatial another acquisition proposal.
The purchase agreement may be terminated by Spatial if:
o Dassault breaches any representation, warranty, covenant or
agreement, or if any representation or warranty of Dassault
becomes untrue, and in either case such breach or failure
prevents the fulfillment of a condition of Spatial's
obligations to consummate the sale of Spatial's component
software division, unless such breach or failure is curable
through the exercise of reasonable best efforts and as long as
Dassault continues to exercise such efforts, Spatial may not
terminate the agreement; or
o Spatial accepts any acquisition proposal that leads to a
transaction which the board of directors of Spatial reasonably
determines, in the exercise of its fiduciary duty, after
having received the written advice of its outside legal
counsel, is more favorable based on the advice of Roth
Capital, from a financial point of view, to Spatial's
stockholders than the purchase agreement (provided that, prior
to such termination, Spatial is required to (i) deliver prior
written notice to Dassault setting forth the terms of the
superior alternative proposal and (ii) grant Dassault five
days from its receipt of the notice to make concessions to
Spatial in respect to the terms of the purchase agreement).
Except for the break-up fee described below, if the purchase agreement
is terminated for any reason described above, the purchase agreement will become
void and of no further force and effect, except with respect to the obligation
of each party to pay its appropriate fees, and except that each of the parties
will retain all rights that it may have for willful or intentional breach of the
purchase agreement.
BREAK-UP FEE
In the event that the purchase agreement is terminated, Spatial will,
in certain circumstances, be obligated to pay to Dassault a fee of $400,000 plus
all of Dassault's actual out-of-pocket expenses and fees of counsel incurred in
connection with the transaction. Spatial's obligation to pay Dassault, however,
would only arise if the purchase agreement is terminated because:
(a) Spatial's board reasonably determines that another acquisition
proposal is superior, from a financial point of view, to Spatial's stockholders
than the purchase agreement;
(b) the purchase agreement is not approved by the stockholders of
Spatial and is terminated by either Dassault or Spatial after Spatial announces
that it has received another acquisition proposal and Spatial enters into an
agreement with respect to an alternate proposal within nine months from the date
the purchase agreement is terminated or an alternate proposal is consummated
within one year from the date the purchase agreement is terminated; or
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(c) Spatial enters into an agreement with respect to an alternate
proposal within nine months or the alternate proposal is consummated within one
year after the termination of the purchase agreement by:
(i) either party if the purchase is not consummated by
November 20, 2000 if such delay is solely attributable to Spatial's failure to
fulfill its obligations under the purchase agreement;
(ii) either party as a result of any final governmental order
preventing the transaction unless the order is a result of the actions of
Dassault;
(iii) Dassault because the board of Spatial withdraws,
modifies or changes its recommendation of the purchase agreement or recommends
to the stockholders of Spatial another acquisition proposal; or
(iv) Dassault because of any material breach or failure by
Spatial to fulfill any obligation under the purchase agreement.
CERTAIN ASSOCIATED INTELLECTUAL PROPERTY AGREEMENTS
The application services offered through PlanetCAD use component
software in providing services. Consequently, Spatial believes that it is
important to maintain a strong relationship with the component software division
after its sale to Dassault. In order to define that relationship, Spatial and
Dassault have agreed to enter into, at the closing, the additional intellectual
property agreements described below. These additional intellectual property
agreements include various license, services and co-branding agreements with
Dassault Systemes, the parent company of Dassault, and/or its affiliates for
software, related technology and certain other intellectual property. These
agreements include three software licenses, a Web services agreement and a
co-branding agreement, each of which includes maintenance and support
obligations.
SOFTWARE LICENSE, MAINTENANCE AND SUPPORT AGREEMENTS
In connection with the sale of Spatial's component software division,
Spatial and Dassault Systemes, the parent of Dassault, intend to enter into
directly or through one of its subsidiaries eight intellectual property and/or
software license agreements: a Cross-License Agreement, Co-Branding Agreement,
Server Software License Agreement, Web-Services Agreement, Joint Software
License Agreement, Master Software Reseller Agreement, Solidworks Server
Software License Agreement, and an IntraVision Source Code Development License
and Exclusive End-User Reseller Agreement.
CROSS-LICENSE AGREEMENT. Because the application services provided by
PlanetCAD are based in part on components that are also sold by the component
software division to third parties, Spatial and Dassault Systemes have agreed to
a cross-licensing arrangement that will allow PlanetCAD to continue using those
components. Under the terms of the Cross-License Agreement, Dassault will grant
back to Spatial a perpetual, non-exclusive license to use certain 3D component
applications software products sold to Dassault as part of the sale of the
component software division, including ACIS and IntraVISION (the "CBD
Software"). Spatial will have the right to use and modify the CBD Software
internally to develop and sell its Internet services and to distribute the
run-time version of the CBD Software solely as it is embedded in Spatial's
PlanetCAD application service provider and other Internet, intranet and
enterprise services (collectively, the "Internet Services"). Under the
agreement, Spatial will (1) not develop any CAD/CAM/PDM modeling applications
without Dassault Systemes' prior approval, (2) not use the CBD Software to
develop and market software with capabilities similar to the CBD Software, (3)
not permit any third party using the Internet Services to download and/or use
any component of the CBD Software as a stand-alone component (with certain
specific exceptions), and (4) use the CBD Software only in connection with the
delivery of the Internet Services. In consideration for Dassault Systemes'
license of the CBD Software, Spatial will pay Dassault Systemes a royalty equal
to a specified percentage of Spatial's net revenue resulting from any Internet
Services facilitated by or based on the CBD Software. The royalty is subject to
a minimum annual payment. Spatial will pay a separate royalty in connection with
the distribution of the IntraVISION and ACIS Open Viewer Plug-Ins application
software.
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Spatial has agreed to grant Dassault Systemes a perpetual,
royalty-free, non-exclusive license to use and modify internally certain of
Spatial's data translation and data exchange application software including IGES
and STEP Toolkits (the "WBM Software"). Dassault Systemes will also have the
right to distribute the WBM Software in run-time or object code format as
component products and/or stand-alone software products or in connection with
providing application service provider and other enterprise services to Dassault
Systemes' customers. Dassault Systemes will also agree to develop CATIA/SAT
translator software (the "Translator Software"). Dassault Systemes will grant
Spatial a perpetual, royalty-free, non-exclusive license to use and modify the
Translator Software as an underlying application for the Internet Services and
to distribute run-time versions of the Translator Software in connection with
the Internet Services. If Dassault Systemes does not develop the Translator
Software within a certain time period, Dassault Systemes will provide Spatial
with sufficient technical information about the CATIA application software to
permit Spatial to develop the Translator Software. If Spatial develops the
Translator Software, it will grant Dassault Systemes a perpetual, royalty-free,
non-exclusive license to use and modify the Translator Software internally and
to distribute run-time versions of the Translator Software.
Spatial will provide Dassault Systemes with maintenance and support
services for the WBM Software for three years from the effective date of the
Cross-License Agreement at no cost to Dassault Systemes. Dassault Systemes will
provide Spatial with maintenance and support services for the CBD Software for
three years from the effective date of the agreement as partial consideration
for the royalty fees paid by Spatial on the CBD Software. The party that
develops the Translator Software will provide maintenance and support services
for four years from the date of the agreement in return for a fixed annual
maintenance fee.
Any modifications made by Spatial or Dassault Systemes to software
licensed to it by the other party will be owned by the owner of the licensed
software unless the modification results in significant value added or creates a
new function that is packaged as a stand-alone product with a different user
interface from the modified software, in which case the new software will be
owned by the developer. Spatial and Dassault Systemes will deliver to each other
any modifications to products licensed from the other party on a regular basis.
Any know-how developed by or shared between Spatial and Dassault Systemes in
connection with the Cross-License Agreement will be jointly owned and may be
used by either party following termination of the agreement. Each party will
provide customary intellectual property indemnification in connection with the
software it licenses under the agreement. The agreement will terminate upon
expiration of the last copyright or other protection available for the licensed
software. A non-breaching party may terminate its maintenance and support
obligations under the agreement if the other party commits a material breach of
the agreement and does not cure the breach within 60 days of notice by the
non-breaching party.
CO-BRANDING AGREEMENT. Under the Co-Branding Agreement, Spatial and
Dassault Systemes, the parent company of Dassault, and/or one or more of its
affiliates will agree to jointly market translation and healing application
services (the "Co-Branded Service"), similar to those currently offered by
Spatial on its web sites under the product name "3Dshare.com," via one or more
Dassault Systemes web sites. Spatial will grant Dassault Systemes a
royalty-free, non-exclusive license to use Spatial's web service infrastructure
software for the purpose of providing the Co-Branded Service to its customers.
Spatial will host the Co-Branded Service and will make the Co-Branded Service
accessible from any Dassault Systemes web site that Dassault Systemes may
request. Spatial will be responsible for implementing the link between the
Dassault Systemes web site(s) as well as any updates and enhancements to the
Co-Branded Service. Each of the parties will maintain their respective
application software in connection with the Co-Branded Service. Spatial will not
be paid a separate fee for either hosting or maintaining the Co-Branded Service.
Dassault Systemes will have the right to host the Co-Branded Service itself or
have it hosted by a third party upon 90 days written notice to Spatial.
In consideration of the infrastructure license and performance of its
obligations under the Co-Branding Agreement, Spatial will be entitled to a
percentage of the net revenues derived from the sale of the Co-Branded Service.
If Dassault Systemes exercises its option to host the Co-Branded Services, the
percentage of the net revenues that Spatial is entitled to will be reduced
appropriately. Dassault Systemes will retain ownership of the customer databases
generated by Spatial in connection with the marketing and distribution of the
web services subject to Spatial's rights in its own customer databases and its
right to use the Dassault Systemes databases to perform its obligations under
the agreement. Other than new functions or services related to the Co-Branded
Service, Spatial will agree not to market any services to Dassault Systemes'
customers during the term of the agreement and for one year after its expiration
or termination without the prior written consent of Dassault
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Systemes, unless Spatial (1) obtained the contact information of the customer
from an independent source and (2) did not use any information contained in the
customer database. Dassault Systemes will agree not to offer any web service
based on certain software acquired under the purchase agreement that is similar
to the Co-Branded Service for two years from the date of the Co-Branding
Agreement. The agreement requires each party to provide customary
indemnification to the other party for breach of the agreement and intellectual
property infringement. The initial term of the Co-Branding Agreement is three
years from the launch of the Co-Branded Service. At the end of the initial term,
the agreement will be automatically renewed for continuing, one-year terms
unless either party gives notice of termination at least three months prior to
expiration of the current term. Either party may terminate the agreement in the
event of a breach by the other party that is not remedied within 60 days of
notice to the breaching party.
SERVER SOFTWARE LICENSE AGREEMENT. Under the terms of the Server
Software License Agreement, Spatial will grant Dassault Systemes, the parent
company of Dassault, and/or its affiliates a perpetual, non-transferable,
non-exclusive license to certain of Spatial's web site infrastructure
applications software (the "Server Software"). Dassault Systemes must exercise
its option to benefit from the license by the closing of the transactions
contemplated by the purchase agreement or the option will expire. Dassault
Systemes will have the right to use and modify the Server Software internally to
provide application services provider and related Internet services to its
customers. In addition, Dassault Systemes will have the right to distribute the
Server Software in connection with those Dassault Systemes software products and
services in which it has incorporated the Server Software. In consideration for
the license of the Server Software, Dassault Systemes will pay Spatial a royalty
equal to a specified percentage of the net revenue resulting from the sale of
any products or services offered by Dassault Systemes incorporated or
facilitated by the Server Software. Dassault Systemes will pay Spatial an
initial license fee for use of the Server Software, which will offset a
percentage of the royalty payments due from Dassault Systemes to Spatial going
forward. In consideration for the license fee and royalty payments, Spatial will
provide Dassault Systemes with maintenance and support services for the Server
Software for four years from the date Dassault Systemes exercises its right to
benefit from the Server Software license.
Any modifications made by Dassault Systemes to the Server Software will
be owned by Spatial unless the modification results in significant value added
or creates a new function that is packaged as a stand-alone product with a
different user interface from the modified software, in which case the new
software will be owned by Dassault Systemes. Dassault Systemes will deliver
modifications to the Server Software to Spatial on a regular basis. Any know-how
developed by or shared between Spatial and Dassault Systemes in connection with
the Server Software License Agreement will be jointly owned and may be used by
either party following termination of the agreement. Spatial will provide
customary intellectual property indemnification in connection with the Server
Software. The agreement will terminate upon the expiration of the last copyright
or other protection available for the Server Software. A non-breaching party may
terminate the agreement if the other party commits a material breach of the
agreement and does not cure the breach within 60 days of notice by the
non-breaching party.
WEB SERVICES AGREEMENT. Under the Web Services Agreement between
Dassault Systemes and/or one or more of its affiliates and Spatial, Spatial will
have the right to market and distribute, via its 3Dshare.com and PlanetCAD.com
web sites, certain agreed upon web services using Dassault Systemes' application
software. Spatial will assist Dassault Systemes in adapting these applications
for Internet use by providing a fixed amount of technical support at no charge
to Dassault Systemes and further support, if necessary, at a reduction from
Spatial's standard consulting rate. Spatial will also, at its own expense,
develop the web pages and functions needed to market and distribute the agreed
upon Dassault Systemes web services. Spatial will be obligated to spend a
minimum percentage of the revenue generated through the distribution of each web
service on advertising programs related to that service for thirty months after
the implementation of each service. Spatial will commit to spending an agreed
minimum amount on advertising in the first year of each service. Spatial's
advertising expenses are subject to certain reimbursements by Dassault Systemes
if Dassault Systemes decides to market a web service directly. As consideration
for marketing and distributing the web services, Spatial will receive a
percentage of net revenues generated by sales of the web services on its web
sites.
Dassault Systemes will have the choice of either having Spatial host
each web service in return for a flat monthly fee or providing Spatial with the
hardware infrastructure necessary to host the service. The agreement provides
for customary cross-licenses of software, technology and trademarks, where
applicable, between the parties solely for the purpose of each party fulfilling
its obligations under the agreement. Dassault Systemes will retain
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ownership of the customer databases generated by Spatial in connection with the
marketing and distribution of the web services subject to Spatial's rights in
its own customer databases and its right to use the Dassault Systemes databases
to perform its obligations under the agreement. The agreement requires each
party to provide customary indemnification to the other party for breach of the
agreement and intellectual property infringement. Either party may terminate the
agreement with respect to any web service or in its entirety for any reason upon
nine months notice or in the event of a breach by the other party which is not
remedied within 60 days of notice to the breaching party.
JOINT SOFTWARE LICENSE AGREEMENT. Under the terms of the Joint Software
License Agreement, Spatial will grant Dassault Systemes, the parent company of
Dassault, and/or its affiliates a perpetual, royalty-free license to use, modify
and distribute certain translator and healing software jointly developed by
Spatial and certain third parties and to use and distribute certain software
licensed to Spatial by certain third parties (collectively, the "Joint
Software"). The license will be exclusive to Dassault Systemes for use of the
Joint Software as component products and non-exclusive for all other purposes.
Spatial will provide Dassault Systemes with maintenance and support services for
the Joint Software for five years from the date of the agreement at no cost to
Dassault Systemes. In addition, Spatial will provide support to Dassault
Systemes to commercialize the Husk versions of the Joint Software as component
products. If Spatial's support is not sufficient to permit the commercialization
of the Husk versions and Spatial does not cure the deficiency within 60 days of
notice from Dassault Systemes, Spatial will be required to make a specified
one-time payment to Dassault Systemes.
Any modifications made by Spatial or Dassault Systemes to the Joint
Software will be owned by the party making the modification. Each party will
deliver any modifications to the other party on a regular basis. The agreement
requires each party to provide customary indemnification to the other party for
breach of the agreement and intellectual property infringement. The Joint
Software Agreement will terminate upon expiration of the last copyright or other
protection available for the Joint Software. A non-breaching party may terminate
its maintenance and support obligations under the agreement if the other party
commits a material breach of the agreement and does not cure the breach within
60 days of notice by the non-breaching party.
MASTER SOFTWARE RESELLER AGREEMENT. Under the terms of the Master
Software Reseller Agreement, Spatial will grant Dassault Systemes a
non-exclusive, non-transferable license to market, promote, reproduce for
distribution, distribute and sublicense certain products and to use a reasonable
number of copies of those products for demonstration and training purposes only.
Spatial also will provide Dassault Systemes with reasonable quantities of
standard product marketing materials and product related training. Spatial will
grant Dassault Systemes a non-exclusive, non-transferable license to use
necessary trademarks in marketing the products.
SOLIDWORKS SERVER SOFTWARE LICENSE AGREEMENT. SolidWorks Corporation, a
wholly owned subsidiary of Dassault Systemes, has agreed to provide to PlanetCAD
a SolidWorks Server Software License Agreement, pursuant to which SolidWorks
will grant Spatial a perpetual, non-transferable, non-exclusive, worldwide
license to certain of SolidWorks' MDA software (the "SW Server Software") in
connection with PlanetCAD's translation and healing services. SolidWorks will
agree to support Spatial's "SAT" file format and to provide Spatial maintenance
and support services for the SW Server Software
INTRAVISION DEVELOPMENT TOOLKIT SOURCE CODE DEVELOPMENT LICENSE AND
END-USER RESELLER AGREEMENT. Dassault Systemes has agreed to grant PlanetCAD a
worldwide, non-exclusive license to use, maintain and support, access and
reproduce the Intravision Software Development Toolkit (the "IVSDK") for the
purposes of porting, problem identification or fulfilling escrow obligations to
third parties. Dassault Systemes will retain the right to use the IVSDK for all
purposes other than for the development of end user products. Dassault Systemes
also will grant PlanetCAD a perpetual, worldwide, irrevocable, exclusive license
to use, maintain and support, adapt, prepare, compile, install, make, execute,
access and reproduce the source code, and modifications thereof, of the computer
software program known as Intravision Enterprise to develop and to offer
PlanetCAD 's customers end-user products based on or incorporating IVSDK.
PlanetCAD will have the right to (1) sell IntraVision Enterprise and end-user
products associated with Intravision Enterprise; and (2) create and own
derivative works, modifications and enhancements to Intravision Enterprise.
39
<PAGE> 46
CERTAIN MATERIAL NEGOTIATIONS AND AGREEMENTS
Spatial and Dassault Systemes are parties to a securities purchase
agreement dated February 18, 2000, among Spatial, Dassault and certain other
investors in Spatial. In connection with the securities purchase agreement,
Dassault Systemes purchased 275,362 shares of Spatial's common stock and 173,913
warrants to purchase Spatial common stock for a total investment in Spatial of
$1.0 million. Dassault has agreed to loan to Spatial $2,000,000 prior to the
closing. The loan is repayable upon termination of the purchase agreement, in
which case it will be repayable either in cash or in shares of common stock of
Spatial, at the option of Dassault, based on a Spatial common stock value of
$3.60 per share.
INTERESTS OF CERTAIN PERSONS IN THE SALE OF THE COMPONENT SOFTWARE DIVISION
Dassault has indicated that, upon consummation of the proposed sale of
the component software division, Mr. Richard Sowar, Spatial's Chairman of the
board of Directors and Chief Technology Officer, and Mr. Todd Londa, Spatial's
Vice President of Administration and Corporate Controller, will be offered
employment by Dassault to continue working with the component software division.
Consequently, Mr. Sowar, Mr. Londa and other employees of Spatial who will
become employees of Dassault after the sale of the component software division
may have interests in the sale of the component software division that are
different from, or are in addition to, their interests as stockholders or
officers of Spatial. The members of Spatial's board of Directors were informed
about these additional interests and considered them at the time the board
approved the purchase agreement.
NO APPRAISAL RIGHTS
Neither you nor any other stockholder of Spatial is entitled to
exercise dissenters' rights in connection with the proposed sale of the
component software division.
SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On July 4, 2000, Spatial signed a purchase agreement to sell its
component software division to Dassault for $21.5 million, which was
subsequently increased to $25.0 million. In addition, certain cross licensing
agreements for component and Internet technologies will be executed as part of
the transaction, and Dassault will increase its minority investment in Spatial
by $2.0 million. The proposed transaction is subject to stockholder approval.
The following unaudited pro forma condensed financial statements give effect to
the consummation of this proposed transaction.
The unaudited pro forma condensed financial statements, including the
notes thereto, are qualified in their entirety by reference to, and should be
read in conjunction with the historical consolidated financial statements and
the notes thereto of Spatial which were previously reported in Spatial's Report
on Form 10-KSB for the year ended December 31, 1999 and the Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 2000 and June 30, 2000.
The Unaudited Pro Forma Condensed Balance Sheet presents the financial
position of Spatial as of June 30, 2000 giving effect to the sale of the
component software division as if it had occurred on such date. The Unaudited
Pro Forma Condensed Statements of Operations of Spatial for the six months ended
June 30, 2000 and the year ended December 31, 1999, assume that the sale of the
component software business was completed on January 1, 1999.
Spatial believes that the accompanying unaudited pro forma condensed
financial statements contain all adjustments necessary to fairly present the
results of operations of Spatial for the six months ended June 30, 2000 and the
year ended December 31, 1999, as if the sale of the component software business
was completed on January 1, 1999.
40
<PAGE> 47
SPATIAL TECHNOLOGY INC
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000
(a) Net cash proceeds from the sale of the component software division
pursuant to the purchase agreement entered into on July 4, 2000 with
Dassault, as amended. Consideration consists of $25.0 million cash as
adjusted pursuant to the purchase agreement and less certain expenses
related to the transaction totaling $3.0 million. In addition, proceeds
include cash from the sale of 555,556 shares of common stock for $2.0
million.
(b) A reduction in assets related to the component software business
totaling $4.4 million, including accounts receivable, prepaid assets,
equipment, purchased computer software.
(c) An increase in liabilities of $1.5 million for estimated income tax on
the initial gain on the transaction.
(d) Elimination of the deferred revenue liability as the total amount of
$2.6 million relates to the component software division.
(e) To reflect the issuance of 555,556 shares of common stock for $2.0
million.
(f) An adjustment to accumulated deficit to reflect the initial gain on the
transaction of $18.7 million.
(g) A reduction in revenue from the sale of the component software business
of $14.9 million and $8.1 million for the year ended December 31, 1999,
and the six-month period ended June 30, 2000, respectively.
(h) A reduction in cost of revenue and operating expenses from the sale of
the component software business of $16.3 million and $8.1 million for
the year ended December 31, 1999, and the six-month period ended June
30, 2000, respectively.
(i) A reduction in interest income from the sale of the component software
business of $93,000 and $73,000 for the year ended December 31, 1999,
and the six-month period ended June 30, 2000, respectively.
(j) An increase in other income of $18.7 million for the gain on the sale
of the component software division, net of income taxes of $1.5
million, for the year ended December 31, 1999.
(k) A reduction in income tax expense from the sale of the component
software business of $246,000 and $138,000 for the year ended December
31, 1999, and the six-month period ended June 30, 2000, respectively.
41
<PAGE> 48
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,331 $ 23,967(a) $ 27,298
Accounts receivable, net of
allowance of $250 4,475 (750)(b) 3,725
Prepaid expenses and other 819 (100)(b) 719
------------ ------------ ------------
Total current assets 8,625 23,117 31,742
Equipment, net 2,513 (1,800)(b) 713
Purchased computer software, net 2,082 (1,700)(b) 382
------------ ------------ ------------
$ 13,220 $ 19,617 $ 32,837
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,560 $ 1,560
Accrued expenses 1,252 1,500(c) 2,752
Deferred revenue 2,569 (2,569)(d) --
------------ ------------ ------------
Total current liabilities 5,381 (1,069) 4,312
------------ ------------ ------------
Stockholders' Equity:
Common stock, $0.01 par value;
22,500,000 shares authorized;
11,495,274 historical and
12,050,830, as adjusted, shares
issued 115 6(e) 121
Additional paid-in capital 32,849 1,994(e) 34,843
Accumulated deficit (24,986) 18,686(f) (6,300)
Other comprehensive loss (139) -- (139)
------------ ------------ ------------
Total stockholders' equity 7,839 20,686 28,525
------------ ------------ ------------
$ 13,220 $ 19,617 $ 32,837
============ ============ ============
</TABLE>
42
<PAGE> 49
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 7,252 $ (7,242)(g) $ 10
Cost of Revenue 1,293 (1,101)(h) 192
------------ ------------ ------------
Gross Profit 5,959 (6,141) (182)
Operating expenses:
Sales and marketing 3,782 (2,607)(h) 1,175
Research and development 5,398 (3,338)(h) 2,060
General and administrative 1,796 (1,022)(h) 774
------------ ------------ ------------
Total operating expenses 10,976 (6,967)(h) 4,009
------------ ------------ ------------
Loss from operations (5,017) 826 (4,191)
Other Income: 105 (73)(i) 32
------------ ------------ ------------
Loss before income taxes (4,912) 753 (4,159)
Income Tax 138 (138)(k) --
------------ ------------ ------------
Net loss $ (5,050) $ 891 $ (4,159)
============ ============ ============
Loss per common share:
Basic $ (0.46) $ (0.36)
Diluted $ (0.46) $ (0.36)
Weighted average number of shares outstanding:
Basic 10,914 11,470(e)
Diluted 10,914 11,470(e)
</TABLE>
43
<PAGE> 50
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 14,900 $ (14,900)(g) $ --
Cost of Revenue 1,132 (1,052)(h) 80
------------ ------------ ------------
Gross Profit 13,768 (13,848) (80)
Operating expenses:
Sales and marketing 5,918 (5,615)(h) 303
Research and development 7,742 (6,831)(h) 911
General and administrative 2,362 (2,349)(h) 13
Acquired in-process research and development 500 (500)(h) --
------------ ------------ ------------
Total operating expenses 16,522 (15,295) 1,227
------------ ------------ ------------
Loss from operations (2,754) 1,447 (1,307)
Other Income:
Interest income, net 139 (93)(i) 46
Gain on sale of component software business -- 18,686(j) 18,686
------------ ------------ ------------
Net income (loss) before income taxes (2,615) 20,040 17,425
Income Tax 246 (246) --
------------ ------------ ------------
Net income (loss) $ (2,861) $ 20,286 $ 17,425
============ ============ ============
Earnings (loss) per common share:
Basic $ (0.31) $ 1.76
Diluted $ (0.31) $ 1.69
Weighted average number of shares outstanding:
Basic 9,345 9,901(e)
Diluted 9,345 10,321(e)
</TABLE>
44
<PAGE> 51
The affirmative vote of the holders of a majority of the
outstanding shares of Spatial common stock as of the record date is required to
approve the sale of the component software division.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE IN FAVOR OF PROPOSAL 1
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<PAGE> 52
PROPOSAL 2
APPROVAL OF SALE AND ISSUANCE OF SPATIAL
COMMON STOCK TO DASSAULT
The board of directors of Spatial has approved the sale and issuance by
Spatial of additional shares of Spatial common stock to Dassault upon the terms
and subject to the conditions set forth in the share purchase agreement to be
entered into between Spatial and Dassault. The board proposes, and recommends
that the stockholders of Spatial approve, the sale and issuance by Spatial of
additional shares of Spatial common stock to Dassault.
A conformed copy of the share purchase agreement is included as
Appendix C to this proxy statement. The summaries of portions of the share
purchase agreement set forth in this proxy statement are qualified in their
entirety by reference to the full text of the share purchase agreement, and you
are encouraged to read it carefully and in its entirety before voting on this
proposal 2.
GENERAL
Spatial's common stock is listed and traded on the American Stock
Exchange LLC (the "AMEX") under the symbol "STY." The AMEX requires stockholder
approval prior to listing additional shares to be issued in connection with the
sale by Spatial of common stock equal to 20% or more of presently outstanding
stock for less than the greater of book or market value of the common stock. In
this instance, the sale and issuance of the shares to Dassault pursuant to the
purchase agreement will not equal or exceed 20% of the outstanding shares of
Spatial. However, due to the nature of the sale of the component software
division and the on-going business relationship between Dassault and Spatial
after that sale, as a matter of good corporate practice and in an effort to keep
the stockholders informed, we thought it appropriate to seek the approval of the
stockholders of the issuance of additional shares of common stock to Dassault.
DESCRIPTION OF SHARE PURCHASE; TITLE AND AMOUNT OF SECURITIES ISSUED
As an inducement to Spatial to enter into the purchase agreement for
the sale of the component software division to Dassault, Dassault agreed to
commit to make a $2.0 million investment in Spatial's PlanetCAD business, on the
terms and subject to the conditions set forth in the share purchase agreement.
The full text of the share purchase agreement is attached to this proxy
statement as Appendix C. Upon the receipt of the payment by Dassault of the
investment amount, which is based on a price of $3.60 per share, Spatial will
issue to Dassault 555,556 shares of Spatial's common stock. As a result of the
acquisition, Dassault and Dassault Systemes will own, in the aggregate
(including exercise in full of all outstanding warrants to acquire shares of
common stock of Spatial owned by Dassault Systemes), 1,106,275 shares of the
common stock of Spatial.
The share purchase agreement provides that Dassault Systemes, subject
to appropriate stockholder approval, will be entitled to the same registration
rights granted to Dassault Systemes and certain other investors in connection
with its acquisition of Spatial common stock and warrants to purchase the common
stock on February 22, 2000. Those registration rights include a mandatory
registration requiring Spatial to file with the Securities and Exchange
Commission, no later than November 20, 2000, a registration statement covering
the shares of common stock and warrants to purchase shares of common stock which
were purchased on February 22, 2000. The registration rights also include
"piggy-back" registration rights, which would be triggered if, during the period
of time that Dassault Systemes holds shares of Spatial common stock subject to
the registration rights, Spatial files a registration statement with the SEC
offering for its own account or for the account of stockholders.
Closing of the share purchase is conditioned upon receipt of the
approval of Spatial's stockholders, but it is not conditioned upon the closing
the sale of the component software division. The sale of the component software
division is, as a practical matter, conditioned upon the closing of the share
purchase since the closing of the share purchase is required to occur at the
time of or before the closing of the sale of the component software division.
46
<PAGE> 53
USE OF PROCEEDS
We plan to use the proceeds of Dassault's investment for general
corporate purposes, including sales and marketing, research and development,
capital expenditures and working capital. In addition, we may use a portion of
the net proceeds to acquire complementary products, technologies or businesses
or to make strategic investments. We currently have no agreements with respect
to any such acquisitions or investments. Pending any of these uses, we intend to
invest the net proceeds in short-term, investment-grade, interest-bearing
securities.
DESCRIPTION OF SECURITIES
The securities to be issued by Spatial to Dassault in consideration of
Dassault's $2.0 million cash investment in Spatial will be newly issued shares
of Spatial's common stock, $0.01 par value per share. The shares of Spatial's
common stock to be issued to Dassault under the share purchase agreement will
carry the same rights as the outstanding shares of Spatial's common stock held
by its existing stockholders.
Spatial has adopted certain takeover defenses that may deter third
parties from acquiring Spatial with the intent to quickly change control of
Spatial. Spatial's certificate of incorporation requires the affirmative vote of
two-thirds of the stockholders to remove a director from the board without
cause. The certificate of incorporation also provides that all board vacancies
are to be filled by the remaining directors. The stockholders of Spatial are not
entitled to elect directors, other than at the annual meeting of the
stockholders of Spatial, to fill vacancies without prior board approval.
Finally, Spatial's bylaws prohibit less than two-thirds of the stockholders of
Spatial from calling a special meeting, whether for the purpose of replacing
directors or for any other purpose. As a result, once elected, the directors may
not be removed from office without cause until the next annual meeting of the
stockholders. Therefore, a third party interested in taking control of Spatial
quickly will not be able to do so unless the third party acquires two-thirds or
more of the voting securities of Spatial at the time of the acquisition.
Spatial has not declared and does not intend to declare in the
foreseeable future any dividends on its shares of common stock. The holders of
shares of Spatial's common stock do not have preemptive rights, and each share
of common stock is entitled to one vote on all matters submitted to a vote of
the stockholders.
REASONS FOR TRANSACTION; EFFECT ON RIGHTS OF EXISTING STOCKHOLDERS
Spatial believes that Dassault's investment is a significant
endorsement of PlanetCAD, and that it will be interpreted as such in PlanetCAD's
market. It will also provide Spatial with additional, needed working capital to
be used in developing and marketing PlanetCAD to its targeted customers.
The sale and issuance of the additional 555,556 shares of Spatial
common stock to Dassault will have very little effect on the existing
stockholders, other than the dilutive effect resulting from the issuance of
shares of common stock.
FINANCIAL AND OTHER INFORMATION
The financial and other information required by Item 13(a) of schedule
14A promulgated under the Securities Exchange Act of 1934, as amended, is hereby
incorporated by reference to Spatial's Form 10-KSB as filed with the SEC on
March 29, 2000, a conformed copy of which is being delivered with this proxy
statement.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES PRESENT
IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING IS
REQUIRED TO APPROVE THE ISSUANCE OF THE ADDITIONAL SHARES OF SPATIAL COMMON
STOCK TO DASSAULT.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
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<PAGE> 54
PROPOSAL 3
APPROVAL OF THE AMENDMENT TO SPATIAL'S
CERTIFICATE OF INCORPORATION CHANGING ITS NAME
The board of directors of Spatial has approved an amendment to Article
I of Spatial's certificate of incorporation changing Spatial's name from Spatial
Technology Inc. to PlanetCAD Inc. The board proposes and recommends that the
stockholders of Spatial approve the amendment to Spatial's certificate of
incorporation upon the closing of the sale of the component software division to
Dassault, for the sole purpose of changing Spatial's corporate name from Spatial
Technology Inc. to PlanetCAD Inc.
In connection with the sale to Dassault of the component software
division, Dassault is acquiring the goodwill and all other rights relating to
the name "Spatial." Accordingly, the purchase agreement requires Spatial to
amend its certificate of incorporation to change its corporate name after the
closing of the transaction.
The board believes that the name "Spatial" is closely linked to the
component software division and is recognized in the industry as a leader in
providing computer design and modeling software components. The board therefore
believes that the name Spatial is valuable to the component software division
and not as valuable to the PlanetCAD application service provider business. In
addition, the board believes that changing Spatial's name will help avoid
confusion after the sale of the component software division.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF SPATIAL COMMON STOCK AS OF THE RECORD DATE IS REQUIRED TO APPROVE THE
AMENDMENT TO SPATIAL'S CERTIFICATE OF INCORPORATION
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
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<PAGE> 55
PROPOSAL 4
ELECTION OF DIRECTORS
There are seven nominees for the seven board positions presently
authorized by the board of directors in accordance with Spatial's amended and
restated by-laws. All of the nominees listed below are currently directors of
Spatial whose term of office ends upon the earlier of the election and
qualification of their successors or their resignation. Each nominee listed
below is currently a director of Spatial. Each director to be elected will hold
office until the next annual meeting of stockholders and until such director's
successor is elected and has qualified, or until such director's earlier death,
resignation or removal.
Shares represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the seven nominees named below. In
the event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
A PLURALITY OF THE VOTES OF THE SHARES PRESENT IN PERSON OR REPRESENTED
BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE IS REQUIRED FOR ELECTION OF
THE DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
NOMINEES
The names of the nominees for the board of Directors and certain
information about them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH SPATIAL
---- --- --------------------------
<S> <C> <C>
Richard M. Sowar............. 55 Chairman of the board of Directors and Chief Technology Officer
R. Bruce Morgan.............. 48 President, Chief Executive Officer and Director
Philip E. Barak(1)(2)........ 48 Director
Chuck Bay.................... 42 Director
Eugene J. Fisher............. 54 Director
H. Robert Gill(1)(2)......... 64 Director
M. Thomas Hull(2)............ 41 Director
</TABLE>
----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
There are no family relationships among any of the directors, executive
officers, or persons nominated or chosen by Spatial to become directors or
executive officers of Spatial.
RICHARD M. SOWAR founded Spatial in 1986 and has served as Chairman of
the board of Directors and Chief Technology Officer of Spatial since October
1998. He has served as a Director of Spatial since 1986. Mr. Sowar served as
Treasurer of Spatial from 1986 to 1988, Vice President from 1986 to 1992, Senior
Vice President, Advanced Technology from 1992 to 1994 and Chief Executive
Officer from 1994 to October 1998. From 1980 to 1986, Mr. Sowar served as Vice
President, Research and Development of Graftek, Inc., a CAD/CAM software
company. Mr. Sowar received a B.S. in Mathematics from Marietta College and an
M.S. in Operations Research from the University of Dayton and completed doctoral
studies in Computer Science at the University of Colorado.
R. BRUCE MORGAN was named President and Chief Executive Officer of
Spatial Technology in October of 1998 after serving as Spatial's President and
Chief Operating Officer since July of 1997. Prior to joining Spatial, Mr. Morgan
served at ANSYS Inc. in senior marketing and business development positions. He
was responsible for
49
<PAGE> 56
developing and implementing a strategy that helped re-establish ANSYS as a
market leader in the computer-aided engineering (CAE) industry, and played a key
role in the company's successful initial public offering in 1996.
From 1991 through 1995, Bruce was Vice President of Sales and Marketing
at Spatial Technology. He developed and executed the OEM business strategy that
established Spatial's ACIS Geometric Modeler as the de facto standard for
geometry creation in the mechanical computer aided design (MCAD) industry. Prior
to his position at Spatial, Mr. Morgan held executive Sales and Marketing
management positions at Convergent Technologies and Burroughs Corporation
(Unisys).
Mr. Morgan holds a B.A. degree in Economics from Carleton University.
PHILIP E. BARAK has served as a Director of Spatial since October 1994.
Mr. Barak joined Nazem & Company in 1983 as Chief Financial Officer and is a
special limited partner of Nazem & Associates II, L.P., which is the general
partner of Nazem & Company II, L.P. Additionally, he is a general partner of
Nazem & Associates IV, L.P., and Nazeem & Associates Transatlantic, L.P., a
general partner of Transatlantic Venture Fund, an affiliated venture capital
fund. Mr. Barak has served as a director of various privately held companies and
served as a director of Consep, Inc. from June 1996 until December 1998. Mr.
Barak holds a B.S. in Accounting from Rider University and is a Certified Public
Accountant.
CHUCK BAY has served as a Director of Spatial since June 2000. Mr. Bay
is currently the Chief Executive Officer, President and a member of the board of
directors of Broadbase Software, Inc. Mr. Bay joined Broadbase in January 1998
and previously served as its Chief Financial Officer, General Counsel and
Executive Vice President of Operations. From July 1997 to January 1998, Mr. Bay
served as Chief Financial Officer and General Counsel for Reasoning, Inc., a
software company. From January 1995 to August 1997, Mr. Bay served as Chief
Financial Officer and General Counsel, for Pure Atria Software, Inc., a software
company. From April 1994 to January 1995, Mr. Bay served as President and Chief
Financial Officer of Software Alliance Corporation, a software company. Mr. Bay
holds a B.S. degree in business administration from Illinois State University
and a J.D. degree from the University of Illinois.
EUGENE J. FISCHER has served as a Director of Spatial since March 2000.
Mr. Fischer co-founded Capstone Ventures in 1996. His investment experience
includes Internet, software, health care service and other technology-enabled
service companies. He has been a venture capitalist since 1983 and a Silicon
Valley financial professional since 1972. Mr. Fischer began his venture capital
career in 1983 with Technology Funding and opened Pathfinder Ventures' West
Coast office in 1988. Prior to 1983 he was the head of Bank of America's elite
Sunnyvale Corporate Banking Group, managing a $250 million loan portfolio with
clients ranging from venture-backed start-ups to Apple Computer, as well as
several venture capital funds. Mr. Fischer serves as a director of Newgen
Results Corp. Mr. Fisher holds a B.S. from the University of Minnesota and a
M.S. from the University of California, Davis.
H. ROBERT GILL has served as a Director of Spatial since December 1996.
Mr. Gill has served as President, Chairman of the board of Directors and Chief
Executive Officer of MobileForce Technologies, Inc., a company which provides
systems for managing vehicle fleets, since May 1997. Additionally, since April
1996, Mr. Gill has served as President of the Topaz Group, a provider of board
consulting services. Before joining the Topaz Group, Mr. Gill served as Senior
Vice President and President, Enhanced Products Group of Frontier Corporation
following its merger with ALC Communications Corporation ("ALC") in December
1995. From January 1989 until the time of such merger, Mr. Gill served as
President and Chief Executive Officer of ConferTech International, a
publicly-traded corporation. Mr. Gill currently serves as a director of Qualmark
and Newgen Results Corporation. Mr. Gill received a B.E.E. from Indiana
Institute of Technology, a M.S.E.E. from Purdue University and a M.B.A. from
Pepperdine University.
M. THOMAS HULL has served as a Director of Spatial since December 1996.
Mr. Hull joined Visio Corporation ("Visio") in July 1994 as Third Party Sales
Manager, was promoted to Director of Corporate and Strategic Sales in June 1996,
and was promoted to Vice President Corporate and Direct Sales in October 1998,
and Senior Vice President of Worldwide Sales where he currently manages Visio's
200 person worldwide sales organization. From December 1991 to June 1994, Mr.
Hull held a management position at Traveling Software, Inc. ("TSI") where he
managed sales of TSI products and technologies. Mr. Hull holds a B.S. in
Electrical Engineering from the University of Washington.
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<PAGE> 57
FORMER DIRECTOR
The following information is being provided with respect to a director
of Spatial who resigned from his position after the end of the fiscal year ended
December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH SPATIAL
---- --- --------------------------
<S> <C> <C>
Fred F. Nazem................ 59 Director
</TABLE>
FRED F. NAZEM served as a Director of Spatial from its inception in
1986 until June 2000. He served as Chairman of the board of Directors of Spatial
from 1986 to October 1998. Since 1981, Mr. Nazem has been President of Nazem &
Company and Managing Partner of the general partner of several Nazem & Company
venture capital limited partnerships, which finance and strategically guide
growing electronics and medical companies. He currently serves as a director of
Tegal Corporation and Oxford Health Plans, Inc., as well as a number of
privately held firms. Mr. Nazem holds a B.S. degree in biochemistry from Ohio
State University, a M.S. in Physical Chemistry from the University of Cincinnati
and a M.B.A. from Columbia University.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the board of directors
held six meetings. The entire board, except Mr. Nazem, attended 75% or more of
the aggregate of the meetings of the board and of the committees on which they
served, held during the period for which he was a director or committee member,
respectively. The board of directors has an audit committee and a compensation
committee.
AUDIT COMMITTEE
The audit committee makes recommendations to the board regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by Spatial's independent certified public
accountants and reviews Spatial's balance sheet, statement of operations and
statement of cash flows for each interim period.
The audit committee has reviewed and discussed the audited financial
statements with the management of Spatial, and has discussed with the
independent auditors the matters required to be discussed by SAS 61. The audit
committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees) and has discussed with the independent accountant the
independent accountant's independence. Based upon the review and discussions
referred to above in this paragraph, the audit committee recommended to the
board of Spatial that the audited financial statements be included in Spatial's
Annual Report on From 10-KSB for the last fiscal year for filing with the SEC.
The audit committee is composed of the following three non-employee
directors: Messrs. Barak, Gill and Hull, each of whom are independent under
Section 121(A) of the AMEX's listing standards. The audit committee met once
during the fiscal year ended December 31, 1999. Spatial's board has adopted a
written charter of the audit committee, a conformed copy of which attached to
this proxy statement as Appendix D.
COMPENSATION COMMITTEE
The compensation committee makes recommendations concerning salaries
and incentive compensation for officers and employees of Spatial. The
compensation committee is composed of the following two non-employee directors:
Messrs. Barak and Gill. The compensation committee met once during the fiscal
year ended December 31, 1999.
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<PAGE> 58
EXECUTIVE OFFICERS
The executive officers of Spatial are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH SPATIAL
---- --- --------------------------
<S> <C> <C>
R. Bruce Morgan.............. 48 President and Chief Executive Officer
Richard M. Sowar............. 55 Chief Technology Officer
Todd S. Londa................ 36 Vice President, Administration, Corporate Controller and Secretary
</TABLE>
----------
See "Proposal 4 - Election of Directors" for the biographies of Mr. Morgan and
Mr. Sowar.
TODD S. LONDA joined Spatial in December 1995 as Finance Manager, and
was promoted to Director of Finance & Administration and Corporate Controller in
November 1997. In October 1998, Mr. Londa was promoted to Vice President,
Administration and Corporate Controller. From 1993 to November 1995, Mr. Londa
served as a senior financial analyst at Network Associates, Inc., a network
security and management software company. Mr. Londa holds a B.B.A. from the
University of Michigan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Spatial's directors and
executive officers, and persons who own more than ten percent of a registered
class of Spatial's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Spatial common stock and other equity securities of Spatial. Officers, directors
and holders of greater than ten percent of Spatial's common stock are required
by regulations of the SEC to furnish Spatial with copies of all Section 16(a)
forms they file.
To Spatial's knowledge, based solely on a review of the copies of such
reports furnished to Spatial and written representations that no other reports
were required, during the fiscal year ended December 31, 1999, all of Spatial's
officers, directors and holders of greater than ten percent of Spatial's common
stock complied with the applicable filing requirements of Section 16(a).
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<PAGE> 59
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended December 31,
1999, 1998 and 1997, certain compensation awarded or paid to, or earned by,
Spatial's Chief Executive Officer and its four next most highly compensated
executive officers whose salary and bonus exceeded $100,000 for the fiscal year
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
------------------------------
SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR $ $ OPTIONS (#)(1) COMPENSATION
------------------------------------ ------ ------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
R. Bruce Morgan.............................. 1999 $ 170,000 $ 34,125 50,000 $ 240(2)
President and Chief Executive Officer 1998 154,167 81,250 50,000 240(2)
1997 75,000 45,000 250,000 17,120(3)
Richard M. Sowar............................. 1999 150,000 13,125 -- 240(2)
Chief Technology Officer 1998 126,250 40,625 50,000 240(2)
1997 120,000 35,000 -- 240(2)
Lee Cole(4).................................. 1999 120,000 9,750 60,000 240(2)
Vice President, Engineering
William Turcotte II(5)....................... 1999 110,000 15,750 50,000 20,180(6)
Vice President, Interoperability 1998 -- -- -- --
Solutions
Karlheinz Peters(7).......................... 1999 120,000 21,000 -- 3,494(8)
Senior Vice President, Worldwide 1998 215,685(9) -- 25,000 12,963(10)
Operations 1997 215,371(11) -- -- --
</TABLE>
---------------------
(1) Options are stock options granted under Spatial equity incentive plans.
(2) Represents matching payments made by Spatial to the individual's
account under Spatial's 401(k) plan.
(3) Includes: (i) $17,000 reimbursement for relocation expenses and (ii)
$120 matching payment made by Spatial to Mr. Morgan's 401(k) account.
(4) Dr. Cole started employment with Spatial in January 1999. Mr. Cole's
employment with Spatial terminated June 30, 2000.
(5) Mr. Turcotte started employment with Spatial in December 1998. Mr.
Turcotte's employment with Spatial terminated March 31, 2000.
(6) Includes: (i) $20,000 reimbursement for relocation expenses and (ii)
$180 matching payment made by Spatial to Mr. Turcotte's 401(k) account.
(7) Mr. Peters' employment with Spatial terminated March 31, 2000.
(8) Includes: (i) $3,264 reimbursement for relocation expenses and (ii)
$230 matching payment made by Spatial to Mr. Peters' 401(k) account.
(9) Salary is based on an exchange rate of 1.7576 DM/$, which is based on a
five quarter average from the last quarter of 1997 and each of the four
quarters in 1998. Includes commission in the amount of $73,446, earned
in fiscal 1998.
(10) Represents amounts paid for relocation from Germany to the United
States.
(11) Salary is based on an exchange rate of 1.7036 DM/$, which is based on a
five quarter average from the last quarter of 1996 and each of the four
quarters in 1997. Salary also includes commission in the amount of
$86,231, earned in fiscal 1997.
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<PAGE> 60
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted to each of the executive officers named in the Summary Compensation
Table above during the fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
Number Of Percent Of
Securities Total Options
Underlying Granted To
Options Employees In Exercise Price Expiration
Name Granted(#) 1999(%)(1) ($/Share)(2) Date
---- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
R. Bruce Morgan.................. 50,000 7.95% $2.9375 May 2009
Lee A. Cole..................... 50,000 7.95% $3.7500 September 2000
10,000 1.59% $2.9375 September 2000
William Turcotte II.............. 50,000 7.95% $3.7500 June 2000
</TABLE>
---------------------
(1) Based on 628,811 options granted in 1999.
(2) The exercise price per share of options granted was equal to the fair
market value of the common stock on the date of grant.
(3) Options granted are immediately exercisable and are subject to
repurchase by Spatial prior to the completion of the vesting of such
shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to (i) the
exercise of stock options by the executive officers named in the Summary
Compensation Table above during the fiscal year ended December 31, 1999, (ii)
the number of securities underlying unexercised options held by such named
executive officers as of December 31, 1999 and (iii) the value of unexercised
in-the-money options (that is, options for which the fair market value of the
common stock at December 31, 1999 exceeded the exercise price) as of December
31, 1999:
<TABLE>
<CAPTION>
Value of Unexercised Options
Shares Number of Unexercised Options In-The-Money Options At Fiscal
Acquired at Fiscal Year-End (1) Year-End (1) (2)
on Exercise ---------------------------- ------------------------------
Name (#) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
R. Bruce Morgan............... -- 168,750 181,250 $ 504,468 $479,688
Richard M. Sowar.............. -- 123,333 57,500 $ 35,938 $107,813
Lee Cole...................... -- -- 60,000 $ -- $ 68,125
William Turcotte II........... -- 12,501 37,499 $ 12,501 $ 37,499
Karlheinz Peters.............. 8,333 58,333 33,333 $ 31,770 $ 51,563
</TABLE>
---------------------
(1) For purposes of this table, valuation is based on vested options for
each named executive officer set forth in the summary compensation
table above. Certain options granted to such individuals include early
exercise provisions, the value of which is not included in this table.
(2) Based on the fair market value of the common stock as of December 31,
1999 as reported on the American Stock Exchange, $4.75, minus the
exercise price, multiplied by the number of shares underlying the
option.
(3) Mr. Peters exercised all of these options in July 1999, at a price of
$3.00 per share.
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<PAGE> 61
COMPENSATION OF DIRECTORS
Each director of Spatial is entitled to be reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at each meeting of
the board of directors. Additionally, each non-employee director of Spatial
receives $1,000 compensation for each regular or special meeting of the board of
directors at which he is in attendance and $500 compensation for each committee
meeting of the board of directors at which he is in attendance.
Each non-employee director of Spatial also receives stock option grants
pursuant to the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only directors of Spatial who are not otherwise employed by Spatial or
an affiliate of Spatial are eligible to receive such options. Options granted to
non-employee directors are non-discretionary. Each non-employee director is
automatically granted an option to purchase 15,000 shares of common stock on the
date such non-employee director is elected to the board of directors.
Additionally, on the date of each annual meeting of the stockholders of Spatial,
each non-employee director who has been a non-employee director continuously for
the preceding year will automatically be granted an option to purchase 7,500
shares of common stock. Each other non-employee director will automatically be
granted an option to purchase a number of shares of common stock equal to 7,500
multiplied by a fraction, the numerator of which shall be the number of days
such person has been a non-employee director of Spatial and the denominator of
which shall be 365. The exercise price of options granted to non-employee
directors shall be the fair market value of the common stock on the date of
grant. Options granted pursuant to the Directors' Plan vest in four equal annual
installments beginning one year from the date of grant and are immediately
exercisable, subject to repurchase by Spatial prior to the vesting of such
shares upon the optionee's cessation of service to Spatial.
EMPLOYMENT AGREEMENTS
Spatial entered into an employment agreement with R. Bruce Morgan, an
executive officer of Spatial, on July 1, 1997. This agreement provides for (i)
an annual base salary of $170,000, (ii) a discretionary bonus in an amount up to
$25,000 per quarter determined solely by the compensation committee of the board
of directors, (iii) one-time relocation expenses up to a maximum of $25,000 in
the aggregate, (iv) eligibility for standard benefits of Spatial and (v) a loan
by Spatial to Mr. Morgan in the amount of $25,000. The agreement may be
terminated by either Spatial or Mr. Morgan at any time, with or without cause or
advance notice. In the event that Spatial terminates Mr. Morgan's employment
without cause, Mr. Morgan shall receive a lump sum severance payment in an
amount equal to six months of Mr. Morgan's base salary in exchange for the
execution of a release of all claims against Spatial by Mr. Morgan. The board of
directors subsequently increased the base compensation payable to Mr. Morgan to
$250,000 per year and the quarterly discretionary bonus in an amount up to
$32,500.
Spatial entered into a separation agreement with Karlheinz Peters on
April 1, 2000. Under the terms of the agreement, Mr. Peters will receive six
months of his normal salary, a lump sum payment of $30,000 in lieu of any
relocation expenses, the laptop computer used during his employment, payment for
138 hours of unused vacation and acceleration of his remaining unvested stock
options. In return for such payments, Mr. Peters agreed to release and waive any
current or future claims he may have against Spatial under any applicable laws.
Spatial entered into a separation agreement with Lee Cole as of July 1,
2000. Under the terms of the agreement, Mr. Cole received a lump sum payment of
$77,500, payment for unused vacation accrued through June 30, 2000, medical,
vision and dental benefits through December 31, 2000, and vesting of options to
purchase 25,000 shares of Spatial not vested as of June 30, 2000. In return for
such payments, Mr. Peters agreed to release and waive any current or future
claims he may have against Spatial under any applicable laws.
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<PAGE> 62
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of Spatial's common stock as of AUGUST 31, 2000 by (i) each director
and nominee for director; (ii) each of the executive officers named in the
Summary of Compensation Table; (iii) all executive officers and directors of
Spatial as a group; and (iv) all those known by Spatial to be beneficial owners
of more than five percent of its common stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
NAME AND ADDRESS OF --------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL(2)
------------------- ------------------ ---------------------
<S> <C> <C>
Special Situations Fund III(3)................ 1,418,100 12.02%
153 E. 53rd Street, 51st Floor
New York, New York 10022
New York Life Insurance Company(4)............ 951,899 8.04
51 Madison Avenue, Room 206
New York, New York 10010
Capstone Ventures SBIC, L.P.(5)............... 786,232 6.50
3000 Sand Hill Road
Building 1, Suite 290
Menlo Park, CA 94025
The Roser Partnership III, SBIC, L.P.(6)...... 673,914 5.59
1105 Spruce Street
Boulder, CO 80302
Eugene J. Fischer(7).......................... 801,232 6.61
Richard M. Sowar(8)........................... 376,968 3.15
R. Bruce Morgan(9)............................ 298,584 2.47
Philip E. Barak(10)........................... 51,197 *
Todd S. Londa(11)............................. 42,128 *
H. Robert Gill(12)............................ 33,000 *
M. Thomas Hull(12)............................ 33,000 *
Chuck Bay(13)................................. 15,000 *
William Turcotte II(14)....................... 448,150 3.80
Karlheinz Peters(14)(15)...................... 101,799 *
Lee Cole(14)(16).............................. 40,001 *
All executive officers and directors
as a group (11 persons)(17).............. 2,241,059 17.47
</TABLE>
----------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Spatial common
stock subject to options and warrants currently exercisable within 60
days of February 29, 2000, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Spatial common stock
shown as beneficially owned by them.
(2) Percentage of ownership is based on 11,795,274 shares of Spatial common
stock outstanding.
(3) Special Situations Fund III, L.P. ("SSF III"), Special Situations
Technology Fund, L.P. ("Technology fund"), Special Situations Cayman
Fund, L.P. ("Cayman Fund"), MGP Advisers Limited Partnership ("MGP"),
SST Advisers, L.L.C. ("SST"), AWM Investment Company, Inc. ("AWM"),
Austin W. Marxe and David M. Greenhouse have together filed a Schedule
13G/A pursuant to which they report sole or shared voting and
dispositive power over an aggregate of 1,418,100 shares owned as of
December 31, 1999, of which 945,000 shares are owned by SSF III,
171,400 shares are owned by SST and 300,400 shares are owned by the
Cayman Fund. The principal business of SSF III, the Technology fund and
the Cayman Fund (individually, a "Fund"
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<PAGE> 63
and, collectively, the "Funds") is to invest in equity and equity
related securities. The principal business of MGP is to act as the
general partner of and the investment adviser of SSF III. The principal
business of SST is to act as general partner of and the investment
adviser of the Technology Fund. The principal business of AWM is to act
as the general partner of MGP and as the general partner of and the
investment adviser to the Cayman Fund. (MGP, SST and AWM are,
collectively, the "Advisers"). The principal occupation of Austin W.
Marxe and David Greenhouse is to serve as officers, directors and
members or principal shareholders of the Advisers.
(4) Includes 48,676 shares of common stock issuable upon exercise of
outstanding warrants.
(5) Includes 304,408 shares of common stock issuable upon exercise of
outstanding warrants.
(6) Includes 260,870 shares of common stock issuable upon exercise of
outstanding warrants.
(7) Includes 15,000 shares subject to stock options that are exercisable
within 60 days of August 31, 2000, 481,884 shares held of record by
Capstone Ventures SBIC, L.P. and 304,348 shares of common stock
issuable upon exercise of outstanding warrants held by Capstone. Mr.
Fischer is a managing partner of Capstone.
(8) Includes 155,833 shares subject to stock options that are exercisable
within 60 days of August 31, 2000.
(9) Includes 273,251 shares subject to stock options that are exercisable
within 60 days of August 31, 2000, 12,333 shares owned by RMI Inc., an
entity of which Mr. Morgan is the sole shareholder. As the president of
RMI Inc., Mr. Morgan exercises sole authority over the voting and
disposition of the shares.
(10) Includes 37,638 shares subject to stock options and warrants that are
exercisable within 60 days of August 31, 2000.
(11) Includes 41,541 shares subject to stock options that are exercisable
within 60 days of August 31, 2000.
(12) Includes 33,000 shares subject to stock options that are exercisable
within 60 days of August 31, 2000.
(13) Includes 15,000 shares subject to stock options that are exercisable
within 60 days of August 31, 2000.
(14) Messrs. Turcotte, Peters and Cole have ceased to be executive officers
of Spatial since December 31, 1999.
(15) Includes 83,333 shares subject to stock options that are exercisable
within sixty (60) days of August 31, 2000.
(16) Includes 40,001 shares subject to stock options that are exercisable
within sixty (60) days of August 31, 2000.
(17) Includes an aggregate of 1,031,945 shares subject to stock options and
warrants that are exercisable within 60 days of August 31, 2000.
PROPOSAL 5
APPROVAL OF STOCK INCENTIVE PLAN
The Spatial board of directors has approved the 2000 Stock Incentive
Plan, subject to approval from our stockholders at this meeting. The board is
asking Spatial stockholders to approve our 2000 Stock Incentive Plan as it
believes that the plan is essential to our continued success. In the judgment of
the board of directors, an initial or increased grant under the 2000 Stock
Incentive Plan will be a valuable incentive and will serve to the ultimate
benefit of stockholders by aligning more closely the interests of the
participants in the 2000 Stock Incentive Plan with Spatial's stockholders. The
board proposes, and recommends that the stockholders approve, the 2000 Stock
Incentive Plan.
A conformed copy of the 2000 Stock Incentive Plan is included as
Appendix E to this proxy statement. The summaries of portions of the 2000 Stock
Incentive Plan set forth in this proxy statement are qualified in their entirety
by reference to the full text of the 2000 Stock Incentive Plan, and you are
encouraged to read it carefully and in its entirety before voting on this
proposal 5.
SUMMARY OF THE PLAN
The purpose of the 2000 Stock Incentive Plan is to attract and to
encourage the continued employment and service of, and maximum efforts by,
officers, key employees and other key individuals by offering those persons an
opportunity to acquire or increase a direct proprietary interest in the
operations and future success of Spatial. As of _____ __, 2000, there were
________ shares of common stock available for grant under the 2000 Stock
Incentive Plan. This _________ share pool includes the 30,599; 1,219,812;
540,434 and 178,500 shares remaining outstanding under the 1987 Stock Option
Plan, the 1996 Equity Incentive Plan, the 1998 Non-Officer Stock Plan and the
1996 Non-Employee Director Plan, respectively (collectively, the "Prior Plans").
Those outstanding shares will
57
<PAGE> 64
be transferred to the 2000 Stock Incentive Plan, and, contingent upon
stockholder approval of the 2000 Stock Incentive Plan, the Prior Plans will
terminate. On ________ __, 2000, the closing price of our common stock was
$________ per share.
Because participation and the types of awards under the 2000 Stock
Incentive Plan are subject to the discretion of the compensation committee, the
benefits or amounts that will be received by any participant or groups of
participants if the 2000 Stock Incentive Plan is approved are not currently
determinable. As of ________ __, 2000, there were approximately 3 executive
officers, 175 employees and 5 non-employee directors of Spatial who would be
eligible to participate in the 2000 Stock Incentive Plan.
DESCRIPTION OF THE PLAN
ADMINISTRATION. The 2000 Stock Incentive Plan is administered by the
compensation committee. Subject to the terms of the plan, the compensation
committee may select participants to receive awards, determine the types of
awards and terms and conditions of awards, and interpret provisions of the plan.
The common stock issued or to be issued under the 2000 Stock Incentive
Plan consists of authorized but unissued shares. If any shares covered by an
award are not purchased or are forfeited, or if an award otherwise terminates
without delivery of any common stock, then the number of shares of common stock
counted against the aggregate number of shares available under the plan with
respect to the award will, to the extent of any such forfeiture or termination,
again be available for making awards under the 2000 Stock Incentive Plan.
ELIGIBILITY. Awards may be made under the 2000 Stock Incentive Plan to
employees of or consultants to Spatial or any of our affiliates, including any
such employee who is an officer or director of Spatial or of any affiliate in
consideration of services provided or to be provided to Spatial.
AMENDMENT OR TERMINATION OF THE PLAN. The Spatial board of directors
may terminate or amend the plan at any time and for any reason. However,
amendments will be submitted for stockholder approval to the extent required by
the Internal Revenue Code or other applicable laws.
OPTIONS. The 2000 Stock Incentive Plan permits the granting of options
to purchase shares of common stock intended to qualify as incentive stock
options under the Internal Revenue Code and stock options that do not qualify as
incentive stock options.
The exercise price of each stock option may not be less than 100% of
the fair market value of Spatial common stock on the date of grant. In the case
of certain 10% stockholders who receive incentive stock options, the exercise
price may not be less than 110% of the fair market value of our common stock on
the date of grant. An exception to these requirements is made for options that
Spatial grants in substitution for options held by employees of companies that
Spatial acquires. In such case, the exercise price is adjusted to preserve the
economic value of the employee's stock option from his or her former employer.
The term of each stock option is fixed by the compensation committee
and may not exceed 10 years from the date of grant. The compensation committee
determines at what time or times each option may be exercised and the period of
time, if any, after retirement, death, disability or termination of employment
during which options may be exercised. Options may be made exercisable in
installments. The exercisability of options may be accelerated by the
compensation committee.
In general, an optionee may pay the exercise price of an option by
cash, certified check, by tendering shares of Spatial common stock (which if
acquired from Spatial have been held by the optionee for at least six months),
by means of a broker-assisted cashless exercise or by a promissory note.
Stock options granted under the 2000 Stock Incentive Plan may not be
sold, transferred, pledged, or assigned other than by will or under applicable
laws of descent and distribution. However, Spatial may permit limited transfers
of nonqualified options for the benefit of immediate family members of grantees
to help with estate planning concerns.
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<PAGE> 65
OTHER AWARDS. The compensation committee may also award:
o shares of common stock subject to restrictions
o deferred stock, credited as deferred stock units, but
ultimately payable in the form of unrestricted shares of
common stock in accordance with the participant's deferral
election
o common stock units subject to restrictions
o shares of common stock at no cost or for a purchase price
determined by the compensation committee which are free from
any restrictions under the 2000 Stock Incentive Plan.
Unrestricted shares of common stock may be issued to
participants in recognition of past services or other valid
consideration, and may be issued in lieu of cash compensation
to be paid to participants
o dividend equivalent rights entitling the recipient to receive
credits for dividends that would be paid if the recipient had
held a specified number of shares of common stock
o a right to receive a number of shares or, in the discretion of
the compensation committee, an amount in cash or a combination
of shares and cash, based on the increase in the fair market
value of the shares underlying the right during a stated
period specified by the compensation committee
o a right to receive a number of shares, subject to the
attainment of specified performance goals (summarized in the
next paragraph and detailed below)
o performance and annual incentive awards, ultimately payable in
stock or cash, as determined by the compensation committee.
The compensation committee may grant multi-year and annual
incentive awards subject to achievement of specified goals
tied to business criteria. The compensation committee may
specify the amount of the incentive award as a percentage of
these business criteria, a percentage in excess of a threshold
amount or as another amount which need not bear a strictly
mathematical relationship to these business criteria.
The compensation committee may modify, amend or adjust the terms of
each award and performance goal. Awards to individuals who are covered under
section 162(m) of the Internal Revenue Code, or who the compensation committee
designates as likely to be covered in the future, must comply with the
requirement that payments to such employees qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code. In modifying,
amending or adjusting the terms of an award to covered employees (or likely
covered employees), the compensation committee may not take any action with
respect to the employee that would cause any payment to the employee to fail to
qualify as performance-based compensation under section 162(m) of the Internal
Revenue Code.
EFFECT OF CERTAIN CORPORATE TRANSACTIONS. Certain change of control
transactions involving Spatial, such as a sale of Spatial, may cause awards
granted under the 2000 Stock Incentive Plan to vest, unless the awards are
continued or substituted for in connection with the change of control
transaction.
ADJUSTMENTS FOR STOCK DIVIDENDS AND SIMILAR EVENTS. The compensation
committee will make appropriate adjustments in outstanding awards and the number
of shares available for issuance under the 2000 Stock Incentive Plan, including
the individual limitations on awards, to reflect common stock dividends, stock
splits and other similar events.
SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section 162(m) of the
Internal Revenue Code limits publicly-held companies such as Spatial to an
annual deduction for federal income tax purposes of $1.0 million for
compensation paid to their chief executive officer and the four highest
compensated executive officers (other than the chief executive officer)
determined at the end of each year (the "covered employees"). However,
performance-based compensation is excluded from this limitation. The 2000 Stock
Incentive Plan is designed to permit the
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<PAGE> 66
compensation committee to grant awards that qualify as performance-based for
purposes of satisfying the conditions of Section 162(m).
The following criteria must be satisfied to qualify as
performance-based:
o the compensation must be paid solely on account of the
attainment of one or more pre-established, objective
performance goals;
o the performance goal under which compensation is paid must be
established by a compensation committee comprised solely of
two or more directors who qualify as outside directors for
purposes of the exception;
o the material terms under which the compensation is to be paid
must be disclosed to and subsequently approved by stockholders
of the corporation before payment is made in a separate vote;
and
o the compensation committee must certify in writing before
payment of the compensation that the performance goals and any
other material terms were in fact satisfied.
In the case of compensation attributable to stock options, the
pre-establishment performance goal requirement is deemed satisfied, and the
certification requirement is inapplicable, if (a) the grant or award is made by
the compensation committee; (b) the plan under which the option is granted
states the maximum number of shares with respect to which options may be granted
during a specified period to an employee; and (c) under the terms of the option,
the amount of compensation is based solely on an increase in the value of the
stock after the date of grant.
One or more of the following business criteria, on a consolidated
basis, and/or with respect to specified subsidiaries or business units (except
with respect to the total stockholder return and earnings per share criteria),
are used exclusively by the compensation committee in establishing performance
goals:
o total stockholder return;
o such total stockholder return as compared to total return (on
a comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 Stock Index;
o net income;
o pretax earnings;
o earnings before interest expense, taxes, depreciation and
amortization;
o pretax operating earnings after interest expense and before
bonuses, service fees, and extraordinary or special items;
o operating margin;
o earnings per share;
o return on equity;
o return on capital;
o return on investment;
o operating earnings;
o working capital;
o ratio of debt to stockholders' equity; and
o revenue.
Under the Internal Revenue Code, a director is an "outside director" if
he or she is not a current employee of the corporation; is not a former employee
who receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts paid to an entity that
employs the director or in which the director has at least a five percent
ownership interest), remuneration from the corporation in any capacity other
than as a director.
The maximum number of shares subject to options that can be awarded
under the 2000 Stock Incentive Plan to any person is three hundred thirty
thousand (330,000) per year. The maximum number of shares that can be
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<PAGE> 67
awarded under the 2000 Stock Incentive Plan to any person, other than pursuant
to an option, is three hundred thirty thousand (330,000) per year. The maximum
amount that may be earned as an annual incentive award or other cash award in
any fiscal year by any one person is [$________ ]and the maximum amount that may
be earned as a performance award or other cash award in respect of a performance
period by any one person is [$__________ ].
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. The grant of an option will not be a taxable
event for the grantee or for Spatial. A grantee will not recognize taxable
income upon exercise of an incentive stock option (except that the alternative
minimum tax may apply), and any gain realized upon a disposition of our common
stock received pursuant to the exercise of an incentive stock option will be
taxed as long-term capital gain if the grantee holds the shares for at least two
years after the date of grant and for one year after the date of exercise (the
"holding period requirement"). Spatial will not be entitled to any business
expense deduction with respect to the exercise of an incentive stock option,
except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the grantee generally must be a Spatial employee or an employee of
our subsidiary from the date the option is granted through a date within three
months before the date of exercise of the option.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the grantee will recognize ordinary income upon the
disposition of the common stock in an amount generally equal to the excess of
the fair market value of the common stock at the time the option was exercised
over the option exercise price (but not in excess of the gain realized on the
sale). The balance of the realized gain, if any, will be capital gain. Spatial
will be allowed a business expense deduction to the extent the grantee
recognizes ordinary income, subject to our compliance with Section 162(m) of the
Internal Revenue Code and to certain reporting requirements.
NON-QUALIFIED OPTIONS. The grant of an option will not be a taxable
event for the grantee or Spatial. Upon exercising a non-qualified option, a
grantee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the common stock on the
date of exercise. Upon a subsequent sale or exchange of shares acquired pursuant
to the exercise of a non-qualified option, the grantee will have taxable gain or
loss, measured by the difference between the amount realized on the disposition
and the tax basis of the shares (generally, the amount paid for the shares plus
the amount treated as ordinary income at the time the option was exercised).
If Spatial complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
A grantee who has transferred a non-qualified stock option to a spouse,
child, grandchild, parent or sibling by gift will realize taxable income at the
time the non-qualified stock option is exercised by the family member. The
grantee will be subject to withholding of income and employment taxes at that
time. The family member's tax basis in the shares will be the fair market value
of the shares on the date the option is exercised. The transfer of vested
non-qualified stock options will be treated as a completed gift for gift and
estate tax purposes. Once the gift is completed, neither the transferred options
nor the shares acquired on exercise of the transferred options will be
includible in the grantee's estate for estate tax purposes.
RESTRICTED STOCK. A grantee who is awarded restricted stock will not
recognize any taxable income for federal income tax purposes in the year of the
award, provided that the shares of common stock are subject to restrictions
(that is, the restricted stock is nontransferable and subject to a substantial
risk of forfeiture). However, the grantee may elect under Section 83(b) of the
Internal Revenue Code to recognize compensation income in the year of the award
in an amount equal to the fair market value of the common stock on the date of
the award, determined without regard to the restrictions. If the grantee does
not make such a Section 83(b) election, the fair market value of the common
stock on the date the restrictions lapse will be treated as compensation income
to the grantee and will be taxable in the year the restrictions lapse. Spatial
generally will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the grantee in the year the grantee is
taxed on the income.
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DEFERRED COMMON STOCK. There are no immediate tax consequences of
receiving an award of deferred common stock under the 2000 Stock Incentive Plan.
A grantee who is awarded deferred common stock will be required to recognize
ordinary income in an amount equal to the fair market value of shares issued to
such grantee at the distribution date(s) under the deferral election, reduced by
the amount, if any, paid for such shares. Spatial generally will be entitled to
a deduction for compensation paid in the same amount treated as compensation
income to the grantee in the year the grantee is taxed on the income.
RESTRICTED STOCK UNITS. There are no immediate tax consequences of
receiving an award of restricted common stock units under the 2000 Stock
Incentive Plan. A grantee who is awarded restricted common stock units will be
required to recognize ordinary income in an amount equal to the fair market
value of shares issued to such grantee at the end of the restriction period or,
if later, the payment date. Spatial generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
UNRESTRICTED COMMON STOCK. Participants who are awarded unrestricted
common stock will be required to recognize ordinary income in an amount equal to
the fair market value of the shares on the date of the award, reduced by the
amount, if any, paid for such shares. Spatial generally will be entitled to a
deduction for compensation paid in the same amount treated as compensation
income to the grantee in the year the grantee is taxed on the income.
DIVIDEND EQUIVALENT RIGHTS. Participants who receive dividend
equivalent rights will be required to recognize ordinary income in an amount
distributed to the grantee pursuant to the award. Spatial generally will be
entitled to a deduction for compensation paid in the same amount treated as
compensation income to the grantee in the year the grantee is taxed on the
income.
STOCK APPRECIATION RIGHTS. There are no immediate tax consequences of
receiving an award of stock appreciation rights under the 2000 Stock Incentive
Plan. Upon exercising a stock appreciation right, a grantee will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the common stock on the date of exercise. If
Spatial complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
PERFORMANCE SHARE AWARDS. There are no immediate tax consequences of
receiving an award of performance shares under the 2000 Stock Incentive Plan. A
grantee who is awarded performance shares will be required to recognize ordinary
income in an amount equal to the fair market value of shares issued to such
grantee pursuant to the award, reduced by the amount, if any, paid for such
shares. Spatial generally will be entitled to a deduction for compensation paid
in the same amount treated as compensation income to the grantee in the year the
grantee is taxed on the income.
Upon a grantee's disposition of performance shares, any gain realized
in excess of the amount reported as ordinary income will be reportable by the
grantee as a capital gain, and any loss will be reportable as a capital loss.
Capital gain or loss will be long-term if the grantee has held the shares for at
least one year. Otherwise, the capital gain or loss will be short-term.
PERFORMANCE AND ANNUAL INCENTIVE AWARDS. The award of a performance or
annual incentive award will have no federal income tax consequences for Spatial
or for the grantee. The payment of the award is taxable to a grantee as ordinary
income. If Spatial complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES PRESENT
IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING IS
REQUIRED TO APPROVE THE 2000 STOCK INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5
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PROPOSAL 6
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The board of directors of Spatial has selected KPMG as Spatial's
independent auditors for the fiscal year ending December 31, 2000, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the annual meeting. KPMG has audited
Spatial's financial statements since fiscal year 1992. Representatives of KPMG
are expected to be present at the annual meeting, will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
Stockholder ratification of the selection of KPMG as Spatial's
independent auditors is not required by Spatial's bylaws or otherwise. However,
the board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the audit committee of the board and the board of
directors will reconsider whether to retain that firm as its independent
auditors. Even if the selection is ratified, the audit committee and the board,
in their discretion, may direct the appointment of different independent
auditors at any time during the year if they determine that a change would be in
the best interests of Spatial and its stockholders.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES PRESENT
IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING IS
REQUESTED TO RATIFY THE SELECTION OF KPMG.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6
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OTHER MATTERS
FORWARD-LOOKING STATEMENTS
This proxy statement, including the appendices and the information
incorporated by reference, contains "forward-looking statements" within the
meaning of Section 27A of the Securities Exchange Act of 1934. The
forward-looking statements are predictions or projections about future events
and results. Future events and actual results, financial or otherwise, may
differ materially from the predictions and projections contained in or implied
by the forward-looking statements. Factors that might cause such differences
include the risks and uncertainties involved in Spatial's business, including,
but not limited to, the possibility that the conditions to closing of the sale
of the component software division will not be satisfied, including the possible
inability to obtain regulatory approvals required to consummate the sale of the
component software division, the effect of economic and market conditions on the
potential success of PlanetCAD, the impact of current or pending legislation and
regulation and the other risks and uncertainties discussed under the heading
"The Transaction - Special Considerations" beginning on page 20 of this proxy
statement. Additional risks and uncertainties are discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Spatial's annual report on Form 10-KSB for the fiscal year ended December 31,
1999.
SOLICITATION
Spatial will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock of Spatial beneficially
owned by others to forward to such beneficial owners. Spatial may reimburse
persons representing beneficial owners of common stock of Spatial for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of
Spatial. No additional compensation will be paid to directors, officers or other
regular employees for such services, but they will be reimbursed for reasonable
out-of-pocket expenses incurred in connection with their solicitation efforts.
STOCKHOLDER PROPOSALS
Spatial anticipates that its next annual meeting of stockholders will
be held on or about May 7, 2001. The deadline for submitting a stockholder
proposal for inclusion in Spatial's proxy statement and form of proxy for
Spatial's next annual meeting of stockholders, as calculated pursuant to Rule
14a-8 of the Securities Exchange Act of 1934, as amended, is January 8, 2001.
The deadline for submitting a stockholder proposal or a nomination for director
that is not to be included in such proxy statement and proxy is no earlier than
February 6, 2001 and no later than March 8, 2001. Stockholders are also advised
to review Spatial's bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations. To be
included in the proxy materials relating to Spatial's next annual meeting of
stockholders, all proposals must be received at Spatial's principal executive
offices on or before the above mentioned dates
INDEPENDENT AUDITORS
KPMG LLP serves as Spatial's independent auditors. A representative of
KPMG LLP will be at the annual meeting to answer your questions regarding the
financial statements of Spatial and will have the opportunity to make a
statement if so desired.
OTHER PROPOSALS
We know of no other matter to be acted upon at the annual meeting.
However, if any other matters are properly brought before the annual meeting,
the persons named in the accompanying form of proxy card as proxies by the
holders of Spatial's common stock will vote thereon in accordance with their
best judgment.
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AVAILABLE INFORMATION
Spatial is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
filed by Spatial with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following Regional Offices
of the SEC: Seven World Trade Center, 13th Floor, New York, New York 10048 and
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the material also can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Spatial is an electronic filer under the EDGAR (Electronic Data
Gathering, Analysis and Retrieval) system maintained by the SEC. The SEC
maintains an Internet site (http://www.sec.gov) on the Internet that contains
reports, proxy and information statements and other information regarding
companies that file electronically with the SEC. In addition, material filed by
Spatial can be inspected at the offices of The Nasdaq Stock Market, Inc.,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information contained in Spatial's
o Annual Report on Form 10-KSB for the year ended December 31,
1999, and
o Quarterly Report on Form 10-QSB for the quarter ended June 30,
2000
is incorporated herein by reference, as permitted by the rules and regulations
of the SEC.
Copies of Spatial's Annual Report for the fiscal year ended December
31, 1999 and Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000
are being transmitted herewith, by order of the board of Directors, but does not
constitute part of the proxy solicitation materials.
By Order of the board of directors
Todd S. Londa
Secretary
[INSERT DATE]
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Appendix A
------------------
PURCHASE AGREEMENT
------------------
by and among
DASSAULT SYSTEMES CORP.,
SPATIAL COMPONENTS, LLC
and
SPATIAL TECHNOLOGY INC.
Dated as of July 4, 2000
<PAGE> 73
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I PURCHASE AND SALE
<S> <C>
SECTION 1.01. Assets to Be Transferred................................................................2
SECTION 1.02. Assumption and Exclusion of Liabilities.................................................4
SECTION 1.03. Sale of Membership Interests............................................................5
SECTION 1.04. Purchase Price; Allocation of Purchase Price............................................5
SECTION 1.05. Closing.................................................................................5
SECTION 1.06. Closing Deliveries by the Seller........................................................5
SECTION 1.07. Closing Deliveries by the Purchaser.....................................................6
SECTION 1.08. Escrow..................................................................................6
SECTION 1.09. Share Purchase..........................................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 2.01. Organization, Authority and Qualification of the Seller.................................7
SECTION 2.02. Organization, Authority and Qualification of the Company................................8
SECTION 2.03. Membership Interests in the Company.....................................................8
SECTION 2.04. No Conflict.............................................................................8
SECTION 2.05. Governmental Consents and Approvals.....................................................9
SECTION 2.06. SEC Filings; Financial Statements.......................................................9
SECTION 2.07. No Undisclosed Liabilities.............................................................10
SECTION 2.08. Insurance..............................................................................10
SECTION 2.09. Receivables............................................................................10
SECTION 2.10. Inventories............................................................................10
SECTION 2.11. Sales and Purchase Order Backlog.......................................................11
SECTION 2.12. Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions......11
SECTION 2.13. Litigation.............................................................................13
SECTION 2.14. Compliance with Laws; Permits..........................................................13
SECTION 2.15. Environmental Matters..................................................................13
SECTION 2.16. Material Contracts.....................................................................13
SECTION 2.17. Intellectual Property..................................................................15
SECTION 2.18. The Seller Software....................................................................17
SECTION 2.19. Assets.................................................................................18
SECTION 2.20. Tangible Personal Property.............................................................18
SECTION 2.21. Real Property..........................................................................19
SECTION 2.22. Customers..............................................................................19
SECTION 2.23. Suppliers..............................................................................19
SECTION 2.24. Employee Benefit Matters...............................................................19
SECTION 2.25. Labor Matters..........................................................................20
SECTION 2.26. Business Employees....................................................................21
SECTION 2.27. Taxes..................................................................................21
</TABLE>
<PAGE> 74
<TABLE>
<S> <C>
SECTION 2.28. Subsidiaries...........................................................................22
SECTION 2.29. Brokers................................................................................22
SECTION 2.30. Prepaid Royalties......................................................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 3.01. Organization and Authority of the Purchaser............................................23
SECTION 3.02. No Conflict............................................................................23
SECTION 3.03. Governmental Consents and Approvals....................................................24
SECTION 3.04. Assets.................................................................................24
SECTION 3.05. Brokers................................................................................24
ARTICLE IV ADDITIONAL AGREEMENTS
SECTION 4.01. Conduct of Business Prior to the Closing...............................................24
SECTION 4.02. Stockholders' Meeting..................................................................24
SECTION 4.03. Proxy Statement........................................................................25
SECTION 4.04. Access to Information..................................................................26
SECTION 4.05. Disclaimer of Representations and Warranties...........................................26
SECTION 4.06. Regulatory and Other Authorizations; Notices and Consents..............................26
SECTION 4.07. Notice of Developments.................................................................27
SECTION 4.08. Non-Competition........................................................................28
SECTION 4.09. Non-Hiring and Non-Solicitation........................................................29
SECTION 4.10. Use of Names and Marks.................................................................29
SECTION 4.11. Bulk Transfer Laws.....................................................................29
SECTION 4.12. Certain Tax Filings....................................................................30
SECTION 4.13. Conveyance Taxes.......................................................................30
SECTION 4.14. No Solicitation of Transactions........................................................30
SECTION 4.15. State Takeover Laws....................................................................32
SECTION 4.16. Cooperation and Exchange of Tax Information............................................32
SECTION 4.17. Right of Information...................................................................32
SECTION 4.18. Public Announcements...................................................................33
SECTION 4.19. Further Action.........................................................................33
SECTION 4.20. Closing Amounts Statement; Receivables.................................................33
SECTION 4.21. Confidentiality........................................................................33
ARTICLE V EMPLOYEE MATTERS
SECTION 5.01. Employees..............................................................................35
SECTION 5.02. Employee Benefits......................................................................35
SECTION 5.03. Key Employee Retention Matters.........................................................36
ARTICLE VI CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller, the Company and the Purchaser.................36
SECTION 6.02. Additional Conditions to Obligations of the Seller and the Company.....................37
SECTION 6.03. Additional Conditions to Obligations of the Purchaser..................................38
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VII INDEMNIFICATION
<S> <C>
SECTION 7.01. Survival of Representations and Warranties.............................................39
SECTION 7.02. Indemnification by the Seller..........................................................40
SECTION 7.03. Indemnification by the Purchaser.......................................................41
SECTION 7.04. Limitations on Indemnification.........................................................42
SECTION 7.05. Distributions from Escrow Fund.........................................................43
SECTION 7.06. Tax Treatment of Indemnifications......................................................43
SECTION 7.07. Exclusive Remedy.......................................................................43
ARTICLE VIII TERMINATION AND WAIVER
SECTION 8.01. Termination............................................................................44
SECTION 8.02. Effect of Termination..................................................................45
SECTION 8.03. Fees and Expenses......................................................................45
SECTION 8.04. Amendment..............................................................................46
SECTION 8.05. Waiver.................................................................................46
ARTICLE IX GENERAL PROVISIONS
SECTION 9.01. Expenses...............................................................................46
SECTION 9.02. Notices................................................................................46
SECTION 9.03. Severability; Entire Agreement.........................................................47
SECTION 9.04. Assignment; No Third Party Beneficiaries...............................................48
SECTION 9.05. Counterparts...........................................................................48
SECTION 9.06. Governing Law; Forum...................................................................48
SECTION 9.07. Currency...............................................................................48
SECTION 9.08. Specific Performance...................................................................48
SECTION 9.09. Waiver of Jury Trial...................................................................49
ARTICLE X DEFINITIONS
SECTION 10.01. Certain Defined Terms..................................................................49
SECTION 10.02. Other Defined Terms....................................................................55
</TABLE>
iii
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PURCHASE AGREEMENT, dated as of July 4, 2000 (this "Agreement"), by and among
DASSAULT SYSTEMES CORP., a corporation organized under the laws of the State of
Delaware (the "Purchaser"), SPATIAL TECHNOLOGY INC., a corporation organized
under the laws of the State of Delaware (the "Seller"), and SPATIAL COMPONENTS,
LLC, a limited liability corporation organized under the laws of the State of
Delaware and a wholly owned subsidiary of the Seller (the "Company").
W I T N E S S E T H:
WHEREAS, among other businesses, the Seller is primarily engaged in (i)
developing, marketing, distributing, licensing and selling component software,
including without limitation, the CBD Software as defined hereafter (the
"Component Business") and (ii) developing, marketing, licensing and providing
its Internet-based services for the engineering community, focusing on
Internet-hosted application services and content, e-commerce and other services
to the manufacturing and design engineering community (the "Internet Service
Business");
WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, the Component Business, including, without
limitation, all right, title and interest of the Seller in and to the property
and assets of the Component Business, and in connection therewith the Purchaser
is willing to assume certain liabilities of the Seller relating thereto, all
upon the terms and subject to the conditions set forth herein (the
"Acquisition");
WHEREAS, the Board of Directors of the Seller (the "Board") has
determined that the Acquisition is in the best interests of its stockholders;
WHEREAS, the Seller shall transfer the Assets (as defined below) to the
Company in connection with the division of the Seller's business into the
Component Business and the Internet Service Business, pursuant to the Assignment
and Assumption Agreement (as defined below);
WHEREAS, the Board has unanimously approved this Agreement, the
Acquisition and the other transactions contemplated by this Agreement and agreed
to recommend that the holders of shares of common stock, par value $.01 per
share (the "Seller Common Stock"), of the Seller approve of the foregoing;
WHEREAS, in connection with the closing of the transactions
contemplated by this Agreement, Dassault Systemes, a societe anonyme organized
under the laws of France and the owner of the Purchaser ("Dassault Systemes"),
and/or certain affiliates of Dassault Systemes, and the Seller intend to enter
into the IP Agreements (as defined below);
WHEREAS, the Purchaser wishes to make an additional equity investment
in the Seller; and
WHEREAS, certain capitalized terms used herein shall having the
meanings ascribed thereto in Article X of this Agreement;
<PAGE> 77
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Assets to Be Transferred. (a) On the terms and subject to
the conditions of this Agreement and the Assignment and Assumption Agreement,
the Seller shall, by means of a capital contribution, on or prior to the
Closing, assign, transfer, convey and deliver to the Company, or cause to be
assigned, transferred, conveyed and delivered to the Company, all the assets,
properties, goodwill and business of every kind and description and wherever
located, whether tangible or intangible, real, personal or mixed, directly or
indirectly owned by the Seller or to which it is directly or indirectly
entitled, other than the Excluded Assets, that are used in or intended to be
used in the Component Business (the assets to be transferred to the Company
pursuant to the Assignment and Assumption Agreement being referred to as the
"Assets"), including, without limitation, the following:
(i) the Component Business as a going concern;
(ii) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations held or used by or
intended to be used by the Seller in connection with, or required for,
the Component Business, including, without limitation, the franchises,
permits, licenses, agreements, waivers and authorizations set forth in
Section 1.01(a)(ii) of the Disclosure Schedule;
(iii) all right, title and interest in, to and under the Owned
Intellectual Property and the Seller's right, title and interest in, to
and under the Licensed Intellectual Property;
(iv) all furniture, fixtures, equipment, machinery and other
tangible personal property used, intended to be used or held for use by
the Seller at the locations at which the Component Business is
conducted, or otherwise owned or held by the Seller on the Closing Date
for use in, or in connection with, the conduct of the Component
Business, including, without limitation, all furniture, fixtures,
equipment, computers, peripheral equipment, machinery and other
tangible personal property located at or held in the properties leased
pursuant to the leases set forth in Section 1.01(a)(xiv) of the
Disclosure Schedule;
(v) all vehicles and rolling stock used in or intended to be
used in the Component Business;
(vi) all Inventories;
(vii) all Receivables;
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(viii) copies, to the extent reasonably requested, of all
books of account, general and financial, tax records, the personnel
records listed in Section 1.01(a)(viii) of the Disclosure Schedule,
invoices, shipping records, supplier lists, correspondence and other
documents, records and files and all computer software and programs and
any rights thereto used in, intended to be used in or relating to, the
Component Business on the Closing Date;
(ix) the goodwill of the Seller relating to the Component
Business;
(x) all the Seller's right, title and interest in, to and
under the name "Spatial";
(xi) all claims, causes of action, chooses in action, rights
of recovery and rights of set-off of any kind (including rights to
insurance proceeds and rights under and pursuant to all warranties,
representations and guarantees made by suppliers of products, materials
or equipment, or components thereof), pertaining to or arising out of
the Component Business;
(xii) all sales and promotional literature, copies of all
customer lists and other sales-related materials designed for or used
in, intended to be used in or related to the Component Business;
provided, however, that, subject to the provisions of Sections 4.08,
4.09 and 4.14, the Seller shall have the right to retain and use for
any business purpose reasonably related to the Internet Services
Business, originals of such customer lists;
(xiii) all rights of the Seller (other than the Seller's
rights in, to and under the Purchased Intellectual Property, which are
as separately addressed herein) under all contracts, licenses,
sublicenses, agreements, leases, commitments, and sales and purchase
orders, and under all commitments, bids and offers (to the extent such
offers are transferable) to the extent used in or intended to be used
in the Component Business, including, without limitation, all
contracts, licenses, sublicenses, agreements and commitments arising
out of or relating to the Component Business on the Closing Date listed
in Section 1.01(a)(xiii) of the Disclosure Schedule;
(xiv) all rights of the Seller in, to and under the leases for
the Leased Real Property listed in Section 1.01(a)(xiv) of the
Disclosure Schedule; and
(xv) all the Seller's direct and indirect right, title and
interest on the Closing Date in, to and under all other assets, rights
and claims of every kind and nature used or intended to be used in the
Component Business.
(b) The Assets shall exclude the following assets owned by the Seller
and all other assets and properties set forth on Section 1.01(b) of the
Disclosure Schedule (the "Excluded Assets"):
(i) all cash, cash equivalents and bank accounts owned by the
Seller;
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(ii) the Retained Intellectual Property;
(iii) all rights of the Seller in, to and under any leases for
real property other than for the Leased Real Property, including,
without limitation, the lease of the real property located at 530
Howard Street, Suite 300, San Francisco, California 94105 and 5485
Conestoga Court, Boulder, Colorado 80301;
(iv) all rights of the Seller under this Agreement, the
Ancillary Agreements, the IP Agreements and any other agreement of the
Seller not related to the Component Business;
(v) the originals of all Board and stockholder minutes of the
Seller;
(vi) all assets and property of the Seller that are not
Assets; and
(vii) all receivables other than the Receivables.
SECTION 1.02. Assumption and Exclusion of Liabilities. (a) On the terms
and subject to the conditions of this Agreement, the Purchaser shall, at the
Closing, assume and shall pay, perform and discharge when due only the following
and no other Liabilities of the Seller as at the Closing Date (the "Assumed
Liabilities"):
(i) all obligations, claims and liabilities arising out of or
relating to performance from and after the Closing Date under the
contracts, licenses, sublicenses, agreements, commitments and leases
listed in Sections 1.01(a)(xiii) and 1.01(a)(xiv) of the Disclosure
Schedule; and
(ii) all Liabilities arising out of or incurred in connection
with the Assets from and after the Closing Date.
(b) The Assumed Liabilities in Section 1.02(a) shall constitute the
only Liabilities assumed by the Company or the Purchaser as a result of the
purchase of the Component Business. The Seller shall retain, and shall be
responsible for paying, performing and discharging, and neither the Company nor
the Purchaser shall assume or have any responsibility for, all Liabilities of
the Seller other than the Assumed Liabilities (the "Excluded Liabilities"),
including, without limitation:
(i) all Taxes (excluding Conveyance Taxes, which shall be
governed by Section 4.13) now or hereafter owed by the Seller or any
Affiliate of the Seller, or attributable to the Assets or the Component
Business, relating to any period, or any portion of any period, ending
on or prior to the Closing Date;
(ii) all Liabilities relating to or arising out of the
Excluded Assets;
(iii) all Liabilities, except the Assumed Liabilities,
relating to or arising out of the conduct of the Component Business
prior to the Closing, including but not limited to any and all
Liabilities associated with any Plans; and
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(iv) all deferred revenue relating to the Internet Service
Business.
SECTION 1.03. Sale of Membership Interests. On the Closing Date, the
Seller shall sell to the Purchaser, and the Purchaser shall purchase from the
Seller, all of the membership interests in the Company (the "Membership
Interests").
SECTION 1.04. Purchase Price; Allocation of Purchase Price. (a) The
purchase price for the Membership Interests shall be $21,500,000 minus Deferred
Revenue plus the sum of (A) Prepaid Expenses and (B) Receivables (the "Purchase
Price").
(b) Prior to the Closing Date, the Purchaser and the Seller shall agree
upon an allocation of the sum of the Purchase Price and the Assumed Liabilities
among the Assets as of the Closing Date (the "Allocation"). Any subsequent
adjustments to the sum of the Purchase Price and Assumed Liabilities shall be
reflected in the Allocation hereunder in a manner consistent with Section 1060
of the Code and the Treasury Regulations thereunder. For all Tax purposes, the
Purchaser and the Seller agree to report the transactions contemplated in this
Agreement in a manner consistent with the terms of this Agreement, including the
Allocation, and that neither of them will take any position inconsistent
therewith in any Tax return, in any refund claim, in any litigation, or
otherwise, except as otherwise required by Law.
SECTION 1.05. Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Membership Interests contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of Hogan & Hartson L.L.P., 1800 Broadway, Boulder, Colorado 80302, at
10:00 A.M. Colorado time on the second Business Day following the satisfaction
or waiver of all other conditions to the obligations of the parties set forth in
Article VI, or at such other place or at such other time or on such other date
as the Seller and the Purchaser may mutually agree upon in writing (the day on
which the Closing takes place being the "Closing Date").
SECTION 1.06. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(a) Executed counterparts of the Intellectual Property Assignment and
such other instruments, in form and substance satisfactory to the Purchaser, as
may be reasonably requested by the Purchaser to evidence the transfer of the
Assets to the Company or evidence such transfer on the public records;
(b) an executed counterpart of the Assignment and Assumption Agreement;
(c) a certificate evidencing the Membership Interests being purchased
at the Closing;
(d) a receipt for the Purchase Price less the Escrow Amount;
(e) the certificates and other documents required to be delivered
pursuant to Section 6.03; and
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(f) a statement of (i) the Deferred Revenue, specifying the amounts of
cash and receivables attributable to (A) maintenance of Software, (B) consulting
services and (C) Licenses and, in each case, the third parties involved and (ii)
the Prepaid Expenses, specifying the amount thereof and the third parties
involved (the "Closing Amounts Statement").
SECTION 1.07. Closing Deliveries by the Purchaser. (a) At the Closing,
the Purchaser shall deliver to the Seller:
(i) the Purchase Price less the Escrow Amount by wire transfer
in immediately available funds to an account or accounts designated in
writing by the Seller to the Purchaser at least three Business Days
prior to the Closing Date; and
(ii) the certificates and other documents required to be
delivered pursuant to Section 6.02.
(b) At the Closing, the Purchaser shall deliver to the Escrow Agent, in
accordance with the Escrow Agreement, the Escrow Amount by wire transfer in
immediately available funds to the account designated therefor in the Escrow
Agreement.
SECTION 1.08. Escrow. Prior to or at the Closing, the Seller and the
Purchaser shall enter into an Escrow Agreement with the Escrow Agent
substantially in the form of Exhibit B (the "Escrow Agreement"). In accordance
with the terms of the Escrow Agreement, the Purchaser shall deposit the Escrow
Amount into an account to be managed and paid out by the Escrow Agent in
accordance with the terms of the Escrow Agreement.
SECTION 1.09. Share Purchase. (a) At or prior to the Closing, on the
terms and subject to the conditions set forth in this Agreement and the iShare
Purchase Agreement, the Purchaser will purchase from the Seller and the Seller
will issue and sell to the Purchaser (the "Share Purchase") 555,556 shares of
Seller Common Stock. With respect to the shares purchased pursuant to this
Section 1.09, the Purchaser shall enjoy all rights, including registration
rights (subject to obtaining all required shareholder approvals), that the
Purchaser enjoys with respect to the shares of Seller Common Stock purchased by
the Purchaser from the Seller pursuant to the Securities Purchase Agreement,
dated as of February 22, 2000, among the Seller and the several purchasers named
therein, including the Purchaser; provided, however, that the Purchaser shall
have no rights with respect to any warrants of the Seller pursuant to this
Section 1.09.
(b) The Share Purchase shall occur at the time and place of the
Closing, or, if the Purchaser so elects in a written notice (the "Share Notice")
delivered to the Seller at least five Business Days prior to the Closing Date,
on any Business Day prior to the Closing Date (which date shall be specified by
the Purchaser in the Share Notice and shall be at least two Business Days after
the date of the Share Notice and, if required by the rules of the American Stock
Exchange, shareholder approval) or on such other date and place as may be
mutually agreed by the Seller and the Purchaser (the "Share Closing"). The Share
Notice shall set forth the Share Purchase Amount. For purposes of this
Agreement, "Share Purchase Amount" means $2,000,000.
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(c) At the Share Closing, the Seller shall deliver: (i) an executed
counterpart of the Share Purchase Agreement; and (ii) one or more certificates
for the shares of Seller Common Stock to be sold to the Purchaser pursuant to
Section 1.09(a) duly registered in the name of the Purchaser or the Person
designated in writing by the Purchaser. The stock certificates issued pursuant
to this Section shall have all such legends restricting or otherwise limiting
transferability as required by the Share Purchase Agreement.
(d) At the Share Closing, the Purchaser shall: (i) deliver an executed
counterpart of the Share Purchase Agreement; and (ii) pay the Share Purchase
Amount to the Seller by wire transfer in immediately available funds to an
account or accounts designated in writing by the Seller.
(e) If, during the period prior to the Share Closing, the outstanding
shares of Seller Common Stock are changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the number of shares
of Seller Common Stock to be sold to the Purchaser pursuant to Section 1.09(a)
shall be correspondingly adjusted to the extent appropriate to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, except
as set forth in the Disclosure Schedule hereto (each section of which qualifies
the correspondingly numbered representation and warranty or covenant to the
extent specified therein), the Seller hereby represents and warrants to the
Purchaser as follows:
SECTION 2.01. Organization, Authority and Qualification of the Seller.
The Seller is a corporation duly organized or formed, validly existing and in
good standing under the Laws of the State of Delaware and has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse Effect.
The execution and delivery of this Agreement and the Ancillary Agreements by the
Seller, the performance by the Seller of its obligations hereunder and
thereunder and the consummation by the Seller of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Seller (other than, with respect to the Acquisition, the
approval and adoption of this Agreement, the Acquisition and the other
transactions contemplated by this Agreement by the holders of a majority of the
then-outstanding shares of Seller Common Stock). This Agreement has been, and
upon their execution the Ancillary Agreements will be, duly executed and
delivered by the Seller, and (assuming due authorization, execution and delivery
by the other parties thereto) this
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Agreement constitutes, and upon their execution the Ancillary Agreements will
constitute, legal, valid and binding obligations of the Seller enforceable
against the Seller in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights (including, without limitation, the effect of
statutory and other Law regarding fraudulent conveyances, fraudulent transfers
and preferential transfers) and to general principles of equity. The Board has
taken all appropriate action to ensure that the restrictions on "business
combinations" contained in Section 203 of the General Corporate Law of the State
of Delaware ("Delaware Law") are inapplicable to this Agreement, the Acquisition
and the other transactions contemplated by this Agreement ("Section 203
Approval").
SECTION 2.02. Organization, Authority and Qualification of the Company.
The Company is a limited liability company duly organized or formed, validly
existing and in good standing under the Laws of the State of Delaware and has
all necessary power and authority to enter into this Agreement and the
Assignment and Assumption Agreement, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The Company is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect. The execution and delivery of this Agreement and the
Assignment and Assumption Agreement by the Company, the performance by the
Company of its obligations hereunder and thereunder and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Company. This Agreement
and the Assignment and Assumption Agreement have been duly executed and
delivered by the Company, and (assuming due authorization, execution and
delivery by the other parties thereto) this Agreement and the Assignment and
Assumption Agreement constitute legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights (including, without
limitation, the effect of statutory and other Law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers) and to general
principles of equity.
SECTION 2.03. Membership Interests in the Company. As of the date
hereof and without giving effect to the consummation of the transactions
contemplated hereby, the Membership Interests constitute all of the membership
interests in the Company. The Seller owns all of the Membership Interests free
and clear of all Encumbrances. There are no outstanding contractual obligations
of the Company to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Person.
SECTION 2.04. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 2.05 have been obtained
and all filings and notifications listed in Section 2.05 of the Disclosure
Schedule have been made, except as may result from any facts or circumstances
relating solely to the Purchaser, the execution, delivery and performance of
this Agreement, the Assignment and Assumption Agreement and the Ancillary
Agreements by the Seller and the Company, as the case may be, do not and will
not (a) violate, conflict with or result in the breach of any provision of the
Certificate of
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Incorporation or By-laws of the Seller or the Certificate of Formation or the
Operating Agreement of the Company, as the case may be, (b) conflict with or
violate any Law or Governmental Order applicable to the Seller, the Company, the
Assets or the Component Business, or (c) conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent (except as set forth
in Sections 2.17(g) and 2.19(b) of the Disclosure Schedule) under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the Assets or properties of the Seller or the Company relating to the
Component Business pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Seller or the Company is a party or by which any of
such Assets or properties is bound or affected, except in the case of clauses
(b) and (c) as would not have a Material Adverse Effect.
SECTION 2.05. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement, the Assignment and Assumption
Agreement and each Ancillary Agreement by the Seller do not and will not require
any consent, approval, authorization or other order of, action by, filing with
or notification to, any Governmental Authority, except the notification
requirements of the HSR Act.
(b) The execution, delivery and performance of this Agreement and the
Assignment and Assumption Agreement by the Company do not and will not require
any consent, approval, authorization or other order of, action by, filing with
or notification to, any Governmental Authority.
SECTION 2.06. SEC Filings; Financial Statements. (a) Each of the Seller
and the Company has filed all forms, reports and documents required to be filed
by it with the Securities and Exchange Commission (the "SEC") since December 31,
1998, and the Seller has heretofore delivered to the Purchaser, in the form
filed with the SEC, (i) its Annual Reports on Form 10-KSB for the fiscal years
ended December 31, 1999 and 1998, (ii) its Quarterly Reports on Form 10-QSB for
the period ended March 31, 2000, (iii) all proxy statements relating to the
Seller's meetings of stockholders (whether annual or special) held since
December 31, 1998, and (iv) all other forms, reports and other registration
statements filed by the Seller with the SEC since December 31, 1998 (the forms,
reports and other documents referred to in clauses (i), (ii), (iii) and (iv)
above being, collectively, the "SEC Reports"). The SEC Reports (i) were
prepared, in all material respects, in accordance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations promulgated thereunder, and (ii) did not, at the time
they were filed, or, if amended, as of the date of such amendment, 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 made therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the SEC Reports was prepared, in all material
respects, in accordance with US GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and each
fairly presents, in all material respects, the financial
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position, results of operations and cash flows of the Seller as at the
respective dates thereof and for the respective periods indicated therein except
as otherwise noted therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments that would not have a Material Adverse
Effect).
SECTION 2.07. No Undisclosed Liabilities. The Company has no
Liabilities other than the Assumed Liabilities and those Liabilities created by
this Agreement and the transactions contemplated hereby.
SECTION 2.08. Insurance. Section 2.08 of the Disclosure Schedule lists
each insurance policy (including policies providing property, casualty,
liability, workers' compensation, and bond and surety arrangements) under which
the Assets have been insured at any time within the past three years. With
respect to each such insurance policy: (i) the policy is legal, valid, binding
and enforceable in accordance with its terms and, except for policies that have
expired under their terms in the ordinary course, is in full force and effect,
and (ii) neither the Seller nor the Company is in breach or default (including
any breach or default with respect to the payment of premiums or the giving of
notice), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default or permit termination or modification,
under the policy.
SECTION 2.09. Receivables. Except to the extent, if any, reserved for
in the audited consolidated balance sheet of the Seller for the fiscal year
ended December 31, 1999 (the "December 31, 1999 Balance Sheet"), all Receivables
arose from, and the Receivables existing on the Closing Date will have arisen
from, the sale of Inventory or services to Persons not Affiliated with the
Seller and in the ordinary course of the Component Business consistent with past
practice and, except as reserved against in the December 31, 1999 Balance Sheet,
constitute or, to the Seller's knowledge, will constitute, as the case may be,
only valid, undisputed claims of the Component Business not subject to valid
claims of set-off or other defenses or counterclaims other than normal cash
discounts accrued in the ordinary course of the Component Business consistent
with past practice. There are no Receivables past due in excess of 60 days.
SECTION 2.10. Inventories. (a) Subject to amounts reserved therefor in
the December 31, 1999 Balance Sheet, the values at which all Inventories are
carried in the December 31, 1999 Balance Sheet reflect the historical inventory
valuation policy of the Seller of stating such Inventories at the lower of cost
(determined on the first-in, first-out method) or market value. The Seller has,
and at the Closing Date the Company will have, good and marketable title to the
Inventories free and clear of all Encumbrances, other than Permitted
Encumbrances. The Inventories do not consist of, in any material amount, items
that are obsolete, damaged or slow-moving. The Inventories do not consist of any
items held on consignment. The Seller is not under any obligation or liability
with respect to accepting returns of items of Inventory or merchandise in the
possession of its customers other than in the ordinary course of the Component
Business consistent with past practice. No clearance or extraordinary sale of
the Inventories has been conducted since the date of the December 31, 1999
Balance Sheet.
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SECTION 2.11. Sales and Purchase Order Backlog. (a) As of July 1, 2000,
open sales orders (including, without limitation, licenses, maintenance and
services sold) accepted by the Seller arising out of or relating to the
Component Business totaled no more than $75,000. Section 2.11(a) of the
Disclosure Schedule lists all sales orders exceeding $30,000 per order, which
have been accepted by the Seller arising out of or relating to the Component
Business and which were open as of the date prior to the date hereof.
(b) As of July 1, 2000, open purchase orders issued by the Seller
arising out of or relating to the Component Business totaled no more than
$100,000. Section 2.11(b) of the Disclosure Schedule lists all purchase orders
exceeding $30,000 per order, which have been issued by the Seller arising out of
or relating to the Component Business and which were open as of the date prior
to the date hereof.
SECTION 2.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since December 31, 1999, the Component Business
has been conducted in the ordinary course of the Component Business and
consistent with past practice. As amplification and not limitation of the
foregoing, since December 31, 1999 (unless a later date is otherwise specified
below), neither the Seller nor the Company has as it relates to the Component
Business:
(a) permitted or allowed any of the Assets to be subjected to any
Encumbrance, other than (i) Permitted Encumbrances, (ii) software licenses
granted in the ordinary course of Component Business and (iii) Encumbrances that
will be released at or prior to the Closing;
(b) written down or written up (or failed to write down or write up)
the value of any Inventories or Receivables or revalued any assets other than in
the ordinary course of business consistent with past practice and in accordance
with US GAAP;
(c) made any change in any method of accounting or accounting practice
or policy used by the Seller, other than such changes required by US GAAP and
disclosed in Section 2.12(c) of the Disclosure Schedule;
(d) amended, terminated, canceled or compromised any material claims
arising out of or relating to the Component Business or waived any other rights
of substantial value to the Component Business;
(e) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible property), primarily
used, or intended to be primarily used in the Component Business, other than the
sale or licensing of Inventories or Software in the ordinary course of the
Component Business consistent with past practice, the sale of obsolete property,
or sales, transfers, leases, subleases, licenses or other dispositions not
exceeding $25,000 individually or $50,000 in the aggregate;
(f) since March 31, 2000, made any capital expenditure or commitment
for any capital expenditure in excess of $50,000 individually or $200,000 in the
aggregate;
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(g) since March 31, 2000, issued any sales orders or otherwise agreed
to make any purchases involving exchanges in value in excess of $30,000
individually or $200,000 in the aggregate, except as disclosed pursuant to
Section 2.11(b);
(h) (A) other than as set forth in Section 2.12(h) of the Disclosure
Schedule, granted any increase, or announced any increase, in excess of 7% in
the wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Seller to any of its employees, or (B) established or
increased or promised to increase any benefits, in either case except as
required by Law, or involving ordinary increases consistent with the past
practice of the Component Business or relating to retention incentives as set
forth in Section 5.03;
(i) entered into any agreement, arrangement or transaction with any of
its directors, officers, employees or Stockholders (or with any relative,
beneficiary, spouse or Affiliate of such Persons);
(j) failed to maintain the Assets other than the Purchased Intellectual
Property in good repair and operating condition, ordinary wear and tear
excepted;
(k) suffered any casualty loss or damage with respect to any of the
Assets which in the aggregate have a replacement cost of more than $50,000,
whether or not such losses or damage shall have been covered by insurance;
(l) amended or modified in any material respects or consented to the
termination of any Material Contract or the Seller's rights thereunder, except
as set forth in Section 2.12(l) of the Disclosure Schedule;
(m) made, changed or revoked any material Tax election or method of Tax
accounting, or settled or compromised any material Tax assessment or deficiency;
(n) with respect to any new maintenance or future service contracts or
agreements, discounted the retail or wholesale price of any product or service
by more than 25 percent other than in the ordinary course of the Component
Business and in accordance with past practice;
(o) stopped or otherwise slowed the development of any material ongoing
computer software development project;
(p) transferred any employee out of the Component Business and into the
Internet Service Business;
(q) hired any employee to work in the Component Business who is not
included in the transferred employee Disclosure Schedule; or
(r) agreed, whether in writing or otherwise, to take any of the actions
specified in this Section 2.12 or granted any options to purchase, rights of
first refusal, rights of first offer or any other similar rights with respect to
any of the actions specified in this Section 2.12, except as expressly
contemplated by this Agreement and the Ancillary Agreements.
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SECTION 2.13. Litigation. There are no Actions by or against the Seller
or the Company or that could materially affect any of the Assets, pending before
any Governmental Authority (or, to the knowledge of the Seller or the Company,
threatened to be brought by or before any Governmental Authority). The Assets
are not subject to any Governmental Order (nor, to the knowledge of the Seller
or the Company, are there any such Governmental Orders threatened to be imposed
by any Governmental Authority) that could materially adversely affect any of the
Assets.
SECTION 2.14. Compliance with Laws; Permits. (a) The Seller (i) has
conducted and continues to conduct the Component Business, in all material
respects, in accordance with all Laws and Governmental Orders applicable to the
Seller, the Assets or the Component Business, and (ii) to the Seller's
knowledge, is not in violation of any such Law or Governmental Order. Section
2.14 of the Disclosure Schedule sets forth a brief description of each material
Governmental Order applicable to the Assets or the Component Business.
(b) The Seller is, and at the Closing the Company will be, in
possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Authority necessary to own, lease and operate the
Assets or the Component Business, or to carry on the Component Business as it
now being conducted (the "Permits"), and no suspension or cancellation of any of
the Permits is now pending or, to the knowledge of the Seller, threatened.
SECTION 2.15. Environmental Matters. The Seller and the Company are in
all material respects in compliance with the provisions of all Laws relating to
pollution, protection of the environment or occupational safety and health
applicable to it or to real property owned or leased by it or to the use,
operation or occupancy thereof. Neither the Seller nor the Company has engaged
in any activity in material violation of any provision of any Law relating to
pollution, protection of the environment or occupational safety and health.
Neither the Seller nor the Company has any known material liability, absolute or
contingent, under any Law relating to pollution, protection of the environment
or occupational safety and health.
SECTION 2.16. Material Contracts. (a) Section 2.16(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral and informal arrangements that are enforceable against
the Seller) of the Seller arising out of or relating to the Component Business
(such contracts and agreements, together with all agreements relating to the
Purchased Intellectual Property set forth in Section 2.17(a) of the Disclosure
Schedule, and any lease or sublease set forth in Section 2.21(b) of the
Disclosure Schedule, being "Material Contracts"):
(i) each contract or agreement under the terms of which the
Seller: (A) is likely to pay or otherwise give consideration of more
than $50,000 in the aggregate during the calendar year ending December
31, 2000, (B) is obligated to pay or otherwise give consideration of
more than $100,000 in the aggregate over the remaining term of such
contract, (C) cannot be canceled by the Seller without penalty or
further payment and without more than 90 days' notice, or (D) is
obligated to a term of length greater than two years;
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(ii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
the Seller or any of its Affiliates is a party and which may obligate
the Seller to pay an amount greater than or equal to $50,000;
(iii) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Seller is a party and which may obligate the Seller to pay an amount
greater than or equal to $10,000 per month;
(iv) all contracts and agreements relating to Indebtedness of
the Seller;
(v) all contracts and agreements with any United States
federal Governmental Authority to which the Seller is a party;
(vi) all contracts and agreements that limit or purport to
limit the ability of the Seller to compete in the Component Business or
with any Person or in any geographic area or during any period of time
other than as contemplated by this Agreement, the Ancillary Agreements,
and the IP Agreements;
(vii) all employee benefit, bonus, commission, pension,
profit-sharing, change of control, severance, stock option, share
purchase and similar plans and arrangements;
(viii) all contracts and agreements between the Seller and any
employee, officer, director or Stockholder of the Seller other than any
such contracts or agreements disclosed pursuant to Section
2.16(a)(vii);
(ix) all contracts and agreements for the provision of
services by the Seller including, without limitation, all contracts and
agreements relating to the development of any computer software for
third Persons other than customer licenses, support or maintenance
contracts entered into in the ordinary course of the Component Business
consistent with past practice;
(x) all agreements that transfer or license to any third
Person any rights in, to or under the Source Code of any Software
included in the Owned Intellectual Property and open sales orders
referred to in Section 2.11;
(xi) all contracts and agreements requiring the deliver of any
service or product within a specified time period other than customer
licenses, support or maintenance contracts entered into in the ordinary
course of the Component Business consistent with past practice and open
sales orders referred to in Section 2.11; and
(xii) all other contracts and agreements, whether or not made
in the ordinary course of the Component Business, that are material to
the conduct of the Component Business.
(b) Each Material Contract: (i) is legal, valid and binding on the
Seller and, to the Seller's knowledge, the other parties thereto and is in full
force and effect, (ii) except to the extent any consents set forth in Section
2.05 of the Disclosure Schedule are not obtained, is
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freely and fully assignable to the Purchaser without penalty or other adverse
consequences and (iii) upon consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, except to the extent that any
consents set forth in Section 2.05 of the Disclosure Schedule are not obtained,
shall continue in full force and effect without penalty or other adverse
consequence. The Seller is not in material breach of, or material default under,
any Material Contract.
(c) To the Seller's knowledge, no other party to any Material Contract
is in breach thereof or default thereunder. There is no contract, agreement or
other arrangement granting any Person any preferential right to purchase, other
than in the ordinary course of the Component Business consistent with past
practice, any of the Assets.
SECTION 2.17. Intellectual Property. (a) Section 2.17 of the Disclosure
Schedule sets forth a true and complete list of all patents and patent
applications, registered trademarks and trademark applications, domain names,
registered copyrights and copyright applications and other definable
Intellectual Property, including, without limitation, trade names and
unregistered trademarks, included in the Purchased Intellectual Property, other
than commercial, off-the-shelf shrink-wrap or click-wrap licenses.
(b) The operation of the Component Business as currently conducted and
the use by the Seller of the Purchased Intellectual Property in connection
therewith do not conflict with, infringe, misappropriate or otherwise violate
the Intellectual Property or other proprietary rights of any third party, and no
Actions are pending or, to the Seller's knowledge, threatened against the Seller
alleging any of the foregoing.
(c) The Seller is the exclusive owner of the entire and unencumbered
right, title and interest in and to the Owned Intellectual Property and has a
valid right and license to use the Licensed Intellectual Property without
limitation, subject only to the terms in the Licenses, in the ordinary course of
the Component Business as presently conducted. All officers and employees of the
Seller are under written obligation to assign to the Seller all inventions,
creations and works of authorship made by them within the scope of their
employment during such employment.
(d) The Purchased Intellectual Property includes all of the
Intellectual Property used and required in the ordinary day-to-day conduct of
the Component Business, and there are no other items of Intellectual Property
that are material to such ordinary day-to-day conduct thereof except for the
Joint Software, to which the Purchaser or an Affiliate shall receive a license
in the form of the Joint Software License Agreement as a condition to the
Closing. The Material Contracts relating to the Owned Intellectual Property and,
to the knowledge of the Seller, the Licensed Intellectual Property, are
subsisting, valid and enforceable and have not been adjudged invalid or
unenforceable in whole or part.
(e) No Actions have been asserted, are pending or, to the Seller's
knowledge, threatened against the Seller (i) based upon or challenging or
seeking to deny or restrict the use by the Seller of any of the Purchased
Intellectual Property, (ii) alleging that any services provided by, processes
used by, or products manufactured or sold by the Seller in connection with the
Component Business infringe or misappropriate any Intellectual Property right of
any
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third party, or (iii) alleging that the Licensed Intellectual Property is being
licensed or sublicensed in conflict with the terms of any license or other
agreement.
(f) To the knowledge of the Seller, no person is engaging in any
activity that infringes the Purchased Intellectual Property. The Seller has not
granted any license or other right to any third party with respect to the
Purchased Intellectual Property except in the ordinary course of the Component
Business. Subject to obtaining all necessary third party consents as set forth
in Section 2.17(g) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not result in the termination,
impairment, invalidity or unenforceability of any of the Purchased Intellectual
Property.
(g) The Seller has delivered or made available to the Purchaser correct
and complete copies of all the agreements included in the Licenses, other than
licenses of commercial off-the-shelf, shrink-wrap or click wrap computer
software. With respect to each such agreement:
(i) such License is valid and binding and in full force and
effect and represents the entire agreement between the licensor and the
Seller with respect to the subject matter of such agreement;
(ii) subject to obtaining all necessary third party consents,
as set forth in Section 2.17(g) of the Disclosure Schedule, such
License will not cease to be valid and binding and in full force and
effect on terms identical to those currently in effect as a result of
the consummation of the transactions contemplated by this Agreement,
nor will the consummation of the transactions contemplated by this
Agreement constitute a breach or default under such agreement or
otherwise give the licensor a right to terminate such License;
(iii) the Seller has not (A) received any written notice of
termination or cancellation under such License, (B) received any
written notice of breach or default under such License, which breach
has not been cured, and (C) granted to any other third party any
rights, adverse or otherwise, under such agreement that would
constitute a breach of such License; and
(iv) to the Seller's knowledge, (A) neither the Seller nor the
licensor is in breach or default thereof in any material respect, and
(B) no event has occurred that, with notice or lapse of time, would
constitute such a breach or default or permit termination, modification
or acceleration under such License.
(h) The Seller has taken all commercially reasonable steps in
accordance with normal industry practice to protect and maintain the
confidentiality of the trade secrets and other confidential Intellectual
Property used in connection with the Component Business. All officers or
employees of the Seller are under written obligation to the Seller to maintain
in confidence all confidential information acquired by them in the course of
their employment. To the knowledge of Seller (i) there has been no
misappropriation of any material trade secrets or other material confidential
Intellectual Property used in connection with the Component Business by any
person, (ii) no employee, independent contractor or agent of the Seller has
misappropriated any
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trade secrets of any other person in the course of performance as an employee,
independent contractor or agent of the Component Business; and (iii) no
employee, independent contractor or agent of the Seller is in default or breach
of any term of any employment agreement, confidentiality/non-disclosure
agreement, assignment of invention agreement or similar agreement or contract
relating in any way to the protection, ownership, development, use or transfer
of Intellectual Property.
SECTION 2.18. The Seller Software. (a) The Software included in the
Owned Intellectual Property (i) is free of all viruses, worms, trojan horses and
other material known contaminants, and does not contain a feature to disable the
operation of all or any part of such Software that arises automatically, through
passage of time, or through any act of a user of such Software; (ii)
substantially conforms to the specifications and operational requirements set
forth in its user documentation and related materials, and is free from material
defects, errors, and faulty workmanship in accordance with best industry
practices; (iii) does not incorporate any GNU, GPL or "open" source code or
object code under which such Software is subject to the GNU general public
license, GNU lesser general public license and other "copyleft" licenses; and
(iv) was authored (A) by an employee or employees of the Seller working within
the scope of their employment such that the contribution of such employee or
employees to such Software constitutes a "work made for hire" as that term is
defined under United States Copyright Laws, or (B) by a person that has executed
a written assignment assigning all right, title, and interest in and to the
portion of such Software authored by that person to the Seller, and the Seller
has delivered a copy of all such written assignments to the Purchaser.
(b) Neither the Seller nor the Company (i) has received notice by
telephone, writing, e-mail or other means that the Software included in the
Owned Intellectual Property contains any bugs, errors, or problems of a material
nature that disrupt its operation or have an adverse impact on the operation of
other software programs or operating systems, except for such bugs, errors, or
problems for which the Seller has provided a fix, patch, or revision in or to
such Software; and (ii) has obtained all approvals necessary for exporting the
Software included in the Owned Intellectual Property outside the United States
and importing such Software into any country in which such Software is now sold
or licensed for use, and all such export and import approvals in the United
States and throughout the world are valid, current, outstanding and in full
force and effect.
(c) All Source Code of the Software included in the Owned Intellectual
Property, software tools, library functions and other software developed by or
on behalf of the Seller that is or was utilized in the development of the
Software or that is required to operate or modify such Software is in the
possession of the Seller. The Source Code of the Software is managed by a source
management software which is accessible to the user and which contains
sufficient and detailed comments regarding operation and revision history to
enable a programmer of ordinary skill to be able to maintain such Software and
to be able to prepare derivative versions of such Software. The Seller has the
unlimited and unfettered right to use such Source Code, software tools, library
functions and other software to the extent necessary to conduct and to continue
to conduct the Component Business.
(d) The Seller has not received any customer complaints with respect to
the Software included in the Owned Intellectual Property or any other product or
service of the
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Seller, other than complaints received in the ordinary course of the Component
Business and which would not materially adversely affect the Component Business,
nor has the Seller had any of its products returned by the purchaser thereof,
other than products returned for minor, non-recurring warranty problems.
SECTION 2.19. Assets. (a) The Seller owns, leases or has, and on the
Closing Date the Company shall own, lease or have, the legal right to use the
Assets and, with respect to contract rights included within the Assets, is a
party to and enjoys the right to the benefits of all contracts, agreements and
other arrangements. The Seller has good and marketable title to, or, in the case
of leased or subleased Assets, valid and subsisting leasehold interests in, all
of the Assets, free and clear of all Encumbrances except Permitted Encumbrances.
(b) Subject to obtaining all necessary third party consents listed in
Section 2.19(b) of the Disclosure Schedule, the Seller has the complete and
unrestricted power and unqualified right to sell, assign, transfer, convey and
deliver the Assets to the Company and the Membership Interests to the Purchaser
without penalty or other adverse consequences. Following the consummation of the
transactions contemplated by this Agreement, the Assignment and Assumption
Agreement and the Ancillary Agreements and the execution of the instruments of
transfer contemplated by this Agreement, the Assignment and Assumption Agreement
and the Ancillary Agreements and subject to the Seller's obtaining all such
third party consents, the Purchaser will own, with good, valid and marketable
title, or lease, under valid and subsisting leases, or otherwise acquire the
Membership Interests and all interests of the Seller in the Assets, free and
clear of any Encumbrances, other than Permitted Encumbrances, and without
incurring any material penalty or other material adverse consequence, including,
without limitation, any increase in rentals, royalties, or license or other fees
imposed as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement, the Assignment and Assumption Agreement and the
Ancillary Agreements.
(c) The Assets constitute all the properties, assets and rights of the
Seller forming a part of, used, held or intended to be used in, and all such
properties, assets and rights of the Seller as are necessary in any material
respect for the conduct of, the Component Business as of the Closing Date.
(d) The representations and warranties contained in subsections (a),
(b) and (c) of this Section 2.19 do not extend to and are otherwise made without
respect to any Intellectual Property.
SECTION 2.20. Tangible Personal Property. Section 2.20 of the
Disclosure Schedule lists each item or distinct group of machinery, equipment,
computers and peripheral equipment and accessories, tools, supplies, furniture,
fixtures, personalty, vehicles and other tangible personal property (the
"Tangible Personal Property") used in, intended to be used in or related to the
Component Business that is owned or leased by the Seller or the Company.
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SECTION 2.21. Real Property. (a) There is no real property that is
owned by the Seller or the Company.
(b) Section 2.21(b) of the Disclosure Schedule sets forth each lease or
sublease for the Leased Real Property and the date on which each corresponding
lease or sublease shall expire.
(c) The Seller is, and on the Closing Date the Company will be, in all
material respects, in peaceful and undisturbed possession of each parcel of
Leased Real Property and there are no contractual or legal restrictions that
preclude or restrict the ability to use the premises for the purposes for which
they are currently being used. All existing water, sewer, steam, gas,
electricity, telephone and other utilities required for the use, occupancy,
operation and maintenance of the Leased Real Property are materially adequate
for the conduct of the Component Business as it has been and currently is
conducted. To the Seller's knowledge, there are no material latent defects or
material adverse physical conditions affecting the Leased Real Property or any
of the facilities, buildings, structures, erections, improvements, fixtures,
fixed assets and personalty of a permanent nature annexed, affixed or attached
to, located on or forming part of the Leased Real Property. Neither the Seller
nor the Company has subleased any parcel or any portion of any parcel of Leased
Real Property to any other Person, nor has the Seller or the Company assigned
its interest under any lease or sublease listed in Section 2.21(b) of the
Disclosure Schedule to any third party. The Seller has, or has caused to be,
delivered to the Purchaser true and complete copies of all leases and subleases
listed in Section 2.21(b) of the Disclosure Schedule.
SECTION 2.22. Customers. Listed in Section 2.22 of the Disclosure
Schedule are the names and addresses of the ten most significant customers (by
revenue) of the Component Business for the twelve-month period ended December
31, 1999 and the amount for which each such customer was invoiced during such
period. Neither the Seller nor the Company has received any written notice and
is not aware that any significant customer of the Component Business has ceased,
or will cease, to use the products, equipment, goods or services of the
Component Business or has substantially reduced, or will substantially reduce,
the use of such products, equipment, goods or services at any time.
SECTION 2.23. Suppliers. Listed in Section 2.23 of the Disclosure
Schedule are the names and addresses of each of the ten most significant
suppliers (by cost) of raw materials, supplies, merchandise and other goods for
the Component Business for the twelve-month period ended December 31, 1999 and
the amount for which each such supplier invoiced the Seller during such period.
Neither the Seller nor the Company has received any written notice and is not
aware that any such supplier will not sell raw materials, supplies, merchandise
and other goods to the Component Business at any time after the Closing Date on
terms and conditions similar to those imposed on current sales to the Component
Business, subject only to general and customary price increases.
SECTION 2.24. Employee Benefit Matters. (a) Section 2.24(a) of the
Disclosure Schedule lists (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical
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or life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, (x) to which the
Seller is a party, (y) with respect to which the Seller has any obligation or
(z) which are maintained, contributed to or sponsored by the Seller, in each
case, for the benefit of any current or former employee, officer or director of
the Component Business, (ii) each employee benefit plan for which the Seller
could incur liability under Section 4069 of ERISA in the event such plan has
been or was to be terminated, (iii) any plan in respect of which the Seller
could incur liability under Section 4212(c) of ERISA and (iv) any contracts,
arrangements or understandings between the Seller and any employee of the
Component Business including, without limitation, any contracts, arrangements or
understandings relating to a sale of the Component Business (collectively, the
"Plans"). Each Plan is in writing and the Seller has furnished the Purchaser
with a true and complete copy of each Plan and has delivered to the Purchaser a
true and complete copy of each material document, if any, prepared in connection
with each such Plan, including, without limitation, (i) a copy of each trust or
other funding arrangement, (ii) each summary plan description and summary of
material modifications, (iii) the most recently filed Internal Revenue Service
("IRS") Form 5500, (iv) the most recently received IRS determination letter for
each such Plan, and (v) the most recently prepared actuarial report and
financial statement in connection with each such Plan.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Seller could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan"). None of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Seller to pay separation, severance, termination or similar-type
benefits solely or partially as a result of any transaction contemplated by this
Agreement or (iii) obligates the Seller to make any payment or provide any
benefit as a result of a "change in control", within the meaning of such term
under Section 280G of the Code. None of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Seller. Each of the Plans is subject only
to the laws of the United States or a political subdivision thereof. None of the
Plans would result in any material liability or contingent liability with
respect to the Purchaser other than liabilities associated with contributions
and administrative costs on behalf of the Plans that arise in the ordinary
course.
(c) Each Plan is now and always has been operated in all material
respects in accordance with its terms and the requirements of all applicable
laws, regulations and rules promulgated thereunder, including, without
limitation, ERISA and the Code.
SECTION 2.25. Labor Matters. With respect to any employees of the
Component Business: (a) neither the Seller nor the Company is a party to any
collective bargaining agreement or other labor union contract, and, to the
Seller's knowledge, currently there are no organizational campaigns, petitions
or other unionization activities seeking recognition of a collective bargaining
unit which could affect the Component Business; (b) there are no strikes,
slowdowns or work stoppages pending or, to the knowledge of the Seller,
threatened between the Seller or the Company and any employees of the Component
Business, and the Seller has not experienced any such strike, slowdown or work
stoppage within the past
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three years; (c) neither the Seller nor the Company has been notified of any
unfair labor practice complaints pending against the Seller before any other
Governmental Authority or any current union representation questions involving
employees of the Component Business; (d) the Seller and the Company are
currently in compliance with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or is holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of the
Seller and the Company and are not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing other
than for wages and taxes not yet due and payable; (e) the Seller has paid in
full to all employees of the Component Business or adequately accrued for in
accordance with US GAAP consistently applied all wages, salaries, commissions,
bonuses, benefits and other compensation due to or on behalf of such employees;
(f) there is no claim with respect to payment of wages, salary or overtime pay
that is now pending or, to the Seller's knowledge, threatened before any
Governmental Authority with respect to any persons currently or formerly
employed by the Component Business; (g) neither the Seller nor the Company is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices; (h) there
is no charge or proceeding with respect to a violation of any occupational
safety or health standards that has been asserted or is now pending or, to the
Seller's knowledge, threatened with respect to the Seller relating to the
Component Business; and (i) there is no charge of discrimination in employment
or employment practices, for any reason, including, without limitation, age,
gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the Seller's knowledge, threatened before the
United States Equal Employment Opportunity Commission, or any other governmental
authority in any jurisdiction in which the Seller or the Company has employed or
currently employs any person in connection with the Component Business.
SECTION 2.26. Business Employees. (a) Section 2.26(a) of the Disclosure
Schedule lists the name and social security number (or local equivalent), the
place of employment, the annual salary rates, bonuses, deferred or contingent
compensation, pension, "golden parachute", accrued vacation, and other like
benefits paid or payable (in cash or otherwise) for the year ended December 31,
2000 (which shall be determined by annualizing all such amounts paid through May
31, 2000), the date of employment, position and title of each current salaried
employee, officer, director, consultant or agent of the Seller and the Company
who devotes any of his employment time to working for the Component Business as
of the date hereof (the "Component Business Employees").
(b) To the knowledge of the Seller and the Company, no officer or key
employee of the Seller or the Company devoting any of his employment time to
working for the Component Business has the intention to terminate his or her
employment with the Seller or the Company nor has any such officer or key
employee provided to the Seller or the Company written notice of such
termination.
SECTION 2.27. Taxes. (a) All returns and reports in respect of Taxes
required to be filed with respect to the Seller or the Company (including the
consolidated Federal income tax return of Seller and any state Tax return that
includes the Seller, the Company or any
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subsidiary of the Seller on a consolidated or combined basis) or the Assets or
the Component Business have been timely filed; (b) all Taxes required to be
shown on such returns and reports or otherwise due have been timely paid or are
being contested in good faith in appropriate proceedings; (c) all such returns
and reports (insofar as they relate to the activities or income of the Seller or
the Company or the Assets or the Component Business) are true, correct and
complete in all material respects; (d) no adjustment relating to such returns
and reports has been proposed formally or informally by any Tax authority
(insofar as either relates to the activities or income of the Seller or the
Company or the Assets or the Component Business or could result in liability of
the Seller, the Company or any subsidiary on the basis of joint and/or several
liability) and, to the knowledge of the Seller, no basis exists for any such
adjustment; (e) there are no pending or, to the knowledge of the Seller,
threatened actions or proceedings for the assessment or collection of Taxes
against the Seller, the Company, the Assets or the Component Business or any
corporation that was included in the filing of a return with the Seller on a
consolidated or combined basis (insofar as either relates to the activities or
income of the Seller, the Company, the Assets or the Component Business or could
result in liability of the Seller or the Company on the basis of joint and/or
several liability); (f) there are no Tax liens on any of the Assets other than
liens for Taxes not yet due and payable; (g) neither the Seller nor the Company
nor any affiliate of either is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of section 280G of the Code by reason of
the transactions contemplated hereunder; (h) there are no requests for
information currently outstanding that could affect the Taxes associated with
the Assets or the Component Business; (i) there are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which the Seller, the Company, the Assets or the Component Business
may be subject and (j) the Company is a newly formed limited liability company
that is and has always been disregarded for United States federal income tax
purposes, and no election has been made to treat the Company as a corporation or
association for any income Tax purpose.
SECTION 2.28. Subsidiaries. Set forth in Section 2.28 of the Disclosure
Schedule is a list of all of the subsidiaries of the Seller relating to the
Component Business. Each such subsidiary is duly organized or formed, validly
existing and in good standing under the Laws of its jurisdiction of
organization. Each such subsidiary is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the properties owned or
leased by it or the operation of its business makes such licensing or
qualification necessary, except where the failure to be so qualified or licensed
would not have a Material Adverse Effect.
SECTION 2.29. Brokers. Except for Roth Capital Partners, Inc., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement, the Assignment and Assumption Agreement, the IP Agreements or the
Ancillary Agreements based upon arrangements made by or on behalf of the Seller
or the Company. The Seller is solely responsible for the fees and expenses of
Roth Capital Partners, Inc.
SECTION 2.30. Prepaid Royalties. The amounts of non-refundable
royalties, related to the Component Business, paid in advance of the periods in
respect of which they are accrued that are presented in, and the list of
customers of the Seller which have paid
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such amounts as set forth in, Section 2.30 of the Disclosure Schedule ("Prepaid
Royalties") are accurate and complete in all material respects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, except as
set forth in the Disclosure Schedule hereto (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein), the Purchaser hereby represents and warrants to the Seller
as follows:
SECTION 3.01. Organization and Authority of the Purchaser. The
Purchaser is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements by the Purchaser, the performance by the Purchaser
of its obligations hereunder and thereunder and the consummation by the
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Purchaser. This Agreement
has been, and upon their execution the Ancillary Agreements will be, duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller and the Company) this Agreement
constitutes, and upon their execution the Ancillary Agreements will constitute,
legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights (including, without limitation, the effect of statutory and
other Law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers) and to general principles of equity.
SECTION 3.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 3.03, except as may result from any facts or
circumstances relating solely to the Seller and the Company, the execution,
delivery and performance of this Agreement and the Ancillary Agreements by the
Purchaser, do not and will not (a) violate, conflict with or result in the
breach of any provision of the certificate of incorporation or the by-laws of
the Purchaser, (b) conflict with or violate any Law or Governmental Order
applicable to the Purchaser or (c) conflict with, or result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party
or by which any of such assets or properties is bound or affected, except in the
case of subsections (b) and (c) that would have a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by this
Agreement or by the Ancillary Agreements.
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SECTION 3.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Ancillary Agreement by the
Purchaser do not and will not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Governmental
Authority, except the notification requirements of the HSR Act.
SECTION 3.04. Assets. The Purchaser has no present intention to sell
the Membership Interests or the entire Component Business to a third Person.
SECTION 3.05. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, the IP Agreements or the
Ancillary Agreements based upon arrangements made by or on behalf of the
Purchaser.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. Conduct of Business Prior to the Closing. (a) The Seller
and the Company covenant and agree that, except for the transfer of the Assets
and the Assumed Liabilities to the Company pursuant to the Assignment and
Assumption Agreement, between the date hereof and the Closing, the Component
Business shall not be conducted other than in the ordinary course and consistent
with the Seller's past practice. Without limiting the generality of the
foregoing, the Seller and the Company, as the case may be, shall, in respect of
the Component Business and the Assets, (i) continue its advertising and
promotional activities, and pricing and purchasing policies, in accordance with
past practice; (ii) not shorten or lengthen the customary payment cycles for any
of its payables or receivables; (iii) use its reasonable best efforts to (A)
preserve intact the business organization of the Component Business, (B) keep
available to the Purchaser the services of the employees of the Seller who
devote employment time working for the Component Business, (C) continue in full
force and effect without material modification all existing policies of
insurance currently maintained, and (D) preserve its current relationships with
its customers, suppliers and other persons with which it has significant
business relationships; (iv) not engage in any practice, take any action, fail
to take any action or enter into any transaction which could cause any
representation or warranty of the Seller to be untrue or result in a breach of
any covenant made by the Seller or the Company in this Agreement and (v) not
without the prior written consent of the Purchaser make, revoke or change (or
cause or permit to be made, revoked or changed) any Tax election that would
affect the Company.
(b) The Seller covenants and agrees that, prior to the Closing, without
the prior written consent of the Purchaser, the Seller will not do any of the
things enumerated in Section 2.12 (including, without limitation, clauses (a)
through (r) thereof).
SECTION 4.02. Stockholders' Meeting. The Seller, acting through the
Board, shall, in accordance with applicable Law and the Seller's Certificate of
Incorporation and By-laws, (a) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders as soon as practicable for the
purpose of considering and taking action on this
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Agreement, the Assignment and Assumption Agreement, the Acquisition and the
other transactions contemplated by this Agreement (the "Stockholders' Meeting"),
and (b) except as required by its fiduciary duties under applicable Law as
advised by outside legal counsel, (i) include in any proxy statement to be sent
to the stockholders of the Seller (such proxy statement, as amended or
supplemented, being referred to herein as the "Proxy Statement"), and not
subsequently withdraw or modify in any manner adverse to the Purchaser, the
unanimous recommendation of the Board that the stockholders of the Seller
approve and adopt this Agreement, the Acquisition and the transactions
contemplated by this Agreement, and (ii) use its reasonable best efforts to
obtain such approval and adoption. At the Stockholders' Meeting, the Purchaser
shall cause all shares of Seller Common Stock then owned by it and its
subsidiaries to be voted in favor of the approval and adoption of this Agreement
and the transactions contemplated by this Agreement.
SECTION 4.03. Proxy Statement. (a) If required by applicable Law, the
Seller shall file the Proxy Statement with the SEC under the Exchange Act, and
shall use its reasonable best efforts to have the Proxy Statement cleared by the
SEC as promptly as practicable. The Purchaser, the Company and the Seller shall
cooperate with each other in the preparation of the Proxy Statement, and the
Seller shall notify the Purchaser of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall provide to the
Purchaser promptly copies of all correspondence between the Seller or any
representative of the Seller and the SEC. The Seller shall give the Purchaser
and its counsel the opportunity to review the Proxy Statement, including all
amendments and supplements thereto, prior to its being filed with the SEC and
shall give the Purchaser and its counsel the opportunity to review all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. The Seller agrees to use its reasonable
best efforts, after consultation with the other parties hereto, which agree to
use their reasonable best efforts to assist the Seller in responding, to respond
promptly to all such comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of shares of Seller Common Stock entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
(b) The information supplied by the Seller for inclusion in the Proxy
Statement shall not, at the time the Proxy Statement (or, in each such case, any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Seller or at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or fail to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If, at any time
prior to the Closing, any event or circumstance relating to the Seller, or their
respective officers or directors, should be discovered by the Seller which
should be set forth in an amendment or a supplement to the Proxy Statement the
Seller shall promptly inform the Purchaser. The Seller agrees that the Proxy
Statement will comply as to form and substance in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
(c) The information supplied by the Purchaser for inclusion in the
Proxy Statement shall not, at the time the Proxy Statement (or, in each such
case, any amendment
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thereof or supplement thereto) is first mailed to the stockholders of Seller or
at the time of the Stockholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time prior
to the Closing, any event or circumstance relating to the Purchaser, or their
respective officers or directors, should be discovered by the Purchaser which
should be set forth in an amendment or a supplement to the Proxy Statement, then
the Purchaser shall promptly inform the Seller.
SECTION 4.04. Access to Information. From the date hereof until the
Closing, the Seller shall and shall cause each of the Seller's officers,
directors, employees, agents, accountants and counsel to: (a) afford the
officers, employees and authorized agents, accountants, counsel, financing
sources and representatives of the Purchaser and its Affiliates reasonable
access upon prior notice, during normal business hours, to the offices,
properties, plants, other facilities, books and records of the Seller and the
Company related to the Component Business and to those officers, directors,
employees, agents, accountants and counsel of the Seller who have any knowledge
relating to the Component Business and (b) furnish to the officers, employees
and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser and its Affiliates such additional financial
and operating data and other information regarding the Component Business and
the assets, properties and goodwill of the Seller related to the Component
Business as the Purchaser and its Affiliates may from time to time reasonably
request; provided, however, that the Purchaser shall make all reasonable efforts
to minimize disruption to the Seller's business in connection with such access.
SECTION 4.05. Disclaimer of Representations and Warranties. Except as
expressly set forth in this Agreement, neither the Seller nor the Company makes
any representation or warranty, express or implied, at law or in equity, in
respect of any of its assets (including, without limitation, the Assets and the
Component Business), properties, liabilities or operations, including, without
limitation, with respect to merchantability for fitness for any particular
purpose, and any such other representations or warranties are hereby expressly
disclaimed. The Purchaser hereby acknowledges and agrees that, except to the
extent specifically set forth in this Article IV, the Purchaser is purchasing
the Assets on an "as-is, where-is" basis.
SECTION 4.06. Regulatory and Other Authorizations; Notices and
Consents. (a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable best efforts to obtain all
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities as are necessary for the consummation of the
transactions contemplated by this Agreement and to fulfill the conditions to the
Closing; provided that the Purchaser will not be required by this Section 4.06
to take any action, including entering into any consent decree, that requires
the divestiture of any assets of any of the Purchaser, the Seller, the Company
or each of their respective Affiliates. Without limiting the foregoing, the
Seller and the Purchaser shall file as soon as practicable notifications under
the HSR Act and respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the United
States Department
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of Justice for additional information or documentation and respond as promptly
as practicable to all inquiries and requests received from any State Attorney
General or other Governmental Authority in connection with antitrust matters. In
addition, the Seller and the Purchaser agree to make as soon as practicable such
other similar filings as may be necessary or required under the Laws of France
or by any non-United States Governmental Authority.
(b) Each of the parties hereto agrees to cooperate and use its
reasonable best efforts vigorously to contest and resist any Action, including
administrative or judicial Action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the transactions contemplated by this Agreement,
including, without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal.
(c) The Seller shall give promptly such notices to third parties and
use its reasonable best efforts to obtain the third party consents listed in
Section 2.19(b) of the Disclosure Schedule and estoppel certificates as the
Purchaser may reasonably deem necessary or desirable in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements,
including, without limitation, all third party consents that are necessary or
desirable in connection with the transfer of the Material Contracts.
(d) The Purchaser shall cooperate and use all reasonable efforts to
assist the Seller in giving such notices and obtaining such consents and
estoppel certificates; provided, however, that the Purchaser shall have no
obligation to give any guarantee or other consideration of any nature in
connection with any such notice, consent or estoppel certificate or to consent
to any change in the terms of any agreement or arrangement which the Purchaser
in its sole discretion may deem adverse to the interests of the Purchaser, the
Purchaser's Affiliates or the Component Business.
(e) The Seller and the Purchaser agree that, in the event any consent,
approval or authorization necessary or desirable to preserve for the Component
Business or the Purchaser any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Seller is a
party is not obtained prior to the Closing, the Seller will, subsequent to the
Closing, cooperate with the Purchaser in attempting to obtain such consent,
approval or authorization as promptly thereafter as practicable. If such
consent, approval or authorization cannot be obtained, the Seller will use its
reasonable best efforts to provide the Purchaser with the rights and benefits of
the affected lease, license, contract, commitment or other agreement or
arrangement for the term of such lease, license, contract or other agreement or
arrangement, and, if the Seller provides such rights and benefits, the Purchaser
shall assume the obligations and burdens thereunder.
SECTION 4.07. Notice of Developments. (a) Prior to the Closing, the
Seller shall promptly notify the Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could result in any material breach of a representation or
warranty or covenant of the Seller in this Agreement or which could have the
effect of making any representation or warranty of the Seller in this Agreement
untrue or incorrect in any material respect, and (ii) all other material
developments affecting the Assets,
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Liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
the Component Business.
(b) Prior to the Closing, the Purchaser shall promptly notify the
Seller in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any material
breach of a representation or warranty or covenant of the Purchaser in this
Agreement or which could have the effect of making any representation or
warranty of the Purchaser in this Agreement untrue or incorrect in any material
respect.
SECTION 4.08. Non-Competition. (a) The Seller and the Purchaser agree
that for a period of five years after the Closing, the Seller shall not engage,
directly or indirectly, in any business anywhere in the world that develops
CAD/CAM/PDM component software for resale as CAD/CAM/PDM component software or,
without the prior written consent of the Purchaser, directly or indirectly, own
an interest in, manage, operate, join, control, lend money or render financial
or other assistance to or participate in or be connected with, as a partner,
stockholder, consultant or otherwise, any Person that develops CAD/CAM/PDM
component software for resale as CAD/CAM/PDM component software.
(b) The Seller and the Purchaser agree that for a period of one year
after the Closing, the Seller shall not engage, directly or indirectly, in any
business anywhere in the world that distributes CAD/CAM/PDM component software
or, without the prior written consent of the Purchaser, directly or indirectly,
own an interest in, manage, operate, join, control, lend money or render
financial or other assistance to or participate in or be connected with, as a
partner, stockholder, consultant or otherwise, any Person that distributes
CAD/CAM/PDM component software.
(c) The Seller and the Purchaser agree that for a period of three years
after the Closing, the Seller shall not engage, directly or indirectly, in any
business anywhere in the world that distributes competing CAD/CAM/PDM solid
modeling kernals or, without the prior written consent of the Purchaser,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as a partner, stockholder, consultant or otherwise, any Person
that distributes competing CAD/CAM/PDM solid modeling kernals.
(d) Notwithstanding anything to the contrary contained in this Section
4.08, for the purposes of this Section 4.08, ownership of securities having no
more than five percent of the outstanding voting power of any competitor which
are listed on any national securities exchange or traded actively in the
national over-the-counter market shall not be deemed to be in violation of this
Section 4.08 so long as the Person owning such securities has no other
connection or relationship with such competitor.
(e) The non-competition provisions set forth in this Section 4.08 shall
be extended by the length of any period during which any party is in breach of
the terms of this Section 4.08. The Seller acknowledges that the covenants of
the Seller set forth in this Section 4.08 are an essential element of this
Agreement and that, but for the agreement of the Seller to comply with these
covenants, the Purchaser would not have entered into this Agreement. The
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Seller has consulted with its counsel and, after such consultation agrees that
the covenants set forth in this Section 4.08 are reasonable and proper.
SECTION 4.09. Non-Hiring and Non-Solicitation. (a) The Seller agrees
with the Purchaser that, for a period of two years following the Closing, the
Seller will not in any way, directly or indirectly, employ or otherwise hire any
of the employees of the Component Business of the Purchaser or any Affiliate of
the Purchaser or violate the terms of their contracts, or any employment or
consulting arrangements, with the Purchaser or any Affiliate of the Purchaser.
(b) The Purchaser agrees with the Seller that, for a period of two
years following the Closing, neither the Purchaser or any of its Affiliates will
in any way, directly or indirectly, employ or otherwise hire any of the
employees of the Seller or any Affiliate of the Seller or violate the terms of
their contracts, or any employment or consulting arrangements, with the Seller
or any Affiliate of the Seller.
(c) The non-hiring and non-solicitation provisions set forth in this
Section 4.09 shall be extended by the length of any period during which any
party is in breach of the terms of this Section 4.09. Each of the Seller and the
Purchaser acknowledges that its covenants set forth in this Section 4.09 are an
essential element of this Agreement and that, but for the agreement of the other
party or parties to this Agreement to comply with these covenants, such other
party or parties, as the case may be, would not have entered into this
Agreement. Each of the Seller and the Purchaser has consulted its counsel and,
after such consultation agrees that the covenants set forth in this Section 4.09
are reasonable and proper.
SECTION 4.10. Use of Names and Marks. (a) The Seller, promptly
following the Closing Date (but in no event later than 45 calendar days after
the Closing Date), will remove or obliterate the name "Spatial" or any other
corporate name of the Component Business (other than those listed in Section
4.10 of the Disclosure Schedule) or any logo, trademark or trade name or any
derivation thereof of the Seller with respect to, or associated with the
foregoing (the "Names and Marks"), from its signs, purchase orders, invoices,
sales orders, labels, letterheads, shipping documents, and other items and
materials.
(b) The Seller, promptly following the Closing Date (but in no event
later than 15 calendar days after the Closing Date), will not put into use any
such items and materials not in existence on the Closing Date that bear any Name
and Mark or any name, mark or logo similar thereto.
(c) The Seller, promptly following the Closing Date (but in no event
later than two Business Days after the Closing Date) will change the corporate
name of the Seller (and each subsidiary of the Seller) and each name, mark or
logo similar thereto, to another corporate name that does not include the name
"Spatial" or any name, mark or logo similar thereto.
SECTION 4.11. Bulk Transfer Laws. The Purchaser hereby waives
compliance by the Seller with any applicable bulk sale or bulk transfer laws of
any jurisdiction in connection with the sale of the Assets to the Purchaser
(other than any obligations with respect to the application of the proceeds
herefrom). Pursuant to Article VII, the Seller has agreed to
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indemnify the Purchaser and its Affiliates against any and all Liabilities which
may be asserted by third parties against the Purchaser and its Affiliates as a
result of the Seller's noncompliance with any such law including, but not
limited to, any Taxes imposed on the Purchaser as a transferee resulting from
the failure to comply with such bulk sales laws.
SECTION 4.12. Certain Tax Filings. The Seller and the Company shall
file with all applicable Tax authorities any statements, certificates or forms
provided for under federal, state, local or other Tax laws to protect the
Purchaser and its Affiliates from liability as a transferee for Taxes of the
Seller of which statements, certificates and forms the Seller has knowledge or
are reasonably requested by the Purchaser. The Seller shall be responsible for
all Tax filings with respect to the Company for all taxable periods ending on or
prior to the Closing Date, and for the payment of all Taxes due in respect of
such filings.
SECTION 4.13. Conveyance Taxes. The Seller and the Purchaser shall be
equally liable for any real property transfer or gains, sales, use, transfer,
value added, stock transfer, and stamp taxes, and any transfer, recording,
registration, and other fees, and any similar Taxes which may become payable in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements. The Seller, after the review and consent by the Purchaser,
shall file such applications and documents, if any, as shall permit any such Tax
to be assessed and paid as soon as practical after the Closing Date. The
Purchaser shall cooperate with the Seller in executing and delivering all
instruments and certificates necessary to enable the Seller to comply with the
foregoing.
SECTION 4.14. No Solicitation of Transactions. (a) Between the date
hereof and the earlier to occur of the Closing and the date of termination of
this Agreement pursuant to Section 8.01 (the "Restricted Period"), the Seller
shall not, directly or indirectly, through any officer, director, agent or
otherwise, (i) solicit, or initiate or encourage the submission of, any
Acquisition Proposal (as defined below), or (ii) except as required by the
fiduciary duties of the Board under applicable Law based upon the advice of
outside legal counsel, participate in any discussions or negotiations regarding,
or furnish to any person any information with respect to, or otherwise cooperate
in any way with respect to, or assist or participate in, or facilitate or
actively encourage, any proposal that constitutes, or may reasonably be expected
to lead to, an Acquisition Proposal. Notwithstanding the foregoing, until 11:59
p.m., Boulder, Colorado time on July 24, 2000, the officers, directors, agents
and representatives of the Seller may engage in discussions or negotiations only
regarding the possible submission of an Acquisition Proposal from any of the
parties contacted by the Seller prior to the date of this Agreement and
identified by the Seller to the Purchaser and may furnish information with
respect to the Seller and the Component Business only to such parties. For
purposes of this Agreement, "Acquisition Proposal" means (i) any proposal or
offer from any Person other than the Purchaser and its Affiliates relating to
any direct or indirect acquisition of all or a substantial part of the Assets or
the Component Business, other than the Acquisition; (ii) any merger,
consolidation, business combination, sale of all or a substantial part of the
Assets, recapitalization, liquidation, dissolution or similar transaction
involving the Assets or the Component Business, other than the Acquisition; or
(iii) any other transaction the consummation of which would reasonably be
expected to impede, interfere with, prevent or materially delay the Acquisition.
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(b) During the Restricted Period except as set forth in this Section
4.14(b), neither the Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Purchaser,
the approval or recommendation by the Board or any such committee of this
Agreement, the Acquisition or the other transactions contemplated by this
Agreement, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that, prior to
the Closing, the Board determines in good faith that it is required to do so by
its fiduciary duties under applicable Law based upon the advice of outside legal
counsel, the Board may withdraw or modify its approval or recommendation of this
Agreement, the Acquisition or the other transactions contemplated by this
Agreement, but only in order to proceed with a transaction relating to a
Superior Proposal (as defined below) and terminate this Agreement in accordance
with Section 8.01(h). For purposes of this Agreement, a "Superior Proposal"
means any Acquisition Proposal on terms which the Board determines, in its good
faith judgment (based on the advice of Roth Capital Partners, Inc. or a
financial advisor of nationally recognized reputation), to be more favorable,
from a financial point of view, to the Seller's stockholders than the
Acquisition.
(c) On July 24, 2000, the Seller shall, and shall direct or cause its
directors, officers, employees, representatives and agents to, immediately cease
and cause to be terminated any discussions or negotiations with any parties that
may be ongoing with respect to any Acquisition Proposal, except as otherwise
expressly prohibited in Section 4.14(b).
(d) During the Restricted Period, the Seller shall promptly (and in any
case within 24 hours of the receipt thereof) advise the Purchaser orally
(provided the Purchaser is available by telephone during such period) and in
writing of any proposal, discussion, negotiation or inquiry received by the
Seller regarding any Acquisition Proposal that reasonably could be expected to
lead to a Superior Proposal or any request for information with respect to any
Acquisition Proposal, the material terms and conditions of any proposal,
discussion, negotiation or inquiry received by the Seller regarding such
Acquisition Proposal or request and the identity of the person making such
Acquisition Proposal or request. The Seller shall promptly (and in any case
within 48 hours of the receipt thereof) provide to the Purchaser (i) copies of
any written materials received by the Seller in connection with any proposal,
discussion, negotiation or inquiry regarding any Acquisition Proposal, (ii) any
non-public information concerning the Seller provided to any other person in
connection with any Acquisition Proposal to the extent not previously provided
to the Purchaser and (iii) a list of all non-public information that has been
provided to any person in connection with such Acquisition Proposal. The Seller
shall keep the Purchaser informed of the status and details of any such
Acquisition Proposal. Not withstanding the foregoing, nothing in this Section
4.14 shall require the disclosure by the Seller of any information that the
Seller is prohibited from disclosing pursuant to any obligation relating to
maintaining the confidentiality of information; provided that, during the
Restricted Period, the Seller shall not agree to any restriction on the
disclosure of information with respect to any Acquisition Proposal that would
prevent the Seller from providing to the Purchaser information about such
Acquisition Proposal that is reasonably sufficient for the Purchaser to assess
and prepare a counter-proposal.
(e) Nothing contained in this Section 4.14 shall prohibit the Seller
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under
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the Exchange Act or from making any disclosure to the Seller's stockholders, if
the Board determines in good faith that it is required to do so by its fiduciary
duties under applicable Law based upon the advice of outside legal counsel;
provided, however, that neither the Seller nor the Board nor any committee
thereof shall, except as permitted by Section 4.14(b), withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement, the Acquisition or the other transactions contemplated by this
Agreement or to approve or recommend, or propose publicly to approve or
recommend, an Acquisition Proposal.
(f) During the Restricted Period, the Seller agrees not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Seller is a party, except pursuant to this Section 4.14.
SECTION 4.15. State Takeover Laws. Notwithstanding any other provision
in this Agreement, in no event shall the Section 203 Approval be withdrawn,
revoked or modified by the Board. If any state takeover statute other than
Section 203 of the Delaware Law becomes or is deemed to become applicable to
this Agreement, the Acquisition or the other transactions contemplated by this
Agreement, the Seller and the Board shall take all action necessary to render
such statute inapplicable to all of the foregoing.
SECTION 4.16. Cooperation and Exchange of Tax Information. The Seller
and the Purchaser will provide each other with such cooperation and information
as either of them reasonably may request of the other in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to a refund of taxes, participating in or conducting any audit or other
proceeding in respect of Taxes or making representations to or furnishing
information to parties subsequently desiring to purchase any part of the
Component Business from the Purchaser. The Seller and the Purchaser shall retain
all returns, schedules and work papers, records and other documents in their
possession relating to Tax matters of the Company or the Component Business for
each taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods, or (ii) six
years following the due date (without extension) for such returns. Any
information obtained under this Section 4.16 shall be kept confidential except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting and audit or other proceeding.
SECTION 4.17. Right of Information. From the period beginning as of the
Closing and ending on the third anniversary thereof, subject to the requirements
of Delaware Law (including, without limitation, the Board's fiduciary duties
thereunder) and applicable securities Laws, the Seller agrees promptly (but in
no case less than three Business Days after the receipt thereof) to advise the
Purchaser in writing of the receipt of any proposal to acquire all or
substantially all of the assets of the Seller in the event that the Board
decides to sell the company, whether by merger, sale of all or substantially all
of its assets, or tender offer. To facilitate the Purchaser's rights pursuant to
this Section 4.17, the Seller agrees to provide the Purchaser, on a confidential
basis, information and due diligence materials substantially equivalent to those
provided to any other potential bidder for the assets of the Seller.
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SECTION 4.18. Public Announcements. (a) The Purchaser and the Seller
shall agree on the form and substance of an initial press release and other
initial statements with respect to this Agreement or any transaction
contemplated by this Agreement (including the Share Purchase), and thereafter
neither the Purchaser nor the Seller shall issue any subsequent press release or
make any public statement with respect to this Agreement or any transaction
contemplated by this Agreement (including the Share Purchase) without the prior
consent of the other, except as may be required by Law or any listing agreement
with a securities exchange to which the Purchaser or the Seller is a party, and
in such case shall obtain the prior written consent of the other parties as to
the form and substance of such press release or any such public statement, which
consent shall not be unreasonably withheld, conditioned or delayed.
(b) Subject to Delaware Law (including, without limitation, the Board's
fiduciary duties thereunder) and applicable securities Laws, Dassault Systemes
shall have the right to review and approve, which approval shall not be
unreasonably withheld, conditioned or delayed, any press release of the Seller
that refers to Dassault Systemes or the Purchaser as investors in or clients of
the Seller.
SECTION 4.19. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Laws, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, taking any actions reasonably requested by the Purchaser to perfect
the assignment of the Purchased Intellectual Property and to give effect to the
other transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.20. Closing Amounts Statement; Receivables. (a) The amounts
presented in the Closing Amounts Statement will be true and correct as of the
Closing Date and will be calculated by the Seller in accordance with U.S. GAAP.
(b) The Seller will provide an aged list of the Receivables as of the
Closing Date showing separately those Receivables that as of such date has been
outstanding (i) 30 days or less, (ii) 31 to 60 days, (iii) 61 to 90 days, (iv)
91 to 120 days and (v) more than 120 days.
SECTION 4.21. Confidentiality. (a) From and after the Closing, the
Seller agrees to, and shall cause its agents, representatives, Affiliates,
employees, officers and directors to: (i) treat and hold as confidential (and
not disclose or provide access to any Person to) all information relating to
trade secrets, processes, code specification, know-how, methodology, patent or
trademark applications, product development, price, customer and supplier lists,
pricing, development and marketing plans, policies and strategies, details of
client and consultant contracts, operations methods, product development
techniques, business acquisition plans, new personnel acquisition plans and any
other confidential information with respect to the Component Business or the
Assets that was in the Seller's possession on or prior to the Closing Date, (ii)
in the event that the Seller or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the Purchaser with prompt written notice of such
requirement so that the Purchaser may have a reasonable opportunity to seek a
protective order or other remedy or waive compliance with this
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Section 4.21(a), (iii) in the event that such protective order or other remedy
is not obtained prior to the date upon which the Seller becomes obligated to
disclose such information, or the Purchaser waives compliance with this Section
4.21(a), furnish only that portion of such confidential information which is
legally required to be provided and exercise its reasonable best efforts to
obtain assurances that confidential treatment will be accorded such information
and (iv) promptly furnish (prior to, at, or as soon as practicable following,
the Closing) to the Purchaser any and all copies (in whatever form or medium) of
all such confidential information then in the possession of the Seller or any of
its agents, representatives, Affiliates, employees, officers and directors and
destroy any and all additional copies then in the possession of the Seller or
any of its agents, representatives, Affiliates, employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, that this sentence shall not apply to any information that, at the time
of disclosure, (A) is available publicly and was not disclosed in breach of this
Agreement by the Seller, its agents, representatives, Affiliates, employees,
officers or directors; (B) is received from a third party who, to the knowledge
of the Seller, is not bound by any confidentiality agreement that would prohibit
such third party from disclosing such information to the Seller; (C) is
independently developed by the Seller; or (D) is required to be disclosed to any
Governmental Authority or is otherwise required to be disclosed by Law, provided
that before making such disclosure the Seller shall give the Purchaser a
reasonable opportunity to interpose an objection or take action to seek
confidential handling of such information and provided, further, that the Seller
may, for a period of five years following the Closing, retain a copy of the
Source Code relating to the Purchased Intellectual Property as it existed at the
Closing Date solely for the purpose of defending any claims for indemnification
that arise during such period. The Seller agrees and acknowledges that the
indemnification obligations of the Seller for any breach of its obligations
under this Section 4.21(a) are inadequate and that in addition thereto the
Purchaser shall be entitled to seek equitable relief, including injunction and
specific performance, in the event of any such breach, without the necessity of
demonstrating the inadequacy of money damages.
(b) From and after the Closing, the Purchaser agrees to, and shall
cause its agents, representatives, Affiliates, employees, officers and directors
to: (i) treat and hold as confidential (and not disclose or provide access to
any Person to) all information relating to trade secrets, processes, code
specification, know-how, methodology, patent or trademark applications, product
development, price, customer and supplier lists, pricing, development and
marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and any other confidential
information with respect to the Internet Service Business or the Retained Assets
(except as provided in the IP Agreements) that was in the Purchaser's possession
on or prior to the Closing Date, (ii) in the event that the Purchaser or any
such agent, representative, Affiliate, employee, officer or director becomes
legally compelled to disclose any such information, provide the Seller with
prompt written notice of such requirement so that the Purchaser may have a
reasonable opportunity to seek a protective order or other remedy or waive
compliance with this Section 4.21(b), (iii) in the event that such protective
order or other remedy is not obtained prior to the date upon which the Purchaser
becomes obligated to disclose such information, or the Seller waives compliance
with this Section 4.21(b), furnish only that portion of such confidential
information which is legally required to be provided and exercise its reasonable
best efforts to obtain assurances that confidential treatment will be accorded
such
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information and (iv) promptly furnish (prior to, at, or as soon as practicable
following, the Closing) to the Seller any and all copies (in whatever form or
medium) of all such confidential information then in the possession of the
Purchaser or any of its agents, representatives, Affiliates, employees, officers
and directors and destroy any and all additional copies then in the possession
of the Purchaser or any of its agents, representatives, Affiliates, employees,
officers and directors of such information and of any analyses, compilations,
studies or other documents prepared, in whole or in part, on the basis thereof;
provided, however, that this sentence shall not apply to any information that,
at the time of disclosure, (A) is available publicly and was not disclosed in
breach of this Agreement by the Purchaser, its agents, representatives,
Affiliates, employees, officers or directors; (B) is received from a third party
who, to the knowledge of the Purchaser is not bound by any confidentiality
agreement that would prohibit such third party from disclosing such information
to the Purchaser; (C) is independently developed by the Purchaser; or (D) is
required to be disclosed to any Governmental Authority or is otherwise required
to be disclosed by Law, provided that before making such disclosure the
Purchaser shall give the Seller a reasonable opportunity to interpose an
objection or take action to seek confidential handling of such information. The
Purchaser agrees and acknowledges that the indemnification obligations of the
Purchaser for any breach of its obligations under this Section 4.21(b) are
inadequate and that in addition thereto the Seller shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such breach, without the necessity of demonstrating the inadequacy of money
damages.
SECTION 4.22. Transfer of revenue. The Seller agrees to pay to the
Company an amount to be agreed before Closing for the performance of services
relating to potential obligations with regard to Prepaid Royalties that the
Purchase will assume. This amount shall be paid within 30 days following the
Closing Date.
ARTICLE V
EMPLOYEE MATTERS
SECTION 5.01. Employees. The Purchaser or the Company shall offer
employment as of the Closing Date to all of the Component Business Employees
listed on Section 5.01 of the Disclosure Schedule and who are actively employed,
whether or not actively at work (including employees on short and long-term
disability and leave of absence), on the Closing Date at rates of compensation
which are no less than their rates of compensation prior to the Closing Date.
The employees of the Component Business who accept employment with the Purchaser
shall be "Transferred Employees".
SECTION 5.02. Employee Benefits. (a) To the extent that service is
relevant for eligibility and vesting under any employee benefit plan, program or
arrangement established or maintained by the Purchaser or any of its
subsidiaries for the benefit of Transferred Employees, such plan, program or
arrangement shall credit for purposes of eligibility and vesting (but not for
benefit accruals) such Transferred Employees for service on or prior to the
Closing with the Seller or any affiliate or predecessor thereof; provided,
however, that such crediting of service shall not operate to duplicate any
benefit or the funding of any such benefit. In addition, the Purchaser shall
waive any pre-existing conditions and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and
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out-of-pocket expenses paid by Transferred Employees and their respective
dependents under the Seller's medical and dental plans in the calendar year in
which the Closing Date occurs.
(b) The Seller shall cause the Transferred Employees to be fully vested
in their account balances under its "employee pension benefit plans" (as such
term is defined in Section 3(2) of ERISA) as of the Closing Date.
(c) The Seller shall, in accordance with applicable Law, pay the
Transferred Employees on the Closing Date for any unused vacation days accrued
by such Transferred Employees on or prior to the Closing with the Seller
("Accrued Vacation Days") and shall provide the Purchaser an accurate and
complete list, providing for each Transferred Employee the number of Accrued
Vacation Days and the amounts paid in respect thereof.
SECTION 5.03. Key Employee Retention Matters. (a) Prior to the Closing,
the Seller shall be permitted to agree, on behalf of the Component Business, to
offer and pay retention bonuses to those Transferred Employees listed on Section
5.03 of the Disclosure Schedule, subject to modification by mutual agreement of
Seller and the Purchaser (the "Key Employees") who are still actively employed
by the Component Business five months after the Closing Date up to the amounts
and on the other conditions to be agreed upon with the Purchaser. The Purchaser
shall be responsible for paying any such bonuses paid to the Key Employees.
Prior to the Closing, the Seller shall not be permitted to agree, without the
written approval of the Purchaser, to offer and pay retention bonuses to
Transferred Employees other than the Key Employees. The Seller and the Purchaser
shall cooperate in good faith regarding the advisability of taking other steps
with respect to Transferred Employee retention. The Purchaser shall be
responsible for paying and shall indemnify and hold the Seller harmless from the
payment of any retention bonuses agreed to and paid in accordance with the
previous sentence.
(b) Prior to the Closing, the Seller shall amend the Stock Option Plans
to provide that all rights under such Stock Option Plans of Transferred
Employees who shall have been continuously employed by the Purchaser or any of
its Affiliates from the Closing Date through the first anniversary of the
Closing shall vest fully on the first anniversary of the Closing. The rights
under the Stock Option Plans of Transferred Employees who are no longer employed
by the Purchaser or any of its Affiliates on the first anniversary of the
Closing shall vest as otherwise provided in such Plans.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller, the Company and
the Purchaser. The obligations of the Seller, the Company and the Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment (or written waiver), at or prior to the Closing, of each of the
following conditions:
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(a) HSR Act. Any waiting period (and any extension thereof),
if any, under the HSR Act applicable to the transactions contemplated
by this Agreement shall have expired or shall have been terminated;
(b) Competition Laws. All consents, authorizations, orders and
approvals required pursuant to any antitrust or competition Law to
consummate the transactions contemplated by this Agreement shall have
been obtained;
(c) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against any of the
Seller, the Company or the Purchaser, seeking to restrain or materially
and adversely alter the transactions contemplated by this Agreement
which is likely to render it impossible or unlawful to consummate such
transactions; provided, however, that the provisions of this Section
6.01(c) shall not apply to the conditions of a party if such party has
directly or indirectly solicited or encouraged any such Action; and
(d) Stockholder Approval. This Agreement, the Acquisition and
the other transactions contemplated by this Agreement shall have been
approved and adopted by the affirmative vote of the stockholders of the
Seller to the extent required by Delaware Law and the Certificate of
Incorporation and the By-laws of the Seller.
SECTION 6.02. Additional Conditions to Obligations of the Seller and
the Company. The obligations of the Seller and the Company to consummate the
transactions contemplated by this Agreement shall also be subject to the
fulfillment (or written waiver), at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in this
Agreement shall have been true and correct when made and shall be true
and correct in all material respects as of the Closing, with the same
force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date which
shall have been true and correct in all material respects as of such
date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality or similar qualifiers, for
purposes of determining whether this Section 6.02(a) has been satisfied
with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects), the covenants and agreements contained in
this Agreement to be complied with by the Purchaser on or before the
Closing shall have been complied with in all material respects, and the
Seller shall have received a certificate from the Purchaser to such
effect signed by a duly authorized officer thereof;
(b) Ancillary Agreements and IP Agreements. Each of the
Purchaser and Dassault Systemes shall have executed and delivered to
the Seller each of the Ancillary Agreements and IP Agreements to which
it is a party;
(c) Resolutions. The Seller shall have received a true and
complete copy, certified by a duly authorized officer of the Purchaser,
of the resolutions duly and validly
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adopted by the board of directors of the Purchaser evidencing its
authorization of the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby; and
(d) Joint Software License. The Purchaser or an Affiliate of
the Purchaser, as the case may be, shall have entered into the Joint
Software License Agreement, and the Seller shall have used its
commercially reasonable efforts to enter into a modified license
agreement, and to permit the Purchaser or an Affiliate of the Purchaser
to enter into a substantially similar license agreement with Geometric
Software Services Co., Ltd. ("GSSL"), regarding the license of the
Joint Software from GSSL, in each case in form and substance
satisfactory to the Seller.
SECTION 6.03. Additional Conditions to Obligations of the Purchaser.
The obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall also be subject to the fulfillment (or written waiver), at
or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Seller contained in this
Agreement shall have been true and correct when made and shall be true
and correct in all material respects as of the Closing with the same
force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date which
shall have been true and correct in all material respects as of such
date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, Material Adverse Effect
or similar qualifiers, for purposes of determining whether this Section
6.03(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and
the covenants and agreements contained in this Agreement to be complied
with by the Seller or the Company on or before the Closing shall have
been complied with in all material respects, and the Purchaser shall
have received a certificate of the Seller to such effect signed by a
duly authorized officer thereof;
(b) Consents and Approvals. The Purchaser and the Seller shall
have received, each in form and substance satisfactory to the Purchaser
in its sole and absolute discretion, all authorizations, consents,
orders and approvals of all Governmental Authorities and officials and
all third party consents and estoppel certificates which the Purchaser
deems reasonably necessary or desirable for the consummation of the
transactions contemplated by this Agreement and the Ancillary
Agreements, including, without limitation, all third party consents
required under any Material Contracts;
(c) Transfer of Assets. The transfer of the Assets to the
Company pursuant to the Assignment and Assumption Agreement shall have
been consummated;
(d) No Material Adverse Effect. No event or events shall have
occurred which have, or could reasonably be expected to have, a
Material Adverse Effect;
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(e) Resolutions. The Purchaser shall have received a true and
complete copy, certified by a duly authorized officer of the Seller, of
the resolutions duly and validly adopted by the Board evidencing its
authorization of the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby;
(f) Confirmation of No Withholding. The Purchaser shall have
received all necessary certificates and documents from the Seller
confirming that no withholding is required under Section 1445 of the
Code, or under the applicable Laws of any state, local or foreign
Taxing jurisdiction, in connection with the transactions contemplated
by this Agreement;
(g) Key Employees. All of the Key Employees shall have
accepted employment with the Purchaser or the Company as of the Closing
Date;
(h) Transferred Employees. No more than 10 Component Business
Employees shall have declined employment with the Purchaser or the
Company as of the Closing Date; provided, however, that if any employee
is hired with the prior written consent of the Purchaser after the date
hereof as a replacement of a Component Business Employee who is no
longer actively employed by the Component Business, then such
replacement employee shall be deemed for the purpose of determining the
satisfaction of this condition to be a Component Business Employee; and
(i) Ancillary Agreements and IP Agreements. The Seller shall
have (i) executed and delivered to the Purchaser each of the Ancillary
Agreements and IP Agreements to which it is a party and (ii) secured an
extension of the expiration of the Software Consulting Agreement, dated
December 31, 1997, between Three-Space Ltd. and the Seller until a date
not earlier than July 31, 2001.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement and
the Ancillary Agreements, and all statements contained in the Acquisition
Documents, shall survive the Closing Date until the second anniversary thereof;
provided, however, that (a) the representations and warranties dealing with Tax
matters shall survive until the expiration of the applicable statute of
limitations with respect to the Tax liabilities in question (giving effect to
any waiver, mitigation or extension thereof), (b) the representations and
warranties contained herein relating to Intellectual Property matters shall
survive until the fifth year anniversary of the Closing Date; and (c) insofar as
any claim is made for the breach of any representation or warranty of the Seller
contained in Sections 2.01, 2.02, 2.04(a) and (b) and 2.29 or of the Purchaser
contained in Sections 3.01, 3.02 and 3.05, such representations and warranties
shall survive indefinitely. Neither the period of survival nor the liability of
the Seller with respect to the Seller's representations and warranties shall be
reduced by any investigation made at any time by or on behalf of the Purchaser.
If written notice of a claim has been given prior to the expiration of the
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applicable representations and warranties to the Seller, then the relevant
representations and warranties shall survive as to such claim until the claim
has been finally resolved.
SECTION 7.02. Indemnification by the Seller. (a) The Purchaser and each
of its Affiliates, officers, directors, employees, agents, successors and
assigns (each, a "Purchaser Indemnified Party") shall be indemnified and held
harmless by the Seller for any and all Liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses) actually
suffered or incurred by them (including, without limitation, any Action brought
or otherwise initiated by any of them) (hereinafter a "Loss"), arising out of or
resulting from:
(i) the breach of any representation or warranty made by the
Seller contained in the Acquisition Documents; or
(ii) the breach of any covenant or agreement by the Seller
contained in the Acquisition Documents; or
(iii) Liabilities of the Seller or the Company, whether
arising before or after the Closing Date, that are not expressly
assumed by the Purchaser pursuant to this Agreement, including, without
limitation: (A) Liabilities of the Seller or the Company arising from
or related to any failure to comply with the Laws relating to bulk
transfers or bulk sales with respect to the transactions contemplated
by this Agreement; or (B) the Excluded Liabilities; or
(iv) any claim made by any of the Transferred Employees or
their respective beneficiaries against the Purchaser or any of its
Affiliates with respect to events occurring on or prior to the Closing
Date, including, without limitation, claims for (A) wages or benefits
accrued on or prior to the Closing Date, (B) employment discrimination
by the Seller including, but not limited to, discrimination in the
Seller's hiring or termination of any employees and (C) any claim of
wrongful discharge by any Transferred Employee (including constructive
discharge) based on events occurring prior to the Closing Date.
Subject to Section 7.04, to the extent that the Seller's undertakings set forth
in this Section 7.02 may be unenforceable, the Seller shall contribute the
maximum amount that it is permitted to contribute under applicable Law to the
payment and satisfaction of all Losses incurred by an Indemnified Party.
(b) A Purchaser Indemnified Party shall give the Seller notice of any
matter which a Purchaser Indemnified Party has determined has given rise to a
right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the Seller from any of its obligations under this Article VII except to
the extent that the Seller is materially prejudiced by such failure. The
obligations and Liabilities of the Seller under this Article VII with respect to
Losses arising from claims of any third party which are subject to the
indemnification provided for in this Article VII ("Third Party Claims") shall be
governed by and contingent upon the
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following additional terms and conditions: if a Purchaser Indemnified Party
shall receive notice of any Third Party Claim, the Purchaser Indemnified Party
shall give the Seller notice of such Third Party Claim within 30 days of the
receipt by the Purchaser Indemnified Party of such notice; provided, however,
that the failure to provide such notice (i) shall not release the Seller from
any of its obligations under this Article VII except to the extent the Seller is
materially prejudiced by such failure and (ii) shall not relieve the Seller from
any other obligation or liability that it may have to any Purchaser Indemnified
Party otherwise than under this Article VII. If the Seller actively and
diligently pursues the defense of such Third Party Claim and if such Third Party
Claim does not involve a claim for equitable relief (other than claims for
equitable relief that are incidental to and cannot be separated from a primary
claim for damages), then the Seller shall be entitled to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Purchaser Indemnified
Party within fifteen days of the receipt of such notice from the Purchaser
Indemnified Party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate in the
judgment of the Purchaser Indemnified Party for the same counsel to represent
both the Purchaser Indemnified Party and the Seller, then the Purchaser
Indemnified Party shall be entitled to retain one outside counsel at the expense
of the Seller. In the event the Seller exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Purchaser
Indemnified Party shall cooperate with the Seller in such defense and make
available to the Seller, at the Seller's expense, all witnesses, pertinent
records, materials and information in the Purchaser Indemnified Party's
possession or under the Purchaser Indemnified Party's control relating thereto
as is reasonably required by the Seller. Similarly, in the event the Purchaser
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Seller shall cooperate with the Purchaser
Indemnified Party in such defense and make available to the Purchaser
Indemnified Party, at the Seller's expense, all such witnesses, records,
materials and information in the Seller's possession or under the Seller's
control relating thereto as is reasonably required by the Purchaser Indemnified
Party. No such Third Party Claim may be settled by the Seller without the
written consent of the Purchaser Indemnified Party unless such Third Party Claim
is settled for money damages and includes a release of the Purchaser Indemnified
Party in connection with such Third Party Claim.
SECTION 7.03. Indemnification by the Purchaser. (a) Seller and each of
its Affiliates, officers, directors, employees, agents, successors and assigns
(each a "Seller Indemnified Party") shall be indemnified and held harmless by
the Purchaser for any and all Losses, arising out of or resulting from:
(i) the breach of any representation or warranty made by the
Purchaser contained in the Acquisition Documents; or
(ii) the breach of any covenant or agreement by the Purchaser
contained in the Acquisition Documents.
(b) A Seller Indemnified Party shall give the Purchaser notice of any
matter which a Seller Indemnified Party has determined has given rise to a right
of indemnification under this Agreement, within 60 days of such determination,
stating the amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this
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Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the Purchaser from any of its obligations under this Article VII except
to the extent that the Purchaser is materially prejudiced by such failure. The
obligations and Liabilities of the Purchaser under this Article VII with respect
to Third Party Claims shall be governed by and contingent upon the following
additional terms and conditions: if a Seller Indemnified Party shall receive
notice of any Third Party Claim, the Seller Indemnified Party shall give the
Purchaser notice of such Third Party Claim within 30 days of the receipt by the
Seller Indemnified Party of such notice; provided, however, that the failure to
provide such notice (i) shall not release the Purchaser from any of its
obligations under this Article VII except to the extent the Purchaser is
materially prejudiced by such failure and (ii) shall not relieve the Purchaser
from any other obligation or liability that it may have to any Seller
Indemnified Party otherwise than under this Article VII. If the Purchaser
actively and diligently pursues the defense of such Third Party Claim and if
such Third Party Claim does not involve a claim for equitable relief (other than
claims for equitable relief that are incidental to and cannot be separated from
a primary claim for damages), then the Purchaser shall be entitled to assume and
control the defense of such Third Party Claim at its expense and through counsel
of its choice if it gives notice of its intention to do so to the Seller
Indemnified Party within fifteen days of the receipt of such notice from the
Seller Indemnified Party; provided, however, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Seller Indemnified Party for the same
counsel to represent both the Seller Indemnified Party and the Purchaser, then
the Seller Indemnified Party shall be entitled to retain one outside counsel at
the expense of the Purchaser. In the event that the Purchaser exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Seller Indemnified Party shall cooperate with the Purchaser
in such defense and make available to the Purchaser, at the Purchaser's expense,
all witnesses, pertinent records, materials and information in the Seller
Indemnified Party's possession or under the Seller Indemnified Party's control
relating thereto as is reasonably required by the Purchaser. Similarly, in the
event the Seller Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Purchaser shall cooperate with
the Seller Indemnified Party in such defense and make available to the Seller
Indemnified Party, at the Purchaser's expense, all such witnesses, records,
materials and information in the Purchaser's possession or under the Purchaser's
control relating thereto as is reasonably required by the Seller Indemnified
Party. No such Third Party Claim may be settled by the Purchaser without the
written consent of the Seller Indemnified Party unless such Third Party Claim is
settled for money damages and includes a release of the Seller Indemnified Party
in connection with such Third Party Claim.
SECTION 7.04. Limitations on Indemnification. (a) Notwithstanding
anything to the contrary contained in this Agreement, no claim may be made
against the Seller for indemnification pursuant to Section 7.02(a) or against
the Purchaser pursuant to Section 7.03(a) with respect to any Loss, unless the
aggregate amount of all such Losses of the Purchaser Indemnified Parties or the
Seller Indemnified Parties, as the case may be, shall exceed $100,000, and the
Seller or the Purchaser, as the case may be, shall then be required to pay or be
liable for the entire amount of any such Losses.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses which may be recovered
from the Seller arising out
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of or resulting from Section 7.02(a) shall be $5,000,000; provided, however,
that the maximum amount of indemnifiable Losses which may be recovered from the
Seller arising out of or relating to any breach of a representation or warranty
related to Intellectual Property matters shall be the Purchase Price and
provided further that the foregoing limitations shall not apply in the case of
fraud or any willful or intentional misrepresentation.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses that may be recovered from
the Purchaser arising out of or resulting from Section 7.03(a) shall be
$500,000; provided, however, that the foregoing limitations shall not apply in
the case of fraud or any willful or intentional misrepresentation.
SECTION 7.05. Distributions from Escrow Fund. In the event that (a) the
Seller shall not have objected to the amount claimed for indemnification by an
Indemnified Party with respect to any Loss in accordance with the procedures set
forth in the Escrow Agreement or (b) the Seller shall have delivered notice of
its disagreement as to the amount of any indemnification requested by an
Indemnified Party and either (i) the Seller and the Purchaser shall have,
subsequent to the giving of such notice, mutually agreed that the Seller is
obligated to indemnify the Indemnified Party for a specified amount and shall
have so jointly notified the Escrow Agent or (ii) a final nonappealable judgment
shall have been rendered by the court having jurisdiction over the matters
relating to such claim by the Indemnified Party for indemnification from the
Seller and the Escrow Agent shall have received, in the case of clause (i)
above, written instructions from the Seller and the Purchaser or, in the case of
clause (ii) above, a copy of the final nonappealable judgment of the court, the
Escrow Agent shall deliver to the Purchaser from the Escrow Fund any amount
determined to be owed to the Purchaser under this Article VII in accordance with
the Escrow Agreement.
SECTION 7.06. Tax Treatment of Indemnifications. The Seller and the
Purchaser agree to treat all payments made by either to or for the benefit of
the other under any indemnity provisions of this Agreement and for any
misrepresentations or breach of warranties or covenants as adjustments to the
purchase price or as capital contributions for Tax purposes, and further agree
that such treatment shall govern for purposes hereof except to the extent that
the Laws of a particular jurisdiction provide otherwise.
SECTION 7.07. Exclusive Remedy. Each of the Purchaser and the Seller
acknowledges and agrees that the indemnification provisions in this Article VII
and specific performance as contemplated by Section 9.08 shall be the exclusive
remedy of each of the Purchaser and the Seller (and their respective successors
and permitted assigns) with respect to this Agreement; provided that, without
limiting the generality of the foregoing, in no event shall the Purchaser or the
Seller or any of their respective subsidiaries or their respective successors or
permitted assigns be entitled to claim or seek any special, incidental, punitive
or consequential damages or any rescission of the transactions consummated under
this Agreement or, except as set forth in Section 9.08, other remedy at law or
in equity. In furtherance of the foregoing, each of the Purchaser and the Seller
hereby waives, from and after the Closing, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action it may have
against any other party hereto relating to the subject matter of this Agreement
arising under or based upon any Law.
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ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of the Purchaser and the Seller;
(b) by the Purchaser or the Seller if the Closing shall not
have occurred on or before the date that is 120 days after the date
hereof; provided, however, that the right to terminate this Agreement
under this Section 8.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(c) by the Purchaser or the Seller in the event that any
Governmental Order which is final and nonappealable shall have
prevented the consummation of the Acquisition or any of the other
transactions contemplated by this Agreement;
(d) by the Purchaser if (i) the Board withdraws, modifies or
changes its recommendation of this Agreement, the Acquisition and the
other transactions contemplated hereby in a manner adverse to the
Purchaser or shall have resolved to do so, or (ii) the Board shall have
recommended to the shareholders of the Seller another Acquisition
Proposal or shall have resolved to do so;
(e) by the Purchaser or the Seller if this Agreement, the
Acquisition and the other transactions contemplated by this Agreement
shall fail to receive the requisite vote for approval at the
Stockholders' Meeting;
(f) by the Purchaser upon a breach of any representation,
warranty, covenant or agreement on the part of the Seller set forth in
this Agreement, or if any representation or warranty of the Seller
shall have become untrue, in either case such that the conditions set
forth in Section 6.03(a) would not be satisfied ("Terminating Seller
Breach"); provided, however, that, if such Terminating Seller Breach is
curable by the Seller through the exercise of its reasonable best
efforts and for so long as the Seller continues to exercise such
reasonable best efforts, the Purchaser may not terminate this Agreement
under this Section 8.01(f);
(g) by the Seller upon a breach of any representation,
warranty, covenant or agreement on the part of the Purchaser set forth
in this Agreement, or if any representation or warranty of the
Purchaser shall have become untrue, in either case such that the
conditions set forth in Section 6.02(a) would not be satisfied
("Terminating Purchaser Breach"); provided, however, that, if such
Terminating Purchaser Breach is curable by the Purchaser through the
exercise of their respective reasonable best efforts and for so long as
the Purchaser continues to exercise such reasonable best efforts, the
Seller may not terminate this Agreement under this Section 8.01(g); or
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(h) By the Seller, upon approval of the Board, if prior to the
Closing the Board is required to do so by its fiduciary duties under
applicable Law after having received advice from outside legal counsel
in order to proceed with a transaction with respect to a Superior
Proposal, upon five days' prior written notice to the Purchaser,
setting forth in reasonable detail subject to Section 4.14(d) the
identity of the person making, and the final terms and conditions of,
the Superior Proposal and after giving effect to any concessions that
may be offered by the Purchaser not later than five days after the
Purchaser's receipt of such prior written notice.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void (except for Sections 8.02, 8.03 and 9.01), and there shall be no liability
on the part of any party hereto, except that nothing herein shall relieve any
party from liability for any willful or intentional breach hereof.
SECTION 8.03. Fees and Expenses. (a) In the event (a "Fee Trigger
Event") that:
(i) (A) this Agreement is terminated pursuant to Section
8.01(e) and at or prior to the time of the Stockholders' Meeting, an
Acquisition Proposal shall have been publicly announced and (B) Seller
enters into an agreement with respect to an Acquisition Proposal within
nine months after the termination of this Agreement, or an Acquisition
Proposal is consummated within one year of such termination of this
Agreement; or
(ii) this Agreement is terminated pursuant to Section 8.01(h);
or
(iii) the Seller enters into an agreement with respect to an
Acquisition Proposal within nine months after the termination of this
Agreement, or an Acquisition Proposal is consummated, within one year
of the termination of this Agreement pursuant to Sections 8.01(b) (in
the event that such termination by the Purchaser is attributable solely
to the Seller's failure to fulfill its obligations under this
Agreement), (c) (in the event that the Governmental Order that gives
rise to the termination is not attributable to the Purchaser), (d) or
(f), and the Seller shall not theretofore have been required to pay the
Fee (as hereinafter defined) to the Purchaser pursuant to Section
8.03(a)(i) or 8.03(a)(ii);
then the Seller shall pay the Purchaser a fee of $400,000 (the "Fee"), which
amount shall be payable by wire transfer in immediately available funds to an
account or accounts designated by the Purchaser, plus all Expenses (as
hereinafter defined). Payment of such amounts shall be payable not later than
the third Business Day following such Fee Trigger Event.
(b) For purposes of this Agreement, "Expenses" shall mean all fees of
outside counsel to the Purchaser and all out-of-pocket expenses actually
incurred by the Purchaser or on its behalf in connection with the transactions
contemplated by this Agreement.
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement, the Stockholders' Agreement, the
Ancillary Agreements, and
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the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Closing occurs.
(d) In the event that the Seller shall fail to pay the Fee or any
Expenses when due, the term "Expenses" shall be deemed to include the costs and
expenses actually incurred or accrued by the Purchaser (including, without
limitation, fees and expenses of counsel) in connection with the collection
under and enforcement of this Section 8.03, together with interest on such
unpaid Fee and Expenses, commencing on the date that the Fee or such Expenses
became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A, from time to time, in the City of New York, as such bank's Base
Rate plus 2.0%.
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Closing; provided, however, that, after the approval
and adoption by the stockholders of the Seller of this Agreement, the
Acquisition and the other transactions contemplated by this Agreement, no
amendment may be made that would reduce the Purchase Price. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Closing, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties of another party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any agreement of another party
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 9.02. Notices. All notices and other communications hereunder
shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made (i) upon receipt, (ii) five Business Days after deposit in
the mail, or (iii) one Business Day after receipt of confirmation of delivery by
telecopy) by delivery in person, by courier service, by telecopy, or by
registered or mail to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
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if to the Purchaser:
Dassault Systemes
9 Quai Marcel Dassault
BP310
2150 Suresnes Cedex
France
Telecopier No: 33.1.42.04.45.81
Attention: Thibault de Tersant
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No: (212) 848-7179
Attention: Alfred J. Ross, Jr., Esq.
if to the Seller:
Spatial Technology Inc.
2425 55th Street, Suite 100
Boulder, Colorado 80301
Telecopier No: (303) 544-3003
Attention: President
with a copy to:
Hogan & Hartson L.L.P.
One Tabor Center, Suite 1600
1200 Seventeenth Street
Denver, Colorado 80202
Telecopier: (703) 899-7333
Attention: Whitney Holmes, Esq.
SECTION 9.03. Severability; Entire Agreement. If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by any Law or public policy, all other terms 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 materially 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 in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible. This Agreement, the IP
Agreements and the Ancillary Agreements constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior
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agreements and undertakings, both written and oral, between the Seller and the
Purchaser with respect to the subject matter hereof.
SECTION 9.04. Assignment; No Third Party Beneficiaries. This Agreement
may not be assigned by operation of Law or otherwise without the express written
consent of the Seller and the Purchaser (which consent may be granted or
withheld in the sole discretion of the Seller and the Purchaser); provided,
however, that the Purchaser may assign this Agreement to an Affiliate of the
Purchaser without the consent of the Seller; provided further that the Seller
may assign this Agreement to an Affiliate of the Seller without the consent of
the Purchaser; and provided further that no such assignment shall relieve the
Seller or the Purchaser of any of its obligations under this Agreement. Except
for the provisions of Article VII relating to the Indemnified Parties, this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, including, without
limitation, any union or any employee or former employee of the Seller, any
legal or equitable right, benefit or remedy of any nature whatsoever, including,
without limitation, any rights of employment for any specified period, under or
by reason of this Agreement.
SECTION 9.05. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.06. Governing Law; Forum. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of New York,
applicable to contracts executed in and to be performed entirely within that
state. All actions and proceedings arising out of or relating to this Agreement,
the IP Agreements and each of the Ancillary Agreements shall be heard and
determined in any court of competent jurisdiction sitting in the State of
Delaware, The City of Wilmington (without regard to the conflicts of Law
provisions thereof). The parties hereto hereby (a) submit to the exclusive
jurisdiction of any court of competent jurisdiction sitting in the State of
Delaware, The City of Wilmington for the purpose of any Action arising out of or
relating to this Agreement and each of the Ancillary Agreements brought by any
party hereto, and (b) agree, to the fullest extent permitted by applicable law,
to waive, and not to assert by way of motion, defense, or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that the Action is brought in an inconvenient forum, that the venue
of the Action is improper, or that this Agreement and each of the Ancillary
Agreements may not be enforced in or by any of the above-named courts.
SECTION 9.07. Currency. Unless otherwise specified in this Agreement,
all references to currency, monetary values and dollars set forth herein shall
mean U.S. dollars and all payments hereunder shall be made in U.S. dollars.
SECTION 9.08. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance
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of the terms hereof, in addition to any other remedy at Law or equity, without
the necessity of demonstrating the inadequacy of money damages.
SECTION 9.09. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY ACTIONS OR PROCEEDINGS DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
ANCILLARY AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
ARTICLE X
DEFINITIONS
SECTION 10.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" means this Agreement, the Ancillary Agreements,
and any other document or certificate delivered pursuant to this Agreement or
the transactions contemplated hereby.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Ancillary Agreements" means the Escrow Agreement and the Transition
Services Agreement.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement to be entered into between the Seller and the Company
immediately prior to the Closing substantially in the form of Exhibit C.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Law to be closed in The City of
New York, Paris or The City of Denver, Colorado.
"CBD Software" means the following computer software programs,
whichever packaging and naming, in the version and release that is commercially
available as of Closing: ACIS(R) 3D Toolkit, ACIS(R) Advanced Blending Husk,
ACIS(R) Advanced Rendering Husk, ACIS(R) Local Operations Husk, ACIS(R) Shelling
Husk, ACIS(R) Precise Hidden Line Husk, ACIS(R) Mesh Surface Husk, ACIS(R) Space
Warping Husk, ACIS(R) Advanced Surfacing Husk, ACIS(R) Cellular Topology Husk,
Spatial Deformable Modeler, ACIS(R) Deformable Modeling Husk, JetScream(TM),
ACIS(R) JetScream Husk, ACIS(R) RevEnge Husk (MetroCad), ACIS(R) AEC Husk,
IntraVISION (R) (formerly known as Calsview), ACIS(R) Open Viewer and Plug-ins,
Large
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Model Viewer, 3D Building Blox(TM), SAT(R) (ACIS File Format), and all
Intellectual Property rights of the Seller therein.
"Code" means the Internal Revenue Code of 1986, as amended.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Deferred Revenue" means the aggregate amount of cash and receivables
received by the Seller on or before the Closing Date for work or obligations
relating to maintenance, support and consulting services in connection with the
Component Business to be performed on or after the Closing Date. "Disclosure
Schedule" means the Disclosure Schedule attached hereto, dated as of the date
hereof, and forming a part of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage,
hypothecation, lien (including, without limitation, environmental and tax
liens), charge, encumbrance, adverse claim, or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, whether or
not recorded with any Governmental Authority.
"Escrow Agent" means State Street Bank & Trust Co. or, if not possible,
a national bank agreed to by the parties that is incorporated under the Laws of
the United States of America with a branch located in the State of New York,
County of New York.
"Escrow Amount" means $1,000,000.
"Escrow Fund" means the Escrow Amount deposited with the Escrow Agent
as such sum may be increased or decreased in accordance with the Escrow
Agreement.
"Governmental Authority" means any United States federal, state or
local or any British, French, German or Japanese government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
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"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with US GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, and (g)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends.
"Intellectual Property" means (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (b) ideas and
conceptions of potentially patentable subject matter, including without
limitation, any patent disclosures whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) Patents, (d) Trademarks, (e) copyrights (registered or
otherwise) and registrations and applications for registration thereof, all
moral rights of authors therein, and all rights therein provided by
international treaties, conventions or common law, (f) Software, (g) Trade
Secrets, and (h) all rights to sue and recover damages and obtain injunctive
relief for past, present and future infringement, dilution, misappropriation,
violation or breach thereof.
"Inventories," means all inventory, merchandise, finished goods
maintained, held or stored by or for the Seller or the Component Business and
any prepaid deposits for any of the same used in or intended to be used in to
the Component Business.
"IP Agreements" means (i) the Cross-License Agreement in the form of
Exhibit A-1, (ii) the Web Services Agreement in the form of Exhibit A-2, (iii)
the Co-Branding Agreement in the form of Exhibit A-3, (iv) the Joint Software
License Agreement in the form of Exhibit A-4, (v) the Server Software Agreement
in the form of Exhibit A-5 and (vi) the Reseller Agreement.
"Joint Software" means the Software licensed and/or owned by the Seller
as set forth on Schedule A of the Joint Software License Agreement.
"Knowledge of the Seller", or words of similar import, means the actual
knowledge after reasonable inquiry of any officer of the Seller.
"Law" means any domestic or foreign statute, law, ordinance,
regulation, rule, code, order, requirement or rule of common law.
"Leased Real Property" means the real property leased by the Seller as
tenant and used in or intended to be used in the Component Business and located
at: (i)2425 55th Street,
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Suite 100, Boulder, Colorado 80301; (ii) 23 Rue Colbert, F-78885 Saint-Quentin
Cedex, France; (iii) Park House, Castle Park, Cambridge CB3 ODU, England; (iv)
An Der Eckesmuhle 10, D-41238 Monchengladbach, Germany; and (v) Hamamatsucho NH
Building, 3rd Floor, 1-25-13 Hamamatsucho, Minato-Ku, Tokyo 105, Japan, together
with, to the extent leased by the Seller, all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Seller attached or
appurtenant thereto, and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licensed Intellectual Property" means Intellectual Property, other
than the Retained Intellectual Property, licensed to the Seller pursuant to the
Licenses.
"Licenses" means (i) licenses of Intellectual Property by the Seller to
third parties, (ii) licenses of Intellectual Property by third parties to the
Seller, and (iii) agreements between the Seller and third parties relating to
the development or use of Intellectual Property, where all of the foregoing
relates to, or governs any Intellectual Property which is used in, intended to
be used in or related to, the Component Business.
"Material Adverse Effect" means any circumstance, change or effect that
individually, or when taken together with all other exceptions, changes and
effects (i) is or is reasonably likely to be materially adverse to the business,
operations, condition (financial or otherwise), profits, assets or Liabilities
(including, without limitation, contingent liabilities) and results of
operations of the Seller or the Component Business taken as a whole, or (b)
would prevent or materially delay the Seller from consummating the Acquisition
and the other transactions contemplated by this Agreement.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Seller holds, or has a right to hold, right, title and interest and
which is used in, intended to be used in or related to the Component Business,
including, without limitation, the CBD Software.
"Patents" means United States, foreign and international patents,
patent applications and statutory invention registrations, including all
reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations thereof, all inventions disclosed therein and improvements
thereto, and all rights therein provided by international treaties and
conventions.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable or which may thereafter be paid without penalty
or that are being contested in good faith by appropriate proceedings; (b)
Encumbrances imposed by Law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period of
more than
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30 days or that are being contested in good faith by appropriate proceedings and
(ii) are not in excess of $5,000 in the case of a single property or $20,000 in
the aggregate at any time; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations; (d) minor survey exceptions, reciprocal easement
agreements and other customary encumbrances on title to real property that (i)
were not incurred in connection with any Indebtedness, (ii) do not render title
to the property encumbered thereby unmarketable and (iii) do not, individually
or in the aggregate, materially adversely affect the value of or the use of such
property for its present purposes; and (e) Encumbrances arising under original
purchase price, conditional purchase price, conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business consistent with past practice.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act.
"Prepaid Expenses" means the aggregate amount of the costs and expenses
that have been paid by the Seller prior to the Closing Date for products and
services to be delivered to or rendered to the Component Business by third
Persons on or after the Closing Date.
"Purchased Intellectual Property" means the Owned Intellectual Property
and Licensed Intellectual Property, collectively.
"Real Property" means the Leased Real Property and any real property
owned by the Seller.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable from third parties, including, without limitation, customers,
arising from the conduct of the Component Business before the Closing Date and
related to Deferred Revenue, whether or not in the ordinary course, together
with any unpaid financing charges accrued thereon as of the Closing Date.
"Retained Intellectual Property" means (i) all of the Seller's right,
title and interest in, to and under the WBM Software and the Server Software
except for those rights transferred pursuant to the IP Agreements, (ii) all
right, title and interest in, to and under any Software or Intellectual Property
owned or licensed by the Seller that is not used in the Component Business,
(iii) all right, title and interest in, to and under any Software or
Intellectual Property granted to the Seller pursuant to the IP Agreements, and
(iv) all of the Seller's right, title and interest in, to and under the Joint
Software, except to the extent licensed to the Purchaser and its Affiliates
pursuant to the Joint Software License Agreement.
"Server Software" means all software, including, without limitation,
Web interface, Web middleware, Web dynamic content billing, Web content
generation software, and any Derivative Works (as defined in the IP
Agreements) thereof, that is used by the Seller to provide application services
over the Internet.
53
<PAGE> 129
"Share Purchase Agreement" means the Share Purchase Agreement to be
executed by the Seller and the Purchaser or an Affiliate of the Purchaser
substantially in the form of Exhibit D hereto.
"Software" means any computer software program, including
programming-code, on-line documentation, if any, user interface related thereto
or associated therewith, to the extent that such user interface does exist, and
related user and installation documentation other than on-line documentation
associated with this computer software program.
"Source Code" means computer-programming code and related system
documentation, comments and procedural code, that is not directly executable by
a computer but which may be printed out or displayed in a form readable and
understandable by a qualified programmer.
"Stock Option Plans" means the Spatial Technology 1996 Equity Incentive
Plan and the Spatial Technology 1998 Non-Officer Stock Option Plan.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs' duties, tariffs, and
similar charges.
"Trade Secrets" mean all inventions, whether patentable or not, trade
secrets, know-how and other confidential or proprietary technical, business and
other information, including manufacturing and production processes and
techniques, research and development information, technology, drawings,
specifications, designs, plans, proposals, technical data, financial, marketing
and business data, pricing and cost information, business and marketing plans,
customer and supplier lists and information, and all rights in any jurisdiction
to limit the use or disclosure thereof.
"Trademarks" mean trademarks, service marks, trade dress, logos, trade
names, corporate names, URL addresses, domain names and symbols, slogans and
other indicia of source or origin, including the goodwill of the business
symbolized thereby or associated therewith, common law rights thereto,
registrations and applications for registration thereof throughout the world,
all rights therein provided by international treaties and conventions, and all
other rights associated therewith.
"Transition Services Agreement" means the Transition Services Agreement
to be executed by the Seller and the Purchaser and to be attached hereto in the
form of Exhibit E as soon as practicable after the date hereof.
"US GAAP" means United States generally accepted accounting principles.
54
<PAGE> 130
"WBM Software" means the following Software, whichever packaging and
naming, in the version and release that is commercially available as of the
Closing Date, as well as corrections, enhancements and modifications of the
software delivered in the maintenance services provided pursuant to the
Cross-License Agreement: IGES Toolkit, PRO/E Translator, Current CATIA V4
Translator (GSSL), the STL Translator, IGES View and STEP Toolkit. WBM Software
does not include any of the Server Software.
SECTION 10.02. Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections of this Agreement set forth
below:
Term Section
------------------------------------------------------------
Acquisition Recitals
Acquisition Proposal 4.14(a)
Agreement Preamble
Allocation 1.03(b)
Assets 1.01(a)
Assumed Liabilities 1.02(a)
Board Recitals
Component Business Recitals
Component Business Employees 2.26(a)
Closing 1.04
Closing Amounts Statement 1.05(e)
Closing Date 1.04
Committed Financing 4.14(b)
Dassault Systemes Recitals
December 31, 1999 Balance Sheet 2.07
Delaware Law 2.01
ERISA 2.24(a)
Escrow Agreement 1.07
Exchange Act 2.06(a)
Excluded Assets 1.01(b)
Excluded Liabilities 1.02(b)
Expenses 8.03(b)
Fee 8.03(a)
Fee Trigger Event 8.03(a)
GSSL 6.02(d)
Independent Accounting Firm 1.09(b)
IP Agreements Recitals
IRS 2.24(a)
Joint Software License Agreement 2.17(d)
License Agreement Recitals
Loss 7.02
Material Contracts 2.16(a)
Multiemployer Plan 2.24(b)
Multiple Employer Plan 2.24(b)
Names and Marks 4.10
Permits 2.14(b)
55
<PAGE> 131
Plans 2.24(a)
Proxy Statement 4.02
Prepaid Royalties 2.30
Purchase Price 1.03(a)
Purchaser Preamble
Purchaser Indemnified Party 7.02(a)
Receivable Amount 4.23
Restricted Period 4.14(a)
SEC 2.06(a)
SEC Reports 2.06(a)
Section 203 Approval 2.01
Securities Act 2.06(a)
Seller Preamble
Seller Common Stock Recitals
Seller Indemnified Party 7.03(a)
Share Closing 1.08(b)
Share Notice 1.08(b)
Share Purchase 1.08(a)
Share Purchase Amount 1.08(b)
Stockholders Recitals
Stockholders Agreement Recitals
Stockholders' Meeting 4.02
Superior Proposal 4.14(b)
Tangible Personal Property 2.20
Terminating Seller Breach 8.01(f)
Terminating Purchaser Breach 8.01(g)
Third Party Claims 7.02(b)
Transferred Employees 5.01
[The Remainder of This Page is Intentionally Left Blank]
56
<PAGE> 132
IN WITNESS WHEREOF, the Purchaser, the Company and the Seller have caused this
Purchase Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DASSAULT SYSTEMES CORP.
By /s/ Thibault de Tersant
-------------------------------
Name: Thibault de Tersant
Title: Chief Financial Officer
SPATIAL COMPONENTS, LLC
By /s/ R. Bruce Morgan
-------------------------------
Name: R. Bruce Morgan
Title: President
SPATIAL TECHNOLOGY INC.
By /s/ R. Bruce Morgan
-------------------------------
Name: R. Bruce Morgan
Title: Chief Executive Officer
57
<PAGE> 133
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
AMENDMENT NO. 1, dated as of September 2, 2000 (this
"Amendment"), to the Purchase Agreement dated as of July 4, 2000 (the "Purchase
Agreement"), by and among Spatial Technology Inc., a corporation organized under
the laws of the State of Delaware (the "Seller"), Dassault Systemes Corp., a
corporation organized under the laws of the State of Delaware (the "Purchaser"),
and Spatial Components, LLC, a limited liability corporation organized under the
laws of Delaware (the "Company"). Capitalized terms used but not defined herein
are used as defined in the Purchase Agreement.
W I T N E S S E T H
WHEREAS, the Purchaser, the Seller and the Company desire to
amend the Purchase Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants set forth herein, the parties hereby agree as
follows:
1. Amendment to Section 1.04(a). Section 1.04(a) of the
Purchase Agreement is hereby amended, effective as of the date of the Purchase
Agreement, by substituting the amount "$21,500,000" set forth therein with the
amount "$25,000,000".
2. New Sections 1.04(c) and 1.04(d). New Sections 1.04(c) and
1.04(d) are hereby added, effective as of the date of the Purchase Agreement,
which read in their entirety as follows:
"(c) Prior to the Closing and upon three Business Days notice
from the Seller, the Purchaser shall extend a loan to the Seller in the amount
of $2,000,000 which loan shall be evidenced by a promissory note (the "Note") in
the form of Exhibit F hereto, which shall become due and payable by the Seller
to the Purchaser on the earlier of (i) the date of termination of the Agreement
or (ii) the Closing Date. In the event the Note becomes due and payable on the
Closing Date, the principal amount thereof and any accrued interest thereon
shall be offset against the Purchase Price. In the event that the Note becomes
due and payable upon termination of the Agreement, the Purchaser shall be
entitled, at the Purchaser's option, to repayment thereof plus any accrued
interest thereon either in cash, Seller Common Stock on the basis of $3.60 per
Seller Common Stock or a combination of cash or Seller Common Stock. The
Purchaser shall give to the Seller notice of its repayment election within three
Business Days of the date of termination of the Agreement."
(d) The Seller shall use reasonable best efforts to amend the
Registration Rights Agreement among the Seller, the Purchaser and certain other
investors dated as of February 18, 2000 (the "Registration Rights Agreement"),
to include the shares of Seller Common Stock issued to the Purchaser pursuant to
the Share Purchase Agreement or Section 1.04(c) as "Registrable Securities"
thereunder. In the event that such amendment is not effective prior to the
closing of the Share Purchase Agreement or the issuance of Seller Common Stock
pursuant to Section 1.04(c), the Purchaser shall have the right to a separate
mandatory registration on substantially the same terms as those provided under
Section 2(a) of the Registration Rights Agreement, with a registration statement
to be filed on or prior to the 30th day after the
<PAGE> 134
2
Purchaser gives the Seller a written registration request. In the event the
Registration Rights Agreement is not amended to include the Seller Common Share
so issued to the Purchaser, the Seller will provide the Purchaser "piggy-back"
registration rights under the terms of Section 2(d) of the Registration Rights
Agreement, and will provide the Purchaser notice of the date on which the Seller
proposes to file a registration statement with respect to which the Purchaser
would be entitled to include its shares of Seller Common Stock, which date shall
be no earlier than thirty (30) days from the date of such notice; provided, that
if the registration being effected by the Seller is on a Form S-3 for purposes
of resale of then outstanding securities, the Purchaser will only be obligated
to provide the Seller with 15 days advance notice. All other terms and
obligations in respect of such registration shall be the same as those provided
under the Registration Rights Agreement.
3. Amendment to Section 1.09(e). Section 1.09(e) is hereby
amended, effective as of the date of the Purchase Agreement, to read in its
entirety as follows:
"(e) If, during the period prior to the Share Closing or prior
to a share purchase closing, if any, effected pursuant to Section 1.04(c), the
outstanding shares of Seller Common Stock are changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the number of shares of Seller Common Stock to be sold to the Purchaser pursuant
to Section 1.04(c) or 1.09(a) shall be correspondingly adjusted to the extent
appropriate to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares."
4. New Section 4.01(c). A new Section 4.01(c) is hereby added,
effective as of the date of the Purchase Agreement, which reads in its entirety
as follows:
"(c) Notwithstanding anything to the contrary contained in
this Purchase Agreement, the Seller shall be permitted and required to modify
from the date hereof until the Closing its licensing fee policy relating to the
Component Business from the existing up front fee policy and prepaid royalty
model to a recurring revenue model, as communicated by the Purchaser to the
Seller. All terms of future licenses of the Seller's Component Business
technology and Intellectual Property relating to fee policies and royalties
shall be submitted for approval to Purchaser's representative, to ensure that
such terms comply with the Purchaser's recurring revenue model. The Purchaser's
representative shall be required to approve such terms, or modify such terms to
ensure compliance with the Purchaser's recurring revenue model, within three
Business Days from the Seller's submission of such terms to the Purchaser's
representative for approval."
5. Amendment to Section 4.14(c). (a) Section 4.14(c) is hereby
amended, effective as of the date of the Purchase Agreement, by deleting the
words "prohibited in" and replacing them with the words "permitted by".
6. New Section 4.18(c). A new Section 4.18(c) is hereby added,
effective as of the date of the Purchase Agreement, which reads in its entirety
as follows:
<PAGE> 135
3
"(c) At or as soon as practicable after the time of the
initial filing of the Proxy Statement with the SEC, the Seller and the Purchaser
shall issue a joint press release explaining any and all material changes to the
terms of this Agreement that have been agreed upon by the parties hereto
subsequent to the date of this Agreement, which joint press release shall
include, among other things, an explanation of any increase in the Purchase
Price and the rationale for including additional agreements within the defined
term IP Agreements."
7. New Section 4.18(d). A new Section 4.18(d) is hereby added,
effective as of the date of the Purchase Agreement, which reads in its entirety
as follows:
"(d) At or immediately after the Closing, the Seller and the
Purchaser shall issue a joint press release whereby the Purchaser shall publicly
endorse PlanetCAD, state that PlanetCAD is the Purchaser's preferred Internet
interoperability solution for CATIA, ENOVIA and SolidWorks, and explain that the
Purchaser's relationship with PlanetCAD is strategically important to the
Purchaser."
8. Amendment to Section 4.22. Section 4.22 is hereby amended,
effective as of the date of the Purchase Agreement, to read in its entirety as
follows:
"Transfer of Revenues. Within 30 days following the Closing
Date the Seller shall pay to the Company an amount of $400,000 in respect of
performance of services relating to potential obligations with regard to Prepaid
Royalties that the Company shall be assuming following the Closing."
9. New Section 4.23. A new Section 4.23 is hereby added,
effective as of the date of the Purchase Agreement, which reads in its entirety
as follows:
"SECTION 4.23 CAA Partnership Agreement. At or prior to
Closing the Purchaser or an Affiliate of the Purchaser, as the case may be,
shall enter into a CAA Partnership Agreement with the Seller for the enterprise
version of the Seller's Prescient product, which agreement will facilitate
integration of Prescient with CATIA. Subject to the Purchaser's normal decision
process and acceptance criteria, the Purchaser (or Purchaser's Affiliate) and
the Seller will negotiate an agreement to take the Prescient enterprise version
in OEM in the CATIA product line under the Purchaser's standard "CAA OSD"
agreement."
10. New Section 4.24. A new Section 4.24 is hereby added,
effective as of the date of the Purchase Agreement, which reads in its entirety
as follows:
"SECTION 4.24 Technology Sharing Arrangement. The Purchaser
shall partner with the Seller for interoperability services with other
mechanical CAD packages through sharing of translation and healing
technologies."
11. Amendment to Section 6.02(c).
Section 6.02 (c) is hereby amended, effective as of the date
of the Purchase Agreement, to read in its entirety:
[RESERVED]
<PAGE> 136
4
12. Amendment to Section 7.04(b). Section 7.04(b) is hereby
amended, effective as of the date of the Purchase Agreement, to read in its
entirety as follows:
"(b) Notwithstanding anything to the contrary contained in
this Agreement, the maximum amount of indemnifiable Losses which may be
recovered from the Seller arising out of or resulting from Section 7.02(a) shall
be $5,000,000; provided, however, that the maximum amount of indemnifiable
Losses which may be recovered from the Seller arising out of or relating to any
breach of a representation or warranty related to Intellectual Property matters
(i) on or before the second anniversary of the Closing Date shall be the
Purchase Price, and (ii) after the second anniversary but on or prior to the
fifth anniversary of the Closing shall be $10,000,000, and provided further that
the foregoing limitations shall not apply in the case of fraud or any willful or
intentional misrepresentation."
13. Amendment to Section 8.01(b). Section 8.01(b) is hereby
amended, effective as of the date of the Purchase Agreements by deleting "the
date that is 120 days after the date hereof" and replacing it with "November 20,
2000".
Amendment to Section 8.02. Section 8.02 is hereby amended,
effective as of the date of the Purchase Agreement, to read in its entirety as
follows:
"SECTION 8.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void (except for Sections 1.04(d), 8.02, 8.03
and 9.01), and there shall be no liability on the part of any party
hereto, except that nothing herein shall relieve any party from
liability for any willful or intentional breach hereof."
14. Amendments to Section 10.01. (a) Section 10.01 is hereby
amended, effective as of the date of the Purchase Agreement, by deleting the
existing defined term "IP Agreements" and substituting, in lieu thereof, the
following new definition:
"IP Agreements" means (i) the Cross-License Agreement in the
form of Exhibit A-1, (ii) the Web Services Agreement in the form of Exhibit A-2,
(iii) the Co-Branding Agreement in the form of Exhibit A-3, (iv) the Joint
Software License Agreement in the form of Exhibit A-4, (v) the Server Software
Agreement in the form of Exhibit A-5, (vi) the Reseller Agreement (vii) the
SolidWorks Server Software License Agreement and (viii) the IntraVision Source
Code Development License and Exclusive End-User Reseller Agreement."
(b) Section 10.01 is hereby further amended, effective as of
the date of the Purchase Agreement, by inserting the following definitions:
"IntraVision Source Code Development License and Exclusive
End-User Reseller Agreement" shall mean the license Agreement between the
Purchaser and/or certain of its Affiliates and the Seller to the IntraVision
computer software to be negotiated in good faith and using best efforts by the
Purchaser and the Seller prior to the Closing.
"Reseller Agreement" shall mean the license between the Seller
and the Purchaser granting the Purchaser the right to certain Seller software to
be negotiated in good faith and using best efforts by the Purchaser and the
Seller prior to Closing.
<PAGE> 137
5
"SolidWorks Server Software License Agreement" shall mean the
license agreement between SolidWorks Corporation and the Seller pertaining to
the licensing of a SolidWorks server product to the Seller to be negotiated in
good faith and using best efforts by the Purchaser and the Seller prior to the
Closing."
15. Amendment to Section 10.02. Section 10.02 is hereby
amended, effective as of the date of the Purchase Agreement, to read in its
entirety as follows:
"Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections of this Agreement set forth
below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Recitals
Acquisition Proposal 4.14(a)
Agreement Preamble
Allocation 1.04(b)
Assets 1.01(a)
Assumed Liabilities 1.02(a)
Board Recitals
Component Business Recitals
Component Business Employees 2.26(a)
Closing 1.05
Closing Amounts Statement 1.06(f)
Closing Date 1.05
Committed Financing 4.14(b)
Dassault Systemes Recitals
December 31, 1999 Balance Sheet 2.07
Delaware Law 2.01
ERISA 2.24(a)
Escrow Agreement 1.08
Exchange Act 2.06(a)
Excluded Assets 1.01(b)
Excluded Liabilities 1.02(b)
Expenses 8.03(b)
Fee 8.03(a)
Fee Trigger Event 8.03(a)
GSSL 6.02(d)
IP Agreements Recitals
IRS 2.24(a)
Joint Software License Agreement 2.17(d)
Loss 7.02
Material Contracts 2.16(a)
Membership Interests 1.03
Multiemployer Plan 2.24(b)
Multiple Employer Plan 2.24(b)
Names and Marks 4.10
Note 1.04(c)
</TABLE>
<PAGE> 138
6
<TABLE>
<S> <C>
Permits 2.14(b)
Plans 2.24(a)
Proxy Statement 4.02
Prepaid Royalties 2.30
Purchase Price 1.04(a)
Purchaser Preamble
Purchaser Indemnified Party 7.02(a)
Receivable Amount 4.23
Registration Rights Agreement 1.04(d)
Registration Statement 1.04(d)
Restricted Period 4.14(a)
SEC 2.06(a)
SEC Reports 2.06(a)
Section 203 Approval 2.01
Securities Act 2.06(a)
Seller Preamble
Seller Common Stock Recitals
Seller Indemnified Party 7.03(a)
Share Closing 1.09(b)
Share Notice 1.09(b)
Share Purchase 1.09(a)
Share Purchase Amount 1.09(b)
Stockholders Recitals
Stockholders Agreement Recitals
Stockholders' Meeting 4.02
Superior Proposal 4.14(b)
Tangible Personal Property 2.20
Terminating Seller Breach 8.01(f)
Terminating Purchaser Breach 8.01(g)
Third Party Claims 7.02(b)
Transferred Employees 5.01"
</TABLE>
16. Effect of Amendment. Except as and to the extent expressly
modified by this Amendment, the Purchase Agreement shall remain in full force
and effect in all respects.
17. Counterparts. This Amendment may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
18. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the Laws of the State with New York applicable to
contracts executed in and to be performed entirely within that state.
(The Remainder of This Page is Intentionally Left Blank.)
<PAGE> 139
7
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SPATIAL TECHNOLOGY INC.
By: /s/ R. Bruce Morgan
------------------------------
Name: R. Bruce Morgan
Title: Chief Financial Officer
DASSAULT SYSTEMES CORP.
By: /s/ Thibault de Tersant
------------------------------
Name: Thibault de Tersant
Title: Chief Financial Officer
SPATIAL COMPONENTS, LLC
By: /s/ R. Bruce Morgan
------------------------------
Name: R. Bruce Morgan
Title: President
<PAGE> 140
Appendix B
August 28, 2000
Board of Directors
Spatial Technology Inc.
2425 55th Street, Suite 100
Boulder, CO 80301
Members of the Board:
We have been requested by the Board of Directors of Spatial Technology Inc.
("Spatial" or the "Company") to render our opinion with respect to the fairness,
from a financial point of view, to the shareholders of the Company, of the
proposed purchase (the "Asset Purchase") of the assets of the Company's
component business division (the "CBD") by Dassault Systemes ("Dassault"). We
have not been requested to opine as to, and our opinion does not in any manner
address, the Company's underlying business decision to proceed with or effect
the sale of these assets.
We understand that the essential feature of the Asset Purchase is the sale of
the assets of the CBD in exchange for a cash payment of $25.0 million.
In arriving at our opinion, we have reviewed: (1) the Company's strategic
financing options in the context of the current state of the market for public
and private equity; (2) the historical and projected pro forma financial
statements of the CBD; (3) the recent public filings of the Company; (4) the
draft Asset Purchase Agreement between Spatial and Dassault; and (5) the
following draft business contracts between Spatial and Dassault that are to be
executed in conjunction with the Asset Purchase Agreement: (i) Co-branding
Agreement; (ii) Cross License Agreement; (iii) Server Software Licensing
Agreement; (iv) Software Reseller Agreement; (v) Web Services Agreement; and
(vi) Joint Software License Agreement. In addition, we have also performed the
following due diligence: (1) interviewed the Company's senior management with
respect to the CBD and its prospects; (2) reviewed certain publicly available
information of companies which we believe to be comparable to the CBD; (3)
reviewed the trading history of the Company's common stock for the most recent
several years and in comparison to the trading history of other companies that
we deemed relevant; (4) compared the historical, present and projected financial
performance and valuation of the Company in comparison with other companies that
we deemed relevant; (5) evaluated the discounted cash flow of the Company based
on projected financial data furnished to us by the Company; and (6) compared the
valuation of the CBD with the implied valuation of certain other transactions
that we deemed relevant.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information, and have
further relied upon assurances of management of the Company that they are not
aware of any facts that would make such information inaccurate or misleading.
With respect to the financial projections of the Company, we have assumed that
such projections have been reasonably prepared and reflect the best currently
available estimates and judgments of the management team. We have not made or
obtained any evaluations or appraisals of the assets or liabilities of the
Company. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, and subject to the condition that there
are no changes in the Asset Purchase that are material to our analysis or other
draft contracts between the date of this letter and the execution by Dassault
and Spatial of such contracts, we are of the opinion as of the date hereof that,
from a financial point of view, the sale of the Assets of the CBD is fair to the
Company and its shareholders other than Dassault.
Roth Capital Partners, Inc. will receive a fee in connection with providing this
fairness opinion that is contingent upon the closing of the sale of this or some
other transaction. In addition, the Company has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. In the
ordinary course of our business, we
<PAGE> 141
provide research coverage on the Company's common stock, serve as a market maker
in its stock, may trade for our own account and for the accounts of our
customers, and accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the Company
and is rendered to the Board of Directors in connection with its consideration
of the Asset Purchase. This opinion is not intended to be and does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote with respect to the Investment.
Very truly yours,
Roth Capital Partners Incorporated
2
<PAGE> 142
Appendix C
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT (this "Agreement"), dated as of ____________,
2000, by and among Spatial Technology Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), and Dassault Systemes Corp., a
corporation organized under the laws of the State of Delaware (the "Purchaser").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon one or more exemptions from the registration
requirements of United States federal and state securities laws.
B. The Purchaser desires to purchase, subject to the terms and
conditions stated in this Agreement, 555,556 shares of the Company's common
stock, par value $.01 per share (the "Common Stock") for an aggregate purchase
price of $2,000,000 (or approximately $3.60 per share).
NOW, THEREFORE, in consideration of the foregoing, the mutual promises,
conditions and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the Company and the Purchaser hereby agrees as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them as provided below:
"Business Day" shall mean any day on which the American Stock Exchange
(the "AMEX") or, if the Common Stock is not then traded on the AMEX, other
principal United States securities exchange or trading market on which the
Common Stock is listed or traded is open for trading.
"Investment Amount" shall mean $2,000,000.
"Material Adverse Effect" shall mean any material adverse effect on (i)
the Shares, (ii) the ability of the Company to perform its obligations hereunder
(including the issuance of the Shares) or under the registration rights referred
to in Section 5(k) below or (iii) the business,
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operations, properties or financial condition of the Company and its
subsidiaries, taken as a whole.
"Purchase Agreement" means that certain Purchase Agreement, dated July
4, 2000, as amended on September 2, 2000, among the Purchaser, the Company and
Spatial Components, LLC, a Delaware limited liability company.
"Shares" means the shares of Common Stock to be issued and sold by the
Company and purchased by the Purchaser at the Closing.
"Trading Day" shall mean a Business Day on which at least 10,000 shares
of Common Stock are traded on the principal United States securities exchange or
trading market on which such shares of Common Stock are listed or traded.
2. PURCHASE AND SALE OF SHARES AND WARRANTS.
a. Generally. Except as otherwise provided in this Section 2 and
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, the Purchaser shall purchase the number of Shares
determined as provided in this Section 2, and the Company shall issue and sell
such number of Shares to the Purchaser for the Investment Amount as provided
below.
b. Number of Shares Purchased; Form of Payment; Closing Date.
i. On the Closing Date (as defined below), the Company shall
sell and the Purchaser shall buy 555,556 Shares for an aggregate purchase price
equal to the Investment Amount (or approximately $3.60 per share).
ii. On the Closing Date, the Purchaser shall pay the
Investment Amount by wire transfer to the Company, in accordance with the
Company's written wiring instructions against delivery of certificates
representing the Shares being purchased by the Purchaser, and the Company shall
deliver such Shares against delivery of the Investment Amount.
iii. Subject to the satisfaction (or waiver) of the conditions
set forth in Section 6 and Section 7 below, the date and time of the sale of the
Shares pursuant to this Agreement (the "Closing") shall be the date and time of
the closing to be held pursuant to Section 1.05 of the Purchase Agreement or
such other date or time as the parties may mutually agree ("Closing Date"). The
Closing shall occur at the offices of Hogan & Hartson L.L.P., 1800 Broadway,
Suite 200, Boulder, CO 80302, or at such other place as the parties may
otherwise agree.
3. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The Purchaser represents and warrants to the Company as follows:
a. Purchase for Own Account. The Purchaser is purchasing the Shares for
the Purchaser's own account and not with a present view towards the distribution
thereof. The
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Purchaser understands and acknowledges that the Purchaser must bear the economic
risk of this investment indefinitely, unless the Shares are registered pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present intention of
registering any such Shares other than as contemplated by Section 5(k).
Notwithstanding anything in this Section 3(a) to the contrary, by making the
foregoing representation, the Purchaser does not agree to hold the Shares for
any minimum or other specific term and reserves the right to dispose of the
Shares at any time in accordance with or pursuant to a registration statement or
an exemption from registration under the Securities Act and any applicable state
securities or blue sky laws.
b. Information. The Purchaser has been furnished all materials relating
to the business, finances and operations of the Company and its subsidiaries and
materials relating to the offer and sale of the Shares which have been requested
by the Purchaser. The Purchaser has been afforded the opportunity to ask
questions of the Company and has received satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by the Purchaser or its counsel or any of its representatives shall
modify, amend or affect the Purchaser's right to rely on the Company's
representations and warranties contained in Section 4 below.
c. Governmental Review. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares.
d. Authorization; Enforcement. The Purchaser has the requisite power
and authority to enter into and perform its obligations under this Agreement and
to purchase the Shares in accordance with the terms hereof. This Agreement has
been duly and validly authorized, executed and delivered on behalf of the
Purchaser and is a valid and binding agreement of the Purchaser enforceable
against the Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
e. Transfer or Resale. The Purchaser understands that (i) except as
provided in Section 5(k), the Shares have not been and are not being registered
under the Securities Act or any state securities laws, and may not be
transferred unless (a) subsequently registered thereunder, (b) the Purchaser
shall have delivered to the Company an opinion of counsel reasonably acceptable
to the Company (which opinion shall be in form, substance and scope customary
for opinions of counsel in comparable transactions) to the effect that the
Shares to be sold or transferred may be sold or transferred under an exemption
from such registration, or (c) sold under Rule 144 promulgated under the
Securities Act (or a successor rule); and (ii) neither the Company nor any other
person is under any obligation to register such Shares under the Securities Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder, in each case, other than pursuant to the registration
rights in Section 5(k). Notwithstanding the foregoing, no such registration
statement or opinion of
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counsel shall be necessary for a transfer by the Purchaser to its stockholders
in accordance with their interest in the corporation.
f. Legends. The Purchaser understands that the Shares and, until such
time as the Shares have been registered under the Securities Act as contemplated
by the registration rights in Section 5(k) or otherwise may be sold by the
Purchaser under Rule 144, the certificates for the Shares will bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state of the United States. The
securities represented hereby may not be offered or sold in
the absence of an effective registration statement for the
securities under applicable securities laws unless offered,
sold or transferred under an available exemption from the
registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Shares upon which it is
stamped, if, (a) the sale of any such Shares is registered under the Securities
Act, (b) such holder provides the Company with an opinion of counsel, in form
and substance customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of any such Shares may be made without
registration under the Securities Act or (c) such holder provides the Company
with reasonable assurances that any such Shares can be sold under Rule 144. The
Purchaser agrees to sell all Shares, including those represented by a
certificate(s) from which the legend has been removed, pursuant to an effective
registration statement or under an exemption from the registration requirements
of the Securities Act. The legend shall be removed when such Shares may be sold
pursuant to an effective registration statement or sold under Rule 144(k).
g. Accredited Investor Status. The Purchaser is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D ("Regulation
D") promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act. The Purchaser is not registered as a broker or
dealer under Section 15(a) of the Securities Exchange Act of 1934, as amended,
or a member of the National Association of Securities Dealers.
h. Company Reliance. The Purchaser understands that the Shares are
being offered and sold to it in reliance on an exemption from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments,
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Shares.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser as follows:
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a. Organization and Qualification. The Company is a corporation, and
each of its subsidiaries is an entity, duly organized and existing under the
laws of the jurisdiction in which it is organized, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign entity to do business and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. The SEC Documents (as hereinafter defined) set forth the name of each of
the Company's subsidiaries and its jurisdiction of organization. Each of the
Company's subsidiaries are wholly-owned.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to issue and sell the Shares in accordance with the terms
hereof; (ii) the execution, delivery and performance of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby
(including, without limitation, the issuance and sale of the Shares) have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required; (iii) this Agreement has been duly executed and delivered by the
Company; and (iv) this Agreement constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
c. Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 25,000,000 shares, consisting of two classes:
22,500,000 shares of Common Stock and 2,500,000 shares of preferred stock, par
value $.01 per Share (the "Preferred Stock"). According to a certificate from
the Company's transfer agent dated _____________, 2000, an aggregate of
__________ shares of the Company's Common Stock were issued and outstanding as
of the date of such transfer agent certificate. No shares of the Company's
Preferred Stock are outstanding as of the date hereof. As of the date hereof,
there is an aggregate of ___________ shares of the Company's Common Stock
reserved for issuance under the Company's stock option plans and employee stock
purchase plan. All of such outstanding shares of the Company's capital stock
have been, or upon issuance will be, validly issued, fully paid and
nonassessable. Except as set forth in this Section 4(c) or on the disclosure
schedule (the "Schedule") referencing this Section 4(c), no shares of capital
stock of the Company (including the Shares) or any of its subsidiaries are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances created or incurred by the Company.
Except for the Shares and as disclosed in this Section 4(c) or Schedule 4(c), as
of the date of this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or such subsidiaries, and (ii) there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register the sale
of any of its or their securities under the Securities Act (except as
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provided in Section 1.04(d) and 1.09 of the Purchase Agreement and the
Registration Rights Agreement, dated February 18, 2000 (the "Registration Rights
Agreement"), among the Company, the Purchaser and the other investors identified
therein). Except as set forth on Schedule 4(c), there are no securities or
instruments containing price-based antidilution or similar provisions that may
be triggered by the issuance of the Shares in accordance with the terms of this
Agreement or the Registration Rights Agreement and the holders of the securities
and instruments listed on such Schedule 4(c) have waived any rights they may
have under any such antidilution or similar provisions in connection with the
issuance of the Shares in accordance with the terms of this Agreement or the
Registration Rights Agreement. The Company has made available to the Purchaser
and counsel for the Purchaser true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the
"By-laws") and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company, except for stock options granted under any employee benefit plan or
director stock option plan of the Company.
d. Issuance of Shares. The Shares are duly authorized and when issued
and paid for in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and
encumbrances, and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and sale of the Shares) will not (i) conflict with or result in a
violation of the Certificate of Incorporation or By-laws or (ii) conflict with,
or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which the Company or any of its subsidiaries is a party, or
result in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
AMEX regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws and other organizational documents and neither the
Company nor any of its subsidiaries is in default (and no event has occurred
which, with notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for actual or possible violations,
if any, the sanctions for which either individually or in the aggregate would
not have a Material Adverse Effect. Except as
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specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, approval, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement (including, without limitation, the issuance
and sale of the Shares as provided hereby) in accordance with the terms hereof.
The Company is not in violation of the listing requirements of the AMEX and does
not reasonably anticipate that the Common Stock will be delisted by AMEX in the
foreseeable future based on its rules (and interpretations thereof) as currently
in effect.
f. SEC Documents; Financial Statements. Since January 1998, the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and has filed all registration
statements and other documents required to be filed by it with the SEC pursuant
to the Securities Act (all of the foregoing filed prior to the date hereof, and
all exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has made available to the Purchaser
and to counsel for the Purchaser true and complete copies of the SEC Documents
not filed on EDGAR and reasonably requested by Purchaser, except for the
exhibits and schedules thereto and the documents incorporated therein by
reference. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any statements made in
any such SEC Documents that are or were required to be updated or amended under
applicable law have been so updated or amended. As of their respective dates,
the financial statements of the Company included in the SEC Documents complied
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC applicable with respect thereto. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its subsidiaries as of the dates thereof
and the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring year-end
audit adjustments). Except as set forth in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to the date of such SEC Documents and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in such SEC Documents, which liabilities and obligations referred
to in clauses (i) and (ii) of this sentence would not individually or in the
aggregate, have a Material Adverse Effect.
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g. Absence of Certain Changes. Except as disclosed in the SEC
Documents, since March 31, 2000, there has been no change or development which
individually or in the aggregate has had or could have a Material Adverse
Effect.
h. Absence of Litigation. Except as disclosed in the SEC Documents and
set forth on Schedule 4(h), there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, or to the knowledge of the
Company, threatened against or affecting the Company, or any of its
subsidiaries, or any of their directors or officers in their capacities as such,
except as would not have a Material Adverse Effect.
i. Intellectual Property. The Company and each of its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted and as proposed
to be conducted. Neither the Company nor any of its subsidiaries is infringing
or in conflict with any other person with respect to any Intangibles. Neither
the Company nor any of its subsidiaries has received written notice that it is
infringing upon third party Intangibles. Neither the Company nor any of its
subsidiaries has entered into any consent, indemnification, forbearance to sue
or settlement agreements with respect to the validity of the Company's or such
subsidiary's ownership or right to use its Intangibles and, to the knowledge of
the Company, there is no basis for any such claim to be successful. The
Intangibles are valid and enforceable, and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are pending and
in good standing. The Company has complied, in all material respects, with its
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. To the Company's knowledge, no person is infringing on or
violating the Intangibles owned or used by the Company.
j. Agreements. Except for the transactions contemplated by the Purchase
Agreement and except as filed as Exhibits to the SEC Documents or as set forth
in Schedule 4(j), there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any of its subsidiaries is a party or by which it is bound that
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $250,000 (other than licenses pursuant to license
agreements entered into in the ordinary course of the Company's business) or
(ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses pursuant to license agreements
entered into in the ordinary course of the Company's business), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's or its subsidiaries' products or services, or (iv)
indemnification by the Company or any subsidiary with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase or sale agreements entered into in the ordinary course of business) or
(v) transactions between the Company and any of the Company's or its
subsidiaries' officers, directors, affiliates, or any affiliates thereof (other
than pursuant to employment
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agreements or stock or benefit plans), or (vi) employment of the Company's
officers or (vii) incurrence of any indebtedness for money borrowed or any other
liabilities (other than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course of business
or as disclosed in the SEC Documents) individually in excess of $250,000 or, in
the case of indebtedness and/or liabilities individually less than $250,000, in
excess of $500,000 in the aggregate, or (viii) the making of any loans or
advances to any person, other than ordinary advances for travel expenses, or
(ix) the sale, exchange or other disposition of any of its assets or rights,
other than licenses in the ordinary course of business.
k. Foreign Corrupt Practices. Neither the Company, its subsidiaries, or
any director, officer, agent, employee or other person acting on behalf of the
Company or any of its subsidiaries has, in the course of such person's actions
for, or on behalf of, the Company, or any of its subsidiaries, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
l. Environment. Except as disclosed in the SEC Documents (i) there is
no environmental liability, nor, to the knowledge of the Company, factors likely
to give rise to any environmental liability, affecting any of the properties of
the Company or any of its subsidiaries that, individually or in the aggregate,
would have a Material Adverse Effect and (ii) neither the Company nor any of the
subsidiaries has violated any environmental law applicable to it now or
previously in effect, other than such violations or infringements that,
individually or in the aggregate, have not had and will not have a Material
Adverse Effect.
m. Title. The Company does not own any real property. Any real property
and facilities held under lease by the Company or any of its subsidiaries are
held by the Company or such subsidiary under valid, subsisting and enforceable
leases with such exceptions which have not had and will not have a Material
Adverse Effect.
n. Insurance. The Company and its subsidiaries maintain such insurance
relating to their business, operations, assets, key-employees and officers and
directors as is appropriate to their business, assets and operations, in such
amounts and against such risks as are customarily carried and insured against by
owners of comparable businesses, assets and operations, and such insurance
coverages will be continued in full force and effect to and including the
Closing Date other than those insurance coverages in respect of which the
failure to continue in full force and effect could not reasonably be expected to
have a Material Adverse Effect.
o. Disclosure. All information relating to or concerning the Company
and its subsidiaries set forth in this Agreement or provided to the Purchaser in
writing in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
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information contained within any of the foregoing related to future events, or
the projected future financial performance of the Company, including any
financial projections, or descriptions of potential strategic or business
relationships between the Company and third parties.
p. No Brokers. Except for Roth Capital Partners, Inc., the Company has
not engaged any person to which or to whom brokerage commissions, finder's fees,
financial advisory fees or similar payments are or will become due in connection
with this Agreement or the transactions contemplated hereby.
q. Tax Status. The Company and each of its subsidiaries has made or
filed all federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and has paid
all taxes and other governmental assessments and charges, shown or determined to
be due on such returns, reports and declarations, except those being contested
in good faith, and has set aside on its books provisions adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes claimed to be
due by the taxing authority of any jurisdiction. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any federal, state or local tax. Except as set forth in Schedule
4(q), none of the Company's tax returns has been or is being audited by any
taxing authority.
r. No General Solicitation. Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated hereby
has conducted any "general solicitation" or "general advertising" as such terms
are used in Regulation D, with respect to any of the Shares being offered
hereby.
s. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Shares being offered hereby under the Securities Act or cause this offering of
Shares to be integrated with any prior offering of securities of the Company for
purposes of the Securities Act or any applicable stockholder approval
provisions, including, without limitation, the applicable AMEX regulations.
t. Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. Except as set forth on Schedule 4(t), to the knowledge of the
Company, there exist no facts or circumstances (including without limitation any
required approvals or waivers of any circumstances that may delay or prevent the
obtaining of accountant's consents) that would prohibit or delay the preparation
and filing of a resale registration statement on Form S-3 with respect to the
shares of Common Stock being purchased by the Purchaser hereunder.
u. Real Property Holding Corporation. Neither the Company nor any
subsidiary of the Company is a real property holding corporation within the
meaning of Section 897(c)(2) of the Code and any regulations promulgated
thereunder.
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v. ERISA. The Company has complied in all material respects with the
applicable rules and regulations of the Employee Retirement Income Security Act
of 1974, as amended, with respect to any employee benefit plans subject thereto.
5. COVENANTS.
a. Best Efforts. Each of the Company and the Purchaser shall use its
best efforts timely to satisfy each of the conditions set forth in Section 6 and
Section 7 of this Agreement.
b. Blue Sky Laws. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary to
qualify the Shares for sale to the Purchaser pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Purchaser and counsel for the Purchaser as soon as practicable
after such filing.
c. Reporting Status. So long as the Purchaser beneficially owns any
Shares, the Company shall timely file all reports required to be filed with the
SEC pursuant to the Exchange Act, and shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company shall use the net proceeds from the
sale of the Shares in order to fund the Company's sales and marketing activities
for working capital and for other general corporate purposes, including
potential strategic acquisitions, but in no event shall the Company use such net
proceeds to repurchase any outstanding securities of the Company or for any
other distribution with respect to outstanding securities of the Company.
e. Listing. Promptly after the Closing Date, the Company shall secure
the listing of the Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed or
quoted (subject to official notice of issuance). The Company will use its best
efforts to continue the listing and trading of its Common Stock on AMEX (or, if
listing is moved, the New York Stock Exchange ("NYSE") or the Nasdaq National
Market ("NASDAQ")), and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of AMEX, NYSE
or NASDAQ, as the case may be.
f. Corporate Existence. So long as the Purchaser beneficially owns any
Shares, the Company shall maintain its corporate existence, except in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, as long as the surviving or successor entity in such transaction assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith.
g. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, shall, directly or
indirectly, make any offers or sales of any security or solicit any offers to
buy any security under circumstances that would require registration of the
Shares being offered hereby under the Securities Act or cause this offering of
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Shares to be integrated with any prior or future offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, the applicable regulations
of AMEX, NYSE or NASDAQ, as the case may be.
h. Restrictions on Purchase. The Purchaser agrees not to purchase any
shares of the Company's Common Stock in the open market or in privately
negotiated transactions from non-affiliates for a period of one year from the
Closing Date, without the prior approval of the Board of Directors of the
Company.
i. Indemnification by the Company. The Company shall indemnify, defend
and hold the Purchaser, and its affiliates, officers, directors, stockholders,
employees and agents, harmless with respect to any and all demands, claims,
actions, suits, proceedings, assessments, judgments, costs, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees) ("Losses") asserted against, resulting from, imposed upon or incurred by
any such indemnified party directly relating to or arising out of: (a) the
inaccuracy of any representation or warranty of the Company contained herein or
in any instrument or certificate delivered pursuant to this Agreement, and (b)
the breach of any covenant or agreement by the Company.
j. Indemnification by the Purchaser. The Purchaser shall indemnify,
defend and hold the Company, and its affiliates, officers, directors,
stockholders, employees and agents, harmless with respect to any and all Losses
asserted against, resulting from, imposed upon or incurred by any such
indemnified party directly relating to or arising out of: (a) the inaccuracy of
any representation or warranty of the Purchaser contained herein or in any
instrument or certificate delivered pursuant to this Agreement, and (b) the
breach of any covenant or agreement by the Purchaser.
k. Registration Rights. The Purchaser will have registration rights in
respect of the shares of Common Stock purchased hereunder as provided in Section
1.04(d) and 1.09 of the Purchase Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Shares to the
Purchaser at the Closing hereunder is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions thereto; provided,
however, that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
a. The Purchaser shall have executed this Agreement and delivered the
same to the Company.
b. The Purchaser shall have delivered the Investment Amount in
accordance with Section 2(b) above.
c. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the Purchaser shall
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have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE
SHARES.
The obligation of the Purchaser hereunder to purchase Shares to be
purchased by it hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed this Agreement and delivered the
same to the Purchaser.
b. The Company shall have instructed its transfer agent to issue to the
Purchaser duly executed certificates representing the number of Shares.
c. Trading in the Common Stock (or on AMEX generally) shall not have
been suspended or be under threat of suspension by the SEC or AMEX.
d. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Purchaser shall have received a
certificate, executed on behalf of the Company by its Vice President,
Administration and Corporate Controller, dated as of the Closing Date, to the
foregoing effect and attaching true and correct copies of the resolutions
adopted by the Company's Board of Directors authorizing the execution, delivery
and performance by the Company of its obligations under this Agreement.
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.
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f. The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form and substance acceptable to
counsel for the Purchaser.
g. From the date of this Agreement through the Closing Date, there
shall not have occurred any Material Adverse Effect.
h. The Company shall have provided advance notice to AMEX of the
issuance of the Shares and provided the Purchaser with oral or written evidence
of the Company's compliance with all applicable rules of AMEX.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments; Waiver. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the Company and by the Purchaser. Any waiver
by the Purchaser, on the one hand, or the Company, on the other hand, of a
breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of such provision of or any breach of any
other provision of this Agreement. The failure of the Purchaser, on the one
hand, or the Company, on the other hand to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
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<PAGE> 156
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Spatial Technology Inc.
2425 55th Street, Ste. 100
Boulder, CO 80301
Telephone No.: 303-544-2900
Facsimile No.: 303-544-3005
Attention: Chief Executive Officer
With a copy to:
Hogan & Hartson L.L.P.
1200 Seventeenth Street, Suite 1500
Denver, CO 80302
Telephone No.: 303-899-7300
Facsimile No.: 303-899-7333
Attention: Whitney Holmes, Esq.
If to the Purchaser
Dassault Systemes
9 Quai Marcel Dassault
BP310
2150 Suresnes Cedex
France
Telephone No.: 33.1.40.99.40.99
Facsimile No.: 33.1.42.0445.81
Attention: Thibault de Tersant
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone No.: 212-848-4000
Facsimile No.: 212-848-7179
Attention: Alfred Ross, Jr., Esq.
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Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by any other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 4, 5 and 8 shall survive the
Closing notwithstanding any due diligence investigation conducted by or on
behalf of the Purchaser. Moreover, none of the representations and warranties
made by the Company herein shall act as a waiver of any rights or remedies the
Purchaser may have under applicable federal or state securities laws. The
Company agrees to indemnify and hold harmless the Purchaser and each of the
Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage relating to the Securities purchased hereunder
arising as a result of or related to any breach by the Company of any of its
representations or covenants set forth herein, including advancement of expenses
as they are incurred.
j. Publicity. The Company and the Purchaser shall have the right to
review and comment upon the issuance of any press releases, or the filing of any
SEC or AMEX filings, or any other public statements with respect to the
transactions contemplated hereby. The Purchaser shall be provided documents to
review at least 48 hours prior to the filing or other issuance thereof except
that draft press releases shall be provided to the Purchaser at least 24 hours
prior to issuance. Within the time period required by the SEC, the Company shall
file a Current Report on Form 8-K or other appropriate form with the SEC
disclosing the transactions contemplated hereby, if required in the judgment of
counsel to the Company.
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing Date shall not have
occurred on or before November 20, 2000, unless the parties agree otherwise,
this Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
m. Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that
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the remedy at law for a breach of its obligations hereunder will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement, that the Purchaser shall be entitled, in addition
to all other available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Securities Purchase Agreement to be duly executed as of the date
first above written.
SPATIAL TECHNOLOGY INC.:
By:
---------------------------
Name:
Title:
DASSAULT SYSTEMES CORP.:
By:
---------------------------
Name:
Title:
<PAGE> 160
APPENDIX D
SPATIAL TECHNOLOGY INC
AUDIT COMMITTEE CHARTER
ADOPTED: JUNE 12, 2000
ORGANIZATION
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
STATEMENT OF POLICY
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the stockholders, potential stockholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial management of the
corporation.
RESPONSIBILITIES
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and stockholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
o Review with the independent auditors, the company's internal auditor, and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the corporation, and elicit any
recommendations for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper. Further, the committee
periodically should review company policy statements to determine their
adherence to the code of conduct.
<PAGE> 161
SPATIAL TECHNOLOGY INC.
AUDIT COMMITTEE CHARTER
JUNE 2000
PAGE 2 OF 2
o Review the internal audit function of the corporation including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year. and the coordination of such plans with the
independent auditors.
o Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
o Review the financial statements contained in the annual report to
stockholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the stockholders. Any changes
in accounting principles should be reviewed.
o Provide sufficient opportunity for the internal and independent auditors to
meet with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
o Review accounting and financial human resources and succession planning
within the company.
o Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
<PAGE> 162
Appendix E
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SPATIAL TECHNOLOGY INC.
2000 STOCK INCENTIVE PLAN
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<PAGE> 163
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
1. PURPOSE........................................................................................1
2. DEFINITIONS....................................................................................1
3. ADMINISTRATION OF THE PLAN.....................................................................6
3.1. Board.................................................................................6
3.2. Committee.............................................................................6
3.3. Terms of Awards.......................................................................6
3.4. No Liability..........................................................................7
4. STOCK SUBJECT TO THE PLAN......................................................................8
5. EFFECTIVE DATE AND TERM OF THE PLAN............................................................8
5.1. Effective Date........................................................................8
5.2. Term..................................................................................8
6. AWARD ELIGIBILITY..............................................................................8
6.1. Company or Subsidiary Employees; Service Providers; Other Persons.....................8
6.2. Successive Awards.....................................................................9
7. LIMITATIONS ON GRANTS..........................................................................9
7.1. Limitation on Shares of Stock Subject to Awards and Cash Awards.......................9
7.2. Limitations on Incentive Stock Options................................................9
8. AWARD AGREEMENT................................................................................9
9. OPTION PRICE...................................................................................10
10. VESTING, TERM AND EXERCISE OF OPTIONS..........................................................10
10.1. Vesting...............................................................................10
10.2. Term..................................................................................10
10.3. Acceleration..........................................................................11
10.4. Termination of Service................................................................11
10.5. Limitations on Exercise of Option.....................................................11
10.6. Method of Exercise....................................................................11
10.7. Form of Payment.......................................................................11
10.8. Rights of Holders of Options..........................................................12
10.9. Delivery of Stock Certificates........................................................12
10.10. Reload Options........................................................................12
11. TRANSFERABILITY OF OPTIONS.....................................................................13
11.1. Transferability of Options............................................................13
11.2. Family Transfers......................................................................13
12. STOCK APPRECIATION RIGHTS......................................................................13
12.1. Right to Payment......................................................................13
12.2. Other Terms...........................................................................13
13. RESTRICTED STOCK...............................................................................14
13.1. Grant of Restricted Stock or Restricted Stock Units...................................14
13.2. Restrictions..........................................................................14
13.3. Restricted Stock Certificates.........................................................14
13.4. Rights of Holders of Restricted Stock.................................................15
13.5. Rights of Holders of Restricted Stock Units...........................................15
13.6. Termination of Service................................................................15
13.7. Delivery of Stock and Payment Therefor................................................15
14. DEFERRED STOCK AWARDS..........................................................................16
14.1. Nature of Deferred Stock Awards.......................................................16
14.2. Election to Receive Deferred Stock Awards in Lieu of Compensation.....................16
14.3. Rights as a Stockholder...............................................................16
14.4. Restrictions on Transfer..............................................................16
14.5. Termination...........................................................................16
</TABLE>
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<TABLE>
<S> <C>
15. UNRESTRICTED STOCK AWARDS......................................................................17
16. PERFORMANCE STOCK AWARDS.......................................................................17
16.1. Nature of Performance Stock Awards....................................................17
16.2. Rights as a Stockholder...............................................................17
16.3. Termination of Service................................................................17
17. DIVIDEND EQUIVALENT RIGHTS.....................................................................18
17.1. Dividend Equivalent Rights............................................................18
17.2. Interest Equivalents..................................................................18
17.3. Termination of Service................................................................18
18. CERTAIN PROVISIONS APPLICABLE TO AWARDS........................................................19
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards................................19
18.2. Form and Timing of Payment Under Awards; Deferrals....................................19
18.3. Performance and Annual Incentive Awards...............................................20
18.3.1. Performance Conditions........................................................20
18.3.2. Performance or Annual Incentive Awards Granted to Designated Covered
Employees.....................................................................20
18.3.3. Written Determinations........................................................22
18.3.4. Status of Section 18.3.2 Awards Under Code Section 162(m)..................22
19. PARACHUTE LIMITATIONS..........................................................................22
20. REQUIREMENTS OF LAW............................................................................23
20.1. General...............................................................................23
20.2. Rule 16b-3............................................................................24
20.3. Limitation Following a Hardship Distribution..........................................24
21. AMENDMENT AND TERMINATION OF THE PLAN..........................................................24
22. EFFECT OF CHANGES IN CAPITALIZATION............................................................25
22.1. Changes in Stock......................................................................25
22.2. Reorganization in Which the Company Is the Surviving Entity and in Which No Change
in Control Occurs.....................................................................25
22.3. Reorganization, Sale of Assets or Sale of Stock Which Involves a Change in Control....26
22.4. Adjustments...........................................................................26
22.5. No Limitations on Company.............................................................26
23. POOLING........................................................................................27
24. DISCLAIMER OF RIGHTS...........................................................................27
25. NONEXCLUSIVITY OF THE PLAN.....................................................................27
26. WITHHOLDING TAXES..............................................................................28
27. CAPTIONS.......................................................................................28
28. OTHER PROVISIONS...............................................................................28
29. NUMBER AND GENDER..............................................................................28
30. SEVERABILITY...................................................................................29
31. GOVERNING LAW..................................................................................29
</TABLE>
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SPATIAL TECHNOLOGY INC.
2000 STOCK INCENTIVE PLAN
Spatial Technology Inc., a Delaware corporation (the "Company"), sets
forth herein the terms of the Company's 2000 Stock Incentive Plan (the "Plan").
PURPOSE
The purpose of the Plan is to enhance the Company's ability to attract,
retain, and compensate highly qualified officers, key employees, and other
persons, and to motivate such officers, key employees, and other persons to
serve the Company and its Affiliates (as defined herein) and to expend maximum
effort to improve the business results and earnings of the Company, by providing
to such officers, key employees and other persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company and with other financial incentives. To this end, the Plan provides
for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, deferred stock awards, unrestricted stock awards,
performance stock awards, dividend equivalent rights, performance awards and
annual incentive awards in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein.
DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "AFFILIATE" means, with respect to the Company, any company or
other trade or business that controls, is controlled by or is under common
control with the Company within the meaning of Rule 405 of Regulation C under
the Securities Act, including, without limitation, any Subsidiary.
2.2 "ANNUAL INCENTIVE AWARD" means a conditional right granted to a
Grantee under Section 18.3.2 hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
2.3 "AWARD" means a grant of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Deferred Stock, Unrestricted Stock,
Performance Stock, Dividend Equivalent Rights, Performance or Annual Incentive
Awards under the Plan.
<PAGE> 166
2.4 "AWARD AGREEMENT" means the written agreement between the Company
and a Grantee that evidences and sets out the terms and conditions of an Award.
2.5 "BENEFIT ARRANGEMENT" shall have the meaning set forth in Section
19 hereof.
2.6 "BOARD" means the Board of Directors of the Company.
2.7 "CAUSE" means, as determined by the Board and unless otherwise
provided in an applicable employment agreement with the Company or an Affiliate,
(i) gross negligence or willful misconduct in connection with the performance of
duties; (ii) conviction of a criminal offense (other than minor traffic
offenses); or (iii) material breach of any term of any employment, consulting or
other services, confidentiality, intellectual property or non-competition
agreements, if any, between the Service Provider or employee and the Company or
an Affiliate.
2.8 "CHANGE IN CONTROL" means a merger, consolidation, or
reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, a sale of substantially all of the assets
of the Company to another entity, or any transaction (including, without
limitation, a merger or reorganization in which the Company is the surviving
entity) approved by the Board that results in any person or entity (or person or
entities acting as a group or otherwise in concert), owning fifty percent (50%)
or more of the combined voting power of all classes of securities of the
Company).
2.9 "CODE" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.10 "COMMITTEE" means a committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any Affiliate.
2.11 "COMPANY" means Spatial Technology Inc.
2.12 "COVERED EMPLOYEE" means a Grantee who is a Covered Employee
within the meaning of Section 162(m)(3) of the Code.
2.13 "DEFERRED STOCK" means a right, granted to a Grantee under Section
14 hereof, to receive Stock, cash or a combination thereof at the end of a
specified deferral period.
2.7 "DISABILITY" means the Grantee is unable to perform each
of the essential duties of such Grantee's position by reason of a
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medically determinable physical or mental impairment which is
potentially permanent in character or which can be expected to last for
a continuous period of not less than 12 months; provided, however,
that, with respect to rules regarding expiration of an Incentive Stock
Option following termination of the Grantee's Service, Disability shall
mean the Grantee is unable to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months.
2.14 "DIVIDEND EQUIVALENT" means a right, granted to a Grantee under
Section 17 hereof, to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
2.15 "EFFECTIVE DATE" means ______ __, 2000.
2.16 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
2.17 "FAIR MARKET VALUE" means the value of a share of Stock,
determined as follows: if on the Grant Date or other determination date the
Stock is listed on an established national or regional stock exchange, is
admitted to quotation on The Nasdaq Stock Market, or is publicly traded on an
established securities market, the Fair Market Value of a share of Stock shall
be the closing price of the Stock on such exchange or in such market (if there
is more than one such exchange or market the Board shall determine the
appropriate exchange or market) on the last market trading date prior to the
Grant Date or such other determination date (or if there is no such reported
closing price, the Fair Market Value shall be the mean between the highest bid
and lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the Stock is not
listed on such an exchange, quoted on such system or traded on such a market,
Fair Market Value shall be the value of the Stock as determined by the Board in
good faith.
2.18 "FAMILY MEMBER" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, of the Grantee, any person
sharing the Grantee's household (other than a tenant or employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Grantee) control the management of
assets, and any other
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entity in which these persons (or the Grantee) own more than fifty percent of
the voting interests.
2.19 "GRANT DATE" means, as determined by the Board or authorized
Committee, the latest to occur of (i) the date as of which the Board approves an
Award, (ii) the date on which the recipient of an Award first becomes eligible
to receive an Award under Section 6 hereof, or (iii) such other date as may be
specified by the Board.
2.20 "GRANTEE" means a person who receives or holds an Award under the
Plan.
2.21 "INCENTIVE STOCK OPTION" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.22 "NON-QUALIFIED STOCK OPTION" means an Option that is not an
Incentive Stock Option.
2.23 "OPTION" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.24 "OPTION PRICE" means the purchase price for each share of Stock
subject to an Option.
2.25 "OTHER AGREEMENT" shall have the meaning set forth in Section 19
hereof.
2.26 "OUTSIDE DIRECTOR" means a member of the Board who is not an
officer or employee of the Company.
2.27 "PERFORMANCE AWARD" means a conditional right granted to a Grantee
under Section 18.3 hereof to receive a cash payment, Stock or other Award,
unless otherwise determined by the Committee, after the end of a period of up to
10 years.
2.28 "PERFORMANCE STOCK AWARD" means Awards granted pursuant to Section
16.
2.29 "PLAN" means this Spatial Technology Inc. 2000 Stock Incentive
Plan.
2.30 "REPORTING PERSON" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
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2.31 "RESTRICTED PERIOD" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.32 "RESTRICTED STOCK" means shares of Stock, awarded to a Grantee
pursuant to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.33 "RESTRICTED STOCK UNIT" means a unit awarded to a Grantee pursuant
to Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.34 "SECURITIES ACT" means the Securities Act of 1933, as now in
effect or as hereafter amended.
2.35 "SERVICE" means service as an employee, officer, director or other
Service Provider of the Company or an Affiliate. Unless otherwise stated in the
applicable Award Agreement, a Grantee's change in position or duties shall not
result in interrupted or terminated Service, so long as such Grantee continues
to be an employee, officer, director or other Service Provider of the Company or
an Affiliate. Subject to the preceding sentence, whether a termination of
Service shall have occurred for purposes of the Plan shall be determined by the
Board, which determination shall be final, binding and conclusive.
2.36 "SERVICE PROVIDER" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or Affiliate, and employees of any of the foregoing, as such persons
may be designated from time to time by the Board pursuant to Section 6 hereof.
2.37 "STOCK" means the common stock, par value [$.001] per share, of
the Company.
2.38 "STOCK APPRECIATION RIGHT" or "SAR" means a right granted to a
Grantee under Section 12 hereof.
2.39 "SUBSIDIARY" means any "subsidiary corporation" of the Company
within the meaning of Section 424(f) of the Code.
2.40 "TERMINATION DATE" means the date upon which an Option shall
terminate or expire, as set forth in Section 10.2 hereof.
2.41 "UNRESTRICTED STOCK AWARD" means an Award granted pursuant to
Section 15 hereof.
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ADMINISTRATION OF THE PLAN
BOARD.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's [CERTIFICATE]/
ARTICLES of incorporation and by-laws and applicable law. The Board shall have
full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Award or any Award Agreement, and
shall have full power and authority to take all such other actions and make all
such other determinations not inconsistent with the specific terms and
provisions of the Plan that the Board deems to be necessary or appropriate to
the administration of the Plan, any Award or any Award Agreement. All such
actions and determinations shall be by the affirmative vote of a majority of the
members of the Board present at a meeting or by unanimous consent of the Board
executed in writing in accordance with the Company's [CERTIFICATE]/ARTICLES of
incorporation and by-laws and applicable law. The interpretation and
construction by the Board of any provision of the Plan, any Award or any Award
Agreement shall be final and conclusive. To the extent permitted by law, the
Board may delegate its authority under the Plan to a member of the Board or to
an executive officer of the Company who is a member of the Board.
COMMITTEE.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in SECTION 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the [CERTIFICATE]/ARTICLES of incorporation and
by-laws of the Company and applicable law. In the event that the Plan, any Award
or any Award Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken or
such determination may be made by the Committee if the power and authority to do
so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. To the
extent permitted by law, the Committee may delegate its authority under the Plan
to a member of the Board or an executive officer of the Company who is a member
of the Board.
TERMS OF AWARDS.
Subject to the other terms and conditions of the Plan, the Board shall
have full and final authority:
(i) to designate Grantees,
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(ii) to determine the type or types of Awards to be made to a Grantee,
(iii) to determine the number of shares of Stock to be subject to an
Award,
(iv) to establish the terms and conditions of each Award (including,
but not limited to, the exercise price of any Option, the nature and duration of
any restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock
subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing an Award,
(vi) to amend, modify, or supplement the terms of any outstanding
Award, and
(vii) in order to effectuate the purposes of the Plan but without
amending the Plan, to modify Awards to eligible individuals who are foreign
nationals or are individuals who are employed outside the United States to
recognize differences in local law, tax policy, or custom.
As a condition to any subsequent Award, the Board shall have the right,
at its discretion, to require Grantees to return to the Company Awards
previously made under the Plan. Subject to the terms and conditions of the Plan,
any such new Award shall be upon such terms and conditions as are specified by
the Board at the time the new Award is made. The Board shall have the right, in
its discretion, to make Awards in substitution or exchange for any other award
under another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate. The Company may retain the right in an
Award Agreement to cause a forfeiture of the gain realized by a Grantee on
account of actions taken by the Grantee in violation or breach of or in conflict
with any non-competition agreement, any agreement prohibiting solicitation of
employees or clients of the Company or any Affiliate thereof or any
confidentiality obligation with respect to the Company or any Affiliate thereof
or otherwise in competition with the Company or any Affiliate thereof, to the
extent specified in such Award Agreement applicable to the Grantee. Furthermore,
the Company may annul an Award if the Grantee is an employee of the Company or
an Affiliate thereof and is terminated for Cause as defined in the applicable
Award Agreement or the Plan, as applicable.
NO LIABILITY.
No member of the Board or of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Award
or Award Agreement.
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STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in SECTION 22 hereof, the number of
shares of Stock available for issuance under the Plan shall be ________. Stock
issued or to be issued under the Plan shall be authorized but unissued shares.
If any shares covered by an Award are not purchased or are forfeited, or if an
Award otherwise terminates without delivery of any Stock subject thereto, then
the number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Award shall, to the extent of any
such forfeiture or termination, again be available for making Awards under the
Plan. If the exercise price of any Option granted under the Plan is satisfied by
tendering shares of Stock to the Company (by either actual delivery or by
attestation), only the number of shares of Stock issued net of the shares of
Stock tendered shall be deemed delivered for purposes of determining the maximum
number of shares of Stock available for delivery under the Plan.
EFFECTIVE DATE AND TERM OF THE PLAN
EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to
approval of the Plan by the Company's stockholders within one year of the
Effective Date. Upon approval of the Plan by the stockholders of the Company as
set forth above, all Awards made under the Plan on or after the Effective Date
shall be fully effective as if the stockholders of the Company had approved the
Plan on the Effective Date. If the stockholders fail to approve the Plan within
one year after the Effective Date, any Awards made hereunder shall be null and
void and of no effect.
TERM.
The Plan shall terminate automatically ten (10) years after its adoption
by the Board and may be terminated on any earlier date as provided in SECTION
21.
AWARD ELIGIBILITY
COMPANY OR SUBSIDIARY EMPLOYEES; SERVICE PROVIDERS; OTHER PERSONS.
Subject to Section 7, Awards may be made under the Plan to: (i) any
employee of, or a Service Provider to, the Company or of any Affiliate,
including any such employee or Service Provider who is an officer or director of
the Company, or of any affiliate, as the Board shall determine and designate
from time to time, and (ii) any Outside Director.
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SUCCESSIVE AWARDS.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
LIMITATIONS ON GRANTS
LIMITATION ON SHARES OF STOCK SUBJECT TO AWARDS AND CASH AWARDS.
During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, the maximum number of shares of
Stock subject to Options that can be awarded under the Plan to any person
eligible for an Award under SECTION 6 hereof is three hundred thirty thousand
(330,000) per year. During any time when the Company has a class of equity
security registered under Section 12 of the Exchange Act, the maximum number of
shares that can be awarded under the Plan, other than pursuant to an Option to
any person eligible for an Award under SECTION 6 hereof is three hundred thirty
thousand (330,000) per year. The preceding limitations in this SECTION 7.1 are
subject to adjustment as provided in SECTION 22 hereof. The maximum amount that
may be earned as an Annual Incentive Award or other cash Award in any fiscal
year by any one Grantee shall be [$__________] and the maximum amount that may
be earned as a Performance Award or other cash Award in respect of a performance
period by any one Grantee shall be [$___________].
LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its Affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
an Award of Options shall specify whether such Options are intended to be
Non-qualified Stock Options or Incentive Stock Options, and in the absence of
such specification such options shall be deemed Non-qualified Stock Options.
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OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated
in the Award Agreement evidencing such Option. The Option Price shall be at
least the aggregate Fair Market Value on the Grant Date of the shares of Stock
subject to the Option; provided, however, that in the event that a Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the Company's outstanding Stock), the Option Price
of an Option granted to such Grantee that is intended to be an Incentive Stock
Option shall be not less than the greater of the par value of a share of Stock
or 110 percent of the Fair Market Value of a share of Stock on the Grant Date.
In no case shall the Option Price of any Option be less than the par value of a
share of Stock.
VESTING, TERM AND EXERCISE OF OPTIONS
VESTING.
Subject to SECTIONS 10.2 AND 22.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this SECTION 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The Board may provide,
for example, in the Award Agreement for (i) accelerated exerciseability of the
Option in the event the Grantee's Service terminates on account of death,
Disability or another event, (ii) expiration of the Option prior to its term in
the event of the termination of the Grantee's Service, (iii) immediate
forfeiture of the Option in the event the Grantee's Service is terminated for
Cause or (iv) unvested Options to be exercised subject to the Company's right of
repurchase with respect to unvested shares of Stock.
TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
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ACCELERATION.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the stockholders
of the Company as provided in SECTION 5.1 hereof.
TERMINATION OF SERVICE.
Each Award Agreement shall set forth the extent to which the Grantee
shall have the right to exercise the Option following termination of the
Grantee's Service. Such provisions shall be determined in the sole discretion of
the Board, need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of Service.
LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any
Option be exercised, in whole or in part, prior to the date the Plan is approved
by the stockholders of the Company as provided herein, or after ten years
following the Grant Date, or after the occurrence of an event referred to in
SECTION 22 hereof which results in termination of the Option.
METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery
to the Company of written notice of exercise on any business day, at the
Company's principal office, addressed to the attention of the Board. Such notice
shall specify the number of shares of Stock with respect to which the Option is
being exercised and shall be accompanied by payment in full of the Option Price
of the shares for which the Option is being exercised.
FORM OF PAYMENT.
Payment of the Option Price for the shares purchased pursuant to the
exercise of an Option shall be made (i) in cash or in cash equivalents
acceptable to the Company; (ii) through the tender to the Company of shares of
Stock, which shares, if acquired from the Company, shall have been held for at
least six months and which shall be valued, for purposes of determining the
extent to which the Option Price has been paid thereby, at their Fair Market
Value on the date of exercise; or (iii) by a combination of the methods
described in (i) and (ii). Unless the Board provides otherwise in the Award
Agreement, payment in full of the Option Price need not accompany the written
notice of exercise provided that the notice of exercise directs that the
certificate or certificates for the shares of Stock for which the Option is
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exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such certificate
or certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. If the Award Agreement so provides, payment
in full of the Option Price for shares purchased pursuant to the exercise of an
Option may be made all or in part with a full recourse promissory note executed
by the Grantee.
RIGHTS OF HOLDERS OF OPTIONS.
Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in SECTION 22 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
RELOAD OPTIONS.
At the discretion of the Board and subject to such restrictions, terms
and conditions as the Board may establish, Options granted under the Plan may
include a "reload" feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with SECTION 10.6
hereof would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Stock (or 110 percent of the Fair
Market Value in cases in which Section 422(b)(6) and 424(d) of the Code apply)
on the date the additional Option is granted and with such other terms as the
Board may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option with an Option term equal to
the remainder of the original Option term unless the Board otherwise determines
in the Option Award Agreement for the original grant.
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TRANSFERABILITY OF OPTIONS
TRANSFERABILITY OF OPTIONS.
Except as provided in SECTION 11.2, during the lifetime of a Grantee,
only the Grantee (or, in the event of legal incapacity or incompetency, the
Grantee's guardian or legal representative) may exercise an Option. Except as
provided in SECTION 11.2, no Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution.
FAMILY TRANSFERS.
If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of an Option which is not an Incentive
Stock Option to any Family Member. For the purpose of this SECTION 11.2, a "not
for value" transfer is a transfer which is (i) a gift, (ii) a transfer under a
domestic relations order in settlement of marital property rights; or (iii) a
transfer to an entity in which more than fifty percent of the voting interests
are owned by Family Members (or the Grantee) in exchange for an interest in that
entity. Following a transfer under this SECTION 11.2, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with
this SECTION 11.2 or by will or the laws of descent and distribution. The events
of termination of Service of SECTION 10.4 hereof shall continue to be applied
with respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods specified
in SECTION 10.4.
STOCK APPRECIATION RIGHTS
The Board is authorized to grant SARs to Grantees on the following
terms and conditions:
RIGHT TO PAYMENT.
A SAR shall confer on the Grantee to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair Market Value of one
share of Stock on the date of exercise over (B) the grant price of the SAR as
determined by the Board. The grant price of an SAR shall not be less than the
Fair Market Value of a share of Stock on the date of grant except as provided in
SECTION 18.1.
OTHER TERMS.
The Board shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which a SAR may be exercised in
whole or in
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part (including based on achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to be or become
exercisable following termination of Service or upon other conditions, the
method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR. SARs may be
either freestanding or in tandem with other Awards.
RESTRICTED STOCK
GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board may from time to time grant Restricted Stock or Restricted
Stock Units to persons eligible to receive Awards under SECTION 6 hereof,
subject to such restrictions, conditions and other terms as the Board may
determine.
RESTRICTIONS.
At the time a grant of Restricted Stock or Restricted Stock Units is
made, the Board shall establish a period of time (the "Restricted Period")
applicable to such Restricted Stock or Restricted Stock Units. Each Award of
Restricted Stock or Restricted Stock Units may be subject to a different
Restricted Period. The Board may, in its sole discretion, at the time a grant of
Restricted Stock or Restricted Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which may be
applicable to all or any portion of the Restricted Stock or Restricted Stock
Units in accordance with SECTION 18.3.1 and 18.3.2. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Stock or Restricted Stock Units.
RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
legend or legends that complies with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
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RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any,
received by a Grantee with respect to Restricted Stock as a result of any stock
split, stock dividend, combination of shares, or other similar transaction shall
be subject to the restrictions applicable to the original Grant.
RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such cash
payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
TERMINATION OF SERVICE.
Unless the Board otherwise provides in an Award Agreement or in writing
after the Award Agreement is issued, upon the termination of a Grantee's
Service, any Restricted Stock or Restricted Stock Units held by such Grantee
that has not vested, or with respect to which all applicable restrictions and
conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Award, including but not limited to any
right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock or Restricted Stock Units.
DELIVERY OF STOCK AND PAYMENT THEREFOR.
The Grantee shall pay any purchase price of the shares of Stock
represented by the Restricted Stock or Restricted Stock Units in cash or by
check promptly following the Grant Date. Upon the expiration or termination of
the Restricted Period, the satisfaction of any other conditions prescribed by
the Board, and provided proper payment was received by the Company as provided
in the preceding sentence, the restrictions applicable to shares of Restricted
Stock or Restricted Stock Units shall lapse, and a stock certificate for such
shares shall be delivered, free of all such restrictions, to the Grantee or the
Grantee's beneficiary or estate, as the case may be.
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DEFERRED STOCK AWARDS
NATURE OF DEFERRED STOCK AWARDS.
A Deferred Stock Award is an Award of phantom stock units to a Grantee,
subject to restrictions and conditions as the Board may determine at the time of
grant. Conditions may be based on continuing Service and/or achievement of
pre-established performance goals and objectives. The terms and conditions of
each such agreement shall be determined by the Board, and such terms and
conditions may differ among individual Awards and Grantees. At the end of the
deferral period, the Deferred Stock Award, to the extent vested, shall be paid
to the Grantee in the form of shares of Stock.
ELECTION TO RECEIVE DEFERRED STOCK AWARDS IN LIEU OF COMPENSATION.
The Board may, in its sole discretion, permit a Grantee to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such Grantee in the form of a Deferred Stock Award. Any such election
shall be made in writing and shall be delivered to the Company no later than the
date specified by the Board and in accordance with rules and procedures
established by the Board. The Board shall have the sole right to determine
whether and under what circumstances to permit such elections and to impose such
limitations and other terms and conditions thereon as the Board deems
appropriate.
RIGHTS AS A STOCKHOLDER.
During the deferral period, a Grantee shall have no rights as a
Stockholder; provided, however, that the Grantee may be credited with Dividend
Equivalent Rights with respect to the phantom stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Board may
determine.
RESTRICTIONS ON TRANSFER.
A Deferred Stock Award may not be sold, assigned, transferred, pledged
or otherwise encumbered or disposed of during the deferral period.
TERMINATION.
Except as may otherwise be provided by the Board either in the Award
Agreement or, in writing after the Award Agreement is issued, a Grantee's right
in all Deferred Stock Awards that have not vested shall automatically terminate
upon the Grantee's termination of Service for any reason.
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UNRESTRICTED STOCK AWARDS
The Board may, in its sole discretion, grant (or sell at par value or
such other higher purchase price determined by the Board) an Unrestricted Stock
Award to any Grantee pursuant to which such Grantee may receive shares of Stock
free of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted
Stock Awards may be granted or sold as described in the preceding sentence in
respect of past services or other valid consideration, or in lieu of any cash
compensation due to such Grantee.
PERFORMANCE STOCK AWARDS
NATURE OF PERFORMANCE STOCK AWARDS.
A Performance Stock Award is an Award entitling the recipient to
acquire shares of Stock upon the attainment of specified performance goals. The
Board may make Performance Stock Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine whether and to whom Performance Stock Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Stock; provided, however, that the Board
may rely on the performance goals and other standards applicable to other
performance unit plans of the Company in setting the standards for Performance
Stock Awards under the Plan. At any time prior to the Grantee's termination of
Service by the Company and its Affiliates, the Board may in its sole discretion
accelerate, waive or amend any or all of the goals, restrictions or conditions
imposed under any Performance Stock Award.
RIGHTS AS A STOCKHOLDER.
A Grantee receiving a Performance Stock Award shall have the rights of
a Stockholder only as to shares actually received by the Grantee under the Plan
and not with respect to shares subject to the Award but not actually received by
the Grantee. A Grantee shall be entitled to receive a Stock certificate
evidencing the acquisition of Stock under a Performance Stock Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Stock Award (or in a performance plan adopted by the Board).
TERMINATION OF SERVICE.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in
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all Performance Stock Awards shall automatically terminate upon the Grantee's
termination of Service for any reason.
DIVIDEND EQUIVALENT RIGHTS
DIVIDEND EQUIVALENT RIGHTS.
A Dividend Equivalent Right is an Award entitling the recipient to
receive credits based on cash distributions that would have been paid on the
shares of Stock specified in the Dividend Equivalent Right (or other award to
which it relates) if such shares had been issued to and held by the recipient. A
Dividend Equivalent Right may be granted hereunder to any Grantee as a component
of another Award or as a freestanding award. The terms and conditions of
Dividend Equivalent Rights shall be specified in the grant. Dividend Equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or
may be deemed to be reinvested in additional shares of Stock, which may
thereafter accrue additional equivalents. Any such reinvestment shall be at Fair
Market Value on the date of reinvestment. Dividend Equivalent Rights may be
settled in cash or Stock or a combination thereof, in a single installment or
installments, all determined in the sole discretion of the Board. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.
INTEREST EQUIVALENTS.
Any Award under this Plan that is settled in whole or in part in cash
on a deferred basis may provide in the grant for interest equivalents to be
credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be specified
by the grant.
TERMINATION OF SERVICE.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of Service for any reason.
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CERTAIN PROVISIONS APPLICABLE TO AWARDS
STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS
Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Affiliate, or any business entity to be acquired by the Company or
an Affiliate, or any other right of a Grantee to receive payment from the
Company or any Affiliate. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for the grant of the new Award. In addition, Awards may
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Affiliate, in which the value of
Stock subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Stock or Restricted Stock), or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Stock minus the
value of the cash compensation surrendered (for example, Options granted with an
exercise price "discounted" by the amount of the cash compensation surrendered).
FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or an Affiliate upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as the
Board shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Board or upon occurrence of one or more specified
events. Installment or deferred payments may be required by the Board or
permitted at the election of the Grantee on terms and conditions established by
the Board. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
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PERFORMANCE AND ANNUAL INCENTIVE AWARDS
PERFORMANCE CONDITIONS
The right of a Grantee to exercise or receive a grant or
settlement of any Award, and the timing thereof, may be subject to such
performance conditions as may be specified by the Board. The Board may use such
business criteria and other measures of performance as it may deem appropriate
in establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under SECTIONS 18.3.2 hereof in the case of a Performance
Award or Annual Incentive Award intended to qualify under Code Section 162(m).
If and to the extent required under Code Section 162(m), any power or authority
relating to a Performance Award or Annual Incentive Award intended to qualify
under Code Section 162(m), shall be exercised by the Committee and not the
Board.
PERFORMANCE OR ANNUAL INCENTIVE AWARDS GRANTED TO
DESIGNATED COVERED EMPLOYEES
If and to the extent that the Committee determines that a
Performance or Annual Incentive Award to be granted to a Grantee who is
designated by the Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance or Annual Incentive Award shall
be contingent upon achievement of preestablished performance goals and other
terms set forth in this SECTION 18.3.2.
(i) Performance Goals Generally. The
performance goals for such Performance or Annual Incentive
Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each
of such criteria, as specified by the Committee consistent
with this SECTION 18.3.2. Performance goals shall be objective
and shall otherwise meet the requirements of Code Section
162(m) and regulations thereunder including the requirement
that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that
such Performance or Annual Incentive Awards shall be granted,
exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals
must be achieved as a condition to grant, exercise and/or
settlement of such Performance or Annual Incentive Awards.
Performance goals may differ for Performance or Annual
Incentive Awards granted to any one Grantee or to different
Grantees.
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(ii) Business Criteria. One or more of the
following business criteria for the Company, on a consolidated
basis, and/or specified subsidiaries or business units of the
Company (except with respect to the total stockholder return
and earnings per share criteria), shall be used exclusively by
the Committee in establishing performance goals for such
Performance or Annual Incentive Awards: (1) total stockholder
return; (2) such total stockholder return as compared to total
return (on a comparable basis) of a publicly available index
such as, but not limited to, the Standard & Poor's 500 Stock
Index; (3) net income; (4) pretax earnings; (5) earnings
before interest expense, taxes, depreciation and amortization;
(6) pretax operating earnings after interest expense and
before bonuses, service fees, and extraordinary or special
items; (7) operating margin; (8) earnings per share; (9)
return on equity; (10) return on capital; (11) return on
investment; (12) operating earnings; (13) working capital;
(14) ratio of debt to stockholders' equity and (15) revenue.
(iii) Performance Period; Timing For
Establishing Performance Goals. Achievement of performance
goals in respect of Performance Awards shall be measured over
a performance period of up to ten years and achievement of
performance goals in respect of Annual Incentive Awards shall
be measured over a performance period of up to one year, as
specified by the Committee. Performance goals shall be
established not later than 90 days after the beginning of any
performance period applicable to such Performance or Annual
Incentive Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance or Annual Incentive Award
Pool. The Committee may establish a Performance or Annual
Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with
Performance or Annual Incentive Awards.
(v) Settlement of Performance or Annual
Incentive Awards; Other Terms. Settlement of such Performance
or Annual Incentive Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee.
The Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such
Performance or Annual Incentive Awards. The Committee shall
specify the circumstances in which such Performance or Annual
Incentive Awards shall be paid or forfeited in the event of
termination of Service by the Grantee prior to the end of a
performance period or settlement of Performance Awards.
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WRITTEN DETERMINATIONS.
All determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award pool or potential
individual Performance Awards and as to the achievement of performance goals
relating to Performance Awards, and the amount of any Annual Incentive Award
pool or potential individual Annual Incentive Awards and the amount of final
Annual Incentive Awards, shall be made in writing in the case of any Award
intended to qualify under Code Section 162(m). To the extent required to comply
with Code Section 162(m), the Committee may delegate any responsibility relating
to such Performance Awards or Annual Incentive Awards.
STATUS OF SECTION 18.3.2 AWARDS UNDER CODE SECTION
162(m)
It is the intent of the Company that Performance Awards and
Annual Incentive Awards under SECTION 18.3.2 hereof granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning
of Code Section 162(m) and regulations thereunder shall, if so designated by the
Committee, constitute "qualified performance-based compensation" within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of SECTION 18.3.2, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards or an
Annual Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Affiliate, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of
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a benefit to or for the Grantee (a "Benefit Arrangement"), if the Grantee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any
Option, Restricted Stock or Restricted Stock Unit held by that Grantee and any
right to receive any payment or other benefit under this Plan shall not become
exercisable or vested (i) to the extent that such right to exercise, vesting,
payment, or benefit, taking into account all other rights, payments, or benefits
to or for the Grantee under this Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Grantee under this Plan
to be considered a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result
of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Grantee from the Company under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
REQUIREMENTS OF LAW
GENERAL.
The Company shall not be required to sell or issue any shares of Stock
under any Award if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to an Award
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an
Award, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by
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such Award, the Company shall not be required to sell or issue such shares
unless the Board has received evidence satisfactory to it that the Grantee or
any other individual exercising an Option may acquire such shares pursuant to an
exemption from registration under the Securities Act. Any determination in this
connection by the Board shall be final, binding, and conclusive. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of an Option or the
issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable until the shares
of Stock covered by such Option are registered or are exempt from registration,
the exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
RULE 16b-3.
During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, it is the intent of the Company
that Awards pursuant to the Plan and the exercise of Options granted hereunder
will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced,
the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features
of, the revised exemption or its replacement.
LIMITATION FOLLOWING A HARDSHIP DISTRIBUTION.
To the extent required to comply with Treasury Regulation Section
1.401(k)-1(d)(2)(iv)(B)(4), or any amendment or successor thereto, a Grantee's
"elective and employee contributions" (within the meaning of such Treasury
Regulation) under the Plan shall be suspended for a period of twelve months
following such Grantee's receipt of a hardship distribution made in reliance on
such Treasury Regulation from any plan containing a cash or deferred arrangement
under Section 401(k) of the Code maintained by the Company or a related party
within the provisions of subsections (b), (c), (m) or (o) of Section 414 of the
Code.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Awards have not been
made; provided, however, that the Board shall not, without approval of the
Company's shareholders, amend the Plan such that it does not comply with the
Code. Except as
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permitted under this SECTION 21 or SECTION 22 hereof, no amendment, suspension,
or termination of the Plan shall, without the consent of the Grantee, alter or
impair rights or obligations under any Award theretofore awarded under the Plan.
EFFECT OF CHANGES IN CAPITALIZATION
CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased
or the shares of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company on account of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company occurring after the Effective Date, the
number and kinds of shares for which grants of Options and other Awards may be
made under the Plan shall be adjusted proportionately and accordingly by the
Company. In addition, the number and kind of shares for which Awards are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the Grantee immediately following such event shall, to
the extent practicable, be the same as immediately before such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of an
Option outstanding but shall include a corresponding proportionate adjustment in
the Option Price per share. The conversion of any convertible securities of the
Company shall not be treated as an increase in shares effected without receipt
of consideration. Notwithstanding the foregoing, in the event of a spin-off that
results in no change in the number of outstanding shares of Stock of the
Company, the Company may, in such manner as the Company deems appropriate,
adjust (i) the number and kind of shares subject to outstanding Awards and/or
(ii) the exercise price of outstanding Options and Stock Appreciation Rights.
REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND IN
WHICH NO CHANGE IN CONTROL OCCURS.
Subject to SECTION 22.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities in which no Change in Control Occurs, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement
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evidencing an Award, any restrictions applicable to such Award shall apply as
well to any replacement shares received by the Grantee as a result of the
reorganization, merger or consolidation.
REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH INVOLVES A CHANGE
IN CONTROL.
(a) Subject to SECTION 22.3(b), upon the dissolution or
liquidation of the Company or upon any transaction that results in a Change in
Control, (i) all outstanding shares subject to Awards shall be deemed to have
vested, and all restrictions and conditions applicable to such shares subject to
Awards shall be deemed to have lapsed, immediately prior to the occurrence of
such event, and (ii) all Options outstanding hereunder shall become immediately
exercisable for a period of fifteen days immediately prior to the scheduled
consummation of the event. Any exercise of an Option during such fifteen-day
period shall be conditioned upon the consummation of the event and shall be
effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate. The Board shall send written notice of an event that
will result in such a termination to all individuals who hold Options not later
than the time at which the Company gives notice thereof to its shareholders.
(b) SECTION 22.3(a) shall not apply to the extent provision is
made in writing in connection with a transaction described in SECTION 22.3(a)
for the assumption of such Options theretofore granted, or for the substitution
for such Options of new options covering the stock of a successor entity, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kinds of shares or units and exercise prices, in which event the Plan and
Options theretofore granted shall continue in the manner and under the terms so
provided.
ADJUSTMENTS.
Adjustments under this SECTION 22 related to shares of Stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share.
NO LIMITATIONS ON COMPANY.
The making of Awards pursuant to the Plan shall not affect or limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.
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POOLING
In the event any provision of the Plan or the Award Agreement would
prevent the use of pooling of interests accounting in a corporate transaction
involving the Company and such transaction is contingent upon pooling of
interests accounting, then that provision shall be deemed amended or revoked to
the extent required to preserve such pooling of interests. The Company may
require in an Award Agreement that a Grantee who receives an Award under the
Plan shall, upon advice from the Company, take (or refrain from taking, as
appropriate) all actions necessary or desirable to ensure that pooling of
interests accounting is available.
DISCLAIMER OF RIGHTS
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any Affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company or an Affiliate. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
Grantee or beneficiary under the terms of the Plan. No Grantee shall have any of
the rights of a shareholder with respect to the shares of Stock subject to an
Option except to the extent the certificates for such shares of Stock shall have
been issued upon the exercise of the Option.
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
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WITHHOLDING TAXES
The Company or an Affiliate, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to
the Company or the Affiliate, as the case may be, any amount that the Company or
the Affiliate may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Affiliate to
withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering
to the Company or the Affiliate shares of Stock already owned by the Grantee.
The shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the shares
of Stock used to satisfy such withholding obligation shall be determined by the
Company or the Affiliate as of the date that the amount of tax to be withheld is
to be determined. A Grantee who has made an election pursuant to this SECTION 26
may satisfy his or her withholding obligation only with shares of Stock that are
not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.
CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
OTHER PROVISIONS
Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
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SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of Delaware other than any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of this Plan and the
instruments evidencing the Awards awarded hereunder to the substantive laws of
any other jurisdiction.
SUPERSEDES OTHER PLANS
Upon the Effective Date, and contingent on the approval of the Plan by
the Company's stockholders as required by SECTION 5.1, no further awards shall
be made under the 1996 Equity Incentive Plan, the 1998 Non-Officer Stock Option
Plan and the 1996 Non-Employee Director Plan (collectively, the "Prior Plans").
As of the Effective Date, and contingent on the required stockholder approval
under SECTION 5.1, the Prior Plans shall terminate and, therefore, shall no
longer be a source of future awards.
* * *
To record adoption of the Plan by the Board as of __________ __, 2000,
and approval of the Plan by the stockholders on __________ __, 2000, the Company
has caused its authorized officer to execute the Plan.
SPATIAL TECHNOLOGY INC.
By:
--------------------------
Title:
--------------------------
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SPATIAL TECHNOLOGY INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
[INSERT DATE]
The undersigned hereby appoints R. Bruce Morgan and Richard M. Sowar
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of capital stock of Spatial
Technology Inc. that the undersigned may be entitled to vote at the annual
meeting of stockholders of Spatial Technology Inc. to be held at the offices of
Spatial, 2425 55th Street, Boulder, Colorado on [INSERT MEETING DATE] at 10:00
a.m., local time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 4 AND FOR ALL OTHER PROPOSALS, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN
ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 1
PROPOSAL 1: To approve the sale of Spatial's component software
division to Dassault Systemes Corp., pursuant to a purchase
agreement dated July 4, 2000, as amended on September 2,
2000, among Dassault, Spatial and Spatial Components, LLC, a
newly formed, wholly owned subsidiary of Spatial.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 2
PROPOSAL 2: To issue shares of Spatial common stock to Dassault
Systemes Corp., pursuant to a share purchase agreement to be
entered into between Spatial and Dassault, in exchange for a
cash payment by Dassault to Spatial of $2.0 million.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 3
PROPOSAL 3: To amend Article I of Spatial's certificate of incorporation
to change its name from Spatial Technology Inc. to PlanetCAD
Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 195
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED BELOW
PROPOSAL 4: To elect seven directors to hold office until the next annual
meeting of stockholders.
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all nominees
listed below (except as marked to the
contrary below).
</TABLE>
NOMINEES: Richard M. Sowar, R. Bruce Morgan, Eugene J.
Fischer, Philip E. Barak, H. Robert Gill, M. Thomas Hull,
Chuck Bay.
To withhold authority to vote for any nominee(s), write the
name of such nominee below:
--------------------------------------------------------------
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 5
PROPOSAL 5: To approve the 2000 Stock Incentive Plan of Spatial.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 6
PROPOSAL 6: To ratify the selection of KPMG LLP as independent auditors
of Spatial for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED ____________ ___, 2000
-----------------------------------
-----------------------------------
SIGNATURE(S)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians and
attorneys-in-fact should add their
titles. If signer is a
corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE, WHICH IS POSTAGE PREPAID IF MAILED WITHIN THE UNITED STATES.
